CONTRACTS QUIZZES

Owner wanted to install solar panels on his house and went to Sam's Solar Store to discuss the cost. After discussing Owner's requirements, Sam said that he would sell the panels and do the installation for a total cost of $20,000. Owner said that he was not ready to make a decision and needed to look around. Sam said that he would guarantee that price for 30 days. Sam wrote out the details of the offer on a sheet of his company's stationery, including the phrase "price guaranteed for 30 days." He included a breakdown of the cost of the panels, equipment, etc., and the installation. Sam signed and dated the paper and handed it to Owner. Within the 30-day deadline, Owner returned to Sam's store with the intent to accept the offer. Before Owner said anything, Sam said "I can't go through with the price I gave you. The cost of panels has gone up considerably. I have to charge you $30,000." Owner said, "I accept your original offer." However, Sam refused to do the work for the original price and said, "It's $30,000. You can take it or leave it." If Owner sues Sam for breach of contract and a court finds in favor of Owner, it is probably because the court determined that: (A) There was consideration for Sam's promise to hold the offer open because Owner gave up a legal right when he first decided to not purchase the panels. (B) Sam's statement that Owner could take it or leave it amounted to an adhesion contract thereby making the contract unconscionable. (C) The predominant purpose of the transaction was for the sale of goods. (D) Owner relied to his detriment when he said he was not ready to make a decision and needed to look around.

(C) The predominant purpose of the transaction was for the sale of goods. Rationale: Answer C is correct. This problem asks for the best statement of the rationale if the court rules a certain way. The answer turns on the choice of law—i.e., the UCC. An offer is freely revocable unless it has been made irrevocable. One way that the offer could be made irrevocable is if there were an option agreement with consideration. However, there is no consideration for Sam's promise to hold the offer open. However, if the court decides that the agreement is subject to the UCC, then—under these facts—the promise to hold the offer open does not need consideration. Under the UCC rules of a Merchant's Firm Offer (UCC §2-205), "an offer by a merchant to buy or sell goods in a signed writing which by its terms give assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months." Since all of the elements of UCC §2-205 are met here, the court merely needs to determine that the contract falls under the UCC. Since it is a mixed sale of goods and services contract, the "predominant purpose" test is the rule by which the court will decide. This makes Answer B the best answer. By deciding that the contract is within the UCC, it does not matter that there is no consideration for the non-revocable offer. The analysis above makes Answer C the best answer. Answer A is incorrect. As written, the sentence does not make sense as a bargain. If true, then it would be as if Sam said, "If you promise to not buy my panels with installation at $20,000 now, then I promise to hold the offer to sell it to you on those terms for 30 days." That was not an exchange that the parties engaged in. Moreover, in such a scenario, Owner gives up no legal right under those terms. Under that idea, Owner would be exchanging the power of acceptance now for the power of acceptance for 30 days. Nothing changed hands. Answer A is a nonsensical bargain. The better explanation is that there was a Merchant's Firm Offer which one can prove but only if the court finds that the UCC applies. As for Answer B, while it is correct that a "take it or leave it" contract may be an adhesion contract, that fact gives no basis for a ruling in Owner's favor. Many contracts are adhesion contracts, and there is no recovery for the party without bargaining power. In any case, the issue is not whether Sam's offer to install and sell the solar panels is unconscionable. The issue is whether Sam's offer to sell and install the panels for $20,000 was still open when Owner accepted it. Answer D is not the best answer. When Owner said he was going to look around at other offers, he was not relying on any promise that Sam made at that point. Sam only made the promise after Owner said he was going to look around. Recommended Reading: Pages 107-109, 235, 238-242 of Templin, Contracts: A Modern Coursebook, Second Edition

Two parties orally form a contract for the sale of land, and memorialize the contract in a properly structured but unsigned writing. The buyer pays the seller a 10% down payment in cash. Which of the following events will most likely render the contract specifically enforceable [or enforceable in an action for specific enforcement] against the seller? (A) The buyer signed the writing. (B) The buyer made an additional 10% payment against the purchase price. (C) With the seller's consent, the buyer took possession of the property, built a house, and occupied the house. (D) On a sound recording, the seller states to the buyer that he will sell the property in accordance with the terms of the writing.

