Legal Exam #2 (Ch. 10-14)

Tara is building an artificial beach at her lakefront resort. She agrees in writing to buy 1,000 tons of sand from Frank for $20 per ton, with delivery on June 1, at her resort. Frank fails to deliver any sand, and Tara is forced to go elsewhere. She buys 1,000 tons from Maureen at $25 per ton and then is forced to pay Walter $5,000 to haul the sand to her resort. Tara sues Frank. Tara will recover:

$10,000

Deborah, a lawyer for a minor league hockey team, is negotiating a contract between the team and its new practice stadium. The contract, now in its fourth draft, addresses all of Deborah's concerns and incorporates all of the changes she wanted. She is ready to sign the agreement, but she wants to be sure that any future conversations she has with the stadium lawyers are not considered additional provisions to the contract. What should Deborah do?

Add an integration clause to the contract

50 Cent has been rapping all day, and he is very thirsty. He pulls his Ferrari into the parking lot of a convenience store. The store turns out to be closed, but luckily for him, a Pepsi machine sits outside. While walking over to it, he realizes that he has left his wallet at home. Frustrated, he whistles to a 10-year-old kid who is walking by. "Hey kid!" he shouts. "I need to borrow fifty cents!" "I know you are!" the kid replies. Fiddy tries again. "No, no, I need to borrow fifty cents!" The kid walks over. "Well, I'm not going to just give you my last fifty cents. But maybe you can sell me something." 50 Cent cannot believe it, but he really is very thirsty. He takes off a Rolex, which is his least expensive bling. "How about this?" "Deal," the kid says, handing over two quarters. Can 50 Cent get his watch back?

After this transaction, 50 Cent may have second thoughts, but they will be too late. The kid committed an act by handing over his money—he was under no legal obligation to do so. And 50 Cent received something of small, but measureable, value. So there is consideration to support this deal, and 50 Cent would not get his watch back.

When Alistair drops off his tuxedo at Whett Dry Cleaners for dry-cleaning, he signs Whett's standard exculpatory clause, which releases Whett from all liability in the event that any item of clothing is damaged, lost, or stolen while in its care. When Alistair returns to pick up his tuxedo, he is informed that the garment tore during the dry cleaning process. Alistair sues. Which of the following results is most likely?

Alistair loses because this is a valid exculpatory clause.

Ted's wallet is as empty as his bank account, and he needs $3,500 immediately. Fortunately, he has three gold coins that he inherited from his grandfather. Each is worth $2,500, but it is Sunday, and the local rare-coin store is closed. When approached, Ted's neighbor Andrea agrees to buy the first coin for $2,300. Another neighbor, Cami, agrees to buy the second for $1,100. A final neighbor, Lorne, offers "all the money I have on me"—$100—for the last coin. Desperate, Ted agrees to the proposal. Which of the deals is supported by consideration?

All three of the agreements

On Monday, Billy receives an offer from Andrew to buy Billy's house for $500,000. On Tuesday Billy mails Andrew a reply, "I'll sell it to you for $600,000 and not a penny less." On Wednesday, Billy reconsiders so he mails Andrew the following note: "I accept your offer for $500,000, the house is yours." On Thursday, Andrew receives Billy's first note. On Friday, Andrew receives Billy's second note. What result?

Billy and Andrew have a contract for $500,000

The agreement between Bob and Cathy says nothing about assignment. May Bob assign his claim to Hardknuckle?

Bob may assign his claim without Cathy's agreement

Bob, a mechanic, claims that Cathy owes him $1,500 on a repair job. Bob wants to assign his claim to Hardknuckle Bank. The likeliest reason that Bob wants to do this is:

Bob owes Hardknuckle Bank money

Consider the following: I. Madison says to a group of students, "I'll pay $35 to the first one of you who shows up at my house and mows my lawn." II. Lea posts a flyer around town that reads, "Reward: $500 for information about the person who keyed my truck last Saturday night in the Wag-a-Bag parking lot. Call Lea at 555-5309." Which of these proposes a unilateral contract?

Both I and II

May pays Charlie to construct a skating rink on her property. She soon changes her mind and, in writing, assigns her right to have the rink built to Jane, whose sons love to play hockey. Neither May nor Jane inform Charlie of the assignment. May goes on a long trip and discovers a skating rink in her backyard when she returns home. Jane sues Charlie and May. What result?

Charlie has no further obligations under the contract

A contract states 1. that Buzz Co. legally exists and 2. will provide 2,000 pounds of wild salmon each week. Which of the following statements is true?

Clause 1 is a representation and Clause 2 is a covenant.

Cookie Co. offered to sell Market 20,000 pounds of cookies at $1.00 per pound, subject to certain specified delivery terms. Market replied in writing as follows: "We accept your offer for 20,000 pounds of cookies at $1.00 per pound, to be weighed on scale with a valid city certificate." Under the UCC:

Cookie and Market have a contract

Sam and Elias agree in writing that Sam will give Elias needlepoint lessons once a week for five weeks in exchange for $1,000 per lesson. The contract stipulates that if either party is going to cancel a lesson, it must provide 48 hours notice. On the morning of the second lesson, Elias calls Sam and says he cannot make it because earthquake damage has closed all roads leading out of his town. Will Elias owe Sam for the missed lesson?

Elias will not be liable if the contract contains a clause discharging the obligation if there is a force majeure provision.

Over her objections, Carlene's husband Silvio borrows $10,000 from his friend Evan so that he can achieve his dream of swimming with great white sharks in South Africa. Carlene knows Silvio has a reputation for being reckless, but she still finds it pretty alarming that Evan and Silvio's friend Constantine and Silvio's business partner Persephone each take out a life insurance policy on Silvio a month before his trip. Who can legally have an insurance policy on Silvio?

