Contracts II Problems

Problem 141 (c) Four Star Construction Company built a $4 million dollar building for Octopus National Bank, with payments to be made as the project progressed. Fifteen percent of each progress payment was to be withheld in a retainage account to be paid at the end of the project after Four Star had obtained a certificate of approval from the architect hired by the bank to supervise the project. The building was built according to specifications, and Four Star was so proud of its work that it called in industry magazines to write up the job. Nonetheless, the architect inspected the project and pronounced the work unsatisfactory, refusing to elaborate beyond saying that the "workmanship is ugly." Four Star sued. Is it entitled to the retainage? Does it matter what the motivation of the architect is?

"Obtaining certificate of approval from an architect" broaden this to a third party. A third party is treated as an objective standard and the courts will defer to that third-party because they are the experts

Problem 66 Bill Cilbert was offered $50,000 for his new play "Engaged" if he could get it to the producer, Dick Carte, by October 12. He finished writing the play on October 10, and called up a private courier, Overnight Delivery, Inc., telling the woman he talked to on the phone all of the above details. He ended the conversation by saying, "I'll lose $50,000 if this package does not arrive by October 12." She told him not to worry. The Overnight Delivery courier picked up the package on October 11 and put it on board its airplane for delivery the next day. That night the plane crashed, and the package was never delivered. Gilbert's play was not produced, and he sued Overnight Delivery, Inc. for $50,000. Are either of the following defenses valid? (a) Mere knowledge of the possible damages flowing from the breach is not the same thing as an agreement to accept the liability for such damages. Before the liability attaches, there must be at least a tacit agreement under which the defendant assumes the risk of the consequential loss. (b) The plane crash was totally unforeseeable, so that Overnight Delivery is not liable for the consequential damages.

(a) Mere knowledge by itself is insufficient. We need to have evidence of an explicit agreement (b) No, the damage itself must be foreseeable, not the intervening event that caused the damages. The question is whether the parties themselves assumed liability.

Problem 131 (a) Behemoth Construction Company agreed to build an office building for the city of Jordan. When the office building was 95 percent completed, it was destroyed by fire due to an act of God. There was no clause in the contract providing what was to happen in such an event. Must Behemoth Construction start over or is the law of impossibility an excuse? (b) Job Paint Contractors agreed to paint the City Council meeting room for the city of Jordan, with the city promising to pay $20,000 on completion. When Job was three-fourths done, the building holding the meeting room was destroyed in an earthquake. May Job Paint Contractors recover anything?

(a) The law of impossibility is not an excuse because the construction company's duty to construct a building is not discharged by destruction of the work in progress unless the other party has assumed that risk. The rationale behind this rule is that the construction of the office building is not rendered impossible; the contractor can still rebuild. The risk of loss during construction, absent contrary provisions, lies with the builder, who is generally in a better position to acquire insurance during the construction process. Therefore, because there is no indication that the builder inserted a provision in the contract relieving him of liability in the case of fire, his duty to build the house is not discharged by the fire. Contractual duties are discharged where it has become impossible to perform them. (b) Yes, Job Paint Contractors can recover the cost of service prior to the earthquake

Problem 152 Tracthouse, Inc., contracted with NewTown of New Jersey to build ten identical houses for $50,000 each on lots owned by NewTown. (a) Tracthouses built the first three houses, but NewTown, financially embarrassed, was unable to make the payments. Advise Tracthouses what to do. Should it stop building and sue? Should it keep building and sue? If it does sue, would it sue for breach on the first three houses only or for all ten? (b) Tracthouses built nine of the houses perfectly, but had huge labor problems and could not complete the tenth, which it left in a half-finished condition. NewTown had agreed to pay when all ten houses were finished. Must it pay anything now that Tracthouses has defaulted? If Tracthouses is in material breach is it entitled to sue for anything?

(a) There is a breach of contract because Tracthouses only built three out of ten houses. Therefore, Tracthouses should stop building and sue for the breach on the first three houses. According to restatement 240, the promise to build ten identical houses for $50,000 each can be apportioned into pairs of part performance. So, NewTown would have a duty to pay for the performance rendered by Tracthouses. (b) There is a breach of contract so NewTown should only pay for what has been completed.

Problem 167 Travis contracted to sell a houseboat to his friend Meyer for $35,000. They agreed to meet on the boat on August 1 and swap the boat for a check for that amount. On July 15 Meyer phoned Travis and told him that the deal was off. Travis refused to accept the cancellation and brought suit on August 10 for breach of contract. (a) Is there a contract? (b) If Meyer can show that Travis never formally tendered the houseboat, is this a defense? (b) If Travis had promised to paint the houseboat prior to delivery, is it a defense that he never did so after Meyer's call?

(a) Yes there is a contract (b) No because Travis repudiated the contract (c) No, once there is a breach, a party does not need to engage in any futile acts. The act of painting would be an act of futility

Problem 153 The Lincoln Railway Company ordered 12 shipments of split rails from the Douglas Timber Corporation, contracting for the delivery of one shipment per month of 500 rails each. The shipments were to be delivered by the end of the first week of each month for a one-year period. (a) The first shipment arrived on time, but contained only 497 rails. May Lincoln Railway refuse to accept? Cancel the contract? (b) The next month Douglas Timber shipped 500 rails but they arrived on the ninth day of the month. May Lincoln Railway reject? (c) If Lincoln Railway refused to pay for the second shipment until Douglas Timber provided evidence of its ability to make future shipments in the proper quantity and on time, and Douglas Timber refused to make further shipments until Lincoln Railway paid for the second, who is in breach here? What should have been down, and by whom?

(a) Yes, Lincoln Railway can refuse if it substantially impairs the value of that installment and cannot be cured. If the non-conformity of this issue is found to substantially impair the value of the whole contract, there is a breach of the whole and the contract can be canceled. (b) Yes, Lincoln Railway may reject the shipment because the late arrival is a non-conformity to the contract that substantially impairs the value of that installment. Lincoln Railway must convince the court that the breach of these contracts affects the whole (c) Douglas Timber is in breach here because they were the first not to conform with the contract and must give adequate assurance of fixing the issue

Problem 70 For the Cleveland World's Fair, Balloons of America had contracted with the government of Cuba to build a giant balloon in the shape of a cigar. It was halfway finished when Cuba decided to abandon the project. Balloons of America phones you, its attorney, and wants to know whether it should complete the cigar-shaped balloon (contract price: $13,000) or stop now (when it has expended only $8,000) and sell the partially completed balloon for its scrap value ($120). The cost of completion is $2,500 and the salvage value after completion is $1,000. Read UCC 2-704 and 2-709 and advise your client.

