contracts 2 problems

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. One that date, the town of Troy told Helen to stop construction on the bourse. 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?

$24,000 (contract price) - $20,000 (cost) = $4,000 (profit/expectation) $15,000 (materials) - $5,000 (payment) - $2,000 (salvage) = $8,000 (out of pocket) $8,000 (out of pocket) + $4,000 (profit/expectation) = $12,000 (loss in expectation value)

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).

$350

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?

An injunction may be adequate to prevent Sammy Stocks from playing from another team.

Problem 192 Instead of the above, the original contract Armstrong signed with the spa provided that "Any problems the customer has with the spa will be settled by negotiations with the spa's management alone, and will in no way be asserted against any finance company to whom this obligation may be assigned." Is such a clause (called a waiver of defenses against assignee clause) valid to insulate the finance company from the same defense, i.e., the destruction of the spa by fire? Read UCC §9-403.

Article 9 validates clauses so they are enforceable, but they are outlawed by most states.

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).

Cannot recover from unjust enrichment because one cannot manufacture a remedy.

Problem 182 After Armstrong had worked out at the spa for six months, it changed ownership. The new owners agreed with the old owners to honor all existing contracts with the spa's customers. Label the type of the transaction and the parties to it.

Delegation of duties Obligee: Joseph Armstrong Delegator: Wonder Spa Delegatee: new owner

Problem 183 Fox borrowed $300 from Holly and promised to repay Lawrence, a creditor to whom by chance Holly owed the same amount. Holly then told Lawrence about the new loan; Lawrence just grunted. When the debt from Fox came due, Lawrence contacted Fox and asked him when he could expect payment. Fox replied that he was financially embarrassed just at present. Lawrence then called Holly and told him all this. Holly replied that because Fox had promised to pay this debt, Holly felt that he no longer owed it, and Lawrence should look only to Fox for repayment. Is this consistent with the law? See First American Commerce Co. v. Washington Mutual Savings Bank, 743 P.2d 1193 (Utah 1987).

Delegation of duties does not relieve delegator from performance obligation

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?

Depends on which approach the court decides to take.

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?

He should not recover because he did not fulfill his end of the bargain.

Problem 133 Hiram Walker contracted to sell T. C. Sherwood a cow called Rose of Aberlone. Prior to the date of delivery, Rose died. Is Walker in beach of contract? See UCC §2-613. What if Rose is very sick on the delivery date? What if Hiram Walker died before the delivery date?

If Rose dies prior to the date of delivery, Walker is not in breach of contract because he was not at fault. If Rose is very sick on the delivery date, Sherwood can either avoid the contract or accept for a lower price and remove the seller's liability. If Walker dies before the delivery date, there is still an obligation for Sherwood to receive the cow since it is alive and well.

Problem 146 When Mausolus was building a crematorium, he ordered 12,000 fancy bricks from Caria Brick Works, 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?

Mausolus

Problem 69 The Garland Coal Company signed a contract with Willie and Lucille Peevyhouse by which they agreed to let the company strip mine their farm at an agreed price. Garland also agreed to restore the land to its former appearance at the conclusion of the mining. When it failed to do so, offering instead to pay the Peevyhouses $300 (this being the market value lost by the failure to replace the strip mines), the Peevyhouse immediately hired another company to cover up the strip mines. This work cost $29,000. The Peevyhouses then brought suit against the Garland Coal Company for that amount. Should they recover it?

No, the cost is grossly disproportionate to the increased value of the farm. Instead of mitigating damages, the Peevyhouses actually aggravated them. They can recover $300.

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? See Official Comment 2 to UCC §2-610.

Phillip is right. Alexander repudiated the contract by acting in a way that indicated a rejection of his obligation.

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. See Foley v. Interactive Data Corp., 47 Cal. 3d 654, 254 Cal. Rptr. 211, 765 P.2d 373 (1988); Metcalf v. Intermountain Gas Co., 116 Idaho 622, 778 P.2d 744 (1989).

Statute of Frauds (no writing needed)

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. Watchtel v. National Alfalfa Journal, 190 Iowa 1293, 176 N.W. 801 (1920).

Suzie wins. Recovery is permitted under a unilateral contract where performance has begun. (class = people who entered into the contest)

Problem 87 Hammer & Son was a contractor. Hammer made plans to build a large shopping center. One of the stores was to be leased to Jane's Fashions. Jane's store was to be built according to general specifications applicable to all store in the center. However, no two stores were to be identical, and Jane and Hammer had never particularized the design of Jane's store. Hammer refused to build Jane's store and lease it to her as promised. Jane sued for breach and asked for specific performance - an order requiring Hammer & Son to build Jane's store and lease it to her. The court finds a contract and a breach. Should the court grant Jane's request for specific performance? See City Stores Co. v. Ammerman, 266 F. Supp. 766 (D.C.C.), aff'd per curium, 394 F.2d 950 (D.C. Cir. 1967).

