Contracts I Final - Keele
Eston is producing a fashion show at a local arts chamber on May 10. He asks Falil to serve as announcer. Falil expresses interest, and before several witnesses, the parties talk and negotiate. Eston begins: "Well, it will require two rehearsals of about four hours each. Then the show itself will last for about two hours. I thought perhaps I'd pay you—for the two rehearsals and the show—$2,000 total." Falil replies, "That's fine; I'll do it. I'd like to be paid $1,000 after the first rehearsal and $1,000 at the completion of the show. Also, if I should put more than twenty hours into all of these efforts, I'd like to be paid an additional $50 for each such hour." Eston says, "It's a deal." The parties then agree on every other detail they can think of, including rehearsal dates and times, Falil's wardrobe, and music to accompany the show. After the parties agree on all details, Falil asks, "Shall we put all of this in writing?" Eaton answers, "I don't think we need to, do we?" "I guess not," Falil says, "but I would like to put in writing some general statement to the effect that I will serve as announcer and how much I will be paid." On March 12, the parties create and sign this writing, which they label "Contract": Eston Eaves and Falil Ford acknowledge, between them, an agreement under which (1) Eston Eaves will produce a fashion show at the Hazelton Arts Chamber on May 10 of this year and (2) Falil Ford will serve as announcer for a total compensation of $2,000, no less and no more. The parties conduct the fashion shown on May 10 as planned. By the time it's over, Falil has devoted twenty-six hours to the whole effort. He reminds Eston of their oral agreement under which Eston would pay him, in addition to the $2,000, another $50 for each hour he worked beyond twenty hours. Falil claims that he is owed a total of $2,300. Eston acknowledges the oral agreement, but nonetheless refuses to pay the additional $300, noting that "our actual contract provides for total payment of $2,000, no less and no more." If the parties' writing is a partial integration of their agreement, is Eston obliged to pay the additional $300 as orally agreed? A. Yes, because the writing is not a total integration B. Yes, because Eston acknowledged that component of the oral agreement C. No, because the writing expressly voids all prior oral agreements D. No, because that component of the oral agreement is inconsistent with the writing
D
Jared operates a retail hardware. By telephone, Sarah, a plumber, contacts him: Communication 1 (telephone), Sarah: Do you have in stock a full set of metric combination wrenches? Communication 2 (telephone), Jared: Yes, we do. Give me your fax number or address, and I'll send you a written description and order form. Communication 3 (telephone), Sarah: Thanks very much. Send it by email, please, to [email protected]. Communication 4 (email), Jared: [description of the wrenches, and then] Full set $450 without ratchet kit. If you want the set, we'll assemble it for you right away. You may pick it up at our store any time tomorrow. Communication 5 (email), Sarah: I'll take it, but please include ratchet kit at your ordinary price. Jared then assembles the wrenches and readies them for Sarah. Communication 6 (email), Jared: We have assembled the wrenches for you, but we do not have any ratchet kits. Please come and take the wrenches. For payment we accept cash, credit card, or debit card. Communication 7 (email), Sarah: Without the ratchet kit I have no interest in the wrenches. Thanks very much, but I won't be making the purchase. Communication 8 (email), Jared: You have a contractual obligation to purchase the wrenches, and you have no right to the ratchet kit. Which of the following facts best supports Jared's position? A. Sarah initiated the contact with Jared; Jared did not initiate contact with Sarah. B. In reliance on Sarah's statements, Jared assembled the wrenches. C. In this circumstances, both Sarah and Jared are merchants. D. Wrenches are goods.
D
Martha secured a patent for a biomedical device she called "Gutmate." Believing that Deborah was a qualified manufacturer of biomedical devices, Martha sent Deborah the Gutmate plans and designs, together with a note: "I am prepared to hire you as a manufacturer of Gutmate. I have little capital and propose, therefore, to convey to you a share of the patent ownership in exchange for your services. I invite your acceptance." Deborah responded, by writing: "Yes, we have a deal." Does Deborah's response constitute an acceptance? A. Yes, because Deborah expressed her assent, clearly and unequivocally B. Yes, because Martha explicitly invited Deborah to accept C. No, because Martha's writing omits to describe Deborah as a qualified manufacturer D. No, because Martha's writing proposes no definite bargain E. No, because it did not present the word "accept" or "acceptance"
D
On November 1, 2019, SurfCo contacts PlexCo. SurfCo: We plan to manufacture a new line of vacuum-formed sandwich-riding surfboards and so wish to purchase polyurethane foam. PlexCo: We have 120 different polyurethane foam preparations. Can you be more specific about the sort you'd like to have? SurfCo: No, we can't. We know only what we wish to do with it. PlexCo: Well, we can offer you our #99 polyurethane foam at $100 per commercial unit, delivered to your facility on November 20. SurfCo: We'll take 100 units. The parties then create a signed writing identifying SurfCo and PlexCo by name and address. It otherwise provides only this: "PlexCo will, on November 20, 2019, deliver 100 commercial units #99 polyurethane foam to SurfCo's facility, with SurfCo to pay $100 per unit for a total price of $10,000." If the #99 polyurethane foam is not suitable for the manufacture of vacuum-formed sandwich-riding surfboards, then, under UCC Article 2, PlexCo is in breach of A. an express warranty of merchantability. B. an express warrant of fitness for particular purpose. C. an implied warranty of merchantability. D. an implied warranty of fitness for particular purpose.
D
Shayna and Chris agree orally that Chris will act as supervisor and manager of Shayna's commercial ice skating rink, Monday through Friday from 9:00 A.M to 5:00 P.M. Shayna is to pay Chris an annual salary of $150,000, in twelve monthly installments of $12,500 each, on the first day of each month. While negotiating, the parties exchange a number of notes and conduct a number of conversations. Ultimately, they agree, orally and by handshake, to the terms described above, and to an additional fifty terms as well. Thereafter, in cursive, they sign their first names only to this short writing, labeled "Employment Contract": The undersigned Shayna Signorelli ("Employer") and Chris Matus ("Employee") hereby agree, finally and unconditionally, that Employee will serve as Employer's general manager, on an ordinary full-time basis and that he will be paid for his service an amount satisfactory to him. Employee acknowledges that the skating rink operates from 8:00 A.M. to 10:00 P.M. seven days per week. If a judge concludes that the writing is a partial integration and not a total integration, her reason will most likely be that A. the writing names itself an "Employment Contract" and therefore must represent, in part, terms on which the parties have finally reached agreement. B. the writing is dated and signed by both parties, each setting forth his or her cursive signature. C. the writing specifies the number of days per week and hours during which the skating rink operates. D. in her opinion, the parties intended the writing as a final statement as to some of what each would do for the other, but they did not intent it fully to state all on which they had agreed.
D
Sidney says to Rena: "I'd like to use your recording studio this coming Tuesday from 9 A.M. Will you rent it to me, and if so, what will you charge?" Rena responds: "Yes, definitely, I accept." The charge is $100 per hour, but on that day the studio is available only from noon to 3 P.M." Which of the following responses from Sidney would most likely create a contract? A. "Fine, noon to 3 P.M. it is, but I can pay only $250." B. "Fine, noon to 3 P.M. it is, but I can't afford $300." C. "Fine, noon to 3 P.M. it is, but let's make it $95 per hour." D. "Fine."
D
To say that a contract "falls within the Statute of Frauds" is to say that A. It is recorded in a writing signed by both its parties. B. It is not recorded in a writing signed by either party. C. It is recorded in a writing signed by one of its parties. D. It is unenforceable unless recorded in a writing signed by the party against whom enforcement is sought.
D
Over the fourteen years, 2005 to 2018, Andrea has visited Frank's diner for breakfast about four times weekly between 6:30 A.M. and 11:45 A.M., each time ordering two soft-boiled eggs with toast, and each time paying the menu price for those items. Also over these fourteen years, Andrea has come to Frank's diner about three times weekly for lunch between 12:15 P.M. and 3:30 P.M., each time ordering two hard-boiled eggs with toast and paying the menu price. At noon sharp on January 3, 2019 Andrea steps into Frank's diner and sits at a table. Which of the following additional facts would best justify the legal conclusion that on that day, Andrea has made an offer to Frank in which she proposes to buy soft-boiled eggs for the menu price? A. Unbeknownst to Frank, Andrea had breakfast today at 7:30 A.M. in another diner, which she has also frequented regularly for fourteen years. B. Unbeknownst to Frank or Andrea, Andrea's wristwatch is running one hour slow, and Andrea believes the time to be 11:00 A.M. C. Frank does not serve breakfast after 11:50 A.M. and begins serving lunch at noon. D. A moment after taking her seat, Andrea says, "Eggs and toast, please." E. A moment after taking her seat, Andrea says, "Another morning -- the usual please."
E
Vortech Inc. supplied industrial chemicals to a large number of customers, including Hartco Inc. After years of doing business with Hartco, Vortech sent Hartco this document: DEFINITIVE OFFER TO SELL We have available a variety of alcohol- and ammonia-based cleaning products in good quantities at favorable prices. Let us know, please, if you wish to purchase any now. Please describe specifically the product(s) you want to purchase and the exact quantities you wish to acquire. This is a definite offer, and we look forward to your acceptance. Did Vortech make Hartco an offer? A. Yes, because Vortech described its message as a "definite offer." B. Yes, because Vortech did not restrict Hartco to purchasing any particular product and left it free to choose among many. C. No, because a seller cannot bind a prospective buyer without that buyer's assent. D. No, because Vortech did not refer to cleaning chemicals by name. E. No, because Vortech was nebulous as to the transaction it suggested.
E
Billionaire wants to help Teacher, who was his math teacher in high school before Billionaire became rich. On June 1, Billionaire enters into a contract to purchase a house worth $300,000 from Seller, but the sales contract calls for Seller to convey title to Teacher. The closing date is August 1. In June, Billionaire tells Teacher about the contract to make sure he wants the house. Teacher thanks Billionaire profusely and tells him that he will prepare to move into the house on August 1. Teacher cancelled his existing lease for the house he rents and purchased new furniture for the house. If Billionaire and Seller agree to mutually rescind their contract, may Teacher sue Seller, Billionaire, or both for rescinding without his consent?
First, identify the parties. Seller is the promisor. Billionaire is the promisee. Teacher is a third-party donee beneficiary. Second, have the beneficiary's rights vested? Recall that the promisor and promisee may modify or rescind the contract without the consent of the third party if it occurs before the third party's rights vest. A beneficiary's rights "vest," making his rights enforceable, when (1) the beneficiary materially changes his position in justifiable reliance on the promise; (2) he brings suit on it; or (3) he manifests his assent to the contract at the request of one of the parties. Here, the third party has both relied to his detriment on the promise and agreed to the exchange at the request of Billionaire. As a result, Teacher's rights have vested. Third, who can Teacher sue? As a donee beneficiary, Teacher can sue the promisor, Seller. Seller should have sought Teacher's consent before agreeing to rescind the agreement. Teacher might be able to sue Billionaire (promisee) under the narrow promissory estoppel exception.
Astor contracts to have the Andrea Doria Shipping Company deliver a valuable shipment of rubies from England to the United States. The contract requires that the rubies arrive by April 1 so that they can be auctioned off on April 3. Andrea Doria delegates its duties under the contract to the Titanic Shipping Company, a reputable shipper. Titanic's shipment is delayed due to its fault, and the rubies arrive April 15. Astor sues Andrea Doria for damages, and recovers $10,000. May Andrea Doria recover the $10,000 in damages from Titanic?
First, identify the role of the parties in the delegation. Astor = Obligee Andrea Doria = Obligor/Delegator (secondarily liable) Titanic = Delegate (primarily liable) Yes. Under these circumstances, the Delegator/Obligor may recover from the Delegate any damages that Delegator/Obligor has to pay Obligee for Delegate's breach. Where a delegation has properly taken place, the delegator (here, Andrea Doria) is only secondarily liable to render the promised performance—the delegate (Titanic) has the primary liability. The obligee (Astor) is always free to sue the delegator without suing the delegate, if she chooses. That's what Astor has done here. But since Andrea Doria's liability is secondary, and Titanic's is primary, once Andrea was required to pay damages, Astor was entitled to recover those damages from Titanic, the primarily liable party.
What's the difference between promissory estoppel and consideration?
In promissory estoppel, the promisor doesn't bargain for the promisee's detriment (the promisor just foreseeably induces the detriment); on the other hand, the promisor does bargain for the promisee's detriment.
Can offers made in jest ever be the basis of a contract?
It depends. As long as a reasonable person in the offeree's shoes would believe that the "offer" was intended to create a power of acceptance in him/her, then the offer is effective. However, if the offeree knows or has reason to know that the offeror is joking, then there's no offer.
Let's say that Teacher agrees to give Student some singing lessons in return for Student's payment of $200. Teacher specifies that the $200 is to be paid to Store, a local grocery store to which Teacher owes money. Identify each of the parties — Teacher, Student, and Store — with the third-party labels (i.e., promisor, promisee, third party). What type of beneficiary is the third party — creditor or donee?
It is very important in third-party problems to correctly identify the parties first. This will affect their rights. Student is the promisor. She's the originally contracting party whose promised performance will benefit the third-party beneficiary, Store. Teacher is the promisee. She's the originally contracting party to whom the promise of performance in question was made—namely, a promise that $200 would be paid. Store is the third-party beneficiary. Store is not a party to the contract. Additionally, Store is a creditor beneficiary, because performance by Student (the promisor) will satisfy a pre-existing debt that Teacher (the promisee) owes Store. ALTERNATIVE FACTS: Let's say instead that Teacher does not owe the Store money, though Teacher shops there regularly. Recently, there has been a downturn in business at the Store and the Store is struggling financially. Teacher wants to give Store the $200 just to help the business survive. Because there's no pre-existing debt being satisfied, Store would be a donee beneficiary.
Intended beneficiaries have enforceable rights; incidental beneficiaries do not. How can you tell if a beneficiary is intended or incidental?
Look to the intent of the promisee (the one to whom the promise of performance was made). The beneficiary is "intended" only if it was the promisee's intent that the third party receive a benefit from the promisor's performance. Otherwise, the third party is an "incidental" beneficiary, i.e., one with no enforceable rights. See Rest. 2d §302(1)(b). Some of the circumstances to be examined include the following: 1. Does the contract explicitly state that the beneficiary is an intended one? (If there is, that will be conclusive.) 2. Is there is a close relationship between the promisee and the beneficiary? (If so, that suggests the beneficiary is intended.) 3. Is the promisor's performance meant to go directly to the third party? (If so, it's more likely that the beneficiary was intended.) EXAMPLE OF FACTOR 3: You sign the papers for a bank loan. You're motivated in part by your desire to pay off some creditors. If you get the proceeds of the loan personally, your creditors are incidental beneficiaries of the loan agreement between you and the bank. If the bank is going to pay the creditors directly with the loan proceeds, the creditors are intended beneficiaries.
Dorothy, owner of the Wizard of Odd-Sizes Shoe Store, is chatting with the Wicked Witch about her ruby slippers. Dorothy says, "I'm planning on selling my ruby slippers for $50." Wicked Witch says, "Here's my check. I accept." Is there a contract?
No, because Dorothy's statement was not an offer, but rather a statement of her intention to contract in the future. An offer requires the present intention to enter into a contract; here, Dorothy did not intend to create in Wicked Witch the immediate power of acceptance. Therefore, no contract results.
CityWatt, an electric utility serving the city of Metro, posts the following notice on its website on January 1, 2015: To All CityWatt Homeowner Customers — Solar Rebate Program If you placed a Qualifying Solar Panel Installation ("QSPI") [a term carefully defined elsewhere in the website] in service at your home during calendar year 2014, under our Solar Rebate Program you are eligible for a 10% credit against the cost of your QSPI. Submit the information required in the application form below, and our home office will determine your eligibility; if you are approved, we will contact you with the amount of your Rebate. Gary Green, a CityWatt customer who made what was in fact a Qualifying Solar Panel Installation during 2014, submits on Jan. 15, 2015 all information required by the online application form. However, before CityWatt makes any further contact with Green, the company on Jan. 17 posts this notice on its website: "We regret to say that the Solar Rebate Program has been canceled. All pending applications are null and void." Green asserts that he accepted CityWatt's offer of a rebate on Jan. 15. Is there a contract between CityWatt and Green whereby CityWatt is obligated to pay Green the QSPI Rebate?
