MBE - contracts & sales

4 forms of consideration

(1) A return promise to do something (2) A return promise to refrain from doing something you are legally entitled to do (3) The actual performance of some act (4) Actually refraining from doing some act that you are legally entitled to do

4 big topics within the question of formation

(1) Agreement (offer and acceptance) (2) Consideration (and related theories for when you have to keep your promise) (3) Defenses to formation (4) Statute of Frauds (enforceability)

3 conditions for an impracticability defense

(1) An unforseeable event has occurred (2) The nonoccurrence of which was a basic assumption on which the contract was made (3) The party seeking discharge is not at fault

3 big questions when addressing a contracts problem

(1) Has an enforceable contract been formed? (2) If yes, has the contract been performed (or has performance been excused)? (3) If no, what are the remedies for breach?

5 methods of termination for offers

(1) Lapse in time (2) Death/mental incapacity of offeror (NOT applicable for option contracts) (3) Destruction OR illegality (4) Revocation (5) Rejection/counteroffer

A binding contract requires these 3 things

(1) Manifestation of mutual assent (i.e., offer and acceptance) (2) Consideration (3) Lack of valid defense

Who lacks capacity to make a contact?

(1) Minors (2) Mentally ill (3) Intoxicated (4) People whose property is under guardianship by reason of adjudication

4 ways in which an irrevocable offer can arise

(1) Option contract (common law) (2) Firm offer (UCC) (3) Unilateral contract and offeree has started performance (4) Detrimental reliance

4 instances where revocation of an offer is limited

(1) Option contracts (2) UCC firm offer rule (3) Promissory estoppel - if offeree reasonably and detrimentally relies on offfer, it may become irrevocable (4) Partial performance

What are two exceptions to the rule that advertisements are usually understood as an invitation to deal rather than an offer?

(1) Reward advertisements (2) Advertisements that are very specific and leave nothing open to negotiation, including how acceptance can occur (e.g.: "first come, first served")

7 situations in which parol evidence rule is inapplicable

(1) Subsequent agreement (2) Condition precedent (3) Raising a defense to the formation of a contract (4) Establishing a defense to the formation of a contract (5) Ambiguity and interpretation (6) Separate deal (7) Trade usage and course of performance or dealings

Under the UCC, what 3 requirements must be met for an offer to buy or sell goods to be an irrevocable firm offer?

(1) The offeror is a merchant (2) There is an assurance that the offer is to remain open, and (3) The assurance is contained in a signed writing from the offeror

6 ways that an offer can be terminated

(1) The offeror revokes the offer by EXPRESS communication to the offeree (2) The offeree learns that the offeror has taken an action that is absolutely inconsistent with a continuing ability to contract (i.e.: CONSTRUCTIVE revocation) (3) The offeree REJECTS the offer (4) The offeree makes a COUNTER-OFFER (5) The offeror dies (6) A reasonable amount of time passes

When a claim is unliquidated or otherwise subject to dispute, it can be discharged by accord and satisfaction if . . .

(1) The person against whom the claim is asserted tendered a negotiable instrument (e.g., a check) (2) The instrument was accompanied by a conspicuous statement indicating that it was tendered as full satisfaction of the claim (e.g., "payment in full"), and (3) The claimant obtained payment of the instrument.

A statement is an offer ONLY IF . . .

(1) The person to whom it is communicated could REASONABLY interpret it as an offer (2) Express PRESENT intent of a person to be legally bound by the contract

Under the UCC, when both parties are merchants, an additional term in the acceptance is automatically included in the contract UNLESS . . .

(1) The term materially alters the contract (2) The offer expressly limits acceptance to the terms of the offer, OR (3) The offeror has already objected to the additional term OR objects within a reasonable time after notice of them was received. *Note:* if ANY of these is present, the term is NOT included and the original contract controls

Under the UCC, in what two circumstances does the seller have a right to cure a defective tender?

(1) The time for performance under the contract has not yet elapsed; OR (2) The seller had reasonable grounds to believe that the buyer would accept despite the nonconformity. *Note:* The seller must give notice of the intent to cure and make a new tender of conforming goods.

4 ways to suspend to excuse conditions

(1) Waiver (2) Wrongful interference (3) Election (4) Estoppel

At the auction of construction equipment owned by a contractor, several lots were offered for bidding and the highest bids for each were accepted by the auctioneer. The auctioneer then announced that a lot that consisted of a backhoe was being auctioned off. Several bids for the backhoe were acknowledged by the auctioneer. Just before the auctioneer brought down her gavel, she glanced at the contractor. The contractor gave the auctioneer a prearranged signal. Acting in accord with the signal, the auctioneer stated that the backhoe was being removed from the auction. There had been no indication as to whether the auction was being held with or without reserve. The highest bidder on the backhoe, contending that he is now its owner, has brought suit against the contractor. How is the court likely to rule? (A) For the contractor, because the auctioneer had not brought down the gavel, announcing the completion of the sale of the backhoe. (B) For the contractor, because the backhoe constituted equipment. (C) For the highest bidder, because the contractor forfeited his right to withdraw the backhoe by prearranging a signal with the auctioneer. (D) For the highest bidder, because the contractor lost the right to withdraw the backhoe once the auction began.

(A) For the contractor, because the auctioneer had not brought down the gavel, announcing the completion of the sale of the backhoe.

A woman emailed her friend, stating that someday, she would like to buy the friend's teacup collection. The email stated, "When times aren't so tough, I would gladly pay $1,000 for them." The friend responded with an email stating, "That would be fine with me. I'd love for you to have them." The women did not exchange money or the teacups and did not see each other until a year later. When they did see each other, the friend apologized for forgetting about their discussion and told the woman she would deliver the teacups the next weekend and would accept a check at that time. The woman said that she did not remember the discussion but would pay $750 for the teacups. The friend responded, "Haven't we already discussed this? Sold." The next day, the friend turned the teacups over to the woman, who provided the friend with a check for $750. The friend immediately responded that she needed the check for the remaining $250. The woman kept the teacups. Is the woman liable for the remaining $250? (A) No, because a contract was not formed until the day the women spoke in person. (B) No, because oral agreements for the sale of goods are not enforceable. (C) Yes, because the original contract was for $1,000. (D) Yes, because the woman kept the teacups.

(A) No, because a contract was not formed until the day the women spoke in person. *Note:* the statute of frauds does not apply when payment for the goods has been made and accepted (as seen here)

On August 1, a buyer and a seller contracted in writing for the sale of the seller's duck farm. The contract provided that the closing would occur on September 15. On September 1, the buyer sent the seller an email containing the following: "After discussing our August 1 contract with my financial advisors and some experts in the field, I am increasingly concerned that entering the duck market at this time is a grave mistake. As such, I do not intend to buy your duck farm unless I am legally obligated to do so." If the seller sues the buyer for breach of contract on September 1, is the seller likely to succeed? (A) No, because the buyer's statement is neither a present breach nor a repudiation of the August 1 contract. (B) No, because the seller has not yet accepted or relied upon the buyer's repudiation. (C) Yes, because the buyer has committed a breach by anticipatory repudiation. (D) Yes, because the buyer's statement created reasonable grounds for the seller's insecurity with respect to the buyer's performance.

(A) No, because the buyer's statement is neither a present breach nor a repudiation of the August 1 contract. *Note:* Since the buyer is legally obligated to perform the contract for the sale of the farm, this statement did not clearly and unequivocally indicate that she would not perform

A wheat farmer contacted an agricultural services company in May to inquire about hiring workers for a five-day period toward the beginning of the summer-long harvest season to assist the farmer in harvesting his wheat crop. After some negotiations, the farmer entered into a written contract with the company "to provide five workers for a five-day period starting in the first week of June for a cost of $5,000." On May 31, the company's workers went on strike. On June 9, the strike ended, and the company's workers began harvesting wheat on the farmer's farm for the next five days. The farmer subsequently refused to pay the company, claiming that the company's delay in performance excused his obligation to pay. Is the farmer's obligation to pay excused? (A) No, because the delay did not deprive the farmer of the substantial benefit of the bargain. (B) Yes, because starting in the first week of June was an express condition of the contract. (C) Yes, because substantial performance does not excuse a breach for commercial contracts. (D) Yes, because the delay was a material breach as the harvesting season had already begun.

(A) No, because the delay did not deprive the farmer of the substantial benefit of the bargain. *Note:* Under common law, which governs contracts for services, a material breach allows the nonbreaching party to withhold its own performance. A breach is material when the nonbreaching party does not receive the substantial benefit of its bargain. As a result, substantial performance—i.e., less-than-full performance that, while imperfect, does not defeat the contract's main purpose—does not typically constitute a material breach.

In January, a local farmer contracted with a chef to sell the chef a specified amount of local organic tomatoes to be delivered on August 1. On June 15, the farmer called the chef to tell him that part of his crop was infested with tomato fruitworms and he was unsure that he would be able to deliver the full amount requested by August 1. The chef told the farmer that it was absolutely essential that he receive those tomatoes on time to make organic tomato sauce for a restaurant scheduled to open in late August. The farmer assured the chef that he would do his very best to save the crop and deliver by August 1. Does the chef have valid legal grounds to cancel the contract and order tomatoes from another source? (A) No, because the farmer did not state unequivocally that he could not deliver the tomatoes on time. (B) No, because the farmer still had more than 30 days to deliver the tomatoes. (C) Yes, because the farmer committed an anticipatory repudiation of the contract by causing the chef to feel insecure about the farmer's performance. (D) Yes, because the farmer failed to provide adequate assurances to the chef.

(A) No, because the farmer did not state unequivocally that he could not deliver the tomatoes on time. *Note:* Chef did not make a written demand for assurances as required under the UCC, so the farmer was not required to provide such assurances. As a result, the chef does not have legal grounds to cancel the contract and order tomatoes from another source.