Evan, Persephone and Carlene

Leila agrees to pay Kendrick $35,000 to repair windmills. Confident of this cash, Kendrick contracts to buy Derrick's used Porsche for $33,000. Then Leila informs Kendrick she does not need his help and will not pay him. Kendrick tells Derrick that he no longer wants the Porsche. Derrick sues Kendrick, and Kendrick files suit against Leila. What law or laws govern these lawsuits?

Goods means anything movable, and a Porsche surely qualifies. The UCC will control Derrick's suit. Repairing windmills is a primarily a service. Kendrick's lawsuit is governed by the common law of contracts.

In which case is a court most likely to enforce an exculpatory clause?

Hang gliding

Which of the following conditions must be met for an implied warranty of fitness for a particular purpose to arise? I. The warranty must be in writing. II. The seller must know that the buyer was relying on the seller in selecting the goods.

II only

Jacobi is visiting Sheila at her apartment while she is redecorating, and Sheila asks him if he would like to buy her two sofas that she is replacing. Sheila tells Jacobi that the sofas are in great condition and are the most comfortable she has ever had. She acknowledges that some of the fabric on the sofas is slightly worn but says that is their only issue. Jacobi buys the sofas on the spot, but once they are back at his house he finds that one of them is infested with bed bugs. Jacobi has to throw out the infested sofa and pay a special exterminator to come and get rid of the insects. Jacobi sues Sheila. Assume their jurisdiction follows the majority approach. How will the court rule?

If Sheila had a reasonable belief that she was telling the truth, Jacobi can rescind the contract but he cannot collect damages.

Faylene underwent heart surgery that included, among other measures, the implantation of a pacemaker in her chest. Faylene later alleged that the surgeon's negligence resulted in a serious infection. Faylene's insurance company stated that the Uniform Commercial Code (UCC) governed the dispute because at issue was a contract for a pacemaker, which is a good. The hospital responded that the claim was based on a contract for a surgery, which is a service, and was therefore covered by the common law. What result is most likely?

The court will apply the predominant purpose test and will probably hold that this was a contract for a service.

For the past seven years, Sommerset Storage, Inc. has hired Mountbattan Tax Associates to prepare its annual tax return. This year the parties agree to their usual $1,000 fee, but Mountbatten finds a loophole in the tax code and gets Sommerset a refund four times the usual amount. Mountbattan then requests that Sommerset pay $4,000 to reflect the increased tax refund. There is nothing in their contract about increased fees, but Mountbatten argues it would be unjust for Sommerset not to pay extra. Sommerset refuses and Mountbatten sues. What result?

The court will uphold the original contract and Mountbatten will lose.

Marko, a sporting goods retailer, speaks on the phone with Wholesaler about buying 500 footballs. After the conversation, Marko writes this message by hand: "Confirming our discussion—you will deliver to us 'Pro Bowl' model footballs—$45 per unit—arrival our store no later than July 20 this year." Marko signs and faxes the note to Wholesaler. Wholesaler reads the fax but then gets an order from Lana for the same model football at $51 per unit. Wholesaler never responds to Marko's fax and sells his entire supply to Lana. Two weeks later, Marko is forced to pay more from another seller and sues Wholesaler. Marko argues that under merchant exception, his fax was sufficient to satisfy the Statute of Frauds. Is he right?

The writing must indicate that the two parties reached an agreement. Marko's memo does so because he says he is confirming their discussion. Even if some terms are omitted, the writing may still suffice. However, the memo will be enforced only to the quantity of goods stated. Marko stated no quantity—a fatal error. His writing fails to satisfy the Statute of Frauds, and he loses the suit.

Central Maine Power Co. (CMPC) made a promotional offer in which it promised to pay a substantial sum to any homeowner or builder who constructed new housing with electric heat. To qualify for the offer, Motel Services, Inc. (MSI) decided to install electrical heat in a housing project it was constructing in Waterville, Maine. MSI built the units and requested payment for the full amount of the promotional offer. Is CMPC obligated to pay? Why or why not?

Yes, CMPC is obligated to pay because this was a unilateral contract and MSI performed.

Susan drops by Dean's garage sale and buys a painting for $10 that both she and Dean think is a copy of a piece by Matisse, a well-known painter. Later, Susan is delighted to discover that the painting is actually an original Matisse and is worth $50,000,000. Dean hears the news and wants the painting back. Will he get it? Why or why not?

Yes, Dean is entitled to rescind. This is a mutual mistake because both parties made an important factual error.

Halifax manufactures a toy aquarium that includes a gel designed to look like underwater scenes, which was manufactured by Agua Corporation. When Halifax stopped ordering gel from Agua due to poor sales of the aquarium, the companies discussed changing the gel's formula. Although it did not receive an order from Halifax, Agua sent an order acknowledgment for 9.5 million packets to Halifax the next week, who made no objection to it. Do Agua and Halifax have an enforceable agreement for the 9.5 million gel packets?

Yes, because Halifax and Agua are merchants and Halifax failed to object to the confirmation within 10 days.

Lucian has every reason to believe the new pizza shop he is opening will be a success, but he also has a lot riding on it. He has borrowed a significant amount and has refinanced his house to pay for the expenses of starting up. If the business does not succeed, it will be a disaster for his family. Fortunately, the construction and start up of the business will be pretty simple, and he is hiring his sister Allegra (an experienced contractor) to do most of the work. Should Lucian and Allegra put their contract in writing?

