Contracts Practice Set 5

The owner of a car that needed brake work took the car to a mechanic. The mechanic orally agreed to repair the car's brakes by the next evening. However, the mechanic, due to a sudden illness, found he could not do the repair in time. Unable to reach the owner, the mechanic made arrangements for another nearby repair shop to pick up the car and replace the brakes. The next morning, the mechanic called the owner and explained what he had done. When the mechanic told the owner that the nearby repair shop had agreed to do the brake job for the same price as the mechanic had promised, the owner was satisfied. The mechanic told the owner that he needed to call the repair shop and give permission, which the owner did. That evening, the owner drove to the repair shop, picked up his car, and paid $1,200 for the brake repair job, of which $500 was the cost of the parts. A block away, the brakes on the car failed due to a failure to properly secure a brake part. When the owner had his car towed to the repair shop that had done the job, the shop refused to deal with the problem. The owner filed a breach of contract action against the mechanic to whom the owner originally brought the car for the brake job. Which of the following is the mechanic's best defense to this action? A. There was a novation of the contract between the mechanic and the owner. B. The mechanic did not replace the brakes on the owner's car. C. The mechanic's duty was discharged because it was impracticable for the mechanic to perform. D. The contract was not in writing.

A. Generally, obligations under a contract can be delegated. When obligations are delegated, the delegator is not released from liability, and recovery can be had against the delegator if the delegatee does not perform, unless the other party to the contract agrees to release that party and substitute a new one (a novation). A novation may be express or implied after delegation if (i) the original obligor repudiates liability to the original promisee and (ii) the obligee subsequently accepts performance of the original agreement from the delagatee without reserving rights against the obligor. Here, the mechanic delegated his duty to place the brakes on the owner's car to another repair shop. Although, despite this delegation, the mechanic remained liable on the contract, there arguably was a novation when the mechanic told the owner that he (the mechanic) could not do the job, but had delegated the brake job to the repair shop, and the owner accepted the repair shop as the place to repair his car's brakes. Answer choice B is incorrect. Although the mechanic did not perform the brake job, he would have remained liable on the original contract had he not been released from his duties under that contract by a novation. Answer choice C is incorrect because, although a party's duty to perform can be dismissed by impracticability, if the contract is a contract to perform services that can be delegated, it is not discharged by the death or incapacity of the party who was to perform the services. Here, the placement of brakes on a car, although a job that certainly involves skill, is typically not a job that involves a special skill that other mechanics lack. In any case, here, the owner accepted the delegation by paying the other repair shop for the brake job. Answer choice D is incorrect. A contract for the sale of goods, which is governed by the Uniform Commercial Code, must be in writing if the price of the goods is at least $500. Here, although the contract does involve goods (i.e., necessary brake parts), the contract is predominantly one for services rather than goods because the cost of the goods is only $500, while the cost of removing and replacing the car's brakes is $700. Consequently, even though the contract involves the sale of $500 worth of goods, the Statute of Frauds has not been violated because the contract is one for services, which is governed by the common law, rather than a contract for the sale of goods.

A widow recently inherited a building from her late husband. The widow had been a homemaker for over 50 years, and had no interest in keeping and maintaining the building. On the advice of her son, she sent a company a signed fax on April 1 offering to sell the building to them for $1 million. Her offer clearly identified the building and assured the company that her offer was open until the end of the month. On April 25, the son found another buyer for the property, and the widow sold the building to the other buyer for $1.5 million. On April 27, a representative of the company learned that the building offered by the widow had a new owner. The company immediately posted a letter to the widow accepting her offer. However, due to an error at the post office, the widow did not receive the letter until May 10. Can the company succeed in a breach of contract action against the widow? A. No, because the company's power of acceptance was terminated by constructive revocation. B. No, because the widow did not receive the company's acceptance until after the end of the month. C. Yes, because an acceptance is effective when sent, not when it is received. D. Yes, because the widow did not revoke her offer to the company.

A. In general, an offer can be revoked by the offeror at any time prior to acceptance. However, if the offeree acquires reliable information that the offeror has taken definite action inconsistent with the offer, the offer is automatically revoked and the offeree's power to accept the offer terminates. Here, the widow's offer was constructively revoked on April 27 when a company representative learned that the building offered by the widow had a new owner, which was before the company sent a letter to the widow accepting her offer. Therefore, the company never effectively accepted the widow's offer as it had already been revoked. Answer choice B is incorrect. The mailbox rule does not apply if an offer is irrevocable, as is the case with an option contract, which requires that the acceptance be received by the offeror before the offer expires. However, for an offer to be irrevocable, consideration must be provided. The company did not provide consideration to keep the offer open for the one month period. Thus, the widow's offer was freely revocable and the mailbox rule applies. However, because the widow's offer had already been constructively revoked when the company sent its acceptance on April 27, the attempted acceptance by the company was not effective, even though it would have been treated as effective when sent under the mailbox rule (April 27), rather than when received (May 10). Answer choice C is incorrect. This was a revocable offer that was constructively revoked before the company sent the letter accepting the offer. Therefore, the offer had been constructively revoked before the company could have effectively accepted the offer under the mailbox rule. Answer choice D is incorrect. If the offeree acquires reliable information that the offeror has taken definite action inconsistent with the offer, the offer is automatically revoked and the offeree's power to accept the offer terminates. Therefore, the widow never needed to expressly revoke this offer in order to avoid liability to the company.

A salon owner contacted a manufacturer by email about purchasing shampoo sinks. The manufacturer sent the salon owner the following email: "I will sell you four shampoo sinks at a discounted price of $300 apiece." The salon owner responded immediately, rejecting the offer. However, due to a transmission problem in the internet routing system, the message was not delivered to the manufacturer until the following day. In the meantime, the salon owner contacted several other sellers, all of whom made significantly higher offers. The salon owner then sent another email to the manufacturer, stating, "I accept your offer." This email was delivered immediately. The following day, the misrouted rejection email arrived in the manufacturer's inbox. Assume the parties are in a jurisdiction that applies the mailbox rule to electronic communications. Was a contract formed? A. Yes, because the salon owner accepted the manufacturer's offer. B. Yes, because the mailbox rule applies. C. No, because the salon owner rejected the offer prior to accepting the offer. D. No, because the manufacturer received the salon owner's rejection.

A. The mailbox rule states that a timely sent acceptance is effective when sent, not upon receipt. However, if a communication is sent rejecting the offer, and a later communication is sent accepting the contract, the mailbox rule does not apply, and the first one to be received by the offeror prevails. Here, the salon owner rejected the offer, then sent an acceptance. Since the acceptance was received by the offeror first, the acceptance prevails. Answer choice B is incorrect because, as noted with respect to answer choice A, the mailbox rule does not apply when an acceptance is sent after a rejection. Answer choice C is incorrect because, while a rejection's effect is to terminate an offer, to be effective, the rejection must be communicated to the offeror. When a rejection is sent before an acceptance, the mailbox rule does not apply and the first communication received by the offeror prevails. Answer choice D is incorrect because a contract was formed when the manufacturer received the acceptance before the rejection. The fact that the manufacturer received the rejection the following day may affect the damages to which the manufacturer is entitled if the salon owner refuses to honor the contract, but it does not control the issue of the formation of a contract.

An art patron had spent years providing low-interest loans to local artists to allow them to pursue their artistic endeavors without worrying about their basic costs of living until they became successful. One such artist had accumulated $10,000 in debt through loans from the patron, and the debt was now due. Because he did not have the money to pay the patron, the artist instead offered to build the patron a large, one-of-a-kind sculpture in full satisfaction of the debt. The patron accepted this offer, and the artist built and delivered the sculpture. The patron had the sculpture appraised and learned that the sculpture was only worth $5,000. The patron then sued the artist to recover the remaining $5,000 of the debt. Is the patron likely to succeed in his suit against the artist? A. No, because the patron accepted the artist's payment in the form of a sculpture. B. No, because there was a dispute as to the validity or amount of the debt that was due. C. Yes, because the artist had a preexisting duty to pay the patron $10,000. D. Yes, because the appraised value of the sculpture was only $5,000.

