Legal Environment Exam 2 (Chapters 10-14)

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

10000

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

6%

PROMISSORY ESTOPPEL

A claim of promissory estoppel requires that the defendant made a promise knowing that the plaintiff would likely rely, and the plaintiff did so. It would be wrong to deny recovery.

QUASI-CONTRACT

A claim of quasi-contract requires that the defendant receive a benefit, knowing that the plaintiff would expect compensation, and it would be unjust not to grant it.

Andy agrees to buy Charlotte's house. The purchase and sale agreement states that if the house passes an inspection, the parties are obligated to go through with the deal. The clause about the inspection is:

A condition precedent.

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

A consumer

CONTRACTS: DEFINITION AND ELEMENTS

A contract is a legally enforceable promise. Analyzing whether a contract exists involves inquiring into these issues: offer, acceptance, consideration, capacity, legal purpose, consent, and sometimes, whether the deal is in writing.

MATERIAL BREACH

A material breach is important enough to defeat an essential purpose of the contract.

MERCHANTS

A merchant is someone who routinely deals in the particular goods involved, or who appears to have special knowledge or skill in those goods, or who uses agents with special knowledge or skill.

MERCHANT EXCEPTION

A merchant who receives a signed memo confirming an oral contract may become liable if he fails to object within ten days.

RIGHT TO ASSIGN

A party generally may assign contract rights unless doing so would substantially change the obligor's rights or duties, is forbidden by law, or is validly precluded by the contract.

EXPRESS WARRANTY

A party may create an express warranty with words or actions.

SOLE DISCRETION

A party with sole discretion has the absolute right to make any decision on that issue.

REMEDIES

A remedy is the method a court uses to compensate an injured party.

SCRIVENER'S ERROR

A scrivener's error is a typo. In the case of a scrivener's error, a court will reform a contract if there is clear and convincing evidence that the mistake does not reflect the true intent of the parties.

THIRD PARTY BENEFICIARY

A third party beneficiary is an intended beneficiary and may enforce a contract only if the parties intended her to benefit from the agreement and enforcing the promise will satisfy a debt of the promisee to the beneficiary or the promisee intended to make a gift to the beneficiary.

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

Add an integration clause to the contract.

ASSIGNMENT AND DELEGATION

An assignment transfers the assignor's contract rights to the assignee. A delegation transfers the delegator's duties to the delegatee.

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

An executed contract- all parties have fully performed

INJUNCTION

An injunction is a court order that requires someone to do something or refrain from doing something.

OFFER

An offer is an act or a statement that proposes definite terms and permits the other party to create a contract by accepting. Offers may be terminated by revocation, rejection, expiration, or destruction of the agreement's subject matter.

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

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

AMBIGUITY

Any ambiguity in a contract is interpreted against the party that drafted the agreement.

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

Bob may assign his claim without Cathy's agreement

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

Bob owes Hardknuckle Bank Money

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

Both I and II

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

Chuck wins because the contract was never put in writing.

A contract statesthat Buzz Co. legally exists andwill provide 2,000 pounds of wild salmon each week.Which of the following statements is true?

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

STATUTE OF FRAUDS

Contracts that must be in writing to be enforceable concern: The sale of any interest in land, Agreements that cannot be performed within one year, Promises to pay the debt of another, Promises made by an executor of an estate, Promises made in consideration of marriage, and The sale of goods worth $500 or more.

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

Cookie and Market have a contract.

Desmond has been a fan of Crispin's paintings for years and is thrilled when the artist promises to give him painting lessons. The two agree that Crispin will provide Desmond with five weekly lessons for $1,000 each, payable once the lessons are complete. After teaching Desmond two lessons, Crispin dies of a heart attack. Crispin's estate sues Desmond for the $5,000 payment for the art lessons. What result?

Crispin's estate will be able to recover $2,000 in restitution.

RIGHT TO DELEGATE

Duties are delegable unless delegation would violate public policy, the contract prohibits delegation, or the obligee has a substantial interest in personal performance by the obligor.