The owner of a rare eighteenth-century chest offered to sell it to a connoisseur of antiques for $75,000. The connoisseur countered that she would buy the chest for $50,000. The owner rejected this price. The owner and the connoisseur then executed a written agreement for the sale of the chest at a price to be determined only by a particular antiques dealer whose expertise in valuing this rare item they both trusted. Two weeks later, the agreed-upon antiques dealer examined the chest. He told the owner and the connoisseur that he had to do further research on the chest but that he would let them know his decision in several days. Unfortunately, the dealer died before doing so. A reasonable price for the chest can be established by the court. Is there likely an enforceable contract? (A) No, because the owner and the connoisseur did not intend to be bound unless the dealer set the price of the chest. (B) No, because the price of the chest was not determined at the time the agreement was executed. (C) Yes, because a reasonable price for the chest can be established by the court. (D) Yes, because the owner and the connoisseur executed a written agreement for the sale of the chest.

(A) No, because the owner and the connoisseur did not intend to be bound unless the dealer set the price of the chest.

While attending a rodeo on August 20, a hatmaker entered into a valid, written agreement with the rodeo manager to make 500 leather cowboy hats for an upcoming rodeo event at a price of $75 per hat. Per the agreement, the rodeo manager agreed to pay one-fourth of the total purchase price to a tannery owner to whom the hatmaker owed a debt for a previous leather order. The hatmaker and the rodeo manager made no mention of the agreement to the tannery owner. On August 25, the hatmaker changed his mind about paying one-fourth of the purchase price to the tannery owner. The hatmaker and the rodeo manager subsequently executed a valid modification of the original agreement. The rodeo manager's brother had also been present on August 20 when the original agreement was executed, but he did not know about the August 25 modification of the agreement to no longer pay the tannery owner. On August 30, the brother, who was friends with the tannery owner, called and told the tannery owner that his debt from the hatmaker would finally be paid off. However, the rodeo manager refused to pay one-fourth of the purchase price to the tannery owner. If the tannery owner sues the rodeo manager for one-fourth of the purchase price, will he likely recover? (A) No, because the tannery owner did not rely on the August 20 agreement between the hatmaker and the rodeo manager. (B) No, because there was no consideration for the promise to pay the tannery owner by the hatmaker and the rodeo manager. (C) Yes, because the tannery owner had the right to sue the rodeo manager to enforce the contract between the rodeo manager and the hatmaker. (D) Yes, because the rodeo manager agreed to pay one-fourth of the purchase price to the tannery owner on August 20.

(A) No, because the tannery owner did not rely on the August 20 agreement between the hatmaker and the rodeo manager.

A builder ordered 100 squares of shingles from a home-supply store for installation on the roofs of homes that he was building. The builder agreed to a price of $120 per square. Delivery to the construction site was set for no later than noon on the following Monday. The store's truck with the ordered shingles arrived at 1:00 p.m. the following Monday. The builder rejected the shipment due to its failure to arrive on time. The store, which regularly sold 600 squares of shingles per week, resold the squares that had been rejected by the builder at a price of $110 per square. The store would have made a profit of $3,000 had the builder accepted the shingles. If the store sues the builder for breach of contract, how much can the store recover from the builder? (A) Nothing. (B) $1,000, the contract price minus the resale price. (C) $3,000, the store's lost profit on the initial sale. (D) $4,000, to recover the store's total expectation damages.

(A) Nothing - seller failed to *perfectly* perform

A bicycle vendor contracted with a supplier to purchase 60 identical helmets to be delivered in six monthly shipments of 10 helmets each. The first four shipments arrived in perfect condition. Upon receiving each shipment, the vendor accepted the helmets and made a payment to the supplier for one-sixth of the total price under the contract. The fifth shipment arrived with only four helmets and a note from the supplier that read as follows: "Six of the helmets in this shipment were damaged when we received them from the manufacturer. We will deliver six replacement helmets within two business days." The four helmets received were in perfect condition, and the vendor has an adequate supply of helmets remaining to prevent any loss of sales in the next two business days. Which of the following is true regarding the vendor's rights under the contract? (A) The vendor must accept the four helmets and is not entitled to cancel the rest of the contract. (B) The vendor must accept the four helmets, but is entitled to cancel the rest of the contract based on the breach. (C) The vendor may accept or reject the helmets, but is not entitled to cancel the rest of the contract based on the breach. (D) The vendor may accept or reject the helmets, and is entitled to cancel the rest of the contract.

(A) The vendor must accept the four helmets and is not entitled to cancel the rest of the contract.

A retailer received a written firm offer signed by a supplier. The offer committed the supplier to providing the retailer with up to 10,000 tubes of toothpaste over the next 45 days at $1.00 a tube. Thirty days later, the supplier informed the retailer that the price per tube of toothpaste would be $1.10. The next day, the retailer ordered 6,000 tubes of toothpaste from the supplier, which the supplier promptly shipped. Sixty days after the receipt of the offer, the retailer ordered another 4,000 tubes of toothpaste, which the supplier also promptly shipped. What price is the supplier permitted to charge the retailer for the toothpaste? (A) $10,000 (10,000 × $1.00), because the supplier's firm offer was effective for three months regardless of its terms. (B) $10,400 ((6,000 × $1.00) + (4,000 × $1.10)), because the supplier's firm offer was effective for only 45 days. (C) $11,000 (10,000 × $1.10), because the firm-offer rule does not apply where the buyer is a merchant. (D) $11,000 (10,000 × $1.10), because the supplier informed the retailer that the price was increased to $1.10 before the retailer placed either order.

(B) $10,400 ((6,000 × $1.00) + (4,000 × $1.10)), because the supplier's firm offer was effective for only 45 days.

A man borrowed $25,000 from his aunt to purchase land. Under the terms of their agreement, the man was to repay his aunt when he sold the land. One year later, the man sold the land for $20,000, but he did not repay his aunt. Four years after the sale, the man promised in a signed writing to pay $15,000 to his aunt for his prior loan obligation. The applicable statute of limitations for enforcement of a debt obligation is three years. Five years after the sale, the aunt sued the man. The man asserted the statute of limitations as a defense. How much can the aunt recover? (A) $0 (B) $15,000 (C) $20,000 (D) $25,000

(B) $15,000

The owner of a boat contracted with a sail maker to make a replacement sail for the boat at a price of $1,500. Under the terms of their written contract, which did not contain a liquidated damages clause, the owner made a deposit of $750. The owner sold the boat before the sail maker finished making the sail. Despite the unusual configuration of the sail, the sail maker was able to sell the finished sail to another boat owner for $1,500. The owner has sued the sail maker in restitution for the return of his deposit. How much of his deposit is the boat owner entitled to receive? (A) $0 (B) $450 (C) $500 (D) $750

(B) $450

A wholesaler of bicycle chains sent a retailer the following fax on December 1: "Because of your continued loyalty as a customer, I am prepared to sell you up to 1,000 units of Bicycle Chain Model D at $7.50 per unit, a 25% discount off our original $10.00 price. This offer will remain open for 7 days." The fax lacked a full, handwritten signature, but it was on the wholesaler's letterhead and had been initialed by the wholesaler's head of sales. On December 4, the wholesaler's head of sales called the retailer and informed the retailer that the wholesaler had decided to revoke his December 1 offer. On December 5, the retailer placed an order for 1,000 bicycle chains, stating that he would pay the discounted price of $7.50 per unit. What is the correct value of the order placed by the retailer? (A) $7,500, because the wholesaler's revocation was not in writing. (B) $7,500, because the wholesaler was bound to keep the offer open for 7 days. (C) $10,000, because the offer was not signed by the wholesaler. (D) $10,000, because the retailer did not provide consideration to hold the offer open.

(B) $7,500, because the wholesaler was bound to keep the offer open for 7 days.

A jeweler who specialized in engagement rings assisted a man who was trying to pick out the perfect engagement ring. The man was inexperienced with the various cuts of diamonds and types of ring settings. Over the course of a few weeks, the jeweler and the man looked at all of the ring styles and discussed pricing based on the man's budget of $5,000. The man finally settled upon a square-cut diamond with a prong setting that was priced at $5,500. The man initially offered the jeweler $4,500 for the ring. While the man and the jeweler were negotiating the price, the jeweler received a phone call regarding a family emergency. The jeweler told the man that he would email him an offer in the evening, and if they could "meet halfway," the jeweler would sell the ring to the man. The man agreed. That evening, the jeweler and the man received emails from one another at the same time. The jeweler's email contained an offer to sell the ring for $5,000, and the man's email contained an offer to buy the ring for $5,000. Both emails (i) specified the same style of ring that the two parties had discussed earlier that day, (ii) required payment upon receipt of the ring in two weeks, and (iii) were signed with an electronic signature. Based upon their earlier discussions and the jeweler's email offer to sell the ring to him for $5,000, the man did not look for an engagement ring at any other jewelry store. When the man showed up two weeks later to pick up and pay for the ring, the jeweler denied that they had a binding contract and would not sell the ring. If the man sues the jeweler for breach of contract, which of the following most persuasively supports the man's position? (A) A sale-of-goods contract does not require that an acceptance be a mirror image of the offer. (B) Both parties conveyed an intent to contract with one another through prior negotiations and the simultaneous emails. (C) Since the jeweler was the only merchant in the transaction, the jeweler is estopped from denying that the parties' correspondence created a binding contract. (D) The man detrimentally relied upon the jeweler's offer to "meet halfway" and the email offer to sell the ring to him.

(B) Both parties conveyed an intent to contract with one another through prior negotiations and the simultaneous emails.

A new florist placed a written order with a wholesaler for $15,000 worth of fresh flowers. Delivery was to be made to the florist's shop via a national delivery service. Because the florist was a new customer, the wholesaler accepted the order on the condition that the florist pay $5,000 in advance and the remaining $10,000 within 20 days of delivery. There was no discussion as to who bore the risk of loss. The florist paid the wholesaler $5,000, and the wholesaler arranged with a national delivery service to pick up and deliver the flowers to the florist. The delivery service picked up the flowers, but, due to malfunction of the temperature controls on the transporting plane, the flowers were worthless upon arrival. The florist rejected the flowers and notified the wholesaler, who refused to ship other flowers. The wholesaler filed a claim against the florist for the remaining $10,000. The florist counterclaimed for the return of his $5,000 payment to the wholesaler. How should the court rule on these claims? (A) Deny both claims, because the florist accepted the risk of loss up to the amount he had paid for the goods. (B) Grant the florist's claim for $5,000 and deny the wholesaler's claim for $10,000, because the risk of loss remained with the wholesaler. (C) Grant the wholesaler's claim for $10,000 and deny the florist's claim for $5,000, because the risk of loss passed to the florist. (D) Offset the two claims against each other and require the florist to pay the wholesaler $2,500, because each party should bear the loss equally.