(C) With the seller's consent, the buyer took possession of the property, built a house, and occupied the house. Rationale: Issue: The problem tests on exceptions to the statute of frauds for the sale of land. Rule: Restatement (Second) of Contracts § 129 (1981) A contract for the transfer of an interest in land may be specifically enforced notwithstanding failure to comply with the statute of frauds if it is established that the party seeking enforcement, in reasonable reliance on the contract and on the continuing assent of the party against whom enforcement is sought, has so changed his position that injustice can be avoided only by specific enforcement. Analysis: Here, the contract is within the statue because it involves the sale of an interest in property. However, there is no memorandum signed by the party against whom enforcement is sought—the seller. Restatement (Second) of Contracts § 129 provides an exception that is based on the actions that the buyer took in reliance of the oral agreement. (Note: The exception is often referred to as the "part performance" exception for land sale contracts; however, the term is a misnomer. The basis of the relief is on actions in reliance taken by the aggrieved party that are not part of any duties spelled out in the contract.) Here, Choice C is the best answer. The buyer's actions in reliance—taking possession, building a house, and occupying it—together with the payment of the purchase provide evidence that the contract exists. Moreover, the equitable relief is justified on the grounds of the buyer's reliance to his detriment. It is similar to the doctrine of promissory estoppel in Restatement (Second) of Contracts § 90. This problem is nearly identical to Illustration #3 in Restatement (Second) of Contracts § 129. The events described in Choices A, B, and D do not remove a land sale contract from the statute of frauds. The buyer's signature on the writing would render the contract enforceable by the seller, not by the buyer. Payment of part of the purchase price alone will not satisfy the reliance exception. Additional action is required. Choice D refers to a seller who affirms the contract by sound recording. Such a thing might, someday, qualify as a 'signature,' but it does not yet do so. Choice C refers to the kind of part performance that matters, and Choice C is correct. Recommended Reading: Pages 266, 279 of Templin, Contracts: A Modern Coursebook, Second Edition

Seller inherited a piece of farmland that he wanted to sell. A prior listing for the property stated that the property had "40 acres of tillable land and 70 acres of pastureland." Seller advertised the property for sale using this information. Buyer and Seller negotiated a price for the property that was based on the fair market value of property having this amount of tillable land and pastureland. Buyer and Seller entered into a signed contract reflecting all the details stated. However, Seller was honestly mistaken, and the information in the listing was incorrect. In fact, the property had only 18 acres of tillable land and 40 acres of pastureland, making the property worth less than half of what Buyer paid for it. Upon discovering this discrepancy, Buyer seeks to rescind the agreement based on a theory of misrepresentation. Which of the following is the most likely result at court? (A) Seller wins, because of the legal principle of caveat emptor. (B) Seller wins, because Seller made an honest mistake. (C) Buyer wins, because Seller's statement was fraudulent. (D) Buyer wins, because Seller made a material misrepresentation.

(D) Buyer wins, because Seller made a material misrepresentation. Rationale: Issue: This problem tests on the difference between a material and fraudulent misrepresentation. Rule: Restatement (Second) of Contracts §§ 162 & 164 Analysis: Choice A is an unlikely result. While caveat emptor (buyer beware) is a traditional legal principle guiding transactions, a more modern approach incorporates representations about material facts into a contract. Restatement (Second) of Contracts § 164 provides that "If a party's manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party upon which the recipient is justified in relying, the contract is voidable by the recipient." Under these facts, Buyer was justified in relying on a contract term that defined the property as having a certain amount of tillable land and pastureland. The price was negotiated based on these statements. Consequently, the historical rule of caveat emptor is inapplicable. Under the Restatement (Second) of Contracts § 162, there are two types of misrepresentation: fraudulent misrepresentation where the maker knows or should have known that the statement was not true; and material misrepresentation. Here, the misrepresentation is not fraudulent because Seller was just mistaken. Seller did not know his statement was not in accord with the facts. Consequently, Choice C is incorrect because Seller's statement is not fraudulent. Choice D is correct because the statement is a material misrepresentation. According to Restatement (Second) of Contracts § 162(2), "A misrepresentation is material if it would be likely to induce a reasonable person to manifest his assent, or if the maker knows that it would be likely to induce the recipient to do so." Here, the price was negotiated based on the tillable acres and amount of pastureland. Under the Restatement, a contract can be voided as a misrepresentation even though the maker was honestly mistaken, provided that the misrepresentation is material. A reasonable person would not have entered into the agreement since the fair market value is actually worth half of what Buyer paid. Therefore, the misrepresentation is material. Recommended Reading: Pages 347-358 of Templin, Contracts: A Modern Coursebook, Second Edition