Yes, because it is essential to the success of Lucian's business that construction goes smoothly.

Woodson Walker and Associates leased computer equipment from Park Ryan Leasing. The lease said nothing about assignment. Park Ryan assigned the lease to TCB. When Walker failed to make several payments on the lease, TCB sued. Was the assignment valid if the original lease made no mention of assignment rights?

Yes, because the contract did not preclude the assignment

Liesl purchased an insurance policy on her house. The policy stated that the insurance company was not liable for any damage to her house caused by vandalism or burglary. An arsonist burned down Liesl's house. Is the insurance company liable?

Yes, because the language is ambiguous and should be interpreted against the insurance company.

Fritz's Pet Shop has a contract with PlanetLazy Pet Products that states: a) PlanetLazy will deliver to Fritz 25 pet beds on the second Saturday of every month for one year; b) Fritz will pay PlanetLazy $2,500 on the first day of each month for one year. If Fritz does not pay PlanetLazy on a given month, is PlanetLazy still obligated to continue delivering pet beds?

Yes, because the terms are reciprocal promises

The McAllisters had several serious problems with their house, including leaks in the ceiling, a buckling wall, and dampness. They repaired the buckling wall by installing I-beams to support it, but never resolved the leaks or the dampness. When they decided to sell the house, they said nothing to prospective buyers about the problems. If asked, they stated that the I-beam had been added for reinforcement. The Silvas bought the house for $60,000 and immediately began to have problems with leaks, mildew, and dampness. Are the Silvas entitled to any money damages?

Yes, the Silvas are entitled to damages or to rescind the contract due to fraud, and possibly both.

Custom Cashmere sends Ultrasound, a maternity clothing boutique, a sales agreement for 200 sweaters. Before signing and returning the agreement, Ultrasound crosses out the provision that reads "for delivery to the Ultrasound boutique" and writes in "for delivery to the Ultrasound warehouse." The warehouse is 400 miles away from the Ultrasound boutique. Do Cashmere and Ultrasound have an enforceable contract?

Yes, the agreement is enforceable. The court will supply gap-fillers for the terms of delivery

On behalf of Brugg Corp., Weimer sent Tri-Circle, Inc. a written offer to buy certain farm equipment. Tri-Circle accepted the offer using a pre-printed form that included a finance charge for late payment. Weimer's offer said nothing about finance charges, and he made no objection to the new term. Tri-Circle supplied the farm equipment but later sued Brugg to for failure to pay part of the agreed upon purchase price and associated finance charges. To determine whether Tri-Circle was entitled to finance charges, the court first inquired whether Brugg and Tri-Circle were merchants. Why is this important?

If both parties are merchants, it is possible the finance charge term is part of the contract

In February, Chuck orally agrees to sell his hunting cabin, with 15 acres, to Kyle for $35,000, with the deal to be completed in July, when Kyle will have the money. In March, while Chuck is vacationing on his land, he permits Kyle to enter the land and dig the foundation for a new cottage. In July, Kyle arrives with the money, but Chuck refuses to sell. Kyle sues.

Kyle wins because Chuck allowed him to dig the foundation

Nationwide Discount Furniture hired Rampart Security to install a fire alarm in its warehouse that would notify Rampart and Nationwide in the event of a fire. Rampart failed to notify Nationwide when a fire did in fact break out. The fire spread next door and damaged a building owned by Gasket Materials Corp. Gasket sued Rampart for breach of contract, and Rampart moved for summary judgment. How will the court likely rule?

Rampart's motion for summary judgment is granted because Gasket is an incidental beneficiary.

Seller's sales contract states that "The model 8J flagpole will withstand winds up to 150 mph, for a minimum of 35 years." The same contract includes this: "This contract makes no warranties, and any implied warranties are hereby disclaimed." School buys the flagpole, which blows down six months later in a 105-mph wind.

Seller is liable because the disclaimer was invalid

PillPharm is negotiating a deal with Happy Valley Health (HVH) for the sale of PillPharm's latest health supplement. PillPharm would like to package its supplements in bottles produced by Frank, but Frank says he will not enter into a contract with PillPharm until the HVH contract is finalized. HVH has sent PillPharm a letter of intent, but Frank thinks it is too vague and refuses to enter into an agreement with PillPharm. What should PillPharm do?

Send HVH its own letter of intent stating that they do have a binding agreement

Slimline and Distributor signed a contract that provided that Distributor would use reasonable efforts to promote and sell Slimline Diet Soda, which was already being sold at Warehouse Club. After the contract was signed, Distributor stopped conducting the in-store demos of Slimline it had previously been doing at Warehouse and it did not repackage the product as Slimline and Warehouse requested. Sales of Slimline continued to increase during the term of the contract. Slimline sued Distributor, alleging a violation of the agreement. Who is likely to win?

Slimline, because Distributer's conduct is a material breach

While George travels for two months, Mary agrees to housesit and care for George's three horses at her stables. The parties agree that Mary will pick up the horses on the first day of George's trip and George will pay Mary when he returns. George returns home from his travels and finds that Mary never picked up the horses. George sues. What result?

The court will apply common law and Mary will lose.

CompuCastle, an electronics store, discusses a deal with OptiScreens, a manufacturer of high-end computer monitors. In December, they verbally agree that CompuCastle will buy 200 AR-206 model monitors, but neither party follows up for several months. In April, CompuCastle sends OptiScreens a fax that reads, "how 'bout them screens? Our clients want 'em and so do we!" OptiScreens does not respond in writing, but sends CompuCastle 200 AR-206 models one week later. CompuCastle accepts them. If CompuCastle does not pay OptiScreens, may OptiScreens sue for breach of contract?

