Legal Environment Exam 2

Tara is building an artificial beach at her lakefront resort. She agrees in writing to buy 1,000 tons of sand from Franco for $20 per ton, with delivery on June 1, at her resort. Franco fails to deliver any sand, and Tara is forced to go elsewhere. She buys 1,000 tons from Martina at $25 per ton and then is forced to pay Walter $5,000 to haul the sand to her resort. Tara sues Franco. Tara will recover:

$10,000

Sarah, age 17, uses $850 of her hard-earned, summer-job money to pay cash for a diamond pendant for the senior prom. She has a wonderful time at the dance, but decides the pendant was an extravagance, returns it, and demands a refund. The store has a "no refund" policy that is clearly stated on a sign on the wall. There was no defect in the pendant. The store refuses the refund. When Sarah sues, she will:

Win $850

Liesl purchased an insurance policy on her house. The policy stated that the insurance company was not liable for any damage to her house caused by vandalism or burglary. An arsonist burned down Liesl's house. Is the insurance company liable?

Yes because the language is ambiguous and should be interpreted against the insurance company.

Daniel and Annie signed a contract providing that Daniel would lend $50,000 to Annie's craft beer business at an interest rate of 8 percent. During negotiations, Daniel and Annie agreed that the interest rate would go down to 5 percent once she had sold 25,000 cases. This provision never made it into the contract. After the contract was signed, Daniel orally agreed to reduce the interest rate to 6 percent once volume exceeded 15,000 cases. The contract had an integration provision but no modification clause. Annie has sold 30,000 cases. What interest rate must she pay?

6 percent

Which of the following amounts to an offer?

All of these

Ted's wallet is as empty as his bank account, and he needs $3,500 immediately. Fortunately, he has three gold coins that he inherited from his grandfather. Each is worth $2,500, but it is Sunday, and the local rare-coin store is closed. When approached, Ted's neighbor Andrea agrees to buy the first coin for $2,300. Another neighbor, Cami, agrees to buy the second for $1,100. A final neighbor, Lorne, offers "all the money I have on me"—$100—for the last coin. Desperate, Ted agrees to the proposal. Which of the deals is supported by consideration?

All three of the agreements

Arnold, a contractor, enters into an agreement with Oswald to build a house for Oswald. In the agreement, Arnold promises to build the house to Oswald's specifications. Oswald agrees to pay for the work on completion according to the terms set out in the agreement. Arnold states that he is licensed by the state contractors licensing board. Which of these statements are covenants?

Arnold promises to build the house to Oswald's specifications. Oswald agrees to pay for the work on completion according to the terms set out in the agreement.

The agreement between Bob and Cathy says nothing about assignment. May Bob assign his claim to Hardknuckle?

Bob may assign his claim without Cathy's agreement.

Bob, a mechanic, claims that Cathy owes him $1,500 on a repair job. Bob wants to assign his claim to Hardknuckle Bank. The likeliest reason that Bob wants to do this is:

Bob owes Hardknuckle Bank money.

In February, Chuck orally agrees to sell his hunting cabin, with 15 acres, to Kyle for $35,000, with the deal to be completed in July, when Kyle will have the money. In March, while Chuck is vacationing on his land, he permits Kyle to enter the land and dig the foundation for a new cottage. In July, Kyle arrives with the money, but Chuck refuses to sell. Kyle sues.

Chuck wins because the contract was never put in writing.

A contract states that Buzz Co. legally exists and will provide 2,000 pounds of wild salmon each week. Which of the following statements is true?

Clause 1 is a covenant, and Clause 2 is a representation.

Adina owns Yogi's Yogurt in Fort Smith, Arkansas. Adina sells the yogurt shop to Dagmar. The contract for the sale of the business includes a clause that prohibits Adina from owning or working in any restaurant in Arkansas for two years from the date of the sale. One year after the sale is completed, Adina opens a steakhouse in West Memphis, Arkansas, which is 300 miles from Fort Smith. If Dagmar sues Adina for breaching the terms of the contract:

Dagmar will probably lose because the covenant not to compete is too restrictive.

Darien has finished the computer installation he promised to perform for Denise, and she has paid him in full. This is:

an executed contract

Maryanne offers to sell her 2015 Mustang convertible to April for $15,000, and April agrees to those terms. April brings the $15,000 to Maryanne, and Maryanne promises to deliver the Mustang to April the next day after she has it detailed. At this point, Maryanne and April have:

an executory contract.