The case is subject to interpretation.

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"? See In re Crisan Estate, 362 Mich. 569, 107 N.W.2d 907 (1961). Would it make a difference if she had tried to commit suicide? If she were a well-known Christian Scientist?

The hospital may recover the reasonable value of services.

Problem 167 Travis contracted to sell a houseboat to his friend Meyer for $35,000. They agreed to need 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. If Meyer can show that Travis never formally tendered the houseboat, is this a defense? If Travis had promised to paint the houseboat prior to delivery, is it a defense that he never did so after Meyer's call? If you were a judge, what would you require Travis to allege and prove here?

There is a contract and it was breached by Meyer. Meyer does not have a defense because they had a contract. Once there is a breach, a party does not have to perform and future acts.

Problem 175 Nicely Johnson borrowed $500 from Sky Matheson but won it back in a floating craps game the next night. One of the losers was Nathan Detroit, who owed Nicely $350 of Nicely's winnings, and he promised Nicely to pay that amount to Sky Matheson the next day. When he did not do so, Sky sued Nathan. He argued that any defense of illegality pertained to the original gambling debt and did not taint the promise Nathan made to pay the money to him. How should this come out?

This is an illegal contract, which is unenforceable. Because a third party beneficiaries rights are derivative, their rights are also invalid.

Problem 158 Mr. and Mrs. America took out insurance policies with NoRisk 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?

Yes, accepted oral notice by taking further action.

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? See its Official Comment 9. What if the problem was caused by rabbits? See Clark v. Wallace County Coop. Equity Exch., 26 Kan. App. 2d 463, 986 P.2d 391 (1999).

Yes, understood that his farm is the intended source of the supply.

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 Roget suffered no consequential or incidental damages?

$40,000

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 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 had paid nothing and has in no way made any expenditures in reliance on this contract furnish him with a defense?

$560,000 - $280,000 = $280,000 (loss in value)

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. If a buyer accepts the goods, the buyer's damages are determined by §§2-714 and 2-715. The basic remedy of §2-714 is the difference between the value of the goods in the condition as sold and the value of the goods as promised. Section 2-715 allows the additional recovery of consequential and incidental damages within various limitations.

$80,000

Problem 173 What arguments might be made either way on the following possible third-party beneficiary claims? (a) An injured tort victim sues the insurance agency that issued a policy to the tortfeasor. Compare Delmar News v. Jacobs Oil Co., 584 A.2d 531 (Del. Super. 1990), with Flattery v. Gregory, 397 Mass. 143, 489 N.E.2d 1257 (1986). (b) Corporate shareholders sue to prevent the breach of a merger agreement between their corporation and another. See Bush v. Brunswick Corp., 783 S.W.2d 724 (Tex. App. 1989). (c) A school bus driver, injured when the brakes failed, sues the entity that sold the bus to the school district. See DuPont v. Yellow Cab Co. of Birmingham, 565 So. 2d 190 (Ala. 1990). See Uniform Commercial Code §2-318 (which gives the states three possible alternatives to adopt here). (d) A bookstore employee who was raped when the security system's alarm failed sues the seller of the system. See Hill v. Sonitrol of Southwestern Ohio, 36 Ohio St. 3d 36, 521 N.E.2d 780 (1988); compare Rhodes v. United Jewish Charities of Detroit, 184 Mich. App. 740, 459 N.W.2d 44 (1990). (e) After the mother died, the father stopped making payments under the divorce property settlement and is sued by his daughter for missed payments and the cost of going to college (also provided for in the settlement). See Morelli v. Morelli, 102 Nev. 326, 720 P.2d 704 (1986). (f) An attorney commits malpractice in the drafting of a will, and the legatee who is cut out by this blunder sues. Is an attorney liable to anyone other than the client who wanted the will? See McIntosh County Bank v. Dorsey & Whitney, LLP, 745 N.W.2d 538 (Minn. 2008).

(a) Asks whether tortfeasor gives rise to a contractual claim for the third party beneficiary (b) (c) Driver can file suit against their employer based on their employment relations. The driver is not a beneficiary, but the students are. (d) The security system is intended to protect the property, not the person. (e) (f) Balance the areas of law. Yes for a tort claim, no for contract.

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 state over, of is the law of impossibility an excuse? See United States Fidelity & Guarantee Co. v. Parsons, 147 Miss. 335, 112 So. 469 (1927); Steve's v. Leonard, 20 Minn. 494 (1874). (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 Painting Contractors recover anything? See Albre Marble & Tile Co. v. John Bowen Co., 338 Mass. 294, 155 N.E.2d 437 (1959).