Yes, there is an enforceable contract because the parties' conduct shows that they reached an agreement

The Hoffmans owned and operated a successful small bakery. Lukowitz, an agent of Red Owl Stores, told them that for $18,000 Red Owl would build a store and fully stock it for them to operate. The Hoffmans sold their bakery and purchased a lot on which Red Owl was to build the store. Lukowitz then told the Hoffmans that the price had gone up to $26,000. The Hoffmans borrowed the extra money from relatives, but then Lukowitz informed them that the cost would be $34,000. Negotiations broke off and the Hoffmans sued. The court determined that there was no contract. Can the Hoffmans recover any money?

Yes. They can most likely recover damages based on promissory estoppel.

Raul has finished the computer installation he promised to perform for Tanya, and she has paid him in full. This is:

an executed contract.

Tobias is selling a surrealist painting. He tells Maud that the picture is by the famous French artist Magritte, although in fact Tobias has no idea whether that is true or not. Tobias's statement is:

fraud

Jody is obligated under a contract to deliver 100,000 plastic bottles to a spring water company. Jody's supplier has just gone bankrupt; any other suppliers will charge her more than she expected to pay. This is:

legally irrelevant

On Monday night, Louise is talking on her cell phone with Bill. "I'm desperate for a manager in my store," says Louise. "I'll pay you $45,000 per year, if you can start tomorrow morning. What do you say?" "It's a deal," says Bill. "I can start tomorrow at 8 a.m. I'll take $45,000, and I also want 10 percent of any profits you make above last year's." Just then Bill loses his cell phone signal. The next morning he shows up at the store, but Louise refuses to hire him. Bill sues. Bill will:

lose, because he rejected the offer.

Which one of the following transactions is not governed by Article 2 of the UCC?

Leasing an automobile worth $35,000

Which of the following amounts to an offer?

All of the above

Malay, the CEO of Santi, Inc., interviews four lawyers to help with a potentially lucrative business deal. He provides each candidate the bare facts of the deal so they can discuss it and present their approaches. Which of the four should he hire?

Anthony, who tells Malay about the risks of that sort of deal and ways to accomplish Santi's goals safely and legally.

Donald Waide had a contracting business. He bought most of his supplies from Paul Bingham's supply center. Waide fell behind on his bills, and Bingham told Waide that he would extend no more credit to him. That same day, Donald's father, Elmer Waide, came to Bingham's store and said to Bingham that he would "stand good" for any sales to Donald made on credit. Based on Elmer's statement, Bingham again gave Donald credit, and Donald ran up $10,000 in goods before Bingham sued Donald and Elmer. What defense did Elmer make, and what was the outcome?

Elmer made a promise to pay the debt of another. He did so as a favor to his son. This is a collateral promise. Elmer never signed any such promise, and the agreement cannot be enforced against him.

The Monroes, a retired couple who live in Illinois, want to move to Arizona to escape the northern winter. In May, the Monroes contract in writing to sell their house to the Temples for $450,000. Closing is to take place June 30. The Temples pay a deposit of $90,000. However, in early June, the Monroes travel through Arizona and discover it is too hot for them. They promptly notify the Temples they are no longer willing to sell and return the $90,000, with interest. The Temples sue, seeking the house. In response, the Monroes offer evidence that the value of the house has dropped from about $450,000 to about $400,000. They claim that the Temples have suffered no loss. Who will win?

In cases involving the sale of land or some other unique asset, a court will grant specific performance, ordering the parties to perform the agreement. All houses are regarded as unique. The court will force the Monroes to sell their house, provided the Temples have sufficient money to pay for it.

Jade owns a straight track used for drag racing. She hires Trevor to resurface it for $180,000, paying $90,000 down. When the project is completed, Jade refuses to pay the balance and sues Trevor for her down payment. He counterclaims for the $90,000 still due. At trial, Trevor proves that all of the required materials were applied by trained workers in an expert fashion, the dimensions were perfect, and his profit margin very modest. The head of the national drag racing association testifies that his group considers the strip unsafe. He noticed puddles in both asphalt lanes, found the concrete starting pads unsafe, and believed the racing surface needed to be ground off and reapplied. His organization refuses to sanction races at the track until repairs are made. Who wins the suit?

Jade has received no benefit whatsoever. She cannot use her track for drag racing. Compensation will not help Jade—she needs a new strip. Trevor's work must be ripped up and replaced. Trevor may have acted in good faith, but he failed to deliver what Jade bargained for. Jade wins all of the money she paid. (As we will see later in this chapter, she may win additional sums for her lost profits.)

Mindy sends Luciano a note signed by Mindy that reads, "This is in acknowledgement of our agreement. I will buy 5 ornate box turtles from you on September 25." Luciano never responds. Can Mindy or Luciano, both nonmerchants, enforce this agreement?

Luciano may enforce the contract, but not Mindy

Jackie offers to sell Mel a concert ticket for $50, and Mel replies, "I'll give you $40." Jackie refuses to sell at the lower price, and Mel says, "OK, OK, I'll pay you $50." Has a contract been formed? At what price?

No. Mel made a counteroffer, which Jackie rejected

Nina, who owns a used car lot, signs and sends a fax to Seth, a used car wholesaler, that says, "Confirming our agrmt—I pick any 15 cars fr yr lot—30% below blue book." Seth reads the fax, laughs, and throws it away. Two weeks later, Nina arrives and demands to purchase 15 of Seth's cars at a 30% discount. Is he obligated to sell?

