Contracts 1LB MC Knap Book Questions

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(CHAP 10.3) Tremont Howard is the owner of a family farm in western Pennsylvania. Tremont would like to bring his family property into the twenty-first century while preserving its historical significance. He has hired Modern but Faithful, Inc. (MBF), a construction company that specializes in what it calls "modern preservation." Under MBF's approach, which Tremont loves, property is equipped with all modern features while the exterior and much of the look of the interior is preserved. Under the terms of the contract between Howard and MBF, MBF was required to follow various detailed specifications for the work. When MBF had largely completed the project, with only painting and decoration left to be done, Howard discovered that MBF had used wiring for the farm that did not meet the contract specifications. It appears that the subcontractor hired by MBF used the wrong brand of wiring, although the quality of wiring appears to be equivalent to the contract specifications. MBF was unaware of the subcontractor's error. Howard has demanded that MBF install wiring that complies with the contract, even if it means tearing open walls to do so. MBF has refused to do this work. Expert testimony would show that the use of the wrong brand of wiring has a de minimis effect on the fair market value of the property; however, the cost to repair the problem would be several hundred thousand dollars. If Howard brings suit against MBF seeking to recover the cost of the repair, which of the following is probably correct? Howard will not be able to recover the cost of repair because repair would involve economic waste and MBF appears to have acted in good faith. Howard will not be able to recover the cost of repair because a risk exists that he would pocket the award rather than using it for repair. Howard may recover the cost of repair because the property has idiosyncratic value to him. Howard may recover the cost of repair because that is the basic measure of damages for breach of a construction contract under the Restatement.

(CHAP 10.7) Assume the reverse of the situation in the Question 6 above. Six months after Orsinski enters into the contract with EM, EM notifies Orsinski that his new E85 is available for delivery. However, Orsinski notifies EM that he is no longer interested in the vehicle because of the delay in delivery. EM is able to find another purchaser for Orsinski's car but had to cut the price a little (to $170,000) because some of Orsinski's extras were not ones that the new purchaser wanted. Assume that EM would have obtained a net profit of $25,000 from Orsinski if he had gone through with the sale. Assume that EM brings suit against Orsinski for breach of contract. How would EM's damages be measured? $5,000 plus incidental damages (e.g. storage costs, etc.) that EM can prove. $25,000 expected profit on the Orsinski sale. $0, because EM failed to resell at a public sale. $0, if EM failed to offer proof of market price.

(CHAP 2.4) During the December pre-holiday sales period, Donaldson's Department Store (DDS) had a prominent sign in its window: Enter now to win a new Mustang!! Put your name in the box at the customer service counter on the fourth floor of our store. Drawing to be held Jan 2. Not necessary to be present to win. Don't miss this fabulous once-in-a-lifetime opportunity!! While doing her holiday shopping at DDS, Ashley Andrews filled out one of the blank cards provided and dropped it in the box in the DDS store. On Jan. 2, one of the store employees pulled Ashley's card from the box. The store notified her of that fact, but when she came to claim her prize of a new Ford Mustang automobile, she was given a plastic model of that car. She promptly complained to the manager, who told her that the holiday sales at DDS had been too disappointing to justify awarding her an automobile. Does Ashley have a valid claim against DDS for a new Mustang (or its value)? Yes, because the store's promise was supported by consideration and Ashley reasonably expected to receive an automobile if her name was drawn. No, because the store got no consideration for its promise. No, because the store's statement was ambiguous.

(CHAP 4.1) Bill Bendix was a popular, thirty-year old singer in local clubs in a small, Midwestern city. In June 2017, Bill decided that he wanted to perform nationally and he contacted Anne Adams, a talent agent with business connections in New York, Los Angeles, and other major cities. Anne agreed to help Bill with bookings but only if he would agree that she would be his exclusive agent for as long as he performed professionally and that she would receive a 10 percent fee for all bookings. Bill orally agreed. Anne then sent Bill her standard representation contract, but he never read or signed it. Nevertheless, Anne arranged an average of three bookings per month for Bill in major cities during the next two years and she received her 10 percent fee for each. In July 2019, Bill sang the national anthem on a televised baseball game to great acclaim and he was soon approached by Mega Artists, the top ranked talent agency in the country, which offered him an exclusive contract. Today, Bill comes to your law office and wants your opinion on whether the lack of a signed writing would give him a good defense to any lawsuit Anne might bring for breach of contract if he signs with Mega Artists. Assuming that there is no applicable writing requirement specifically for agency contracts, would Anne be able to enforce the oral agreement if Bill raises the statute of frauds as a defense? A.Yes, Anne can enforce the oral agreement because it is not subject to the writing requirement under the typical statute of frauds. B.Yes, Anne can enforce the oral agreement because Bill's conduct would amount to authentication of the written contract. C.No, Anne cannot enforce the oral agreement because Bill's career has already lasted for more than a year after the contract was made. D.No, Anne cannot enforce the oral agreement because she has been fully compensated for her past services.

(CHAP 5.1) In February 2019, Jim, the owner of a janitorial company, contacted Ann, the owner of an accounting business, about Ann taking over the billing process for Jim. After negotiating for a month in person and by email, Jim and Ann both signed a two-page contract on March 24 that provided Anne would "receive billing invoices on Friday of each week for customers served by Jim's Janitorial Service that week and will mail bills to customers on Wednesdays." The contract was to last for one year from April 1, 2019. The contract also included a statement that "this writing contains the entire agreement of the parties." In August, Jim discovered that Ann was not sending out bills to customers each week, but instead was sending out bills every two weeks. Jim asked Ann about this practice. Ann responded she was only required to send out bills by Wednesday during weeks that she did mailings, but she was not required to send bills every week. She stated her staff had calculated that it was more efficient to do mailings every other week. Jim has an email from Ann on March 3, 2019, in which she stated, "I will collect your service invoices each Friday and send bills the following week." Would Jim be likely to succeed in action against Ann for breach of the contract due to her mailing practice? A.Yes, because the email from Ann is relevant negotiating history that would explain the parties' agreement. B.Yes, because the terms in the written contract have only one plain meaning which requires a mailing every week. C.No, because the email from Ann would be barred from consideration due to the merger clause. D.No, because Ann offered a compelling business reason for deviating from the parties' contract terms.

(CHAP 6.4) Vern Vendor owned a road paving construction business. He had a used road grader that he no longer needed and decided to offer for sale. Vern advertised the road grader for sale through a listing service for industrial equipment. In August 2018, Bob Buyer contracted Vern about buying the road grader. After some negotiations, Bob agreed to buy the road grader for $325,000. On August 15, 2018, Vern and Bob both signed a brief standard form sales agreement which accurately described the road grader and stated the purchase price. In a space designated, "Date for performance," Bob wrote in, "payment and delivery after Buyer obtains financing." On October 15, 2018, Vern called Bob and asked if the financing had been arranged. Bob responded that he had decided to delay buying the road grader until June 2019 and would let Vern know when he was ready to take delivery. Would Vern have a viable legal claim that Bob was in breach of the contract by delaying performance until June 2019? A.Yes, because the law would imply a reasonable time to obtain financing since the contract did not specify a date and nine months would be too long in this context. B.Yes, because the absence of a specific payment and delivery date would give Vern, as seller, the unilateral option of setting a date for performance. C.No, because the failure to include a date for payment and delivery would render Bob's promise to purchase illusory. D.No, because the failure to include a deadline for obtaining financing would make the contract an option agreement for Bob.

(CHAP 7.3) The owner of a small electrical company (SEC) has come to you for advice. SEC did a major project for a company that owns residential apartment buildings (RAB) at a contract price of $90,000. RAB expressed dissatisfaction with SEC's work and refused to pay it anything unless SEC reduced its invoice by 50 percent. RAB told SEC to carefully consider its settlement offer because SEC would "flood the Internet with negative reviews if you refuse." Your client reluctantly agreed, received payment from RAB, but now has regrets about the decision. You are considering a lawsuit against RAB based on claims of duress, undue influence, and breach of fiduciary duty. Which one of the following is most correct? A.SEC is unlikely to succeed on a claim of duress unless it was in desperate need of the money. B.If RAB's threat to flood the Internet with negative comments was not illegal, it would not amount to an improper threat. C.Because SEC was under the domination of RAB, it will be able to rescind the contract on the ground of undue influence. D.RAB breached a duty of fairness to SEC because the contract created a fiduciary relationship.

(CHAP 7.8) Which statement about surrogacy contracts is probably not correct? A.It is against public policy for a surrogate mother to be paid anything in connection with the contract. B.In a traditional surrogacy contract, it is against public policy for the contract to provide that the surrogate mother has no parental rights. C.In a traditional surrogacy contract the court must determine what is in the best interest of the child with regard to custody. D.In a gestational surrogacy contract, the courts are likely to conclude that the surrogate mother has no parental rights.

