B Law Test 2 Ch. 11

When analyzing any contract problem, it is important to determine whether the UCC governs the dispute. It probably does if the contract

concerns the sale of goods.

The courts will find an implied contract when

conduct of the parties indicates they intended an agreement.

In the surrogacy suit between Mary Beth Whitehead and William and Elizabeth Stern, the court awarded the baby to the Sterns because

it was in the baby's best interest

Courts may award damages called quantum meruit, which means

"as much as he deserves."

What are the three basic questions that are important when analyzing contracts?

1. If the defendant did promise, is it fair to make her honor her word? 2. If she did not promise, are there unusual reasons to hold her liable anyway? 3. Is it certain that the defendant promised to do something?

Which of the following must a plaintiff prove to win a quasi-contract claim?

1. The defendant knew the plaintiff reasonably expected to be paid for the benefit 2. The defendant would be unjustly enriched if he did not pay 3. The plaintiff gave some benefit to the defendant

Which of the following must a plaintiff show in order to prevail in a promissory estoppel claim?

1. The plaintiff did rely on the promise 2. The only way to avoid injustice is to enforce the promise 3. The defendant made a promise to the plaintiff 4. The defendant knew the plaintiff would likely rely on the promise

Which of the following are factors cited by the court in Davis v. Mason as the basis for its ruling on the noncompetition agreement?

1. The terms were not necessarily unreasonable 2. The public was unlikely to be injured by the agreement 3. The parties exchanged fair consideration

Define: Executed Contract

A contract in which all parties have fulfilled their obligations.

Define: Bilateral Contract

A contract in which each party has made a promise to do something.

Define: Unilateral Contract

A contract in which one party makes a promise that the other party can accept only by actually doing something.

Define: Executory Contract

A contract that has been made, but one or more parties has not yet fulfilled its obligations.

Promissory estoppel allows a party to recover without a contract in certain circumstances,

but these types of claims rarely succeed in court.

Define: Offer

All contracts begin when a person or a company proposes a deal, but only proposals made in certain ways amount to a legally recognized offer.

Define: Void Agreement

Cannot be enforced by either party.

Define: Consent

Certain kinds of trickery and force can prevent the formation of a contract.

In a(n)______the two parties explicitly state all the important terms of their agreement.

Express Contract

A party in a voidable contract may retain the benefits of the agreement while repudiating its obligations.

False

A valid contract can legally be voided by either party.

False

All oral contracts are quasi-contracts until they are completely executed.

False

An injured plaintiff can never recover without a contract.

False

Lucy and Rick sign a contract in which Lucy agrees to deliver 10 boxes of chocolates in exchange for Rick's promise to pay $5 per box. Lucy delivers the candy. Rick pays for the goods. This contract is fully executory.

False

Paid surrogacy contracts are viewed by the legislative majority in all states as immoral and illegal.

False

The element of a contract that states the parties must be adults of sound mind is consent.

False

The vast majority of contracts are unilateral contracts.

False

Interactive Data Corp. hired Foley as an assistant product manager and over the next six years Interactive steadily promoted him. Interactive officers repeatedly told Foley that he would have his job as long as his performance was adequate. They also distributed an employee handbook that specified termination guidelines that included a mandatory seven-step pre-termination procedure. Foley learned that his supervisor was under investigation by the FBI, and he told Interactive officers. Shortly thereafter, Interactive fired Foley. He sued, claiming that Interactive could fire him only for good cause after the seven-step procedure. Who wins?

Foley wins because he and Interactive had a bilateral, express employment contract that incorporated the seven steps.

In a(n)____ the words and conduct of the parties indicate that they intend an agreement.

Implied Contract

Common Law Principle:

Implied Contract, Promissory Estoppal, Quasi-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.

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.

Define: Acceptance

Once a party receives and offer, he must respond to it in a certain way.

Patty is a poor college student struggling to work and keep up with her studies. Fred, her uncle, promises to pay Patty support of $200 per month for the next six months. Although Fred didn't ask her to, she quits her current job in order to devote full time to her studies for the next six months. Fred makes one payment and then stops with no explanation. If Patty sues, what is the likely result?

Patty may win under the doctrine of promissory estoppel.

If a party fully accomplishes what the contract requires, his duties are discharged. But what if his obligations are performed poorly, or not at all?

Performance and discharge

Relief a court will award to a party injured by a breach of contract.

Remedies

Governed by the UCC:

Sale of goods, Negotiable instruments, Secured transactions

Define: Valid Contract

Satisfies all the law's requirements, a court will enforce it.

Which of the following would be considered "goods" under UCC Article 2?

Sweatshirts, bannas, 500 turtles NOT: money, land, a house, a ride on a boat

Isaac puts together a plan to rob First National Bank, and hires Cynthia to assist him when he does it. He and Cynthia agree that Cynthia will be paid $3,000 for her help in the heist. The day before they are set to rob the bank, Cynthia backs out of the deal, saying she does not want to commit a crime. Isaac sues to enforce the agreement. What result?

The contract is void because the purpose of the deal is illegal.

Define: Legality

The contract must be for a lawful purpose.

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.

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.

Define: Voidable Contract

The law permits one party to terminate the agreement.

Shelly offers to sell Jane goods both parties know are stolen. Jane accepts the offer, and agrees to pay for the goods. Later, Jane refuses to accept or pay for the goods. If Shelly sues Jane for breach of contract, what is the probable result?

The law would not enforce Jane's promise, as it does not have a lawful purpose.

Define: Unenforceable Agreement

The parties intend to form a valid bargain but a court declares that some rule of law prevents enforcing it.