- 2-704(2) Where the goods are unfinished an aggrieved seller may in the exercise of reasonable commercial judgment for the purposes of avoiding loss and of effective realization either complete the manufacture and wholly identify the goods to the contractor cease manufacture and resell for scrap or salvage value or proceed in any other reasonable manner. - 2-709(1) Of goods identified to the contract if the seller is unable after reasonable effort to resell them at a reasonable price or the circumstances reasonably indicate that such effort will be unavailing.

Absolute Contract v. Conditional Contract

- Absolute Contract - Terms require performance - Conditional Contract - Contracting parties are protected by understanding that performance is not guaranteed

Problem 86 Home run king Sammy Stocks has played for the same California professional baseball team for his entire career. Recently, he has announced that (in violation of his contract) he will switch teams and play for an east coast ball club. His current team is outraged and has applied to you, a California federal judge, for an order of specific performance, requiring him to continue playing in California as per his contract (which has three years remaining). If you grant such a request, what would you have to do to enforce it? Would you have any difficulties with the Thirteenth Amendment to the United States Constitution, which prohibits involuntary servitude? See Oman, Specific Performance and the Thirteenth Amendment, 93 Minn. L. Rev. 2020 (2009). Is there any other relief that might be adequate?

- Should specific performance be granted? Are money damages inadequate? Is the subject matter unique? - Alternatively, should the court invoke a negative injunction? These answers are up to interpretation and reasonable minds will differ which is why there are many different reasonable arguments presented to persuade the jury

Problem 141 (b) When Scarlett decided to sell her ancestral home, Tara, she engaged the services of Mitchell Realty, agreeing to pay a 10% commission if the company could produce a "satisfactory" buyer. Mitchell Realty scouted around and found a millionaire named John Doe, who agreed to pay cash. Investigation showed him to be a shy, quiet recluse. She turned him down as unsatisfactory, and Mitchell sued her for its fee. 1) How should this come out? 2) Would it influence your answer if the seller were a corporation?

1) Most courts will go with a subjective standard in cases like this. So, Mitchell Realty cannot sue 2) Most courts will say that, if the seller were a corporation, it would be an objective standard

Problem 141 (a) Oscar Wilde went to James Whistler and asked to have his portrait painted, agreeing to pay Whistler $40 if he was satisfied with the painting. Whistler produced what all agree to be a masterpiece, but Wilde pooh-poohed it, proclaiming it "crude and mean." Whistler sued. 1) Must Wilde pay? 2) Is the contract illusory? 3) Who has the burden of proof here?

1) No, Wilde does not have to pay because the objective test would not apply to a painting, the subject test would. Since Wilde was not satisfied with the painting, he should not have to pay. 2) No the contract is not illusory because the parties agreed that Wilde would pay "if he was satisfied." 3) James Whistler does because he is making the allegation. He is the one who sued

Problem 163 Assume that in the same basic fact pattern as in the last problem, NASA had phoned Venture's Vehicles in 2026 and inquired how production was going. John Venture, president of the company replied, "Well, I'm really not sure if we're going to be able to do the job. We've encountered some glitches on this one." May NASA immediately take steps to mitigate? Does that statement constitute reasonable grounds to suspect breach? (a) If NASA sent a 2-609 notice, which of the following responses by Venture's Vehicles would be a satisfactory response in your opinion?

A mere equivocation does not constitute a repudiation. There needs to be something of greater certainty "I won't do it". I "can't do it". All we have here is uncertainty, not a definitive statement. A possibility does not give rise to relief for anticipatory repudiation. (a) UCC 2-609 says that NASA may demand, in writing, adequate assurance of due performance and until they receive that assurance, they can suspend any performance for which they have not already received.

Problem 72 Hearing a report that Alice Chalk, a popular high school teacher, was a drug dealer on the side, the school's principal marched down to her classroom and fired Alice on the spot. Her horrified students' jaws dropped open when the principal accused her of selling drugs and ordered her from the building. Later that day, the principal learned that the report was false, and he phoned Alice at home, apologized, and offered her job back. She declined and took a job as an evening waitress in an all-night diner. She also sued the school for wrongful termination. Is it a defense that she refused to return to her job? Is the salary she receives as a waitress a mitigating factor? See John Call Engineering v. Manti City Corp., 795 P.2d 678 (Utah Ct. App. 1990). What if she had accepted unemployment compensation? See Corl v. Huron Castings, Inc., 450 Mich. 620, 544 N.W.2d 278 (1996).

Alice is being offered her exact job back but with substantially less intangible benefits because her reputation is ruined. A party is not required to accept a job that would be offensive or degrading to them

Anticipatory Repudiation

An assertion or action by a party indicating that he or she will not perform an obligation that the party is contractually obligated to perform at a future time.

Problem 75 When student Portia Moot tried to rent an apartment near the law school, she was required to sign a lease and put down a deposit of $600. The lease provided that this amount would be kept by the lessor as liquidated damages if Portia did any of the following things: damage the apartment in any way, cause a disturbance, bother the other tenants, keep a pet, put holes in the wall, move out without giving 30 days' notice, or fail to pay the usual $600 rent each month. The clause also provided that Portia would have to pay such other actual damages as the lessor might be able to prove. Is this cause valid? See Perillo, Contracts 14-32. (b) What about the validity of a clause that provides that if the tenant does not fulfill the entire term of the one-year lease that there is a penalty equal to all of the remaining rent? Two months' rent? See Paragon Group, Inc. v. Ampleman, 878 S.W.2d 878 (Mo. Ct. App. 1994).

Analysis: Difficulty of determining damages at the time of the contract? - We don't know the dollar amount of the damages at the time of contracting Proportionate? - It is not proportionate. Windfall? - Yes, if the damage caused by Portia was less than $600. (b) The landlord has a duty to mitigate damages.

Problem 148 When ordering supplies for the construction of the Dickens Orphanage, Mr. Bumble, president of the Bumble Construction Company, saw that the specifications called for the installation of Reading pipe throughout the building. He told his clerk, Oliver, to order Cohoes pipe instead because it was cheaper and more or less the same thing as Reading pipe. When the directors of the orphanage learned of the substitution, they refused to make the final progress payment. Bumble sued. Who should prevail?