No, because a reasonable person in Green's position would have understood that CityWatt did not intend to be bound until its home office determined an applicant's eligibility. Rest. 2d, § 26 says, "A manifestation of willingness to enter into a bargain is not an offer is the person to whom it is addressed knows or has reason to know that the person making [the manifestation] does not intend to conclude a bargain until [the maker] has made a further manifestation of intent." Here, the communication that Green asserts was an offer -- the Jan. 1 website notice -- tells customers to submit an application form," and says that CityWatt's "home office will determine our eligibility." These references to an application and a determination of eligibility would give the customer reason to know that (in the Restatement's words), CityWatt did not intend for any "bargain" (agreement to award a rebate) to be concluded until CityWatt had made a "further manifestation of intent," namely at least a determination of eligibility, and probably also contact with the customer. In other words, the website made it clear to one in Green's position that the customer's application would be the offer, and that acceptance would not occur until the home office's determination of eligibility and notice of such to the customer.
Two business acquaintances are talking. The first says, "I'm planning on selling my car for $400." The second says, "I accept" and then offers $400 cash. Is there a contract?
No, because a reasonable person would conclude that the first person's statement was merely a statement of intent, not a commitment to enter into a bargain. An offer is "the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain without the first person doing anything further. A statement that a person is "planning" to do a transaction on specified terms would not justify the listener in thinking that the speaker is ready to be immediately bound.
Charize Anon, an avant garde artist who designs flower vases with blown glass, send a letter to an art dealer, Emil Alou, offering to sell her latest piece, entitled, "Sunrise in Bloom," for $500. At the same time, Emil sends Charize a letter offering to buy "Sunrise in Bloom" for $500. The letters cross in the mail. At a time before letter has been received, is there a contract?
No, because there is no mutual assent. In the ordinary case of cross-offers, where neither party is aware of the other's offer, neither is treated as being an acceptance (since neither was sent with the expectation that it would conclude a binding contract). See Rest. 2d § 23, Illustr. 4: "A sends B an offer through the mail to sell A's horse for $500. While this offer is in the mail, B, in ignorance thereof, mails to A an offer to pay $500 for the horse. There is no contract." NOTE: But notice that either of these crossing offers could then be accepted. For instance, suppose Charize got Emil's letter, and then quickly sent a reply letter, "Your offer is accepted." At that point, there would be a contract (with Emil's letter being the offer, and Charize's reply being the acceptance, effective upon dispatch).
Uncle tells Nephew, "I intend to offer Niece my season ticket to the theater for $200." Niece overhears Uncle's comment, walks up, and says, "I accept." Is there a contract between Uncle and Niece?
No, because there was no offer that Niece could accept. An offer is "the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it." Rest. 2d § 24. Here, by using the word "intend," Uncle did not do or say anything to justify Niece in believing that Niece's assent was currently invited and would conclude the deal -- all Uncle did was indicate that he would likely be making an offer to Niece sometime in the future.
Once a delegator delegates his duties under a contract, does he remain primarily liable to the obligee?
No, the delegator is secondarily liable. The delegate is primarily liable. This means that if the delegator has to pay damages to the obligee due to the delegate's breach, the delegator can recover those damages from the delegate; also, if the circumstances merit it, the delegator can seek specific performance from the delegate. The one who must perform—the delegate—becomes primarily liable for the duties he assumes. The delegator is released from secondary liability under the contract only by the delegate's performance (or tender of performance); OR by a novation (where the obligee expressly agrees to have the delegate replace the delegator under the contract).
Wallflower Mart send a purchase order to Harry's Wholesale Florist for 500 dried flower arrangements, style 402, for $3 each, to be paid in full 60 days after receipt of goods. Harry's sends back an acknowledgement form confirmed that it will sell 500 dried flower arrangements, style 402, for $3 each, to be paid in full 10 days after receipt of goods. At the bottom of the acknowledgement form there is the following statement in bold type: "This acknowledgment shall operate as an acceptance if and only if you assent to any terms in it that may be different from terms in your order. If you do not so assent, you should notify us immediately." (A) Assume that Wallflower receives the acknowledgement, reads it, and makes no response. Harry's has not yet made shipment. At this moment, is there a contract? If so, what are the contract's payment terms? A. Now, assume that Harry's, not having heard any response to its acknowledgement form 5 days after sending it, sends the flower arrangements. Wallflower Mart receives the flowers and immediately resells them. Is there a contract? If so, what are its payments terms?
No, there is no contract. Under § 2-207(1), an "expression of acceptance" acts as an acceptance even though it contains different or additional terms, "unless acceptance is expressly made conditional on assent to the additional or different terms." Harry's acknowledgment form was "expressly made conditional on assent," since the form made it clear that Harry's was only willing to enter into the transaction if Wallflower assented to all the terms in Harry's form, which Wallflower did not do. Wallflower's mere silence (and failure to comply with Harry's directive that Wallflower immediately indicate if it's unwilling to assent to all aspects of Harry's form) doesn't change the fact that Wallflower has failed to assent to Harry's form in its entirety. Therefore, Harry's acknowledgment form was a rejection and counter-offer, which Wallflower could either accept or reject. As of the moment of the question, Wallflower hadn't done either, so there's no contract.
O'Hara owns Tara, a plantation. She hires Selznick to build a movie set in the backyard, which will enhance the value of the property next door, Twelve Oaks, owned by Wilkes. When Wilkes learns of the pending set project, Wilkes adds a souvenir hut to his front yard. Selznick breaches the contract with O'Hara and the set is never built. May Wilkes sue Selznick as a third party beneficiary to the O'Hara-Wilkes contract?
No. A beneficiary may sue the promisor only if the beneficiary was an "intended" beneficiary. A beneficiary is "intended" if the circumstances indicate that the promisee intended to give the beneficiary the benefit of the promised performance. Here, there is no evidence that O'Hara (the promisee) intended to give Wilkes the benefit of the promised set — Wilkes was essentially a bystander whose very existence was probably not even considered by O'Hara when O'Hara made the set deal. Therefore, Wilkes was an "incidental" (not "intended") beneficiary, and as such, has no right to sue on the promise.
Mike and John knew one another socially for many years. John owns an expensive sports car worth over $50,000. Mike has always admired John's sports car but could not afford such an expensive car. Over the years, Mike had joked with John that he would purchase John's car for $5. John would laugh and turn Mike down. One evening at a party, Mike repeatedly asked John to sell him the car for $5. As always, John laughed and turned Mike down. Finally, Mike said that he would purchase the car for $10. John laughed again and said, "OK. You finally named the right price." Is there a contract?
No. Although the objective meaning of their words suggests that there is mutual assent, the context suggests that both parties are joking. In this case, both the offeree and the offeror know that this was not a serious attempt to enter into a bargain; therefore, there is no offer.
Mayor of Munchkinland owns property next door to property owned by Dorothy. Mayor says to Dorothy, "Anytime you or your successors in interest to your property want to use the yellow brick road across my property, you're free to do so. This easement will be permanent." The next day, Mayor changes his mind, before Dorothy has ever used the road. May Dorothy have the easement enforced?
No. An easement is considered an "interest in land." Therefore, a promise to convey it falls within the general rule that a promise to convey an "interest in land" must be in writing.
Prince Charming finds a glass slipper on the sidewalk in front of his house. Unbeknownst to him, Cinderella has offered $1,000 as a reward for the slipper's return. Charming goes from house to house, looking for the slipper's owner. He finally finds Cinderella and returns the slipper to her. Is there a contract between Cinderella and Charming for payment of $1,000?
No. An offer can generally be accepted only by a person who knows of the offer and intends to accept. This rule applies to rewards. Charming didn't know about the reward, so his actions of returning the slipper did not constitute a valid acceptance.
The Rosebud General Contractor agrees to build a fabulous home, Xanadu, for Charles Foster Kane, on Kane's land, in return for $750,000. Will the contract have to comply with the statute of frauds?
No. First, building a house is considered a service, no matter how much the materials involved cost. As a service, the contract is not subject to the statute of frauds under the UCC. (So the UCC provision, § 2-201, requiring contracts for the sale of goods for more than $500, doesn't apply.) Next, although this contract "involves" land, it isn't for the sale of an "interest in land," just for the provision of services in connection with land. That's not enough to bring the contract within the land provision. Since there's no other statute of frauds provision that applies, the contract is enforceable though oral.
Romulus leases Rome to Remus for nine months, the lease to begin the following day. The agreement provides that at the end of the nine months the lease shall automatically be renewed for six-month intervals thereafter, unless either party terminates. Will the lease require a writing to be enforceable?
No. If the initial contract itself may be performed within a year -- as here -- extensions that are each for 1 year or less do not require a writing either.
The Camelot Army/Navy Surplus Store advertises in a local circular, "Magic Swords, Excalibur model, for sale @ $24 ea." Lance walks into the store, and says "I accept your ad; here's my $24, give me 1 sword." Is there a contract?
No. Mass-market advertisements are generally construed as invitations for offers, not offers themselves, because they do not contain sufficient words of commitment to sell.
Owner owns a vacant lot of property in a residential neighborhood that is unsightly. The vacant lot is covered with weeds and is infested with rats. Owner wants to improve the property value of his vacant lot, so Owner enters into a contract with Landscaper to clean up the property (ridding it of rats) and to plant mature trees and foliage to give the lot a park-like feel. The contract between Owner and Landscaper is expected to raise the property value of all of the houses in the residential neighborhood. Neighbor owns the house next to the vacant lot. Owner tells Neighbor about the contract. Landscaper breaches the contract and the lot remains vacant and unsightly. As a result, the property values of Neighbor's house did not increase. What type of beneficiary is Neighbor? Can Neighbor sue Landscaper for breach as an intended beneficiary of the Owner-Landscaper contract?
No. Neighbor is an incidental beneficiary of the Owner-Landscaper contract. Neighbor is not an intended beneficiary because nothing in the facts suggests that Owner intended to confer a benefit on Neighbor. Owner was acting for his own purposes, not out of a desire to help Neighbor. An incidental beneficiary has no enforceable rights; therefore, Neighbor has no right to sue either Landscaper or Owner.
Collector has a large collection of ceramic figurines. One day, Neighbor was visiting, pointed to a particular figurine and asks, "Would you consider selling that ceramic bunny rabbit for $150?" Collector replies, "I accept." Is there a contract?
No. Neighbor's question is an invitation for Collector to negotiate (or for him to make an offer), not an offer in and of itself. For a statement to be an offer, it must be reasonably interpreted as creating in the listener an immediate power of acceptance. When a speaker says, "Would you consider. . . ," this indicates an interest in negotiating, rather than a commitment to be immediately bound without further action by the speaker.
Lawd Baron is hiking on his property one day and stumbles into a hidden cave, which is stuffed with ancient treasure. He runs home and calls his fiancée, Mia Lady. She is thrilled, and he says, "Naturally, I'll split it with you." An hour later, while Mia is still in shock over her good fortune, Baron calls her and says, "You know, I reacted emotionally. I'm not going to share the treasure with you after all." Mia is devastated. Can Mia recover any part of the treasure's value from Baron under the doctrine of promissory estoppel?
No. Promissory estoppel applies only where the promisee has justifiably and actually relied on the promise. The facts tell us that for the hour between Baron's promise and his revocation, Mia sat there in shock. Therefore, she couldn't have relied in any objective way (her disappointment doesn't count as reliance). The case therefore falls within the general principle that promises to make gifts are not enforceable due to lack of consideration.
In its advertising circular, a supermarket advertises milk for $1 a gallon. Is this an offer?
No. Such public ads generally are construed as invitations for offers, stating prices at which the seller wishes to receive offers. These are not offers because the quantity term is missing, and there is no clear offeree.
Dealer contracts to buy a yacht from Boat Builder for $100,000. After contract formation, Dealer assigns the right to receive the boat to Sailor in return for Sailor paying Dealer $120,000. However, Boat Builder goes bankrupt before the boat is complete. May Sailor recover against Dealer for Boat Builder's nonperformance?
No. The assignor, even under an assignment for value, is not deemed to warrant that the obligor can or will perform. See Rest. 2d §333(2): "An assignment does not of itself operate as a warranty that the obligor is solvent or that he will perform his obligation." So, Dealer has not impliedly warranted that Boat Builder will perform, which means that Sailor has no claim against Dealer when Boat Builder doesn't perform. Sailor will have to recover from Boat Builder or no one.
Socrates offers to sell his collection of Great Philosophers bubble gum cards to Plato for $20. Plato responds, "I'll give you $15 for them." At common law, is Socrates' offer still valid?
No. The common law on this point is illustrated by the Second Restatement. Rest. 2d § 39(1) says that "[a]n offeree's power of acceptance is terminated by his making of a counteroffer, unless the offeror has manifested a contrary intention or unless the counteroffer manifests a contrary intention of the offeree." Here, nothing in Plato's $15 counteroffer indicated that Plato intended to keep Socrates's original offer in force, so the "contrary intention" language does into come into play. (And nothing in Socrates's original offer shows an intent by him to keep the offer in force should there be a counteroffer.) RELATED ISSUE: Suppose Plato had said, "I am keeping your $20 offer under advisement. But would you be interested in taking $15 and an autographed Cleveland Indians baseball instead? In this situation, Plato as offeree has "manifest[ed] a contrary intention," i.e., an intention that his counteroffer should not cause Socrates's offer to terminate. Therefore, the original offer would remain alive.
Enrico Fermi patents a new invention: a solar-powered flashlight. He enters into a written agreement to sell the patent to Albert Einstein. The parties orally agree that the contract will not become effective until the patent is reviewed and approved by a patent expert, Moe Howard, of the patent law firm Larry, Moe, and Curly Joe, P.C. Howard reviews the patent and tells Einstein, "It's bogus. Only a stooge would buy this." Fermi sues Einstein, seeking to enforce the contract. Einstein wants to introduce evidence of the oral condition. Will the parol evidence rule prevent him from doing so?
No. The parol evidence rule only operates when a contract is effective. This means that anything showing it's not effective — fraud, a lack of consideration, duress, mistake, or, as here, failure of a condition to the contract's effectiveness — is admissible. Here, the allegation is that the agreement is only binding if Howard approves the patent. If true, this would be a condition to the contract's effectiveness, so Einstein can introduce evidence to prove the condition was agreed upon.
Seller and Buyer enter into a contract for Seller to sell 1,00 place-mats to Buyer. They have a written contract with a merger clause that says the agreement is intended to be a final, complete expression of their agreement. The contract says that the price per placemat will be 20 cents. The written document says nothing about the effect of subsequent oral modifications. One month after the signing, Seller orally asks for an increase to 25 cents. Buyer orally agrees. After delivery, Buyer pays only 20 cents per mat, and Seller sues for the extra nickel. Will Seller be barred from introducing evidence of the oral agreement to raise the price?
No. This illustrates one of the exceptions to the parol evidence rule. The parol evidence rule doesn't deal with subsequent modifications to written contracts. It covers only prior or contemporaneous oral agreements (and prior written agreements) supplementing or contradicting the main written agreement. So as long as the writing itself doesn't ban subsequent oral modifications, either party will be allowed to prove that such an oral modification occurred (even if the modification is, as here, a direct contradiction of the original writing).
Inventor patent a new invention -- a solar-powered flashlight. He enters into a written agreement to sell the patent to Promoter. However, just prior to signing, they orally condition the sale on the review and approval of the patent by a patent attorney. The attorney reviews the patent and tells Promoter, "It's bogus. The patent will not be enforceable if litigated." Inventor sues Promoter, seeking to enforce the contract. At trial, Promoter wants to introduce evidence of the oral condition. Will the parol evidence rule prevent him from doing so?
No. This illustrates one of the exceptions to the parol evidence rule. The parol evidence rule operates only when a contract is effective. This means that any evidence showing it's not effective is admissible. Thus, failure of an orally-agreed-upon condition precedent to the effectiveness of the contract may be proved. See Rest. 2d §217: "Where the parties to a written agreement agree orally that performance of the agreement is subject to the occurrence of a stated condition, the agreement is not integrated with respect to the oral condition." (Since the written agreement is not "integrated" with respect to the oral condition, the oral condition may be proved, even if it's inconsistent with the agreement.) Since each parties' duty to perform is conditioned on the patent attorney's approval, either party is permitted to show that the condition was orally agreed upon.
Bandit holds Mother's daughter hostage until Mother agrees to sell Bandit a diamond that she owns for $20,000, a price that is far below its true value. Mother agrees in writing. The writing, of course, makes no mention of the daughter. Mother, however, refuses to honor the agreement as soon as her daughter is released. When Bandit sues Mother for breach, will the parol evidence rule bar evidence of the daughter's kidnapping?