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

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

Able orally agreed to pay Carr $800 to restore Able's antique car within 18 months, even though it was possible for him to complete the restoration in 10 months. The agreement is:

Enforceable because the work could be completed within one year.

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

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

FRAUD

Fraud is grounds for disaffirming a contract. The injured party must prove a false statement of fact, materiality, and justifiable reliance.

Melnick built a house for Gintzler, but the foundation was defective. Gintzler agreed to accept the foundation if Melnick guaranteed to repair any damage that was caused by the defects in the future. Melnick agreed, but when Gintzler called Melnick two years later to repair water damage resulting from the foundation defects, Melnick refused to make any repairs. Gintzler sued, and Melnick argued that his promise to make future repairs was unsupported by consideration. Who will win the suit?

Gintzler will win because he gave consideration

GOOD FAITH

Good faith performance is required in all contracts.

When Griffiths sold his house to Hippen, Griffiths orally agreed to buy the house back at the selling price if Hippen should happen to move within the next three years. Two years later, Hippen was transferred to Miami and tried to sell the house back to Griffiths, but Griffiths refused. Hippen sued for breach of contract, but Griffiths claimed there was never an enforceable contract. Who wins?

Griffiths wins. The purchase - or repurchase - of a house is a classic interest in land, and any such promise must be written to be enforceable

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

II only

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

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

UNIFORM COMMERCIAL CODE AND COMMON LAW

If a contract is for the sale of goods, the UCC is the relevant body of law. For anything else, the common law governs. If a contract involves both goods and services, a court will examine the agreement's primary purpose to determine which law applies.

EXPRESS AND IMPLIED CONTRACTS

If the parties formally agreed and stated explicit terms, there is probably an express contract. If the parties did not formally agree but their conduct, words, or past dealings indicate they intended a binding agreement, there may be an implied contract.

IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE

If the seller knows that the buyer plans to use the goods for a particular purpose, the seller generally is held to warrant that the goods are, in fact, fit for that purpose.

ILLEGAL CONTRACTS

Illegal contracts are void and unenforceable. Claims of illegality often arise concerning non-compete clauses and exculpatory clauses.

Jimmy's Luxury Cars was a used auto dealer located in Miami, Florida. On February 15, 2005, Jimmy's sold a 1995 Mercedes Benz with 126,000 miles to Marty for $17,546. Jimmy, the owner of the business, had driven the Mercedes as his personal vehicle for two years prior to selling it to Marty. He tells Marty during negotiations that the Mercedes has been "the best car he's ever driven." During his ownership, Jimmy had a few problems with the car's air conditioner, but he hadn't had any issues in recent months. When Marty tries to use the air conditioner two months later, in April 2005, it does not function at all. A trip to a mechanic discovers that one of Jimmy's prior repairs will complicate the resolution of the air conditioner's problem, costing about $3,500. Marty asks Jimmy to pay for the repairs, but he refuses. In a claim for the repair costs, what theory of warranty would best support Marty's case?

Implied warranty of merchantability

UNILATERAL MISTAKE

In a case of unilateral mistake, the injured party may rescind if the other party knew or had reason to know of the mistake, the mistake was solely mathematical or mechanical, or enforcement would be unconscionable.

EXECUTORY AND EXECUTED CONTRACTS

In an executory contract, one or both of the parties have not done everything that they promised to do. In an executed contract, all parties have fully performed.

UNILATERAL AND BILATERAL CONTRACTS

In bilateral contracts, the parties exchange promises. In a unilateral contract, only one party makes a promise, and the other must take some action; his return promise is insufficient to form a contract.

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

It is not clear who Purchaser and Seller are.

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

Jacquie, because the class is primarily a service.

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

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

John contracts with FashionWare for the purchase of 1,000 zippers for $1 each. The agreement states that John will pay $500 when the contract is signed and the remaining $500 when FashionWare delivers the zippers. In the contract, John specifically states that he is buying the zippers for the manufacture of 1,000 windbreaker jackets for Campers' Crevasse, which he is contractually required to deliver to Campers' Crevasse in 30 days. FashionWare breaches the contract, causing John to miss his delivery date with Camper's Crevasse, which then cancels its contract with John. What remedies are available to John?