Probably, if Seth and Nina had previously made this agreement orally

The Hoffmans owned and operated a successful small bakery and grocery store. They spoke with Lukowitz, an agent of Red Owl Stores, who told them that for $18,000, Red Owl would build a store and fully stock it for them. The Hoffmans sold their bakery and grocery store and purchased a lot on which Red Owl was to build the store. Lukowitz then told Hoffman that the price had gone up to $26,000. The Hoffmans borrowed the extra money from relatives, but then Lukowitz informed them that the cost would be $34,000. Negotiations broke off and the Hoffmans sued. The court determined that there was no contract because too many details had not been worked out—the size of the store, its design, and the cost of constructing it. Can the Hoffmans recover any money?

Red Owl received no benefit from the Hoffmans' sale of their store or purchase of the lot. However, Red Owl did make a promise and expected the Hoffmans to rely on it, which they did. The Hoffmans won their claim of promissory estoppel.

Fred slips on some ice on Opal's front steps and shatters both his kneecaps. Opal has a comprehensive homeowner's policy with Riskocity Insurance, but Riskocity refuses to pay for Fred's injuries as the policy does not cover accidents caused by Opal's "dangerous conduct." The Community Rules of Opal's gated community require residents to keep their front steps free of ice. Riskocity contends that because Opal violated the Community Rules, she is liable for Fred's injury. Opal argues that the insurance policy makes no mention of her Community Rules and because she could not foresee Riskocity relying on the Rules, they should not prevent her from recovering. What result?

The insurance contract was ambiguous, so the Community Rules will not prevent Opal from recovering.

Assume that Elaine's offer concerns goods. Is there an agreement?

The parties have probably created a binding contract unless Elaine indicated in her offer that she would accept her terms only, with no changes.

An example of true impossibility is:

illegality

The purchaser of a business insisted on putting this clause in the sales contract: The seller would not compete, for five years, "anywhere in the United States, the continent of North America, or anywhere else on Earth." What danger does that contract represent to the purchaser?

"Anywhere else on Earth"? This is almost certainly unreasonable. It is hard to imagine a purchaser who would legitimately need such wide-ranging protection. In some states, a court might rewrite the clause, limiting the effect to the seller's state or some other reasonable area. However, in other states, a court finding a clause unreasonable will declare it void in its entirety—enabling the seller to open a competing business next door.

The nudity provision in the movie contract is vague. Rewrite it so that it accurately reflects the agreement between the parties.

"The script for the Picture includes scenes showing Artist a. with frontal nudity from the waist up and with rear below-the-waist nudity (but no frontal below-the-waist nudity); and b. in simulated sex scenes. However, no scenes shall be shot in which Artist's buttocks and/or genitalia are shown, depicted, or otherwise visible without Artist's prior written consent. Artist shall have the absolute right not to perform in any nude scene or simulated sex scene. If shot, no nude or sex scenes may appear in the Picture without Artist's prior written consent."

Mark, a newspaper editor, walks into the newsroom and announces to a group of five reporters: "I'll pay a $2,000 bonus to the first reporter who finds definitive evidence that Senator Blue smoked marijuana at the celebrity party last Friday." Anna, the first reporter to produce the evidence, claims her bonus based on:

unilateral contract

Michael and Scarlett cannot agree on the price he will pay her to manage his hotels in the third year of their contract. They agree to a provision stating that the price will be "reasonable." This provision is ___________ . Parties should never include such a provision in a contract unless __________.

vague; they would not mind if the other side's interpretation prevails in litigation

Sarah, age 17, uses $850 of her hard-earned, summer-job money to pay cash for a diamond pendant for the senior prom. She has a wonderful time at the dance, but decides the pendant was an extravagance, returns it, and demands a refund. The store has a "no refund" policy that is clearly stated on a sign on the wall. There was no defect in the pendant. The store refuses the refund. When Sarah sues, she will:

win $850

To satisfy the UCC Statute of Frauds, which of the following must generally be in writing? a. Designation of the parties as buyer and seller b. Delivery terms c. Quantity of the goods d. Warranties to be made

(C). The contract will be enforced only to the extent of the quantity stated.

Producer does not want Artist to pilot an airplane during the term of the contract. Would that provision be a warranty and representation or a covenant? How would you phrase it?

A promise not to pilot an airplane is a covenant. The contract could say, "Until Artist completes all services required hereunder, he shall not pilot an airplane."

Daniel and Annie signed a contract providing that Daniel would lend $50,000 to Annie's craft beer business at an interest rate of 8 percent. During negotiations, Daniel and Annie agreed that the interest rate would go down to 5 percent once she had sold 25,000 cases. This provision never made it into the contract. After the contract was signed, Daniel agreed to reduce the interest rate to 6 percent once volume exceeded 15,000 cases. The contract had an integration provision but no modification clause. Annie has sold 30,000 cases. What interest rate must she pay?

6 percent

Manufacturer sells a brand-new, solar-powered refrigerator. Because the technology is new, Manufacturer sells the product "as is." Plaintiff later sues Manufacturer for breach of warranty and wins. Plaintiff is probably:

A consumer

Joe buys an Otterhound named Barky from Purity Dog Shop. He pays $2,500 for the puppy, the high cost due to the certificate Purity gives him, indicating that the puppy's parents were both AKC champions (elite dogs). Two months later, Joe sells the hound to Emily for $2,800. Joe and Emily both believe that Barky is descended from champions. Then a state investigation reveals that Purity has been cheating and its certificates are fakes. Barky is a mixed-breed dog, worth about $100. Emily sues Joe. Who wins?