A. Under an accord agreement, a party to a contract agrees to accept a performance from the other party that differs from the performance that was promised in the existing contract, in satisfaction of the other party's existing duty. When a party agrees to accept a lesser amount in full satisfaction of its monetary claim, there must be consideration or a consideration substitute for the party's promise to accept the lesser amount. For example, consideration can exist if the other party honestly disputes the claim or agrees to forego an asserted defense, or if the payment is of a different type than called for under the original contract. Here, the parties entered into an enforceable accord agreement because the patron accepted the sculpture in full satisfaction of the $10,000 debt when the debt originally called for an exchange of money. Therefore, this accord agreement is supported by consideration, and the debt has been discharged. Answer choice B is incorrect. The artist did not dispute the validity of the debt or the amount that was owed to the patron. Instead, he claimed he did not have the money to pay the patron and would create a sculpture for the patron to satisfy his debt. An undisputed debt, as here, can still be discharged if payment is accepted in a different form than required under the debtor's preexisting duty. Answer choice C is incorrect. When a party agrees to accept a lesser amount in full satisfaction of its monetary claim, there must be consideration or a consideration substitute for the party's promise to accept the lesser amount. For example, consideration can exist if the other party honestly disputes the claim or agrees to forego an asserted defense, or if the payment is of a different type than called for under the original contract . Here, the payment was in the form of a sculpture. Therefore, although the artist had a preexisting duty to pay the patron $10,000, the patron agreed to accept the sculpture instead and this agreement was supported by consideration in the form of a different type of payment than called for under the original contract. Answer choice D is incorrect. Because the artist offered payment in a form different than that called for under the contract (i.e., a sculpture instead of money), it does not matter that the sculpture was worth less than the outstanding debt. The debt is still discharged by this accord agreement.

On December 1, a supplier sent a hospital the following email: "I will sell you 10,000 tubes of ointment at $4 per tube, a 20% discount off our normal price of $5 per tube. This offer will remain open for seven days." The email lacked a handwritten signature, but contained the supplier logo. On December 4, the supplier called the hospital's purchasing agent and informed the agent that the supplier was revoking the December 1 offer. The next day, the hospital's purchasing agent placed an order for 10,000 tubes of ointment, stating that the hospital would pay the discounted price of $4 per tube. If the supplier delivers the ointment, how much is the supplier likely entitled to recover from the hospital? A. $40,000, because the supplier was bound to keep the offer open for 7 days. B. $40,000, because the supplier's revocation was not in writing. C. $50,000, because the hospital did not provide consideration to hold the offer open. D. $50,000, because the offer was not signed by the supplier.

A. Under the UCC's firm offer rule, an offer to buy or sell goods is irrevocable if the offeror is a merchant, there is an assurance that the offer is to remain open, and the assurance is contained in a signed writing from the offeror. No consideration by the offeree is needed to keep the offer open. Here, because the appearance of the supplier's logo in the email most likely suffices as a "signature," all three conditions are satisfied, and the supplier's offer was irrevocable until the offer period of seven days expired. Since the hospital's order was placed within this period, the order for 10,000 tubes of ointment is priced at $4 each, or $40,000 total. Answer choice B is incorrect because the supplier was bound by the UCC firm offer rule, and his offer was irrevocable regardless of the method of his attempted revocation. Answer choice C is incorrect because, under the UCC's firm offer rule, no consideration is required to hold the offer open. Answer choice D is incorrect because the appearance of the supplier's logo on the supplier's own email most likely is sufficient to show the supplier's deliberate intention to make a binding firm offer.

A man learned that his ex-wife might lose their former marital home, which she had been awarded outright as part of the divorce decree, due to her inability to make the monthly mortgage payment of $2,500. He sent her a letter promising to send her $2,500 in a week "for the house." Upon receipt of the letter, the ex-wife entered into a contract to purchase a big screen TV for $2,500. Upon learning of the contract for the TV, the man told his ex-wife he would not be sending her any money. She has sued him for $2,500. Will the ex-wife prevail? A. No, because repudiating the promise to give his ex-wife $2,500 did not result in injustice to her. B. No, because the man's promise to give his ex-wife $2,500 did not result in an economic benefit to him. C. Yes, because the amount of the ex-wife's reliance equaled the amount promised by the man. D. Yes, because the ex-wife took action in response to the man's promise.

A. Under the doctrine of promissory estoppel, a promise is binding if (i) the promisor should reasonably expect it to induce action or forbearance on the part of the promisee or a third person, (ii) the promise does induce such action or forbearance, and (iii) injustice can be avoided only by enforcement of the promise. Here, the ex-wife relied on the man's promise to give her $2,500. It is arguable whether the man could reasonably have expected his promise to send her money "for the house" would induce her to buy a big screen TV rather than paying the mortgage. Regardless, denying the ex-wife the money did not cause injustice to her because she should have put the money towards the mortgage, not an extravagance like a big screen TV. Answer choice B is incorrect because a promise may be enforceable under the doctrine of promissory estoppel even though carrying through on the promise will not result in an economic benefit to the promisor. Answer choice C is incorrect. Under the doctrine of promissory estoppel, there is no requirement that the promisee's degree of reliance as measured in monetary terms equal the amount promised. A promisee may be able to recover the amount that she has expended in reliance on a promise, such as preparatory costs, even though that amount is less than the promised amount. Answer choice D is incorrect. To be enforceable, the promise must induce the promisee or a third party to act. It is doubtful that the man reasonably expected that his promise would induce his ex-wife to take the action that she did—to contract to purchase a big screen TV. However, she can assert that the acquisition of the TV, as a household item, would be "for the house." Even though the ex-wife did take action in response to the man's promise, a court's refusal to enforce the promise would not be unjust.

A man borrowed $25,000 from his aunt to purchase land. Under the terms of their agreement, the man was to repay his aunt when he sold the land. One year later, the man sold the land for $20,000, but he did not repay his aunt. Four years after the sale, the man promised in a signed writing to pay $15,000 to his aunt for his prior loan obligation. The applicable statute of limitations for enforcement of a debt obligation is three years. Five years after the sale, the aunt sued the man. The man asserted the statute of limitations as a defense. How much can the aunt recover? A. $0 B. $15,000 C. $20,000 D. $25,000

B. A new promise to pay a debt after the statute of limitations has run is enforceable without any new consideration. Most states require that the new promise be in writing and signed by the debtor. Here, although there is no additional consideration for the man to pay $15,000 to his aunt, the man's new promise, made in a signed writing, to pay that amount after the statute of limitations had run is enforceable. Therefore, the aunt can recover $15,000. Answer choice A is incorrect. Although the man's original promise to repay the $25,000 is not enforceable because it is barred by the statute of limitations, the man's signed, written promise to pay $15,000 is enforceable, even though it is not supported by consideration. Answer choice C is incorrect. Although the man only received $20,000 when he sold the land, he was obligated to repay the full $25,000 that he had borrowed from his aunt to buy the land. However, his obligation to repay the full amount of the $25,000 loan is barred by the statute of limitations. Answer choice D is incorrect because enforcement of the man's original promise to repay the $25,000 loan is barred by the statute of limitations.

A nursery and a contractor entered into an agreement for the construction of a greenhouse for $50,000. The contract price would be due when the greenhouse was completed. The contractor expected a profit of $15,000 for the job. Two weeks later, the contractor had spent $25,000 on labor and materials, including $15,000 on uninstalled windows. The reasonable market value of the labor and materials provided at that time was $20,000. At this point, the nursery told the contractor to stop working because the nursery had decided to forego the greenhouse. The contractor was able to sell the windows to a builder for $10,000. In an action by the contractor against the nursery, which of the following is the highest amount of damages the contractor may recover? A. $40,000, the contractor's construction costs of $25,000 plus the $15,000 profit. B. $30,000, the contractor's construction costs of $25,000 plus the $15,000 profit, minus the $10,000 saved by selling the windows. C. $20,000, the reasonable value of the services the contractor provided to the nursery. D. $15,000, the contractor's construction costs of $25,000 minus the $10,000 saved by selling the windows.

B. A recovery of $30,000 represents the contractor's expectation measure of damages and gives him the benefit of the bargain. The general measure of damages for the nursery's failure to pay the contract price, in whole or in part, is the profits that the contractor would have earned ($15,000), plus any costs incurred by the contractor ($25,000), less the amount of any payments made by the nursery to the contractor ($0) and any materials purchased by the contractor that are used by the contractor on another job or sold to a third party ($10,000). This amount would place the contractor in the position he would have been in but for the breach. It is also the greatest amount the contractor is able to recover. Answer choice A is incorrect because it fails to subtract the loss avoided by the contractor's sale of the windows to the third-party builder. Answer choice C is incorrect because it is a restitutionary measure of damages that will not allow for damages related to benefit of the bargain. Because the contractor can recover more by seeking expectation damages, this is not the correct answer. Answer choice D is incorrect. This calculation, which is the contractor's reliance damages, fails to allow the contractor the benefit of his bargain.