John can recover from FashionWare the $500 he paid for the zippers, any reliance interest, and the expectation interest from his contract with Campers' Crevasse.

Krug International contracted with Iraqi Airways to build equipment for training pilots. Krug then contracted for Power Engineering to build the specialized gearbox to be used in the training equipment for $150,000. Power did not know that Krug planned to resell the gearbox to Iraqi Airways. When Power had almost completed the gearbox, the Gulf War broke out and the United Nations declared an embargo on all shipments to Iraq. Krug notified Power that it no longer wanted the gearbox. Power sued. Please rule.

Krug wins because of true impossibilty

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

Leasing an automobile worth $35,000

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

Lose, because he rejected the offer

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

Luciano may enforce the contract, but not Mindy.

CAPACITY

Minors, mentally impaired persons, and intoxicated persons generally may disaffirm contracts.

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

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

While staying overnight at Lily's house, Martin indicates that he would like to buy her car. Lily says she'll think it over. The next day Martin finds a note on the kitchen counter from Lily that reads, "I might be able to sell the car for about $22,000." Martin writes her a check for $22,000, takes the car keys off the hook by the front door and drives off in the car. Have Lily and Martin formed a binding contract?

No, Lily's note was an invitation to bargain, not an offer.

Rothman's clothing store had a 20-year lease in a shopping center in Phoenix, Arizona owned by Foundation Development. In addition to monthly rent, Rothman's was obligated to pay common-area charges four times a year. The lease stated that if Rothman's failed to pay on time, Foundation could send a notice of default. Then if the store failed to pay all money due within 10 days, Foundation could evict. On February 23, Foundation sent to Rothman's the common-area charges for that quarter. Rothman's believed the bill was in error and sent an inquiry on March 18. On April 10, Foundation insisted on payment of the full amount within 10 days, but it sent the letter to Rothman's Phoenix office, which was not responsible for paying the bill. The Phoenix office forwarded the bill to the relevant executive in New York, who received it on April 20. Rothman's issued a check for the full amount on April 24 and mailed it the following day. On April 28, Foundation sued to evict. On April 29, the company received Rothman's check. Will Foundation be able to evict Rothman's?

No, based upon the "good faith" requirement.

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

No, because Rosa did not sign the flyer.

Annisa, owner of the party planning company Palacial Parties, Inc., is hired by Jerard to organize a spectacular celebration for his girlfriend Amber. Amber was just named winner of the national vocal competition "America Sings," and is arriving home in less than 24 hours. Jerard asks Annisa to hire Jack Flash, Amber's favorite vocal artist, to give a concert on the night of the party. Annisa works very hard trying to get the event together with such short notice, but is unable to get in touch with Jack Flash, who was traveling in Antarctica. The day of the party, there is no entertainment to welcome Amber home, and Jerard files a breach of contract suit against Annisa's company the next day. Jerard also calls Jack Flash and tells him about the missed opportunity; Jack Flash quickly joins the suit against Palacial Parties. Does Jack have a claim for breach of contract against Annisa?

No, because he is an incidental beneficiary.

Yvonne promises to sell 500 pounds of rice to Zed at market price. To secure Zed's rice, Yvonne enters into a contract with McKinley Venturesto to ship the cargo. The contract stipulates that McKinley will deliver the rice to Yvonne within 48 hours. However, the rice does not arrive for 5 days, during which time the market price of rice decreases 11 percent. Because of the delay, Yvonne lost considerable profit. Can Yvonne recover her damages because of McKinley's breach?