(B) Grant the florist's claim for $5,000 and deny the wholesaler's claim for $10,000, because the risk of loss remained with the wholesaler. *Note:* Here, the florist and the wholesaler formed a destination contract because delivery was to be made at a particular location—the florist's shop. As a result, the risk of loss was still with the wholesaler when the flowers were destroyed during transport. Because the wholesaler delivered worthless flowers, the florist was entitled to reject the goods and recover his $5,000 payment

On April 1, a buyer agreed in writing to purchase an antique car from a seller for $20,000. The parties met on April 10, the scheduled date of the sale, at which time the buyer accepted the car and gave the seller a check for $15,000. The buyer, seeking to create an accord and satisfaction, had added the following conspicuous notation on the check: "This check is in full and final satisfaction of my obligation under our April 1 agreement." The seller did not realize that the check was for only $15,000 and that it contained the notation until the seller sought to deposit it at her bank later that day. Needing the money, the seller deposited the check anyway. If the seller sues the buyer for breach of contract seeking damages of $5,000, the difference between the amount paid and the contract price, will the buyer's accord and satisfaction defense likely succeed? (A) No, because the buyer could not modify the agreement without consideration. (B) No, because the buyer did not dispute the initial purchase price of the car. (C) Yes, because the notation on the check formed a substituted contract. (D) Yes, because the seller deposited the check knowing it was offered in full and final satisfaction of the buyer's obligation.

(B) No, because the buyer did not dispute the initial purchase price of the car.

Prior to her death, a celebrity commissioned an artist to paint a portrait of her. The celebrity hired this particular artist because he painted using an old-fashioned and rarely used style that required two months of daily appointments during which the subject would sit for a few hours each day. The contract between the parties specified that this live-model method would be used and that the celebrity would deliver increasing payments throughout the process, with the first payment occurring after two weeks of painting. One week into the process, after the painting had begun, the celebrity died. Her family demanded that the artist continue with the painting, using photographs as a substitute for the daily sessions. Is the artist required to complete a painting of the celebrity? (A) No, because no payment had yet occurred. (B) No, because the celebrity died after only one week. (C) Yes, because the artist can complete the painting by relying on photos of the celebrity. (D) Yes, because the artist had already begun painting the celebrity

(B) No, because the celebrity died after only one week. *Note:* In a personal-services contract (e.g., contract to paint a portrait), impracticability can arise when the party who is to perform the contract—or a person whose existence is required for that performance—dies or becomes incapacitated

s part of a divorce settlement, an ex-husband purchased an annuity from an insurance company to be paid to his ex-wife so that she would receive a fixed amount quarterly for the duration of her life. Within a week after the purchase, the ex-wife learned that she had a fatal illness, which had not previously manifested itself but had existed for some time. She died two months later, prior to receiving any payments from the annuity. The ex-husband has filed suit to rescind the annuity contract. Will the ex-husband be likely to prevail? (A) No, because the annuity contract was a third-party beneficiary contract. (B) No, because the ex-husband assumed the risk of his ex-wife's death. (C) Yes, because the ex-wife's death frustrated the purpose of the annuity. (D) Yes, because the ex-husband and the insurance company made a mutual mistake as to the ex-wife's health.

(B) No, because the ex-husband assumed the risk of his ex-wife's death. *Note:* a party assumes the risk of the mistake—and cannot void the contract—if the party knew at the time of the contract that he/she had limited knowledge of the facts and accepted this knowledge as sufficient.

The only intestate heir of a wealthy businessman, upon hearing of the businessman's death, immediately visited his friend who worked at an expensive car dealership. The heir signed a contract with the friend, a legal representative of the car dealership, to purchase a car from the dealership. The car needed to be ordered from overseas, so no money was due up front on the contract. Just before he signed the contract, the heir told his friend that he certainly would not be able to buy the car without obtaining this inheritance, but that as soon as the heir inherited the businessman's estate, he would return to pay for the car. The friend agreed, and they both signed the contract, which did not make mention of the inheritance. A week later, the heir discovered that the businessman had left a valid will that left his entire estate to a charity, and that the heir was not entitled to any portion of the estate. He returned to the car dealership to try to cancel his contract to purchase the car, but the car had already arrived. The car dealership has not attempted to resell the car. The car dealership subsequently sued the heir to enforce the contract. Is the car dealership's action likely to succeed? (A) No, because the car dealership has not attempted to resell the car. (B) No, because the heir's duty to purchase the car was conditioned upon receiving an inheritance. (C) Yes, because the heir signed the contract with a legal representative of the car dealership. (D) Yes, because the heir's oral statements to his friend contradict the written contract.

(B) No, because the heir's duty to purchase the car was conditioned upon receiving an inheritance.

On April 1 of Year 1, a teacher orally agreed with a school principal to teach for nine months beginning on September 1 of Year 1. The agreement required that the teacher be paid $1,000 per month in advance on the first of each month. The teacher taught for eight months, for which he was paid in accordance with the agreement. On May 1 of Year 2, the principal paid the teacher $1,000, but he refused to teach. The principal sued the teacher to recover the $1,000 she paid him. In his defense, the teacher pleads the Statute of Frauds. Is the teacher's defense likely to be successful? (A) No, because the agreement provided for the teacher to teach for only nine months. (B) No, because the principal had fully performed her obligation under the agreement. (C) Yes, because the agreement could not be completed within one year of its formation. (D) Yes, because the value of the services was more than $500.

(B) No, because the principal had fully performed her obligation under the agreement.

A homeowner entered into a contract with a landscaper. The contract specified that the homeowner would pay the landscaper $10,000 upon completion of a list of projects. The landscaper performed the work while the homeowner was away on vacation. When the landscaper sought payment, the homeowner refused, noting that a tree had not been trimmed as required by the contract. The landscaper responded that, since he would now have to forego other work in order to trim the tree, he would do it but only if the homeowner agreed to pay him a total of $10,500 for his services. The homeowner, desperate to have the work completed, agreed. Once the work was completed, however, the homeowner gave the landscaper a check for $10,000 and refused to pay more. The landscaper sued for breach of contract. Is the landscaper likely to succeed in his claim? (A) No, because an enforceable contract cannot be renegotiated. (B) No, because there was no consideration for the promise to pay $10,500 and no unanticipated circumstances arose. (C) Yes, because there was a valid modification of the contract. (D) Yes, because the landscaper suffered a detriment by foregoing other work.

(B) No, because there was no consideration for the promise to pay $10,500 and no unanticipated circumstances arose.

The owner of a retail clothing store regularly displayed for-sale works by local artists on a wall in the store. An art collector who came into the store inquired about purchasing a particular work for display at his home. The two agreed upon a price, but the collector was not ready to commit to purchasing it immediately. Confident that the collector would purchase the work, the owner promised in a signed writing to sell the work to the collector at the agreed-upon price at any time before the end of the month. On the last day of the month, the collector sent the owner a check for the agreed-upon price, which the owner received on the following day. If the owner returns the collector's check and refuses to sell the artwork to the collector, which of the following best supports the owner's position that a contract had not been formed? (A) The collector could not accept the owner's offer by mailing a check. (B) The collector's acceptance of the owner's offer was not timely. (C) The firm-offer rule is not applicable because the collector was not a merchant with respect to the artwork. (D) The firm-offer rule is not applicable because the owner was not a merchant with respect to the artwork.

(B) The collector's acceptance of the owner's offer was not timely.

A construction company contracted with a manufacturer to purchase 100 identical prefabricated windows to use while constructing houses in a gated community. The windows were to be delivered in shipments of 25 windows each on April 1, May 15, July 1, and August 15. The written contract, signed by both parties, was silent as to when payment for each shipment would be due. The manufacturer made the first two shipments in conformity with the contract requirements, and the construction company paid one-fourth of the full contract price upon each delivery. However, on June 1, the manufacturer demanded that the construction company pay the entire remainder of the contract price before the manufacturer made any further shipments. Which of the following statements is true? (A) The construction company has no duty under the contract to make any payments until the final delivery is made. (B) The construction company must pay the manufacturer one-fourth of the contract price upon delivery of each conforming shipment of windows. (C) The construction company's failure to pay the requested sum will amount to a repudiation of the contract. (D) The manufacturer waived his right to demand immediate payment of the full contract price when he accepted the first payment of one-fourth of the contract price on April 1.

(B) The construction company must pay the manufacturer one-fourth of the contract price upon delivery of each conforming shipment of windows. *Note:* Special rules apply to installment contracts for the sale of goods (e.g., windows), which are governed by the UCC. Under the UCC, an installment contract is defined as a contract in which the goods are to be delivered in multiple shipments, and each shipment is to be separately accepted by the buyer. Payment by the buyer is due upon each delivery unless the price cannot be apportioned.

A jeweler and a goldsmith signed a written agreement that provided as follows: "For $3,000, the goldsmith shall sell to the jeweler a size six gold ring setting that the jeweler shall select from only the goldsmith's white gold ring designs." The agreement did not address any other specific terms with regard to the business arrangement between the jeweler and the goldsmith. When the jeweler arrived to select a ring, he refused to select one of the goldsmith's white gold ring designs. The jeweler claimed that the goldsmith, immediately prior to the execution of the written agreement, had orally agreed to broaden the jeweler's choices to also include rose gold ring designs. The jeweler also claimed that the goldsmith had, at the same time, orally agreed to include a set of earring settings, valued at $1,000, as an incentive for the jeweler's continued business. The goldsmith refused to sell to the jeweler any of his rose gold ring designs or include the earring settings. If the jeweler sues the goldsmith for damages, how should the court handle the evidence of the alleged oral agreements? (A) The court should admit the evidence as to both the promise to include the earring settings and the option to choose a rose gold ring design. (B) The court should admit the evidence as to the promise to include the earring settings but not the option to choose a rose gold ring design. (C) The court should admit the evidence as to the option to choose a rose gold ring design but not the promise to include the earring settings. (D) The court should exclude the evidence as to both the option to choose a rose gold ring design and the promise to include the earring settings.