(CHAP 8.4) R2D2 is a singing group from Europe that has contracted with National Artists, LLC for a United States Tour during August and September. R2D2 801has applied for and obtained a P-1 Visa for its tour. Unfortunately, two weeks before the tour, the U.S. Immigration and Naturalization Service notified the drummer for the group that he would not be able to enter the country under the P-1 visa. The drummer was not told the reason, but he suspects that it is because of a recent criminal conviction for drug use. R2D2 is prepared to hire a substitute drummer, but National Artists is afraid that the tour will suffer because of the drummer's absence. However, even before the problem with the drummer arose, tickets sales for the group's tour have been surprisingly slow. Is National Artists entitled to cancel the contract because of the unavailability of R2D2's usual drummer? A.No, because it appears unlikely that the purpose of the contract has been substantially frustrated because of the drummer's absence. B.No, because the parties could have specified in the contract that all original band members must be on tour. C.Yes, because the drummer's inability to perform was the result of governmental action. D.Yes, because R2D2 was at fault.

(CHAP 2.2) Xena (X) is a young woman living in Ohio. Recently she wrote the following email to her cousin Yancey (Y), an Indiana resident: Dear Y: After some consideration, I've decided that I need to sell the antique roll-top desk that our grandfather left to me. I need the money, and it takes up a lot of space in my small house. I know you've always admired it, so I thought I would give you a chance to buy it before I put it up for sale on Craigslist. I had it appraised not long ago, and I was told that it's worth at least $15,000. I'd certainly sell it for that, or you could make me an offer. I need to hear from you by the end of the week, if possible. - Fondly, your cousin X. Y responds to X's note the next day, with the following note: Dear X: Thanks for thinking of me. I'd certainly love to own Grandpa's desk, but $15K is pretty high for me. I guess I can go up to $12K. Would you take that for it? - Y Given the facts, which of the following statements is/are potentially accurate? If X's communication was not an offer, Y's response is an offer. If X's communication was an offer, Y's response is a counter-offer. If X's communication was an offer, Y's response necessarily acts as a rejection of that offer.

A & B

(CHAP 1.1) You are an attorney in a small American town. One of your clients asks you to represent her in dealing with a lawsuit being threatened by her next-door neighbor. The neighbor claims that your client promised to pay half the cost of trimming and maintaining several large trees on his property that overhang her property line, and that since that time he has paid a landscape expert several thousand dollars to do that work. She tells you that although they did discuss it, she never made such a promise. If you undertake to represent her in this matter, in what kinds of legal materials might you find it necessary or appropriate to do research? A.Court decisions in your jurisdiction. B.The Restatement (Second) of Contracts. C.Statutes in your jurisdiction applying to land use. D.The CISG.

A,B, & C

(CHAP 2.3) After receiving Y's note on Friday, X answers the same day: Dear Y: Sorry, but I can't go as low as that. I know it's worth at least $15K, and I might be able to get even more. - X After thinking it over for a few days, Y responds to X on Monday with the following note: Dear X: It's a stretch for me, but I hate to see Grandpa's desk leave the family. I'll meet your price of $15K. Let me know when I can come to pick it up. - Y Assuming the facts of Questions, which of the following statements is/are potentially accurate? Y's last note to X is an acceptance of X's original offer. Y's last note to X is not an acceptance of X's original offer, because that was terminated by an earlier rejection. Y's last note to X is not an effective acceptance of X's original offer, because it was not communicated in time to be effective. Y's last note to X is an offer which Y is free to accept or reject.

ALL THE ABOVE

(CHAP 1.3) Which of the following statements is most likely to be true? A.When analyzing a legal problem, an attorney always looks at things in the way most favorable to her client. B.Many attorneys seldom if ever appear in court. C.Attorneys don't negotiate deals for their clients, they just draft contracts for them. D.When a contract dispute arises, it's likely to end up in court.

(CHAP 10.2) Mega University, a major urban college, wanted to expand its campus to add more student housing. Mega was bordered by residential and commercial buildings on all sides. Janet Smith owned two modest-sized apartment buildings near the east side of campus. After negotiations, Janet signed a contract with officials from Mega agreeing to sell the two buildings to Mega for $1 million, with closing in 60 days. When it was announced that the sale was taking place, there was immediate protest from activists about the loss of affordable housing. The activists rallied and protested both on campus and near Janet's buildings. There were newspaper articles with data showing that the two buildings were worth only $700,000 on the open market. After six weeks, Mega announced that due to the protest, it would not go through with the purchase of Janet's buildings. Instead, Mega would on the west side of campus buy warehouse space, of comparable size, for $1.2 million that would not lead to the same community protests. Assuming that Mega does not have a valid excuse for nonperformance and Janet sues for money damages, what would be Janet's measure of recovery? $1 million, as the full measure of the promised performance because Mega's breach was willful. $300,000, as the best measure of the benefit of the bargain for Janet. $200,000, as the difference between the original contract price and Mega's mitigating contract. Nothing, because there is no evidence that Janet has acted in reliance on the contract and thus she has suffered no harm.

(CHAP 10.8) Ramon Sanchez and his wife Esmerala have lived at their home in Jackson, Texas for more than 35 years. This year their youngest child Sofia was married and moved to live with her husband in Atlanta. Being "empty nesters," the Sanchezes decided that it was time to move to a much smaller house. Over the next few months they began cleaning out the tangible results of their more than three decades in their current home. In the process of doing so they discovered a treasure trove of old family photographs and papers going back at least 100 years. They decided that they wanted to preserve this material for their children and future generations. After talking with friends, seeking advice from local librarians, and conducting Internet searches, they decided to hire Family Preservation Specialists (FPS), a company that focuses on preservation of materials like the ones found by the Sanchezes. They paid a fee of $7,500 to turn all of the material into digital form, to make it searchable, and to preserve the physical copies in the most protective way. However, to their great sadness, the Sanchezes received a call about two months later from FPS reporting to its great regret that due to a flash flood at its headquarters, all of the Sanchezes' property had been destroyed. At first the Sanchezes were saddened by the news, but their sadness turned to anger as they learned more about the flash flood and FPS's failure to institute reasonable precautions to protect the irreplaceable property FPS had received. Suppose the Sanchezes have brought suit against FPS for breach of contract, intentional infliction of emotional distress, and negligence including negligent infliction of emotional distress because of FPS's failure to preserve their irreplaceable family material. Assume that the Sanchezes are able to establish that FPS breached its contract with them and that FPS was also negligent (but that it did not act intentionally and was not grossly negligent) in failing to preserve and protect their material. Which of the following is the most accurate statement about the remedy available to the Sanchezes? They will be able to recover punitive damages for breach of contract under the bad faith exception to general prohibition against recovery of punitive damages for breach of contract. Unless their contract with FPS provides for the award of attorney fees, they will be unable to recover the fees that they incurred in the litigation. They will be able to recover damages for emotional distress for breach of contract only if they are able to show that they suffered some bodily harm as a result of FPS's breach of contract. They will be unable to recover damages in tort from FPS because they failed to prove that FPS's conduct was either intentional or grossly negligent.

(CHAP 11.2) Assume the same facts as Question 1, except that AZ's offer to CC of a three-year contract did not include a sales commission as part of her compensation, but instead provided for a fixed annual salary of $100,000. CC decided to accept AZ's offer even though her salary at EF was higher, because a three-year contract with AZ would provide her with job security. But (as in Question 1) CC was fired by AZ at the end of six months. Assuming again that AZ did not have sufficient cause to terminate her employment, what remedy could CC expect to receive in a lawsuit against AZ for wrongful termination? Damages for the period from July 1, 2019 to December 31, 2021 at the annual rate of $100,000. Damages for the period from July 1, 2019 to December 31, 2021 at the annual rate of $100,000, offset by what she could reasonably earn at comparable employment during that period. Damages for the period from July 1, 2019 to December 31, 2021 at the annual rate of $120,000, offset by what she could reasonably earn at comparable employment during that period. Reinstatement as an AZ employee at the annual salary rate of $100,000, computed from July 1, 2019.

(CHAP 2.6) Your client Bob, a building contractor, makes many purchases through the exchange of emails. He wants to be able to avoid waiving any rights that he ordinarily would have for legal remedies for defective materials, especially if the defects are discovered only after the materials have been incorporated in a building project, because this could prove very costly for him to repair or replace. Typically, he attaches to every email order a set of his own "Terms and Conditions," which his email order refers to as follows: By accepting this order you are agreeing to the attached Terms and Conditions, which are part of every purchase contract we make. All inconsistent terms are hereby objected to. The following language appears in Bob's attached Terms and Conditions form: Buyer retains all rights under the Uniform Commercial Code to remedies for breach of contract or of warranty, including consequential damages. Bob has asked you if this language will protect against a seller's attempt (in "Terms and Conditions" of its own) to disclaim the warranties that would otherwise be implied by law, or to exclude consequential damages as a remedy. What would you tell him? A.The language will absolutely preserve for Bob his legal remedies under the UCC. B.The language will protect him generally, but not if he or his agent signs a seller's form that contains terms unfavorable to him. C.The effect of his language can be defeated if Bob receives and does not expressly object to a seller's form that provides "Seller's Terms and Conditions are part of this contract if Buyer accepts the goods without objecting to them." D.There is no way the buyer can achieve his objective; a seller's form always has the benefit of being the "last shot" if the buyer accepts the goods.