No. This illustrates one of the exceptions to the parol evidence rule. The parol evidence rule bars only extrinsic evidence of prior agreements or contemporaneous oral agreements that contradict, vary, or modify the contract; evidence of defects in formation are admissible. Thus, lack of consideration, fraud, and duress, as here, may be proven via extrinsic evidence. See Rest. 2d §214: "Agreements and negotiations prior to or contemporaneous with the adoption of a writing are admissible in evidence to establish . . . (d) illegality, fraud, duress, mistake, lack of consideration, or other invalidating cause[.]"
In the spring, Jack, a farmer, orally agrees to sell his bean crop for this year to Grocer for $200. The beans are still growing, and under the agreement, Grocer must harvest the crop. Must the agreement be in writing?
No. This problem actually turns on which body of law is applied -- (1) the UCC statute of frauds, or (2) the land sale provision of the common law statute of frauds. Growing crops are treated different than unextracted minerals for the purposes of which body of law applies to their sale. Growing crops are not considered an interest in land regardless of who harvests the crops. UCC § 2-107(2) defines "growing crops" as goods that are subject to the provisions of the UCC. Therefore, the UCC's sale-of-goods statute of frauds provisions apply. See § 2-201. If the price is $500 or more, the contract would have to be in writing. But here, since the total price is under $500, the oral agreement is enforceable.
Jackson Pol-lick, an avant-garde artist who paints landscapes with his tongue, sends a letter to Artie Snob, an art dealer, offering to sell his painting "Sunset Over Breakfast" for $5,000. At the same time, Snob sends Pol-lick a letter offering to buy "Sunset Over Breakfast" for $5,000. The letters cross in the mail. Nothing further happens. Is there a contract?
No. Under these facts we have two offers and no acceptance. Neither letter was sent with the expectation that it would create a binding contract, because neither was sent in response to what the sender knew to be an offer.
King George III sends a letter to James Monroe offering to sell him Canada; the letter gives Monroe until July 15 to accept. On July 10, Monroe gets the letter, reads it, and is about to phone George with an acceptance. Before he can do so, George calls him and says, "I revoke my offer." May Monroe still accept the offer?
No. Unless there's something specific that makes it irrevocable, an offer is revocable whenever the offeror wants to revoke. See Rest. 2d § 36(1): "An offeree's power of acceptance may be terminated by . . . (c) revocation by the offeror[.]" That's true even if the offer recites that it will remain open for a stated period of time. Once the offeror validly revokes, the offeree can no longer accept and make a contract. Here, there was nothing to make the offer irrevocable (e.g., there was no separate payment for irrevocability, creating an option contract), so once George revoked, Monroe no longer had the power to accept. COMMON EXCEPTIONS TO REVOCABILITY OF OFFERS An offer can be made irrevocable through the following methods: 1. Part Performance of a Unilateral Contract 2. Option Contract 3. Conditional Contract 4. Promissory Estoppel 5. UCC Merchant's Firm Offer
Heathcliff orally agrees to support Catherine, the mother of his illegitimate child, "for the rest of your life." Catherine is 30 at the time, and in perfect health. Does the contract violate the statute of frauds?
No. You might think that this contract would fall within the one-year provision, which requires a writing for contracts that are incapable of performance within 1 year from the date of agreement. After all, it's highly likely that a 30-year-old in good health would live more than a year, in which case Heathcliff's obligation could not be fully performed within a year. But to take the case out of the one-year provision, all that's required is that full performance could possibly occur within 1 year, no matter how unlikely that outcome is. See Rest. 2d §130, Comment a: "[T]he enforceability of a contract under the one-year provision does not turn on the actual course of subsequent events, nor on the expectations of the parties as to the probabilities. Contracts of uncertain duration are simply excluded; the provision covers only those contracts whose performance cannot possibly be completed within a year." Therefore, since there is some chance, however, small, that Catherine will die within a year, that's enough to take the case out of the one-year provision and make it enforceable even though it is oral.
Painter contracts to paint Owner's boat in return for Owner's promise to pay $1,000 within 30 days after completion. Painter assigns its rights to receive the money under the contract to Bank. With respect to the assignment, who's the obligor? Who's the assignor? Who's the assignee?
Owner is the obligor . Painter is the assignor . Bank is the assignee . As with third-party beneficiaries, it's helpful to diagram the relationships when you begin an assignment problem—the titles actually make sense, but a diagram makes it easier to keep things straight. Here, Painter assigned its rights to receive money to Bank, so Painter is the assignor. Bank has received the assignment (i.e., it will get the benefit of the promised performance), so Bank is the assignee. What are the rights being assigned? On completion of the boat being painted, Owner owes Painter the obligation to make payment of $1,000. Thus, Owner is the obligor and Painter is the obligee. But Painter transferred his rights to receive the obligation to Bank through an assignment. Thus, Owner, as obligor, now owes the obligation to the assignee (Bank)—not the original obligee (Painter) to the contract.
What is the overarching rule for the common law "parol evidence rule"? What analytic framework should you use to apply the rule?
PAROL EVIDENCE OVERARCHING RULE When the parties to a contract have agreed that the writing is a total integration of their agreement, then a court shall not admit extrinsic evidence (I.e, parol evidence) of prior or contemporaneous agreements that contradict or supplement the writing. If the writing is only a partial integration of the contractual terms, then the writing cannot be contradicted but can be supplemented by evidence of consistent additional terms. If the writing is not integrated, then a party may introduce both contradictory and supplemental evidence. ANALYTICAL FRAMEWORK To analyze this rule, you should take the following steps: 1. Determine the level of integration -- i.e., total or partial or not integrated. 2. Determine admissibility of the evidence based on the level of integration. this requires you to determine whether the evidence being offered is either contradictory or supplemental. 3. If evidence is excluded in the steps above, then consider whether any of the five exceptions apply. Details on these steps will be covered in the following questions and answers.
Assume there's a third-party beneficiary to a contract, and the promisor doesn't perform as promised. Who can the beneficiary sue — promisor, promisee, or both?
PROMISOR: A third-party beneficiary can sue the promisor for breaching the contract regardless of whether the third party is a creditor or donee. PROMISEE: However, whether the third party can sue the promisee depends on whether the beneficiary is a creditor beneficiary or a donee beneficiary. Creditor Beneficiary: A creditor beneficiary may sue both the promisor and the promisee on the original debt. Why? The promisor/promisee contract does not discharge the promisee's original debt to the creditor. However, the third party can only recover from one—not both. See Rest. 2d §310(1). Donee Beneficiary: A donee beneficiary may sue the promisor but may not normally sue the promisee. However, there is a narrow exception in promissory estoppel. If (1) the promisee told the third-party donee directly of the benefit that the donee would receive under the contract, and (2) the third-party donee then reasonably relied to their detriment on the promisee's statement (sufficient to fulfill the requirements of Rest. 2d §90), then the promisee might be held liable. See Rest. 2d §302, Comment (d).
Pavlov offers to sell his laboratory equipment to Rover. They argue about terms for a while, during which Rover does not specifically agree to Pavlov's proposed terms regarding price, warranties, or the time for delivery. Rover then says, "Well, I assume we can iron out the details later, so I accept your proposal in principle." Is there a contract?
Probably not. A court would likely hold that this is merely an "agreement to agree," and not a valid contract. That is because there is such a complete indefiniteness in the terms (What's the price? What are the warranties? When is delivery?) that a court would likely conclude that there is no basis on which a court could grant relief for a breach. So the offer will be treated as having been neither accepted nor rejected.
Detective agrees to appear on Police Commissioner's TV talk show if the Commissioner gives a new night vision digital camera to her college roommate, Friend. Detective tells Friend about the agreement, and Friend buys himself an extra-long-life battery and a padded camera case in anticipation. Before Detective appears on the show, she and the Commissioner agree to cancel the contract. May Friend recover the cost of the camera from Detective?
Probably yes. As a donee beneficiary, Friend normally has no claim against the promisee, Detective. However, an exception exists since Detective told Friend about the gift and then Friend detrimentally relied on the statement (by buying the battery and camera case). Friend's reliance had two effects. First, it caused Friend's rights to vest for purposes of a suit against the Commissioner. Second, the reliance created a right on Friend's part to sue Detective. Rest. 2d §302, Comment d, §311(4), and §90.
What is the issue that arises in the contracts doctrine referred to as the Battle of the Forms?
The battle of the forms refers to an issue that arises when an offeror makes an offer with a certain set of terms and the offeree purports to accept with a slightly different or additional set of terms. Normally, this issue arises when the parties exchange forms and some of the terms of the contract are contained in the boilerplate provisions of the forms, but the offeree's form doesn't match the offeror's form. Under the common law, the offeree's purported acceptance is really a counteroffer because of varying or additional terms. In such a situation, has a contract formed? If the parties behave as if a contract has formed, then whose terms control -- the offeror's terms or the offeree's terms? Battle of the forms is a term that is normally used in reference to contracts for the sale of goods -- governed by the UCC. However, the same issue can arise in contracts governed by the common law. The common law and the UCC treat this problem differently.
In addition to a tutu, Tutu needed tights for her dance lessons. She called Leo Tard, a specialist in dancing attire, and ordered three pairs of tights for a total of $350. She arranged with Leo that the tights would be delivered C.O.D. within a week. Leo immediately shipped the tights to Tutu, accompanied by his standard invoice. The invoice stated, "For sanitary reasons, we cannot accept the return of clothing delivered to a customer. All sales are final once the clothing leaves our premises." By the time that Tutu received the tights, a week later, she had changed her mind about taking dancing lessons and no longer wants the tights. Leo insists that she has bought them and cannot return them. Is he right?
The facts make it clear that Tutu and Leo made an oral contract on the phone. Because an enforceable contract came into existence at the time of the telephone call, there are no offer and acceptance issues implicated in Leo's response. The only question to be decided is if Leo's "no return" term was part of the contract. The garbled language of §2.207(1) muddles the very different situations that occur when the additional or different terms are in a confirmation rather than an acceptance. However, where a post-contractual confirmation is concerned, the purpose of the section is not to raise an offer and acceptance issue, but simply to provide the same rule for confirmations as applies to additional or different terms in an acceptance. That is, they only become part of the contract if both parties are merchants and none of the three other barriers to entry in §2.207(2) apply. Because Tutu is not a merchant, the answer is simple: An additional or different term in the confirmation would not become part of the contract unless she specifically agreed to modify the contract by adding it. The twist here is that Leo's term may not actually be additional or different on the facts of the case. In the absence of a term in the contract (whether express or implied through a clearly established usage in the marketplace) that gives Tutu the right to cancel the sale and return the goods if she no longer wants them, she cannot simply change her mind and refuse to accept the goods. Therefore, in the absence of such a return right expressly or impliedly included in the oral contract, Leo's confirmation does not seek to change the terms of the contract.
Hound Dogg, a general contractor, wants to bid on a construction project to be done for casino magnate Steve Winner: a hotel in the shape of Elvis Presley. Hound solicits sub-contract bids from a number of electrical sub-contractors, including Elektra Cution. Elecktra's sub-bid on the electrical work comes in the lowest, $1 million. (The next lowest bid, by Juice Corp., is $1.2 million.) Hound figures in Electra's sub-bid into Hound's own master bid, and bids a total of $10 million, on which Hound projects a profit of $300,000 (it's a low-margin industry, unlike operating casinos.) Two hours after Hound submits its bid, Elecktra phones Hound and says, "My bid was due to a terrible computational error. I can't do the job for less than $1.25 million. I revoke my offer to do the job for $1 million." Hound tells Elektra that Elektra must perform if Elektra is awarded the job, but Elektra still insists on revoking. The terms of Winner's bid-solicitation say that all master bids are final, and that all such bids must be backed by a construction-completion bond (as Hound's bid is.) Hound is awarded the job at $10 million. When Elektra persists in refusing to honor its original $1 million bid, Hound gives the job to Juice for $1.2 million. What, if anything, can Hound recover against Elektra?
$200,000. Most courts treat sub-contractors' bids as offers that are temporarily irrevocable for the period necessary to allow the contractor to obtain the job and accept the sub-contractor's bid. The reasoning is based on the theory of promissory estoppel, since the contractor justifiably relies on the sub-contractor's bid. That's what happened here. (If Hound had had the chance to withdraw or amend his own bid to Winner, his failure to do so would have made his continued reliance on Electra's offer unreasonable; but the facts tell us that Hound was stuck with his bid.) The recovery will protect Hound's reliance interest, i.e., the amount by which he was worse off than had Elektra honored her offer. That amount is the difference between Elektra's bid and the next-lowest bid that Hound ended up using, or $200,000.
As Elvira knows, Lilly Munster often gives ten-lesson private classes on the art of interior decorating for a total of $400. (The market price for such courses tends to be more like $300.) Lilly and Elvira meet at a party, and Lilly says, "I could come to your house and teach you." Elvira says nothing. Lilly then shows up at Elvira's house every Thursday evening for ten weeks, and teaches Elvira her decorating tricks. Elvira never says anything to indicate that she's expecting to pay for the lessons. At the end of the ten weeks, what, if anything does Elvira owe Lilly, and on what basis?
$400, on a contract. Elvira accepted the benefit of Lilly's services, having had the opportunity to reject them, when she knew or should have known that Lilly expected to be compensated for them at Lilly's standard rate. Therefore, she will be held to have impliedly agreed to a contract for those services, on what she knew to be Lilly's standard terms. The "market rate" or "market value" of such lessons is irrelevant, since the implied-in-fact contract was for Lilly's standard terms ($400), not for lessons at the prevailing market rate.
Fern owns an antique shop, Junk Is Us. She sends a written offer to Euphrates Antique Wholesalers to buy the latter's entire inventory of old string, partial shipments to occur monthly, with separate billing for each shipment, over a period of months. Euphrates send back a confirmation that purports to accept her offer. At the bottom of the confirmation is a sentence providing that Fern must pay 3% annual interest (a reasonable rate under the circumstances) on overdue invoices. Fern receives the confirmation and makes no response. (a) Is there a contract? (b) If so, is the interest clause part of the contract?
(a) Yes. The UCC does not follow the common law "mirror image" rule. So the fact that the "acceptance" contains additional terms does not prevent it from being a true acceptance that concludes the bargain. See rules regarding Battle of the Forms and UCC § 2-207(1). Here, nothing in Euphrates' confirmation made his acceptance expressly conditional on Fern's acceptance of the interest clause, so the confirmation acted as an acceptance. (b) Yes. UCC § 2-207(2) controls whose terms are included if a contract is formed. Here, the terms are integrated into the agreement because the two parties are merchants and none of the exceptions apply. The offer doesn't provide any limits on acceptance. Since we're told that Fern "makes no response," this means she didn't object to the interest term. So the only issue is whether a clause charging a reasonable rate of interest for overdue invoices is a "material alteration" of the contract. The comments to UCC § 2-207 defines "material" as resulting "in surprise or hardship" and provide an example similar to these facts.
Whenever you're confronted with a situation where a third party would be benefitted by the performance of one of the parties to a contract, that third person might have enforceable rights under the contract as a third-party beneficiary. In such a scenario, what are the questions you should ask, listed in the order in which you should ask them?
1. Did the benefit to the third person come about in the contract itself, or did one of the parties transfer the benefit to the third person later on? (If the rights are transferred to the third party after the contract is created, it's not a third-party beneficiary problem; it's an assignment of rights problem (see TPI/AST)). 2. Did the party who bargained for the giving of the benefit intend the third party to benefit? (This distinguishes intended beneficiaries from incidental beneficiaries; only intended beneficiaries have enforceable rights.) 3. If the original parties have attempted to modify or rescind the beneficiary's rights, did the beneficiary's rights "vest" before the modification or rescission? If "yes," the modification or rescission won't be effective. If "no," the modification/rescission will be effective, and the beneficiary is out of luck. 4. Are there any defenses available to the party who's supposed to perform?