(B) The court should admit the evidence as to the promise to include the earring settings but not the option to choose a rose gold ring design.

A dancer signed a contract with a traveling circus to travel and perform as an aerialist for six months. The contract provided that the dancer would be paid $500 per week and would be guaranteed employment for the full six months, with an option to renew the contract for the next traveling season. Excited for the opportunity to perform for a traveling circus, the dancer turned down an invitation to dance with a theatre group for the same time period as the circus contract. After two weeks of traveling and dancing for the circus, the dancer sprained her ankle and was briefly hospitalized for one week. The circus was forced to hire another aerialist. After an additional week, the dancer's doctor gave her approval to return to work, but the circus refused to honor the remainder of the contract. The dancer brought an action against the circus for breach of contract. If the dancer wants to recover the highest possible amount of damages, which of the following is the dancer's best legal theory? (A) The dancer detrimentally relied on the contract by declining the other dancing job. (B) The dancer's failure to perform for two weeks was not a material breach of the contract. (C) The dancer's performance of the terms of the contract was impracticable given her injury. (D) The dancing contract with the circus is legally severable into weekly units.

(B) The dancer's failure to perform for two weeks was not a material breach of the contract. *Note:* Under the doctrine of promissory estoppel, a party's detrimental reliance may serve as an alternative basis for recovery when no valid contract was formed. BUT since the dancer and the circus formed a valid contract, this doctrine does not apply

A maker of handwoven rugs contracted with a supplier to provide yarn made from sheep's wool. The written contract specified that, for four years, the supplier would provide the rugmaker with 2,000 spools of yarn made from 100% sheep's wool per month, at $10 per spool, for a total of $20,000. Two years into the contract, the supplier sent the rugmaker 2,000 spools of yarn made from 90% sheep's wool and 10% synthetic fiber. The rugmaker sent the supplier a check for $15,000 for the shipment, and added a clear note on the check stating that the payment was in full for the shipment but was $5,000 less due to the synthetic fiber in the yarn. The supplier promptly deposited the check, and then four months later filed suit against the rugmaker for the remaining $5,000. The supplier has submitted evidence of the written contract, and the rugmaker has submitted evidence of the deposited check. What is the rugmaker's best defense in this situation? (A) By depositing the check, the supplier was estopped from claiming that the rugmaker owed him an additional $5,000. (B) The rugmaker's and supplier's good-faith dispute over the yarn composition suspended the rugmaker's obligation to pay the remaining $5,000. (C) The supplier deposited the check for $5,000 less than the contract price, thereby discharging the rugmaker of any further duty to pay the remaining amount for that month's shipment. (D) The supplier's act of knowingly depositing the check for $15,000 was a novation that relieved the rugmaker from any further liability.

(B) The rugmaker's and supplier's good-faith dispute over the yarn composition suspended the rugmaker's obligation to pay the remaining $5,000. *Note:* The check clearly stated that it was being tendered as payment in full for the supplier's shipment of the lesser-quality yarn. The supplier then obtained payment by depositing the $15,000 check. Therefore, the rugmaker's best defense is that there was an accord and satisfaction that discharged the rugmaker of any further duty to pay the remaining $5,000 for the shipment.

The owner of a restaurant who highlighted local ingredients when creating his menu bought cheese and other dairy products from a local dairy farmer. The owner and the farmer had entered into written requirements contracts each spring for the past 10 years. In the winter of the tenth year, the farmer purchased a substantial amount of new dairy cows and expanded his farming capabilities. He notified all customers that he would have a higher volume and amount of available products the following spring and would adjust deliveries accordingly. The owner responded with a date he wished the products to be delivered, as per custom, but said nothing else. On the agreed-upon date, the farmer delivered substantially more products than he had customarily provided. The owner attempted to accept half of the shipment, as that was roughly his customary quantity, but the farmer stated that the products were already packaged and that the owner should have spoken up after receiving the notice from the farmer. The owner then rejected the shipment in its entirety. Did the owner breach the contract with the farmer as to this shipment? (A) No, because no contract existed, as the parties did not agree to a quantity. (B) Yes, because the owner rejected the shipment in its entirety. (C) Yes, because the owner should have given the farmer time to cure the nonconformity. (D) Yes, because the owner rejected the shipment in its entirety.

(B) Yes, because the owner rejected the shipment in its entirety.

An honest dispute developed between a condominium owner and a plumber over whether plumbing installed in the kitchen and bathrooms of the condominium satisfied contractual specifications. If the plumbing met those specifications, the condominium owner would owe the plumber $15,000 under the terms of the contract. The condominium owner offered to pay the plumber $10,000 in satisfaction of the owner's contractual obligations if the plumber replaced the plumbing in the kitchen with another grade of pipe. The plumber accepted the condominium owner's offer. After the plumber replaced the kitchen plumbing, the condominium owner refused to pay the plumber. In a breach-of-contract action brought by the plumber, the fact finder determined that the plumbing originally installed by the plumber did satisfy the contract specifications. The fact finder also determined that the plumber and the condominium owner entered into a substitute agreement under which the owner failed to deliver the required performance. What is the maximum amount that the plumber can recover in damages from the condominium owner? (A) $25,000. (B) $15,000. (C) $10,000. (D) Nothing

(C) $10,000. *Note:* Fact finder determined this was a SUBSTITUTE agreement NOT an accord agreement. Substitutes are more formal and completely discharge the original agreement, therefore, can only sue on the new contract.

Pursuant to its current written contract with a boutique retailer of bath products, a soap maker was to supply 100 bars of soap each month. The contract called for payment upon delivery and specified that failure to pay would trigger an additional interest charge on the amount due. The retailer failed to timely pay for the first and second deliveries, and the soap maker imposed an additional interest charge of 10% of the amount due, which the retailer paid without objection. Under a previous contract between the retailer and the soap maker, which contained a similar clause, the soap maker had imposed an additional interest charge of 5% each of the three times that the retailer had failed to make a timely payment. However, in its dealings with other customers, the soap maker has imposed an interest charge of 6% of the amount due. There is no consistent practice among manufacturers of goods in general or soap in particular as to the rate of interest imposed on the unpaid amount due. This is true regardless of the type of retailer's boutique or otherwise. In a suit by the soap maker against the retailer for the unpaid amount due under the contract, what interest rate will the finder of fact likely determine formed part of the contract? (A) 5%, the interest rate that reflects the most recent course of dealings between the soap maker and the retailer. (B) 6%, the interest rate that reflects the course of dealings between the soap maker and its other customers. (C) 10%, the interest rate that reflects the course of performance under the current contract. (D) A reasonable rate of interest, as there is no common trade practice upon which the court can rely.

(C) 10%, the interest rate that reflects the course of performance under the current contract.

A homeowner entered into oral contracts with both a painter and a landscaper to perform services at his home. The landscaper was the first to begin the services, and shortly after he began to work, he realized that the projected cost of the project would increase dramatically. After the homeowner learned how high the cost of the landscaping services was going to be, he called the painter to tell her that he could not go through with their contract at that time. The painter stated that she had already purchased a standard set of paintbrushes to paint his home, as well as glass necessary to create a custom mosaic on a back corner of the house, according to the homeowner's specifications. She had also paid for a temporary city permit to park her utility van on the residential street where the homeowner lived. In a suit by the painter against the homeowner, which of the following is the painter LEAST likely to recover? (A) The contract price minus the market cost of performance. (B) The cost of the glass for the mosaic. (C) The cost of the paintbrushes. (D) The cost of the parking permit.

(C) The cost of the paintbrushes. *Note:* recovery of reliance damages may be reduced by the amount spent by the nonbreaching party on materials that could reasonably be repurposed for another job

A homeowner entered into a written contract with a contractor to construct an elaborate tree house among the large trees located in the homeowner's backyard. After commencing construction of the tree house, the contractor discovered that one of the trees intended to be used as support for the tree house had a relatively common fungal infection in its core that would cause the strength of the tree's branches to falter if left untreated. Neither the homeowner nor the contractor had knowledge of the fungal infection when they entered into the contract, but the contractor knew that such infections were common in the area and did not request an inspection of the trees before entering the contract. The contractor also knew that treatment was available at a high cost, but that even after treatment, he would need to create additional heavy-load-bearing supports for the tree at a substantial cost. When the contractor informed the homeowner that he would not perform under the contract unless the homeowner provided at least 75% of the additional costs needed to make the structure safe, the homeowner refused to pay the additional amount. The homeowner then sued the contractor for breach of contract. What is the likely result? (A) The contractor wins, because his performance was discharged due to impracticability. (B) The contractor wins, because neither party was aware of the fungal infection. (C) The homeowner wins, because the contractor assumed the risk of the fungal infection. (D) The homeowner wins, because the fungal infection did not render performance impossible.

(C) The homeowner wins, because the contractor assumed the risk of the fungal infection.

A licensing agreement provided that a manufacturer could use an inventor's patent in manufacturing its products for 10 years. Immediately thereafter, the inventor assigned his rights to receive payments pursuant to the licensing agreement to a corporation. The inventor did not receive compensation for this assignment. The inventor, upon his death five years later, devised his stock in the corporation to his daughter and all of his remaining property to his son. To whom should the manufacturer make its payments under the licensing agreement? (A) The corporation. (B) The inventor's daughter. (C) The inventor's son. (D) No one, because the manufacturer's obligation to make payments under the licensing agreement terminated upon the death of the inventor.