Jones Construction Company is building a series of new subdivisions in Newtown over the next two years. Jones enters into a verbal agreement with Harley Concrete Inc. to construct all the driveways and sidewalks in the subdivisions that Jones will be building. Jones and Harley agree on a price of $130 per cubic yard and that Jones will pay Harley at the end of each project. Harley completes the first project, which is four sidewalks and sixteen driveways, and bills Jones for the project. Jones decides that the price is too high and refuses to pay, claiming that they have no obligation to pay because the parties did not have a valid contract. If Harley sues Jones for payment the court would probably:

apply quasi contract theory and award the fair market value of the work that Harley completed.

Owen offers to sell his motorcycle to Julian for $5,000. After he makes the offer, Owen has second thoughts. Owen can revoke the offer to sell his motorcycle to Julian:

as long as Julian has not yet accepted the offer.

A contract for the sale of $300 worth of decorative stone must be in writing to be enforceable.

FALSE

If an offer demands a reply within a stated period, the offeree's silence indicates acceptance.

FALSE

Homers Frozen Foods has a two-year contract with Johnson Farms to purchase all the russet potatoes that Johnson can produce for two dollars per kilogram. When the price of potatoes goes up during the second year of the contract, Johnson Farms breaches its contract with Homers and sells its potatoes to Land of Lakes Foods. Homers purchases the potatoes it needs from Homegrown Farms at a price of three dollars per kilogram. If Homers sues Johnson Farms for breach of contract, the likely result will be:

Johnson Farms will have to pay Homers one dollar per kilogram for the potatoes that Homers purchases from Homegrown Farms during the remainder of the contract.

Marion orally agrees to sell Ashley her condominium in Philadelphia for $700,000. The parties have known each other for 20 years and do not bother to put anything in writing. Based on the agreement, Marion hires a moving company to pack up all her goods and move them to a storage warehouse. Ashley shows up with a cashier's check, and Marion says, "You're going to love it here." But at the last minute, Marion declines to take the check and refuses to sell. Ashley sues and wins:

Nothing

Ruby, a seventeen-year-old, purchases a car from Smitz Used Auto Sales and agrees to pay for it over a period of twenty-four months. Ruby makes the payments for four months but then decides the car payment is too much for her limited budget. Ruby tells Smitz that she wants to stop making payments and that she wants out of the contract completely. The contract between Ruby and Smitz can be canceled by:

Ruby, because she is a minor, but Ruby must return the car.

A court is unlikely to enforce an exculpatory clause included in a contract for surgery.

TRUE

A party who delegates duties remains liable for contract performance.

TRUE

A seller of property must generally disclose latent defects that they know about.

TRUE

The description of products in promotional materials can create express warranties.

TRUE

Unless the contract provides otherwise, both sides in a contract dispute pay their own legal fees.

TRUE

Where one party has clearly breached, the injured party must mitigate damages.

TRUE

Without a meeting of the minds there cannot be a contract.

TRUE

Harold offers to sell Emma his farmland in Bryson County. After discussing the sale at length in front of their friends Nicole and Jackson, Harold and Emma orally agree on a price of $120,000 for the land. The next day, Emma goes to the bank and withdraws $120,000 to pay Harold for the land. When Emma presents the $120,000 to Harold, Harold tells Emma he was just joking and does not wish to sell the land. Emma tries to enforce the deal, and Harold continues to refuse by saying that the deal was not in writing, and, therefore, it is unenforceable. The contract between Harold and Emma for the sale of the land:

is not enforceable because it violates the statute of frauds.

Michael and Scarlett cannot agree on the price he will pay her to manage his hotels in the third year of their contract. They agree to a provision stating that the price will be "reasonable." Which of the following statements is correct?

vague; they are sure they will be able to reach an agreement later

Manufacturer sells a brand-new, solar-powered refrigerator. Because the technology is new, Manufacturer sells the product "as is." Plaintiff later sues Manufacturer for breach of warranty and wins. Plaintiff is probably a:

A consumer

Arvitz and Siri have been friends for thirty years. Arvitz agrees to sell Siri a fifty percent ownership in his bait and tackle shop for $50,000. Because they are such good friends, Arvitz thinks they do not need to contact a lawyer to draw up an agreement; after all, a partnership can be created without a formal written agreement. Siri thinks it would probably be a good idea to have a lawyer draft an agreement, so he contacts Attorney Frost about drawing up the contract. What is Attorney Frost's primary goal in drafting the contract?