No, because it was not foreseeable to McKinley that the shipping delay would cost Yvonne so much money

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

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

Simon, aged 10, is invited to a classmate's birthday party at an exclusive ski resort on March 15th. The day will include 4 hours of snowboarding, lunch and birthday cake. Simon's mother checks a box on the invitation that says "YES, we will attend" and returns it to the classmate's address. Unfortunately, they later don't attend the party when Simon comes down with the flu. On March 17th, Simon's mother receives an invoice in the mail from Simon's classmate for $35 that says, "Party No-Show Fee." Can Simon's classmate collect the fee?

No, because there was no intent to form a contract by Simon's mother.

Horace signs a contract to deliver 40,000 snow globes to Luther by May 11. Horace delivers the snow globes on May 8. On May 12, Luther calls Horace and says the goods are nonconforming because each one had a replica of James Madison inside of it, instead of the figure of John Quincy Adams he had requested. Horace promises to cure within a reasonable time, and on May 17 he delivers 40,000 conforming snow globes to Luther. Has either party breached the contract?

No. If Horace reasonably thought that the original snow globes were acceptable, then he properly cured.

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

No. Mel made a counteroffer, which Jackie rejected

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

No. Neither Rafferty nor Maya can delegate their obligations.

When discussing the sale of a used Beechcraft Baron airplane, a United Technologies agent told Thompson the plane was "excellently maintained" and said it had been inspected for airworthiness every 100 hours. Thompson signed a sales agreement that stated in large, bold letters that the plane was sold "AS IS" and that there were "no representations or warranties, express or implied, including the condition of the aircraft, its merchantability, or its fitness for any particular purpose." The sales contract did not say anything about the plane's maintenance history or current condition. When Thompson tried to fly the plane after purchasing it, he immediately experienced problems with its brakes, steering, ability to climb, and performance while cruising. Can Thompson successfully sue United for breach of express and implied warranties?

No. The aircraft was sold "as is."

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

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

Norv and Wanda agree verbally that Wanda will buy Norv's house, and that Norv will also sell her his living room furniture for $1,000. They agree on a total price, and that the deal will close in 30 days. Norv prepares his house for Wanda, taking out all his possessions, and leaving the living room furniture. Two weeks later, Wanda tells Norv she does not want to go through with the deal. Can Norv enforce his agreement with Wanda?

Norv cannot enforce the deal because it was not in writing.

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

Nothing

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

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

Refinery contracted with Oilko to buy oil at $100 per barrel. Refinery refused Oilko's shipment on November 1 when the oil was worth $99 per barrel. Oilko waited three months to resell the oil when it received only $92 per barrel. Under the Uniform Commercial Code (UCC), what damages may Oilko receive?

Only $1 per barrel in damages.

Polyquan, Inc. emails a dozen companies, offering to sell them 100 sweatshirts in either blue, red, orange, black, or green. The sweatshirts are $6 each. Shirts-A-Lot Clothing emails back, "We accept your offer of 100 sweatshirts for $6 each. No orange sweatshirts." Bespoke Tourism emails back, "We accept your offer of 100 sweatshirts for $6 each on the condition that you do not include any orange sweatshirts." Does Polyquan have a contract with either company?

Polyquan has a contract with Shirts-A-Lot but not with Bespoke Tourism.

Alex contracts with Rashard to purchase thirty umbrellas. Rashard ships the umbrellas to Alex, and Alex mails Rashard payment. When the umbrellas arrive, Alex is shocked to see that the fabric canopy at the top of each umbrella is made out of paper towel and is not waterproof. Alex sues, and Rashard argues that he never indicated that the umbrellas were made out of waterproof material. What result?

Rashard will lose. The parties did not agree on the exact specifications of the umbrella, but the court will imply a condition that the umbrellas be waterproof

REASONABLY

Reasonably means ordinary or usual under the circumstances.

Rick was in the process of buying 320 acres of land when Rick signed a contract to sell that same land to Simon. Simon paid Rick $144,000, the full price of the land. Before Simon could complete the purchase of the land, Rick went bankrupt. Which of the following remedies should Simon seek from Rick?