(C) The inventor's son. *Note:* A revocable assignment is automatically revoked upon the death, incapacity, or bankruptcy of the assignor.

The owner of a log cabin contracted with a carpenter to construct a wooden spiral staircase in his cabin for $100,000. Because the owner wanted to support sustainable building practices, the contract included a provision requiring the carpenter to obtain all of the construction materials for the staircase using reclaimed wood from local sources. After the carpenter began construction, he discovered that there was a severe local shortage of reclaimed wood. The carpenter informed the owner that he could obtain the reclaimed wood quickly and affordably from an overseas distributor, or that he could wait approximately one year for a local supply to become available at a considerably higher cost. The owner told the carpenter to do whatever he had to do to complete the staircase within a month. For this reason, the carpenter finished the staircase with the reclaimed wood obtained from overseas. The value of the staircase as constructed was $80,000, and the cost of renovating the staircase to replace the overseas reclaimed wood with local reclaimed wood would be $30,000. When the carpenter demanded payment under the contract with the owner, the owner refused to pay. Which of the following arguments best supports the highest amount the carpenter can recover against the owner in a contract action? (A) The carpenter substantially performed under the contract by completing the staircase. (B) The owner was unjustly enriched and the carpenter is entitled to quantum meruit recovery. (C) The owner effectively elected to waive the condition requiring local reclaimed wood. (D) The shortage of local reclaimed wood made strict performance impracticable.

(C) The owner effectively elected to waive the condition requiring local reclaimed wood.

In June, a local chef learned of a new business that opened in the area. Hoping to attract the business as a new client, the chef sent the business an offer consisting of a catalog of menus available through his catering service and a form letter that he sent to all new businesses in the area. The letter was signed by the chef and included the following language: "Welcome! I specialize in creating delicious meals with local and organic ingredients, and I would be honored to be your catering source for all your business, promotional, and personal needs! To welcome you to the community, I would like to offer you a 25% discount off my catalog prices on any three-course meal order, for up to 100 people, submitted this calendar year. I hope to hear from you soon, and I look forward to doing business with you!" No communication occurred between the parties until the end of November, when the business faxed an order form to the chef requesting a catered meal for 60 people at a promotional event for a 25% discount. The chef refused to provide the business with the catered meals at a 25% discount. As a result, the business sued the chef for breach of contract. The court found that both parties are merchants with respect to this transaction. Is the business likely to succeed in its action? (A) No, because the business's power of acceptance terminated after a reasonable period of time. (B) No, because the form letter was only an invitation to deal. (C) Yes, because the chef had not revoked the offer before the end of the calendar year. (D) Yes, because the signed promotional letter created a firm offer.

(C) Yes, because the chef had not revoked the offer before the end of the calendar year. *Note:* Under the UCC firm-offer rule, an offer to buy or sell goods is irrevocable if the offeror is a merchant and provides a signed writing containing assurances that the offer will remain open. However, the period of irrevocability cannot exceed three months unless the offeree gives consideration. Since the business provided no such consideration, the chef's June offer was irrevocable until September. The chef was then free to revoke the offer but did not do so . . . Unclear if UCC or common law applies here, but wouldn't matter either way.

An elderly man owned a run-down diner that was in financial trouble. The man wanted to retire, but he could not find a buyer for the diner. The man's son decided to help the man. The son promised to pay the man $5,000 per month to cover all expenses associated with the man's cost of living. In addition, the son would cover the costs associated with keeping the diner running. In exchange, the man promised to relinquish total control of the diner to the son's girlfriend. The man and his son executed a valid, written contract, which stated that the agreement would take effect 30 days after the contract was executed. The son then told his girlfriend the good news. The girlfriend was excited about the opportunity to revamp the diner. She immediately ordered new dinnerware, created and printed out new menus, and paid $3,000 upfront to an interior decorator to help redesign the diner's interior. She spent $5,000 in total. The girlfriend also told the man and the son what she had done to help revamp the diner's image. Two weeks before the man was to relinquish total control of the diner to the girlfriend, the son and the girlfriend broke off their relationship. When the time came to relinquish control of the diner to the girlfriend, the man and the son orally agreed that the man would instead give control to the man's daughter. If the girlfriend sues the son for breach of contract, will she likely succeed? (A) No, because the girlfriend was only a donee beneficiary of the contract. (B) No, because the girlfriend's benefit was only incidental to the benefit conferred on the man. (C) Yes, because the girlfriend spent $5,000 in detrimental reliance on the contract. (D) Yes, because the modification of the contract to give control of the diner to the daughter was not in writing.

(C) Yes, because the girlfriend spent $5,000 in detrimental reliance on the contract.

A sister convinced her brother that they should open a small coffee shop. Their friend, a guitarist, suggested bringing his band to play live music in order to attract customers. He did not request any payment, saying that the publicity would be good for the band. The siblings agreed, and the band started playing at the coffee shop weekly. The coffee shop became a success, in no small part due to the band's performances. When a businessperson offered to buy the coffee shop from the siblings, they orally agreed to each pay the guitarist $10,000 out of their share of the sale proceeds for his help in making the shop popular. The sister told the guitarist about their agreement. He was so delighted with it that he made a down payment on a new car. By the time the sale of the coffee shop was finalized, the brother had encountered financial difficulties. After the sale, the siblings signed a written contract stating that the sister would pay the guitarist $10,000 and her brother would pay him $5,000. If, after the sale, the brother pays the guitarist only $5,000, will the guitarist have a valid basis for an action against the brother for another $5,000? (A) No, because the guitarist was bound by the written modification of the contract made by the siblings. (B) No, because the guitarist was only a donee beneficiary of the oral contract between the siblings. (C) Yes, because the guitarist's reliance on the promised payment prevented the siblings from changing the obligations of their oral contract. (D) Yes, because the oral promise to pay $10,000 to the guitarist was made binding by the guitarist's valuable and uncompensated contributions to the business.

(C) Yes, because the guitarist's reliance on the promised payment prevented the siblings from changing the obligations of their oral contract.

A tenant rented a small cabin from a landlord. The lease provided that the tenant was permitted to make structural improvements to the cabin but that the tenant must pay for such improvements. Relying on this clause in the contract, the tenant contacted a contractor to install a loft in the cabin for $10,000. The tenant and the contractor agreed in a writing signed by both parties that payment would be due 30 days after the loft was completed. The contractor knew that the tenant was renting the cabin and sent the landlord a letter informing him of the impending construction on his property. The landlord received the letter and did not reply. The contractor completed the loft, which increased the market value of the cabin by $6,000. Ten days later and three months before the end of her lease, the tenant vacated the cabin and disappeared. Thirty days after the loft was completed, the contractor's bill remained unpaid. If the contractor has no remedy quasi in rem under the jurisdiction's mechanic's lien statute, which of the following will give the contractor the best chance of recovery in personam against the landlord? (A) An action as a third-party beneficiary to the lease. (B) An action based on an implied-in-fact contract. (C) n action based on promissory estoppel. (D) An action in quasi-contract for the benefit conferred on the landlord.

(D) An action in quasi-contract for the benefit conferred on the landlord. *Note:* A plaintiff can recover under a quasi-contract theory—despite having no contractual relationship with the defendant—if the plaintiff conferred a non-gratuitous benefit on the defendant that resulted in unjust enrichment.

An independent trucker and a manufacturer entered a written contract for the delivery of a farming implement from the manufacturer to a farmer. Under the terms of the contract, the trucker promised "to deliver a farming implement from the manufacturer to the farmer," and in exchange, the manufacturer promised "to pay the trucker if the trucker delivers the implement directly to the farmer after picking it up." The trucker picked up the implement but, instead of driving directly to the farmer, drove 100 miles out of his way to pick up another item from a third party before delivering the implement to the farmer. The manufacturer, unaware that the trucker had failed to deliver the implement directly to the farmer, refused to pay the trucker. Who has breached this contract? (A) Both the trucker and the manufacturer. (B) The trucker only. (C) The manufacturer only. (D) Neither the trucker nor the manufacturer.

(D) Neither the trucker nor the manufacturer. *Note:* Here, the trucker fully performed his promise to deliver a farming implement from the manufacturer to the farmer, so the trucker has not breached the contract (Choices A & B). However, the manufacturer's duty to pay the trucker was expressly predicated on the trucker's direct delivery of the implement to the farmer. The trucker did not fully satisfy this condition precedent because he took a 100-mile detour, so the manufacturer's performance is not due (Choice C). Therefore, neither party has breached the contract.

A mining company contracted with a railroad to transport 10,000 tons of coal from the company's mines to a power company at a cost of $100,000. The railroad told the mining company that the coal would arrive at the power company on June 1, but the contract contained a clause that the railroad would not be liable for any losses suffered by the mining company as a result of a late shipment. The railroad was aware that the mining company had contracted with the power company to deliver the coal on June 1, and pursuant to standard industry custom, the price to be paid by the power company decreased by $1 per ton for each day that the coal was late. The shipment of coal did not reach the power company until June 11, and the railroad had no justification for the 10-day delay. Because of the delay, the mining company lost $100,000 in revenue from the sale. The mining company filed suit against the railroad for breach of contract, claiming $100,000 in damages. Is the mining company likely to succeed in its claim? (A) Yes, because the damages that the mining company would suffer from the railroad's delay were known to the railroad prior to shipment of the coal. (B) Yes, because consequential damages cannot be excluded by a merchant. (C) No, because the claimed damages are disproportionate to the original contract price between the railroad and the mining company. (D) No, because the contract between the mining company and the railroad protected the railroad from liability for losses suffered by the mining company due to a late shipment.

(D) No, because the contract between the mining company and the railroad protected the railroad from liability for losses suffered by the mining company due to a late shipment.

A widow offered to sell her deceased husband's wedding ring to a friend at its fair market price. Although the widow did not objectively indicate otherwise, the friend knew that the widow would never actually be able to part with the ring. Regardless, the friend agreed to buy the ring. Does the friend's agreement constitute a valid acceptance of the widow's offer? (A) Yes, because the price for the ring was reasonable. (B) Yes, because, as judged objectively, the widow offered to sell the ring. (C) No, because the widow lacked the subjective intent to sell the ring. (D) No, because the friend was aware that the widow lacked the subjective intent to sell the ring.

