MBE contracts Incorrect #1

A shoe manufacturer contends that the owner of a shoe store called and ordered 50 pairs of a type of shoe. The manufacturer promptly sent the owner a signed, written acknowledgment of the alleged order that reflected the manufacturer as seller and the shoe store owner as buyer, as well as the number and type of shoes, but that did not indicate the price of the shoes. The owner admits to receiving the acknowledgment the following day. Two weeks later, the owner received a shipment of 25 pairs of the shoes along with an invoice that reflected the price of $100 per pair. The owner immediately called the manufacturer and asserted that he had never ordered the shoes. Can the manufacturer enforce this contract against the owner? A:Yes, but only to the extent of $2,500, which is the price of the shoes shipped. B: Yes, because the owner did not respond to the written acknowledgement in a timely manner. C:No, because the acknowledgment did not indicate the price of the shoes. D: No, because of the Statute of Frauds.

Answer choice B is correct. Generally, a contract that falls within the Statute of Frauds is unenforceable unless evidenced by a writing. The writing must (i) be signed by the party to be charged and (ii) contain the essential elements of the deal. A contract for the sale of goods for a price of at least $500 falls with the Statute of Frauds. Consequently, the purported order of 50 pairs of shoes at $100 per pair is subject to the Statute of Frauds. Although the acknowledgement sent by the manufacturer to the shoe store owner is otherwise sufficient to satisfy the Statute of Frauds, it was not signed by the shoe store owner. However, if both parties are merchants and a memorandum sufficient against one party is sent to the other party, who has reason to know its contents, and the receiving party does not object in writing within 10 days, then the contract is enforceable against the receiving party even though he has not signed it. Here, this merchant's exception applies to the shoe store owner who received the acknowledgement of his order and did not reply for more than 10 days after receiving it.

A boutique hotel contracted with a seamstress to hand make 500 pillows. The signed contract specified that the pillows should be filled with down, and that the pillow covers be made with white, 1000 thread count cotton fabric. Before the seamstress began making the pillows for the boutique hotel, she secured another commission for work that would prevent her from making the hotel's pillows. As a result, the seamstress informed the boutique hotel that she was passing on the hotel's contract to her former business partner, who was comparable in talent and skill at making high-quality pillows. The boutique hotel did not object to the substitution. The former partner diligently worked on making the pillows, using white, 1000 thread count fabric to make the pillow covers. However, instead of using down to fill the pillows, she used a comparably priced synthetic microfiber. The boutique hotel subsequently filed a breach of contract action against the seamstress. Will it succeed? A: No, because the former partner's use of a synthetic microfiber instead of down did not reduce the value of the pillows. B:No, because the boutique hotel was aware of, and did not object to the delegation of the seamstress's duties to her former partner. C: Yes, because the boutique hotel had not released the seamstress from liability under the contract. D:Yes, because the seamstress did not give consideration for delegating the contract to the former partner.

Answer choice C is correct. When obligations are delegated, the delegator is not released from liability, and recovery can be had against the delegator if the delegate does not perform, unless the other party to the contract agrees to release that party and substitute a new one (a novation). Here, the former partner filled the pillows with a microfiber instead of down. Thus, the seamstress is liable under the contract for her former partner's failure to comply with the terms of 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 losses suffered by the mining company due to a late shipment.

Answer choice D is correct. Although a party may be liable for consequential damages of the other party to a contract where those damages are foreseeable, a party may eliminate that liability through an agreement with the other party. Here, while the railroad was aware of the mining company's liability for failing to supply the power company with coal on June 1st, the contract between the railroad and the mining company eliminated the railroad's liability for any losses suffered by the mining company due to late delivery.

A collector agreed to sell his collection of authentic extras' costumes from a cult classic 80's show to a costume store for $10,000, payable one month after the collection was delivered to the store via a third-party carrier. Due to the time and expense that went into accumulating and repairing the costumes, the collector expected a $2,000 profit. The costumes suffered minor water damage in transit, and the store immediately notified the collector that it was rejecting the collection and would hold the collection until the collector picked them up. The collector told the store that he would look for a new buyer and would pick up the collection in a few weeks. The collector quickly found another buyer willing to pay the original contract price. However, before the collector retrieved the costume collection, the store sold and delivered the costumes to a theater company who knowingly accepted the costumes despite the water damage. The theater company paid the store $15,000 for the collection, which the store retained. If the store's sale of the costume was NOT an acceptance, what is highest value remedy available to the collector? A: $2,000, the collector's lost profit. B:$5,000, the difference between market price and contract price. C:$10,000, the collector-store contract price. D: $15,000, damages for conversion.

Answer choice D is correct. The store's rejection of the collection was proper under the perfect tender rule, but the store's selling the collection to the theater company constituted conversion. The remedy for conversion is the fair market value of the goods at the time of the conversion of the collection. The $15,000 received by the store from the sale of the collection reflects the collection's fair market value at the time of the conversion.

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 vendor failed to demand assurances. D: Yes, because the vendor's complaint is premature.

Answer choice D is correct. Under the doctrine of anticipatory repudiation, which is applicable when a promisor repudiates a promise before the time for performance is due, the promisee may treat the repudiation as a breach of the contract and sue immediately. However, in a situation in which the date of performance has not passed and the only performance left is payment, the aggrieved party must wait until performance is due before filing suit. Here, despite the fact that the customer unequivocally stated that he would not pay for the services rendered by the vendor, the customer's payment is the only performance left on the contract, and the vendor must therefore wait until the 60-day period expires, as dictated by the contract terms, before filing suit. Thus the court's dismissal without prejudice is proper, as the vendor may re-file the complaint after the 60-day period has expired.