If the two sides agree based on an important factual error, the contract is voidable by the injured party. A mutt is entirely different from a dog that might become a champion. The parties erred about the essence of their deal. Joe's good faith does not save him, and Emily is entitled to rescind.

Elaine faxes an offer to Raoul. Raoul writes, "I accept. Please note, I will charge 2 percent interest per month for any unpaid money." He signs the document and faxes it back to Elaine. Do the two have a binding contract?

If this is an agreement for services, there is no contract. However, if this agreement is for goods, the additional term may become part of an enforceable contract.

Chef Jacquie is scheduled to teach a cooking class to three students. The class tuition is $1,100 per student. In the class, each student cooks a French meal under Jacquie's expert supervision and receives a cookbook (worth $30) and a cooking pan (worth $150). Tory, one of the students, tells Jacquie the day before the class that she will be unable to attend and requests a refund. Jacquie denies the refund and Tory sues. Tory claims that the UCC should govern the contract, and Jacquie argues that it should be covered by the common law. Who is right?

Jacquie, because the class is primarily a service.

Mrs. Martin tells some neighborhood kids that she will pay $100 if any of them mows her lawn. Jake goes to a hardware store, purchases a lawnmower for $60, and then mows Mrs. Martin's lawn. Jake has entered into what types of contract?

Jake has made a unilateral contract with Mrs. Martin and a bilateral contract with the hardware store.

Museum schedules a major fund-raising dinner, devoted to a famous Botticelli painting, for September 15. Museum then hires Sue Ellen to restore the picture, her work to be done no later than September 14. Sue Ellen is late with the restoration, forcing Museum to cancel the dinner and lose at least $500,000 in donations. Sue Ellen delivers the picture, in excellent condition, two weeks late. Museum sues.

Museum will win if, when the parties made the deal, Sue Ellen knew the importance of the date.

Trinity Trucking signs a contract with Olsen Oil to purchase all of the fuel for its fleet of trucks for the next year from Olsen at a price of $3.00 per gallon. At the time Trinity and Olsen sign the contract, the market price for gasoline was $3.25 per gallon, and Trinity had an expert report predicting that the price would rise to at least $4.25 per gallon in the upcoming six months. Instead, the price dropped to $2.00 per gallon. May Trinity rescind the contract with Olsen due to its mistaken belief about the future of the price of gasoline?

No, because Olsen had no way of knowing of Trinity's mistake

Rosa and Happy Movers sign a contract that states Rosa will pay Happy Movers 100 dollars an hour to move all of her furniture to her new house on September 1. The contract also states that any modifications to the agreement must be "made in writing signed by the party to be charged with the amendment." The day of the move, a Happy Movers representative shows Rosa a flyer for a promotion offering to complete a move in under two hours for an extra $300, and Rosa agrees orally to the deal. The Happy Movers representative signs his name on the flyer and staples the flyer to the contract. If Happy Movers finishes moving Rosa's furniture in less than two hours, is Rosa contractually required to pay the extra $300?

No, because Rosa did not sign the flyer

In exchange for Dalton's car - which is worth approximately $20,000 - Ramona signs a document assigning Dalton her claim against a drunk driver who crashed into Ramona's car several months earlier. Ramona has not yet filed a lawsuit against the drunk driver and the total value of her claim could be as much as $100,000. Will the court allow Dalton to file suit against the drunk driver for the claim assigned to him by Ramona?

No, because assignments of this type are not prohibited by public policy.

For his 17th birthday, Asher bought himself a used car from a car dealer for $10,000. The dealer had purchased it for $6,000, repaired it, and then sold it to Asher. Eighteen months later, Asher has almost finished paying off the car when he totals it by accidentally driving it into his neighbor's swimming pool. Asher's mother is a lawyer and tells him to rescind the contract. Will Asher be able to recover any money from the dealer?

No, because he did not disaffirm within one year after forming the contract

Charles places a stool he recently purchased on top of his toilet and climbs on top of it in order to change a light bulb. As he is unscrewing the bulb, he loses his balance and crashes face first into the side of his bathtub, shattering his nose and fracturing both wrists. If Charles sues the stool manufacturer, will he win?

No, because he was misusing the stool

Guyan Machinery, a North Carolina manufacturing corporation, hired Albert Voorhees as a salesman and required him to sign a contract stating that if he left Guyan he would not work for a competing corporation anywhere within 250 miles of North Carolina for a two-year period. Later, Voorhees left Guyan and began working at Polydeck Corp., another North Carolina manufacturer. The only product Polydeck made was urethane screens, which comprised half of 1 percent of Guyan's business. Is Guyan entitled to enforce its noncompete clause?

No, because it is not necessary to protect trade secrets, confidential information, or customer lists developed over an extended period.

Honeybrook Pies and Elsie's Bakery enter into a contract in which Honeybrook will deliver 25 rhubarb pies to Elsie's each week for six months. The next week, Elsie assigns its rights with Honeybrook to Namaste Restaurant, a neighboring café, as part of a new contract. Namaste informs Honeybrook that it only serves food that is both vegan and gluten free, so the rhubarb pies will have to be made differently. Honeybrook has never used vegan or gluten free ingredients and to purchase them and find a new recipe would be extremely expensive. Can Elsie's assign the contract to Namaste?