Becky, age 92, has only $25,000 to her name and is fearful that she will outlive her financial resources. On August 10, 2015, she describes her concern to her wealthy great-nephew Logan. On that same day, by signed writing, Logans makes her this promise: "When you exhaust the $25,000 that you now have, I will provide you, as a gift, any amount of money you request, up to a maximum of $50,000 per year, for the remainder of your life." In September 2015, Becky's grandson Thane asks Becky for $25,000. Unable to resist, and believing that she can turn to Logan for any money she may need, Becky gives Thane the $25,000 in her bank account -- all that she has in the world. Becky then contacts Logan. Revealing what she has done, she asks him for $25,000. Logan responds, "I did not make my promise to you so that you could give your money away to Thane. I'm not going to keep the promise." To what extent does the doctrine of promissory estoppel require that Logan keep his promise of August 10, 2015? A. Not at all, because Becky did not reasonably or foreseeably rely on it B. To the extent of $25,000, because that is the extent to which Becky relied on it C. To the extent of $50,000, because that is the amount he promised to pay per year. D. Fully, because Becky was reasonable in believing that Logan would honor his promise
A
By signed writing, Party G makes this offer: "My 300-acre farm is for sale immediately. The land is described at volume 2084, page 782 of the Harrison County Land Records. $10 million, all cash, payable immediately." Party H reads the offer and responds, whereupon G and H exchange writings. Among the exchanges shown below, which creates an option contract? A. (1) Party H: I'll pay you $1 million one month from today if you give me five years to decide that I do or do not wish to buy the farm for an additional $9 million. (2) Party G: Agreed. B. (1) Party H: I'm interested. I'll pay you $1 million one month from today. In five years, I'll pay you the remaining $9 million and at that time you'll transfer the farm to me. Agreed? (2) Party G: Agreed. C. (1) Party H: I'm interested, but I'd like to buy an option to purchase the farm. Agreed? (2) Party G: The option period will be five years, the option price $1 million, and the strike price $9 million. D. (1) Party H: I'm interested, but I need five years to make a decision. Agreed? (2) Party G: Agreed.
A
On Monday, by signed writing, Sahlia and Bahlia form a contract under which Sahlia will perform on Wednesday morning, and Bahlia immediately thereafter on that same day. On Tuesday, also by signed writing, with a copy of Monday's writing attached, Bahlia and Chalia form a contract under which Bahlia "assigns Monday's contract" to Chalia. Bahlia then sends a copy of the Bahlia/Chalia writing to Sahlia. Is Chalia obliged, on Monday, to give the performance owed to Sahlia under Monday's contract? I. Yes, almost certainly, if Sahlia and Bahlia are, respectively, the seller and buyer of goods II. Yes, almost certainly, if Sahlia and Bahlia are, respectively, the seller and buyer of a service A. I only B. II only C. I and II D. Neither I nor II
A
Sally manufactures valves. Betty manufactures tires. On June 1, Sally sends Betty this signed writing: "I am prepared to sell you our standard tire value #19 at 40 cents per unit, quantity 100 units delivered to your facility. You have six weeks to consider this offer; during that period we will not withdraw it." When Sally hears nothing from Betty, she writes again on June 14: "I now withdraw our offer of June 1." On June 19, Betty writes back: "I accept your offer of June 1." As of June 20, Betty and Sally A. are parties to a contract because Sally made an offer and Betty accepted it. B. are parties to a contract because the common law provides that Sally, as merchant, is bound by her promise to hold her offer open. C. are parties to a contract because Betty is a merchant. D. are parties to a contract because Betty responded to Sally on June 19 by signed writing. E. are not parties to a contract because Sally revoked her offer before Betty attempted to accept it.
A
Sidney says to Rena: "I'd like to use your recording studio this coming Tuesday from 9 A.M. to noon. Will you rent it to me, and if so, what will you charge?" Rena responds: "Yes, definitely, I accept. The charge is $100 per hour, but on that day the studio is available only from noon to 3 P.M." Assume that Sidney responds to Rena: "Well, that's a high price, and I'd feel better with a price of $95. But that's my problem — you've got a deal." Have the parties formed a contract? a. Yes, because Sidney assented fully to the terms Rena proposed b. Yes, because Sidney's proposed price of $95 differs only slightly from Rena's proposed price of $100 c. No, because Sidney did not manifest complete satisfaction with Rena's proposed price term d. No, because as to time, Rena's offer did not conform to Sidney's original proposal
A
TeleCo provides television conferencing services, and StockCo is a nationwide stockbroker. By signed writing, TeleCo and StockCo form a contract under which TeleCo, for three years, will service all of StockCo's needs for teleconferencing among its various offices, with StockCo to pay for that service in installments every three months, beginning three months after the parties create their contract. The contract features no provision that concerns assignment or delegation. Before the first three-month period expires and hence before StockCo makes its first payment, TeleCo assigns to ElectriCo its right to receive the first payment from StockCo. TeleCo notifies StockCo of the assignment, and StockCo acknowledges the notice. When its first payment is due, StockCo contacts TeleCo and asks for permission to pay one month late. TeleCo gives permission and so notifies ElectriCo, but ElectriCo objects to the one-month extension. It contacts StockCo and demands immediate payment. In light of the extension that TeleCo has given StockCo, is ElectriCo entitled to immediate payment? A. Yes, because as to that payment TeleCo and StockCo have no contractual relationship B. Yes, because StockCo sent no notice to ElectriCo of the extension given it by TeleCo C. No, because as assignor of a contract right, TeleCo maintains its power under the original contract to modify StockCo's duties D. No, because ElectriCo's position is subordinate to TeleCo's and ElectriCo is bound by any waiver TeleCo might make in respect of StockCo's obligations
A
The parol evidence rule I. concerns the definition of signatures as to those contracts that are unenforceable unless set forth in writing. II. concerns the enforceability of terms upon which two parties orally agree but then fail to include in a writing that purports to represent their contract. III. is a substantive rule of evidence that concerns the relative probative values of signed and unsigned writings. A. II only B. I and II only C. III only D. II and III only
A
The parol evidence rule is I. a rule of evidence II. a substantive rule of contract law III. clear and well understood throughout the states and enjoys consistent and coherent interpretation and understanding A. II only B. I and II only C. II. and III only D. I, II, and III
A
Without a writing, Kevin as a seller and Taylor as buyer contract for the purchase and sale of Kevin's farm. Thereafter, Kevin declines to proceed with the sale, and Taylor sues for specific performance. Which of the following additional facts, if proven, would most likely allow Taylor to sustain his action against Kevin? A. Before Kevin announced his intention not to proceed, Taylor, with Kevin's permission, moved onto the farm and built a new barn. B. Eight persons saw and heard the parties form their contract, and each is willing to so testify. C. After the parties formed their contract, Taylor prepared and signed a writing that accurately described the agreement. D. Before the parties formed their contract, each, by signed writing, declared to the other his tentative interest in concluded an agreement for the sale of the farm.
A
Delilah wants to cut Samson's hair. She goes to Medusa's Beauty Supply Store to buy some shears. Medusa shows her a sample of the Exacto-Chop, manufactured by Exacto Corp. Exacto-Chop is a newly-invented hair-cutting machine that attaches to a vacuum cleaner hose; the device cuts the hair and sucks up the trimmings at the same time. Medusa tells Delilah, "This machine is foolproof: You just program in the style you want and it does all the work for you, with extreme accuracy." Delilah decides to buy one. A. Delilah takes home the box containing the Exacto-Chop, opens it, and finds an owner's manual. The manual contains the following statement (which Delilah reads before she uses the device): "Exacto-Chop cannot guarantee satisfactory results. Use at your own risk. ALL WARRANTIES ARE HEREBY DISCLAIMED." (Assume that the outside of the box contains no relevant information.) Delilah tries the machine on Samson, using it according to the instructions, and with the intent of giving Samson a regular crew-cut. Instead, Samson ends up looking like a cross between a bald eagle and a mangy sheep. If you represent Delilah, what type(s) of warranty action would you advise, and against whom? B. Will Delilah succeed in the action(s) you recommended in (A)? C. Now assume that Medusa does not make any express statement about the device, but that she simply shows the box to Delilah as something she might be interested in. The advertising copy on the outside of the box says, "Precise and Automated Hair Cutter!" Delilah buys one. (Assume that there's no disclaimer in or on the box.) When Delilah tries the machine on Samson, it has the same bad results as in Parts (A) and (B). What successful warranty claim(s), if any, can Delilah bring against Exacto Corp?
A. An express-warranty action against Medusa, and a claim for breach of the implied warranty of merchantability against Exacto Corp. B. Probably yes, as to both defendants. First, Medusa, by telling Delilah that the machine is "foolproof" and cuts with "extreme accuracy," has made an express warranty as to these performance attributes. And Exacto Corp., by manufacturing and selling the machine at all, has made an impliedly warranted the machine's "merchantability," which means that Exacto has implicitly said that the goods are, among other things, "fit for the ordinary purposes for which such goods are used." (§ 2-314(2)(c).) It seems highly likely that the machine doesn't in fact satisfy either of these warranties, so unless there has been an effective disclaimer, both defendants will lose. The question, then, is whether the disclaimer statement in the owner's manual will be effective. The answer is that it will probably not be. The problem for both defendants is that the only disclaimer was contained in the owner's manual, which was inside the box. Since Delilah was not given an opportunity to read the manual before she made the purpose (and was not, so far as the facts tell us, otherwise aware of the disclaimer), a court will probably hold that the disclaimer was a post-contract fact, which had no impact on the parties' bargain. C. Breach of both an express warranty and the implied warranty of merchantability. The description on the outside of the box would constitute an express warranty that the machine will indeed precisely and automatically cut hair. Since it doesn't, that's grounds for recovery. And any good is impliedly warranted by its seller (Exacto is a "seller" for this purpose, even though it didn't sell directly to Delilah) to be "merchantable," which under UCC § 2-314(2)(f) includes conforming to promises or affirmations of fact made on the container or label
Khufu has Valley King Architects design a pyramid for him. Khufu takes the plans to Cheops General Contractor, and contracts to have Cheops build the pyramid for him. The contract says nothing about whether delegation by Cheops is permitted. Cheops delegates its duties under the contract to Tut General Contractors, a reputable contractor with reasonable experience in projects of this kind. A. Suppose Khufu objects to the delegation as soon as he learns of it. Cheops insists that it is permitted to make the delegation, and that Khufu must accept performance from Tut or be in breach. Khufu remains firm. Which, if either, original party (Khufu or Cheops) is in breach? B. For purposes of this part only, assume that the original Khufu-Cheops contract contains the following language: "Cheops hereby agrees to personally perform its duties under this agreement, and not to delegate or attempt to delegate those duties." As soon as Khufu learns of the attempted delegation, he objects. Assume that in the absence of the just-quoted clause, the attempted delegation would be invalid. Cheops refuses to do the work, and insists that its delegation is valid. Which, if either, original party is now in breach? C. Same basic facts as (B). Now, however, assume that the Khufu-Cheops contract's only provision relating to assignment or delegation says, "This contract may not be assigned." If Cheops insists on delegating its performance to Tut, and Khufu objects, who is breach, Cheops or Khufu?
A. Khufu, probably. Where the contract is silent, delegation is normally permissible unless either: (1) the promisee has a substantial interest in having the delegator perform (usually due to the delegator's unusual personal skills); or (2) the surrounding circumstances indicate that the parties both intended that the duty in question not be delegated. The facts indicate that (1) is not satisfied, since we're told that Tut is competent at work of this type, and the promisee's mere preference that the work be done by the promisor is not enough to constitute a substantial interest in having the work done by the promisor. As to (2), there's nothing in the surrounding facts to indicate that the parties ever thought about delegability, let alone implicitly agreed to forbid it. Therefore, as in most construction contracts, the duty of performance here will probably be found delegable. B. Cheops. A contract provision stating that the duties are not delegable will be enforced, even if the duties are ones that would, in the absence of the provision, be delegable. Therefore, Cheops is insisting on doing something that it has no right to do, and that insistence would be a breach (a repudiation). C. Cheops. A contract provision that prohibits "assignment of the contract" will, unless the circumstances indicate otherwise, be prohibited as barring the delegation of duties, but not the assignment of rights. (See UCC § 2-210(3), so stating, for sales-of-goods cases.) Here, there are no circumstances indicating otherwise. Therefore, Cheops' attempted delegation will be a breach of the "anti-assignment" clause (but Cheops' assignment of, say, its right to be paid for its work would not be.)
Ali Baba is out hiking on his property one day and stumbles into a hidden cave that is stuffed with ancient treasure. He runs home and calls his girlfriend, Scheherezade. She is thrilled. Ali tells her, "Naturally, I'll split it with you." The value of Scheherezade's 1/2 of the treasure would be $1 million (in 1999 dollars). A. One hour after making the promise, before Scheherezade has even really started to think about what the treasure will mean to her life, Ali has a change of heart. He immediately calls Scheherezade back and reneges on his promise to split the treasure with her. Can Scheherezade recover anything from Ali, and if so, what amount? B. Assume that during his initial phone call with Scheherezade, Ali adds, "I know how much you have been wanting that 200-camel-power convertible Porsche. Now you will be able to buy it." As soon as she hangs up the phone, Scheherezade races over to the Porsche dealer and puts a down a $25,000 deposit on the car of her dreams, which has a market value of $250,000. Ali then decides to keep the treasure all for himself. The dealer refuses to refund any part of the deposit, and Scheherezade can't afford the car without the treasure. Can Scheherezade recovery anything from Ali, and if so, what amount?
A. No, because Scheherezade did not suffer a detriment in reliance on Ali's promise. First, remember that of course promises to make gifts are generally not enforceable, because they're not supported by consideration. Promissory estoppel can overcome this problem, but p.e. only protects against the promisee's reasonable and foreseeable detrimental reliance on the promise. Here, the facts tells us that Scheherezade did not take any action in reliance on the promise before it was retracted. Therefore, there is nothing on which the promissory estoppel doctrine could operate, and the usual "promises to make gifts are not enforceable" rule applies. B. Yes, but only $25,000. Here, unlike in part (A), Scheherezade has reasonably and foreseeably relied on Ali's promise to her detriment. She will therefore be able to enforce his promise under a theory of promissory estoppel. However, the promise will only be enforceable to the extent necessary to prevent injustice, which means that only Scheherezade's reliance expenditures will be protected. In this case, that will mean that Ali will have to reimburse Scheherezade for the forfeited deposit money, since this is the only respect in which Scheherezade has actually relied on the promise.
Madame Gioconda contracts to pay Leonardo da Vinci $10,000 to paint her portrait. Da Vinci delegates his duties under the contract to Picasso. Gioconda shows up at da Vinci's studio for her first sitting for the portrait, and is shocked to find Picasso instead of da Vinci waiting for her. She's familiar with Picasso's work, which is very different from da Vinci's. A. Suppose that Madame Gioconda immediately objects to the switch, and insists that da Vinci do the portrait. da Vinci refuses, claiming that Picasso's work is at least as good. Will Madame G. be in breach if she refuses to let Picasso do the work? B. For this part only, suppose that Madame Gioconda, though upset at the switch, nonetheless sits for her portrait, while Picasso paints it. May Madame G. recover against da Vinci for breach of contract?
A. No. Duties to be performed under a contract are generally delegable. But where a contract calls for the performance of personal services by a person with particular personal skills, those services normally may not be delegated. Since portrait-painting involves personal skills that vary significantly from one person to another, such services may not be delegated without the consent of the person who is to receive the services. Therefore, Madame Gioconda can refuse to let Picasso paint her portrait and can insist that da Vinci do it. If she refuses to accept Picasso and da Vinci refuses to paint her portrait, he's breached the contract by repudiating it, and she can recover damages from him. B. No. If she sits for the portrait, she will be held to have implicitly assented to the delegation. She will thereby have waived her right to complain about the delegation, and must pay the contract price.
Euphrates Faceless claims to have Napoleon's diary in his possession. He sells it to the Liberté Publishing Company in return for royalties, on Euphrates' promise that the diary is genuine. The publishing contract calls for Liberté to make an advance of $50,000 against royalties one month after signing. Euphrates assigns this right to an advance to his nephew, Irving. Euphrates does this as a gift. Before Liberté pays the advance, the company learns that the diary is forged — for one thing, it's written in felt-tip pen — and Euphrates admits to the forgery. Liberté refuses to honor the contract. A. Does Irving have a valid contract claim against Liberté? B. Does Irving have a valid contract claim against Euphrates?
A. No. The assignee stands in the shoes of his assignor. This means that Irving takes subject to all the defenses, set-offs, and counterclaims which Liberté could have asserted against Euphrates. Here, Euphrates guaranteed that the diary was genuine and then later admitted it was forged. Euphrates' breach of the contract nullifies Liberté's obligation to pay. B. Probably not, because the assignment was gratuitous. The maker of a gratuitous assignment does not make an implied warranty of the assigned claim's validity, as the maker of an assignment-for-value does. Therefore, the mere fact that the claim turns out to be invalid won't be enough to allow Irving to recover against Euphrates. However, if Irving can prove that he relied to his detriment on the assignment (e.g., that he charged an expensive vacation in reliance on it), it is conceivable that Irving may be able to recover under a kind of promissory estoppel theory against Euphrates; that is, Irving would claim that the assignment was an implicit promise by Euphrates that Irving would in fact collect the money, and that Irving's reliance was foreseeable and reasonable.