Dickens Orphanage should prevail because Mr. Bumble intended to deviate from the contract and use a material that was not contracted for - Substantial performance is not available when there is an intentional breach

Problem 132 In 2025, when the United States began regular flights to and from the moon, strange cracking problems began to plague the barges the spaceships towed behind them. The government advertised for bids for a contractor/inventor who would guarantee the government a solution to the problem. The government explained in its advertisement that it was unsure whether current technology was advanced enough to solve the problem at all. Edison Tomorrow Company submitted the only bid and was awarded the job. After two years of steady effort, Edison Tomorrow threw in the towel and demonstrated to the satisfaction of everyone that the project was impossible; there was no way that the cracking could be prevented at this date. Edison Tomorrow then submitted its bill for its expenses, and the government refused to pay, pointing to the guarantee Edison Tomorrow had signed when awarded the contract. Edison Tomorrow took refuge in the law of impossibility. How should this come out?

Edison Tomorrow Company assumed the risk after the government said they were unsure whether current technology was advanced enough to solve the problem. Edison was the only one who bid because all the other companies thought it was impossible. When a party seeks relief from the law of impossibility, they have to act in good faith. Individuals should not be contracting with the pretense that they will use the law of impossibility Edison is not excused because he entered into a contract without any condition. Edison clearly assumed the risk of performance.

Two Kinds of Anticipatory Repudiation

Express - Occurs when a party unequivocally declares its intent to do something that would materially and totally breach the contract Implied - Occurs when a party does something that makes it unable to perform

Failure of a Condition v. Failure of a Promise

Failure of a condition - Excuses performance Failure of a promise - Constitutes breach of contract

Problem 84 ​​Famous movie star Howard Teeth agreed to accept a $50,000 fee to appear in a low-budget remake of Aristophanes's The Birds. As part of his contract, he promised to undertake a publicity tour to promote the film. After the film was over, he flatly refused to go on the tour. The movie was nonetheless a surprise hit and made millions for its producers. Teeth, not having been paid anything, sued for $1 million, the reasonable value of his services. What amount should he recover? Would your answer change if he had been involved in an accident and was not feeling well?

Howard has to have clean hands to seek an equitable remedy. He does not because he did not complete performance. He should recover $50,000 but cannot recover the full $1 million

Doctrine of Prevention and Cooperation

Implied promise that the parties will cooperate within their performance obligations and not hinder the performance obligations of other parties. - If someone is hindering the performance of the other party then they are in violation of the doctrine of prevention and cooperation

Problem 169 Judge Hardy promised his son Andy that he would buy him the used car that Andy had been admiring down at MGM Motors if Andy would agree to go to law school instead of pursuing a career in the theater. Andy did go to law school, which, of course, he loved so much he gave up any further thoughts of an alternative career. Judge Hardy failed to buy the promised car, but Andy was so happy in his studies that he didn't care. MGM Motors cared, however, and it brought suit against Judge Hardy for failing to buy the car from the dealership. MGM claimed to be the third-party beneficiary of the promise Judge Hardy made to Andy. Should this suit succeed?

MGM is an incidental third party beneficiary. The parties did not intend to benefit MGM. The promise was made to encourage Andy to go to law school therefore, MGM's suit should not succeed.

Problem 106 Honest John to Mr. and Mrs. Consumer that the used car he was selling them was in "great condition and was never mistreated by its prior owner, a nun." In fact, unknown to Honest John, the nun had been a bad driver and repeatedly wrecked and repaired the vehicle. The Consumers signed a contract of sale that conspicuously stated there were "no express or implied warranties, particularly not the implied warranty of merchantability," involved in the sale. Two days later the car fell to pieces because of its many prior accidents, and the Consumers were injured. May they sue for breach of express warranty? Does it help Honest John that he did not know nor have reason to know of the car's defects? Did Honest John disclaim any implied warranties?

May they sue for breach of express warranty? Yes, they may sue for express warranties. Express warranties are not disclaimable Does it help Honest John that he did not know nor have reason to know of the car's defects? No, this is irrelevant Did Honest John disclaim any implied warranties? 2-316(2) - In order to disclaim implied warranties you must comply with 2-316(2) - Implied warranties are made as part of the negotiation process

Problem 145 Travis agreed to sell a houseboat to his good friend Meyer, to be delivered on the first of August. It was to be paid for by a check for $1,000 on the first of each month thereafter, starting in September until a total of $35,000 had been paid. Travis failed to deliver the board on the date agreed, and Meyer sued on August 10th. Must he tender payment in order to prevail in his suit?

Meyer does not have to pay until September 1st

Problem 156 Mr. and and Mrs. America bought a $28,000 automobile from Swank Motors, promising to make installment payments on the first of each month. The contract provided that "time is of the essence," and the failure to make payments as agreed was a ground for declaring a default and repossessing. Nonetheless, they were frequently late on the payments, some months as much as ten days late. After seven months of late payments, Swank had had enough, and without warning it repossessed the car. The Americas sued for conversion and breach of contract. Who should win the lawsuit? See UCC 2-208 (a) Would it affect your answer if each month Swank had vigorously protested the late payment, and threatened repossession if it happened again? (b) Would it affect your answer if the contract contained a clause saying that the "acceptance of late payments shall not be construed as a waiver of the right to declare a default because payments are not made as agreed; in spite of the acceptance of such late payments, time remains of the essence"? (c) Swank Motors calls you, its attorney, with this question. It knows that its acceptance of the late payments has probably resulted in a waiver of the ability to repossess, but it has grown weary of the sloppy payment practices of the Americas. Is it possible to reinstate the "time is of the essence" clause? What procedure would you advise? See UCC 2-209(5).

Mr. and Mrs. America would prevail because Swank waived the behavior in the past and did not assert to them that he would stop allowing this and that they need to pay on time (a) Swank would have had to assert his rights, "standing on our rights (protecting them)" a protest implies no waiver. (b) This clause is known as an anti-waiver clause. Most courts would hold that even though there is an anti-waiver clause, if there is a continuous waiver granted by one party the courts will construe the waiver to be valid. (c) Yes, it is possible to reinstate the "time is of the essence" clause by providing the Americans with reasonable notification that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.