(a) Behemoth must start over because the fire did not make it impossible to perform because performance is the act of building, not the use of the building. (no clause included) (b) Yes, possibly under quantum meruit for the value of the work completed.

Problem 168 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. On April 5, 2026, the company informed NASA by letter that it was repudiating the contract. NASA's purchasing director was dumbfounded by this news but immediately began casting about for a substitute, which NASA found on September 10, 2026, signing a contract on that date to pay the new company $48 billion for delivery for the scooter as agreed. Assume that the market price for the scooter would be $45 billion of April 5, 2026, and $55 million of July 1, 2030. (a) You are the chief attorney for NASA and your phone rings with these questions. Must NASA sue now? Take mitigate your action now? Or may it treat the repudiation as a brutum fulmen ("empty noise") and await performance in 2030 as agreed? At what moment will its damages be measured? See UCC §§2-610, 2-713, and 2-732. Doe these sections conflict? What does "learned from the breach" mean in §2-713? See Cosden Oil & Chem. Co. v. Karl O. Helm Aktiengesellscaft, 736 F.2d 1064 (5th Cir. 1984). (b) If NASA does nothing, may Venture's Vehicle change its mind, retract the repudiation, and reinstate the contact? See UCC §2-611. If NASA had contracted with another company for the space scooter on learning of the repudiation, would Venture's Vehicles have been able to do this?

(a) NASA should sue now because if they do not, they risk the repudiation being retracted. (b) If NASA does nothing, Venture's Vehicles can retract the repudiation. If NASA contracts with another company, Venture's Vehicles will no longer be able to retract the repudiation. Under UCC §2-611(1), NASA changed positions to indicate that the repudiation was final.

Problem 66 Bill Gilbert 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) There needs to be evidence of an explicit agreement. (b) Were the damages foreseeable? Did they accept liability?

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. Must Wilde pay? Is this an illusory contract? Who has the burden of proof here? (b) When Scarlett decided to sell her ancestral home, Tara, she engaged the services of Mitchell Realty, agreeing to pay a 10 percent 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. How should this come out? Would it influence your answer if the seller were a corporation? (c) Four Star Construction Company built a $4 million 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?

(a) Wilde does not have to pay (subjective standard). The contract is not illusory (good faith and fair dealing). James has the burden of proof. (b) Scarlett should not pay (subjective standard). The seller being a corporation would influence the answer and would be more objective. (c) Four Star is entitled to retainage (objective standard).

Problem 107 The restaurant menu had beautiful photographs of the food. When Portia Moot 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. (a) 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? See UCC §2-313. Is the service of food a sufficient sale to trigger the UCC? See UCC §2-314(1). (b) If Ralph chokes on a bone in the fish chowder, what commercial theory will offer possible relief to him or his heirs? See UCC §2-314(2)(c); Webster v. Blue Ship Tea Room, Inc., 347 Mass. 421, 198 N.E.2d 309 (1964). Is the question easier if the offending object in the fish chowder is a piece of gravel? (c) If the water glass that Portia is holding proves to be defective and suddenly shatters, lacerating her hand, does any part of UCC §2-314 apply? See Shaffer v. Victoria Station, Inc., 91 Wash. 2d 295, 588 P.2d 233 (1978). (d) Assume that Portia told the waitress that she was allergic to milk and asked her to make sure that the dishes she was served contained none. The waitress made no express promise (indeed, she said nothing when Portia gave her this information), but the food Portia was served made her very sick because it was laced with milk. May she sue in warranty? See UCC §2-315.

(a) Yes (UCC 2-313(c)) (b) Yes (UCC 2-314(2)(c)) (c) Yes (UCC 2-314(2)(c)) (d) Yes (UCC 2-315)

Problem 177 (This Problem appeared on the Indiana bar exam in July 1971.) In June 1968, John Good, having decided to retire and wishing to help his alma mater, ABC College, entered into a written lease agreement for the facilities of his small factory with his employee, Henry Work. The lease provided that for a period of ten years from the date of the lease, Henry Work, as lessee, would pay as rental the sum of $1,200 each month to ABC College. John Good sent a copy of said lease agreement to ABC College and received the usual form letter acknowledging gifts. Henry Work made the $1,200 monthly payments to ABC College until July 1970, when he advised John Good that the factory equipment was old and it would be impossible for him to continue in business unless he could purchase new equipment of the value of $15,000, and that he could not purchase the same unless the rent were reduced to $900 per month. John Good agreed to reduce the monthly rental to $900, and Henry Work purchased the new equipment. ABC College learned of the reduction in rent when it received Henry Work's check for $900, which it refused to accept, and is now demanding $1,200 per month. John Good and Henry Work have come to you for advice as to their rights and liabilities. Advise them.