Cagney and Lacey enter into a written contract to open "Tried and True," a store specializing in used guns recovered from murder scenes. The writing is a 2-paragraph handwritten document, prepared during a 1-hour meeting. The writing states that each party will receive 50 percent of any net profits and that each will devote 30 hours a week to the venture. Both parties regard the writing as a final expression of their deal. A. Subsequently, Cagney sues Lacey for breach because Lacey has been working only 20 hours per week over the last few months, which are summer months. In defense, Lacey attempts to testify that just prior to the parties' signing of the writing, Cagney orally agreed that for the approximately four months a year when Lacey's young children were on vacation from school, Lacey could work only 20 hours a week. Is Lacey's testimony admissible? B. Assume that in the same lawsuit, Lacey counterclaims for lost profits due to certain small merchandise discounts that Cagney gave to her adult children. Cagney tries to testify that before the writing was signed, the parties orally agreed that each party could sell up to $500 per year in merchandise, at a 20% discount, to members of that party's immediate family. The writing says nothing about whether and when such merchandise discounts will be given. Is Cagney's testimony admissible?
A. No. The parol evidence rule bars any evidence of a prior or contemporaneous oral agreement where such evidence would contradict a term of a written contract that was intended as a "final" (even if not "total") integration, i.e., expression of the parties' agreement. The facts tell you that the writing is a final integration, so this rule applies here. The writing specifically requires both parties to work 30 hours a week, and an oral clause that would reduce Lacey's time by 1/3 for 1/3 of the year certainly seems to be a contradiction of the agreement, not a mere supplementation or interpretation of it. B. Yes, probably. The merchandise-discount clause merely supplements the writing, and doesn't contradict it, since the writing is silent on the subject. The parole evidence rule provides that a final integration may be supplemented (not contradicted) by prior oral agreement if and only if the integration is partial rather than total (that is, only if the writing was not regarded by the parties as covering all aspects of the deal). Here, the relatively short length of the writing, the fact that it was handwritten, and the fact that it was entirely drafted in one hour, all make it likely that the parties intended the integration to be merely partial. If so, the supplementary oral term will be admissible.
Saul Practitioner is an attorney in practice for himself. He decides it is time to update his computer system, but he knows very little about the latest technological options. He goes to a local computer dealer and consults with Tammy Techno, the owner. Saul explains that he needs a computer to keep track of his billable time, to generate his invoices, to do his accounting work and to do his word processing. Tammy shows him a computer that is "on special." Saul buys it, but when he gets it back to the office and sets it up, he discovers that the computer is completely inadequate for his needs. There is nothing inherently wrong with it, however — it is a perfectly fine computer for most kinds of tasks for which people customarily use a PC. A. Assuming the sale price meant he could not return the PC, can Saul recover for some kind of breach of warranty? If so, what kind, and what will he have to prove? B. Now assume that when Saul signed the sales slip, it contained the following language: "There are no warranties which extend beyond the product descriptions on the packaging of the items you are purchasing." This statement was printed in red ink (the rest of the sales slip was in black). Assume that in the absence of this statement, Saul would have a valid claim for breach of some sort of warranty. How does the clause affect Saul's rights?
A. Yes, for breach of the implied warranty of "fitness for a particular purpose." In order to succeed, Saul will have to prove three things: (1) that Tammy knew what he needed the computer to be able to do, (2) that Tammy knew Saul was relying on Tammy's skill and judgment to recommend a suitable computer, and (3) that Saul did in fact rely on Tammy's advice. B. This statement will work as an effective disclaimer of the implied warranty of fitness for a particular purpose. UCC § 2-316(2) allows a merchant to disclaim implied warranties, provided that the merchant follows some specific rules. In the case of a warranty of fitness for a particular purpose, the rules are that the disclaimer must be: (1) in writing, and (2) "conspicuous." The statement on the sales slip will likely pass the test, because it is in writing and is conspicuous (due to the contrasting ink color).
Dorothy contracts to appear in Wizard's play. The agreement provides that Wizard will also tender a standard Actors Equity acting contract to Dorothy's friends Scarecrow, Lion and Tin Man, for co-leading roles in the production. Dorothy shows her friends her contract with Wizard. They express to her their delight that they'll be getting roles, and they all buy new wardrobes to be worn in the show. Subsequently, Wizard decides not to produce the play, and he and Dorothy agree to rescind the agreement. A. Assume that the contract says nothing about whether or when the parties may modify or rescind the agreement. May Dorothy's friends recover against Wizard for failing to tender them contracts? B. Assume, for this part only, that the Dorothy-Wizard contract contained the following provision: "The parties may at any time, by mutual agreement, modify or rescind this agreement without consideration." If all other facts are the same, may Dorothy's friends recover against Wizard for failing to tender them contracts?
A. Yes, probably. The rule is that a beneficiary's rights "vest," making his rights irrevocable, when one of three events occurs: (1) the beneficiary materially changes his position in justifiable reliance on the promise; (2) he brings suit on it; or (3) he manifests his assent to the contract at the request of one of the parties. Here, the third party beneficiaries have materially relied on the contract to their detriment, by buying expensive wardrobes. Assuming that their reliance was reasonable, they will be able to recover in their suit. (An alternative rationale is that when the friends were shown the agreement by Dorothy and expressed their delight, this constituted their "assent" to the contract at Dorothy's request, making their rights irrevocable.) B. No, probably. Although a beneficiary's rights normally vest upon any of the three types of events described in the answer to Part (A), the original parties are always free to retain the right to vary this rule. Here, Dorothy and Wizard's retention of the right to modify or rescind the contract (even though they don't mention the effect this will have on the three friends) will probably be interpreted as an implicit variation of these normal vesting rules. If so, the fact that the friends materially relied on (or manifested their assent to) the promise will be irrelevant.
Fern owns an antique shop, Junk Is Us. She makes a written offer to buy Euphrates Antique Wholesaler's entire inventory of old string over a period of months. Fern's offer promises that she'll pay any invoice within 30 days, but says nothing about what happens if Fern doesn't pay on time. Nor does the offer says anything specific about what kind of response by Euphrates will constitute an acceptance. Euphrates immediately sends a written response that says, "We accept your offer." The response includes an extra clause providing for 8% interest (a rate typical in the industry) on overdue invoices. Fern makes no response to the overdue-invoices clause, receives the first shipment of string and places it into her inventory. A. Is there a contract? B. If your answer to (A) is yes, is the overdue-invoices clauses part of that contract?
A. Yes. This is a contract by Article 2 of the UCC (since it's for the sale of goods). Under § 2-207(1), the fact that an "expression of acceptance" "states terms additional to or different from those offered or agreed upon" does not prevent that expression from operating as an acceptance, unless the expression is "expressly made conditional on assent to the additional or different terms." Since Euphrates' response didn't indicate that Euphrates was unwilling to enter the deal if Fern wouldn't agree to the overdue-invoices clause, the response was not "expressly made conditional on [Fern's] assent" to the overdue-invoices clause, and that response therefore served as an acceptance. B. Yes. Unlike at common law, under the UCC terms in an acceptance that fail to match those in the offer can nonetheless becomes part of the contract in some circumstances. Under § 2-207(2), if both parties are merchants, an "additional" term in the acceptance will become part of the contract unless either: (a) the offer expressly limits acceptance to the terms of the offer; (b) the additional term "materially alters" the offer; or (c) the offeror gives notice of her objection to the additional term either before the acceptance, or within a reasonable time after the offeror receives notice of the additional term. Here, Fern and Euphrates are both merchants. (Since we're told that Fern has an antique shop, we know she's in the business of dealing in the type of merchandize in question, i.e., antiques. The facts make it clear that neither (a) nor (c) applies -- Fern didn't indicate in advance that Euphrates had to accept exactly on the offer's terms, and she remained silent after she got notice of the new clause in the acceptance. As to (b), The overdue-invoices clause is probably not a material alteration to the contract, since: (i) it will apply only if Fern fails to do what she's already promised she'd do (pay on time), and (ii) a charge for overdueness that's of a size typical for the industry probably isn't a material change to the overall agreement. Therefore, § 2-207(2) says that the clause became part of the contract.
Lear agrees to lease his Castle to Cordelia for nine months, with the lease to begin six months from the signing of the contract. A. Must the lease be in writing under the Statute of Frauds? B. Say instead that the lease is to begin immediately, and to last for nine months. Must the lease be in writing?
A. Yes. What counts is not the length of the lease once it begins, but the time from the making of the lease until its full performance (its expiration). Although the lease itself is only for nine months, the contract cannot be performed within one year from the execution of the contract, so a writing is required. B. No. Now no writing is required because the contract can be fully performed within one year of its making. (Remember that leases for one year or less in duration do not constitute an "interest in land," so the "Land Contract" provision of the Statute of Frauds would not come into play here, either.)
What is an "option" contract?
An option contract holds an offer open for a specified period of time -- I.e., makes the offer irrevocable. An option must be supported by consideration; otherwise, the offeror may revoke the offer. Rest. 2d § 25. An option contract creates a property right in the offeree. Consequently, unless the agreement clearly says otherwise, the offeree can sell or transfer this power of acceptance to someone else, enabling the latter to accept the original offer. NOTE: When the option expires, the offer isn't automatically revoked; instead, the offeror regains the right to revoke the offer, which she may or may not exercise.
At noon on Saturday, Alan and Betty form a contract under which (1) on Monday Betty is to perform service S for Alan, and (2) on Wednesday Alan is to pay Betty $10,000. At noon on Sunday, Betty assigns to Charles her rights under the contract with Alan and notifies Alan that she has done so. As a result of the assignment, I. Betty need never perform service S on Monday. II. Alan need not pay Betty anything, ever. III. if Betty substantially performs service S on Monday, Alan must pay Charles $10,000 on Wednesday. IV. even if Betty does not substantially perform service S on Monday, Alan must pay Charles $10,000 on Wednesday. A. I and II only B. II and III only C. III and IV only D. I, II, and IV only
B
Channah visits TronCo to purchase a set of wall-mountable shelves on which to place her stereo equipment. The salesperson shows her a set of shelves mounted in its showroom and says, "How about this?" In color, the shelves happened to be black. Channah asks about this price, receives an answer of "$195," and then says, "I'll take it." The salesperson retrieves a receipt that reads "$195 received for X23 Wall Unit." At home, Channah opens the box and finds shelves that resemble the ones shown to her at TronCo, except that they are white instead of black. Is TronCo in breach of an express warranty? A. Yes, because the receipt expressly identifies the product for which Channah paid B. Yes, because of the color difference between the product TronCo supplied to Channah and the one it showed her C. No, because TronCo made no expression or communication as to the color of the shelves it supplied Channah D. No, because Channah asked no questions and made no statements about color or preference as to color
B
In the town of Hampshire there live two women named Harriett Folger. One lives at 14 Chelton Lane. The townsfolk know her to be an industrial quality control engineer. She is also a talented seamstress but, as she is well aware, no one knows that. The other Harriett Folger, of 14 Chester Lane, is a seamstress, renowned for the high quality of her work. Farah Fuilan, also of Hampshire, writes and signs this letter: Dear Ms. Folger, As is well known, you are a gifted seamstress. I have a dress in need of repair. I'd like you to examine it and determine whether you can fix it. I'll pay you $100 to do just that much. I'd like to meet next Saturday — at 1:00 P.M. if that works for you. Are you agreeable? Sincerely yours, Farah Fuilan Confused as to which Harriett lives where, Farah addresses her letter to Harriett the engineer at 14 Chelton Lane. Harriett receives the letter, opens it, and writes back to Farah: "Yes, absolutely. I am agreeable. Let's meet this coming Saturday at 1:00 P.M., my home." Farah then learns of her error. She contacts Harriett the engineer and tells her, "By error, I sent my letter to you. I now know that I should have sent it to Harriett Folger the seamstress, at 14 ChesterLane." The engineer responds, "You do not know it, but I too am a capable seamstress. You sent the letter to me, I accepted your offer, and we have a contract." Farah asserts that she and Harriett (the engineer) did not form a contract. Her position is best supported by which fact? A.Farah honestly wished to contact the other Harriett and, under the circumstances, her error was reasonably understandable. B.Harriett knew that her abilities as a seamstress were unknown to the community. C.Harriett's principal professional activity is in the field of engineering. D.Farah cannot be bound to an agreement she did not intend to make.
B
Jeffrey's employer is sending him on a six-month overseas business trip. Not wanting to disrupt his 12-year-old son Kyle's school year, Jeffrey forms a contract with Kandy under which Kandy promises to live in Jeffrey's house as a full-time caregiver to Kyle, in exchange for which Jeffrey promises to pay Kandy $35,000 for the full six-month period. If Kandy fails properly to care for Kyle, can Kyle (through his guardian ad litem) sustain an action against her? A. Yes, because Jeffrey and Kyle have a direct familial relationship B. Yes, because contract law affords Kyle that right C. No, because Kyle is not a party to the contract between Jeffrey and Kandy D. No, because Jeffrey was not within the jurisdiction at the time of the breach
B
On April 1, Fay send to Mort this signed fax message: "Mort -- April is upon us. I need your services -- this Wednesday, please, at 11 A.M. I'll be ready with cash. Okay?" What additional circumstance, if proven, would most clearly mean that Fay's message constitutes an offer? A. Mort is a skilled landscaper, mechanic, and carpenter, and at various times in the past Fay has hired him to perform services related to those skills. B. Every April for the previous twelve years Mort has trimmed the trees in Fay's front yard, for which Fay has each time paid him $125. C. Fay does not know Mort, but has heard that he is a skilled landscaper. D. By signed writing, Mort responds to Fay: "Yes, I'll be there." E. By signed writing, Mort responds to Fay: "I'll be glad to help you, but my fee is now $35 per hour."
B
On December 1, 2015, Sabrina and Barry form an oral contract under which Barry is to (a) decorate Sabrina's retail store for Christmas Day 2016 and then, after Christmas, (b) take the decorations down. Sabrina is to pay Barry $15,000 on or before December 1, 2016. Twelve months later, on December 1, 2016, Sabrina comes to Barry with her $15,000 check. Barry refuses to accept it and tells Sabrina that he will not perform; he won't decorate her store for Christmas. Sabrina sues Barry for breach. Barry moves to dismiss the suit, citing the fact that he signed no contractual writing. Should the court grant his motion? A. Yes, because the agreement exact no consideration from Sabrina B. Yes, because the Statute of Frauds renders the contract unenforceable C. Yes, because the agreement reflects a bargain in which neither party suffers a legal detriment D. No, because Sabrina, if she wished, might have paid Barry before December 1, 2016
B
On October 30, Tien brings a box full of silverware to Alex's store, "Shine, Sheen, and Show-It-Off." 1. Tien: I'd like you to polish all of my silverware by November 1. 2. Alex: I can do the job by November 5, for $75. 3. Tien: What do you think about by November 3? 4. Alex: No, I can't do that either. In fact, I've just realized that I can't do it, even by November 5. How about November 7? Deal? After Alex makes statement 4, A. the parties have no contract, but Tien is empowered to accept Alex's offer to complete the job by November 5. B. the parties have no contract, but Tien is empowered to accept Alex's offer to complete the job by November 7. C. the parties have a contract requiring that Alex complete the job by November 5. D. the parties have a contract requiring that Alex complete the job by November 7.
B
Shayna and Chris agree orally that Chris will act as supervisor and manager of Shayna's commercial ice skating rink, Monday through Friday from 9:00 A.M to 5:00 P.M. Shayna is to pay Chris an annual salary of $150,000, in twelve monthly installments of $12,500 each, on the first day of each month. While negotiating, the parties exchange a number of notes and conduct a number of conversations. Ultimately, they agree, orally and by handshake, to the terms described above, and to an additional fifty terms as well. Thereafter, in cursive, they sign their first names only to this short writing, labeled "Employment Contract": The undersigned Shayna Signorelli ("Employer") and Chris Matus ("Employee") hereby agree, finally and unconditionally, that Employee will serve as Employer's general manager, on an ordinary full-time basis and that he will be paid for his service an amount satisfactory to him. Employee acknowledges that the skating rink operates from 8:00 A.M. to 10:00 P.M. seven days per week. If the judge were to conclude that the writing constitutes no integration at all, she would most likely do so because A. in her opinion, it fails to state some of the terms on which the parties actually agreed. B. in her opinion, the parties did not "intend" the writing to be final even as to the terms it states. C. each of the parties signed with a first name, but not a last name. D. it does not refer to itself as an integration of the parties' agreement.