No, because it would substantially change the obligor's position

Mina, a real estate developer, reads that the tiny town of Lakeview is considering building a large shopping center and adding public transportation from the nearby city to Lakeview. Mina knows that these types of changes would greatly increase the demand for real estate in Lakeview. She buys 10 acres of land in Lakeview from Arlen, so that she can build houses and take advantage of the town's economic boom. There is no reference in the purchase and sale agreement or deed to the possible development in Lakeview. A few weeks later, the town declares that, due to changes in zoning laws, it is not building the shopping center or adding the public transportation. Can Mina rescind on her contract with Arlen?

No, because she understood the risk she was assuming.

Rafferty, a caterer, and Maya, an opera singer, are pleased to be hired to provide their respective services at the same wedding. Unlike Maya's contract, Rafferty's contains a non-delegation clause. Two days before the wedding, Rafferty and Maya decide to go on vacation, so they delegate their wedding obligations to friends they know and trust. The bride and groom object. Is delegation permissible?

No. Neither Rafferty nor Maya can delegate their obligations

Louise Latour, a successful interior designer, won a contract to design the interiors of Greentree Broadcasting's corporate headquarters. A few weeks after signing the agreement, Greentree receives a much cheaper bid from another designer and decides to get out of the contract. A Greentree lawyer notices that the top of the contract contains an embarrassing typographical error: It states that the agreement is between "Louise Latour and Grantree Broadcasting." Will Greentree be able to use this mistake to get out of the contract?

No. There is clear and convincing evidence that the mistake does not reflect the intent of the parties and the court will reform the contract.

Monty buys a big screen television from Martha and agrees to pay her back with interest over the next three years. A year later, Monty decides to stop watching TV and gives the TV to his friend Bo, assigning all his rights and delegating all his duties to Bo. Bo pays Martha for a few months and then stops, so she sues both Monty and Bo. Monty will be able to avoid liability if he can prove

None of these

Marion orally agrees to sell Ashley her condominium in Philadelphia for $700,000. The parties have known each other for 20 years and do not bother to put anything in writing. Based on the agreement, Marion hires a moving company to pack up all her goods and move them to a storage warehouse. Ashley shows up with a cashier's check, and Marion says, "You're going to love it here." But at the last minute, Marion declines to take the check and refuses to sell. Ashley sues and wins:

Nothing

Olivia agrees that she will bring Desiree a cherry pie every Monday for a month in exchange for $15 per week. Olivia delivers a pie to Desiree for four weeks, and Desiree pays her each time. Olivia continues to deliver Desiree pies every Monday, and Desiree continues to pay for another five weeks. On the tenth week, Olivia brings a pie and Desiree refuses to pay. Olivia sues for payment. What result?

Olivia will win. The court will rule that they had an implied contract.

Cookie Co. offered to sell Distrib Markets 20,000 pounds of cookies at $1 per pound, subject to certain specified terms for delivery. Distrib replied in writing as follows: "We accept your offer for 20,000 pounds of cookies at $1 per pound, weighing scale to have valid city certificate." Under the UCC: a. A contract was formed between the parties. b. A contract will be formed only if Cookie agrees to the weighing scale requirement. c. No contract was formed because Distrib included the weighing scale requirement in its reply. d. No contract was formed because Distrib's reply was a counteroffer.

The "valid city certificate" phrase raises a new issue; it does not contradict anything in Cookie's offer. That means it is an additional term, and it becomes part of the deal unless Cookie insisted on its own terms, the additional term materially alters the offer, or Cookie promptly rejects it. Cookie did not insist on its terms, this is a minor addition, and Cookie never rejected it. The new term is part of a valid contract, and the answer is "a."

Mr. and Ms. Beard contracted for Builder to construct a house on property he owned and sell it to the Beards for $785,000. The house was to be completed by a certain date, and Builder knew that the Beards were selling their own home in reliance on the completion date. Builder was late with construction, forcing the Beards to spend $32,000 in rent. Ultimately, Builder never finished the house, and the Beards moved elsewhere. They sued. At trial, expert testimony indicated the market value of the house as promised would have been $885,000. How much money are the Beards entitled to, and why?

The Beards' direct damages represent the difference between the market value of the house and the contract price. They expected a house worth $100,000 more than their contract price, and they are entitled to that sum. They also suffered consequential damages. Builder knew they needed the house as of the contract date, and he could foresee that his breach would force them to pay rent. He is liable for a total of $132,000.

Envirotex owes Simla Inc. $1,200 for services rendered. An Envirotex corporate officer calls Simla's Chief Operating Officer (COO) and offers to settle the debt by assigning to Simla the right to payment of a $1,500 debt that Riann Corp. owes to Envirotex for its purchase of Envirotex merchandise. Simla's COO agrees to the deal and cancels Envirotex's debt. Riann never pays anyone, and Simla sues Riann. What result?

The assignment is not valid because it was not in writing

For 20 years, Art's Flower Shop relied almost exclusively on advertising in the Yellow Pages to bring business to its shop in a small West Virginia town. One year, the Yellow Pages printer accidentally did not print Art's ad, and Art's suffered an enormous drop in business. Art's sued for negligence and won a judgment of $50,000 from the jury. The printing company appealed, claiming that under an exculpatory clause in the contract, the company could not be liable to Art's for more than the cost of the ad (about $910). Art's claimed that the exculpatory clause was unconscionable. Please rule.

The clause is unenforceable because it is unconscionable.

A tenant rented space from a landlord for a seafood restaurant. Under the terms of the lease, the tenant could assign the lease only if the landlord gave her consent, which she had the right to withhold "for any reason whatsoever, at her sole discretion." The tenant grew too ill to run the restaurant and asked permission to assign the lease. The landlord refused. In court, the tenant argued that the landlord could not unreasonably withhold her consent. Is the tenant correct?