Problem 158 Mr. and Mrs. America took out insurance policies with NoRist Insurance Company on each of their lives. The policies provided that notice of death had to be given in writing within ten days of occurrence or the insurance company had no liability. Mr. America suffered a heart attack while jogging and died. The next afternoon, Mrs. America phoned the NoRisk office and informed the company of his death. The person who took the call expressed sympathy. Two weeks later a claims adjuster from the company called on Mrs. America and had her fill out the appropriate forms. He discussed with Mrs. America the possibility of settling the claim for one-half its face value "because of some concern about the insurance application." Two days after that she received a letter from the company stating that its review of the file revealed that she had never given a written notice of her husband's death as required by the policy, so it was denying liability. Distraught, Mrs. America phones you, her attorney. What is your theory? Can she prove reliance here? Does it matter?

Mrs. America prevails. "Even where the contract specifically states that no written modification will be recognized, the parties may yet alter their agreement by parol negotiation

Problem 159 Opera singer Beverly Pipes was engaged to sing the role of Michelle in a new opera entitled Obama. The opera went into rehearsal in May, with a scheduled opening date of September 1. During the first week of August, Ms. Pipes fell ill with pneumonia and missed all subsequent rehearsals. The producer of the opera engaged another soprano to take over the role, and the show opened as scheduled. It was a tremendous sensation. At the end of the first week of performances, Beverly Pipes showed up at the opera house, ready to sing. She said that she felt fine and that her voice was never better. She knew the role and wanted it back. The producer refused and a lawsuit followed. Is Ms. Pipes in breach for failing to rehearse? (a) Is the manager in breach for failing to give her the part back?

Ms. Pipes is not in breach for failing to perform because she could not control the circumstances. (a) There is no breach if it is minor there is a breach if it is material.

Problem 102 For two years world wide widgets negotiated for the constructions and purchase of a new computer system from MegaHard Computers, with reams of lawyers bargaining heatedly over the contract terms. A long, detailed contract was finally signed by the two parties, and the new system was designed and installed. Two days later the president of WWW canceled the purchase, saying that the system was unsatisfactory and the, in additional to all the terms of the written contract, parties had an oral understanding that WWW could get out of the deal at any time if it didn't like the way the computer system was functioning. You are the trial judge hearing the lawsuit, will you allow in evidence of this oral understanding?

No because the contract was fully integrated

Problem 103 Jane Bean and Hiram Walkup agreed that Jame would build a dock for Hiram on a lake near Big Rock Candy Mountain. They entered into a formal written contract utilizing a construction contract form supplied by Jane's attorney. Construction began. One day while sitting near lemonade Springs, Jame commented that it was becoming difficult to purchase copper-clad nails as specified in the contract. Hiram said "Oh Jane, you can use galvanized nails if you like". And Jane did. Now Hiram has sued Jane for breach of contract because Jane used galvanized nails. Jane has offered evidence of the oral agreement. Hiram objects because of the parol evidence rule. Is it applicable here?

No because the oral agreement was made after the formal agreement - There is a modification after the contract was entered into. Amendments made after the contract is not valid in the parol evidence rule

Problem 154 Sangazure General Construction Company signed a contract with Pointdextre Plumbing and Fixtures to use the latter for the plumbing work on the new building for Wells & Associates. The contract provided that Sangazure could dismiss the subcontractor if Pointdextre Plumbing at any point become insolvent. The construction lasted for a two-year period. During the second year, Sangazure General Construction Company itself had financial problems, leading it to be late on a number of occasions with the progress payments it was required to make to Pointdextre Plumbing. This in turn upset the delicate financial status of Pointdexter so that it became insolvent - under any definition of the term - whereupon Sangazure exercised the insolvency clause and dismissed Pointdextre, planning to do the plumbing itself. Pointdextre sued, and Sangazure pointed to the insolvency clause as its defense. Is the clause effective in this circumstance?

No the insolvency clause is ineffective because no party can take advantage of a failure of a condition that it causes. Here, Sangazure's late payments that caused Pointdextre's insolvency.

Problem 140 Deciding that she needed a new, distinctive briefcase, Portia Moot, well-known appellate lawyer, hired a leather craftsman who promised to make her one for court appearances. She agreed to pay him $400 on completion. On the date the briefcase was to be delivered, she went to his shop. He had moved to Arizona. She had the same briefcase made elsewhere for $600. May she sure him for the damages his breach has caused her? Must she pay him first? Why or why not?

No, Portia may not sue the leather craftsman because their agreement was conditioned on the completion of the briefcase. She had not paid him the $400 so there was no breach of contract Is this a promise or is this a condition? They are both making a promise. He is promising a briefcase and she is promising payment Some people say this is a condition, others say it is a condition. The correct way to read this is as a promise, therefore, there is a breach

Problem 134 Mona's Kitchen contracted with the U.S. Navy to supply it with 100,000 chicken pot pies every year for ten years at an agreed upon price. Mona's had always purchased its chickens from the Chicken Ranch of Best, Texas, with whom it had done business for 80 years. The Chicken Ranch suddenly closed its doors, a totally unexpected event, and Mona's Kitchens was unable to find substitute chickens at a price that made the contract with the Navy profitable. Is this an excusing event?

No, failure of supply is not an excusing event. Mona's Kitchen should have found a supplier elsewhere despite the fact that the substitute chicken would be at a higher price.

Problem 68 On graduating from law school, Andrew Advocate received a gift of $25,000 from his wealthy parents and used it to buy a sports car that he had long desired. The car proved to be a lemon; four times it stalled and stranded Andrew in dangerous traffic situations. He took time off from his new job 18 times to take the car to and from the dealer's repair shop. Finally, when it stalled for the fifth time and made him miss a court appearance, he parked the car at the dealership and gave notice that he was revoking his acceptance (UCC 2-608) and wanted his money back (UCC 2-711 and 2-715). When the dealer ignored him, he sued, asking for a return of his purchase money plus consequential damages of $5,000 for "mental anguish." Is this last element of damages recoverable?

No, mental anguish is rarely allowed in a UCC transactions

Problem 157 Wong Construction Company signed a contract to build an auditorium for the City of Thebes, Utah. The agreement had a clause that required all changes to the duties of the contractor to be in writing. Nonetheless, as construction proceeded the city official in charge of the project constantly demanded additions, and when Wong's manager asked for these changes to be put in writing, she was told "Don't worry about it." When the time came for payment, the city was unwilling to pay for modifications unsupported by ten change orders. Will this argument succeed?

No, the argument will not succeed because she stated "don't worry about it"

Problem 138 Your insurance policy provides that you must give notice of an insured-against event within ten days of its occurrence or the company is not liable. Suppose that you fail to do so. Must the insurance company pay your claim? If not, why not? Can the insurance company sue you for failure to give the contracted-for notice? If not, why not?

