ACCT248 Exam 2: Scenario Problems

a building contractor contracts with a homeowner to build a garage, the builder makes the usual test and begins construction. it is then discovered that the ground contains an important archeological find, which will cause considerable extra work for the builder to comply with the state and federal laws. this will add 30 percent to the costs and the builder will actually lose money on the deal at the current contract price. is there any legal theory under which the builder may be discharged from the contract if it exists

Impracticability still can be done but harder and more money unforeseen event

Joan, who is sixteen years old, moves out of her parents' home and signs a one-year lease for an apartment at Kenwood Apartments. Joan's parents tell her that she can return to live with them at any time. Unable to pay the rent, Joan moves to her parents' home two months later. Can Kenwood enforce the lease against Joan? Why or why not?

They cannot enforce the entire lease against Joan but can make her pay 2 months because of the shelter aspect of contracts.

Ball emails Sullivan and inquires how much Sullivan is asking for a specific forty-acre tract of land Sullivan owns. Sullivan responds, "I will not take less then $60,000 for the 40 acre tract as specified." Ball immediately sends Sullivan a fax stating "I accept your offer for $60,000 for the 40 acre tract as specified." Can Ball hold Sullivan to a contract?

No because he hasn't made an offer

State X requires that persons who prepare and serve liquor in the form of drinks at commercial establishments be licensed by the state to do so. The only requirement for obtaining a yearly license is that the person be at least twenty-one years old. Mickey, aged thirtyfive, is hired as a bartender for the Southtown Restaurant. Gerald, a staunch alumnus of a nearby university, brings twenty of his friends to the restaurant to celebrate a football victory one afternoon. Gerald orders four rounds of drinks, and the bill is nearly $600. When he learns that Mickey has failed to renew his bartender's license, Gerald refuses to pay, claiming that the contract is unenforceable. Discuss whether Gerald is correct.

No because he only needs to be 21 years old and he's 35.

A man walks into a barber shop and sits in one of the vacant chairs. He nods to the barber and rubs his three-day growth of beard. The barber begins giving the man a shave. Has the customer agreed to pay the barber, even though no words were exchanged?

Yes because it is an implied in fact contract (behavior shows intent)

Peggy Williams helped eighty-seven-year-old Melvin Kaufman care for Elsie Kaufman, his wife and Williams's great aunt, for several years before her death. Melvin then asked Williams to "take care of him the rest of his life." He conveyed his house to her for 10 dollars, and other good and valuable consideration," according to the deed, and executed a power of attorney in her favor. When Melvin returned from a trip to visit his brother, however, Williams had locked him out of the house. He Fled a suit in a Texas state court, alleging fraud. He claimed that he had deeded the house to her in exchange for her promise of care, but that she had not taken care of him and had not paid him the ten dollars. Williams admitted that she had not paid the ten dollars, but argued that she had made no such promise, that Melvin had given her the house when he had been unable to sell it, and that his trip had been intended as a move. Do these facts show fraud? If so, what would be the appropriate remedy?

Yes this is fraudulent misrepresentation recession of the contract

Taco Bell, Psycho Chihuahua case

it was an implied contract

Barry offers to sell Jane his HP laptop and promises her he will give her until noon the next day to accept. that evening their mutual friend cleo excitedly shows jane the hp laptop she just bought from barry. Did barry have an obligation to keep the offer open as he promised jean?

no she would have to have given him money (option contract) to hold it

a buyer makes a low offer to a car dealer who rejects it. after further discussion with the buyer the dealer says "you know your offer doesn't sound so bad now. Ill accept it" at this point the buyer does not want the car. does the dealer have a contract?

no because this is counteroffer (lack of mirror image rule)

Fred offers to sell ginger his car for 2000. ginger says "you've got a deal so long as you pay for the next oil change." do they have a contract?

no this is a counteroffer mirror image rule

Is a promise to make a gift enforceable? Why or why not? any exceptions?

no, no consideration charities yes is enforceable

What statue (really a group of provisions in various laws) dictates that certain types of contracts have to be in writing? What are those types of contracts

statute of frauds

As a general rule can an offeror revoke an offer? if so when? what are situations when an offer cannot be revoked?