The court ruled for the landlord. She had the absolute right to make any decision, as long as the decision was legal. The moral: Sole discretion clauses are serious business. Do not enter into one lightly.

Martha intended to transfer one piece of land to Paul. By mistake, she signed a contract transferring two parcels of land. Each piece was accurately described in the contract. Will the court reform this contract and transfer one piece of land back to her?

The court ruled that it was not a scrivener's error because it was not a typo or clerical error. Therefore, the court did not reform the contract, and the land was not transferred back to Martha.

Norv owned a Ford dealership and wanted to expand by obtaining a BMW outlet. He spoke with Jackson and other BMW executives on several occasions. Norv now claims that those discussions resulted in an oral contract that requires BMW to grant him a franchise, but the company disagrees. Norv's strongest evidence of a contract is the fact that Jackson gave him forms on which to order BMWs. Jackson answered that it was his standard practice to give such forms to prospective dealers, so that if the franchise were approved, car orders could be processed quickly. Norv states that he was "shocked" when BMW refused to go through with the deal. Is there a contract?

The order forms are neither an offer nor an acceptance. Norv has offered no evidence that the parties agreed on price, date of performance, or any other key terms. There is no contract. Norv allowed eagerness and optimism to replace common sense.

Louise emails Sonya, "I will sell you my house at 129 Brittle Blvd. for $88,000, payable in one month. Best, Louise." Sonya emails back, "Louise, I accept the offer to buy your house at that price. Sonya." Neither party prints a copy of the two emails.

The parties have a binding contract for the sale of Louise's house

The following list provides reasons why a party would strongly consider putting a contract in writing. Which of these reasons is least important?

The parties reside in different jurisdictions

A contract provided, "On January 5, Purchaser shall provide Seller with a certified check in the amount of $100,000. Seller shall transfer a deed for the Property to Purchaser." What is wrong with this provision?

The promises are reciprocal.

Tom and Harriet, adult siblings, are taking their parents on a weekend trip. They pick up their father, Luther, at his house where he is singing a goodbye song to each of his 20 plants, and eating pancakes out of his coat pocket. Next, they drive to an assisted living facility, to collect their mother Augusta who has lived there since a judge declared her mentally incompetent a few years ago. When they arrive at their hotel, Luther writes postcards to his plants, Augusta knits a sweater, Harriet goes for a walk, and Tom orders a glass of scotch. When Harriet returns, she learns that a hotel guest sold Tom and her parents each a souvenir snow globe for $1,000. The snow globes are for sale in the hotel gift shop for $5. Harriet is furious. Can her family members get their money back?

The sale to Augusta is void; the sales to Luther and Tom may be voidable.

Omega Concrete had a gravel pit and factory. Access was difficult, so Omega contracted with Union Pacific Railroad (UP) for the right to use a private road that crossed UP property and tracks. The contract stated that use of the road was solely for Omega employees and that Omega would be responsible for closing a gate that UP planned to build where the private road joined a public highway. In fact, UP never constructed the gate; and Omega had no authority to construct the gate. Mathew Rogers, an Omega employee, was killed by a train while using the private road. Rogers's family sued Omega, claiming that Omega failed to keep the gate closed as the contract required. Is Omega liable?

There was no gate, and Omega had no right to build one. This is a case of true impossibility. Omega was not liable

Shauna flew a World War II fighter aircraft as a member of an exhibition flight team. While the team was performing in a delta formation, another plane collided with Shauna's aircraft, causing her to crash-land, leaving her permanently disabled. Shauna sued the other pilot and the team. The defendants moved to dismiss based on an exculpatory clause that Shauna had signed. The clause was one paragraph long and stated that Shauna knew team flying was inherently dangerous and could result in injury or death. She agreed not to hold the team or any members liable in case of an accident. Shauna argued that the clause should not be enforced against her if she could prove the other pilot was negligent. Please rule.

This is a clear, short clause, between parties with equal bargaining power, and does not exclude an intentional tort or gross negligence. The activity is unimportant to the public welfare. The clause is valid. Even if the other pilot was negligent, Shauna will lose, meaning the court should dismiss her lawsuit.

One provision in a contract states "Ulysses vows he is a board certified physician" and another states "Emma promises not to eat red meat for six months from the date of this agreement." Which of the following best describes these contract terms?

Ulysses has made a warranty and representation; Emma has made a covenant

Vivica is a sales associate at Sir LampsALot lighting store. She tells a customer, "This lamp gives the most beautiful lighting, and is virtually indestructible. You'll change the bulbs once a year at most." The customer purchases the lamp and signs a sales contract that states, "Customer will be able to use a single lamp to safely light an entire living room. However, Sir LampsALot makes no warranty with respect to this product. Any statements made by a salesperson or printed in this sales contract are disclaimed and form no part of this contract." Are Vivica's statements and the sales contract promises disclaimed?

Vivica's statements are disclaimed but the promise in the contract is not

While negotiating with Stewart to purchase his house, Yasmine asks him about the condition of the roof. "Excellent," he replies. "It is only 2 years old, and should last 25 more." In fact, Stewart knows that the roof is 26 years old and has had a series of leaks. The parties sign a sales contract for $600,000. A week before Yasmine is to pay for the house and take possession, she discovers the leaks and learns that a new roof will cost $35,000. What kind of contract exists between Yasmine and Stewart?

Voidable by Yasmine

To establish a cause of action based on strict liability in tort for personal injuries resulting from using a defective product, one of the elements the plaintiff must prove is that the seller (defendant):

Was engaged in the business of selling the product