(CHAP 3.1) Rebecca Ray is the CEO and chief stockholder of a company which operates a successful on-line dating service, "Dates with Destiny." Two weeks ago, when Rebecca was dining out with friends at a local seafood restaurant, she got a fishbone stuck in her throat. Making the throat-clutching gesture to signal choking, she attracted the attention of Myles Marlin, a real estate salesperson from out of town who was visiting local friends. Being familiar with the Heimlich Maneuver, Myles was able to assist Rebecca in dislodging the bone and breathing normally again. She thanked him profusely for saving her life at a time when her companions and the others around her seemed unable to be of assistance, and asked for his mailing address, so that she might send him a proper note of thanks and a suitable reward. He protested that it was really nothing, anyone would have done the same, but he did give her his business card, with an email and mailing address. Five days later, Myles received in the mail a thank-you greeting card, along with a check from Rebecca, made out to him, in the amount of $10,000. Written on the card was the message "Thank you - I owe you my life!! And here is my reward for you. - Rebecca." Myles immediately deposited the check in his bank account, and wrote Rebecca a note of thanks, which he mailed to her address (which was on the check). A few days later he got back from her a brief note, saying merely: "Sorry but my accountant says that was a mistake. But thanks anyway." Around the same time, Myles was advised by his bank that payment on Rebecca's check had been stopped before it cleared. Assume that under applicable law the issuance of a check like this one creates a rebuttable presumption of consideration. If Myles attempts to recover $10,000 in a lawsuit against Rebecca, what would be the most likely outcome, and why? A.Myles should win, because Rebecca's promise was evidenced by a writing. B.Myles should lose, because there was no consideration for Rebecca's promise. C.Miles should lose, because Rebecca promptly withdrew her offer. D.Myles should win, because public policy should encourage people to assist others who are in need of emergency aid.

(CHAP 3.4) Megan Murphy went shopping last Monday at a local bookstore and bought several books for herself and as gifts for her friends, at a total price of $92.58. She paid in cash, with five 20-dollar bills, and received back some bills and coins, which she put in her purse without looking carefully at them. When she got home she found a message on her land-line phone from the clerk in the bookstore (which had her number on file from prior ordering requests) saying that Megan had apparently been accidentally given a $50 bill in change, instead of a five. Megan looked in her purse and found a $50 bill there which had not been there earlier. Megan called the store, spoke to the clerk, confirmed the error, and said she would be in the store later that day to refund the extra amount. Which of the following is the best description of her legal position? A.Megan is obligated to pay the store $45 only because she promised to do so. B.Megan is obligated to pay the store $45 because otherwise she would be unjustly enriched. C.Megan is not obligated to pay the store, because the mistake was not her fault, and she got no consideration for her promise to repay.

(CHAP 4.4) Ed Evans graduated from State College in May 2019 with a master's degree in computer science. On June 1, 2019, Ed participated in a job fair where he met Gina Givens, the owner of the Givens Greeting Card Company. Gina was very impressed by Ed and said she wanted to offer Ed a position in her company's technology department. Gina pulled from her brief case a blank piece of Givens stationery with the company logo and letterhead, and wrote on it, "Two-year position in IT, $75,000 per year salary, start date August 1, plus $5,000 moving allowance." Gina told Ed, "You will also get standard benefits." She gave the piece of paper to Ed who said he would think about the offer. Two days later, Ed called Gina and told her that he accepted the job offer and would see her August 1. Gina replied, "Great. See you in August." Ed stopped looking for work and took a month long vacation in Europe and Asia. On July 30, 2019, Gina sent an email message to Ed which said, "Due to some financial reversals here at the company, I am imposing a hiring freeze and backing out of our agreement for the two-year position. Maybe you can work for us at some other time. Best wishes, Gina." Which of the following statements would likely be true regarding possible application of the statute of frauds? A.Ed can enforce the contract because it might come to an end in less than one year if he were to be terminated for breaching company policy. B.Ed can enforce the contract because Gina wrote the details of the offer on company stationery and the email referenced those same terms. C.Ed cannot enforce the contract because neither the piece of stationery nor the email message contains all the details of the alleged employment contract. D.Ed cannot enforce the contract because neither the piece of stationery nor the email message contains a personal signature by Gina or someone serving as her agent.

(CHAP 5.4) Olga was the owner of two homes, a primary home in the capital city and a lakeside cabin on the other side of the state of Adams. Olga owned a car in each location. Olga's daughter, Enid, graduated from college in June 2018 and decided to live in the cabin for the following year with her college friend, Fay, while the two of them collaborated on a writing project. Olga contacted her automobile insurance company, Acme Insurance, to renew her auto insurance policy for the coming year and to make sure that both Enid and Fay would be fully covered while driving her second car. The Acme agent said that the policy covered friends who were not listed on the policy when driving with Olga's permission. Olga paid her annual premium on June 10, 2018, and received a new copy of the policy one week later. On April 15, 2019, Fay was involved in an accident while driving Olga's car. The driver of the other car promptly brought a lawsuit against Olga and Fay for physical injuries and property damage. Olga filed a claim with Acme under her auto policy but Acme denied coverage based on language on page 7 of the 20-page policy which defined a "permissive driver" as "someone other than a listed driver who does not regularly drive the auto for more than 30 consecutive days." Because Fay had driven the car regularly for more than nine months, Acme said that she was not a permissive driver and was not covered. Olga had never read the policy and was not aware of the definition of a "permissive driver." If the state of Adams has adopted a broad version of the reasonable expectations doctrine, would Olga be likely to succeed in a lawsuit to assert coverage under the policy for Fay's accident? A.Yes, because Olga did not receive her copy of the policy until after she had paid her renewal premium. B.Yes, because the limitation in the policy was fundamentally at odds with the contract terms as represented by the agent to Olga. C.No, because Olga has admitted that she never read the full insurance policy. D.No, because there was not any patent ambiguity in the insurance policy.

(CHAP 5.5) Bob Byer entered into negotiations to purchase a house from Sam Seller during April 2019. On April 15, while touring the house with his realtor, Bob noticed some water stains on the ceiling in an upstairs bedroom. Bob asked Sam, who happened to be present, about the condition of the roof. Sam stated that there had been a leak in the roof but said it was repaired during March 2019. Sam went on to say, "Rest assured that the roof is in good shape." In fact, the roof actually had not been repaired. On April 21, 2019, Bob signed a five-page, standardized purchase contract for the house which contained a provision which read, "Seller makes no representations concerning the condition of the roof, plumbing, or electrical wiring in the house. Buyer may conduct any inspections of the house that may be desired." Another paragraph read, "This writing contains the entire agreement of the parties." Bob took possession of the house on June 2, 2016, and the next day he discovered that the roof was still leaking in the upstairs bedroom when a rainstorm occurred. Would Bob be likely to succeed in an action to rescind the home sales contract? A.Yes, because the oral commitment about the roof would modify the written contract. B.Yes, because a merger clause would not bar evidence of a claim for fraud in the inducement. C.No, because the writing would supersede Sam's earlier oral statement about the roof. D.No, because a buyer cannot reasonably rely on any oral statements from a seller.

(CHAP 6.1) Beth Buyer wanted a new sports watch that she could use while participating in water sports. She had frequently noticed ads for a Windsor brand watch in Sports Illuminated magazine which stated that the watch had a "rugged design that is water-resistant to a depth of 50 meters." In May, Beth went to a Windsor Company retail store to look at the Windsor watch. Sam, the store manager, said to Beth, "Windsor makes a wonderful sports watch. They do a good job for all my customers." Beth purchased a Windsor watch for $1,000. Sam had misplaced the original box for the watch and thus Beth did not get a copy of the Windsor written instructions or warranty. Beth took the watch with her on a trip to Hawaii the next month. While in Hawaii, the watch stopped working when some water got inside the watch when Beth was swimming laps in the hotel pool. Does Beth have grounds to assert a claim for breach of an express warranty against Windsor? A.Yes, Beth has grounds for an express warranty claim because of Sam's comments about the watch. B.Yes, Beth has grounds for an express warranty claim because of Windsor's statements about the watch in the magazine ads. C.No, Beth does not have grounds for an express warranty claim because Sam's comments and the statements in the magazine ad were mere commendation of the watch. D.No, Beth does not have grounds for an express warranty claim because neither Sam's statements nor the magazine ad were contained in a signed writing.