1: Type of third party beneficiary? (indented or incidental) 2: Have rights vested? (term, material change, etc.)

Problem 176 Fox borrowed $300 from Holly and promised to repay it the following week to Lawrence, one of Holly's creditors to whom Holly owed the same amount. The next day Holly phoned Fox and said, "Forget repaying Lawrence the money. I've changed my mind and want you to repay the money directly to me next week. I'll settle my debt with Lawrence later." Fox didn't care, so he said it was fine with him. Lawrence learned of this modification agreement and, fearing that Holly would never get around to honoring the debt, Lawrence brought an action in equity to enjoin Fox from paying the debt to Holly. You are the judge. Do you issue the injunction? Would your decision be influenced by any of the following facts? (a) The modification agreement was entered into before Lawrence ever became aware of the first promise by Fox. (b) Instead of (a), Lawrence did learn of the original Fox promise but never acted on it in any way. (c) On learning of the original Fox promise, Lawrence dropped his plans to sue Holly and garnish his wages. (d) Do your answers depend in any way on the state of Holly's finances?

Ask whether the rights of the third party beneficiary have vested. No injunction should be issued, Lawrence did not change his position in reliance on the promise. (a) No, rights have not vested - unaware of rights, parties have right to modify (b) No, no term in the contract and no material change (c) Yes, induced a material change - vested (d) No

Problem 181 Joseph Armstrong went down to Wonder Spa and signed a contract agreeing to pay the spa $1,000 in return for the use of its facilities for a two-year period. A week later the Nightflyer Finance Company sent him a payment booklet, stating that the contract he had signed with the spa had been purchased by Nightflyer. Label the type of transaction and the three parties involved using the terminology just discussed.

Assignment of rights Obligor: Joseph Armstrong Assignor: Wonder Spa Assignee: Night Flyer

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? Is the manager in breach for failing to give her the part back? This Problem is based on the well-known case of Poussard v. Spiers & Pond, 1 Q.B.D. 410 (1876).

Beverly Pipes did not breach the contract because it was impossible for her to rehearse. The manager may or may not have breached the contract depending on the materiality.

Problem 195 When Octopus National Bank bought the mortgage John and Mary Smith had signed on their home five years ago, the bank had major problems. It had purchased the mortgage by an assignment from Last National Bank, which had in turn purchased it from the trustee of a securitization trust. The original mortgagee was Pursuit National Bank, but it was no longer in business (closed down in a scandal over its creation of dubious mortgages). No one knew the current location of the promissory note the Smiths had signed at the closing, though Octopus National did have a copy of the note. After the foreclosure suit was thrown out by the court for these reasons, the bank's attorney was flummoxed when thinking about what to do next. Read Restatement (Second) §333 (which can be found in the text above) and advise the bank's attorney.

Breach, lost note - no proof

Problem 132 In 2025, when the United States began regular flights to an from the moon, strange crashing 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 cover meant 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 is not excused because they assumed the risk. There was no condition in the terms of the contract excusing performance if conditions failed. absolute contract —> require performance vs. conditional contract —> condition performance

Problem 163 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 2026, NASA phones Venture's Vehicles and inquired how production was going. John Venture, president of the company, replied, "Well, I'm really not sure if we are going to be able to do the job. We've encountered some glitches on this one." May NASA immediately take steps to mitigate? What should NASA do? See UCC §2-609 and its Official Comments.

If NASA stops paying, they will be in breach. There must be certainty of repudiation. Venture's Vehicles did not repudiate the contract because there were no reasonable grounds for insecurity. Their comments were not certain enough and NASA can only demand assurance when there is an actual repudiation.

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? What would the plaintiff have received in Problem 63 if the suit there sought recovery for only the reliance interest?

In Problem 63, the plaintiff would recover $8,000 if the suit sought to recover only for the reliance interest. $15,000 (materials) - $5,000 (payment) - $2,000 (salvage) = $8,000 (out of pocket cost)

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 losing contracts, courts can use discretion. Possible options: $50K (cost) $0 (loss avoided) = $50K $100K - $80K = $20K (profit) + $50K (cost) = $70K $80K (contract price) - $50K (cost) = $30K

Problem 185 Professor Chalk of the Gilberts Law School was scheduled to make a speech in Detroit in late February. his fee for the speech was to be $1,000. He came down with a cold in early February and became worried about the advisability of going to Detroit just as he was recovering. He phoned his friend Professor Podium and asked him if he would make the speech in his stead. Podium agreed, so Chalk phoned the president of the group to whom he was to give the speech and asked if the substitution was acceptable. Because Podium was an even better speaker than Chalk, the president also agreed. When Podium failed to show up on the day scheduled, the organization sued Chalk for its wasted expenses. Is he liable?