(D) No, because the friend was aware that the widow lacked the subjective intent to sell the ring.

On behalf of an elementary school, the school's principal entered into a written contract to purchase shirts for the school's students for a total cost of $5,000. The name of the school was to be imprinted on the back of each shirt. After the seller had acquired the shirts but before they had been imprinted, the principal emailed the seller and requested, in good faith, that a picture of the school's mascot be imprinted on the front of the shirts at no additional cost. In a reply email, the seller agreed to the principal's request. When the shirts arrived at the school, only the school's name appeared on the back of each shirt; the school's mascot did not appear on the shirt. The principal rejected the shirts and refused to pay for them. The seller sued the school for breach of contract. Who will prevail? (A) The seller, because the shirts were specially manufactured goods. (B) The seller, because the seller did not receive consideration for the modification. (C) The school, because the school was not a merchant. (D) The school, because of the perfect tender rule

(D) The school, because of the perfect tender rule

On January 5, a buyer and a seller contracted for the delivery of 100 widgets if they could be delivered by February 20. The agreement was made in a writing signed by both parties and provided that the buyer would pay the contract price of $1,000 upon delivery. On February 3, the buyer and the seller orally agreed to postpone delivery until March 1. However, when the widgets arrived on March 1, the buyer refused to accept or pay for the widgets. If the seller sues the buyer for breach of contract, who is most likely to succeed in the action? (A) The buyer, because any modification of the parties' contract must satisfy the statute of frauds. (B) The buyer, because the agreement on February 3 was not supported by consideration. (C) The seller, because the contract modification on February 3 was immediately binding on both parties. (D) The seller, because the oral agreement on February 3 waived the February 20 delivery date

(D) The seller, because the oral agreement on February 3 waived the February 20 delivery date *Note:* The parties' oral modification was subject to the statute of frauds because the contract, as modified, was for the sale of goods for $500 or more. However, the statute of frauds will not prevent the enforcement of an oral modification when, as here, (1) the promisor should have reasonably expected to—and did—induce action or forbearance on the modification and (2) injustice can be avoided only by enforcing the

A homeowner called a septic cleaning company and made arrangements for the company to remove the waste from the septic tank on the homeowner's property. After completing the job, the company mailed the homeowner a bill for $500, the fair market value of the services rendered by the company. The bill indicated that payment was due in 60 days. Upon receiving the bill, the homeowner called the company and informed it that, since he had lost his job due to an accident, he would not be paying the company's bill. The following day, the company filed suit for breach of contract. Ten days later, the homeowner moved to dismiss the suit. The court granted the motion, dismissing the suit without prejudice. Is the court's dismissal proper? (A) No, because the parties' dealings created an implied-in-fact contract. (B) No, because the homeowner has repudiated the contract. (C) Yes, because the company failed to demand assurances. (D) Yes, because the company's complaint is premature.

(D) Yes, because the company's complaint is premature.

A manufacturer of T-shirts contracted with a brand-new clothing store to sell the store 1,000 T-shirts per month for a period of two years. The clothing store's signature color for its clothing was an orange-tinted red color, called coquelicot, which is very difficult to replicate on a consistent basis. The final, written contract specified that any T-shirts that were not coquelicot could be returned, but it was silent with regard to the return of T-shirts for other reasons. One year into the contract, the store decided to switch to coquelicot-colored baseball caps instead of T-shirts. As a result, the store returned the most recent shipment of coquelicot-colored T-shirts to the manufacturer and demanded a refund. The manufacturer refused to grant the refund, and the store sued the manufacturer for damages. At trial, the manufacturer introduced the contract, which clearly stated that T-shirts that were not coquelicot could be returned. The store then attempted to introduce evidence that it had returned coquelicot-colored T-shirts to the manufacturer over the past year without objection and received a refund. Is this evidence admissible? (A) No, because evidence regarding the return of the T-shirts violates the parol evidence rule. (B) No, because the express term in the contract regarding the return of T-shirts takes precedence over the course of performance. (C) Yes, because the evidence can reasonably establish the parties' course of dealing on this issue. (D) Yes, because the evidence is relevant to show that the manufacturer had accepted the return of coquelicot-colored T-shirts in the past.

(D) Yes, because the evidence is relevant to show that the manufacturer had accepted the return of coquelicot-colored T-shirts in the past. *Note:* Course of dealing is a sequence of conduct concerning previous contracts between the parties that can reasonably establish a common basis of understanding for interpreting their conduct. Here, there is no indication that the manufacturer and the brand-new clothing store had prior contracts, so there is no evidence of the parties' course of dealing

A nonprofit organization that provides summer camps for at-risk youth hosted a walkathon to raise money to provide stipends for summer-camp expenses to 350 low-income families. The organization solicited various businesses to sponsor the walkathon, including an executive of a large food-services company. The executive wanted the organization to hire his food-services company to provide food services to the organization's summer camps when the organization's contract with their current food-services provider expired in one month. Hoping to catch the organization's attention, the executive pledged that his company would match all of the sponsors' pledges. Because he was a business sponsor, the executive was required to fill out and sign a writing stating this promise. The walkathon was a success, and the total amount raised, excluding the executive's pledge, was $42,000. After collecting the pledge money from all of the sponsors except for the executive, the organization was able to issue stipends to all 350 families. The organization planned to use the executive's pledge to repair some of the older cabins at the summer camp. Prior to being asked for his matching pledge, the executive learned that the contract of the organization's current food-services provider had been renewed for another five years. The executive subsequently repudiated his promise to match all of the sponsors' pledges. If the nonprofit organization sues the executive for $42,000, will it likely succeed? (A) No, because the organization did not actually rely to its detriment on the executive's promise to match all of the sponsors' pledges. (B) No, because there is no substantial injustice since the organization was able to issue all 350 stipends without the executive's pledge. (C) Yes, because the executive acted in bad faith when he repudiated his promise to match the pledges of the other sponsors. (D) Yes, because the executive's promise to match the pledges of the other sponsors is enforceable without proof of detrimental reliance or substantial injustice.

(D) Yes, because the executive's promise to match the pledges of the other sponsors is enforceable without proof of detrimental reliance or substantial injustice. *Note:* when it comes to charitable subscriptions most courts find that proof of detrimental reliance is not required. Therefore, a charitable institution need only demonstrate that the promisor reasonably expected to induce reliance on the promise.

A general contractor learned that a company was accepting bids for a lucrative construction project involving a high-rise building. The general contractor contacted a number of subcontractors and informed them that he would be accepting bids for the electrical work on the project for the next week. After receiving a number of bids from subcontractors, the general contractor selected a bid from a young subcontractor, which was the lowest bid but still within a reasonable range of the other bids. The general contractor used that sub-bid in calculating his overall bid on the construction project. Soon after submitting his sub-bid to the general contractor and after the general contractor had submitted his overall bid to the company, the young subcontractor realized that he could have charged more for his services based on their market value. The company ended up choosing the general contractor's bid for the project, and later that same day, the young subcontractor told the general contractor that he was revoking his sub-bid for the electrical work. As a result, the general contractor had to use a different subcontractor to perform the work at a cost $3,000 higher than the young subcontractor's bid. In a suit to recover the $3,000 from the young subcontractor, is the general contractor likely to prevail? (A) No, because the young subcontractor's sub-bid was an offer that could be freely revoked. (B) No, because the young subcontractor's sub-bid was lower than the market value of similar services. (C) Yes, because an enforceable contract was formed when the general contractor used the young subcontractor's sub-bid in his overall bid on the project. (D) Yes, because the general contractor detrimentally relied on the young subcontractor's sub-bid.

(D) Yes, because the general contractor detrimentally relied on the young subcontractor's sub-bid.

A nature magazine advertised a photography contest in its January issue, offering "$1,000 to any subscriber who sends us a photograph of the rare Florida Grasshopper Sparrow that we use for the cover of our May issue. Only submissions meeting our technical specifications and received by April 1 will be considered." The only subscriber to respond to the advertised contest sent the magazine a photograph of the sparrow that met the magazine's technical specifications. The photograph arrived on March 15. However, due to an ecological disaster that occurred in early April, the magazine decided to use a different picture on the cover of its May issue. The magazine used the subscriber's picture on the cover of its June issue and has refused to pay $1,000 to the subscriber on the ground that it was not used on the May cover. Is the subscriber likely to prevail in a breach-of-contract action against the nature magazine? (A) No, because the subscriber's photograph was not used on the cover of the May issue. (B) No, because the subscriber failed to adequately notify the magazine of his acceptance. (C) Yes, because all of the express conditions of the offer have been satisfied. (D) Yes, because the magazine prevented the publication of the photograph.

(D) Yes, because the magazine prevented the publication of the photograph. *Note:* A condition precedent will be excused if a party whose performance is subject to that condition wrongfully prevents or interferes with its occurrence—e.g., by breaching the duty of good faith and fair dealing (which includes the duty to cooperate) that is implied in every contract. When this occurs, the condition no longer needs to occur for the interfering party's performance to become due.

On November 1, the owner of a yacht posted a flyer at a local coffee shop reading, "Yacht for Sale: Make me an offer!" The flyer also included the owner's phone number. A buyer called the owner on November 3 to ask how much the owner wanted for the yacht. The owner said, "Well, I'd hate to part with it for less than $55,000, but if you can pay me $50,000 by November 20, I'd sell it to you. I'll hold onto the yacht for you until then." Elated, the buyer took steps to obtain a loan by November 20. On November 15, a second buyer called the owner and offered to buy the yacht for $60,000. The owner immediately accepted, and the second buyer picked up the yacht the next day. On November 20, having obtained a loan, the first buyer visited the owner with a check for $50,000. The first buyer then learned the owner had already sold the yacht. Can the first buyer bring a successful suit against the owner for breach of contract? (A) No, because the owner's statement to the first buyer was only an invitation to deal. (B) No, because the second buyer offered more money for the yacht than the first buyer agreed to pay. (C) Yes, because the owner promised to keep the offer open for a specific period of time. (D) Yes, because the owner's offer to the first buyer was still outstanding on November 20.

