R6 Optional

In general, a clause in a real estate contract entitling the seller to retain the purchaser's downpayment as liquidated damages if the purchaser fails to close the transaction, is enforceable:

A clause in a contract that provides for liquidated damages will be enforceable if the amount of the damages clause bears a reasonable relationship to the probable loss. Liquidated damages clauses will not be enforced where they are so high as to constitute a penalty.

Express Warranty

An "express" warranty is created by the seller's description of the goods which forms part of the basis of the bargain between the parties. The "express" warranty does not require that the seller select goods knowing the buyer's intended use.

To prevail in a common law action for innocent misrepresentation, the plaintiff must prove:

Innocent misrepresentation may be used as a defense in contract action. It requires proof of the same elements as fraudulent misrepresentation except for intent. Thus, it requires proof of a material misrepresentation of fact, and intent to reduce reliance, actual and justifiable reliance by the contracting party, and damages.

Graham contracted with the city of Harris to train and employ high school dropouts residing in Harris. Graham breached the contract. Long, a resident of Harris and a high school dropout, sued Graham for damages. Under the circumstances, Long will:

Only intended third party beneficiaries can enforce a contract. To qualify as an intended third party beneficiary, there must be an intent to give a benefit directly to the third person. The contract here calls for Graham to hire and train drop outs. It would be unreasonable to assume that he would have to hire and train all drop outs. Therefore, the contract does not intend to directly benefit any particular drop out, so Long cannot qualify as an intended beneficiary. At best, Long is an incidental beneficiary and as such unable to enforce the contract between Graham and the city. For this reason choice "c" is incorrect.

Dunne and Cook signed a contract requiring Cook to rebind 500 of Dunne's books at 80¢ per book. Later, Dunne requested, in good faith, that the price be reduced to 70¢ per book. Cook agreed orally to reduce the price to 70¢. Under the circumstances, the oral agreement is:

Since this contract is for services (rebinding books) the agreement is governed by the common law of contracts. Under the common law of contracts a contract modification is treated like a separate contract and requires consideration. Nevertheless, proof of the modification would be admissible into evidence. The parol evidence rule prohibits introduction of prior or contemporaneous oral statements and prior written statements to vary the terms of a fully integrated written contract (i.e., one purporting to reflect the whole agreement). It does not prohibit introduction of evidence of subsequent agreements, such as the modification here.

Opal offered, in writing, to sell Larkin a parcel of land for $300,000. If Opal dies, the offer will:

The death of an offeror prior to acceptance terminates the offer by operation of law without notice to the offeree.

Jefferson Hardware ordered three hundred Ram hammers from Ajax Hardware. Ajax accepted the order in writing. On the final date allowed for delivery, Ajax discovered it did not have enough Ram hammers to fill the order. Instead, Ajax sent three hundred Strong hammers. Ajax stated on the invoice that the shipment was sent only as an accommodation. Which of the following statements is correct?

The examiners were trying to trick you here. Under the Sales Article, an offer can be accepted by shipment, and shipment of nonconforming goods can constitute both an acceptance and an immediate breach unless the seller had notified the buyer that nonconforming goods would be shipped as an accomodation. The accomondation rules does not apply here since reasonable notice was not provided that nonconforming goods would be shipped as an accomondation to the buyer. Thus, the shipment of a different brand of hammers constitutes a breach of contract.

In 1959, Dart bought an office building from Graco under a written contract signed only by Dart. In 1991, Dart discovered that Graco made certain false representations during their negotiations concerning the building's foundation. Dart could have reasonably discovered the foundation problems by 1965. Dart sued Graco claiming fraud in the formation of the contract. Which of the following statements is correct?

The statute of limitations on Dart's fraud claim will begin to run when Dart reasonably could have discovered the fraud (1965). The limitations period on most contracts claims generally varies from four to six years. Here, Dart waited about 26 years before bringing his claim, and the statute of limitations surely would have expired before he filed.

Under common law and under the UCC Sales Article, a plaintiff who proves fraud in the formation of a contract may:

Under common law and under article 2 of the UCC a plaintiff who establishes fraud in the formation of sales contract may act to rescind the contract and also seek to collect damages for the fraud.