Novation, accepted new speaker

Problem 186 Jay Eastriver promised to sell to Gerald Czeck all of the mufflers that Gerald needed to operate the Czech Muffler Shop for the years 2021 through 2024. Gerald decided to sell the shop to a corporation called Texas Auto and assigned to it his right to purchase the mufflers from Jay. Jay now refuses to sell any mufflers to Texas Auto, complaining that the contract was not assignable. Who wins? Does Jay have any intermediate recourse if he is unsure of how Texas Auto will perform? Read UCC §§2-210, 2-306, and 2-609. Can §2-306 be used as an argument for Jay? For Texas Auto? See Official Comment 4. Does it matter if Texas Auto requires more or fewer mufflers than Gerald would have?

Is there a material change in obligation?

Problem 156 Mr. 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 had previously accepted late payments (waiver). (a) No waiver (standing on their rights) (b) Yes, created an anti-waiver clause. (see UCC 2-209(5)) (c) They must reasonably notify Mr. and Mrs. America that strict performance is required.

Problem 71 Basketball star Michael Jordan entered into a contract with WorldCom, Inc., in which he received an annual sum of $2 million to do endorsements for its telecommunications products during the next ten years. After two years of such endorsements, WorldCom filed a bankruptcy petition, and Jordan filed a claim in the bankruptcy court for the amounts still due under his contract. The objection to this claim was that Jordan had not mitigated his damages by seeking other endorsement contracts, to which he responded he had cut back on the number of endorsements he'd been doing for fear of diluting his reputation and also because he was investigating becoming the owner of a NBA team. How should this come out? See In re WorldCom, Inc., 361 B.R. 675 (Bankr. S.D.N.Y. 2007).

Must ask what mitigation means/requires in the context of the case.

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).

Must ask what mitigation means/requires in the context of the case.

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 clause valid? See Perillo, Contracts §14-32. 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).

Must conduct a penalty analysis: 1: Were damages hard to determine at time of contract? - We do not know the $ amount of potential damages. 2: Are damages proportionate? - not necessarily - must assess damages against the language of the clause? 3: Are damages reasonable, or will they result in a windfall? No, have to mitigate damages.

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).

Must conduct a penalty analysis: 1: Were damages hard to determine at time of contract? 2: Are damages proportionate? 3: Are damages reasonable, or will they result in a windfall?

Problem 164 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 and NASA 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 European Space Agency. May NASA treat this as a repudiation? May it cut off the progress payments?

Needs more than simply being insolvent. (actual notice?)

Problem 102 For two years World Wide Widgets (WWW) negotiated for the construction and purchase of a new computer system from MegaHard Computers, with teams 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 that, in addition to all the terms of the written contract, the 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 that arose out of this. Will you allow in evidence of this oral understanding?

No - contract was long, detailed, and signed indicating that it was fully integrated - if part of the contract was intended to be included, it would be since lawyers bargained What is the purpose of a writing? - memorialize agreement - binding performance obligation - eliminate ambiguity

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 31. One year they were amazed when the landlord refused their offer of renewal on June 1, 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 case

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 1:00 p.m. tomorrow. The next day he arrived with the proper amount at 1:23 p.m. 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 1:00 p.m. the next day, and Rhett was simply late in paying?

No relief, condition to pay at a certain time.

Problem 139 Nebuchadnezzar hired the Hanging Gardens Construction Company to build a terrace for $20,000, agreeing to pay for it in stages upon the completion of various parts of the building, less a percentage retained until the end of the project. One month, by accident, Nebuchadnezzar's check was $50 short of the correct amount. Hanging Gardens' president calls you, its attorney. Can it sue Nebuchadnezzar if the money is not immediately paid? For this reason alone could it refuse to perform further on the construction job? Why or why not?

No, both parties have already started to perform.

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 showed 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 his suit succeed without more? On these facts would Travis succeed in a similar suit against Meyer? See UCC §2-309, Official Comment 5, and consider the UCC sections that follow.

No, concurrent condition (order of performance). No breach, terminated due to silence. There would be a breach if one showed up.

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 boat on the date agreed, and Meyer sued on August 10. Must be tender payment in order to prevail in his suit? How does he avoid the language of UCC §2-511(1)?

No, delivery had to happen first.

Problem 187 Joseph Armstrong went down to Wonder Spa and signed a contract agreeing to pay the spa $1,000 in return for the use of its facilities for a two-year period. A week later the Nightflyer Finance Company sent him a notice that the contract he had signed with Wonder had been assigned to Nightflyer. Joseph read the notice but promptly forgot it and continued to pay Wonder, who pocketed the money. Wonder is bankrupt, and Nightflyer now insists that Joseph pay Nightflyer. Joseph told them they were crazy if they thought he was going to pay twice. Nightflyer has sued Joseph, and he has retained you. Does he owe the money or doesn't he? See UCC §9-406(a). Could he validly claim that his payment obligation was too personal to be assigned?