Define: Capacity

The parties must be adults of a sound mind.

Define: Consideration

There has to be bargaining that leads to an exchange between the parties.

If Ella and Declan have a contract that falls apart, can Tyrone sue to enforce the agreement?

Third-party interests

Robert, a minor, buys a stereo from Jane for $200. State law allows a minor to disaffirm contracts within a reasonable time after turning 18. Robert disaffirms the contract the day after turning 18 and returns the stereo.

This contract was a voidable contract, Robert can disaffirm.

A contract is a promise that the law will enforce.

True

Contract law varies from state to state.

True

Contracts for the sale of fabric, automobiles, computers, furniture, and paper clips would all be governed by Article 2 of the Uniform Commercial Code.

True

Mary goes into Honest Harry's Electronics and purchases a TV. Mary agrees to pay for the TV in 30 days on the store's "30 days same as cash" plan. This is an executory contract.

True

One purpose of contract law is to determine which agreements are worthy of legal enforcement.

True

Robert offers to buy a car from Jane for $400. Jane must accept this offer in order to form an enforceable contract.

True

Some of the elements of a contract are acceptance, consideration, legality, and capacity.

True

Today, courts enforce the majority of contracts.

True

When ruling on common law contract claims, state judges are under no obligation to follow the precedent of other states.

True

On January 16, Deb offers to sell her waterbed to Colleen for $600. Colleen accepts and agrees to pay Deb $600 on January 27. Which of the following is correct?

Until January 16, the contract was executory.

In Mr. W Fireworks v. Ozuna the court decided in favor of Ozuna, declaring the contract ____.

Void

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

Define: Writing

While verbal agreements are often contracts, some types of contracts must be in writing to be enforceable.

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.

Riley, age 16, and Samuel, age 36, enter into a contract in which Riley will sell Samuel his car for $11,000. The next day, Samuel decides he no longer wants the car and tries to get out of the contract. Samuel argues that because Riley is a minor, the contract is void. If Riley wants to enforce the contract, will he be able to?

Yes, the contract is voidable and only Riley can cancel it.

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.

One of the factors leading courts away from a laissez-faire approach to contract law was

a change in relative bargaining power between parties to contracts.

Which of the following is NOT required to establish promissory estoppel?

a promise made by the plaintiff in response to the defendant's promise

Every state has adopted

at least part of the UCC

Coworkers Mindy and Jerome agree that Mindy will drive them to work every weekday for one month, and then Jerome will drive them both to work every weekday the following month. This arrangement is a(n) _____, agreement.

bilateral , executory

Today, the most hotly contested disputes about implied contracts arise _____.

in an employment setting

For a contract to be ____ , seven requirements _____ present.

enforceable, must be

Mike made the following offer to Mick: "I will pay you $500 if you agree to paint my house." Mick replied that he would. At this point, the contract is an

executory, bilateral, express contract.

The UCC was drafted in order to

facilitate the easy formation and enforcement of contracts.

In the early twentieth century, courts increasingly began to analyze the basic fairness of a contract. What change lead to this shift in the common law?

farms and small businesses were being replaced by corporations

An express contract

has both parties setting forth their intentions.

By the fifteenth century, courts would permit suits based on a broken promise

if one party had paid some amount of money

Davis v. Mason was typical of disputes at that time. The court took a ____ approach, declaring that parties had_____and would have to live with the consequences. The law had gone from _____ most promises to______nearly all.

laissez-faire, freedom to contract, ignoring, enforcing

Noncompetition agreements are

more common today than they were in the past, although policy issues they raised in the 1700s have never gone away.

The basic distinction between a bilateral contract and a unilateral contract is that

only one promise is involved in a unilateral contract.

In a mixed contract, UCC Article 2 governs only if the ____ was _____.

primary purpose, the sale of goods

As English judges were developing the common law of contracts in the twelfth and thirteenth centuries,

promises were found not binding unless written and sealed.

A _____ makes a promise to a _____.

promisor, promisee

If a plaintiff can show that he has been injured, but does not have a contract, he can sometimes still recover under certain theories. In ______cases, the defendant received a benefit from the plaintiff. In _____cases, the defendant made a promise that the plaintiff relied on.

quasi-contract, promissory estoppel

When a court relies on the theory of ____, the damages awarded to the plaintiff are called ____ , which means that the plaintiff gets "as much as he deserves." This is a form of ____.

quasi-contracts, quantum meruit, judicial activism

A bilateral agreement can be for

services, for sale of goods, or for almost any other purpose.

In Fallsview Glatt Kosher Caterers, Inc. v. Rosenfeld the court found that the UCC did not govern the contract because

the contract did not specify and quantity of goods

In the twelfth and thirteenth centuries, courts did not consider promises binding unless

they were in writing and sealed

A medical insurance contract is a(n) ______ contract, because the insurance company agrees to pay for treatment if the policyholder goes to the doctor. If the policyholder does not go to the doctor, the insurance company does not pay.

unilateral

Larry goes to his barber who has cut his hair for the past several years. The barber proceeds to cut his hair as they talk about the most recent snowstorm to hit the area. This is an example of a

unilateral, implied contract.

Courts will not enforce a sales agreement ____.

when the agreement is not socially responsible

Miles purchased a lawnmower with an attached warning that said, "The manufacturer is not responsible in the case of an injury caused by the lawnmower." If Miles is injured because of a defect in the mower and sues the lawnmower manufacturer, he will most likely

win, as this warning would be unenforceable.

Contract law is based on the notion that

you are the best judge of your own welfare