B
Which of the following contracts, if breached by A, is enforceable by B? I. An oral contract, whereunder A agrees to sell land to B II. A written contract, signed only by B, whereunder A agrees to employ B for a period of two years III. A written contract, signed only by A, whereunder B agrees to employ A for two years IV. A written contract, signed by both parties, whereunder A guarantees payment of her son's debt to B V. A written contract, signed only by A, whereunder B agrees to marry A's daughter and A agrees to pay B $500,000 A. I and II B. III, IV, and V C. I, II, III, and IV D. I, II, III, IV, and V
B
Ballet de la Forms, Inc., a manufacturer of dance apparel, needed to replenish its stock of fabric. It submitted a written purchase order to Material Alterations, Inc., a fabric manufacturer, in which it specified the description, quantity, and price of the fabric ordered as well as the delivery date and payment terms. Ballet's order form contained a preprinted term that stated, "Ballet de la Forms shall have the right to return unused goods to the seller within 60 days of delivery of the goods under this order. Acceptance of this offer is limited to the terms stated in this purchase order." Material Alterations received the order on the next day and immediately mailed its order acknowledgment to Ballet. Unquestionably, the response was mailed and received in good time and before the offer had lapsed. The acknowledgment expressed assent to the order and accorded in all respects with the order, except that it contained a printed term that stated, "Return Policy: Goods may be returned only if defective. No returns will be accepted for any other reason." Material Alterations has not yet shipped the goods. Do the parties have a contract? If so, what is the contract's term relating to return of the goods?
Ballet's order form was an offer. The question is therefore whether Material Alterations' acknowledgment with the conflicting term on return of the goods was an acceptance and, if it was, whether Ballet's or Material Alterations' term became part of the contract. If the common law "mirror image" rule applied, the conflicting term in the acknowledgment relating to return of the goods would make it a counteroffer, unless the conflict was nonmaterial. However, §2.207(1) would likely treat Material Alterations' acknowledgment as a definite and seasonable expression of acceptance, rather than a counteroffer, because it expresses agreement on all the transaction-specific terms and conflicts with the offer only in the boilerplate. This being so, there is a contract, and the question to be resolved is which of the conflicting terms becomes part of it. Because both parties are clearly merchants, §2.207(2) should resolve this question. The problem is that it is not clear if §2.207(2) applies because Material Alterations' term directly conflicts with Ballet's term, and so it is better characterized as "different" rather than "additional." Some courts decline to apply §2.207(2) to "different" terms because the subsection refers only to "additional" terms. A court that adopts this approach will find that as there is nothing in §2.207 that allows the term to enter the contract, it simply falls away. On this analysis, the contract is on Ballet's terms. Other courts treat the omission of "different" from §2.207(2) as inadvertent and apply it irrespective of whether the term is "different" or "additional." On this analysis, Material Alterations' term enters the contract only if none of the barriers in §2.207(2) apply. The exclusion in §2.207(2)(a) applies. It does not allow the proposal for the term to enter the contract if the offer expressly limits acceptance to the terms of the offer. Ballet included such language in its order form, so Material Alterations' term cannot enter the contract. It is not necessary to decide whether it is material. Although there is no statutory language authorizing it, some courts adopt a third approach to "different" terms, under which they use a knockout rule to resolve the conflict. On this approach, both terms relating to return of the goods are eliminated, and the question of whether Ballet can return unsold goods must be resolved by trade usage or, if none exists, by a gap filler. Article 2 makes no provision for the return of goods in the absence of a defect, so the neutral principles of Article 2 would favor Material Alterations in this situation
Bernard Bailey and Sahar Scott are long-time friends and business associates. For several months, Bernard has spoken to Sahar about the possibility of purchasing a parcel of Sahar's land. As Bernard and Sahar sit together one evening at a (dull) Chamber of Commerce meeting, Bernard takes hold of a wet cocktail napkin. On it he writes, in crayon, "About your land, 28 Pate Street, Addington, MT 78420 (Volume 909 land books, page 187), I'll buy it for $940,000 -- let's close by the end of the week. Deal?" Bernard passes the napkin to Sahar. Sahar reads the message and takes from her pocket a piece of crumpled notepaper, personalized with her full name printed at its top. On the paper, with an eyebrow pencil, she circles her name, and writes, "Okay." Sahar passes her message to Bernard. On the following day, Bernard calls Sahar by telephone. "Let's set a date for closing, so I can pay you the $940,000 purchase price and you can hand me a deed to the Pate Street property." Sahar responds that she has changed her mind: "I'm not going to sell." Can Bernard sustain an action against Sahar for breach of a contract to sell the land? A. Probably not, because Bernard did not sign his name on the cocktail napkin B. Probably not, because the napkin and notepaper constitute two separate writings C. Probably, because Sahar "signed" her notepaper D. Probably, because the contract falls outside the Statute of Frauds
C
Eston is producing a fashion show at a local arts chamber on May 10. He asks Falil to serve as announcer. Falil expresses interest, and before several witnesses, the parties talk and negotiate. Eston begins: "Well, it will require two rehearsals of about four hours each. Then the show itself will last for about two hours. I thought perhaps I'd pay you—for the two rehearsals and the show—$2,000 total." Falil replies, "That's fine; I'll do it. I'd like to be paid $1,000 after the first rehearsal and $1,000 at the completion of the show. Also, if I should put more than twenty hours into all of these efforts, I'd like to be paid an additional $50 for each such hour." Eston says, "It's a deal." The parties then agree on every other detail they can think of, including rehearsal dates and times, Falil's wardrobe, and music to accompany the show. After the parties agree on all details, Falil asks, "Shall we put all of this in writing?" Eaton answers, "I don't think we need to, do we?" "I guess not," Falil says, "but I would like to put in writing some general statement to the effect that I will serve as announcer and how much I will be paid." On March 12, the parties create and sign this writing, which they label "Contract": Eston Eaves and Falil Ford acknowledge, between them, an agreement under which (1) Eston Eaves will produce a fashion show at the Hazelton Arts Chamber on May 10 of this year and (2) Falil Ford will serve as announcer for a total compensation of $2,000, no less and no more. On April 9, Eston calls for the first rehearsal and Falil properly performs his part. At the rehearsal's end, Falil asks Eston for his first $1,000 payment. Eston refuses to pay, asserting that "according to our contract of March 12, I need pay you only $2,000, which I will pay after the show itself is complete." Falil counters, "Don't you remember that before signing that short writing we agreed that you would pay me $1,000 after the first rehearsal and $1,000 after completion of the show itself?" "Yes," says Eston, "but we didn't put it in the writing, so as far as I'm concerned I need not do it. But I'll ask my lawyer her opinion." Eston consults with his attorney, who knows how the parol evidence rule is traditionally conceived. She advises him, "You are probably obliged to pay in installments as you agreed, even though the writing recites no such obligation." Apparently, the attorney believes that I. the March 12 writing was a partial integration. II. there were several witnesses to the parties' March 12 conversations. III. payment in two installments would not contradict the March 12 writing.
C
FlyCo, an airline, forms a contract with ServeCo, a packaged food sales company, under which ServeCo will supply FlyCo with packaged meals suitable for delivery to passengers during flight. The contract is specific as to quantities, time periods, and the nature of the packaged meals. FlyCo pays ServeCo its full fee under the contract and awaits ServeCo's performance. ServeCo then meets with MealCo, which is in the business of preparing packaged meals. ServeCo explains to MealCo its contractual obligations to FlyCo and that FlyCo has fully paid for the services it was to perform. Thereupon, ServeCo and MealCo form a contract under which ServeCo will pay MealCo and MealCo will actually prepare and package the meals to be delivered to FlyCo. MealCo fails properly to perform and, as a result, ServeCo is unable to deliver meals to FlyCo as required by its contract. FlyCo brings an action naming both ServeCo and MealCo as defendants. MealCo moves to dismiss the action as to itself. In reaching its decision, a court might logically observe that FlyCo's status is that of I. creditor beneficiary. II. donee beneficiary. III. intended beneficiary. IV. incidental beneficiary. A. I B. I and II C. I and III D. I, III, and IV
C
TeleCo provides television conferencing services, and StockCo is a nationwide stockbroker. By signed writing, TeleCo and StockCo form a contract under which TeleCo, for three years, will service all of StockCo's needs for teleconferencing among its various offices, with StockCo to pay for that service in installments every three months, beginning three months after the parties create their contract. The contract features no provision that concerns assignment or delegation. MeetCo too provides teleconferencing services and is known to have a status, capacity, and reputation equal to TeleCo's. For this question, assume that TeleCo does not assign any right to ElectriCo. Instead, before beginning its performance, TeleCo signs a writing on which it writes "Contract with StockCo is hereby assigned to MeetCo, rights and duties." TeleCo staples to that writing a copy of its written contract with StockCo and delivers the two stapled writings to MeetCo. MeetCo takes the papers and gives back to TeleCo a signed writing on which it writes "Assignment of StockCo's contract with TeleCo is accepted." TeleCo and MeetCo then notify StockCo of these events. Thereafter, MeetCo visits StockCo's facility and announces its readiness to provide teleconferencing service. StockCo refuses to accept the service on the ground that its contract is with TeleCo, not MeetCo. It then contacts TeleCo, insisting that TeleCo is in breach of contract. Which of the following facts most strongly suggests that StockCo is wrong? A. TeleCo and MeetCo made their arrangement in writing. B. The contract provides for the sale of a service, not for the sale of goods. C. MeetCo is capable of offering service equivalent to TeleCo's. D. TeleCo not only delegated its duties but also assigned its rights
C
VentCo installs and repairs heating, air conditioning, and ventilation equipment. BuildCo is a builder. Both are located in a jurisdiction that imposes an implied warranty on all providers of building construction services. In connection with its construction of a residential apartment building, BuildCo, by signed writing, forms a contract with VentCo under which VentCo, for $700,000, is to "perform all services relating to the installation, placement, connection, and adjustment of all vents and related conductors appurtenant to the heating, air conditioning, and ventilation systems in the said building." Although the written agreement comprises thirty-five pages, it nowhere expressly describes the quality of VentCo's work or service. When VentCo announces completion of its work, BuildCo inspects it and finds it unsatisfactory. BuildCo brings an action alleging that VentCo is in breach of warranty. At trial, BuildCo calls as witnesses various VentCo personnel, who describe in detail the way in which they think about their work, make their judgments, and perform their installations. Separately, BuildCo introduces evidence of the way in which the heating, ventilation, and air conditioning systems, as installed, do and do not function. Thereafter, BuildCo calls as a witness a professional expert in the field of heating, ventilation, and air conditioning systems. That witness will most directly support BuildCo's claim if he testifies that A. In his opinion, VentCo's work product would not suit the ordinary and reasonable needs of the residents who occupy BuildCo's building. B. He himself would have performed the work differently from the way in which VentCo performed it. C. In his opinion, VentCo did not reach its professional decisions with the same care as would a professional in the same field with the ordinary degree of skill. D. Having examined the building's heating, air condition, and ventilation systems after VentCo installed them, he would not hire VentCo to do the sort of work for which BuildCo hired it.
C
Wallace manufactures light bulbs, and Shep makes electric sockets. They exchange these signed writings: June 1, Shep: I offer you type 47 electric sockets for $1 each, quantity 20,000, to be shipped by us to your facility at your convenience. The offer is firm, open, and irrevocable until midnight on September 15. September 5, Shep (again): I have heard nothing from you regarding my June 1 offer. I now withdraw it. September 6, Wallace: You made your offer firm until September 15. By that date we'll let you know if we wish to accept. On September 15 Wallace decides to accept Shep's offer. Does he have the power to do so? A. Yes, because he reasonably expects that Shep will honor his written statement B. Yes, because She is a merchant who made his offer by signed writing C. No, because Shep effectively revoked on September 5 D. No, because when Wallace contacted Shep on September 6, he did not attempt to accept
C
WaxCo is in the business of selling wax to candle manufacturers. CandleCo manufacturers. On August 10, with a signed, preprinted "Available for Purchase" form, completing various of its blank spaces in handwriting, WaxCo makes CandleCo this offer: "Will ship to you @ $200 per ton, 15 tons of WaxCo Z-25 Candle Wax, color White. Total price: $3,000. Delivery within 10 days of your acceptance. Will unload and stack boxes on your receiving platform." On August 11, by signed, preprinted "Purchase Order" form, completing various of its blank spaces in handwriting, CandleCo responds by signed writing. For this question, assume that on August 11, CandleCo responds thus: "As per offer of August 10, please ship. Additional Comment(s): You will stack boxes in piles of three." Making no response to CandleCo, WaxCo delivers the wax and stacks the boxes in piles of four (not three). CandleCo sues WaxCo alleging that WaxCo was contractually obliged to stack the boxes in piles of three. WaxCo maintains that the parties' contract included no such requirement. Which of the following facts, if proven, best supports WaxCo? A. In the wax industry, sellers ordinarily deliver boxes and stack them in piles of four. B. Many times in the past, WaxCo has delivered the wax to CandleCo, stacking the boxes in piles of four. C. The difference between piles of three and piles of four materially alters WaxCo's obligation. D. WaxCo and CandleCo have never before done business with each other.
C
THE PAROL EVIDENCE RULE -- WHAT IT'S ABOUT
The parol evidence rule addresses the issue of whether (1) a writing reflects the parties' entire agreement or (2) if the parties agreed on additional or different terms—such as orally-agreed-upon terms—that aren't in the written document itself. As a very general rule, when confronted with a written agreement, courts don't like to admit evidence of other terms and agreements related to it. That evidence is called "parol evidence." Although the word "parol" is French for "oral," the term has come to mean any evidence outside of the written document—e.g., oral evidence, another writing, etc. Parol evidence is often referred to as extrinsic evidence. The question of whether to admit parol evidence rule is determined by the judge—not the jury—as a question of law. If evidence is admitted, then it merely means that the jury will hear the evidence and then determine—as a question of fact—whether the evidence is persuasive enough to determine the outcome of the trial.
What is promissory estoppel and how does it relate to the consideration requirement?
The primary function of promissory estoppel is to take the place of consideration in certain circumstances. The most significant ramification of the doctrine is that it can make gratuitous promises enforceable if the promisee relies on the promise to his detriment. (It can also do other things, like making an offer temporarily irrevocable. But it's the enforceability of gratuitous promises that's the most important role of promissory estoppel.)
On March 1, 2020, the owner of a plot of land an offer to sell it to a prospective buyer for $500,000. The offer gave the buyer until 5:00 P.M. on March 7, 2020 to accept it. The final sentence of the offer stated, "In consideration for $10.00 received, the seller undertakes not to withdraw this offer before it expires at 5:00 P.M. on March 7, 2020." On March 4, before the buyer had accepted the offer, the seller delivered a letter to the buyer revoking the offer. Did the seller have the legal right to revoke the offer?
The seller's offer contains an unequivocal promise that it will not be revoked before its stated lapse date. An offeror is not bound by a promise not to revoke an offer unless that promise qualifies as a valid option, which requires that the offeree gives consideration to the offeror separate and distinct from the consideration that would be exchanged in the proposed contract. That is, the $500,000 that would be the buyer's consideration for the farm if the contract is concluded cannot also be consideration for the grant of the option to the buyer. The parties have recited a separate consideration of $10 from the buyer in exchange for the seller's promise not to revoke. The facts do not state the actual economic value of an option to buy property worth $500,000, but $10 may be well below that value. If so, the purpose of the providing for consideration is not to exchange something of real economic value for the option, but to use nominal consideration purely as a formality to validate the option. Courts generally do not inquire too closely into the question of whether the consideration is equivalent or adequate. (This is explained in section 7.7.) This principle applies particularly strongly to options, for which courts more readily accept the validity of clearly nominal consideration. The offer states that the $10 consideration was received by the seller. However, options sometimes say that even though the fee for the option was not actually paid and is not intended to be paid—it is just a sham for the purpose of validating the option. Even in such a case, a court may hold the option to be binding by refusing to go behind the recital. If a court accepts the recited consideration as valid, the seller had no right to revoke the offer and it remains in force, so that the buyer can accept it up to the end of the lapse date specified in the offer.
