Contracts MC Practice

In a contract between a homeowner and a painter, the entirety of the agreement was that the painter would paint the homeowner's house on August 1. Which of the following statement(s), if either, would constitute an anticipatory repudiation by the painter? A. "I will not be painting your house" B. "My painting business closed. My friend can paint your house August 1" C. Both of the above statements constitute anticipatory repudiations. D. Neither statement

A. Answer option A is correct. In option A, the painter clearly stated that he would not be painting the house in accordance with the contract. Even though the breach has not yet occurred, the painter's statement clearly indicates the intention to breach, so the homeowner could likely sue prior to the date for performance on a theory of anticipatory repudiation. Answer option B is incorrect because as a general matter, a party to a contract may delegate her duty to perform to a third party. This is true unless the parties prohibit such delegation or the subject matter of the contract creates in one party a substantial interest in the personal skill or judgment involved in the other party's performance. Here, the contract did not prohibit delegation, and there is no indication that the homeowner had a substantial interest in the painter's personal performance. Therefore, the statement in answer option B would likely be treated merely as the communication of a proper delegation, rather than an anticipatory repudiation, and would not give rise to any right to sue prior to the date of performance. Answer options C and D are necessarily incorrect for the above reasons.

A recent law school graduate signed an employment contract with a law firm to begin working the next month. As part of the contract, the graduate agreed to reject any other offers of employment, and she in fact rejected two subsequent offers from other firms. Two weeks before her starting date, the graduate learned from a reliable source that the firm that she was going to work for had declared bankruptcy. If the graduate immediately seeks legal advice regarding her options, what course of action should the advising attorney recommend to best protect the graduate's interests? A. The graduate should demand adequate assurance of employment from the law firm and may not accept employment with another firm, but she may wait to reject any further offers until she receives assurances. B. The graduate should demand adequate assurance of employment from the law firm but must continue to reject any further offers. C. The graduate should immediately seek another offer and sue the firm for a remedy to compensate her for the previously rejected offers. D. The graduate should immediately seek another offer and, if she does not receive a comparable offer, then she should sue the firm for a remedy for prospective lost earnings.

Answer option A is correct. If a party to a contract has reasonable grounds to believe that the other party will be unable to perform, the first party may suspend his own performance and demand adequate assurance; if adequate assurance is not provided within a reasonable time, then the suspending party may treat the prospective inability to perform as an anticipatory repudiation and sue for a remedy. Here, the law firm's insolvency would constitute a reasonable ground to believe that the firm will be unable to employ the graduate. Thus, she is entitled to demand assurances and to suspend her own performance by waiting to reject any further offers that she receives. Answer option B is incorrect because the graduate may suspend her own performance while waiting for adequate assurances, meaning that she need not continue to reject any further offers she receives. Note that she would be wise not to accept any such offer, however, because the law firm may in fact provide adequate assurances, in which case the graduate is bound by the original terms. Accordingly, answer option D is incorrect. Answer option C is incorrect because we do not yet know if the firm will provide adequate assurance of the graduate's employment. If the firm does not provide adequate assurance within a reasonable amount of time, then the graduate may treat the prospective inability to perform as an anticipatory repudiation and may sue the firm for any harms resulting from the firm's breach. However she may not sue before giving the firm a reasonable time to provide assurances.

An artist contracted with a local jewelry store to sell the store 20 hand-beaded bracelets of a particular design for $200, to be delivered in two months. The next day, the local supplier that normally crafted the distinctive beads that the artist used for bracelets of this design went out of business. The supplier's beads were unique, and the artist could find only one vendor who had a quantity of them for sale. This vendor was located overseas and, upon hearing that the bead supplier had gone out of business, the vendor had raised the price of the beads substantially above the price that the artist typically paid for them. The cost of purchasing the beads from this vendor and shipping them overseas would raise the total cost of the artist's performance of the bracelet contract to $600. Under which contract law doctrine, if any, would the artist potentially be able to avoid performing the bracelet contract? A. Impossibility B. Impracticability C. Frustration of purpose D. There is no contract law doctrine that potentially permits a party to avoid performing a K solely based on monetary loss.