(D) Yes, because the owner's offer to the first buyer was still outstanding on November 20.

A private port authority contracted with a company that manufactures and operates cranes to assist with loading and unloading containers from ships docked at the port. One of the company's cranes was defectively manufactured. Due to this defect, a container was dropped, injuring an individual below. The individual sued the port authority, alleging negligence. Neither the individual nor the port authority notified the crane company of this lawsuit. The port authority settled its claim with the individual before trial for a reasonable amount. The port authority seeks to recover the cost of the settlement from the crane company under a breach-of-contract action. Is the port authority likely to prevail? (A) No, because damages for personal injury cannot be recovered in a breach-of-contract action. (B) No, because the port authority settled the lawsuit rather than litigating the matter to a final judgment. (C) Yes, because the crane company is liable for all consequences flowing from its breach of the contract. (D) Yes, because the settlement was reasonably foreseeable at the time the contract was formed.

(D) Yes, because the settlement was reasonably foreseeable at the time the contract was formed.

A woman sent an offer to sell her office printer to her friend for $450. In her offer, the woman said that the friend was welcome to mail her acceptance to the woman's business address but that the friend had to let the woman know within the next week whether she was interested. The friend needed an office printer, so she immediately accepted the woman's offer by mailing a letter to the woman's home address. Later that same week, thinking that the friend was not interested, the woman sold the office printer to a different person. A few days later, after the one-week deadline had passed, the friend's letter was delivered to the woman's house. The woman called the friend thereafter and told her that the office printer had already been sold. Will the friend likely succeed in an action for breach of contract? (A) No, because the offeror determines the manner and means by which an offer may be accepted. (B) No, because the woman did not receive the friend's acceptance letter until after the one-week deadline had passed. (C) Yes, because the offer was irrevocable for at least one week. (D) Yes, because the woman did not specify that mailing an acceptance to her business address was the only mode of acceptance.

(D) Yes, because the woman did not specify that mailing an acceptance to her business address was the only mode of acceptance.

Until the repudiating party's next performance is due, he may retract the repudiation so long as the nonrepudiating party has not yet . . .

(i) accepted the repudiation, (ii) acted in reliance on the repudiation, or (iii) sued the repudiating party for breach.

Rule re: notice of acceptance in a unilateral contract

*Offeree NOT required to give notice after completing performance UNLESS:* - Offeror wouldn't lear of performance with reasonable certainty and promptness; OR - Offer requires notice *Notice required but NOT provided - offeror's duty is discharged, UNLESS:* - Offeree exercises reasonable dilligence to give notice; - Offeror learns of performance within reasonable time; OR - Offer indicates notice of acceptance is not required

What are the two potential rules when looking at a mixed contract for goods and services?

- *"All-or-nothing" rule* - you CANNOT be in two universes at the same time, so mixed contracts must fall into one universe or the other . . . EXCEPT for divisible contracts - *"Predominant purpose" rule - ask whether a good or service plays a bigger role in the contract and apply the law accordingly.

What is an implied-in-fact contract?

- A contract that results when a person's assent to an offer is inferred solely from the person's conduct. - To be contractually bound, the person must: (1) intend the conduct, AND (2) know or have reason to know that the conduct may cause the offeror to believe the offer was accepted.

Rules re: reinitiating promise to pay debt after SOL has run

- A new promise to pay a debt after the SOL has run IS enforceable without any new consideration - BUT IF new promised amount differs (i.e.: is less than the original debt), can only recover new promised amount. - MOST STATES require that the new promise be in writing and signed by debtor.

Rule re: suspension of excuse of a condition via election

- A party who chooses to continue with a contract AFTER a condition is not met effectively elects to waive that condition as justification for that party's own non-performance - BUT party may be able to seek damages resulting from the non-occurrence of the condition

Rule re: suspension or excuse of condition via waiver

- A party whose duty is subject to the condition can waive (either by words or conduct) - A condition that is *material* can be reinstated - A condition that is NOT material MAY be reinstated IF: (1) waiving party communicates retraction of the waiver before condition is due to occur (2) other party has not already detrimentally relied on the waiver. - *Common law*: only non-material condition can be waived without consideration - *UCC*: any condition can be waived in GOOD-FAITH without consideration (BUT modified contract might be subject to SOF if over $500)

What is an "invitation to deal"?

- A preliminary communication that reserves a final right of approval with the speaker. - It does NOT convey the power of acceptance to the other side . . . so NOT an offer

Mailbox rule for rejection following acceptance

- Acceptance will control EVEN IF offeror receives rejection first - BUT IF offeror detrimentally relies on rejection then offeree estopped from enforcing the contract

What is the doctrine of frustration of purpose?

- Come into play when an unexpected event arises that destroys one party's purpose in entering into the contract but performance of the contract is not rendered impossible. - The frustrated party is able to rescind the contract without paying damages *Note:* the event that arises must NOT be the fault of the party, and its nonoccurrence must have been a basic assumption to the contract.

Mailbox rule for options and other irrevocable offers

- Does NOT apply - Acceptance must be RECEIVED by offeror by a certain date or before offer expires

Mailbox rule for revocations

- Does NOT apply - Revocation is effective upon receipt

Rule re: suspension or excuse of a condition via wrongful interference

- Duty of good faith and fair dealing, which is implied in any contract, includes the duty not to hinder the other party's performance AND a duty to cooperate when necessary - IF party whose duty is subject to the condition wrongfully interferes with the occurrence of the condition THEN the condition is excused and the party wrongfully interfering has an absolute duty to perform (i.e.: "doctrine of prevention")

Ways to discharge contractual obligations include . . .

- Full performance of contractual obligations - Impossibility, impracticability, or frustration of purpose - Release (in writing only) - Mutual rescission - Substituted contract - Contract or covenant not to sue - Accord & satisfaction - Novation

Rule re: revocation of general offers (to large number of people)

- General offers are revocable ONLY by notice given at at least the same level of publicity as offer - Effective EVEN IF potential offeree acts in reliance on offer

When is the warranty of fitness for a particular purpose implied and how is it disclaimed?

- Implied whenever the seller has reason to know: (1) the buyer has a particular use for the goods, AND (2) the buyer is relying upon the seller's skill to select the goods - A disclaimer must be in writing AND conspicuous

When is the implied warranty of merchantability implied and how can it be disclaimed?

- Implied whenever the seller is a merchant - Can be disclaimed orally BUT MUST use the term "merchantable" and must be conspicuous if in writing.

Mailbox rule for acceptance following rejection

- Mailbox rule does NOT apply - First one received (i.e., in possession of offeror or her agent or deposited in mailbox) will prevail - Offeror need NOT actually read the received communication

Quasi-contract

- NOT a contract, but rather a restitution remedy designed to prevent unjust enrichment - Usually arises when there is an unenforceable agreement, but one side has realized a benefit *Elements:* (1) Plaintiff has conferred a measurable benefit onto defendant (2) Plaintiff acted without gratuitous intent (reasonably expects to be paid) (3) Defendant knowingly accepted the benefit OR OR plaintiff had a reasonable excuse for not giving defendant an opportunity to decline (4) Defendant would be unjustly enriched if plaintiff is not compensated

What is fraud in the inducement?

- Occurs when a fraudulent misrepresentation is used to induce another to enter into a contract. - Contract is voidable by the adversely affected party IF she justifiably relied on the misrepresentation in entering into the contract.

What is fraud in the factum (execution)?

- Occurs when the fraudulent misrepresentation prevents a party from knowing the character or essential terms of the transaction. - No contract is formed . . . apparent contract is void

General rules re: revocations of offers

- Offer can be revoked ANY TIME prior to acceptance . . . EVEN IF it states it will remain open for a specific amount of time - NOT effective until communicated - Revocation sent by mail is NOT effective until received (i.e., mailbox rule NOT applicable here)

A party who substantially performs contractual obligations can generally recover ____________________________________________. In contrast, a party who commits a material breach can recover only ____________________________________________.

- The contract price minus any cost that the nonbreaching party incurred to receive full performance - For any benefit conferred on the nonbreaching party minus damages for the breach

When is the doctrine of anticipatory repudiation applicable, and in what manner must the repudiation be made?

- The doctrine is applicable when a promisor repudiates the promise BEFORE the time for performance is due. - Repudiation must be clear and unequivocal, may be by conduct or words, and, if a statement, must be made to the promisee, a third-party beneficiary, or assignee of the promise.

If the seller of goods makes a nonconforming tender or tenders nonconforming goods under one segment of an installment contract, the buyer can reject ONLY IF . . .

- The nonconformity *substantially* impairs the value of that shipment to the buyer AND CANNOT be cured - BUT IF the seller makes *adequate assurances* that he can cure the nonconformity THEN buyer MUST accept the shipment *Note*: exception to the perfect tender rule

Under the UCC, what is required by the "perfect tender rule"?

- The perfect tender rule requires perfect goods and perfect delivery. - "Perfect" means in accordance with the contract provisions or in accordance with the UCC if the contract is silent on tender.

When are objective and subjective standards each used to determine whether a condition is satisfied?

- The preferred method is an objective standard based upon whether a reasonable person would be satisfied. - - When the aesthetic taste of a party determines whether the other party's performance is satisfactory, satisfaction is determined under a subjective standard.

Rule re: nonconforming goods shipped as acceptance

- The shipment of nonconforming goods in response to an offer is both an acceptance AND a breach . . . UNLESS seller seasonably notifies buyer that goods are an accommodation (i.e., a counteroffer) - Buyer may then accept OR reject the nonconforming goods

When is a plaintiff entitled to restitutionary recovery, and how is it measured?

- When a defendant is unjustly enriched by the plaintiff, restitution generally allows the plaintiff to recover on the benefit conferred by the plaintiff upon the defendant. - Generally, the benefit is measured by either (i) the reasonable value of the defendant obtaining that benefit from another source, or (ii) the increase in the defendant's wealth from having received that benefit.