Carr Buff's hobby is restoring vintage cars. He just completed the restoration of a 1957 Ford after working on it for many years. On December 15, he parked the car in the parking lot of a shopping mall. When he returned to it, he found a note stuck under the windshield wiper that read: "Dear owner of 1957 Ford, my name is Rod Hott. I love this car and would like to buy it from you. I offer to pay you $100,000 for it, which I will pay on delivery of the car and its title papers. If you would like to sell the car to me, please reply to me at [email protected]. by no later than December 20. On your acceptance, we will arrange a date to complete this transaction before Christmas." After thinking about the offer for a couple of days, Carr decided to accept it. At 7:00 p.m. on December 20 he sent an email to the address in the note in which he said, "Rod, I agree to sell the Ford to you for $100,000. Please note that payment must be in cash or by cashier's check. Reply to me as soon as you get this message to arrange the time for delivery. The server hosting Rod's email account was down for maintenance during the evening of December 20, so Carr's email was not delivered to Rod's inbox until 6:00 am on December 21. Do Rod and Carr have a contract?
This is a sale of goods, so §2.207 applies. Although it is nicknamed the "battle of the forms,"§2.207 is not confined to transactions in which forms are used. Article 2 does not deal with the question of whether a communication qualifies as an offer, so general common law principles apply. Rod's letter appears to qualify as an offer. It set out the terms on which he proposed to buy the car, and can be reasonably understood to confer a power of acceptance on the offeree. Although Rod did not know who the owner of the car was, he addressed the offer to the owner, an identifiable person. The offer just asked for a reply by December 20, and did not actually say that it would lapse if not accepted by that date. However, this is its reasonable meaning. Carr intended to accept and communicated his acceptance on December 20 by the mode specified in the offer. The message was not instantly delivered to Rod because the medium of communication, the server, was not operational when Carr sent his email. It was not delivered to Rod until the next morning, after the offer had lapsed. The acceptance would have been timely if it was effective on dispatch, but not if it was effective only on receipt. The mailbox rule applies to non-instantaneous communications through the medium of a third party, so it could apply to email. (See section 4.11.2.) If it does, Carr's acceptance is timely. Even if Carr's email was timely (seasonable), §2.207(1) also requires that it must be a definite expression of acceptance. Carr's response appears not to be exactly in accord with the offer, but it actually is. His statement that the price must be paid in cash or by cashier's check does not deviate from the offer because payment in cash on delivery is implied in the offer. Rod's letter is silent on the method of payment, and in the absence of agreement to the contrary this is the payment term implied by §2.310. Carr's response is therefore a definite expression of acceptance.
How do you determine whether a communication has the required amount of certainty to be considered an offer?
To be considered an offer, the terms have to be reasonably certain. The terms "are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy." Not every term is necessarily required to meet this standard of certainty since a court could imply reasonable. However, if the parties leave one or more material terms open or uncertain, that "may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance." The UCC is more flexible. Just because terms are missing, the agreement will not necessarily "fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy."
STEP 1: LEVEL OF INTEGRATION (1 of 2) For the common law parol evidence rule, how do you characterize the three levels of integration? What does it mean to have an integrated agreement?
To determine if the evidence submitted is admissible in court, the parol evidence rule characterizes the "writing" in one of three ways -- (1) total integration, (2) partial integration, or (3) no integration. The word "integration" here may be confusing. Consider the following scenario to explain the use of the word. Two parties negotiated a proposed contract at different times. First, they agreed on some terms orally. Later, they agreed on the rest of the terms in an email exchange. They then decided to draft a written agreement. The levels of integration simply mean the degree to which the terms they agreed on (i.e., both oral and in email) were included (i.e., integrated) into the written agreement. In other words, does the written agreement include: 1. All of the terms agreed on (total integration); 2. Only some of the terms agreed on (partial integration); or 3. None of the terms agreed on (no integration)? The level of integration determines the type of evidence can be submitted to the jury.
STEP 1: LEVEL OF INTEGRATION (2 of 2) What factors do you apply to determine the level of integration for the common law parol evidence rule?
To determine the level of integration for the parol evidence rule, you should consider two factors: 1. Final Expression. Is the writing the final expression of the parties' agreement? For example, a preliminary draft of a contract would not be the final expression of the parties' agreement. 2. Complete Expression. A complete expression means that all of the agreed-upon terms are in the writing. A merger clause (a boilerplate clause stating the writing is the final, complete, and exclusive agreement between the parties) is strong evidence that the writing is complete. Applying these two factors, the three levels are characterized as: A. TOTAL INTEGRATION: Both Final and Complete. B. PARTIAL INTEGRATION: Final but not Complete. C. NO INTEGRATION: Neither Final nor Complete. ANALYTIC FRAMEWORK: To recap, the parol evidence analytic framework had the following three steps: 1. Determine the level of integration. 2. Determine admissibility of the evidence based on the level of integration. 3. If evidence is excluded, then consider whether any exceptions apply. This completes STEP 1 of the parol evidence analytic framework. We will now move to STEP 2.
Worker owes Dentist $1,500 for dental work that Dentist provided to Worker. Worker enters into a contract with Farmer to harvest Farmer's crops in return for $1,000. Worker and Farmer agree at contract formation that Farmer will pay the $1,000 not to Worker but directly to Dentist once the crops are harvested. Worker tells Dentist of this arrangement, and Dentist agrees to accept partial payment of the debt this way. Worker harvests the crops but Farmer refuses to pay the $1,000 to Dentist or to Worker. Who can Dentist sue — Worker, Farmer, or both?
To work out this problem, you should (1) label the parties, (2) see if the rights have vested, and (3) identify who the third party can sue. 1. Labeling the parties. Farmer is the promisor (promising to pay $1,000). Worker is the promisee (to whom the promise was made at contract formation). Dentist is an intended third-party beneficiary (creditor type since the benefit is intended to pay off a debt owed by the promisee). 2. Have the rights vested? Dentist has enforceable rights under the Worker-Farmer contract because his rights "vested" when he assented to the contract at Worker's request. See Rest. 2d §311(3). 3. Who can Dentist sue? Dentist has a choice. He can sue either Farmer (promisor) or Worker (promisee) because Dentist is a creditor beneficiary. Dentist will probably sue the party from whom it will be easiest to collect a judgment.
Mentor says to Student, "I know how much you want a new computer. I'll give you $1,000 to buy it." If Student relies on that promise and spends $900 of his own money to buy a computer in anticipation of Mentor's gift, and Mentor refuses to pay, could Student enforce the promise of $1,000 on grounds of promissory estoppel?
Yes, at least to some extent. Most courts would enforce the agreement under the doctrine of promissory estoppel. See Rest. 2d § 90. Although Mentor didn't bargain for Student's detriment, Mentor should reasonably have anticipated that Student would rely on the promise by purchasing a computer, and Student did in fact so rely. Consequently, even though promises to make a gift are generally not enforceable for lack of consideration, Student will obtain at least partial enforcement of the promise. NOTE: Courts have some discretion in fashioning remedies for promissory estoppel. They needn't enforce the entire promise if justice doesn't require it. Thus, Rest. 2d § 90, after setting forth the doctrine as quoted above, adds that "[t]he remedy granted for breach may be limited as justice requires." Often, the limitation will consist of awarding reliance damages rather than expectation ("benefit of the bargain") damages. So here, a judge would likely order Mentor to pay the $900 that Student spent in reliance, instead of requiring that Mentor to pay the full $1,000 that was promised.
Must a statement sufficiently identify the offeree to constitute an offer?
Yes, because it must create in the offeree an immediate power of acceptance. This is sometimes referred to as the "power of acceptance." Although the offeree is often one person, it can be a class of persons and even the general public, as long as the terms are sufficiently definite and the offeree is clearly identified. Note, however, that the broader the "class" of ostensible offerees, the more likely a court is to find that the communication (e.g., an advertisement) was actually only an invitation for offers. SIGNIFICANCE: No one except the offeree can accept an offer; so, for instance, if you're in a bar and you overhear an offer being made to someone else, you can't turn around and accept that offer because you're not the offeree.
A department store puts the following ad in a local newspaper: "Sale -- Saturday only -- 5 refrigerators. Worth $800, now only $100 each. First come, first served. Will open at 10 A.M." The ad includes details on the model of refrigerator. Buyer sees the ad, camps out in front of the department store Friday night, and is the first one in on Saturday morning. Buyer says, "I accept your offer for the advertised refrigerator. Here's my $100." Is there a binding agreement?
Yes, because the department store's offer was specific as to subject matter, quantity and price, stated to whom the offer was made ("first come"), and, in general, was worded as a "promise." As such, it created an immediate power of acceptance in Buyer, and when he accepted, a contract was formed. Note that most ads are not as definite as this one, and, as such, are typically considered only invitations for offers.
Mark Antony promises to buy a new barge for his girlfriend, Cleopatra, as a token of his love for her. He shows her the brochure of the model he has chosen and tells her the boat will arrive in five days. Cleo goes out and leases a berth on the Nile, hires a crew, purchases barge accessories, and, most importantly, buys a new sailing wardrobe. Antony changes his mind and never gives her the gift. Can Cleo enforce the promise? If so, what will the damages be?
Yes, but she'll only recover for her reasonably expenditures. Despite the lack of consideration, Antony's promise is enforceable due to promissory -- Cleo's reliance to her detriment on Antony's promise was both reasonable and foreseeable. Note, however, that a court will generally only enforce a promise under the p.e. doctrine to the extent necessary to avoid injustice. That generally means that a court will award reliance damages, rather than specific performance. So here, Antony will not have to buy Cleo a barge, but he will have to reimburse her for all her for all her out-of-pocket expenses. Also, a court might find that although Cleo's basic reliance was reasonable, some of her particular expenditures were not; in that case she wouldn't recover for the unreasonable ones.
Maddy Steward is the host of a daily television craft show called Stamp and Craft. One of her key workers is Ella Bean, who has been on the job for 20 years. Ella works on an at-will basis, but Maddy has followed a practice of never terminating an at-will worker whose performance is acceptable. Maddy, knowing that Ella would like to retire and move away if she could afford it, says to Ella "If you ant to retire, I'll pay you an annual pension equal to 50% of your salary, for the next 10 years." (Ella has no pension plan at the moment.) In making this offer, Maddy is acting solely out of concern for Ella's well-being. Ella, in reliance on this promise, retires, sells her house at a loss, and moves to a rental home in a different region, where job opportunities are much scarcer. Maddy stops paying the pension after one year and refuses to rehire Ella. Can Ella force Maddy to resume paying the pension for the remaining nine years?
Yes, probably, under the doctrine of promissory estoppel. Notice that without promissory estoppel, Ella will lose since there's no consideration for Maddy's promise of the pension. Maddy is not bargaining for any benefit to herself since she's acting out of concern for Ella's welfare -- I.e., moral consideration. But Maddy has made a promise, and it was reasonably foreseeable that Ella would rely in the way she did (by retiring, selling her house, and moving to a place with few jobs). Ella has in fact relied in this foreseeable manner. So a court would likely conclude that enforcement of the pension promise is "necessary to avoid injustice," making the case eligible for promissory estoppel.
Einstein, intending his statement as a joke, tells Oppenheimer, "I'll sell you my chemistry set for $50." Oppenheimer, who has no idea that the set's plutonium alone is worth many times the $50 price (or that Einstein is joking) says, "I accept." Is there a contract?
Yes, probably. If a reasonable person in Oppenheimer's position would have no reason to know of the value of plutonium (or any other reason for thinking that Einstein was joking), then under the objective theory of contracts, Einstein's offer would create an immediate power of acceptance in Oppenheimer. The fact that Einstein actually was joking is irrelevant; it's the appearance of a valid offer that counts. If, however, Oppenheimer knew that Einstein had a very dry sense of humor, and realized at the time that Einstein was joking, there'd be no valid offer and thus no contract. (An "offer" which the offeree knows is made in jest is not a valid offer, regardless of what any other "reasonable person" might think.)
Gretel eats $500 worth of gingerbread from the walls of Witch's home, and Witch demands $500 from her. Shortly thereafter, Hansel, Gretel's brother, enters into a contract with Mother Goose Publishing to write his autobiography. In the publishing contract, at Hansel's request, Mother Goose agrees to pay part of the royalties to Witch to pay for the damage caused by Gretel. (Hansel doesn't like to see his sister burdened down by debt.) If Mother Goose doesn't pay the royalties to Witch, can Gretel sue Mother Goose?
Yes. A non-party who would benefit by performance of a contractual promise may sue if the non-party is found to be an "intended" beneficiary. Where the promisee's purpose in bargaining for the promise is, at least in part, to confer a benefit on the beneficiary, the beneficiary is "intended." Here, although Hansel doesn't personally owe money to Witch, he clearly has a desire to see his sister's debt repaid. Therefore, he's intentionally attempting to confer a benefit on her by extracting the promise from Mother Goose that she'll part off the debt. Consequently, Hansel is an intended beneficiary, and may sue. Note that these facts present an exception to the general rule-of-thumb that when performance does not run directly to the beneficiary, the beneficiary is probably not "intended" — here, the payment will go to Witch, not Gretel, but Gretel is still an intended beneficiary since Hansel intends that Gretel benefit by having her debt be extinguished.
Owner grants Neighbor an easement to walk across Owner's property. Must the easement be in writing to be enforceable?
Yes. An easement is considered an interest in land. Therefore, a promise to create or transfer an easement must be in writing to satisfy the statute of frauds. NOTE: Licenses, which are considered "personal" and not an interest in land (e.g., attending a concert), need not be in writing (even if they are irrevocable licenses).
Jessica Rabbit's Microbrewery send the follow letter to Toontown Tavern: "We hereby offer to sell you 50 kegs of beer at a price of $40 per keg. This offer shall remain open for 2 months from the date of receipt." Toontown does not give or promise anything of value in return for this offer. After six weeks, Jessica Rabbit's Microbrewery sends another letter that says, "As we have not heard from you in all this time, we revoke out offer." A week later, Toontown Tavern faxes a letter to the Microbrewery saying, "We accept your offer of 50 kegs at $40 per keg." Is there a contract?
Yes. At common law, there would be no contract, because the Tavern gave no consideration for the promise of irrevocability -- at common law, offers are revocable even if they say otherwise, unless separate consideration has been given for an option. But the UCC provides for what it calls "firm offers"; under UCC § 2-205, a merchant will be held to have made an irrevocable offer -- even though no consideration is given by the offeree -- if the merchant makes the offer in writing and with explicit assurances that the offer will remain open for a specified period of time. That's what the Microbrewery did here. Therefore, the Microbrewery had no ability to revoke its offer before the two-month period had lapsed, and the offer was still open when Tavern accepted.
Buyer orally agrees to buy 250 Statute of Liberty erasers from Seller for $750. Buyer receives the erasers, inspects them, and keeps them for one month. Then, when Seller sends a bill for $750, Buyer refuses to pay on the grounds that the agreement is unenforceable under the statute of frauds, but offers to return the erasers. Is the agreement enforceable by Seller?
Yes. Even though the agreement should have been in writing (because it involved the sale of goods for $500 or more), the UCC statute of frauds is satisfied by "partial performance," i.e., receipt and "acceptance" of the goods by the buyer (or, conversely, partial or full payment accepted by the seller). See UCC §2-201(3)(c), saying that a contract that does not satisfy the statute of frauds is enforceable "with respect to goods for which payment has been made and accepted or which have been received and accepted." Goods are deemed "accepted" under §2-606 if the buyer "fails to make an effective rejection . . . , but such acceptance does not occur until the buyer has had a reasonable opportunity to inspect them[.]" Under §2-602(1), a rejection of goods "must be within a reasonable time after their delivery or tender [and] is ineffective unless the buyer seasonably notifies the seller." So when Buyer received the erasers and silently kept them for a month, his failure to "seasonably" (i.e., promptly) notify Seller that he wanted to return them meant that Buyer failed to reject the goods. Buyer's failure to reject the goods meant that he "accepted" them. Since the goods were "accepted," Buyer was required to pay the orally-agreed-upon price. His offer to return them came too late to undo this effect. (If Buyer had promptly upon receipt returned the goods or offered to return them, this would have been a timely and thus proper "rejection," and would have prevented §2-201(3)(c) from making the contract enforceable based on part performance.)