yes as long as no performance done yet or payment contracts of marriage uc goods over 500 land/realestate things that in terms cannot be completed within one year

Costello hired Sagan to drive his racing car in a race. Sagan's friend Gideon promised to pay Sagan $5,000 if she won the race. Sagan won the race. , but Gideon refused to pay the $5,000. Gideon contended that no legally binding contract had been formed because he had received no consideration from Sagan in exchange for his promise to pay the $5,000. Saga sued Gideon for breach of contract, arguing that winning the race was the consideration given in exchange for Gideon's promise to pay the $5,000. What rule of law discussed supports Gideon's claim

Again is already supposed to win race and has pre existing contract with Costello to win

Ricky and Sherry Wilcox hired Esprit Log and Timber Frame Homes to build a log house, which the Wilcoxes intended to sell. They paid Esprit $125,260 for materials and services. They eventually sold the home for $1,620,000 but sued Esprit due to construction delays. The logs were supposed to arrive at the construction site precut and predrilled, but that did not happen. So it took five extra months to build the house while the logs were cut and drilled one by one. The Wilcoxes claimed that the interest they paid on a loan for the extra construction time cost them about $200,000. The jury agreed and awarded them that much in damages, plus $250,000 in punitive damages and $20,000 in attorneys' fees. Esprit appealed, claiming that the evidence did not support the verdict because the Wilcoxes had sold the house for a good price. Is Esprit's argument credible? Why or why not? How should the court rule?

Fraudulent Misrepresentation didn't give them what they asked for at all and they had out of pocket costs, espirit breached the contract, and the money they got from sale doesn't matter.

Melissa Faraj owns a lot and wants to build a house according to a particular set of plans and specifications. She solicits bids from building contractors and receives three bids: one from Carlton for $160,000, one from Feldberg for $158,000, and one from Siegel for $153,000. She accepts Siegel's bid. One month, after beginning construction of the house, Siegel contacts Faraj and tells her that because of inflation and a recent price hike for materials, he will not finish the house unless Faraj agrees to pay an extra $13,000. Faraj reluctantly agrees to pay the additional sum. Can Seixal legally enforce her to pay the added sum? What types of extraordinary difficulties that could arise during construction would justify a contractor charging more that the original bid?

No because you are supposed to factor in these things doesn't justify more money. Geographical things like sinkhole that you didn't know was there

John has been paying the property taxes on land that he reasonably believes he owns, Mary comes along after several years with a better title to the property and has john evicted. Is there any legal theory john may use to try and get reimbursed for the property taxes he has paid?

Quasi contract

Charter One Bank owned a fifteen-story commercial building. A fire inspector told.Charter that the building's drinking water and fire suppression systems were linked. Without disclosing this information, Charter sold the building to North Point Properties Inc. North Point spent $280,000 to repair the water and fire suppression systems and filed a suit against Charter One. Is the seller liable for not disclosing the building's defects?

Silence but this is something very important and a regular inspection would not uncover that information and because it is material Charter is liable

Before Maria starts her first year of college, Fred promises to give her $5,000 when she graduates. She goes to college, borrowing and spending far more than $5,000. At the beginning of the spring semester of her senior year, she reminds Fred of the promise. Fred sends her a note that says, "I revoke the promise." Is Fred's promise binding? Explain.

Yes, partial performance. Detrimental reliance

what are examples of something that would merit a specific performance remedy

something not easily replaceable

Ann posts a sign offering a reward for her lost ferret Slinky. Sam, who has seen the poster finds slinky on his back porch and brings the ferret back that day. is there a contract and what kind?

unilateral contract but there is none because he didn't see the offer

June 1 Chloe sends offer to Bruce. offer states the acceptance is valid on receipt by chloe june 3 bruce receives offer june 4 chloe changes her mind and sends revocation letter june 5 bruce sends acceptance by mail june 6 bruce gets revocation letter june 7 chloe gets acceptance letter

Mailbox rule does not apply because she said in the terms "acceptance is valid on receipt by chloe"

Daniel, a recent college graduate, is on his way home for the Christmas holidays from his new job. He gets caught in a snowstorm and is taken in by an elderly couple, who provide him with food and shelter. After the snowplows have cleared the roads, Daniel proceeds home. Daniel's father, Fred is most appreciative of the elderly couple's action and in a letter promises to pay them $500.00. The elderly couple, in need of funds, accept Fred's offer. Then, because of a dispute between Daniel and Fred, Fred refuses to pay the elderly couple the $500.00. Can the couple hold Fred liable in contract for the services they gave to Daniel?