(CHAP 6.5) Hugh owned a hotel in Maintown and wanted to make major renovations of the facility. On July 2, 2018, First Bank agreed to make a short-term construction loan of $1 million that would be repayable in six months or at the end of construction, whichever came earlier. Hugh applied to Second Bank for long-term financing of $1 million, repayable over 15 years, to be provided upon completion of work. Second Bank agreed to make the long-term loan at an interest rate of 4 percent but insisted on including an addendum to the loan agreement that read, "Second Bank's obligation to fund the loan is conditioned upon satisfactory monthly progress reports and final certificate of approval issued by an architect named by Second Bank verifying that all work is of adequate quality." From August through December 2018, the architect issued monthly reports verifying that construction on the hotel met the required quality standards. In early January 2019, Second Bank announced that it was reducing its commercial loan portfolio because residential lending was more profitable. Shortly thereafter, the architect issued a final report on Hugh's hotel which stated that the renovations were not of adequate quality but stated no specific problems that could be corrected. Hugh has read reliable news reports that Second Bank is attempting to withdraw from all pending construction loan agreements. Would Hugh be likely to prevail in an action against Second Bank for breach of the loan agreement? A.Yes, because Second Bank drafted the addendum and thus it would be construed to require objective dissatisfaction by the architect. B.Yes, because of the strong evidence that the architect did not act independently and in good faith in refusing the final certificate of approval. C.No, because the condition of satisfaction would be construed to grant to the architect completely unfettered discretion to approve or disapprove the work. D.No, because the inclusion of the condition of satisfaction would render the loan agreement too uncertain to be enforceable.

(CHAP 7.1) Adam, age 16, recently lost his parents in an automobile accident. Adam moved into the home of his aunt and uncle, but he has a job, is able to support himself financially, and pays rent to his aunt and uncle. Adam purchased a motorcycle from Sam Seller for a cash payment of $5,000, the market price, and Adam registered the motorcycle in his name with the Department of Motor Vehicles. After keeping the motorcycle for three months and driving it for 2,500 miles, Adam decided he wanted to return it to Sam and get his money back so that he could buy a car instead. What argument would best support Sam's argument that the contract is binding on Adam? A.Adam cannot disaffirm the contract because the motorcycle has suffered from depreciation through his use. B.The motorcycle would be a necessary since he uses it to get to work and support himself financially. C.The contract is enforceable because the price was fair and there is no evidence that the motorcycle is defective. D.The contract is enforceable because it has been fully performed by both Adam and Sam for a substantial period of time.

(CHAP 7.2) Elaine Rosen has consulted with a lawyer about the behavior of her mother, Natalie Schwartz. Elaine tells the lawyer that her mother has started to engage in behavior that Elaine finds strange and financially risky. Recently, her mother has started to go on "buying sprees" in which she spends literally thousands of dollars acquiring new clothes, jewelry, shoes, etc. She has talked with her mother about the situation, and her mother says that sometimes she gets very depressed and lonely, and going shopping makes her feel better. She realizes that she doesn't need a lot of the items that she is buying, but that doesn't seem to stop her behavior. Elaine states that other than the overspending her mother seems perfectly normal. A recent doctor visit resulted in a diagnosis of bi-polar disorder which causes Natalie to be unable to make rational decisions at times. Many of the items that Natalie has purchased are unused. In addition, most of the items were purchased from a large department store, Northrop's. Elaine has talked with the store about return of the items, but they have refused to take them back because the return dates in the sales slips have passed. She wants to know whether her mother has the legal right to return these items to the stores and get her money back. Does her mother have that right? A.Yes, because Natalie may rescind her contract with Northrop's since she lacks cognitive capacity. B.Yes, because Natalie may rescind her contract with Northrop's since she lacks volitional capacity, provided that Northrop's either knew or had reason to know of her incapacity. C.No, because the return period specified in Northrop's contract of sale has expired. D.No, because it is too difficult for a retail store to determine the capacity of a customer to enter into a contract.

(CHAP 8.1) Buyer enters into a contract with Seller to purchase a townhome. Buyer plans to use the first floor of the home as an office for her solo legal practice and the second and third floors as her residence; she informs Seller of her plans. Unknown to Buyer or Seller, zoning restrictions in the area prohibit the use of any part of the townhome for business or commercial purposes. When Buyer learns of this restriction, she wants to rescind the contract with Seller. The contract does not contain an "as is" clause, nor does it make any mention of zoning restrictions. Is it probable that Buyer will be able to rescind the contract on the basis of mutual mistake? A.No, because rescission based on mutual mistake requires a factual rather than a legal mistake. B.No, because Buyer probably bears the risk of the mistake. C.Yes, because both Buyer and Seller were mistaken about the zoning restriction. D.Yes, because the contract does not contain an "as is" clause.

(CHAP 9.3) On October 4, Carl Contractor entered into a written contract to build a two-car garage for Haley, a homeowner. The price was $20,000, with half paid at the signing of the contract and the remaining $10,000 to be paid upon completion of the garage. The contract stated in part, "All work to be completed no later than December 1." Carl obtained the necessary building permits by November 2 after some delay due to a backlog in the municipal permits office. Carl then began actual work on November 4 and by December 1 the garage was completed in accordance with the plans, except that Carl needed to apply a second coat of paint to the garage door. Carl completed the remaining painting process on the morning of December 2. If Haley should refuse to pay Carl the second half of the price, would Carl have a valid, legal basis to seek the money? Yes, because Carl has the right to recover for benefit conferred to Haley. Yes, because Carl rendered substantial performance of the contract by being only one day late in completing the work. No, because Carl committed a willful breach by not managing to finish the job by the stated date. No, because the contract included an express condition to Carl's right to payment that was not satisfied.

(CHAP 10.1) Gabriela Santos moved to the United States three years ago as an economist with the World Bank in Washington, DC. She purchased a single family home in the Georgetown area for $1,800,000. She is now ending her assignment in Washington and will be returning to her native country of Brazil. Gabriela entered into a contract to sell her home to Francesco Romano, an Italian economist, who is also coming to the United States to take a position with the World Bank. The price was $1,900,000. The contract called for closing within 90 days. Gabriella's real estate broker is entitled to a commission of 5 percent ($95,000) payable by Gabriella when and if the sale closes. Unfortunately, shortly before the closing Francesco was told by the Italian Government that he would not be coming to the United States for at least a year and perhaps not at all. If Gabriella brings suit against Francesco, which of the following is most likely to be a correct statement? Gabriella must hire an expert to establish the fair market value of the property. Gabriella will be entitled to recover prejudgment interest on her damages. If Gabriella rents the property before reselling it, the amount of rental income that she receives will reduce the amount of her damages. Gabriella will be entitled to recover the amount of the real estate commission that she contracted to pay.

(CHAP 10.5) Consider again the situation of law professor Stephanie Zinn in Question 4 above. Assume that prior to her discharge, her annual salary was $150,000 per year. Assume that after Southeastern gave Professor Zinn a notice of discharge, she considered whether to look for another position as a law professor, but she finally decided that the job market was so tight that it was very unlikely that she would obtain another position. She also considered private employment with a law firm, but the only position that she was able to obtain was that of a contract attorney doing document review work. She was told that she could anticipate 1,000 hours of work over the next year at a rate of $30 per hour, total $30,000. Stephanie concluded that accepting such employment would be so damaging to her reputation and future prospects that even though she needed the money, she would not accept employment doing document review work. She does have some savings and family support that enable her to get by for a while and fortunately she also has a good friend/lawyer who will handle her lawsuit against Southeastern without charge except for court-awarded fees. Several months after filing suit, her lawyer tells her that the Southeastern has offered to reinstate her at a salary of $75,000 per year. Stephanie rejects the offer saying, "I will never work for those people again." Assume that Stephanie is able to establish that they breached her employment contract — what would be the measure of her damages for the first year of breach? (Note that she might be entitled to damages for future years depending on her job prospects, discounted to present value). $150,000, because Southeastern acted in bad faith. $120,000, because Stephanie did not accept employment as a contract attorney. $75,000, because Stephanie should have accepted the offer of reinstatement. Nothing, because Stephanie failed to make any effort to mitigate her damages.

(CHAP 11.3) Bonnie Berger is the owner of a popular barbeque restaurant in the city of Austen. On March 15, Bonnie made an oral agreement with Sara Smith, a local contractor, to build two customized "smokehouse sheds" on property in the rear of her restaurant. Bonnie already had plans for the two smokehouses of 10 feet by 20 feet with related equipment and storage bins. Bonnie and Sara agreed upon a price of $50,000 per smokehouse with 50% due at the beginning of construction of each smokehouse and the balance due upon completion of each unit. They agreed that Sara would complete the first unit before starting the second. The first smokehouse was to be completed by May 1 and the second smokehouse was to be completed by July 1. Sara started work on the first smokehouse on April 1 and Bonnie paid her $25,000 that week. Sara completed the first smokehouse on April 30 and gave an invoice to Bonnie for the $25,000 due upon completion. Before making that payment, Bonnie asked Sara when she would start the second smokehouse. Sara told Bonnie, "I just got a big cabinetry subcontract on an office building and I am not going to have time to build your second smokehouse. You need to get someone else." Bonnie then said, "I won't pay you another dime until you keep the contract to build the second smokehouse." After three months, Bonnie heard no more from Sara and got bids on the second smokehouse from two contractors who both quoted a price of $55,000. Bonnie comes to your law office and wants to know if she might be liable to Sara if Sara should bring suit for payment of the balance of $25,000 on the first smokehouse. Which of the following outcomes is most likely? The agreement between Bonnie and Sara is not enforceable because it is not in a signed writing. Bonnie is entitled to a refund of her initial payment of $25,000 for the first smokehouse. Sara committed a willful breach of the contract and therefore would not be able to recover any damages from Bonnie for nonpayment of the $25,000 balance for the first smokehouse. Sara would be able to recover the $25,000 balance for the first smokehouse because she rendered substantial performance on a divisible part of the contract, but would be liable to Bonnie for the additional cost of $5000 to build the second smokehouse. Sara would be able to recover the reasonable value of her work on the first smokehouse, less the $25,000 she has been paid, without regard to the contract price.