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 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 he 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

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 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 he 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 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 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 he 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? Answers: $7,500, because the wholesaler's revocation was not in writing. Correct Answer: $7,500, because the wholesaler was bound to keep the offer open for 7 days. $10,000, because the offer was not signed by the wholesaler. You Selected: $10,000, because the retailer did not provide consideration to hold the offer open.

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 At common law, a promise to perform a preexisting legal duty does not qualify as consideration because the promisee is already bound to perform. In this case, the landscaper had a preexisting legal duty to trim the tree, and thus there was no consideration to support the homeowner's promise to pay an additional $500.

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 ten 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 for 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 would customarily provide. 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: No, because the farmer made a nonconforming tender of goods. CYes, 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 The parties here had a requirements contract, and the farmer delivered much more than the owner reasonably required, thereby making a nonconforming tender of goods. While some variation is permissible in requirements contracts, the farmer supplied double the amount of customary products, which is unreasonable, especially considering the shelf life of dairy products. Upon receiving a nonconforming tender of goods, the owner had the right to accept or reject all or part of shipment. Here, the owner tried first to accept half of the goods, and then rejected all of the nonconforming tender after the farmer did not allow him to do so.

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 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 For the defense of impracticability to be available, an unforeseeable event must occur and the nonoccurrence of that event must have been a basic assumption on which the contract was made. If a party assumes the risk of an event happening that makes performance impracticable, then the defense of impracticability will not apply. In this case, the contractor discovered a relatively common fungal infection in the core of one of the trees. Because the contractor knew that the fungal infection was relatively common in the area, the nonoccurrence of the infection was likely not a basic assumption on which the contract was made. Therefore, the contractor assumed the risk of encountering the fungal infection in the tree when he entered into the contract with the homeowner.

A maker of hand-woven 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 rug maker 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 2,000 spools of yarn to the rug maker made from 90% sheep's wool and 10% synthetic fiber. The rug maker sent a check to the supplier 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 rug maker for the remaining $5,000. The supplier has submitted evidence of the written contract, and the rug maker has submitted evidence of the deposited check. What is the rug maker's best defense in this situation? A:The rug maker's and supplier's good faith dispute over the yarn composition suspended the rug maker's obligation to pay the remaining $5,000. B:The act of knowingly depositing the check for $15,000 by the supplier was a novation that relieved the rug maker from any further liability. C: The supplier deposited the check for $5,000 less than the contract price, thereby discharging the rug maker of any further duty to pay the remaining amount for that month's shipment. D: By depositing the check, the supplier was estopped from claiming that the rug maker owed him an additional $5,000.

C This is considered an "accord and satisfaction," which discharges both the original contract and the accord contract. 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. Generally, consideration is required for an accord to be valid. By compromising, each party surrenders its respective claim as to how much is owed. If a claim is subject to dispute, it can be discharged if the person against whom the claim is asserted in good faith tenders a negotiable instrument (e.g., a check) that (i) is accompanied by a conspicuous statement indicating that the instrument was tendered as full satisfaction of the claim (e.g., "payment in full"), and (ii) the claimant obtains payment of the instrument. Here, the rug maker compromised by accepting the 90% wool yarn, and the supplier compromised by accepting $15,000 rather than $20,000. Thus, there was an accord and satisfaction and the rug maker is not liable for the remaining $5,000.

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 and attract customers. He did not request any payment, saying the publicity would be good for the band. The siblings agreed, and the band started playing at the 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 $10,000 out of their share of the sale proceeds to the guitarist for his help in making the shop popular. The sister told the guitarist about their agreement. He was so delighted with it that he put a down payment on a new car. By the time the sale of the business 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 he have a valid basis for 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.

The guitarist was an intended beneficiary of the siblings' oral agreement to each pay him $10,000. His rights under that contract vested when he made a down payment on a car in reliance on the agreement. The power of the siblings to modify their duties by subsequent agreement between themselves was terminated when the guitarist materially relied on their promised performance.

While attending a rodeo on August 20, a hat maker 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 hat maker owed a debt for a previous leather order. On August 25, the hat maker changed his mind about paying one-fourth of the purchase price to the tannery owner. The hat maker and rodeo manager subsequently executed a valid modification of the original agreement. The rodeo manager's brother was also 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 him that his debt from the hat maker 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 recover? A: No, because the tannery owner did not rely on the August 20 agreement between the hat maker and the rodeo manager. B: No, because there was no consideration for the promise to pay the tannery owner by the hat maker and the rodeo manager. CYes, because the tannery owner had the right to sue the rodeo manager to enforce the contract between the rodeo manager and the hat maker. DYes, because the rodeo manager agreed to pay one-fourth of the purchase price to the tannery owner on August 20.

a If performance of a promise would satisfy an actual, supposed, or asserted duty of the promisee to a third party, and the promisee did not intend to make a gift to the third party, then the third party is an intended beneficiary who is a creditor beneficiary. A creditor beneficiary has the right to sue either the promisor or the promisee to enforce the contract. Here, the tannery owner was a creditor beneficiary as of August 20. However, the hat maker and the rodeo manager agreed on August 25 to not pay the tannery owner. The tannery owner did not know about the August 20 agreement until August 30, after the two parties had agreed to not pay the tannery owner. Thus, he did not rely upon the original agreement that was later modified by both parties. For this reason, answer choices C and D are incorrect.