Attorney Frost's primary goal in drafting this contract is to protect Siri from litigation, or, if litigation does occur, making sure the contract has been drafted in such a way that Siri wins.

Consider the following: Madison says to a group of students, "I'll pay $35 to the first one of you who shows up at my house and washes my car." Jenny posts: "Reward: $500 for information about the person who keyed my truck last Saturday night in the Wag-a-Bag parking lot. Call Jenny at 867-5309." Which of these proposes a unilateral contract?

Both I and II

Danny hires Evelyn to install a swimming pool at Danny's home for $40,000, to be completed by June 1. Evelyn completes the job on time. When Danny inspects the pool, he discovers that Evelyn used a vinyl lining, and the contract called for a fiberglass lining. Danny refuses to pay Evelyn, stating that Evelyn breached the contract because the contract was not completed according to the specifications stated in the contract. If Evelyn sues Danny for the contract price:

Evelyn will probably receive the contract price less the cost to replace the pool liner with a fiberglass liner.

A force majeure clause indicates who has the authority to write the first draft of the contract

FALSE

Abdul hires Sean to work in his office and agrees to pay him $9 per hour. This agreement is governed by the Uniform Commercial Code.

FALSE

An agreement for the sale of 600 plastic cups, worth $0.50 each, must be in writing to be enforceable.

FALSE

An agreement for the sale of a house does not need to be in writing if the deal will be completed within one year.

FALSE

An agreement to sell cocaine is a voidable contract.

FALSE

Contract dates and deadlines are strictly enforceable unless the parties agree otherwise.

FALSE

For a modification to a contract to be valid, both parties must sign it.

FALSE

In a contract for the sale of goods, the offer may include any terms the offeror wishes; the offeree must accept on exactly those terms or reject the deal.

FALSE

Sellers can be bound by written warranties but not by oral statements.

FALSE

The same states must be named in the Choice of Law and Choice of Forum provisions.

FALSE

To be enforceable, all contracts must be in writing.

FALSE

Tobias is selling a surrealist painting. He tells Maud that the picture is by the famous French artist Magritte, although in fact Tobias has no idea whether that is true or not. Tobias's statement is:

Fraud

Otto orally agrees to install three wells for Green Space Energy over the next eighteen months. When the three wells are completed, Green Space Energy will pay Otto $10,000. After the first well is completed, Green Space Energy tells Otto that it does not want any more wells. Green Space Energy refuses to pay Otto for the first well, claiming that the contract was not in writing and, therefore, not enforceable. If Otto sues Green Space Energy to enforce the contract:

Green Space Energy will have to pay Otto a reasonable price for the one well that was installed.

In which case is a court most likely to enforce an exculpatory clause?

Hang gliding

Which of the following conditions must be met for an implied warranty of fitness for a particular purpose to arise? The warranty must be in writing. The seller must know that the buyer was relying on the seller in selecting the goods.

II only

An example of true impossibility is:

Illegality

A contract provided, "On January 5, Purchaser shall provide Seller with a certified check in the amount of $100,000. Seller shall transfer a deed for the Property to Purchaser." What is wrong with this provision?

It is not clear who Purchaser and Seller are.

Midwest Life Insurance sells a life insurance policy to Thiago. Under the terms of the contract between Thiago and Midwest Life, Thiago will pay $75 per month for the policy, and, upon Thiago's death, Midwest Life will pay $100,000 to Laurelei. Four years later, Thiago dies, and Midwest refuses to pay under the terms of the policy. The party entitled to sue Midwest for its failure to honor the terms of the contract is:

Laurelei, because she is a donee beneficiary.

Which one of the following transactions is not governed by Article 2 of the UCC?

Leasing an automobile worth $35,000

Annalisa calls Will and says, "I'm desperate for a web designer. I'll pay you $25,000 if you can start building my website tomorrow morning and finish it within three months. What do you say?" "It's a deal," says Will. "I can start tomorrow at 8:00 a.m. and finish it by the deadline. I'll take $25,000, and I also want 10 percent of any profits you make above last year's." Before Annalisa answers, Will loses cell phone signal and the call is dropped. The next morning Will starts working, but Annalisa refuses to hire him. If Will sues immediately, he will:

Lose, because he rejected the offer.