In April, a school district placed an order with a vendor for 500 desks at a price of $75 per desk. The vendor, who qualified as a volume seller under the Uniform Commercial Code (UCC), confirmed this order. The desks, which were ordered in anticipation of the opening of a new elementary school in the district, were to be delivered to the new school on August 5. In late May, the school district received notice from the contractor who was responsible for building the new school that the building would not be ready for the beginning of the school year. The school district notified the vendor and canceled the order. Although the vendor received this notification, due to a clerical error, it did not take any action in response. In early July, the contractor informed the school district that the new school would be ready on August 1. Upon receiving this news, the school district promptly notified the vendor to ship the desks as per the original agreement. When the desks did not arrive on August 5, the school district purchased 500 desks from a local supplier at a price of $80 per desk. The desks from the local supplier arrived at the new school on August 7. The school district rejected the vendor's shipment of 500 desks that arrived on August 8. Is the school district entitled to recover $2,500 from the vendor, representing the additional cost of the replacement desks obtained from the local supplier? A. Yes, because the school district is not a merchant of desks. B. Yes, because the school district retracted its repudiation of the contract. C. No, because the vendor is a volume seller of desks. D. No, because the UCC recognizes good-faith modification of a contract.

B. Anticipatory repudiation occurs when there has been an unequivocal refusal of the buyer or seller to perform, or when reasonable grounds for insecurity arise with respect to the performance of either party, and the other party fails to provide adequate assurances within a reasonable time (not to exceed 30 days under the UCC). The repudiation can be retracted if the other party has not canceled the contract or materially changed position. In this case, although the school district repudiated its contract with the vendor, the vendor neither notified the school district of its acceptance of the repudiation, nor took any action in reliance on that repudiation. Consequently, the contract remained in effect. When the vendor breached the contract by failing to deliver the desks on August 5, the school district could seek to cover by purchasing the desks from the local supplier, and recover the $2,500 difference between the replacement price and the contract price from the vendor. Answer choice A is incorrect. Although the school district is not typically a seller of desks, the school district is nevertheless an entity that regularly deals in desks. Moreover, even though the school district is a merchant with regard to this transaction, this status does not place an additional obligation on the school district in retracting its prior repudiation of the contract with the vendor. A repudiation can be retracted if the other party has not acted in reliance on the repudiation, accepted the repudiation, or brought suit for breach of contract. Answer choice C is incorrect. Although the vendor is a volume seller of desks, and as such could seek to recover profits it would have made on the sale, the vendor is the party who has breached the contract. Consequently, the vendor's status as a volume seller of desks does not affect its contractual liability that arose from its own breach of the contract. Answer choice D is incorrect because, although the UCC does permit parties to a contract to modify a contract in good faith and without consideration, here the vendor did not accept the school district's offer to cancel the contact, so no modification occurred.

The owner of a boat contracted with a sail maker to make a replacement sail for the boat at a price of $1,500. Under the terms of their written contract, which did not contain a liquidated damages clause, the owner made a deposit of $750. The owner sold the boat before the sail maker finished making the sail. Despite the unusual configuration of the sail, the sail maker was able to sell the finished sail to another boat owner for $1,500. The owner has sued the sail maker in restitution for the return of his deposit. How much of his deposit is the boat owner entitled to receive? A. $0 B. $450 C. $500 D. $750

B. For contracts for the sale of goods, a defaulting buyer is entitled to a refund of any payments made on the contract less damages provable by the seller and either (i) the amount to which the seller is entitled by virtue of an enforceable liquidated-damages provision or (ii) a penalty of "20 percent of the value of the total performance for which the buyer is obligated under the contract, or $500, whichever is smaller." Here, because the contract between the boat owner and the sail maker did not contain a liquidated damages clause, the boat owner is entitled to a refund of his $750 deposit less the smaller of $500 or 20 percent of the price of the sail ($1,500), which is $300. The boat owner, therefore, is entitled to recover $450 ($750 - $300) of his deposit. Answer choice A is incorrect because, even though the boat owner breached the contract, the boat owner is nevertheless entitled to recover a portion of his deposit in restitution. Answer choice C is incorrect because, although $500 is the maximum that a seller who is not otherwise entitled to damages may retain of a buyer's deposit, it is in this case neither the amount that the sail maker may retain, which is $300, nor the amount that is due to the boat owner, which is $450 ($750 - $300). Answer choice D is incorrect because the boat owner, despite breaching the contract, is entitled to a recovery with respect to his deposit, but that recovery is limited in this case.

A manufacturer was developing a new, more powerful battery for use with its electrical tools. On January 15, the manufacturer contracted in writing with a company that owned a chain of home improvement stores to deliver 1000 of these batteries on or before June 11. As of January 15, the manufacturer had not yet successfully produced the new battery, but it was confident that it was close to a breakthrough. However, on April 10, the manufacturer's development team concluded that they were unable to solve the technical problems that prevented them from producing the battery. The manufacturer immediately notified the company that, due to present technological limits, it was impossible for the manufacturer or any other company to produce the promised battery. If the company sues the manufacturer for breach of contract, which party is likely to prevail? A. The company, because the defense of impossibility does not apply to merchants under the UCC. B. The company, because the manufacturer assumed the risk that it could not produce the more powerful battery. C. The manufacturer, because it was objectively impossible to perform the manufacturer's duty under the contract. D. The manufacturer, because the manufacturer acted in good faith and used its best efforts to produce the promised battery.

B. If a party assumes the risk of an event happening that makes performance impracticable, then the defense of impracticability will not apply. Here, the manufacturer knew at the time of contracting that the more powerful battery had not yet been created. Based on these facts, the manufacturer assumed the risk that it might never successfully make this battery, and that the order would be impossible to fill. Therefore, the defense of impracticability will not apply. Answer choice A is incorrect. First, note that under the modern view, the defense traditionally called "impossibility" is now generally referred to as "impracticability." Second, this defense does apply to merchants under the UCC. Answer choice C is incorrect because mere objective impossibility is not enough to provide a defense against a breach of contract action. For the defense of impracticability to be available, an unforeseeable event must occur, nonoccurrence of the event must be a basic assumption of the contract, and the party seeking discharge of a breached duty must not be at fault. Here, the failure of the manufacturer to develop the more powerful battery was foreseeable, and the manufacturer therefore assumed the risk that it may fail to develop the promised battery. Answer choice D is incorrect because acting with good faith and using one's best efforts to avoid a breach are not defenses to a breach of contract claim.

On March 5, a watchmaker contracted with a bride to make a custom gold watch with a special engraving for her soon-to-be husband. The bride contracted with the watchmaker to make and deliver the watch to her by March 15, a few weeks before the wedding on April 5. Per the contract, the cost to make the watch was $1,500. At the watchmaker's request, the bride agreed to pay the $1,500 to his nephew to help the nephew with his car payments. The watchmaker completed and delivered the watch to the bride on March 15. However, the bride and her future husband had ended their relationship, and the bride refused to tender payment to the watchmaker's nephew. If the nephew recovers the $1,500 from the bride, it will be because he is a/an A. Incidental beneficiary B. Intended beneficiary C. Creditor beneficiary D. Delegate

B. In general, an intended beneficiary is one to whom the promise of the performance will satisfy the obligation of the promisee to pay money to the beneficiary or the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance. Here, the nephew is an intended beneficiary because the watchmaker promised to make the watch for the bride if the bride paid the $1,500 to the nephew. Answer choice A is incorrect. An incidental beneficiary is one who benefits from a contract even though there is no contractual intent to benefit that person. An incidental beneficiary has no rights to enforce the contract. Here, there was contractual intent to benefit the nephew and thus he is able to enforce the contract against the bride. Answer choice C is incorrect. If performance of a promise would satisfy an actual, supposed, or asserted duty of the promisee to a third party, and the promisee did not intend to make a gift to the third party, then the third party is called a creditor beneficiary. Here, the nephew is not a creditor beneficiary because there are no facts to indicate that the watchmaker owed a duty to the nephew or had an obligation to pay the nephew $1,500. Rather, it appears the $1,500 was meant to be a gift to the nephew to help with his car payments. Answer choice D is incorrect. "Delegation" is the transfer of duties and obligations under a contract. Here, the watchmaker did not transfer his duties and obligations under the contract to the nephew. The nephew was not obligated to perform under the contract, and merely had the right to the $1,500 as an intended beneficiary of the contract.