No, the insurance company does not need to pay your claim because giving notice of an insured-against event within ten days of its occurrence was a constructive condition. No, the insurance company cannot sue you for failure to give the contracted-for notice because there was no promise to the insurance company that was broken for which they could seek damages

Problem 150 Fibber McGee and his wife Molly had lived in their apartment for ten years. Every two years they went down to the landlord's office and signed a new lease, the lease ending every two years on May 31st. One year they were amazed when the landlord refused their offer of renewal on June 1st, noting that their option had expired at midnight of the day before and saying that he planned to raze the building and turn it into a parking lot. They come to your office for help. Do they have a case? Should there be a different rule for the exercise of an option to renew a lease than to purchase real property?

No, they do not have a case because their right to renew disappears, thus, they have no cause of action

Problem 143 Scarlett contracts to sell her ancestral home, Tara, to Rhett Butler "provided he is able to obtain satisfactory financing by June 4th, 2021." June 4 was the date set for the closing. Does this agreement oblige him to try to obtain financing? That is, has he made a promise to do so? If he does not try at all, could she procure it for him? Would he have to take it?

No, this is a condition precedent not a promise

Problem 151 When Howard Mortus signed up for a $1 million life insurance policy from the Norisk Insurance Company he was able to make only a small down payment. For the bulk of the initial premium, he gave the insurance company a promissory note payable on July 1, 2020, six months from the date the insurance became effective. He became ill early in 2020 and failed to make the payment in July as he had promised. He died on September 25 of that year. The company had not contracted with him in any way between the first of July and his death. Must Norisk pay his estate the $1 million, or is his failure to make the July payment an excusing event?

Norisk should pay Howard's estate the $1 million. Howard paid a down payment and there was no express statement that said the insurance policy would be void if the rest of the initial premium was not paid. Carter v. Sherburne Corp. said that in the absence of a total disavowal of the contract, failure of payment does not require an immediate cessation of performance.

Doctrine of Substantial Performance

One party under a contract can still recover for damages if he substantially performed his duties under the contract even though that individual failed to comply with the contract in some way. - Does not apply to UCC - Excuses complete performance when a substantial amount of the work is done - An equity doctrine that applies when the defect is immaterial/minor/trivial. If it is anything more than that, then we cannot say that there has been substantial performance

Problem 166 After his horse Bucephalus won the Kentucky Derby, Alexander agreed to sell him to Phillip on September 1 for $15 million. On July 10, Phillip learned that Alexander had sold Bucephalus to Darius for $20 million. Phillip sued immediately, but Alexander contended that no breach could possibly occur until September 1. Who is right here?

Phillip wins. It is highly unlikely that Alexander will buy the horse back and resell it to Phillip by their September 1st contract date.

Problem 77 Roget agreed to purchase 40 new computer workstations with state-of-the-art speakers from Sleazic Computers located in Quartz, California. The workstations were to be delivered by the seller to Roget's place of business in Lewiston, Indiana, on March 1, 2020. The cost of each was $3,000. When the workstations were delivered, Roget discovered that the built-in speakers were barely audible and totally worthless. Roget properly revoked acceptance of the products on March 25, 2020, pursuant to UCC 2-608. On April 1, Roget purchased another brand at the cost of $4,000 each. The new workstations had excellent speakers and were essentially identical to those purchased from Sleazic except that the substitute workstations had a keyboard with a built-in mouse, a feature worth $200. This feature was of no importance to Roget, who had purchased the substitute workstations because they were readily available (a must). What are Roget's damages under $2-712 if you presume that Roger suffered no consequential or incidental damages?

Roget is entitled to the difference between the cost of the new workstations and the contract price New workstations ($160,000) - Contract Price ($120,000) = $40,000

Problem 81 All the neighbors on the block, except Ruth McCarty, signed contracts with Quick Construction, Inc., to have curbing installed. Ruth decided that the price was too high and she told Quick's manager that she did not want the curbing. Deciding that the block would look odd if her lot were left uncurbed, Quick put curbing along McCarty's property at the same time it installed the rest. Quick then sent her a bill for her share of the project. The curbing is beautiful, is worth $500 (and the bill is only for $350), and has improved the value of her house by $1,000. What must she pay? See Enterprises v. Galloway, 192 Ohio App. 3d, 948 N.E.2d 473 (2011).

Ruth is not required to pay; she did not want the work done and Quick Construction was acting officiously. Ruth explicitly said no. Quick cannot manufacture a remedy.

Problem 83 Attorney Amos Factory was world famous for his legal abilities in the area of antitrust law. He was employed by a client for the agreed fee of $50,000 to handle a complex negotiation leading to a merger. When he was half done with the task, the client discharged him without cause. He proves to the court's satisfaction that his efforts prior to the discharge were already worth $50,000. May he recover that amount?

The client will argue that the attorney only did half the work and thus should only be paid half the contract price. You have to analyze the three rules from Rosenberg. - Contract Rule: An attorney discharged without cause may recover damages for breach of contract under traditional contract principles. The measure of damages is usually the full contract price. - Quantum Meruit Rule: An attorney discharged without cause can recover only the reasonable value of services rendered prior to discharge. There is an implied condition in every attorney-client contract that the client may discharge the attorney at any time with or without cause. - Quantum Meruit Rule Limited by the Contract Price: This limitation is believed to provide client freedom to substitute attorneys without economic penalty.

Problem 63 Helen's Contracting agreed to build a huge horse for the town of Troy's annual pioneer parade. Helen agreed to build the horse for $24,000. It was going to cost Helen $20,000 to build the horse. After three months' work and the expenditure of $15,000, the horse was three-fourths completed. On that date, the town of Troy told Helen to stop construction on the horse. Troy had already paid Helen $5,000 but refused to pay any more. Helen can sell the horse for $2,000 salvage value. What is the loss in expectation value to Helen?

The contract price was $24,000 and it would cost $20,000 to make the horse so she expected a $4,000 profit. $4,000 is the expectation interest She spent $15,000 on materials and was paid $5,000 and can salvage $2,000 15 - 5 - 2 = $8,000 She can recover $4,000 + $8,000 = $12,000

Problem 165 To heat the music hall for the evening's performance each evening, the manager had to turn up the furnace by four o'clock in the afternoon. One February day the advertised event was a rock concert by the Body Bags, a popular group touring New England. They were still in a city 80 miles away on the date of the performance, and traffic had been made impossible by a New England blizzard that stranded everyone. Certain that they would not show up, and figuring that in any event no audience would, the manager decided to cancel that evening's performance; he did not heat the music hall. It was understood by all parties that the performers, if they were ready, willing, and able to perform, were to be paid even though weather conditions caused the performance to be canceled. Half an hour before showtime, the musicians did arrive; they had rented snowmobiles to get through. When they learned that there would be no show and no payment, they sued. The manager defended by pointing to their prospective inability to perform and the doctrine of impossibility. How would this come out in a court in which you were the judge?