Selma wants to buy Matilda's house. Selma has been admiring the house for a long time and has asked Matilda repeatedly to sell the house to her, but Matilda has always refused. Finally, Selma tells Matilda that if Matilda does not sell Selma the house, Selma will kill Matilda's daughter. Afraid for her daughter's life, Matilda signs the contract to sell the house to Selma. If Matilda later tries to rescind the contract:

Matilda may rescind the contract on the grounds that she signed the contract under duress.

Museum schedules a major fundraising dinner, devoted to a famous Botticelli painting, for September 15. Museum then hires Valentina to restore the picture, her work to be done no later than September 14. Valentina is late with the restoration, forcing Museum to cancel the dinner and lose at least $500,000 in donations. Valentina delivers the picture, in excellent condition, two weeks late. Museum sues.

Museum will win if, when the parties made the deal, Valentina knew the importance of the date.

Geraldo is the owner/manager of Geraldo's Cleaning Service, a firm that cleans office building. Geraldo has a team of seven employees who do a fantastic job. To encourage them to keep up the good work, Geraldo tells his employees that if they continue to work hard until the end of the quarter and if he is pleased with his profits at the end of the quarter, he will give them each a $100 bonus. At the end of the quarter, the company's profits were extremely high. Will Geraldo have to make good on his promise of a $100 bonus for each employee?

No, Geraldo will not have to award the bonuses because his offer of a $100 bonus if he is pleased with his profits was an illusory promise.

Jane decides to terminate her position with Roseworld Flowers after six years of employment. When Jane was hired, she signed Rosewood's standard employee agreement. In the agreement, Jane agreed not to work for a competitor in the same county for three years. Three months after Jane terminates her employment, she begins work for Tipton Florist, a florist in the same county as Roseworld. Roseworld sues Jane for violating the terms of her employee agreement because she went to work for a competitor less than three years after her termination with Roseworld. Jane defends by stating that the agreement prohibited her from working for a competitor in the same county for three years from the date of the agreement, which was six years ago. Will Roseworld be successful in its lawsuit against Jane?

No, Roseworld will not be successful in its lawsuit against Jane because the contract is ambiguous.

Seller's sales contract states: "The model 8J flagpole will withstand winds up to 150 mph, for a minimum of 35 years." The same contract includes this: "This contract makes no warranties, and any implied warranties are hereby disclaimed." School buys the flagpole, which blows down six months later in a 105-mph wind.

Seller is liable because the disclaimer was invalid.

A contract may not be rescinded based on puffery.

TRUE

A severability provision asks the court simply to delete the offending clause and enforce the rest of the contract.

TRUE

Courts award the expectation interest more often than any other remedy.

TRUE

Non-compete clauses are suspect because they tend to restrain free trade.

TRUE

Louise emails Sonya, "I will sell you my house at 129 Brittle Blvd. for $88,000, payable in one month. Best, Louise." Sonya emails back, "Louise, I accept the offer to buy your house at that price. Sonya." Neither party prints a copy of the two emails.

The parties have a binding contract for the sale of Louise's house.

The following list provides reasons why a party would strongly consider putting a contract in writing. Which of these reasons is LEAST important?

The parties reside in different jurisdictions.

Wilton World is a huge hotel chain. The Wilton World Hotel in San Francisco wants to hire a local artist to paint some landscapes of the Bay area to display in its hotel. Carl contacts the San Francisco Wilton World manager and shows them samples of his paintings. The manager is very pleased with Carl's work and offers Carl $5,000 to paint six landscape paintings. Carl eagerly accepts, so they begin to discuss who should draft the contract. The contract will probably be drafted by:

Wilton World's attorney.

Nadia needs help running her bakery. Nadia contacts her friend Zoey, who has baking experience but lives in another state, and offers Zoey a job. Nadia orally promises Zoey that she will employ Zoey for at least two years. Zoey quits her job in the other state, moves her family, and begins to work for Nadia. After three months, Nadia terminates Zoey's employment. Zoey sues Nadia, claiming they had a contract for two years. If Nadia defends the lawsuit by claiming the contract could not be enforced because it violates the statute of frauds, the court will likely hold in favor of:

Zoey, under the theory of promissory estoppel.