Restitution

Rodolfo hires Tessa to paint the exterior of his house. Two days into the project, smoke from a nearby forest fire blows onto the property and stains her work. Tessa will have to start again. Tessa asks Rodolfo to pay for the additional labor and materials, and Rudolfo agrees. Tessa completes the job, but Rodolfo refuses to pay the additional fee. Tessa sues. What outcome?

Rodolfo owes Tessa the additional money because Tessa promised to re-paint the stained areas of the house and needed more paint to do the job.

Sabrina tells her boyfriend Alexander that if they get married, she will give him 50 percent ownership of her tech startup company. Alexander quits his job as a teacher and begins working at Sabrina's company. The two get married but divorce ten months later. Alexander claims that Sabrina owes him 50 percent of her company. Please rule

Sabrina owes Alexander nothing because the agreement was not in writing.

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

Seller is liable because the disclaimer was invalid.

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

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

The Onyx Company negotiated intensely for months to hire Robert Conyers as its new Chief Executive Officer (CEO). Attorneys for both the Company and Mr. Conyers were now working on the final employment contract, and it was especially important to the Onyx Company to keep their new CEO for at least 10 years. Because Mr. Conyers had exceptional skills and considerable experience related directly to the company's industry, it was important for the contract to include an atypical retention clause in the event of a merger with another entity. If Onyx's attorney was concerned about enforceability of the retention segment, what could they add to the contract to safeguard the rest of the provisions?

Severability provision

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

Slimline, because Distributer's conduct is a material breach

SPECIFIC PERFORMANCE

Specific performance, ordered only in cases of a unique asset, requires both parties to perform the contract.

SUBSTANTIAL PERFORMANCE

Strict performance, which requires one party to fulfill its duties perfectly, is unusual. In construction and service contracts, substantial performance is generally sufficient to entitle the promisor to the contract price, minus the cost of defects.

Jonah is 12 years old and absolutely loves soccer trading cards. At the local hobby shop, he finds a "Lionel Messi" trading card in the case, which has a handwritten tag by it that reads "9/00-." The employee at the front desk interprets this to mean $9.00 and sells Jonah the card for that amount. A few days later, Ronaldo, the card shop owner calls Jonah and asks for the card back because it is worth around $900. Jonah refuses, and Ronaldo sues. Which of the following is Jonah's strongest argument?

That neither Ronaldo nor Jonah knew the real value of the card.

IMPLIED WARRANTY OF MERCHANTABILITY

The UCC implies that goods will be fit for the purpose for which they are sold.

The Progressive Construction Company was building a "Smart" home that would have all appliances and systems connected to the internet and controllable by mobile phone. Melissa, the owner of the company, saw an advertisement for a recently-developed proprietary stereo system that would fit well into her house plan. In a conversation with the stereo company, Melissa discovered that the system equipment, including lighting, phone, music and theater elements, would cost $15,500, and installation would cost between approximately between $8,000 and $12,000, depending on the house configuration. Due to the unusual nature of the system, only the manufacturer's employees can install it. The companies form a contract to have the system installed, and everything is completed within one month. The final cost was $15,500 for the equipment, and $11,200 for the installation. A few weeks after the system is installed, Melissa begins to have problems with various components. The issues are so serious that she refuses to pay the stereo company invoices. If the stereo company brings a claim to recover their payments under the contract, will the court apply common law, the Uniform Commercial Code, or both, to this contract?

The Uniform Commercial Code (UCC) applies because this is predominantly a contract for goods.

THE UCC

The Uniform Commercial Code is designed to modernize commercial law and make it uniform throughout the country. Article 2 applies to the sale of goods.

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

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

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

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

VALUE

The courts will seldom inquire into the adequacy of consideration. This is the "peppercorn rule."

EXPECTATION INTEREST

The expectation interest puts the injured party in the position she would have been in had both sides fully performed. It has three components: direct, consequential, and incidental damages.

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

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

ACT OR FORBEARANCE

The item of value can be either an act or a forbearance.