NO past consideration is no consideration no bargain for consideration

While gambling at Prairie Meadows Casino, Troy Blackford became angry and smashed a slot machine. He was banned from the premises. Despite the ban, he later gambled at the casino and won 9,387. When he tried to collect his winnings, the casino refused to pay. He filed a suit for breach of contract, arguing that he and the casino had a contract because he had accepted its offer to gamble. Is there a contract between the casino and Blackford?

No

Sun Airlines, Inc., prints on its tickets that it is not liable for any injury to a passenger caused by airline's negligence. If the cause of an accident is found to be the airlines negligence can it use the clause as a defense to liability?

No because contrary to exculpatory clauses, this goes against public policy

Access Organics, Inc, hired Andy Hernandez to sell organic produce. Later, Hernandez signed an agreement not to compete with Access for 2 years following the termination of his employment. He did not receive pay increase or any other new benefits in return for signing the agreement. When Access encountered financial trouble, hernandez left and began to compete with his former employer. Access filed a lawsuit against him. Is noncompete agreement enforceable?

No because he did not get anything in return to not compete. so NO consideration

Dana tells Ed that she will pay him $1000 to set fire to her store so that she can collect under a fire insurance policy. Ed sets fire to the store, but Dyna refuses to pay him. Can ed recover?

No because this was illegal so void contract meaning there is none

The Baton Rouge Crime Stoppers ( BCS) offered a reward for information about the " South Louisiana Serial Killer." The information was to be provided via a hot line. Dianne Alexander had survived an attack by a person suspected of being the killer. She identified a suspect in a police photo lineup and later sought to collect the reward. BCS refused to pay because she did not provide information to them via the hot line. Did Alexander comply with the terms of the offer?

No she didn't it had to be done via hotline

Fred tells Gracie he will sell her his bike for $400 and promises to giver her three days to make up her mind. On the second day without telling Gracie, he sells it instead to Monty. Does Gracie have any recourse against Fred? If not, how might she have locked in Fred's promise to giver her three days to decide?

No, he revoked by selling to someone else. If she made an option contract and paid him to hold it in the mean time

Fidelity Corporation offers to hire Ron to replace Monica, who has given Fidelity a month's notice of intent to quit. Fidelity gives Ron a week to decide whether to accept. Two days later, Monica decides not to quit and signs an employment contract with Fidelity for another year. The next day monica tells Ron of her new contract. Ron immediately faxes a formal letter of acceptance to Fidelity. Do Fidelity and Ron have a contract?

No, revocation was implied

A famous New York City hotel, Hotel Lux, is noted for its food as well as its luxury accommodations. Hotel Lux contracts with a famous chef, Chef Perlee, to become its head chef at $30,000 per month. The contract states that should Perlee leave the employment of Hotel Lux for any reason, he will not work as a chef for any hotel or restaurant in New York, New Jersey, or Pennsylvania for a period of one year. During the first six months of the contract, Hotel Lux extensively advertises Perlee as its head chef, and business at the hotel is excellent. Then a dispute arises between the hotel management and Perlee, and Perlee terminates his employment. One month later, he is hired by a famous New Jersey restaurant just across the New York state line. Hotel Lux learns of Perlee's employment through a large advertisement in a New York City newspaper. It seeks to enjoin (prevent) Perlee from working in that restaurant as a chef for one year. Discuss how successful Hotel Lux will be in its action.

Not very, because it is a highly unreasonable request since its not even the same state, but could win the border line of NJ would prevail that is more reasonable.

A person tries to avoid (that is, not complete his side of) a contract by claiming he was not making a serious offer. "I was joking!" What standard will a judge apply in determining whether that person should be able to walk away from the agreement?