Your law school bookstore offers to sell you a contracts textbook for $100 and it promises via a signed writing not to revoke this offer for one week. Ten days later, you stop by the bookstore to accept the offer. Can you still accept?

- Yes as long as a reasonable amount of time has not passed *Note:* Just because a firm offer ends, the offer is not automatically revoked, it just means that the offeror COULD revoke now

What is the difference between a void and a voidable contract?

A *void* contract results in the entire transaction being regarded as a nullity . . . the contract is unenforceable. A *voidable* contract opperates as a valid contract UNLESS and until one of the parties takes steps to avoid it.

Define consideration

A bargained-for exchange of legal value between the parties

Define condition precedent

A condition that precedes the obligation to perform

What is a requirements contract?

A contract in which a buyer agrees to purchase all of its requirements for an item from one seller (the other party) *Note:* the consideration/legal detriment is giving up the legal right to purchase from others

Rule re: suspension or excuse of a condition via estoppel

A party who indicates that a condition will NOT be enforced may be estopped from using that condition as a defense IF the other party reasonably relied on that party's words or conduct that the condition would be waived.

For contracts for the sale of goods, a defaulting BUYER is entitled to . . .

A refund of any payments made on the contract LESS damages provable by the seller AND either: (1) the amount to which the seller is entitled by virtue of an enforceable liquidated damages clause, OR (2) a penalty of 20% of the value of the total performance for which the buyer is obligated under the contract OR $500, whichever is smaller

How is an offer for a unilateral contract accepted?

Acceptance for an offer for a unilateral contract requires complete performance. *Note:* once performance has begun, the unilateral offer is irrevocable for a reasonable period of time to allow for complete performance UNLESS there is a manifestation of the contrary intent.

Mailbox rule for acceptance

Acceptance is effective when sent (NOT upon receipt) UNLESS offer provides otherwise

Rule re: advertisements as offers

Advertisements are ONLY an INVITATION to receive offers . . . BUY MAY qualify as an offer IF: (1) sufficiently specific AND limited to who can accept, OR (2) associated with a stated reward

Under the common law, what terms must be covered for a contract to be formed?

All *essential* terms (e.g.: parties, subject matter, price, and quantity)

Define acceptance

An acceptance is an objective manifestation by the offeree to be bound by the terms of the offer.

When is an acceptance effective under the mailbox rule?

An acceptance that is mailed properly (i.e.: correct postage and address) within the allotted response time is effective when *sent* as opposed to on receipt UNLESS the offer provides otherwise

What are the rights of an assignee?

An assignee takes all of the rights of the assignor as the contract stands at the time of the assignment BUT she takes subject to any defenses that could be raised against the assignor.

What is the difference between an assignment and a delegation?

An assignment is the transfer of rights under a contract, and a delegation is the transfer of duties and obligations under the contract.

How is an offer for a bilateral contract accepted?

An offer for a bilateral contract can be accepted with either a return promise OR by starting performance

Define offer

An offer is an objective manifestation of a willingness by the offeror to enter into an agreement that creates the power of acceptance in the offeree.

UCC firm offer rule

An offer is irrevocable (for a reasonable time but no more than 3 months) IF offeror is a merchant (or any business person), and assurances (in authenticated writing) are made that the offer will remain open.

Rule re: language in an offer

An offer must contain WORDS OF PROMISE, undertaking, or commitment AND be TARGETED to a number of people who could actually accept - IF return promise requested, THEN it is a bilateral contract - IF an action is requested, THEN it is a unilateral contract

Rule statement for anticipatory repudiation/breach

Anticipatory repudiation occurs before the time of performance is due when a party either unequivocally refuses to perform, or creates reasonable grounds for insecurity about his ability or willingness to perform

For the purposes of the firm offer rule, a merchant is . . .

Any business person, when the transaction is commercial in nature

What types of contracts are governed by the UCC?

Any contract involving the sale of goods

Under the common law, offeree must generally give ______________ for an option to be enforceable

Consideration

What is an output contract?

Contract in which the seller guarantees to sell all that she manufactures of a product to the buyer. *Note:* the consideration/legal detriment is giving up the legal right to sell to others

What types of contracts are governed by the common law?

Contracts for services or real estate

Under the UCC, even if the terms of a written contract for the sale of goods appear to be unambiguous, what evidence can be presented to explain or supplement the contract?

Course of performance, course of dealing, and trade usage. *Note:* If the express contract terms are inconsistent with the course of performance, or trade usage, priority is given to: (1) the express terms, followed by (2) course of performance, (3) course of dealing, and then (4) trade usage.

What is the formula for expectation damages?

Expectation Damages = loss in value + other loss - cost avoided - loss avoided

If a party has substantially complied or performed with a constructive condition, what can the party recover?

In general, the party can recover the contract price minus any amount that it will cost the other party to obtain the promised full performance. *Note:* A party who has not substantially performed generally cannot recover damages based on the contract BUT she may be able to recover through restitution.

A retraction of a repudiation is effective ONLY IF . . .

It includes assurances of performance that the other party has justifiably demanded from the repudiating party.

Main difference between contract modification under the common law and the UCC

Modification under the common law requires consideration. Modification under the UCC requires only good faith

I offer to sell you my house for $1 million, and I promise not to revoke this offer for one week. Five minutes later, I say "Never mind. I revoke the offer." Can you still accept

No - no consideration or option

Rule re: notice of acceptance in a bilateral contract

Offeree MUST give notice of acceptance

If a destination contract authorizes the seller to ship the goods by carrier, when does the risk of loss shift from the seller to the buyer?

Once the goods are delivered to a particular place (specified in the contract)

If a shipment contract authorizes the seller to ship the goods by carrier, when does the risk of loss shift from the seller to the buyer?

Once the goods are delivered to the carrier

Define intended beneficiary

One to whom the promisor will pay directly to relieve the promisee from a debt or whom the promisee intends to give the benefit of the promised performance

Define incidental beneficiary

One who benefits from a contract even though there is no contractual intent to benefit that person *Note:* an incidental beneficiary has no rights to enforce the contract.

Under the UCC, what essential term(s) are required for a contract to be formed?

Quantity *Note:* the UCC will "fill in the gaps" if other terms are missing

At what point can repudiation no longer be retracted?

Repudiation may be retracted until such time as the promisee: (1) Acts in reliance on the repudiation, (2) Signifies acceptance of the repudiation, or (3) Commences an action for breach of contract.

Rule re: silence as acceptance to an offer

Silence is not acceptance UNLESS offeree has reason to believe offer could be accepted by silence OR previous dealings make it reasonable to believe that offeree must notify offeror if he does not intend to accept

Rule re: standard for terms in a contract

Terms must be CERTAIN and DEFINITE . . . otherwise contract will fail for indefiniteness *Under the common law:* - essential terms = (1) parties, (2) subject matter, (3) price, and (4) quantity - IF the parties intended to make a contract, then court MAY supply missing terms *Under UCC* - ONLY essential term = quantity . . . EXCEPT for requirements/outputs (then "good-faith" standard) - UCC will "gap fill

Under the common law, if the breach is material, what remedies can be sought by the nonbreaching party?

The nonbreaching party is able to withhold any promised performance and pursue remedies for breach, including damages. *Note:* If the breach is minor, the nonbreaching party may be able to recover damages BUT that party also still must perform under the contract.

What is the parole evidence rule?

The parol evidence rule generally prevents a party to a written contract from presenting extrinsic evidence of a prior or contemporaneous agreement that contradicts the terms of the contract as written.

What are the requirements of a writing for contracts that fall under the Statute of Frauds?

The writing must: (1) Be signed by the party against whom enforcement is sought; AND (2) Contain the essential elements of the deal.

What is the basic concept of "legal detriment"?

There must be something of substance (either an act or a promise) which is given in exchange for the promise that is to be enforced.

True or False: Although in contract law, intent is generally determined by an objective standard and not by the subjective intent or belief of a party, when an offeree is aware of the other's party's subjective intent not to enter into a contract, the offeree's agreement to enter into a contract does not constitute a valid acceptance.

True

True or False: Full performance by either party to the contract will generally take the contract out of the Statute of Frauds

True

True or False: Even if the contract by its terms prohibits assignment, a party retains the power to assign.

True - although an assignment may operate as a breach of contract, still must recognize the assignment.

True or False: While acting in bad faith during contract negotiations may have consequences, bad faith alone is not a defense to contract

True. A duty of good faith and fair dealing is imposed on each party in the performance and enforcement of an existing contract—not in contract formation.

Define accord and satisfaction

Under an accord agreement, a party to a contract agrees to accept a performance from the other party that differs from the performance that was promised in the existing contract, in satisfaction of the other party's existing duty. A "satisfaction" is the performance of the accord agreement; it will discharge both the original contract and the accord contract.

Under common law, why was something given in the pas NOT considered adequate consideration for a new contract?

Under common law, past consideration is typically NOT consideration because it could not have been bargained for, nor could it have been done in reliance upon a promise *Note:* there is a modern trend towards enforcing such promises under the "material benefit" rule

What is the common-law "four-corners" rule?

Under the common law, a court was permitted to look only to the writing itself (within the "four corners" of the document) for evidence of intent (regarding whether there is total, partial, or no integration).

What is the material benefit rule?

When a party performs an unrequested service for another party that constitutes a material benefit, the modern trend permits the performing party to enforce a promise of payment made by the other party after the service is rendered, even though at common law such a promise would be unenforceable for lack of consideration. *Note:* does NOT apply when the conferring party performed without the expectation of compensation.

Bob offers to buy "all the windshield wiper blades that I need for the next 10 years" from Sue for a "fair price." Is this a valid offer?

Yes, as a requirements contract

Under the Second Restatement, can an extrinsic term that would "naturally be omitted" from a writing be introduced?

Yes, so long as it does NOT contradict the writing.

Parties are entitled to expect _____________________ of contractual obligations and are __________________ to take steps to protect that expectation.

due performance; permitted