Lewis signed a contract for the rights to all timber located on Nine-Mile Mine agreeing to pay $70 per thousand board feet ($70/mbf). As he began work, Nine-Mile became convinced that Lewis lacked sufficient equipment to do the job well and forbade him from entering the land. Lewis sued. Nine-Mile moved for summary judgment. The mine offered proof that the market value of the timber was exactly $70/mbf for which Lewis had no contradicting evidence. The court granted summary judgment. Why?

The market value evidence shows that Lewis suffered no harm and, therefore, had no claim.

ACCEPTANCE

The offeree must say or do something to accept. The common law mirror image rule requires acceptance on precisely the same terms as the offer. Under the mailbox rule, acceptances are effective upon dispatch.

MEETING OF THE MINDS

The parties can form a contract only if they have a meeting of the minds.

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

The parties reside in different jurisdictions.

Confluence Corporation, located in Champaign, Illinois, decided to begin buying rare earth metal from the Canadian Rare Earth Company, with headquarters in Montreal, Quebec Province. The following clause was included in a signed contract between the companies to purchase quantities of the metal Lanthanum for Confluence's production of rechargeable batteries: "During the Initial Term, Seller shall sell the Products to Buyer at the purchase prices set forth on Exhibit A. All prices are in dollars with no cents. Any adjustment to prices will require written modification signed by both parties within ten (10) business days." A few weeks after signing, the Confluence Corporation attorney calls the Canadian company with a concern about the clause. What do you believe this concern may be?

The prices are in dollars

RELIANCE INTEREST

The reliance interest puts the injured party in the position he would have been in had the parties never entered into a contract.

RESTITUTION INTEREST

The restitution interest returns to the injured party a benefit that she has conferred on the other party which would be unjust to leave with that person.

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

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

STRUCTURE OF A CONTRACT

The structure of a contract looks like this: Title Introductory Paragraph Definitions Covenants Covenants are the promises the parties make about what they will do in the future. Breach Conditions Representations and Warranties Representations and warranties are statements of fact about the present or past—they are true when the contract is signed (or at some other specific, designated time). Boilerplate Choice of Law and Forum Modification Assignment of Rights and Delegation of Duties Arbitration Attorney's Fees Integration Severability Force Majeure Notices Closing

WRITING REQUIREMENT

The writing must be signed by the defendant and must state the name of all parties, the subject matter of the agreement, and all essential terms and promises.

CONSIDERATION

There are three rules of consideration: Both parties must get something of measurable value from the contract. A promise to give something of value counts as consideration. The two parties must have bargained for whatever was exchanged.

Angelo and Yvette were injured in an automobile accident allegedly caused by a vehicle belonging to Truck Equipment of Boston. Quagmire Insurance Co. paid insurance benefits to Angelo and Yvette, who then assigned to Quagmire their claims against Truck Equipment. Quagmire sued Truck Equipment, which moved to dismiss. Who wins?

Truck Equipment wins because a claim for personal injury cannot be assigned

IMPOSSIBILITY

True impossibility means that some event has made it impossible to perform an agreement.

CONTRACT FORMATION

UCC §2-204 permits the parties to form a contract in any manner that shows agreement.

UCC §2-207

UCC §2-207 governs an acceptance that does not "mirror" the offer. Additional terms usually become part of the contract. Different terms contradict the offer and are generally replaced by the Code's own gap-filler terms.

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

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

DISCHARGE

Unless the obligee agrees otherwise, delegation does not discharge the delegator's duty to perform.

VALID, UNENFORCEABLE, VOIDABLE, AND VOID AGREEMENTS

Valid contracts are fully enforceable. An unenforceable agreement is one with a legal defect. A voidable contract occurs when one party has an option to cancel the agreement. A void agreement means that the law will ignore the deal regardless of what the parties want.

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

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

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

Voidable by Yasmine

VAGUENESS

When a provision in a contract is deliberately left unclear.

MUTUAL MISTAKE.

When both parties to a contract make the same fundamental factual error as to the existence or the identity of the contract's subject matter, either party may rescind.