Answer option B is correct. A party may avoid performance when it becomes impossible or impracticable to perform due to changed circumstances; impossibility is established where the party's performance has become objectively impossible for anyone, while impracticability is established where the party's performance would be subjectively impracticable, through extreme and unreasonable difficulty, expense, injury, or loss. Here, the significant change in the artist's cost of performing, such that the artist would be spending $600—three times the amount the artist expected to receive under the bracelet contract—could potentially amount to impracticability. Answer option A is incorrect because a performance has become impossible only when it objectively cannot be performed by anyone, not just the specific party to the contract. Here, the facts reveal that performance is not impossible even for the artist. The artist could purchase the beads from the overseas vendor and perform the contract at a monetary loss. Answer option C is incorrect because a party may avoid performance under the doctrine of frustration of purpose when that party's principal purpose in making the contract is substantially frustrated due to changed circumstances that make the other party's performance virtually worthless to the party seeking to avoid performance. Here, the changed price to obtain the beads has not affected the underlying value of the $200 contract price promised to the artist by the local jewelry store; instead, the change has affected the cost of the artist's performance and the artist's resulting profit. Answer option D is incorrect because, as stated above, the doctrine of impracticability does allow a party to avoid performing a contract based on an unforeseen monetary loss, where such a loss would be extreme and unreasonable.

A homeowner contracted with a groundskeeper to plow a large area of overgrown garden in preparation for new landscaping. The work was to be performed the following Friday. On Tuesday, the groundskeeper twisted his ankle. On Wednesday, the groundskeeper's ankle was still in pain. He called the homeowner and said, "I don't know if I am going to be able to plow your land on Friday." Can the homeowner sue the groundskeeper for a remedy on Thursday? A. No, because the groundskeeper provided sufficient notice that he would be unable to plow the land. B. No, because the groundskeeper has not expressly repudiated the contract and the time for performance has not passed. C. Yes, because the groundskeeper's statement constitutes an anticipatory repudiation. D. Yes, because the groundskeeper's statement fails to provide the homeowner with adequate assurance of his ability to perform.

Answer option B is correct. Although the groundskeeper expressed doubt in his ability to perform, a mere expression of doubt is not sufficient to constitute an anticipatory repudiation, which would allow the homeowner to bring a cause of action before the due date of performance. Thus, the homeowner cannot sue the groundskeeper until he actually fails to perform. Accordingly, answer option C is necessarily incorrect. Answer option A is incorrect because it is irrelevant that the homeowner received notice of a possible breach. Notice does not excuse a breach of contract. Answer option D is incorrect because the requirement of adequate assurance is relevant where a party to a contract has demanded assurance of the other party's ability to perform. Here, the homeowner has not made such a demand. Accordingly, without a clear indication of the groundskeeper's intention to breach the contract, the homeowner must wait to see if he actually fails to plow the land before she would be able to sue for a remedy.

On November 1, an artist contracted with a collector to exchange an original painting for the collector's antique writing desk, with the exchange to take place on December 1. On November 10, the artist learned that the collector had agreed to sell the desk to a third party, and the artist immediately demanded assurance from the collector that the collector would perform the original contract with the artist. On November 11, the collector told the artist that he was thinking about selling the desk to the third party. On November 12, the collector told the artist that he had changed his mind, cancelled the agreement with the third party, and planned to perform the original contract with the artist. Which of the following best describes the legal consequences of these events? A. The collector's November 11 statement was a final repudiation, and the artist may sue the collector for breach immediately; the collector's November 12 statement had no legal effect. B. The collector's November 11 statement was an expression of doubt that gave the artist the right to demand assurances; however the collector's November 12 statement effectively gave such assurances, and the original contract remains binding on both parties. C. The collector's November 11 statement was a nonfinal repudiation; however the collector's November 12 statement was an effective retraction, and the original contract remains binding on both parties. D. The collector's statement on November 11 neither repudiated the contract nor gave the artist reasonable grounds to demand assurances; the collector's November 12 statement likewise had no legal effect on the rights of the parties.