(CHAP 11.5) Assume all the facts in the first paragraph of Question 4, above. Assume also that six days after the signing of their contract, GD changed its mind about buying RR's property and repudiated their contract, because it had found an equally suitable property in the same general area for a substantially lower price, $400,000. Assuming that GD has thereby committed a breach of its contract with RR without legal excuse, which of the following statements is/are accurate description(s) of this situation? In a successful suit against GD for breach of contract, RR will (if she requests it) be awarded the remedy of specific performance. In a successful suit against GD for breach of contract, RR's remedy will include damages based on the difference between the sale price in their contract and the lower price that GD is going to pay for the other property. In a successful suit against GD for breach of contract, RR's remedy will include damages based on the difference between the sale price in their contract and the market value of the property at the time of GD's repudiation (if that latter figure is lower), plus incidental damages. If RR chooses to seek another buyer for her property, and finds one who is willing to pay $455,000 for it, she will have no effective damage claim against GD.

(CHAP 12.2) O'Hara Construction, LLC is engaged in the business of construction of office buildings for private developers and governmental entities. From time to time, O'Hara needs capital to support its operations. O'Hara has a working relationship with Capitol City Bank under which O'Hara sells its rights to receive payment under specified contracts to Bank. In the standard transaction, O'Hara sells all of its payment rights under a specified contract to Bank, typically for about 80% of the contract amount. When the sale involves a contract with the federal government, O'Hara usually receives about 90% of the face amount of the contract because the risk to the Bank is less in such transactions. Sometimes, the transaction involves a sale of only a portion of O'Hara's right to receive payment under a contract. Which of the following is the most accurate statement about transactions between Bank and O'Hara? A sale by O'Hara to Bank of a right to receive payment under a contract with the federal government will probably be enforceable because of the public policy in favor of free markets. A sale by O'Hara to Bank of a right to receive payment under a contract with a private developer is unenforceable without the consent of any developer because the sale affects the obligations of the developer. A sale by O'Hara to Bank of a portion of its right to receive payment under a contract with a private developer will probably be enforceable. If O'Hara fails to perform a contract when the right to receive payment has been sold to Bank, Bank will have the obligation to complete performance of the contract.

(CHAP 2.5) Three years ago Chuck Carlson agreed to lease from Lily Landon a vacant storefront in which Chuck intended to operate a gourmet food shop, "Chucky's Cheeses." The term of the lease was three years, and the rent provided in the written lease (which was signed by both parties) was $2,000 a month. The lease contained the following provision: Renewal Option. Tenant is to have the option to renew for an additional three-year period, at the monthly rate of $2,250 or such other amount as the parties may agree to, provided Tenant gives Landlord written notice of intent to renew at least 60 days before the end of the term of this lease. The shop proved to be successful. When 80 days remained on his lease term, Chuck delivered to Lily a written notice of his intent to renew the lease for three years at the rate of $2,250 per month. Lily stated she would not recognize his right to renew unless he agreed to a monthly rental of $2,500. Which of the following statements best describes the parties' legal position? Chuck cannot enforce the option to renew because it is only an agreement to agree. Chuck can enforce the option to renew, but only if he can demonstrate reliance on the renewal provision in the lease. Chuck can enforce the option to renew at the monthly rental of $2,250. Chuck cannot enforce the option to renew unless he can show that Lily is acting in bad faith.

(CHAP 3.2) A year ago, Ashley Anderson was a college senior, making plans to attend college. She was accepted at a community college in her hometown, and also at a large private university, Stepford U. Initially, Ashley planned to attend the local college because of the high cost of attending Stepford, but her Aunt Ivy (her mother's wealthy sister, who had attended Stepford herself) urged Ashley to attend Stepford even if it did mean Ashley would incur a larger burden of student debt. When Ashley hesitated, Aunt Ivy promised Ashley (in a written email note) that she (Aunt Ivy) would pay Ashley's tuition at Stepford for her sophomore year if she finished the first year at Stepford with a grade point average of 3.0 or better. Ashley agreed, and attended Stepford for her first year of college with some financial help from her parents and the benefit of substantial student loans. She finished the year with a 3.4 GPA. When she notified her Aunt Ivy of that achievement, Ashley received the following response: "Ashley: I'm delighted to hear of your excellent work at Stepford this past year. I'd like to help with your tuition this coming year, but some of my business ventures require additional attention and investment from me. I'm sure with your outstanding record you'll have no problem getting scholarship aid from Stepford for next year. - Your loving Aunt Ivy" It may be unlikely that Ashley would actually bring a lawsuit against her aunt, but should she decide to do that, is her claim likely to succeed? A.No, because Aunt Ivy received no consideration for her promise. B.No, because it was unreasonable for Ashley to rely on her aunt's promise. C.Yes, because Ashley reasonably and detrimentally relied on her aunt's promise. D.No, because justice does not require enforcement of her aunt's promise because she can get other scholarship aid.

(CHAP 3.3) Your local city school board operates a fleet of school buses to serve the students who live far enough from their school to require transportation. The 25 buses it is currently using were all purchased in 1995. Recently, the local newspaper reported that the school board was considering replacing a large part of its fleet of buses with newer, more energy-efficient ones. Hank Hill, the owner and operator of a tourists' sightseeing business, wrote the following email note to Linda Lawrence, the chairman of the school board: "Dear Linda: I understand that your board is considering replacing all or some of its buses with new ones. I would buy five of your old ones, for the price of $20K each. (My son rides one every day and I have a good sense of their condition.) This offer is good for the next two weeks. - Your friend, Hank Hill" Three days after receiving this note, the school board entered into a contract with Monarch Motors to purchase ten new school buses, delivery to be in three months. Linda then received another email from Hank: "Dear Linda: I've had second thoughts about buying the buses. I think I'll go in another direction. Sorry to disappoint you. - Hank" As of this point, which of the following statements best describes the school board's legal position with respect to the sale of buses to Hank Hill? A.Hank is free to withdraw his offer without liability because he is not in the business of selling buses. B.Hank is free to withdraw his offer without liability because it was not a "firm offer." C.Hank's offer can still be accepted by the school board, so long as two weeks have not gone by since it was made. D.Hank is free to withdraw his offer because it was not hand-signed by him.

(CHAP 4.2) Carl decided to sell his classic car, a 1963 Chevy Corvette. He advertised in the newspaper and received a call from Donna. Donna went to Carl's house on Monday to look at the car and decided to offer Carl $20,000 for the Corvette, stating that she could pay $1,000 at that moment and that she would return with the balance on Tuesday and take possession of the car at that time. Carl agreed to that arrangement. Donna then wrote out and signed a personal check for $1,000, noting on the memo line "Deposit on 1963 Chevy Corvette." The next morning Donna called to say that she had changed her mind and would not be buying the car. On what basis is Carl likely to be able to enforce the contract against Donna without a written sales agreement? A.Carl can enforce the contract only if Donna admits in court that she agreed to buy the car. B.Carl can enforce the contract only if he promptly cashes the check. C.Carl can enforce the contract because the check is a sufficient writing. D.Carl can enforce the contract because the car is relatively unique.

(CHAP 5.2) Clara, a home improvement contractor, and Hannah, a home-owner, both signed a brief one-page "work bill" form which simply stated, "$4,000 — a new fence for backyard — redwood five-foot high — pay in full on completion." The writing did not contain a merger clause. Hannah alleges that there was also an oral understanding that Clara would receive an additional $500 for removing debris from the old fence and disposing of it at a waste facility. Clara dismantled the old fence and placed it in the center of Hannah's backyard. When Clara completed the new fence and asked for payment, Hannah asked about removal of the old fence debris. Clara replied that she never committed to the $500 price to remove the old fence and that she is only willing to do so for $1,000. Hannah then refused to pay the $4,000 for the new fence. If a lawsuit ensues, would Hannah be able to offer evidence of the alleged oral agreement to have the old fence removed for $500? A.No, because the alleged oral agreement would contradict the written agreement. B.No, because there is no ambiguity in the written agreement. C.Yes, because the alleged oral agreement would be a separate contract with separate consideration from the written agreement. D.Yes, because the absence of a merger clause would make the written agreement a partial integration.