No, he received notification of the assignment.

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 sue him for the damages his breach has caused her? Must she pay him first? Why or why not?

No, neither party has performed.

Problem 188 The publication of her sensational memoirs made Lynn Brown a rich woman. One day she met her good friend Polly Travis on the street and, hearing Polly's tale of financial woe, said to her, "I'll tell you what. I have a savings account with Octopus National Bank that has a healthy amount in it. I have no need of the money, and I hereby give it to you." Polly thanked her with enthusiasm. Polly's friend Mary Bush was present throughout the conversation and is willing to testify to it. That evening Polly was shocked to hear that Lynn had been killed in a car accident. She was also shocked to learn that Octopus National Bank and Lynn's executor refused to give her the amount in the savings account. Will the law give it to her?

No, no writing. Revocable in event of death. No action or forbearance in reliance.

Problem 134 Mona's Kitchen contracted with the U.S. Navy to supply in 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 Kitchen was unable to find substitute chickens at a price that made the contract with the Navy profitable. Is this an excusing event? See Ecology Services, Inc. v. Granturk Equipment, Inc., 443 F. Supp. 2d 756 (D. Md. 2006).

No, not entirely unforgettable and the source of supply is irrlevant.

Problem 68 On graduating from law school, Andrew Advocate received a gift of $25,000 from his wealthy parents and sued 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 him 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 45,000 for "mental anguish." Is this last element of damages recoverable? Compare Volkswagen of Am., Inc. v. Dillard, 579 So 2d 1301, 14 U.C.C. Rep. Serv. 2d 475 (Ala. 1991) (yes), with Kwan v. Mercedes-Benz of N. Am. Inc., 28 Cal. Raptor. 371, 23 Cal. App. 4th 174 (1994) (no, distinguishing Volkswagen in part because of no uniform language in Alabama UCC)

No, recovery of mental anguish is rarely allowed under the UCC.

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 became 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 Pointdextre 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 that clause effective in this circumstance?

No, the clause is ineffective because they cannot take advantage of a condition that it caused.

Problem 137 In 1970, Monopoly Oil Company entered into a ten-year contract with Icarus Airlines by which it contracted to furnish the airline with all the gasoline it would need for that period at as set price per barrel. The next year the oil-producing countries created for the the first time a cartel to fix oil prices and suddenly the price of oil skyrocketed. Monopoly Oil Company, unable to get oil at the cheap oil price, tells you, its attorney, that it will go bankrupt if it is forced to honor its contract with Icarus. Advise your client. Does UCC §2-615 provide an avenue of escape? Read it and its Official Comment 4 carefully.

No, they must pay because the increase is price is foreseeable. - escalator clause (not included in contract): as costs increase, contract price increases too

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 written change orders. Will this argument succeed?

No, they still have to pay because they said not to worry about it.

Problem 174 When Cable TV Company signed Wanda Wonderful to star in a new television series it was producing, the contract between them required her to procure and maintain a $4 million life and health insurance policy payable to the company in the event she couldn't work for health reasons. Wanda took out such a policy with the NoRisk Insurance Company. She made the required monthly payments for the first six months but then missed two in a row. The company sent her numerous letters reminding her of the required amounts, but she ignored them. Tragically, she mysteriously drove her car off a canyon road. By coincidence, she and the grace period on the policy expired together. When Cable TV Company sent in a notice of claim, NoRisk Insurance responded that the policy had lapsed. Cable TV sued, arguing that once its rights were established, those rights existed wholly apart from the contract, unaffected by subsequent problems between the original contracting parties. How should this come out?

NoRisk prevails because Cable TV did not sue in time. Third party beneficiary rights are derivative.

Problem 143 Scarlett contracted to sell her ancestral home, Tara, to Rhett Butler "provided he is able to obtain satisfactory financing by June 4, 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? See Stackhouse v. Gaver, 801 N.W.2d 260 (Neb. App. 2011). If he does not try at all, could she procure it for him? Would he have to take it?

Not a promise, but a condition.

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?

Not necessarily, but recommended because the inclusion of a merger clause is a strong indication that the contract is complete.

Problem 196 When ballet star Vera Toes suddenly got the chance to dance the part of Pat Nixon in the new ballet called Watergate, she was thrilled and quickly signed the contract with the Wilma Arts Dance Company. A week before rehearsals were to begin, the State Department asked Vera if she would be willing to tour South America as part of a cultural exchange program. She decided that helping her government was more important than the Watergate show, so she called her good friend Carla Pas de Deux and they agreed that Carla would assume her obligation to the dance company. Then Vera phoned Wilma Arts, president of the organization, and received her permission to substitute Carla in her stead. Vera went off to South America on the tour, but Carla never honored her agreement to appear in Watergate. When the dance company threatened suit, Carla replied that any contract she had was with Vera and not the Wilma Arts Dance Company. Is Vera liable here to the dance company? Is Carla? What are the legal theories involved?