In exchange for a payment of $6,000, a company agreed to prepare a site on which a contractor was committed to erect a building. The written agreement required the company to be finished on or before a specific date and contained a clause that penalized the company $500 for each day the company was late in meeting this deadline. The company was two days late in meeting the deadline. As a consequence of the delay, the contractor suffered $200 in damages. The contractor paid the company $5,000, and the company sued the contractor to collect the remaining $1,000 of the contract price. How much can the company recover in damages under this contract from the contractor? A. $1,000 B. $800 C. $200 D. $0

B. Liquidated damages are damages to be recovered by one party without proof of actual loss in the event the other party breaches the contract. If the liquidated damages are disproportionate to the actual damages, then the clause will not be enforced, and recovery will be limited to the actual damages proven. In this case, although the contractor is not entitled to enforce the liquidated damages clause because the amount specified in the clause ($500 per day) constitutes a penalty rather than a reasonable estimate of the damages that the contractor might sustain, the contractor is entitled to actual damages that were suffered as a consequence of the company's delay in completing the contract. Consequently, the company can recover $1,000 (the contract price) less $200 (the actual damages suffered by the contractor from the two-day delay). Answer choice A is incorrect because, although the contractor cannot recover under the liquidated damages clause, the contractor can recover the actual damages that were suffered as a consequence of the company's delay in completing the contract. This amount ($200) would be subtracted from the remaining amount under the contract ($1,000), permitting the company to recover $800 from the contractor. Answer choice C is incorrect because this represents the amount of damages to which the contractor is entitled, not the amount that the company can recover. Answer choice D is incorrect because a liquidated damages clause is unenforceable if the amount constitutes a penalty rather than a reasonable estimate of the damages that the nonbreaching party might sustain, as in this case.

A manufacturer entered into a written contract with a pet store chain whereby the manufacturer promised to design and create 1,000 collars to discourage dogs under 10 pounds from barking. In exchange, the pet store agreed to pay $50,000 upon delivery of these "bark prevention" collars. After doing some research and development, the manufacturer realized that the current device used in such collars for larger dogs would not work for dogs under 10 pounds. Upon determining the need for a new type of vibration sensor, which would add an additional $10,000 to the cost of the collars, the manufacturer informed the pet store of the issue. The pet store chain signed a document agreeing to the increased purchase price. After the collars were delivered and accepted, the pet store paid the manufacturer $50,000 only. If the manufacturer files an action against the pet store to recover the additional $10,000, will it succeed? A. Yes, because the unforeseen difficulties in designing a collar for small dogs made performance impracticable. B. Yes, because consideration is not required for a modification of this contract. C. No, because the manufacturer did not sign the price increase document. D. No, because there was no bargained for exchange for the increased price.

B. The UCC does not require consideration to modify a contract, although the modified contract must satisfy the Statute of Frauds if the sale of goods is for at least $500. Here, the UCC applies to the sale of dog collars. Since the modification was in writing, it is enforceable even though the buyer did not receive additional consideration for the modification. Answer choice A is incorrect. Although impracticability may constitute a reason for permitting modification of a contract without additional consideration under the common law, a mere increase in the cost to a party in order to be able to perform does not generally constitute impracticability. Moreover, the manufacturer likely assumed the risk of having to create a new sensor. Consequently, the doctrine of impracticability does not apply here. Answer choice C is incorrect. The Statute of Frauds only requires that the party against whom a writing is to be enforced sign the writing (i.e., the party to be charged). The chain's signature on the document is sufficient because the manufacturer is seeking to enforce the pet store chain's promise to pay an additional $10,000. Answer choice D is incorrect because there does not need to be a bargained for exchange to support a modification of a contract governed by the UCC.

A boutique commissioned a potter to make 50 serving bowls at a price of $100 each. The store paid the full $5,000 for the bowls at the time that the contract was executed. The contract specified that the potter would deliver the bowls personally to the store on March 1. Upon completion of the bowls in conformity with the contract on February 25, the potter notified the store and made arrangements to deliver the bowls on March 1. Unfortunately, five of the bowls were destroyed in transit due to the potter's careless driving. The store refused to accept the remaining 45 bowls, even though the potter offered to reduce the purchase price by $500. The store sued the potter for the return of the $5,000 paid to the potter. What will be the likely result? A. The store will prevail, because the contract is void due to the potter's inability to deliver 50 bowls. B. The store will prevail, because the store is not required to accept a non-conforming delivery. C. The store will prevail, but can only recover the contract price for the broken bowls. D. The store will not prevail, because the risk of loss transferred to the store upon notification of the completion of the bowls.

B. The UCC requires "perfect tender," and substantial performance will not suffice except for installment contracts or when the parties agree that it applies. Here, the store has the option of voiding the contract because the potter failed to deliver all 50 of the bowls as called for in the contract. Answer choice A is incorrect because the contract is not void. The store may accept delivery of the 45 bowls at the lower price or avoid the bargain. Consequently, the contract is voidable, but not void. Answer choice C is incorrect because the potter cannot force the store to accept a non-conforming shipment. Answer choice D is incorrect because, since the potter was a merchant and the contract did not require or authorize the bowls to be shipped by carrier, the risk of loss did not pass to the store until the store received the bowls.

A retailer entered into a written contract with a wholesaler for 1,000 pairs of blue jeans. The blue jeans were to be delivered to the retailer by August 1. On August 1, the wholesaler delivered 1,000 pairs of black jeans to the retailer. In prior transactions with the wholesaler, the retailer had accepted black jeans although the contract called for the delivery of blue jeans. The retailer rejected the delivery of the black jeans. Immediately following the retailer's rejection, the wholesaler notified the retailer that it would deliver 1,000 pairs of blue jeans on August 2. On August 2, the wholesaler delivered 1,000 pairs of blue jeans to the retailer. The retailer rejected the delivery since it was made after August 1. The wholesaler subsequently sued the retailer for breach of contract. Is the wholesaler likely to prevail? A. Yes, because the retailer did not have the right to reject the black jeans on August 1. B. Yes, because the wholesaler delivered 1,000 pairs of blue jeans within a reasonable time. C. No, because the time for performance under the contract had elapsed when the wholesaler delivered conforming goods. D. No, because the wholesaler did not satisfy the perfect tender rule.

B. The seller has a right to cure a defective tender if (i) the time for performance under the contract has not yet elapsed or (ii) the seller had reasonable grounds to believe that the buyer would accept despite the nonconformity. The seller must give notice of the intent to cure and make a new tender of conforming goods. If the seller had reasonable grounds to believe that the buyer would accept despite the nonconformity, the tender must be made within a reasonable time. In this case, the wholesaler had reasonable grounds to believe that the retailer would accept the 1,000 pairs of black jeans since the retailer had accepted black jeans in past transactions with the wholesaler when the contract called for the delivery of blue jeans. The wholesaler notified the retailer that it would deliver the 1,000 blue jeans the following day. The wholesaler made proper delivery of the jeans on August 2. Since the wholesaler had a right to cure and delivery of the blue jeans was made within a reasonable time, the wholesaler will likely prevail. Answer choice A is incorrect. Under the UCC, if either the tender or the goods are nonconforming, then the buyer has the right to reject or accept all or part of the goods. Since the black jeans were nonconforming, the retailer had the right to reject the delivery on August 1. Answer choice C is incorrect. A seller has a right to cure if the seller had reasonable grounds to believe the buyer would accept despite the nonconformity, even if the time for performance under the contract has elapsed. The seller must provide conforming tender within a reasonable time. Answer choice D is incorrect. Although performance under the UCC requires perfect tender, a seller may have the right to cure a defective tender. In this case, the wholesaler's delivery of 1,000 pairs of black jeans did not satisfy the perfect tender rule. However, the wholesaler had the right to cure and did so by notifying the retailer and delivering conforming goods within a reasonable time.

A wedding ceremony and reception were to be held outside on an estate owned by the bride-to-be. She entered into a written agreement with a landscaper to prepare the grounds for the wedding at a cost of $10,000. Due to his other jobs, the landscaper did not begin preparing the grounds until three days before the wedding. The next day, the landscaper realized that because he had underestimated the time required to perform, he would not be able to complete the preparations without extra help at an additional cost of $1,000. The bride-to-be agreed to the additional cost because she had no other option and needed the landscaping completed before the wedding. As they had initially agreed, the contractor completed the landscaping before the wedding. The bride paid him $10,000 but refused to pay the additional $1,000. Can the landscaper recover the additional $1,000 from the bride? A. No, because the agreement to pay the additional cost was not in writing. B. No, because there was no consideration for the bride-to-be's promise to pay the additional amount. C. Yes, because the bride-to-be agreed to pay the additional amount and the landscaper completed his performance on time. D. Yes, because the landscaper's unforeseen difficulties make this modification enforceable.