Answer option B is correct. If a party to a contract definitively states that he will not perform, the other party may sue for breach before the due date of the performance; such an "anticipatory repudiation" of the contract only occurs where the repudiation is more than a mere expression of doubt about performance. Once an anticipatory repudiation becomes final by the injured party's change in circumstances in reliance on it, it cannot be retracted; generally, however, a nonfinal anticipatory repudiation may be retracted if the injured party receives notice of the retraction or of a change to the underlying cause of the repudiation. Here, the artist heard about the collector's deal with a third party, but the facts don't make clear whether the source of this information was reliable, thereby giving rise to a right for the artist to demand and receive assurance of the collector's intent to perform. However, after the artist demanded such assurance, the collector himself expressed doubt about his intent to perform, when he indicated on November 11 that he was thinking about selling the desk to the third party. The collector's November 11 statement that he was "thinking about" selling to the third party was not certain enough to constitute a repudiation, making both answer option A and answer option C incorrect. Note that the difference between a final and a nonfinal repudiation is not dependent on the certainty of the repudiating party's statement, but instead on the injured party's circumstances. For example, a repudiation becomes final and cannot be retracted when the injured party makes a deal with another party related to the same subject matter, or otherwise clearly announces to the repudiating party that he or she is relying on the repudiation and considers it final. Here, there was no repudiation, final or otherwise. Instead, the November 11 statement gave the artist reasonable grounds to demand assurances of the collector's intent to perform. Before anything else occurred, the collector gave such assurance by informing the artist on November 12 that the deal with the third party had been canceled. Answer option D is incorrect because as stated above, the collector's November 11 statement did give the artist the right to demand assurances.

A homeowner contracted with his neighbor to buy the neighbor's "working lawn mower" for $150, with the mower to be delivered and the payment to be made the following month. The contract contained no terms related to which party would maintain the lawn mower prior to the date of performance or related to which party bore the risk of loss in the event that the lawn mower was destroyed prior to the date of performance. After the contract was made and unbeknownst to the neighbor, the neighbor's son continued to use the lawn mower and didn't change the oil, severely damaging the mower's engine and rendering the lawn mower useless on the date that the homeowner and the neighbor had agreed to perform the contract. Can the homeowner avoid buying the lawn mower from his neighbor? A. Yes, due to impossibility B. Yes, due to impracticability. C. Yes due to frustration of purpose. D. No, because the contract did not require the neighbor to maintain the lawn mower, and the neighbor didn't cause the damage.

Answer option C is correct. A lawn mower is a tangible, movable good, so the contract between the homeowner and the neighbor would be governed by the Uniform Commercial Code (UCC). In such a contract, the doctrines of impossibility and impracticability are generally used by the seller, while the doctrine of frustration of purpose is generally used by the buyer, because payment of the contract price would rarely be considered impossible or impracticable. A party may avoid performance under the doctrine of frustration of purpose when that party's principal purpose in making the contract, which was known to the other party, is substantially frustrated due to changed circumstances that make the other party's performance virtually worthless to the party seeking to avoid performance. Here, the entire purpose of the homeowner in entering into the contract was to obtain a working lawn mower, and the contract itself stated that the agreement was for the neighbor's "working lawn mower." Accordingly, even if the neighbor were to tender the lawn mower in its damaged, useless state on the date of performance, the homeowner likely could avoid paying the neighbor for the mower under the doctrine of frustration of purpose. Note that such tender of a nonworking lawn mower would likely amount to a breach of contract by the neighbor as well, because absent some other agreement by the parties, the seller typically bears the risk of loss in such a case and may be required to find substitute goods. Answer option D is necessarily incorrect for the same reasons. Answer option A is incorrect because a party may invoke impossibility to avoid performing where changed circumstances have made the party's performance objectively impossible for anyone to accomplish. Here, it is clearly not objectively impossible for the homeowner to pay the neighbor $150. In addition, the changed circumstances in this case have affected the neighbor's ability to perform, not the homeowner's ability to perform. Answer option B is incorrect because a party may invoke impracticability to avoid performing where changed circumstances have made the party's performance subjectively impracticable, through extreme and unreasonable difficulty, expense, injury, or loss. Here, the changed circumstances have perhaps affected the practicability of the neighbor's performance, but have not affected the homeowner's ability to perform in any way.