(CHAP 6.2) Regal Roofing Supply was a major seller of wholesale roofing material in Megatown, a large city. Regal sold roofing supplies to contractors and hardware stores. In August 2016, Regal was contacted by Empire Roofing Corp., a fairly new maker of environmentally friendly roofing material. Empire was interested in finding a distributor for its product in the Megatown area. After some negotiations, Regal and Empire signed an exclusive distributorship contract that stated: "Empire hereby grants Regal the exclusive rights to sell Empire roofing products in the Megatown area for five years, beginning September 1, 2016. Regal will use best efforts to promote Empire product sales." Regal promptly began promoting and selling Empire products, and sales were very good. During summer 2018, Regal discovered that some contractors who had previously purchased Empire roofing material from Regal were now buying the Empire products from Suburban Roofing Co., located just outside the Megatown city limits. Moreover, it became clear to Regal that Suburban was buying Empire products at a lower price than the published wholesale price that Regal was paying. When Regal asked Empire about these sales, Empire responded that it had the legal right to sell to Suburban. Would Regal be likely to succeed in a lawsuit against Empire for breach of contract? A. No, because the contract did not expressly ban sales outside the Megatown city limits. B.No, because the contract would not be enforceable since it contained only an illusory promise by Regal to use best efforts to promote sales. C.Yes, because sales by Empire to a competitor just outside the Megatown city limits at a reduced price would frustrate Regal's reasonable expectations under the contract. D.Yes, because Empire would be equitably estopped from selling its products to Suburban without the consent of Regal.

(CHAP 7.5) On a brutally hot day Andre Massati's home air conditioning fails. He calls AAAA Heating & Air, and the company sends out a repairman that afternoon. The repairman arrives late and Andre tells him that he must go to work that evening. The repairman says that he cannot begin the repair without credit card authorization and estimates that the cost would be $200 to $300. Because Andre must go to work, he leaves the repairman at home with his credit card information. When he returns late that evening, he sees a credit card receipt for $1,500 and the air conditioning is still not working well. Andre is furious, calls the company to complain, but gets no response. Andre goes to a consumer lawyer for advice. One of the theories that the lawyer is evaluating is unconscionability. Is a claim by Andre for return of his $1,500 on the ground of unconscionability likely to be successful? Choose the best answer: A.No, because unconscionability is a defense, not the basis of affirmative relief. B.No, because excessive price cannot be the basis of a claim of unconscionability. C.Yes, if Andre can establish that he did not have a reasonable choice with regard to payment and that the price charged was grossly excessive. D.Yes, if the repairman knowingly made a false prediction about what the total charges would likely be.

(CHAP 7.6) A law firm is considering hiring a "lateral," i.e., a lawyer who works for another firm and brings with him a book of business. The lateral handles securities fraud litigation, which is highly lucrative to the law firm. The law firm will pay the lateral a "signing bonus" of $1 million. May the contract between the lateral and the law firm provide that if the lateral leaves the law firm, the lateral agrees not to work for a competing firm in the field of securities litigation for a period of one year? Choose the best answer: A.Yes, if the one-year period is considered to be reasonable. B.Yes, because the law firm has a legitimate interest in protecting its investment in the lateral. C.No, because a covenant not to compete by a lawyer is unenforceable. D. No, because the agreement interferes with the judicial process.

(CHAP 8.2) Subcontractor (Sub) submits a bid to the general contractor (GC) for the excavation and foundation work for a new office building for a price of $100,000. During the construction Sub encounters major bedrock problems that require specialized equipment and increased time, both of which together escalated the cost of the work by $35,000. Which of the following statements is most likely to be correct? A.If Sub is able to establish the elements of unilateral mistake, it could recover the increased cost of construction from GC. B.Sub does not bear the risk of mistake because it did not discover the bedrock problems until after it entered into the contract. C.If Sub wishes to avoid the contact on the ground of unilateral mistake, it will need to establish that GC either caused the mistake, knew of the mistake, or that the increased cost would be unconscionable. D.Sub cannot avoid the contract because the mistake was not a palpable one.

(CHAP 8.3) AutoParts, Inc. is a supplier of transmission parts to one of the major automobile manufacturers, Famous Motors, Inc. (FM) under a five-year contract with a fixed price and a monthly minimum amount of goods that must be accepted by FM. FM has been unable to reach an agreement with its labor union, which has now gone on strike. FM has notified AutoParts that it is delaying its purchase of parts until the strike is concluded. Delay by FM of purchases from AutoParts will cause AutoParts difficulties: It will need to lay off workers, and if the strike goes on long enough it could place the company at risk of having to default on its loans. AutoParts wants your advice about whether it can insist on the delivery and payment dates set forth in its contract with FM. Which of the following is the best advice: A.The strike does not excuse FM from the delivery dates set forth in its contract because performance by FM is not impossible. B.The strike does not excuse FM from the delivery dates set forth in its contract because under the UCC a buyer does not have a right to claim impracticability of performance. C.FM's performance of the contract is excused if the contract has a standard force majeure clause. D.FM's performance of the contract is excused if taking delivery of the parts will cause FM to incur large storage fees.

(CHAP 9.2) Teri worked for Acme Drug Stores for 20 years, eventually becoming director of marketing. On August 10, Teri was contacted by a professional staffing agency about an executive position with Paragon Pharmaceutical Co., a regional wholesale supplier for drug stores in the Midwest. Teri interviewed with Paragon's president, Pat Park, and was offered a position as sales manager at a salary of $200,000 per year for a five-year period, starting September 15. Teri accepted the offer on August 24 and signed a written contract for the five-year agreement. On September 1, Teri gave two weeks notice to Acme that she would be leaving to work for Paragon. Acme senior management was very concerned about losing Teri and immediately offered to raise her annual salary to $230,000 if she would stay with Acme. On the morning of September 2, Teri called Pat and told him that she would come to work for Paragon only if they were willing to match the $230,000 salary that Teri was now being offered by Acme. Pat responded, "Let me think about it." After further thought, Teri called back to Pat's office two hours later and said, "Forget about my earlier call. I will come to work for Paragon on the terms we agreed to." Pat had been busy with other matters had not done anything about Teri's earlier call. If Paragon should now refuse to employ Teri, would Teri have a viable legal claim that she has a right to the job under contract law? No, Teri does not have a right to the job because she repudiated the contract. No, Teri does not have a right to the job because she committed a material breach. Yes, Teri has a right to the job because she retracted her repudiation. Yes, Teri has a right to the job because she never stated absolutely that she would not work for Paragon and therefore she never repudiated the contract.

(CHAP 9.5) Vic Vintner, sales manager of ABC Wine Co., agreed with Mike Mills, owner of Mike's Cafes, to sell Mike 50 cases of wine per week for 6 months, beginning July 1, at 5 percent below list price. The contract provided that Mike would submit an order one week in advance and would pay for each shipment within 30 days after delivery. When Vanna Vintner, the business manager for ABC, saw the first order from Mike for July 1 she was surprised to learn Vic had agreed to sell to Mike on credit, because it had been widely reported during the preceding month in newspapers and trade magazines that Mike had closed two of his ten restaurants because of financial difficulty and that Mike was having trouble paying his suppliers. When Vanna asked him about the contract, Vic simply said, "I think Mike will be good for it." Vanna immediately sent an email message to Mike informing him that the wine would not be delivered unless Mike provided a current financial report showing his ability to pay. Mike wrote back to Vanna, reminding her that he had been in business for 20 years, telling her that he was insulted by the request, and saying that he would sue if delivery was not made. Vanna calls you and wants to know if ABC or Mike will be in breach if the wine is not delivered on credit? Mike will be in breach because his financial difficulties would amount to an anticipatory repudiation of the credit contract. Mike will be in breach because he failed to give proper assurances to ABC about the concerns regarding his finances. ABC will be in breach because its demand for assurances was based on information about Mike's financial situation that it had before it made the contract. ABC will be in breach because their concerns about Mike's finances were based on mere news reporting.

(CHAP 10.4) Stephanie Zinn was a law professor with the Southeastern Law School, a for-profit law school created about seven years ago. Two years ago Stephanie received tenure from the Law School, which means that she could be discharged only for good cause or for bona fide reductions in staff due to financial exigencies. In awarding her tenure, the school noted that Stephanie was a recognized expert in data privacy and was working on a book on the subject. Many other professors at the law school publish books and obtain royalties from their publications. Six months ago Southeastern notified Stephanie that her employment with the school was being terminated effective at the end of the current school year. The school claims that the termination was proper because it faced financial exigencies due to declining enrollment. However, Stephanie contends that the owners of the school simply wanted to reduce expenses and increase their profits, and this motivation does not satisfy the contractual requirement of a "financial exigency." Several months after Stephanie received her notice of termination, she received another shock. The publisher of her data privacy book notified her that it was cancelling her contract to publish the book on the ground that she failed to meet one of the requirements for publication — being a tenured professor at an accredited law school. Stephanie tried without success to find another publisher for the book. Assume that Stephanie brings suit against Southeastern for breach of contract and is able to establish that the school breached the contract, will she probably be able to recover damages for lost royalties from her book? No, she will not be able to recover the lost royalties from the book because such profits are inherently speculative. No, she will not be able to recover the lost royalties because Southeastern did not "tacitly agree" to be liable for the lost profits in the event of breach. Yes, if Stephanie can prove that the amount of her lost royalties was reasonably foreseeable at the time of breach by Southeastern. Yes, because at the time the school awarded Stephanie tenure, it was reasonably foreseeable that the breach of her contract could result in a loss of royalties.