B. Under the common law preexisting duty rule, modification of an existing contract must be supported by consideration. Here, the landscaper was already obligated to prepare the grounds for the wedding and has suffered no additional legal detriment that could be considered consideration. The bride-to-be did not receive any consideration from the landscaper for her promise to pay the additional $1,000. A modification of a contract can also be enforced when there are unforeseen difficulties, and one of the parties agrees to compensate the other when the difficulties are discovered if those difficulties would make performance impracticable. However, performance here is not made impracticable just because the landscaper chose to finish other jobs before beginning to work on this one. Therefore, the landscaper cannot recover the additional $1,000. Answer choice A is incorrect because the modification to this services contract did not need to be in writing to be enforceable. However, consideration was required in order for the modification to be enforced. Answer choice C is incorrect. Although the bride-to-be promised to pay the additional amount, there was no consideration to support this promise and thus it is not enforceable. The fact that the landscaper completed his contractual performance on time does not entitle him to recover the additional $1,000 because the landscaper was already obligated to complete performance on time in exchange for the agreed-upon $10,000. Answer choice D is incorrect. Although modification of a contract may be enforced when there are unforeseen difficulties, in this case, the landscaper's failure to properly estimate the time required for the job, without additional facts, does not trigger the defense of impracticability.

An elderly homeowner used a construction company for many years to do work on his home. The homeowner decided to repave his driveway. On April 15, he called the manager of the company to get a quote on this job. The manager and the homeowner orally agreed that the homeowner would pay the company $1,000 to repave his driveway by May 1. In addition, the homeowner emphatically stated, "I will only allow [crew chief] to repave my driveway." The crew chief was working on another job, but the manager did not want to lose the homeowner's business. Knowing that the homeowner was hard of hearing, the manager replied, "Yes, I will have [contractor] repave your driveway." The next day, the manager sent the contractor, not the crew chief, to repave the homeowner's driveway. If the homeowner decides he does not want the contractor to repave his driveway, can he rescind the contract? A. Yes, because there was a misunderstanding. B. Yes, because the manager caused the mistake. C. No, because the homeowner bore the risk of the mistake. D. No, because the mistake did not relate to an essential element of the contract.

B. When there is a unilateral mistake, the mistaken party can void the contract if the mistaken party did not bear the risk of the mistake and either the mistake would make enforcement of the contract unconscionable, or the non-mistaken party caused the mistake, had a duty to disclose or failed to disclose the mistake, or knew or should have known that the other party was mistaken. Here, there was a unilateral mistake caused by the manager, as he knew that the homeowner was hard of hearing and attempted to have the homeowner unknowingly agree to performance by the contractor. Answer choice A is incorrect. A misunderstanding occurs when both parties believe that they are agreeing to the same material terms, but they in fact agree to different terms. It arises when a material term in the contract is ambiguous and can be interpreted by each party as having a different meaning. There was no misunderstanding in this case. The parties did not have a different understanding of the same material term in the contract. Rather, based on the manager's statement of a different person than the homeowner requested, the parties did not agree on who would perform the work. Answer choice C is incorrect because based upon the facts, the homeowner did not bear the risk of the mistake that the manager would send the contractor instead of the crew chief. Answer choice D is incorrect. The mistake here concerned an essential element of the contract as the homeowner specifically stated that he would only allow the crew chief to repave the driveway.

Under the terms of an insurance contract, a casualty insurance company required an insured to give the company written notification of a casualty within 30 days of its occurrence. A wind storm caused a large tree to topple onto the insured's dwelling. The insured, who was away on vacation at the time of the storm, did not discover the casualty until she returned three weeks after the casualty. That same day, the insured contacted the company by phone and notified the company of the casualty. Three days later, the company sent an agent to the dwelling. The agent, with actual authority on behalf of the insurance company, told the insured that she did not have to take any further action with regard to notifying the company of the claim. A week after this conversation, the insured, having taken no action in reliance on the agent's statement, received a written communication from the insurance company, indicating that the company required the insured to fill out the enclosed notification form and return it to the company within 30 days in order for the company to cover the insured's loss. The insured failed to fill out the form for 45 days and the insurance company refused to pay for the casualty loss. The insured sued the insurance company, and the company defended against the action on the ground that the insured failed to give written notice of the casualty to company. How should the court rule? A. For the insurance company, because the company reinstated the written notice condition and gave the insured reasonable time to comply. B. For the insurance company, because the insured did not detrimentally rely on the company's waiver before the company reinstated the written notice condition. C. For the insured, because the company's agent waived the written notice condition and the company failed to timely reinstate it. D. For the insured, because, once waived, the company could not reinstate the written notice condition.

C. A party to a contract whose duty is subject to a condition can waive the condition, either by words or by conduct. In addition, that party may reinstate the condition if (i) the waiving party communicates a retraction of the waiver before the condition is due to occur, and (ii) the other party has not already suffered detrimental reliance. Here, although the company's agent, acting on behalf of the insurance company, could and did waive the written notice condition, the company's attempt to reinstate this condition was not timely, as it occurred after the condition, the initial 30-day period for providing written notification, had lapsed. Answer choice A is incorrect. Although the insurance company could have reinstated the waived condition, and the provision of an additional 30 days in which to give the insurance company written notice was most likely a reasonable time, the company did not act to reinstate the condition before the condition expired. Answer choice B is incorrect because, even though the insured did not detrimentally rely on the company's waiver, the insurance company could not reinstate the waived condition after the condition expired. Answer choice D is incorrect because, even though the insurance company did waive the written notice condition, the company could have reinstated the condition, as the insured had not relied on the waiver, had the company acted before the condition was due to occur.

A homeowner went to a home improvement store specializing in plumbing supplies to purchase a filter for the water filtration system in her house. After telling a store clerk that she needed the appropriate filter for her system, the clerk excused himself, went to the storeroom, and inadvertently returned with a filter for another water filtration system. The clerk, who became engaged in a conversation with another employee, handed the filter to the homeowner but said nothing to her. The homeowner took the filter to the register and paid for it. The cashier noticed that the filter was discounted and told the homeowner that the filter was sold "without the store's usual warranties." The homeowner installed the filter, and as a consequence, suffered a debilitating disease from the improperly filtered water. The homeowner has sued the store for breach of the warranty of fitness for a particular purpose. Is she likely to succeed? A. No, because no store employee made any express promise to the homeowner regarding the filter she purchased. B. No, because the cashier's comment that the filter was sold "without the store's usual warranties" effectively disclaimed any implied warranty. C. Yes, because the clerk knew that the homeowner wanted an appropriate filter for her water filtration system, and the homeowner relied on the clerk's knowledge. D. Yes, because the home improvement store was a merchant that specialized in selling plumbing supplies.

C. A warranty that the goods are fit for a particular purpose is implied whenever the seller has reason to know (from any source, not just from the buyer) that the buyer has a particular use for the goods, and that the buyer is relying upon the seller's skill to select the goods. Here, the homeowner went not just to a store that sold hardware items, but to one that specialized in selling plumbing supplies. The store clerk was aware of the homeowner's need for a filter that was appropriate for her water filtration system, but instead mistakenly supplied the homeowner with a filter that did not meet that need. Consequently, the store has breached the warranty of fitness for a particular purpose. Answer choice A is incorrect because the warranty of fitness for a particular purpose is an implied warranty. There is no requirement that the seller make an express promise in order to violate this warranty. Answer choice B is incorrect. Unlike the implied warranty of merchantability, implied warranties of fitness for a particular purpose may be excluded by general language, but only if it is in writing and conspicuous. Therefore, the cashier's oral disclaimer was ineffective. Answer choice D is incorrect. Although the store was a merchant for plumbing supplies, any seller may breach the warranty of fitness for a particular purpose. Unlike the implied warranty of merchantability, the seller need not be a merchant who deals in goods of the kind.

A carpenter entered into a valid contract with a man to build a treehouse on the man's property on a particular day for $3,000. The particular date was chosen so that the treehouse would be completed for his son's birthday, which was the day after the agreed-upon building date. Because the carpenter had outstanding debt with a local bank, the carpenter asked the man to deliver his payment for the treehouse directly to the bank to pay off his debt. The man agreed, and the carpenter informed the bank that they should soon expect payment from the man to satisfy the carpenter's debt. However, when the carpenter showed up at the agreed-upon time to build the treehouse, he was so intoxicated that he was incapable of completing the treehouse safely and competently. After it became clear that the carpenter could not complete the work that day, the man ordered the carpenter off of his property. The bank has now brought an action against the man to recover the $3,000 owed to it under the contract with the carpenter. Which of the following is the man's strongest defense? A. The bank is not a party to the contract. B. The bank's rights under the contract have not vested. C. The carpenter failed to perform under the contract. D. The carpenter impermissibly assigned his right under the contract to the bank.