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

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

Richard hires Paul to paint his kitchen in two eight-hour days of work for $500. At the end of the first day, the kitchen is 85 percent complete. Richard asks Paul to stay late and finish. Paul agrees to stay and complete the painting if Richard pays him a total of $750 for the job. Richard agrees. Does Richard owe Paul the additional $250?

Yes, Paul provided the additional consideration of working overtime and completing the work in a shorter time period than originally agreed

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

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

Maybelline falls down a well and is saved when her neighbor Ruben makes a very daring rescue. Ruben hoists her to safety, and Maybelline hugs him and promises him a check for $100,000 for his kindness. Ruben is delighted and when Maybelline visits him the next day and again mentions the $100,000, he tells her that he is going to quit his job as a preschool music teacher and use the money to start a business. Two days later he resigns from the nursery school and calls Maybelline and asks when he can expect his money. He is startled when she replies that she is not going to give him a cent. Will a court enforce Maybelline's promise?

Yes, because Ruben relied on the promise.

For seven years, Stanford Owens has run a successful practice that helps small businesses file their taxes, become incorporated, and perform other legal tasks. Stanford moves his practice to NYC, and is happy to find his first local client, DiggyWerx, almost immediately. They negotiate a flat fee of $5,500 for six months of Stanford's services. A month later, Stanford is more familiar with the local business landscape and realizes that most people offering his services in NYC charge around $13,000 for six months of work because of the higher costs to do business in NYC. Is the deal between Stanford and DiggyWerx enforceable?

Yes, because Stanford and DiggyWerx each receive a benefit and incur a detriment.

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

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

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

Yes, because the contract did not preclude the assignment

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

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

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

Yes, because the terms are reciprocal promises.

The Tufte family leased a 260-acre farm from the Travelers, Inc. Toward the end of the lease, Travelers mailed the Tuftes an option to renew the lease. The option arrived at the Tuftes' house on March 30 and stated that they had until April 14 to accept. On April 13, the Tuftes signed and mailed their acceptance, which Travelers received on April 19. Travelers claimed there was no lease and attempted to evict the Tuftes from the farm. May the Tuftes stay?

Yes, because under the mailbox rule, an acceptance is generally effective when mailed.

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

Yes, the Silvas are entitled to damages for both fraud and nondisclosure.

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

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

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

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

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

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

Mastercraft Boat made boats and often used instrument panels manufactured and assembled by Ace Industries. Typically, Ace would order electrical instruments and other parts and assemble them to Mastercraft's specifications. Mastercraft decided to work with a different assembler, M & G Electronics, so it terminated its relationship with Ace and requested that Ace deliver the remaining parts to M & G, which Ace did. Mastercraft then refused to pay for these parts, claiming that they were nonconforming. Is Ace entitled to payment from Mastercraft for the parts?

Yes. Mastercraft has accepted the goods and, therefore, must pay Ace for them.

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

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

Stephan and his boss agree to extend his employment contract by an additional six months. The employment contract states that all amendments must be in writing, so Stephan and his boss cross out and change the provision in his contract that covers the duration of his employment and rewrite it to include the additional six months. They each initial and date the change, and they each keep a copy of the agreement. Is the amendment valid?

Yes. This is a valid way to execute a written amendment.

Which of the following amounts to an offer?

all of these

Ted's wallet is as empty as his bank account, and he needs $3500 immediately. Fortunately, he has three gold coins that he inherited from his grandfather. Each is worth $2500, but it is Sunday, and the local rare coins store is closed. When approached, Ted's neighbor Andrea agrees to buy the first coin for $2300. Another neighbor, Cami, agrees to buy the second for $1100. A final neighbor, Lorne, offers "all the money I have on me" - $100 - for the last coin. Desperate, Ted agrees to the proposal. Which of the deals is supported by consideration?

all three of the agreements

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

fraud

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

hang gliding

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

he court will apply common law, and Mary will lose.

an example of true impossibility is

illegality

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

legally irrelevant

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

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

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

unilateral contract.

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

vague; they are sure they will be able to reach an agreement later

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

win $850