(CHAP 10.6) Exorbitant Motors, LLC (EM) is the local distributor of the new Exorbitant E85, an all-electric vehicle that is revolutionizing the automotive market. The E85, as the name of the company indicates, is pricey, starting at $150,000. Nathan Orsinski, a car enthusiast, places an order for a new E85 on the first day that the car is offered for sale. With various options and add-ons, Orsinski's contract price is $175,000. EM tells Orsinski that because the car is in such high demand, EM has a back order of vehicles for more than a year. Six months after placing his order, Orsinski receives a notice from EM that his order is being cancelled because of "supply difficulties." Orsinski has learned, however, that EM has delivered the E85 to some "favored buyers" in the area. Orsinski searches in vain to find an E85 available for sale. Assume that Orsinski brings suit against EM for specific performance, or in the alternative, damages. Which of the following is the most accurate statement about Orsinski's possible recovery? He will not be able to obtain specific performance because that remedy is limited to real estate contracts. He will not be able to obtain specific performance because the E85 is not unique. He will not be able to obtain specific performance because his damage remedy is adequate. He will be able to obtain specific performance if he can show that the E85 is not readily available on the market.

(CHAP 11.1) Cathy Coleman (CC) is an expert in refrigeration systems. Beginning in 2001, she was a salaried employee of Eezy Freezy, Inc. (EF), a manufacturer of refrigeration equipment for large commercial uses. CC had no written contract with EF, and worked on an at-will basis. Her salary steadily increased over time; by 2018 she was being paid by EF at an annual rate of $120,000. In late 2018, CC was offered a job by Absolute Zero, Inc. (AZ), a maker of household refrigerators and freezers, selling appliances in bulk to residential developers and large retail dealers. The offer was for a three-year full-time employment contract, with her compensation to be in the form of a 5% commission on all sales made by her annually up to $3,000,000. She would receive a $10,000 monthly advance against commissions to be earned. CC was assured that based on past experience of AZ sales agents she could easily make up to $3 million in annual sales, and also that if she was successful in making sales she would be considered for a stock bonus after one year. CC accepted the offer from AZ, and began working on Jan. 1, 2019, pursuant to a written contract signed by both parties. By the end of April, serious differences had developed between CC and AZ's vice-president in charge of sales. At the end of June 2019, CC had made sales of only $450,000 for AZ, and she was notified by AZ that her employment was being terminated for cause: insufficient productivity and refusal to follow established AZ procedures. It is now July of 2019. CC has inquired of EF whether her old job could be available to her again, but the answer was no. She is contemplating suing AZ for wrongful termination of her employment contract. A major issue in such a suit would obviously be whether AZ had sufficient legal cause to terminate her contract. Assuming CC could prevail on that issue, what damages could she expect to be awarded as the successful plaintiff? Damages for the period from July 1, 2019 to December 31, 2021 at the annual rate of $150,000, computed on the basis of 5% of $3 million in annual sales. Damages for the period from July 1, 2019 to December 31, 2021 at the annual rate of $120,000. Damages for the period from July 1, 2019 to December 31, 2021 at the annual rate of $150,000, offset by what she could reasonably earn at comparable employment during that period. Damages for the period from July 1, 2019 to December 31, 2021 at the annual rate of $120,000, offset by what she could reasonably earn from comparable employment during that period.

(CHAP 11.4) Gateway Drug, Inc. (GD), is a corporation that owns and operates a national chain of retail pharmacies. Recently GD's staff competed a study showing that because of population growth in that area over the last five years, a new pharmacy on the west side of Smalltown would be a good investment, yielding profits at least at the average level for Gateway stores in that region of the country. GD's real estate agents identified in that area a three-acre lot of appropriate size and location for its proposed new store. The lot was owned by Rachel Robinson (RR), an elderly widow. RR had lived in a small house on that lot for over 25 years, but during that time the character of the neighborhood had changed from rural/residential to residential/commercial. After the death of her husband two years ago, RR began to feel the burden (financial and practical) of maintaining the house on her own, and finally decided to sell the property and move to live with her daughter in Capital City, some 200 miles to the east. After some negotiation, RR and GD's agents agreed that GD would buy RR's property for $455,000, the closing to be held within 60 days after the parties' signing of the agreement, at a time and place to be mutually agreed upon. The contract provided for a down payment of $25,000 by GD, with the balance to be paid at the closing. The agreement also provided that in the event the sale did not take place, RR would be entitled to retain the down payment as liquidated damages. GD's intention, of which RR was aware, was to demolish the house and erect on the lot a building suitable for a full-size retail pharmacy. Six days after the signing of the contract, RR changed her mind about selling the property to GD, because she could not bear to think of her long-time home being demolished, and notified GD of this fact. Assuming that RR has committed a breach of this contract without legal excuse, which of the following statements is/are accurate description(s) of this situation? GD will not be awarded specific performance, because RR is an elderly widow. GD will not be awarded specific performance, because the parties have not made an agreement definite enough for a court to enforce specifically. If GD seeks to recover full expectation damages including lost profits, it will be able to do so. If GD is unable to recover lost profits because they are deemed too speculative, it should still be able to recover from RR both (1) its $25,000 down payment and (2) the difference between the contract price and the fair market value of the lot at the time of breach, if the latter is higher.

(CHAP 12.1) Two years ago Hirato Electrical Supplies, Inc. agreed to sell its business to Construction Supplies, Inc., a large international supplier of materials for home construction. The agreement between Hirato and Construction provided that Construction agreed to keep operating Hirato as a wholly-owned subsidiary of Construction for at least two years after the closing of the acquisition. While Hirato's current employees were all at-will (i.e., may be terminated regardless of cause), as part of Construction's agreement to continue to operate Hirato as a subsidiary for two years, Construction also agreed that it would continue to employ all of Hirato's current employees for two years, except those for whom good cause for discharge existed. However, one year after the closing of the acquisition Construction decided to merge Hirato's operations into the parent company. In connection with this transaction, approximately 100 of Hirato's employees were laid off. The discharged employees have brought suit against Construction claiming that it has breached a contractual duty owed to them. Which of the following statements best describes the legal position of the discharged employees? They do not have any contractual rights against Construction because they were not signatories to the contract between Hirato and Construction. They do not have any contractual rights against Construction because Hirato did not have a duty to continue their employment. They have contractual rights against Construction because they would receive a benefit from the agreement between Construction and Hirato. They have contractual rights against Construction because Hirato intended to provide a benefit to the employees and Construction was aware of and agreed to that intent.

(CHAP 12.3) Livingston Management Services, LLC is an agent for developers of residential apartment buildings located in the Washington, DC area. Livingston provides a wide range of management services to the owners, including leasing, maintenance, and rent collection. National Leasing Management, Inc. is a large nationwide company that provides services similar to the ones offered by Livingston. National also operates in the Washington area in competition with Livingston. While National and Livingston are competitors, their competition has been "friendly." Recently, National approached Livingston about the possibility of acquiring Livingston's operations. After some negotiations, National agreed to acquire all of Livingston's Washington contracts with apartment owners. However, National will not purchase Livingston's facilities, and it will offer employment to only some of Livingston's personnel. Which of the following is the most correct statement about the relationship among Livingston, National, and the owners of the apartment buildings? Because the contracts between Livingston and the owners involve personal services, Livingston may not transfer the contracts to National without the consent of the owners. Livingston does not have the right to delegate performance of its contracts to National because the owners have a substantial interest in performance by Livingston due to the fact that National and Livingston were competitors. After National acquires Livingston's contracts, Livingston will not be liable to the owners for nonperformance of those contracts. After National acquires Livingston's contracts, National will be liable to the owners for any breach of those contracts.

(CHAP 4.3) Dina Drew decided in May 2019 to leave her job as an accountant and to pursue a long-time goal by opening a children's day care center in Oaktown. Dina had saved $500,000, all of which she used to purchase a commercial building and buy furniture and supplies. Upon inspection by the Oaktown City Building Department in July 2019, it was discovered that the building needed two more emergency exits to meet city safety code requirements. Dina contacted Carl Cruz, a contractor who had often done work for her mother, Megan Drew. Carl offered to do the renovations within a week at a price of $25,000. Dina did not have cash funds to pay Carl and was having trouble getting a loan from a bank. Upon hearing about the problem, Megan called Carl and spoke with him over the telephone. Megan told Carl, "If you will go ahead and do the work for my daughter, Dina, I will pay you the $25,000 in two months if Dina cannot borrow the money from a bank by then." After that conversation, Carl agreed with Dina to do the work, and they both signed a brief one-page contract. In the margin Carl had added this sentence: "Payment in two months guaranteed by Megan Drew." If Carl completes the work and after two months Dina cannot borrow the money to pay him, is Carl likely to be able to enforce Megan's oral promise to pay him the $25,000? A.Yes, Carl can probably enforce the promise because Megan's performance would be completed in less than one year. B.Yes, Carl can probably enforce the promise because Megan made it directly to him and Dina signed the writing confirming it. C.No, Carl probably cannot enforce Megan's promise because his performance affected an interest in real property. D.No, Carl probably cannot enforce the promise because Megan did not sign the written contract.