C. An intended beneficiary to whom the promisee owed money (i.e., a creditor beneficiary) or an intended beneficiary to whom the promisee is under a legal obligation, may sue either the promisor to enforce his contractual promise, or the promisee on the underlying obligation, but only one recovery is allowed. Here, the bank is the creditor of the carpenter (i.e., the promisee) and an intended beneficiary. Therefore, the bank is permitted to sue the man (i.e., the promisor) under the contract. However, the promisor can raise any defense against the third-party beneficiary that the promisor has against the original promisee. Because the original promisee here, the carpenter, failed to perform under the contract, the man, as promisor, can raise this failure to perform as a defense against an action by the bank to enforce the contract. Answer choice A is incorrect. Even if the bank was not a party to the original contract, it is an intended beneficiary with a vested right in the contract. Therefore, the bank is permitted to bring this action against the man. Answer choice B is incorrect. The rights of an intended beneficiary vest when the beneficiary materially relies on the rights created, manifests assent to the contract at one party's request, or files a lawsuit to enforce the contract. Here, because the bank has filed a lawsuit, its rights have vested. Answer choice D is incorrect because contract rights generally can be assigned.

Prior to the beginning of the season, a professional hockey player entered into a signed, written agreement with the owner of the team. Among the provisions in the agreement was one that provided that, if the player scored 20 or more goals during the season, he would receive additional compensation. The player tried his best during the season, but only managed to score 19 goals. The owner refused to pay the player any additional compensation. Is the owner excused from paying the additional compensation? A. No, because the player substantially complied with the condition regarding goals scored. B. No, because the player's failure to satisfy the condition was not willful. C. Yes, because the additional compensation was conditioned on the player scoring at least 20 goals during the season. D. Yes, because the player promised to score 20 goals.

C. Express conditions are specified in the contract and must be complied with fully unless excused. Substantial compliance will not suffice. Here, the agreement between the player and the owner contained an express condition requiring the player to score 20 goals during the season before the owner's obligation to pay the player additional compensation arose. Since the player failed to meet this condition, the owner was not obligated to pay the player additional compensation. Answer choice A is incorrect. The doctrine of substantial performance does not apply to express conditions, even though the contract is governed by the common law rather than the UCC. Answer choice B is incorrect. The owner was not obligated to perform under the agreement because the player failed to comply with the express condition in the agreement. Answer choice D is incorrect. Under these facts, the player has not promised to score 20 goals during the season. Had he done so, his failure to score 20 goals would be treated as a breach of the contract. Instead, this was just an express condition that, if met, would have triggered an additional duty on the part of the owner of the team.

A political candidate for a statewide office contracted with a songwriter to compose a theme song for his campaign for $10,000. The contract provided that, rather than paying the songwriter, the candidate was to pay the money to the songwriter's daughter. The contract also prohibited the assignment of any rights or duties arising under the contract without the permission of the other party. Subsequently, the daughter, upon learning of the contract from her father, decided to donate this money to a charity and transferred her rights under the contract to the charity. She did not secure the permission of the political candidate before making this transfer. The songwriter composed the song, which the candidate used in her campaign, but the candidate did not pay anyone for the song. The charity filed suit against the candidate for breach of contract. The charity has taken no action and has incurred no expenses related to the contract. Will the charity prevail in its action against the candidate? A. No, because the charity has not detrimentally relied on the candidate's promise. B. No, because the contract prohibits assignments. C. Yes, because the charity is the assignee of the daughter's contractual rights. D. Yes, because the charity is the donee beneficiary of the contract

C. Generally, contract rights are assignable unless the assignment materially increases the duty or risk of the obligor or materially reduces the obligor's chance of obtaining performance. Here, because the right assigned is the right to receive payment and the songwriter has performed his obligation under the contract by composing the song, this right may be assigned and enforced by the charity through a breach of contract action. Answer choice A is incorrect because, as assignee of the daughter's contractual right to receive payment from the candidate, the charity can enforce those rights without the need to establish that it detrimentally relied on the candidate's promise. Answer choice B is incorrect because, although the assignment of contractual rights in violation of a prohibition against the assignment of rights does constitute a breach of contract, the prohibition is not enforceable against the assignee to prevent the assignee from enjoying the assigned rights. Answer choice D is incorrect because, although the charity does benefit from the contract by virtue of the daughter's gratuitous assignment, the charity is not a donee beneficiary of the contract because the candidate and songwriter did not enter into contract with the intent to benefit the charity.

A contractor purchased a furnace from a distributor of heating systems, after the distributor recommended the furnace based on the contractor's stated needs. The bill of sale included a general disclaimer of warranties in small print on the back of the document. The contractor installed the furnace in an office building. Due to a manufacturing defect, the furnace failed to heat the building as it should have. The contractor was sued by the owner of the office building. Can the contractor assert a claim against the distributor for breach of the implied warranty of merchantability? A. No, because there is no implied warranty of merchantability for sales between merchants. B. No, because the distributor disclaimed this warranty. C. Yes, because the furnace failed to heat the building. D. Yes, because the contractor relied on the distributor's judgment.

C. Goods that are not fit for the ordinary purpose for which such goods are used are not merchantable. As a merchant seller of the furnace, the distributor can be liable for breach of the warranty of merchantability. Answer choice A is incorrect because the implied warranty of merchantability applies when the seller is a merchant dealing in goods of the kind sold. It applies even where the buyer is also a merchant. Answer choice B is incorrect because an inconspicuous general disclaimer is not sufficient to disclaim the warranty of merchantability. The disclaimer need not use the term merchantability, but it must use language that makes clear there is no implied warranty and must be conspicuous if in writing. Here, the general disclaimer (which may or may not have contained sufficient language) was not conspicuous. Answer choice D is incorrect because reliance on a seller's judgment is not a requirement of the implied warranty of merchantability, and a warranty of fitness for a particular purpose may be disclaimed in general language.

An art gallery contracted with a local artist to deliver three sculptures of her choice from her collection that the gallery would find suitable for sale in an upcoming family art show. The contract required a down payment of $1,000, which the art gallery paid immediately, with the rest to be paid upon delivery, depending on the price of the exact pieces delivered. The artist was to deliver the three sculptures the day before the art show. When the artist delivered the sculptures, the art gallery discovered that the sculptures were sexually explicit and unsuitable for their family art show. The art gallery immediately informed the artist that the work was unacceptable and could not be used in the show. The art gallery also told the artist that they would store the sculptures until the artist could collect them. The art gallery carefully stored the sculptures for the duration of the show, and had to offer an incomplete exhibit in the space that had been saved for the artist's sculptures. The art gallery subsequently brought a breach of contract action against the artist to recover incidental and consequential damages. If the art gallery properly establishes damages, is it likely to recover in this action? A. No, because the art gallery breached the contract by rejecting the sculptures. B. No, because the art gallery's pre-inspection payment of $1,000 constituted acceptance. C. Yes, because the art gallery had the right to inspect the sculptures before accepting them. D. Yes, because the art gallery properly revoked its acceptance of the sculptures.

C. Under the UCC, the buyer has the right to inspect the goods before deciding whether to accept or reject. Payment does not constitute acceptance if there is no right of inspection before payment. Here, the art gallery paid a down payment of $1,000 for the sculptures before having a chance to inspect them. Therefore, this payment did not constitute an acceptance of the sculptures that were delivered. The buyer also has the right to accept or reject all or part of nonconforming goods. A valid rejection requires that the buyer give notice to the seller within a reasonable time and before acceptance. When the sculptures were delivered, the art gallery was permitted to inspect them and reject them if they did not meet the art gallery's good faith subjective standard of "suitability," as provided in the contract. The art gallery then properly rejected the sculptures because they were sexually explicit and not appropriate for a family art show. On these facts, the art gallery properly exercised its right to inspect the sculptures before accepting them and can bring an action to recover damages. Answer choice A is incorrect. Rejection of conforming goods under the UCC amounts to a breach of contract. However, when the aesthetic taste of a party determines whether the other party's performance is satisfactory (e.g., painting a family portrait), satisfaction is determined under a subjective standard. Under this standard, if the party is honestly dissatisfied, even if the dissatisfaction is unreasonable, the condition has not been met. However, the party's dissatisfaction must be in good faith, or a claim of dissatisfaction can be a breach, such as when a party is asserting dissatisfaction merely to avoid its own contractual obligation. In this case, when these sculptures were delivered, the art gallery was permitted to inspect them and reject them if they did not meet the art gallery's good faith subjective standard of "suitability" as provided in the contract. Therefore, because the art gallery found the sculptures "unsuitable," the sculptures were nonconforming and could be rejected without breaching the contract. Answer choice B is incorrect because payment does not constitute acceptance if there is no right of inspection before payment. Here, the art gallery paid a down payment for the sculptures before having a chance to inspect them. Therefore, this payment did not constitute acceptance of the sculptures. Answer choice D is incorrect because the art gallery never properly accepted the sculptures. Therefore, there was no acceptance to revoke.