A painter contracted with a homeowner to paint the homeowner's fence. The contract specified that the fence was to be painted "eggshell white." While shopping for supplies, the painter learned that eggshell white had been discontinued as a color option, and he instead bought snowflake white paint and used it to complete the job. The homeowner subsequently sued the painter for breach of contract. Which fact, if true, best supports a finding that the breach was likely NOT material to the contract? A. The painter knew that many homeowners were using the new color (snowflake white) to paint their fences. B. The homeowner never specified what the painter should do if her color preference (eggshell white) was unavailable. C. The homeowner didn't notice the difference in color when she first viewed the paint job. D. The painter has substituted different shades of white in previous jobs and has never received a complaint about it.

Answer option C is correct. Although the painter did not paint the fence the specified color, he did paint the fence. There are four circumstances that must be considered in determining whether a breach of contract is material: (1) the loss of benefit to the nonbreaching party; (2) the adequacy of compensation for the nonbreaching party's loss; (3) the likelihood of a cure by the breaching party; and (4) the extent of forfeiture by the breaching party if the breaching party is denied the bargained-for compensation or benefit. In this case, the significance of the loss of the benefit of the contract to the nonbreaching party, the homeowner, is undermined if the difference between the two paint colors was not immediately discernible to her. If she didn't even notice the difference, it is unlikely that the difference was so important as to rob her of the benefit of the bargain and to justify the significant forfeiture that the painter will suffer if he is determined to be in material breach. - Note that the above considerations all pertain to the parties' perspectives and go to whether the "heart" of what the parties bargained for has been betrayed. Answer options A and D are incorrect because the opinions of others in the community do not factor into the determination of whether a breach was material to the contract at issue. Note that the above considerations all pertain to the parties' perspectives and go to whether the "heart" of what the parties bargained for has been betrayed. Answer option B is incorrect because a term of a contract may be material even though this materiality is not explicitly stated and even though the parties didn't specify alternative acceptable avenues to performance. The materiality considerations focus on whether a party's performance substantially met the parties' expectations of what they would each get out of the deal and how they would each perform under the deal.

A builder agreed to build a woman's house for $75,000. The contract specified that the house be carpeted with a particular brand of carpeting in a color named "sand dune." Subsequently, the builder's son agreed to build the house for the builder. In exchange, the builder agreed to pay the son $50,000 and also to pay off the son's student loan debt of $10,000. When the son completed the house, however, the woman discovered that the carpet color was named "sandy beach." However, the carpet was of the same brand, the color was indistinguishable from the requested "sand dune" color, and it would cost $15,000 for the son to replace the carpeting. If the woman sues the builder for breach of contract, is she likely to prevail? A. Yes, because the builder remains liable for performance, and the son's performance breached the contract. B. No, because the cost of replacement would be a disproportionate forfeiture for the builder. C. No, because the builder delegated his duty to perform to his son. D. No, because the breach was not material.

Answer option D is correct. A nonbreaching party may sue a breaching party for a remedy if the breach was material. There are four circumstances that must be considered in determining whether a breach of contract is material under the common law: (1) the loss of benefit to the nonbreaching party; (2) the adequacy of compensation for the nonbreaching party's loss; (3) the likelihood of a cure by the breaching party; and (4) the extent of forfeiture by the breaching party if the breaching party is denied the bargained-for compensation or benefit. Here, the carpeting that was installed is of the same brand, and is indistinguishable in color, from the carpet that was specified in the contract. Therefore a court would likely find that the contractor substantially performed the contract and the woman lost no benefit that she bargained for. In addition, the contractor's cost in replacing the carpet would also weigh against a finding of material breach. Note that the doctrine of disproportionate forfeiture is used to excuse the non-occurrence of a condition, but there are no conditions at issue here. Accordingly, although the contractor did remain liable for performance, the son's performance did not constitute a material breach that would support the woman's action. Answer options A, B, and C are necessarily incorrect for the same reasons. Forfeiture wouldn't be correct here, thats for excuse of non-occurrence of a condition but there are no conditions at issue here.