Novation, if did not occur Vera would be liable, but she got permission to be replaced by Carla.

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? See VRT, Inc. v. Dutton-Lainson Co., 530 N.W.2d 619 (Neb. 1995).

Orphanage would prevail because Mr. Bumble willfully ignored contract provision resulting in an intentional 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 august because of the mishap. Can thy recover consequential damages for their suffering? Thea causal case is Renihan v. Wright, 125 Ind. 536, 25 N.E. 823 (1890); Annotate., 54 A.L.R. 4th 901; see Douglas Whaley, Paying for the Agony: The Recovery of Emotional Distress Damages in Contract Actions, 26 Suffolk U. L. Rev. 935 (1992).

Yes, they can recover because the emotional anguish that they suffered would likely result from such a breach.

Problem 103 Jane Bean and Hiram Walkup agreed that Jane 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, Jane 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?

Parol evidence rule is not applicable here because this does not involve a prior agreement. An amendment to a contract is essentially another contract. The language was also consistent with the terms of the contract.

Problem 147 Bill Gilbert agreed to write the lyrics for a musical show to be produced the following year. After writing one-half of the lyrics, Bill approached the producer and demanded that the producer pay him one-half of the promised price. The producer refused, and Bill quit writing and said he would write no more. The producer hired another lyricist, and Bill sued. What result? Consider the following section of the Restatement (Second) of Contracts and the comment. How would you draft the contract for Bill to reach the result he desires?

Producer

Problem 191 Joseph Armstrong signed a contract with Wonder Spa, and at the same time he signed a promissory note for $1,000, payable to the order of the spa. A week later he received a payment booklet from Nightflyer Finance Company, and he dutifully began making payments to it. Six months later the spa burned to the ground, so Armstrong stopped making payments. The finance company brought suit against him on the promissory note, claiming to be a "holder in due course" of the note, and thus free of his defense of failure of consideration. Must he pay? Under the complicated rules of Article 3 (see UCC §§3-302, 3-305(a) and (b)) a holder in due course (an innocent party acquiring the instrument) takes free of most defenses (called "personal" defenses), but not very serious ones (called "real" defenses). Mere failure of consideration, as here, is a personal defense.

Real defenses: fraud/misrepresentation Personal defenses: anything other than fraud/misrepresentation

Problem 87 Hammer & Son was a contractor. Hammer made plans to build a large shopping center. One of the stores was to be leased to Jane's Fashions. Jane's store was to be built Hammer & Son was a contractor. Hammer made plans to build a large shopping center. One of the stores was to be leased to Jane's Fashions. Jane's store was to be built all stores in the center. However, no two stores were to be identical, and Jane and Hammer had never particularized the design for Jane's store. Hammer refused to build Jane's store and lease it to her as promised. Jane sued for breach and asked for specific performance—an order requiring Hammer & Son to build Jane's store and lease it to her. The court finds a contract and a breach. Should the court grant Jane's request for specific performance? See City Stores Co. v. Ammerman, 266 F. Supp. 766 (D.D.C.), aff'd per curiam, 394 F.2d 950 (D.C. Cir. 1967).

Subject to interpretation.

Problem 106 Honest John told 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?

The Consumers may sue for breach of warranty because there was an expressed warranty saying the car was in great condition. Express warranties cannot be disclaimed. It does not help Honest John that he did not know or have reason to know of the car's defects. See UCC 2-316(3)(b)

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). 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 affect the result), with Lind Bldg. Corp. v. Pacific Bellevue Dev., 55 Wash. App. 70, 776 P.2d 977 (1989) (no liquidated damages should be allowed where the seller in fact suffered no damages).

The clause is invalid - need uncertainty of value of damages for breach at time of contract.

Problem 105 In 1939, when Orson Welles wrote, directed, and starred in the famous movie Citizen Kane, he signed a contract with 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 and 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 rights 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 contract went on to add: In case of any original story written by [Welles] or any of its employees and used as the basis of either Picture, however, [RKO] shall acquire the motion picture and television rights in such story for such Picture only. [RKO] shall not remake any such Picture unless [Welles] produces or directs the same or unless [RKO] buys the remake rights from [Welles] at a price satisfactory to both parties. [Welles] shall own the publication, radio, dramatic and other rights in any such story but shall not use the same in any way to compete with or injure the distribution of the Picture based on such story. 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 now arguably the finest movie ever made. When RKO's successor refused to share any of the DVD profits, Welles's daughter Beatrice sued. You are on the bench. Would you allow the Welles estate any claim to royalties from the use of the movie in media not in existence in 1939? See Welles v. Turner Entertainment Co., 503 F.3d 728 (9th Cir. 2007).