The owner of a residence on 10 acres of land contracted with a construction company to build a bridge for $50,000 across a small stream in order to give himself a second means of accessing his residence. Due to the owner's poor credit rating, the contract required the owner to pay $30,000 of the cost up front. The contract specified that the bridge piers were to be made completely out of stone. However, the company decided to save money by constructing the piers out of concrete and facing them with stone. Several months later, the owner learned what the company had done. The owner sued the construction company for breach of contract. The cost to reconstruct the bridge piers using only stone would be $25,000. In addition, the diminution in the market value of the bridge due to the use of concrete was $5,000. What net amount of damages is a court most likely to award to the owner? A. Nothing, because the construction company substantially performed its contractual obligation. B. $5,000, because a larger award would result in economic waste. C. $25,000, because the contractor's breach of the contract was willful. D. $50,000, because the company did not make the bridge piers completely out of stone.

C. When breach of a construction contract results in a defective or unfinished construction, if the award of damages based on the cost to fix or complete the construction would result in economic waste, then a court has the discretion to award damages equal to the diminution in the market price of the property caused by the breach. Economic waste occurs when the cost to fix or complete the construction is clearly disproportional to any economic benefit or utility gained as a result. However, if the breach is willful, and only completion of the contract will give the nonbreaching party the benefit of its bargain, then a court may award damages based on the cost to fix or complete the construction, even if that award would result in economic waste. Here, although the cost of reconstructing the bridge piers using only stone is five times the diminution in the market value of the bridge ($25,000 v. $5,000), the construction company willfully chose to ignore the mandate of the contract and use concrete, instead of stone, in the construction of the piers. Thus, a court would likely award damages to the owner based on the cost of reconstruction ($25,000). Answer choice A is incorrect. Even though the construction company substantially performed its contractual obligation to build the bridge, the use of concrete in the piers is a breach of the contract. Therefore, the construction company is subject to the owner's claim for damages resulting from this breach. Answer choice B is incorrect because, as noted with regard to answer choice C, a court is not likely to limit the damages to the diminution in the market price of the property caused by the breach in order to prevent economic waste because the construction company's breach was willful. Answer choice D is incorrect because the construction company substantially performed its contractual obligation to build a bridge, and thus the owner cannot recover the full contract amount ($50,000). As a construction contract is governed by the common law rather than the UCC, the company was not required to make a perfect tender.

A nanny and a mother entered into negotiations for the nanny to provide care for the mother's child. After several emails back and forth, the mother and the nanny agreed in writing that the nanny would care for the child from 9:00 a.m. to 5:30 p.m., Monday through Friday, for $750 per week. The nanny provided care for the child as specified for a week. The mother found that, to arrive at her job on time in the mornings, she needed the nanny to begin child care at 8:45 a.m. instead and emailed the nanny to that effect. By a reply email, the nanny agreed to the earlier start time. After several weeks during which time the nanny often failed to arrive before 9:00 a.m., the mother informed the nanny that the mother had found a replacement and that the nanny's services would no longer be required. It took the nanny several months to find another nanny position. She sued the mother for the income she would have earned under their agreement during the time she was unemployed. The mother offers into evidence the nanny's agreement to begin working at 8:45 a.m. each day. The nanny objects. Is the court likely to admit this evidence? A. No, because the agreement as to the earlier start time arose after the contract was executed. B. No, because the contract between the parties did not include a requirement for the nanny to begin working at 8:45 a.m. C. Yes, because the parol evidence rule does not apply. D. Yes, because there was no new consideration for the earlier start time.

C. While the parol evidence rule generally prevents a party to a written contract from presenting prior or contemporaneous extrinsic evidence that contradicts or is inconsistent with the terms of the contract as written, it does not apply to subsequent agreements like the email agreement regarding the earlier start time. Answer choice A is incorrect because the parol evidence rule does not apply to agreements subsequent to the execution of a contract. Answer choice B is incorrect because, even though the original contract did not include a requirement that the nanny begin working at 8:45 a.m., the parties subsequently agreed that the nanny would do so. Answer choice D is incorrect because, while it is true that the court might refuse to enforce the earlier start time requirement due to the lack of additional consideration, this question asks about whether evidence of the agreement would be admitted, not whether it would be enforced.

A landowner entered into a written agreement to sell his land for a fraction of its fair market value. The landowner was subsequently adjudicated to be incompetent, and his son was appointed his guardian. When the landowner's son learned of the agreement, acting as his father's court-appointed guardian, he sought to have the sale set aside. The buyer argued that the agreement was enforceable because it was totally integrated and in writing. The son argued that, based on prior conversations between the landowner and the buyer in which the landowner said that he was an alien from a distant planet, the buyer knew or should have known that the landowner was suffering from dementia. Will the court likely admit evidence of the prior conversations between the landowner and the buyer? A. No, because the landowner signed the agreement. B. No, because the writing was a totally integrated agreement. C. Yes, because the evidence is being offered as a defense to formation of the contract. D. Yes, because the landowner has been adjudicated to be incompetent.

C. While the parol evidence rule generally prevents a party to a written contract from presenting prior or contemporaneous extrinsic evidence that contradicts or is inconsistent with the terms of the contract as written, the rule does not apply to evidence offered to establish a defense such as incompetence. If the landowner was suffering from dementia at the time he entered into the contract, the court will likely admit evidence of the prior conversations. Answer choice D is incorrect. If an individual is adjudicated mentally incompetent, a purported contract made by the individual is void. However, not only did this adjudication occur after the contract was formed, but this adjudication does not affect the admissibility of the prior conversations. Answer choices A and B are incorrect because, even if the agreement was totally integrated and the landowner signed the writing, his incompetence would invalidate the agreement.

A homeowner's furnace stopped working. The homeowner called a friend who repaired furnaces. The friend concluded that the furnace could not be repaired and recommended a particular furnace based on her knowledge of the homeowner's needs. Relying on her friend's advice, the homeowner ordered that furnace from a heating contractor who later installed it. When the furnace was installed, the homeowner discovered that the recommended model, though functioning properly, was inadequate for her needs. Under which of the following warranties can the homeowner sue to recover from her friend? A. Implied warranty of fitness for a particular purpose only B. Implied warranty of merchantability only C. Implied warranties of merchantability and fitness for a particular purpose D. Neither the implied warranty of merchantability nor the implied warranty of fitness for a particular purpose

D. Although the friend's conduct would create both an express warranty and an implied warranty of merchantability if the friend were the seller of the furnace, since the friend is not, neither warranty applies. Answer choices A, B, and C are incorrect because the friend is not a seller of the furnace. Therefore, her comments do not constitute an express warranty or an implied warranty of merchantability.

A daughter successfully petitioned a court to have her father declared incompetent to manage his affairs and to have herself appointed as guardian of his property. Subsequently, the father ordered furniture totaling $3,500 from a local store. The store, unaware of the guardianship and not otherwise having a reason from the father's behavior to learn of his incompetency, delivered the furniture to the father's residence where he received and accepted it. The next day a flood destroyed the furniture before the daughter had the opportunity to contact the store. Is the store entitled to enforce the contract for the sale of the furniture? A. Yes, because the risk of loss had passed to the father, as buyer of the furniture, upon its delivery. B. Yes, because the store was unaware of the guardianship and the father's incompetency. C. No, because the daughter did not have the opportunity to contact the store. D. No, because the father had been adjudicated incompetent.

D. An individual who is the subject of a court-ordered guardianship over that individual's property lacks the capacity to enter into a contract. Consequently, any contract purportedly entered into by such an individual is void. Since the father was under a court-ordered guardianship, his contract to purchase the furniture was void. (Note: If the furniture is a necessity, the store may be able to recover the furniture's reasonable value in restitution under a quasi-contract action, but cannot enforce the contract of sale between the store and the father.) Answer choice A is incorrect because, although where a contract for the sale of goods exists the delivery of the goods by the seller to the buyer generally shifts the risk of loss to the buyer, here the purported contract entered into by the father for the purchase of the furniture was void. Answer choice B is incorrect because, where a guardianship over an individual's property has been recognized by a court, the seller's lack of actual knowledge of the guardianship or the individual's inability to contract is irrelevant. Answer choice C is incorrect because, since the father's contract with the store was void rather than merely voidable, the daughter's lack of opportunity to contact the store is irrelevant.