A party planner contracted to rent a rooftop patio from a vendor for a Fourth of July party. The party planner rented the patio based on the belief that the planner's clients would be able to see the city's fireworks display from the patio. In order to ensure that the patio would be safe, the vendor visited the building upon which the patio was to be placed, took measurements, and inspected the condition of the roof. However, a week before the party, the building was destroyed in a fire. Which of the following arguments can the party planner successfully use to refuse to pay for the patio? A. It is impossible to use the patio to see the fireworks. B. It is impracticable to use the patio to see the fireworks. C. The parties made a mutual mistake about the continued existence of the building. D. The purpose of renting the patio has been frustrated by the destruction of the building.

Answer option D is correct. A party may avoid performance under the doctrine of frustration of purpose when that party's principal purpose in making the contract, which was known to the other party, is substantially frustrated due to changed circumstances that make the other party's performance virtually worthless to the party seeking to avoid performance. Here, the party planner's primary purpose for renting the rooftop patio was to place the patio on a particular building's rooftop to allow clients to see the fireworks display. However, due to the destruction of the building, the party planner's principal purpose has been substantially frustrated, and he may be successful in avoiding paying for the patio based on frustration of purpose. Note that the vendor's measurements and inspection of the building make it clear that the vendor knew of the party planner's purpose of using the patio on that particular building. Answer options A and B are incorrect because under the doctrine of changed circumstances, a party may avoid performance when changed circumstances render his own performance impossible or impracticable. However, it has not become impossible or impracticable for the party planner to pay for the rooftop patio. Note that in contracts for the sale—or in this case, rental—of goods, the doctrines of impossibility and impracticability are generally used by the seller, while the doctrine of frustration of purpose is generally used by the buyer, because payment of the contract price would rarely be considered impossible or impracticable. Answer option C is incorrect because a mistake is a belief not in accordance with the existing facts at the time of the contract. See Restatement (Second) of Contracts § 151 (1981). A mutual mistake of the parties to a contract, relating to a past or existing fact, allows the adversely affected party to avoid performing the contract if (1) the mistake relates to the substance of the agreement, (2) the resulting imbalance in the exchange is so severe that the adversely affected party cannot be fairly required to perform, and (3) the adversely affected party did not bear the risk of the mistake. Here, there was no mistake of fact at the time of the contract, which mistake might allow the party planner to later avoid performance. Instead, it was a future event that intervened to frustrate the party planner's entire purpose in making the contract.

A photographer was commissioned to take a photograph of the skyline of San Francisco from the Golden Gate Bridge. Which of the following facts, if true, would allow the photographer to avoid performance under the doctrine of impossibility? A. It has always been illegal to take pictures on the Golden Gate Bridge. B. The photographer's camera breaks. C. It rains the day of the photo shoot. D. An earthquake destroys the Golden Gate Bridge.

Answer option D is correct. Generally, impossibility of performance may result from three types of events, or changes in circumstances: (1) the death or incapacity of a person necessary to performance, (2) the destruction or significant deterioration of the subject matter of the contract, or (3) a change in the law or issuance of a court order that prevents performance. Here, the photographer could avoid taking the photo based on impossibility due to the destruction of the subject matter, the Golden Gate Bridge, which is necessary to performance. Answer option A is incorrect because only a law that comes into existence after a contract is created may support a claim of impossibility. A law that is already in existence at the time of the contract does not support a claim of impossibility, although it may allow a party to avoid performance based on mistake. Answer option B is incorrect because a broken camera would not make the photographer's performance impossible. Impossibility is established where a party's performance has become objectively impossible for anyone. Here, another photographer could take a picture from the Golden Gate Bridge regardless of whether this particular photographer's camera is broken. Even for this particular photographer, his performance might be more difficult, but there is no indication that he cannot use a different camera to take the photograph. Answer option C is incorrect because again, impossibility is established where a party's performance has become objectively impossible. Here, a photo could be taken in the rain or, if the parties prefer, the photo shoot could be rescheduled