The estate would not receive any royalties because they signed the exit agreement.

Problem 165 To hear 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 cancelled. 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? See Hathaway v. Sabin, 63 Tv. 527, 22 A. 633 (1891).

The manager must pay. There was no impossibility because the group was able to perform and there was a clause in the contract. The hall took the risk.

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 min-2026, Venture's Vehicles sent NASA a letter sadly informing the agency that it was unable to fulfill its contract but 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, thte scheduled date of delivery?

They can recover now or in 2030.

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?

They do not have to pay your claim (condition precedent), but they cannot sue you (promise).

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 (white has three years remaining). If you grant such a request, what would you 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?

To prevent any issues with the Thirteenth Amendment, an injunction could be implemented to forbid Sammy Stocks from playing for a different team.

Problem 142 Every time 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? See Mularz v. Greater Park City Co., 623 F.2d 139 (10th Cir. 1980).

Yes ??

Problem 193 Joseph Armstrong signed the usual contract with Wonder Spa. It contained the required FTC legend preserving his ability to assert defenses against assignees. The spa assigned his contract to Nightflyer Finance Company, which notified Armstrong that in the future he should make payment directly to it. Two weeks later one of the instructors at the spa negligently dropped a barbell on Armstrong's foot. May he subtract the doctor's bills from the payment to Nightflyer? What if the sole owner of the spa was driving around town in the spa's car and accidentally ran over Armstrong's dog? May Armstrong subtract the value of the dog from the payments due to Nightflyer? Does your answer to this last question change if the dog were already dead before Armstrong learned of the assignment of his contract to the finance company? To answer these questions, see UCC §9-404(a).

Yes for foot, no for dog.

Problem 184 As part of their divorce agreement, George promised Martha that he would make her car payments until the vehicle was paid for completely. He was true to his promise for six months, but then he suddenly left the state and could not be found. The finance company to whom the automobile dealership sold the paper is hounding Martha for payment. She calls you, her divorce attorney. She doesn't owe this debt anymore, does she?

Yes, Martha must pay. There were two separate contracts, the promissory not and the divorce agreement. Martha is still responsible for the promissory note despite the divorce agreement because the two contracts are unrelated. There needs to be a novation to relieve Martha.

Problem 194 Prester John made maps for a living and sold them to National Auto Club. It was agreed that he would receive $5,000 for each map he produced under the contract. Needing money, Prester John went to Medieval National Bank and borrowed $30,000, assigning to the bank the payments due to him from National Auto Club. The quality of his maps was not as good as the parties had originally contemplated, and National Auto Club threatened to cancel and sue. Prester John agreed to accept $4,000 for each map, but Medieval National Bank protested this change. Is the bank bound by the modification in the contract? See UCC §9-405.

Yes, good faith modification is permitted by statute.

Problem 136 Henry Higgins asked Eliza Doolittle to go with him to the Embassy Ball and for that purpose ordered a special gown to be made for her by Shaw of London, a famous designer. Shaw created the dress for her after several fittings, but before it could be delivered Eliza suddenly died. Must Higgins pay for the dress? What if the Embassy Ball was cancelled? See In re Estate of Sheppard, 328 Wis. 2d 533, 798 N.W.2d 616 (Wis. App. 2010) (estate was sued for failure of deceased to pay for flying lessons not yet received because of his death during the contract period).

Yes, specifically manufactured goods assume the risk.

Problem 172 The boxing match between Bill Holt and Bobby Startup was the fight of the decade, but it ended badly when Bill was repeatedly floored in the ninth round and finally knocked out seconds before the bell. He never recovered consciousness. Everyone at the fight was outraged that the referee, ex-champion Killer Knight, allowed the fight to continue after the first two knockdowns in the beginning of the ninth round. Hearing the criticism later, Knight said, "You got to let them fight because the crowd likes blood." Knight was publicly condemned by the Referees' Association for failing to stop the fight long before the fatal blow. Bill Holt's estate filed suit against Killer Knight, contending that it was a third-party beneficiary of his contract with the boxing association that hired him to referee the fight. Will this theory succeed? See Wolfgang v. Mid-America Motorsports, Inc., 111 F.3d 1515 (10th Cir. 1997).

Yes, the referee owes a duty to protect the boxers from such harm and the boxers are those they are intended to protect.

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).

Yes, the spa is entitled to $3,450 because their expectation interest is $3,500 ($50 already paid as deposit). There was also no liquidated damages or penalty provision.