The court should rule for the musicians because they have a contract. They arrived ready, willing, and able to perform and both parties understood that the musicians would be paid if weather conditions caused the performance to be canceled. This is not a risk that the musicians took on. The manager took that risk.

Problem 74 The construction contract contained a liquidated damages clause stating that the contractor must complete the bridge by August 10 or pay $500 a day for each day thereafter that the bridge remained uncompleted. On August 10 the bridge was still uncompleted, but the road on the other side of the river to which it was to be connected was not completed by other contractors until September 8, by which time the bridge was done. Must the bridge contractor pay the liquidated amount? What was the purpose of the clause at the time it was drafted? Compare Massman Construction Co. v. City Council, 147 F.2d 925 (5th Cir. 1945), with Southwest Engineer Co. v. United States, 341 F.2d 998 (8th Cir.), cert. denied, 382 U.S. 819 (1965). For a more modern view on the issue see Boone v. Coleman Constr., Inc. v. Piketon, 145 Ohio St. 3d 450, 50 N.E.3d 502 (2016).

The courts are split on this problem but the damages must be difficult to calculate at the time of contracting, they must be proportional, and it cannot create a windfall. No, the bridge contractor should not pay the liquidated amount because the amount was not a reasonable estimate at the time of contracting of the likely damages from breach. The contractor would have to pay an additional $14,500 in addition to completing the bridge. This would create a windfall for the construction company The purpose of the clause at the time it was drafted was a penalty

Problem 78 Assume the same facts as in the last problem, except also assume that the market price of processors like that purchased by Roget was $5,000 in Lewiston and $3,000 in Quartz. Roget has sued Sleazic for damages under UCC 2-713. If you assume Roget is entitled to sue under that section, what would be the amount of damages assuming no incidental or consequential damages? Is Roget entitled to sue under that section or should Roget be limited to damages as measured by 2-712? See Official Comment 3 to 2-712, and Official Comment 5 to 2-713. If Roget had consequential damages that could have been avoided by cover, are those damages recoverable in an action under 2-713? See UCC 2-715 (2) (a) and Official Comment 3 to 2-712.

The damages are measure by the price at the time the breach is learned. $5,000 - $3,000 = $2,000 $2,000 * 40 = $80,000 UCC 2-713(2) says the market price is to be determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival. Here, since Roget rejected the goods after arrival, the market price would be determined in Lewiston so they would be $3,000. Roget should be entitled to sue under 2-712 because he obtained a cover of substitute goods.

Problem 76 Portia Moot next decided to sign up with a health spa to improve her physical fitness, which was suffering from the law school regimen. The spa manager talked her into a three-year contract under which she obligated herself for a total of $3,500 in lessons and training. She went once and then the strain of her studies forced her to discontinue the program. The spa sued her for $3,450 (she had put down a $50 deposit). Is it entitled to this amount? See Cellphone Termination Cases, 193 Cal. App. 4th 298, 122 Cal. Rptr. 3d 726 (2011); Vogue Models, Inc. v. Reina, 6 Ill. App. 3d 211, 285 N.E.2d 256 (1972); Westmount Country Club v. Kameny, 82 N.J. Super. 200, 197 A.2d 379 (1964); Nu Dimensions Figure Salon v. Becerra, 73 Misc. 2d 917, 340 N.Y.S.2d 268 (Civ. Ct. 1973).

The spa entered into a contract with Portia and they expected to receive $3,500. Portia expects to receive that amount in lessons and training Is the spa entitled to this amount? Yes. We have to identify the party's expectation interests. Once a party that enters into a contract, they are expected to perform on that contract.

Problem 133 Hiram Walker contracted to sell T.C. Sherwood a cow named Rose of Aberlone. Prior to the date of delivery, Rose died. Is Walker in breach of contract? See UCC 2-613.

The subject matter was destroyed so the death of the cow is an excusing event and Walker is not in breach of contract

Problem 82 Weekend Construction Company agreed to build a parking garage for Municipal Airport, but it proved to be a foolish contract because the construction would cost Weekend Construction $100,000, although the Airport would pay no more than $80,000, as per the contract. When the construction was halfway completed, Municipal Airport filed for a bankruptcy and repudiated this contract. Weekend Construction has incurred $50,000 in expenses so far, with the same amount yet to go. What is the amount of the claim it should file in the bankruptcy proceeding? In the context of a losing contract, the courts can exercise their equitable discretion to arise at what they believe would be a fair and just amount

There are three approaches: - $50,000 (costs) less no losses avoided - $100,000 - $80,000 = $20,000; $50,000 + $20,000 = $70,000 - $80,000 (contract) - $50,000 = $30,000

Problem 155 When Bob Cratchit interviewed for a job with the firm of Scrooge and Marley, Mr. Marley told him that he would be permanently employed there at a salary to be negotiated from time to time. They agreed on a starting salary, and Cratchit took the position. He worked tirelessly for three years, pleasing both of the partners. Then, Mr. Marley died and Scrooge became harder and harder to please. On a Tuesday, he fired Cratchit, saying that he couldn't stand to see his face one more day. Advise Cratchit, who is in your law office asking whether a lawsuit against Scrooge has any chance of succeeding.

This can be viewed through the lens of a condition or through SOF - Under the SOF it would fall under the 1 year exception so it does not need to be in writing - As a condition this could be viewed as permanent employment (Employment at will - Can be fired at any time)

Problem 73 Dr. Watson signed a contract to purchase land in Florida, agreeing to pay a set amount each month to the sellers. A liquidated damages clause provided that if he missed a payment the sellers could foreclose their purchase money mortgage and reclaim the land, plus keep all payments made to date as liquidated damages. Is the clause valid? See Hutchinson v. Tompkins, 259 So. 2d 129 (Fla. 1972). (a) What about a clause that provides for liquidated damages of 15 percent of the contract price? Should the result be affected by the fact that before trial the seller sold the land for a price greater than the original sale price? Compare Leeber v. Deltona Corp., 546 A.2d 452 (Me. 1988) (a "fortuitous resale" should not numbed affect the result), with Lind Bldg. Corp. v. Pacific Bellevue Dev, 33 Will. App. 70, 776 P.2d 977 (1989) (no liquidated damages should be allowed where the seller in fact suffered no damages).