Objective Theory of Contracts (analyzing if they are serious and would a reasonable person believe that person was being serious)

Paul orally agrees to work with the Next Corporation in NY for 2 year. Paula moves her family and begins work. 3 months later, paula is fired for no stated cause. she sues for reinstatement and back pay. Next Corporation argues that there is no written contract between them. What will the court say?

although it couldn't be completed in one year and should have been in writing Promissory Estipol will be argued

Schmidt, the owner of a small business, has a large piece of used fair equipment for sale. He offers to sell the equipment to Barry for $10,000. Schmidt dies prior to Barry's acceptance, and at the time he accepts Barry is unaware of Schmidt's death The night before Barry accepts, fire destroys the equipment Barry pays $100 for a 30 day option to purchase the equipment. During this time Barry dies and later Barry accepts offer, knowing of his death. Barry pays $100 for a 30 day option to purchased the equipment. During this period Barry dies and Barrys estate accepts Schmidts offer within the time frame

no operation of law (Death) no operation of law (destroyed) Yes ( b/c option contract) yes ( b/c option contract)

Ruth offers Ed a minimum wage job but agrees to sweeten the deal with fair share of profits if he does well. the business is successful but ruth refuses to pay ed. is there a contract? if not is there any way ed might be able to pursue a remedy?

no the terms are too vague. Promissory epistopal

What are some examples of commercial impracticality of performance? does an increase in ones sides costs constitute commercial impracticability allowing a party to get out of a contract or demand more money

no you cannot get out of contract

Joanne is a seventy-five-year-old widow who survives on her late husband's small pension. Joanne has become increasingly forgetful, and her family worries that she may have Alzheimer's disease. No physician has yet diagnosed her as having Alzheimer's, however, and no court has ruled on Joanne's legal competence. One day while she is out shopping, Joanne stops by a store that is having a sale on pianos and enters into a fifteen-year installment contract to buy a grand piano. When the piano arrives the next day, Joanne seems confused and repeatedly asks the delivery person why a piano is being delivered. Joanne claims that she does not recall buying a piano. Can joanne avoid her contract for the pain? is the contract likely to be called, voidable, or void

voidable shows signs of mental impairment, would be void if she was already declared mentally impaired by a court but she was not.

June 1: offeror sends offer by mail (no mention of when acceptance is valid) June 3: offeree receives the offer June 4: offeror changes mind and sends revocation letter June 5: offeree drops her acceptance letter in the mailbox June 6: Offeree receives the offeror revocation letter is there a contract?

yes because acceptance letter was put in mailbox before revocation was received and in that instance putting it in the mailbox was the acceptance

Steven Simkin married Laura Blank in 1973. when they divorced in 2006, they agreed to split their assets equally. At the time of the agreement, both parties believed that they owned an account with Bernard L. Madoff investment securities worth $ 5.4 million. Simkin kept the account and paid his wife more than $ 6.5 million including $ 2.7 million to offset the amount of funds they thought were in the account. Later they learned that the account actually contained no funds due to Madoffs fraud. Could their argument be rescinded on the basis of mistake

yes because mutual mistake of fact (subject matter is the issue)

On jan 2 Mike sends joe an offer which is received on jan 4 on jan 3 mike sends revocation of offer. joe sends an acceptance of the offer on jan 5 and receives revocation jan 6. do they have a contract?

yes mailbox rule accepted when put acceptance in mailbox ad not otherwise stated in terms

Anne is a reporter for Daily Business Journal a print publication consulted by investors and other businesspersons. She often uses the Internet to per-form research for the articles that she writes for the publica-tion. While visiting the Web site of Cyberspace Investments Corp., Anne reads a pop-up window that states, "Our business newsletter, E-Commerce Weekly, is available at a one-year subscription rate of $5 per issue. To subscribe, enter your e-mail address below and click 'SUBSCRIBE.' By subscribing, you agree to the terms of the subscriber's agreement. To read this agreement, click 'AGREEMENT.' " Anne enters her e-mail address, but does not click on "AGREEMENT" to read the terms. Has Anne entered into an enforceable contract to pay for E-Commerce Weekly? Explain.

yes she accepted terms