Hyster Material Handling sells 300 order pickers to Amazon. The order pickers cost $25,000 each, and each comes with a maintenance contract that costs $2,000 per year. After six months, a dispute arises between the parties when Hyster fails to perform all the monthly maintenance required under the contract, and Hyster decides to sue. Because the contract covers both goods and services, to determine what law applies to this contract the court will:

apply the predominant-factor test and determine that UCC Article 2 applies.

Lorenzo and Antonio agree that Antonio will buy Lorenzo's Go Cart Fun Park for $300,000. Lorenzo asks his lawyer to draft the contract. Lorenzo is surprised when the contract that the attorney drafts contains more than the description of the property, the price, and the payment terms. The contract also contains paragraphs that describe the choice of law and forum, how the contract can be modified, terms for assigning rights and delegating duties under the contract, and an arbitration clause. Lorenzo's lawyer explains to Lorenzo that these are boilerplate, and that they are important because:

boilerplate creates a private law that governs disputes between the parties.

Reginald hires Sophia to deliver pizzas for his restaurant. All goes well at first. But one night, Sophia decides to go to a concert instead of delivering pizzas. She delegates her delivery tasks to Rosemary, who accepts the delegation and agrees to deliver the pizzas. However, instead of delivering the pizzas, Rosemary takes the pizzas home to her family. At the end of the evening, Reginald has many unhappy customers, and wants to sue for breach of contract to recover the income he lost for the evening. Reginald should be able to sue:

both Sophia and Rosemary.

Mia contracted with Greencare Lawn Service for a pest treatment on Mia's lawn for $1,000. Pat lives next door to Mia. Greencare mistakenly treats Pat's lawn instead of Mia's. When Greencare seeks payment from Pat, Greencare can probably receive:

from Pat an amount less than the contract amount that will reimburse Greencare for expenses incurred

Best Dollar Store publishes an advertisement in the local newspaper promoting its new baby diapers that are good for the environment. The advertisement states that the diapers are made from entirely biodegradable materials and that each diaper will completely biodegrade within two months and become a natural part of the soil. Leon is very concerned about the environment and has created a compost heap in the pasture behind his home. Leon purchases a package of the diapers for his child, and, as they are soiled, he adds them to the compost heap. Six months later, the diapers have not even begun to degrade. Best Dollar Store has violated:

its express warranty that the diapers will biodegrade within two months.

Jody is obligated under a contract to deliver 100,000 plastic bottles to a spring water company. Jody's supplier has just gone bankrupt; any other suppliers will charge her more than she expected to pay. This is:

legally irrelevant.

Lydia promises to sell ten designer evening gowns to Beth, owner of Beth's Prom Shop, for $5,000. Each gown is a one-of-a-kind original that Beth specifically picked out from Lydia's inventory. Lydia decides she can get more money for the gowns if she takes them to New York to sell, so Lydia notifies Beth's Prom Shop that she is canceling the deal. If Beth sues Lydia for breach of contract, the court will likely:

require Lydia to honor the contract and sell the evening gowns to Beth.

Milo is the owner of a sporting goods store that has only been open for three months. The holiday season is coming up, and Milo realizes that he will need extra help. Milo asks his friend Jess to help him out at the store. Milo and Jess agree that Jess will work during the months of November and December. However, because Milo is unsure how much help he will need and how much he will be able to pay, they agree to decide each week on the hours that Jess will work for the following week, and to decide the hourly rate after Jess has worked two weeks before she receives her first paycheck. Just before November 1, Jess takes a job at another store. If Milo tries to sue Jess for breach of contract, the court will probably decide:

that the parties had no contract because the terms of the offer were not definite.

Angelo owns Computer Hut, where he sells computers, printers, scanners and copiers. Basil visits Angelo's store and purchases a computer and printer. While Basil is completing the purchase, he notices a mountain bike chained up in the corner of the store with a for-sale sign on it and inquires about the bike. Angelo explains to Basil that this is Angelo's personal mountain bike, and he has decided to sell it because he never has time to go biking. Basil agrees to buy the mountain bike for $300. If a dispute later arises between Angelo and Basil, Angelo would be held to the stricter standards of a merchant for:

the sale of the computer and printer only.

Miguel, a Capitol Hill news correspondent, announces to a group of five reporters: "I'll pay $2,000 to the first reporter who finds definitive evidence that Senator Doe smoked marijuana before the Senate hearing last Friday." Anna, the first reporter to produce the evidence, claims the money based on:

unilateral contract.