This clause is not valid because it is a penalty. (a) There is not proportionality and the damages are not reasonable

Problem 144 Travis decided to sell a houseboat to his good friend Meyer for the sum of $35,000. They agreed that Meyer would pay by check and that the sale would be made at noon on the first day of August on board the boat. On that date neither shoed up at the appointed time. Meyer was at a conference, and Travis was at home reading an adventure story. When Meyer returned from the conference, he sued Travis for breach of contract. As judge, would you let this suit succeed without more? On these facts would Travis succeed in a similar suit against Meyer?

This is a concurrent condition. There is a contract for the purchase of the item but the term is silent as to which condition needs to happen first. Therefore neither party can complete their promise

Problem 160 Luciano Uvula, world-renowned tenor, was engaged by the Chicago Opera Association to sing a series of roles in famous operas, all of which were already in his extensive repertoire. He agreed to come to Chicago on May 1 and begin rehearsals with the company, but he came down with a cold and didn't show up in Chicago until May 15, at which time he announced he was ready to rehearse. The opera season was scheduled to start July 1 and extend through April of the next year. The management refused to let Uvula rehearse, saying that missing the beginning of rehearsals was too serious. He sued. How should this come out?

This is not material because the songs were already in his extensive repertoire so there is no breach

Problem 149 Scarlett entered into a valid option contract to sell her ancestral home, Tara, to Rhett if he brought the entire payment in cash to Tara between the hours of noon and 1:00pm tomorrow. The next day he arrived with the proper amount at 1:23pm and tendered the money. By this time she had changed her mind and refused to go through with the deal. If he sued in equity, asking for specific performance after paying the money into court, would you, as judge, grant him relief? Was "time of the essence" here? Would your answer change if the parties had already formed a valid contract that called for payment by 1:00pm the next day, and Rhett was simply late in paying?

Time was of the essence here because this was an option contract where Scarlett gave Rhett a constructive condition to pay between the hours of noon and 1:00pm. - Express conditions must be performed exactly Yes, my answer would change if the parties had already formed a valid contract. Time would not be of the essence in this case because there is not express provision that provides that the contract will be void if performance is not within the specified time.

Problem 85 Montgomery sold King several marine charts for $2,000. King sent a $750 down payment. Shortly thereafter, King relinquished his merchant marine commission and told Montgomery that he was not going to buy the charts and wanted his $750 back. Montgomery's actual damages are only $250. Is King entitled to any recovery? If so, how much? See UCC 2-718(2).

UCC 2-718(2) says: Where the seller justifiably withholds delivery of goods because of the buyer's breach, the buyer is entitled to restitution of any amount by which the sum of his payments exceeds (a) the amount to which the seller is entitled by virtue of terms liquidating the seller's damages in accordance with subsection (1), or (b) in the absence of such terms, twenty % of the value of the total performance for which the buyer is obligated under the contract or $500, whichever is smaller. King is entitled to $350 20% of 2,000 = $400 $750 - $400 (Montgomery) = $350 (remainder than King gets back)

Problem 104 Your client is Howard Damon, an eccentric entrepreneur, who is having his dream house built by his best friend, architect James Pythias (they have known each other since the first grade). They have been planning the house for decades and have finally decided to have a lawyer draft up the formal agreement. Should you put in a merger clause or not?

Yes to show that the agreement is completed. If there is not a merger clause, the communication the two parties have had for the previous decades would be too extensive to filter through if one party believed something else needs to be added to the agreement

Problem 142 Everytime his rich Aunt Augusta came to town, she gave Algernon a gift of $1,000. Her next visit was scheduled for the first of April, but Algernon ran short of funds before that date. He went to his friend John Worthing and asked to borrow $200, signing a promissory note in which he agreed to repay the money "when Aunt Augusta next arrives in town." Unfortunately, Aunt Augusta died suddenly, leaving all of her fortune to her daughter Gwendoline. Must Algernon pay when John Worthing presents the promissory note?

Yes, Algernon must pay the $200. "When Aunt Augusta next arrives in town" is ambiguous as to whether it is a condition or a promise/covenant. Since there is ambiguity makes the contract susceptible to interpretation which will prevent a forfeiture, that is how it should be construed. Algernon then must pay for breach of a promise.

Problem 170 Judge Hardy paid MGM Motors $20,000 upon MGM's promise to deliver a new car to Andy Hardy on his fifteenth birthday. Judy Hardy never made it to Andy's birthday, and MGM never delivered the car to Andy. Andy has sued. Should he recover from MGM? Would your answer differ if Judge Hardy had owed Andy $20,000 as opposed to it being a gift?

Yes, Andy should recover from MGM. The third party beneficiary is Andy Judge Hardy is the promisor of the payment and MGM is the promisee of the payment. MGM is the promisor of the car delivery and Judge Hardy is the promisee of the delivery

Problem 162 For a trip to the moon from the space station in 2030, NASA requested bids on a gravity-free scooter capable of making the trip. It awarded the contract in early 2022 to Venture's Vehicles, a company specializing in experimental craft. The contract price was $32 billion payable on delivery in 2030. In mid-2026, Venture's Vehicles sent NASA a letter sadly informing the agency that it was unable to fulfill its contract by the date scheduled. NASA was able to purchase a substitute vehicle elsewhere for $56 billion. Can it recover from Venture's Vehicles now in (2026), or must it wait until 2030, the scheduled date of delivery?

Yes, NASA can recover from Venture's Vehicles now. They can choose to recover now or wait.

Problem 107 The restaurant menu had beautiful photographs of the food. When Portia Moor and her friend Ralph Res were ready to order, Portia pointed at the picture of the plate of spaghetti and told the waitress, "I'll take that." Ralph ordered fish chowder When the food arrived, Portia was annoyed to note that there were only two meatballs (the picture showed three). May she refuse the food for this reason? Is the service of food a sufficient sale to trigger the UCC?

