PQ incorrect
vesting of beneficiary rights A widow and widower were engaged to be married. After some discussion as to how to pay for the wedding, the son of the widow and the daughter of the widower each orally agreed to give $50,000 to the other's parent as a gesture of approval of the upcoming union. The son and daughter shook hands in agreement as to the arrangement, but before either gift had been made, the two became embroiled in a serious disagreement, and both agreed to forego making the gifts. In spite of this, the son of the widow did make a gift of $50,000 to the widower at the time of the wedding. Soon after the marriage of the widow and widower, the widower died. Subsequently, the widow learned of the arrangement and sued the daughter of widower to compel her to pay $50,000. Is the widow likely to prevail?
No, because the agreement between the children was rescinded before the widow's rights vested. The widow was an intended beneficiary of the agreement between the children. In this case, she was the one to whom the promisee wished to make a gift of the promised performance. An intended beneficiary may sue a promisor to enforce the contract once her rights have vested. The rights of an intended beneficiary vest when the beneficiary (i) detrimentally or materially relies on the rights created; (ii) manifests assent to the contract at one of the party's request; or (iii) files a lawsuit to enforce the contract.
When the parol evidence is inapplicable A corporation entered into an agreement with an accountant to audit the corporation's books pending a sale of all of the company's assets. The agreement specified that the accountant would perform "all services relating to the sale of assets of the corporation." The agreement was fully integrated, but did not contain a merger clause. The day after the agreement was executed, the corporation and the accountant amended the agreement to include the evaluation of prospective buyers, for $2,000 per buyer. The accountant evaluated two corporations who were potential buyers. The corporation refused to pay the additional $4,000. In a breach of contract action, will evidence of the evaluation agreement be excluded?
No, because the agreement regarding the evaluation of prospective buyers was entered into after the execution of the writing. The parol evidence rule does not apply because the second agreement was entered into after the writing was executed; the rule only applies to agreements reached before or contemporaneous with the writing.
satisfaction of conditions A homeowner entered into an oral agreement with a landscaper to landscape the grounds surrounding her home for $75,000 while she was away for the summer. While the homeowner had described the overall effect that she wanted the landscaper to create as "stately," she left the choice of plants and other materials and their placement up to the landscaper. In order to secure the homeowner's assent, the landscaper promised her that she would be satisfied with the job or she would not have to pay him. Upon the homeowner's return in the fall, the landscaper sought payment from the homeowner. The homeowner refused to pay because, in her honest opinion, the landscaper had failed to create the effect she desired. The landscaper filed a breach of contract action to recover $75,000 from the homeowner. At trial, the landscaper offers evidence that the landscaping was done in conformity with standards set forth by a national organization of landscapers and testimony from several witnesses that the homeowner was being unreasonable because the grounds were stately. Will the landscaper likely prevail?
No, because the homeowner was not satisfied with the landscaping. When the aesthetic taste of a party determines whether the other party's performance is satisfactory (e.g., painting a family portrait), satisfaction is determined under a subjective standard. Under this standard, if the party is honestly dissatisfied, even if the dissatisfaction is unreasonable, the condition has not been met. However, the party's dissatisfaction must be in good faith, or a claim of dissatisfaction can be a breach, such as when a party is asserting dissatisfaction merely to avoid its own contractual obligation. Because the homeowner honestly believed that the landscaping was not stately, her duty to pay the contract price of $75,000 was excused.
Intended and incidental beneficiaries A toy company specialized in producing high-end toy racecars. Three months prior to the holiday shopping season, the toy company received an order of 50,000 racecars from a major retailer. The toy company immediately contracted with two of its major suppliers, a metalworking company and a paint company, to provide essential parts and paint for the racecars. The metalworking company and the paint company both were extremely busy with orders from other manufacturers, but agreed to supply needed parts and paint for the racecars. One month later, the metalworking company, without justification, informed the toy company that it would not be able to perform the contract. The toy company found a replacement metal parts supplier, but the new supplier was only able to provide 25,000 parts. Consequently, the toy company reduced its order with the paint company by 25,000 units. The paint company then sued the metalworking company, seeking the profits it lost because of the reduced order. The contract between the toy company and the metalworking company was silent on the issue of third-party liability. Is the paint company entitled to such relief?
No, because the paint company is not an intended beneficiary of the contract between the toy company and the metalworking company Under the Restatement (Second) of Contracts, a third party must be a vested intended beneficiary of a contract in order to enforce its provisions. In general, an intended beneficiary is one to whom the promise of the performance will satisfy the obligation of the promisee to pay money to the beneficiary or the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance. The promisee must have an intention (explicit or implicit) to benefit the third party, or the beneficiary is incidental.
Mutual assent A concert violinist received an offer by mail to play a concerto with a local symphony orchestra. She checked her schedule, and thinking that she had the date free, mailed a letter to the symphony orchestra accepting the offer. Later that day, as she was checking her calendar about another matter, she realized that she had a rehearsal for another performance on that date. The violinist called the orchestra manager and declined the offer to play the concerto. In a breach of contract action by the orchestra against the violinist, will the orchestra prevail?
Yes, because the acceptance was sent before the rejection phone call was made. The "mailbox rule" does apply in this situation. Under this rule, an acceptance creates a contract when it is sent, not when it is received. Even if an offeree sends an acceptance and later a rejection, the acceptance will control even if the rejection was received first, unless the offeror detrimentally relies on the rejection.
Defenses to formation A homebuyer was discussing the purchase of a house with the seller. Of particular concern to the buyer was whether the house had a termite problem. The seller, aware of the buyer's concern, ordered an inspection from a licensed inspection company. The company issued a report stating that the house was free of termites. In fact, the company's inspector was negligent, and the house's foundation had a modest termite problem. Relying on the report, the seller told the buyer that the house was free of termites. The buyer is seeking to avoid the contract. Will he prevail?
Yes, because the buyer reasonably relied on the misrepresentation. Even though the misrepresentation was not fraudulent, it nevertheless renders the contract voidable. Here, the buyer justifiably relied on a certified inspection, and it was a material misrepresentation because the presence of termites was a major factor in the buyer's decision.
Specific Performance A famous jazz pianist and a nightclub owner executed a contract that called for the pianist to perform at the nightclub five times per week for six months. The contract prohibited the pianist from giving public performances during the contract period at any other venue located within a specified distance of the nightclub. Three months into the contract term, the pianist received a more lucrative offer to play a series of shows at a restaurant located within the contractually prohibited area. The pianist accepted the offer. Upon learning about this arrangement, the nightclub owner filed a suit seeking an injunction to prevent the pianist from performing at the restaurant. The nightclub owner has made no attempt to hire another performer to replace the pianist. The judge determines that the contract restriction on the pianist is reasonable. Is the judge likely to grant the injunction?
Yes, because the restriction is a valid non-compete clause. The nightclub owner is seeking to enforce only the non-compete covenant in the contract. Courts rarely grant specific enforcement of contracts for personal services, but will restrain breaching parties from working for another when the contract contains a non-compete clause. Consequently, the court should grant the injunction.