(CHAP 4.5) In June 2019, Sam Seller, a high school teacher, decided to sell a unique chair that had been designed in 1920 by world renowned architect, Fred L. Bright, to go into a house he had also designed. The "Bright" chair had been passed down through Sam's family for four generations. He advertised the chair for sale online and received a call from Ben Buyer, a wealthy art collector. Ben went to Sam's house on June 20 to look at the chair and decided to offer $150,000 for it. Sam orally agreed to sell the chair for that price. The next day, June 21, Ben obtained from his bank a cashier's check payable to Sam Seller, for $150,000. Ben sent the check in a letter to Sam by messenger, along with a signed note that accurately described the agreement. The following day, June 22, Sam returned the check to Ben with the letter unopened. Ben immediately called Sam to ask why the check was returned. Sam stated, "I never really agreed to sell the chair. I merely agreed to consider your offer and I have decided that I cannot part with it." Ben promptly filed a lawsuit for breach of contract, but Sam filed a motion to dismiss with a sworn affidavit that he never agreed to sell the chair. Would Ben be likely to succeed in his lawsuit to enforce the oral agreement? A.Yes, because the chair was an item of specially manufactured goods. B.Yes, because the note he sent would satisfy the statute of frauds against Ben and it was received by Sam. C.No, because the part performance exception to the statute of frauds would require both payment by the buyer and delivery of goods by the seller. D.No, because Sam did not sign a writing, promptly denied making a contract, and did not accept the payment.

(CHAP 5.3) Lucy Lee, an art collector, writes the following email to Grant Gilmore, a prominent art dealer: "Dear Grant: As you know, I own four oil paintings by Warren Wyatt, entitled "Spring," "Summer," "Autumn," and "Winter." Because I am temporarily in need of immediate funds for another project, I'm offering to sell all my Wyatts to you for a total of $280,000, delivery and payment to be made within one month. As you know, the paintings were recently appraised at $300,000. Please let me know if you accept my offer. - Lucy Lee" Grant immediately writes back to Lucy: "Lucy: That's great news! I accept gladly. I'll be in touch shortly to work out the details. - Grant" In the discussions that follow, Grant tells Lucy that for his $280,000 he expects to receive not only the four oil paintings mentioned in her email but also a set of six small water-color sketches by Wyatt that Lucy owns. Lucy denies that she intended to include those in her offer and correctly states that the six sketches themselves have been valued at more than $500,000. Would Grant be likely to succeed in an action to obtain the oil paintings and the sketches for $280,000? A.Yes, because Lucy's written offer clearly stated "all my Wyatts" for $280,000. B.Yes, because any ambiguity in the agreement would be due to Lucy's drafting error. C.No, because Lucy's note refers to the four oil paintings by name, and only to them. D.No, because interpreting the contract to include the paintings and the sketches would be unreasonable. E.No, because there was no meeting of the minds.

(CHAP 6.3) Edna lost her job in June 2018 after a reduction in staff by her employer. Edna soon applied for two job openings — one as an accounting assistant at Acme Manufacturing Co. and a second as a sales clerk at Best Box Store. Edna interviewed for both jobs and was offered both positons. She decided to accept the position with Acme, effective July 1, 2018. The personnel manager gave Edna a document entitled, "Acme Employee Retention Policy." Part of the document stated that, "all employees are probationary for 90 days and then become permanent employees, eligible to participate in the employee retirement plan." Edna began work and received "excellent" ratings from her supervisor, Sally, for each of her first three quarterly evaluations. On April 7, 2019, Edna had a heated argument with Sally during lunch about the upcoming presidential election. Edna was suddenly terminated one week later by Sally with the only stated reason being "unsatisfactory performance." If Edna can establish that she was terminated because of the argument, would she be likely to prevail in a lawsuit about her firing? A.Yes, because Edna's status as a "permanent" employee would mean that she could be let go only for just cause. B.Yes, because Edna's termination for exercising her right to freedom of speech would be a wrongful discharge in violation of public policy. C.Yes, because Edna detrimentally relied on the job offer from Acme in turning down the job offer from Best Box Store. D.No, because Edna would be an at-will employee, subject to termination without just cause.

(CHAP 7.7) A salesman for a chemical company is considering leaving his employment to work for a competitor of his employer. The salesman's employment agreement has a covenant not to compete. Which of the following would probably not be relevant to a determination of the reasonableness of the covenant? A.The extent to which the salesman has confidential information about the company's customers. B.The duration of the salesman's covenant not to compete. C.The geographical area in which the covenant operates. D.The salesman's current salary.

(CHAP 8.5) Buyer and Seller entered into a written contract for the sale of 50 desks at a total price of $25,000 with a delivery date of June 1. A few weeks before the delivery date, Seller telephones Buyer to inform it that Seller cannot meet the original delivery date without paying overtime to its workers and to ask for a 30-day extension, to which Buyer agreed. After June 1 but before the Seller ships the goods, Buyer informs Seller that it will not accept the desks because the original delivery date has passed. Seller brings suit against Buyer and offers to prove the oral agreement extending the date for delivery. Is the agreement by the parties to extend the delivery date enforceable? A.No, because the Seller did not give any consideration for the Buyer's agreement to extend the delivery date. B.No, because the agreement was not reduced to writing. C.Yes, because the Seller would have been excused due to impracticability without the oral agreement. D.Yes, because the Seller reasonably and materially relied on the oral agreement.

(CHAP 9.1) Homer planned to retire during the coming months from his career as a factory supervisor in Chicago and he wanted to move to Arizona. On January 15, he met with Donna who owned a senior housing development near Phoenix. Homer and Donna agreed in writing that same day to a sales contract for a recently constructed home at a price of $400,000 with closing set for April 1. Homer paid a deposit of $10,000. The contract included a provision that read:This contract is conditional upon purchaser obtaining approval no later than March 1 for a 30-year fixed loan for 90 percent of the purchase price ($360,000) from a federally insured bank at an interest rate no higher than 5 percent. Deposit shall be returned to buyer and this contract shall be terminated if financing is not obtained by the stated date.The week after signing the contract with Donna, Homer completed a loan application with First Bank and provided all necessary information except for his Federal Income Tax returns for the two preceding years which he accidentally forgot to retrieve from his file cabinet. On February 1, First Bank informed Homer that he had been provisionally approved for a loan in the amount of $360,000 at an interest rate of 5 percent, subject to Homer providing the missing documentation. The very next day Homer learned that his largest retirement investment account, which he thought was worth almost $1 million, had announced a projected loss of value of about 20 percent over the coming year. Consequently, Homer decided to postpone his retirement and he was no longer interested in buying the home in Arizona. Homer ignored multiple requests from First Bank for the tax returns and on February 22, First Bank withdrew the provisional approval for the loan. Homer then notified Donna that he would not close on the home purchase contract. If Donna sues Homer for breach of contract, will Homer have a good defense? Yes, Homer has a good defense because his investment account loss would give him grounds for a claim of impracticability. Yes, Homer has a good defense because his contract with Donna included a condition that was not satisfied. No, Homer does not have a good defense because the financing condition was substantially satisfied by the provisional approval. No, Homer does not have a good defense because he failed to provide the documentation needed for the loan and thereby prevented the loan from being approved.

(CHAP 9.4) Bob, owner of a local hotel, became interested in buying an adjacent lot of land that was vacant so that he could expand his building and become part of a national hotel chain. He contacted Owen, the owner of the vacant lot, and learned that Owen was interested in selling it. Bob met with Owen on February 15 at a realty office and they both signed a brief contract that stated that Bob would have the exclusive right for six months to buy the parcel of land for $45,000, plus a nonrefundable deposit of $5,000. The contract also stated that "the buyer must give written notice to the seller of the decision to purchase by August 15, or the right to purchase will terminate." Bob paid the $5,000 deposit to Owen at the time of signing the agreement. Over the next six months, Bob spent about 50 hours meeting with an architect and national chain hotel representatives and he paid the architect $2,500 to draft preliminary plans for the building expansion. Ultimately, Bob decided to buy the land. Late in the day on August 15, Bob realized that he needed to give notice about his decision to Owen. Bob immediately drafted and signed a brief note to Owen which said, "I will buy the parcel of land." He dropped the letter in a U.S. Postal Service mailbox on the way home that night. Owen received the letter on August 17. Does Bob have a legal right to purchase the land? Yes, because he mailed his notice by August 15. Yes, because he substantially complied with the notice requirement. No, because Bob's actions related to the potential purchase were not part of the bargain. No, because Bob did not strictly comply with the notice requirement.

(CHAP 7.4) True or false? Art dealer agrees to sell a painting to Buyer. Dealer represents to Buyer that the painting is an "original painting by Alexander Caldo." Unknown to either Dealer or Buyer, the painting is in fact a Caldo reproduction. In order to rescind the sale it will be necessary for the Buyer to show that the Dealer either knew or should have known that the painting was a reproduction rather than an original. Explain your answer.

FALSE

(CHAP 1.2) Which - if any - of the following statements are definitely true? A.In our system of contract law, legislatures make "the law"; courts just apply it to resolve disputes. B.Contract law is not concerned with "justice" or "fairness," but only with enforcing whatever agreement the parties have made. C.Legal theory has no relation to the way that courts actually decide cases.

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