Yes, Portia may refuse the food. UCC section 2-313(b) states that any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description. Yes, the service of food a sufficient sale to trigger UCC 2-314(1)

Problem 64 Rogette began drafting the fourteenth edition of her tour guide pursuant to an agreement with White publishing. After Rogette was one-quarter done, White repudiated the agreement. Rogette sued White for the amount of money she had expended touring the world to gather updated information for the book. She also sued White for the "expectancy" - that is, the total amount she expected she would have earned as royalties on the book. White admits liability but alleges the damages should be measured either by the expectancy or the amount spent but should not include both. Rogette argues that she had suffered the loss of both elements of damages and should receive both. Who is right?

Yes, Rogette can sue for both damages as long as she can establish reasonable certainty

Problem 105 In 1939, when Orson Welles wrote, directed, and starred in the famous movie Citizen Kane, he signed a contract with the movie distributor RKO for a two-picture deal that stated that RKO shall own the negative and positive prints of each of the pictures and all rights of every kind and nature in an to each picture, and all parts thereof and all material, tangible and intangible, used therein, as soon as such rights come into existence, including, but not being limited to, the exclusive right of distribution, exploitation, manufacture, recordation broadcasting, televising (other than in connection with the advertising or exploitation of a commercial product or service), and reproduction by any art or method, and the literary, dramatic, musical and other works included in such Picture. The original movie lost money, no second picture was made, and in late 1944 the parties signed an "exit agreement" with this language in it: It is now the mutual desire of the parties to terminate and cancel each and all of the existing agreements between [RKO] and Welles, and to mutually release and discharge each party to each of said agreements from all rights, duties, liabilities and obligations thereunder and from all claims, demands and causes of action of every kind and nature of each party as against the other party. In subsequent decades the movie gained in stature and is not arguably the finest movie ever made. When RKO's successory refused to share any of the DVD profits, Welles's daughter Beatrice sued. Would you allow the Welles estate any claim to royalties from the use of the movie in media not in existence in 1939?

Yes, Welles's estate should have a claim to the royalties because of the the word "all" in the exit agreement. This indicates that the parties were discharged from the every part previous agreement.

Problem 164 Assume NASA had agreed to make progress payments of $1 million monthly to Venture's Vehicles starting in January 2022. After NASA had made payments through October of that year, it learned that Venture's Vehicles was insolvent and had defaulted on a similar job it had with the European Space Agency. May NASA treat this as a repudiation? May it cut off the progress payments?

Yes, because Venture's Vehicles was insolvent, NASA had reasonable grounds to believe they would commit a breach and so NASA can suspend any performance which they have not already received. Insolvency can be measured in different ways. The two most common ways are the equity method (you cannot pay your bills as they become due) and the balance sheet method (do you have more liabilities than assets). In general, courts are slow to allow insolvency alone as sufficiency for repudiation. There needs to be a lack of payments or a history of breach.

Problem 67 When their young daughter died in a tragic accident, the parents contracted with a funeral home to prepare her body for burial. When they went to the funeral home to view the body, the mortician was apologetic. He had misplaced the body, and "I think she's in Ohio" was all that he could say. Both parents suffered extreme mental anguish because of this mishap. Can they recover consequential damages for their suffering?

Yes, because this breach is of such a kind that would likely cause serious emotional disturbance. Restatement 353: Recovery for emotional disturbance will be excluded unless the breach also causes bodily harm or the contract or the breach is of such a kind that serious emotional disturbance was a particularly likely result

Problem 65 Suzie Temple entered her dog in the "Perfect Pet" contest at the Savabit store. The grand prize was $25,000. Suzie's dog and three other dogs made it to the finals. Two hours before the final judging among Suzie's dog and the other finalists, the company running the contest, Big Winner, Inc., withdrew. Suzie sues, requesting the money. Big Winner defends, alleging insufficient certainty. Who wins? Cf. Wachtel v. National Alfalfa Journal, 190 Iowa 1293,176 N.W. 801 (1920).

Yes, recovery is permitted because this is a unilateral contract. Performance has begun and the identity of the offeree is not required as long as you can identify the class (the people who entered their dogs into the contest).

Problem 80 When Elsie Maynard passed out in the department store, she was rushed to Tower Hospital for emergency medical care. After two weeks in a coma, she died. May the hospital recover its expenses from her estate? Was its behavior officious?

Yes, the hospital may recover the reasonable value of the services from her estate because this is an implied in law contract and the services were emergency and necessary to prevent Elise from suffering serious bodily harm or pain and it was impossible for her to give consent. Restitution damages are recoverable pre and post contract There is no contract but that does not mean that there is not recovery This is a pre contractual agreement

Problem 135 Farmer McGregor contracted to sell 10,000 potatoes to the Potter Grocery Store. Both parties knew McGregor expected to grow the potatoes on his own farm, though the contract said nothing about the expected source of the potatoes. A tornado swept through McGregor's farm and destroyed the potato crop. Is this an excusing event under UCC 2-615? What if the problem was caused by rabbits?

Yes, the tornado and rabbits would be an unforeseeable event that excuses performance because the source of supply was McGregor's farm specifically. Failure of an intended supply is an excusing event if the term itself cannot be completed. When the parties intend source of supply, that will have a bearing on whether performance is excused or not.

Problem 146 When Mausolus was building a crematorium, he ordered 12,000 fancy bricks from Caria Brick Words, agreeing to pay $6,000 for them. Caria promised to deliver the bricks by the first of June. On the fifth of May, Caria delivered 6,000 of the bricks, informing Mausolus that the rest would be delivered shortly and presenting an invoice for $3,000. Mausolus refused to pay until all the bricks were delivered. Caria announced that unless Mausolus paid the bill, no further bricks would be delivered. Who is right?

Yes, there is a breach. Mausolus is right. According to UCC 2-307, all goods in a sale must be tendered in a single delivery unless otherwise agreed and payment is due only on such tender

Problem 62 Roderick Murgatroyd had always thought his family house was worth little because it was so old, and therefore he was surprised when Rose Maybud offered to buy it from him for $280,000. He signed the contract with her immediately. As he finished signing, he asked her why she was willing to pay so much for the property, and she replied, "Because it's worth twice the amount you have just sold it for, and I plan to enjoy the profit I'll make when I resell." Astounded, Roderick tore up the contract and told her that he was not going to sell her the property. When she sues, what damages should she ask for, considering that she never paid him a cent (although the property is worth $560,000)? Does the fact that she has paid nothing and has in no way made any expenditures in reliance on this contract furnish him with a defense?

You do not need to exchange cash for there to be a contract. There was an exchange of promises so there is a contract. Rose is losing the difference between the price she was going to pay and the price she was going to sell it for. Rose should ask for $280,000 (value at the time of the breach - the contract price)