A television network created a contest open to the public. The network decided to place five screen reels in different locations around a city. Any person who found one of the screen reels and returned it to the network in person would receive a $500 prize. While a woman was waiting for the bus one morning, she noticed a metal object in the bushes. Upon closer inspection, the woman discovered it was a screen reel. The reel had a sticker that read, "Please return to Network." Unaware of the contest, the woman decided she would help the network, and put the reel in her bag. Two days later, she went to the network's headquarters and gave the reel to a manager, who had forgotten about the contest and merely thanked the woman. The woman later learned of the contest. Can the woman recover the prize? A. Yes, because she performed pursuant to the terms of the offer. B. Yes, because the offer was open to the public. C. No, because she waited two days before returning the reel to the network. D. No, because she was not aware of the offer at the time of performance.

D. An offeree must know of the offer upon acceptance for it to be valid. The offeree of a unilateral contract can only accept an offer of which he is aware. If the offeree does not become aware of the offer until after acting, then his acts do not constitute acceptance. In this case, the television network's contest was a unilateral offer, requiring performance from anyone who found the screen reels. The woman could only properly accept the network's offer if she was aware of the contest at the time that she performed. However, the woman was not aware of the contest and did not learn about it until after performance was complete. Therefore, the woman cannot recover the $500 prize. Answer choice A is incorrect because although the woman performed under the terms of the network's offer, she was not aware of the offer when she acted. Answer choice B is incorrect. The fact that the offer was open to the public, including the woman, is not enough to allow the woman to recover the prize. She must also have been aware of the offer. Answer choice C is incorrect because the terms of the contest did not require the return of the screen reel within a specific time period after finding it.

The owner of a retirement facility entered into a contract with a golf club that owned and operated a golf course that was located on adjacent land. Under the terms of the contract, the residents of the facility could use the golf club during certain times in exchange for monthly payments from the owner of the facility. Due to no fault of the owner, the retirement facility was destroyed by fire and, as a result, the owner was unable to continue operating the retirement facility. The contract made no provision for this type of event. Which of the following provides the best ground upon which the owner can escape the obligation to make future monthly payments to the golf club? A. Unilateral mistake B. Mutual mistake C. Impracticability D. Frustration of purpose

D. In order for a contractual obligation to be discharged by frustration of purpose, there must be an unexpected event that occurs, even though the nonoccurrence of the event was a basic assumption of the contract, without the fault of the frustrated party and the event destroys that party's purpose in entering into the contract. Here, the owner of the retirement facility and the golf club entered into a contract. The existence of the retirement facility was a basic assumption of the contract. The fire that destroyed the retirement facility was not the fault of its owner. The destruction of the facility frustrated the owner's purpose of providing access to a golf course as an amenity of the retirement facility for its members. Consequently, frustration of purpose, unlike the other answer choices, provides a defensible justification for discharging the owner's obligation to make monthly payments to the golf club. Answer choice A is incorrect. When only one of the parties is mistaken as to an essential element of the contract, the mistaken party can void the contract if the grounds for mutual mistake exist and either (i) the mistake would make enforcement of the contract unconscionable, or (ii) the non-mistaken party caused the mistake, had a duty to disclose or failed to disclose the mistake, or knew or should have known that the other party was mistaken. The mistake must be with regard to a belief about an existing fact and not with regard to something that will happen in the future. Here, the destruction of the retirement facility by a fire was not a fact that existed at the time that the owner of the facility entered into the contract. Answer choice B is incorrect. Mutual mistake occurs when (i) there is a mistake of fact existing at the time the contract was formed, (ii) the mistake relates to a basic assumption of the contract, (iii) the mistake has a material impact on the transaction, and (iv) the adversely affected party did not assume the risk of the mistake. As was the case with regard to a unilateral mistake defense, the destruction of the retirement facility by a fire was not a fact that existed at the time that the owner of the facility entered into the contract. Answer choice C is incorrect. Although a party's duty to perform his contractual obligations can be discharged when performance becomes impracticable, here the owner's duty to make monthly payments to the golf club was not directly affected by the fire, unlike the situation in which a fire destroys goods that are the subject of the contract.

On March 1, an office supply vendor emailed a manufacturer asking the following: "We have received your catalog and are interested in doing business. Do you offer any discounts for bulk orders of printer ink?" On March 2, the manufacturer emailed the vendor the following reply: "For a limited time, we can offer you 1000 units of printer ink for 25% off the unit price." The vendor replied with the following by email on March 4: "We accept. Please deliver the printer ink to our address on March 30." The manufacturer replied with the following on the same day: "As noted in the Terms of Service in our catalog, we do not offer shipping. By March 20, you will need to choose one of the remote offices listed in our catalog. You can pick up the ink there on March 30." On March 5, the vendor emailed the following to the manufacturer: "At your prices, it is outrageous to refuse to offer shipping. We won't be doing business." The manufacturer never replied. On March 15, the vendor sent the following email to the manufacturer: "You drive a hard bargain. We will pick up the shipment at the closest remote office on March 30." If the manufacturer does not have the ink available by March 30, can the vendor recover in an action for breach of contract? A. No, because the manufacturer's price quote on March 2 was not an offer to form a contract. B. No, because the vendor clearly and unequivocally repudiated the contract on March 5. C. Yes, because both of the parties are merchants. D. Yes, because the vendor properly retracted its repudiation on March 15.

D. Repudiation may be retracted so long as the other party has not canceled the contract or materially changed position. Here, the manufacturer did not reply to the March 5 email and does not appear to have changed position based on the repudiation in any way. Therefore, the retraction is effective, and the vendor can enforce the contract. Answer choice A is incorrect because the price quote in the March 2 email was more than an advertisement or an invitation to deal. It was an objective manifestation of a willingness by the offeror to enter into an agreement, creating the power of acceptance in the offeree. Answer choice B is incorrect because the vendor effectively retracted its repudiation with its March 15 email. Answer choice C is incorrect. Even if the vendor's request for shipping was a new term under a "battle of the forms" analysis, the manufacturer promptly and clearly objected to the term, and the vendor then repudiated on the contract. Therefore, the fact that the parties are merchants is not determinative of the vendor's ability to bring an action to enforce this contract.

A new men's apparel company entered into a contract with a well-known former mayor to make appearances at different retail stores throughout the country to promote the company's line of men's suits. Knowing that the former mayor's sponsorship had helped other new companies in the area build a consumer base, the company agreed to pay the former mayor $10,000 per appearance. Prior to the former mayor's first appearance, a news story was released that alleged the company engaged in discriminatory practices in the workplace. Despite the company's truthful assertions that the news story was completely false, the former mayor refused to make any appearances under the contract. The company was unable to find another famous public figure to make the appearances and, as a result, its line of men's suits was a complete failure. The company subsequently sued the former mayor for breach of contract. At trial, the company's attorney presented reliable uncontested evidence calculating the lost profits sustained by the company due to the former mayor's failure to make the appearances. Will the company likely be able to recover damages for lost profits? A. No, because the damages for lost profits were not foreseeable. B. No, because the lost profits of a new business cannot be recovered. C. Yes, because the former mayor anticipatorily repudiated the contract. D. Yes, because the lost profits of a new business are recoverable if proved with reasonable certainty.

D. To recover damages, a plaintiff must prove the dollar amount of the damages with reasonable certainty. Courts are hesitant to award damages for lost profits, as they are difficult to prove. When lost profits are considered too speculative, such as with a new venture, courts often limit a party's recovery to reliance damages (i.e., reasonable expenditures made in connection with the contract). However, in this case, the facts provide that the company's attorney presented reliable and uncontested evidence regarding the company's lost profits due to the former mayor's breach. This evidence is sufficient to prove those damages with reasonable certainty, especially as the evidence was uncontested. Accordingly, although the company is a new business, on these facts, it can recover its lost profits. Answer choice A is incorrect. Damages are recoverable if they were the natural and probable consequences of breach. Here, it was foreseeable that the former mayor's failure to appear at the retail stores would result in significantly lower sales numbers for the company's new line of suits. Answer choice B is incorrect because lost profits of a new business can be recovered if proved with reasonably certainty. Answer choice C is incorrect. Although the former mayor's failure to appear constituted an anticipatory repudiation of the contract, that fact would entitle the company to damages, but not necessarily lost profits. The reason lost profits are recoverable here is because they were proved with reasonable certainty by the company's attorney. Therefore, answer choice D is the best answer choice.