Gary Gullible enters into a contract with Sam Slick, owner of the "Better than New" used car lot, for the purchase of a used car. While examining the car, Gary asks Sam if it had ever been in any accidents. Sam says, "Absolutely not. This car is in the same condition it was in the day it left the assembly line." On the sales contract, Gary is required to initial a clause stating as follows: "Buyer has had an opportunity to inspect this vehicle and to satisfy himself of its condition prior to the purchase. Buyer accepts this vehicle in its current condition. Buyer is not relying in any way on any oral representations concerning the vehicle's condition that may have been made by Seller." A few months later, during a routine service, a mechanic points out some obvious repair work indicating the car has been in a major accident sometime in the past. Gary sues to have the contract rescinded. At trial, may Gary enter evidence that Sam knowingly lied about the accident issue?
Yes. Even though the disclaimer states that Buyer assumed the risk of the car's condition and that Seller made no oral representations, Gary will be able to introduce evidence of his conversation with Sam during the negotiations for the sale. The parol evidence rule does not bar evidence designed to prove fraud, such as that the other party intentionally misrepresented an aspect of the deal otherwise covered by a disclaimer clause.
Pope orally agrees to sell his country place, Santa Maria del Grazie, to da Vinci. da Vinci gives Pope a down payment and Pope conveys the property to da Vinci. da Vinci moves in and begins to paint a giant mural, "The Last Supper," on one of the walls. da Vinci subsequently decides he doesn't like the décor of the place and moves out without paying another lira. Can Pope enforce the agreement?
Yes. It's true that contracts for the sale of land normally require a writing. But where the seller has made the contracted-for conveyance, he can recover the contract price even though the original agreement was not in writing.
Missy, a recent law school graduate and practicing lawyer, writes to Paul, offering to sell Paul a collection of her law school hornbooks in return for Paul's collection of gold coins. The offer letter, signed by Missy, says, "I promise you faithfully that I will leave the offer open for one week." Three days later, before Paul has made up his mind, Missy sells her hornbooks to Carmella, and notifies Paul of this transaction. Was Missy entitled to revoke her offer to Paul?
Yes. It's true that the UCC makes enforceable "firm offers," I.e, signed offers that by their terms contain a promise to remain open for a specified length of time. A firm offer is irrevocable even without payment of consideration for the irrevocability. However, UCC § 2-205 allows only a "merchant" to make a firm offer. Missy is a lawyer. There is no indication that Missy regularly sells hornbooks, so she's not a merchant and there cannot be a firm offer. her offer was thus revocable even though it purported to be irrevocable. RELATED ISSUE: Suppose Paul gave Missy $10 to keep the offer open for a week. He would then have had an "option," which would mean Missy could not revoke for that period of time. RELATED ISSUE: Note that Missy need not have told Paul about the revocation, because she performed an act inconsistent with her offer -- she sold the subject matter of the offer to someone else. As soon as Paul found out about the sale to Carmella, the offer to him would be considered revoked.
Amelia Earhart takes out flight insurance with the Icarus Insurance Company, naming her parents as beneficiaries. Amelia is killed in an airplane crash. May Amelia's parents enforce the insurance contract?
Yes. Life insurance policies are the most common form of third-party beneficiary contracts. Here, Amelia's parents are the beneficiaries, Amelia is the promisee, and Icarus is the promisor. Amelia's parents have enforceable rights because they satisfy the two elements required for an intended beneficiary: (1) giving the parents a right of action against the insurer would be consistent with the intentions of the contracting parties; and (2) the promisee intended to make a gift to the parents of the promised performance (making them donee beneficiaries as opposed to creditor beneficiaries). See Rest. 2d §302.
Alcazaba hires Granada to build a house on his estate, Alhambra. Alcazaba agrees to pay $100,000, of which Alcazaba advances Granada $15,000. Granada subsequently assigns its right to payment of the $100,000 under the contract to Moor, and Moor notifies Alcazaba of this assignment. Alcazaba thereafter pays the remaining $85,000 to Granada rather than to Moor. May Moor recover $85,000 from Alcazaba?
Yes. Once an obligor receives notice of an assignment, he pays the assignor at his own risk, since he (the obligor) won't be able to use this payment as a defense in a suit by the assignee. So Alcazaba was very stupid to ignore the notice of assignment and pay Granada, the assignor. (But any payments that Alcazaba made to Granada before Alcazaba received notice of the assignment are a defense vis à vis Moor, even if payment occurred after the assignment.)
Owner owns several ocean-view properties. Friend is a friend of Owner, and has frequently expressed his desire to purchase one of the properties, Suite Sunrise. During dinner one night, the two discuss the Suite Sunrise property, including possible terms for its sale, over several bottles of wine. At the conclusion of the evening, Owner writes the following on an unused dinner napkin: "I agree to sell Suite Sunrise to Friend for $75,000, closing to occur tomorrow." Signed: Owner. Owner then hands the napkin to Friend and says, "Good luck." Friend subjectively (and reasonably) believes that Owner intends to be making an offer to sell the property. In fact, Owner, who is somewhat drunk but still lucid, is only joking. Friend responds, "Thanks, I accept." The next day, Friend presents a check to Owner for $75,000. Owner laughs and says that he was joking and drunk; he refuses to consummate the transaction. Do the parties have a contract?
Yes. Owner manifested the willingness to enter into a contract with Friend. The hypo stipulates that Friend reasonably and honestly believed that Owner was serious. Therefore, the fact that subjectively Owner was only joking doesn't prevent the napkin from representing an offer that could be accepted, as it was. This hypo is a good example of the objective theory of contract: what counts is not the speaker's subjective intention, but what the other party reasonably understands the speaker to intend. The fact that Owner is "somewhat drunk" does not mean that he can make the contract void because of incapacity. In some limited circumstances, a party might be able to rescind a contract on the basis of incapacity due to intoxication. However, on these facts, Owner was still lucid and therefore not incapacitated. See Lucy v. Zehmer, 197 Va. 493 (1954). NOTE: As we'll see later, under the "statute of frauds" a contract for the sale of an interest in land must be in writing signed by "the party to be charged." So the offer, once accepted, was binding on Owner, since he signed the offer document. However, the deal would not have been immediately binding on Friend, since his acceptance was only oral.
Magellan offers to buy the unusual birdbath Pisarro keeps in his front yard for $400, providing Pisarro gets it to Magellan's house by Saturday. Pissaro says, "Well, I'm not at all fond of your terms, but OK." Does a contract exist?
Yes. Pisarro's acceptance is called a grumbling acceptance -- he has not offered different terms, but merely expressed his dislike for those Magellan offered. However, because his acceptance is valid apart from the "grumbling," a contract results. The test is an objective one: Would a reasonable person assume the original offer had been rejected?
Bob Cratchit desperately wants to buy new crutches for Christmas for a poor orphan boy, Tiny Tim. To raise the money, he agrees to de-bug Ebeneezer Scrooge's home computer in return for Ebeneezer's buying Tim the crutches. Neither party tells Tim about the agreement. Before Bob de-bugs the computer, he and Ebeneezer decide to cancel their agreement. Is this rescission effective without Tim's consent?
Yes. The majority view is that a donee beneficiary's rights vest only when he either (1) manifests assent to an agreement at the request of the promisor or promisee; (2) materially changes his position in justifiable reliance on the promise; or (3) brings suit on it. Rest. 2d §311(3). Here, (2) and (3) obviously didn't occur. And since we're told that Tim never knew about the agreement prior to rescission, he couldn't have done (1) (manifested assent at the request of the promisor or promisee). Because none of these three events occurred here (i.e., Tim's rights never vested), Tim's consent was not required prior to modification or revocation.
Seller and Buyer have a written contract for Seller to sell Buyer a set of antique candy dishes for $1,000, with Buyer to receive 30 days to pay. The document is silent about whether interest is to be owed after 30 days and if so, at what rate. Seller ships, and Buyer does not pay until 90 days later. Seller sues Buyer for 6% interest for the 60-day period of lateness, claiming that prior to the signing of the written document, the parties orally agreed to this interest rate for late payments. Buyer claims that the written agreement was intended to be a complete (and final) integration, so that it cannot be supplemented by evidence of even consistent prior orally-agreed-upon terms. Seller offers to testify that just before they signed the writing, Buyer said to him, "I recognize that the writing doesn't cover all the points of our deal, like our oral agreement that I'll pay you 6% interest on overdue invoices." Should the court permit Seller to give this testimony?
Yes. The parol evidence rule forbids only the introduction of prior agreements or contemporaneous oral agreements that vary, modify, or contradict a fully integrated writing, i.e., a writing intended to be the final and complete expression of agreement. But a party is always permitted to put in evidence that the writing was not intended to be fully integrated. That's the type of evidence that Seller is offering here. (Older decisions often said that only evidence from the "four corners" of the document could be admitted to determine whether the document was a full and/or final integration, but modern decisions allow oral evidence of what the parties intended.) Then, if the court believes Seller's testimony that the contract was not intended to be a full integration, it will allow into evidence his additional testimony about the interest clause (since that is a consistent, not contradictory, additional term, and can therefore come in to supplement the partially integrated agreement).
Washington and Adams agree for Adams to sell Washington 1000 Declaration of Independence Commemorative Placemats, which Washington intends to re-sell. They sign a written contract, which both parties intend to represent all aspects of their agreement, and which both parties intend to be final. One day after the writing is signed, the parties orally agree that the price to Washington will be adjusted from $ .40 per mat to $ .30. The writing says nothing about subsequent oral agreements. Adams ships the mats, and bills at the $ .40 price. If Washington refuses to pay more than $ .30 and Adams sues, may Washington prove in court that the oral modification occurred?
Yes. The parol evidence rule would prevent Washington from showing an oral agreement that occurred prior to or contemporaneously with the writing, and that either contradicted or supplemented the writing. But the parol evidence rule doesn't prevent (or even deal with) subsequent oral modifications to contracts. Since the writing has no No Oral Modification clause, the oral modification may be proved (and will be enforced).
Minnie and Mickey decide to get married. The Etty-Kette Paper Goods Company orally agrees to custom-make 350 party hats with Minnie and Mickey's names printed on them for the wedding for $675. After Etty-Kette begins to manufacture the hats, Minnie decides Mickey is a rat, and cancels the wedding. She also tries to cancel the hat contract. Can Etty-Kette enforce the oral agreement?
Yes. There is an exception to the "sale of goods" provision of the Statute of Frauds for goods that are "specially manufactured." § 2-201(3)(a). As long as the seller has made a "substantial beginning" on their manufacture, or has made "commitments for their procurement," the oral agreement will be enforceable. Since the facts tell us that Etty-Kette has begun manufacture, this condition is satisfied.
Rock Racer's Aston Martin luxury sports car is stolen and he offers $20,000 for its return. Suzie Sleuthm an amateur detective, after learning of the reward, locates and retrieves the car, which was abandoned in an alley near the airport, and immediately returns it to Rock. Is Suzie entitled to the reward?
Yes. There is consideration for the promise. Rock's offer was to the public in general. It is also a typical unilateral contract where the acceptance is the actual performance of the promisee. Such offers of rewards for the return of missing items are generally construed as being capable of acceptance by the first person who complies with the offer after learning about it. Because Suzie knew of the offer, was the first person to respond, and was under no pre-existing legal duty to return the Aston Martin, she is entitled to the reward. If Suzie had been a police officer performing in the scope of her duties, then the promise would be unenforceable because Suzie would have had a pre-existing legal duty to return the car.
Distributor Corp. is the exclusive distributor for Famous Tea Scones, Inc. and is contractually required to use its "best efforts" to market the scones to customers. Last month, Distributor Corp. was sold (and its contracts were assigned) to a subsidiary of Steward Bakeries. However, Steward Bakeries is a direct competitor of Famous Tea Scones, Inc. Does Famous Tea Scones, Inc. have a legal basis to object to this assignment?
Yes. This assignment included a delegation of Distributor Corp.'s duty to use best efforts to sell Famous Tea Scones, Inc.'s scones. An assignment-and-delegation will not be proper where it would materially impair the obligee's (Famous Tea Scones, Inc.'s) chances of receiving the delegated performance. Since the assignee is a subsidiary of a direct competitor of the obligee, the obligee can reasonably worry that the assignee has a serious conflict of interest that might well inhibit it from using best efforts to sell the obligee's scones. Therefore, the assignment would involve an improper delegation of the duty to use best efforts in the distribution of the obligee's scones, and the assignment of the contract from Distributor Corp. to Steward Bakeries is voidable at the obligee's option. See Sally Beauty Co. v. Nexxus Products, 801 F.2d 1001 (7th Cir. 1986) (similar facts).
Under the UCC, is there a presumption that an assignment of rights includes a delegation of duties?
Yes. UCC §2-210(4) says that "[a]n assignment of 'the contract' or of 'all my rights under the contract' or an assignment in similar general terms is an assignment of rights and unless the language or the circumstances . . . indicate the contrary, it is a delegation of performance of the duties of the assignor and its acceptance by the assignee constitutes a promise by him to perform those duties." So, general language of assignment will serve as both an assignment and a delegation. The modern rule is the same for contracts that aren't governed by the UCC, as well. (Traditionally, an assignment of rights didn't include a delegation of duties.)
Betsy Ross contracts to deliver 50 hand-sewn Stars and Stripes flags to Washington. Washington promises Betsy in return that once he receives the flags, he will pay off Betsy's $500 debt to Singer. Betsy tells Singer about the agreement. Betsy delivers the flags, but unfortunately the flags are red, white, and chartreuse instead of the contracted-for red, white and blue. Betsy refuses to correct the defect, and Washington refuses to pay Singer. Singer sues Washington for the $500. Does Washington have a valid defense?
Yes. When an intended beneficiary (Singer) sues the promisor (Washington) under a contract, the promisor has the same defenses as he would have against the promisee (Betsy Ross). Thus, breach of contract (as here), lack of mutuality or consideration, fraud, duress, or mutual mistake will all be valid defenses against the beneficiary.
In determining whether an offer to enter into a contract has been made, is the context of the communication relevant?
Yes. Where the language itself is not definite, the relationship between the parties, prior practices, method of communication, and the like frequently can determine whether an offer has been made.
In determining whether an offer has been made, do you use a subjective standard (i.e., what the offeror actually intended) or an objective standard (i.e., what a "reasonable person" would have thought the offeror intended)?
You use an objective standard. You ask: Would a reasonable person in the offeree's shoes assume that a power of acceptance had been created in him? Note that this means that if the offeree knows or has reason to know that the offeror hasn't made an offer (e.g., he's joking), then there's no offer.
How can the legal concept of promissory estoppel make an offer irrevocable?
Promissory estoppel is another way in which an offer may be made irrevocable. An offer might simply promise to revoke an offer; however, the promise is gratuitous if there is no consideration for the promise to not revoke. Unlike an option contract, the offeror is not contractually bound to honor his promise to not revoke because there is no consideration. However, in such a situation, an offeree might assert the doctrine of promissory estoppel (also referred to as a detrimental reliance) to make the offer irrevocable. Rest. 2d § 90(1) states, "A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires." Examples of the application of promissory estoppel in this context can be found in the Contractor-Subcontractor bidding cases.
How does the UCC handle the parol evidence rule?
UCC § 2-202 applies concepts similar to the common law parol evidence rule, though the language and structure of the rule is different. TOTAL INTEGRATION With respect to total integration, no contradictory or supplemental evidence is allowed -- same as the common law. Note that the UCC doesn't use the term "total integration." It refers to the "final expression" and "complete and exclusive statement" in order to apply the concept of total integration. PARTIAL INTEGRATION The UCC also doesn't use the term "partial integration"; however, the concept is expressed similarly as a "final expression" but an agreement that is not a "complete and exclusive statement." The result is the same as the common law. In such cases, a party may introduce supplemental evidence of consistent additional terms, but may not introduce contradictory evidence. All of the exceptions applicable to the common law are generally applicable to the UCC. Note, however, that the rule uses terms of art (course of performance, course of dealing, and trade usage) that will be explained in the interpretation section. UCC § 2-202.
What are the elements of promissory estoppel?
Under Rest. 2d § 90, promissory estoppel applies when: 1. Someone makes a promise 2. that he should reasonably expect 3. will induce action or forbearance on the part of the promisee, where 4. the promisee does in fact justifiably rely on the promise to his detriment and 5. injustice can be avoided only by enforcement of the promise. NOTE: The court needn't enforce the promise completely; it can enforce it to the limited extent necessary to avoid injustice. NOTE: Promissory estoppel replaces consideration where the promisee's detriment was not bargained for (as long as the above elements are present).