Nephew inherited a large collection of antique jewelry from his aunt. Nephew wished to sell most of the collection. Dealer, who was familiar with the collection, asked if Nephew would sell the entire collection to Dealer. On November 5, Nephew sent Dealer a signed letter stating, "I offer to sell you portions of my aunt's collection of antique jewelry as listed below for $300,000 to be paid by certified check at closing. This offer terminates if your acceptance is not received by November 15." Nephew's letter then listed the items Nephew wanted to include in the sale and the time and place of closing. Dealer received Nephew's letter on November 10. On November 11, Dealer telephoned Nephew and said, "I would like to keep your offer of November 5 open, but I want to inquire whether it was possible to include one or two items that are not listed in your letter. I am willing to pay an additional price." Nephew declined but stated that he hoped Dealer would still accept Nephew's offer. On November 15, Dealer mailed a signed letter that stated, "I accept your November 5 offer to sell the jewelry listed for $300,000 according to the terms and conditions of the offer." On November 20, Nephew received Dealer's November 15 letter. Which of the following most accurately reflects the relationship of the parties on November 20? (A) Dealer's letter of November 15 formed a contract since acceptance is effective on dispatch. (B) Dealer's letter of November 15 could not form a contract because the terms of Nephew's November 5 offer were not certain and definite. (C) Dealer's letter of November 15 failed to form a contract because Dealer lost the power of acceptance when Dealer made a counteroffer during the November 11 telephone call. (D) Dealer's letter of November 15 can be reasonably construed to be an offer to purchase the collection of jewelry listed in Nephew's November 5 letter, and Nephew had the power to accept that offer but failed to do so.

(D) Dealer's letter of November 15 can be reasonably construed to be an offer to purchase the collection of jewelry listed in Nephew's November 5 letter, and Nephew had the power to accept that offer but failed to do so. Rationale: Issue: Although the problem appears to be about the mailbox rule, the central issue is what constitutes an acceptance. Rule: Restatement (Second) of Contracts § 50(1) provides "Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer." Analysis: Although this problem appears to be one about the mailbox rule, its resolution turns on whether the offer is accepted in the manner required. The crucial fact to see in this problem is that the offer specifies that acceptance must be received by a certain time—November 15. The last part of Restatement (Second) of Contracts § 50(1) requires that the acceptance be made "in a manner invited or required by the offer." Choice A is incorrect. The mailbox rule—that an acceptance is effective on dispatch—does not apply to these facts. If you missed this, then remember to examine the terms of the offer closely to see if the offer specifies a manner of acceptance. The mailbox rule will not apply if the offer requires acceptance in a manner inconsistent with the mailbox rule. Choice B is wrong because Nephew's offer contained all of the terms necessary to the transaction including the object of the sale (the list of items to be sold), the price, the method of payment, and a time and place for the closing. Choice C is wrong because Dealer's phone call on November 11 is more likely to be construed as a "mere inquiry" rather than a counteroffer. Even if Dealer's inquiry was a counteroffer, Nephew reaffirmed his November 5 offer at the end of the phone call. Choice D is correct. Although Dealer lost the power of acceptance by missing the November 15 deadline, Dealer's purported acceptance can be construed as an offer. Dealer manifests intent to enter into a contract with certain and definite terms to the nephew, who is the offeree. Recommended Reading: Pages 198-199, 210-212 of Templin, Contracts: A Modern Coursebook, Second Edition

Stan and Barbara are neighbors. On April 15, Stan told Barbara he was planning to sell his car. Barbara said she might be interested in buying it. After discussion, Barbara paid Stan $100 in cash and Stan signed a document which contained the following language: 'For $100 and other good and valuable consideration, receipt of which is acknowledged, I hereby offer to sell my car to Barbara at a price of $5,000 and promise to hold this offer open until June 1. If Barbara decides to purchase the vehicle, the $100 which I have received from her shall be applied to the purchase price. If Barbara does not decide to purchase the vehicle, I will keep the $100.' On May 15, Barbara informed Stan that she had borrowed money from her parents and had decided to buy the car, but Stan said that he had already sold the car to someone else. If Barbara asserts a claim against Stan based on Stan's promise to keep the offer open until June 1, the court should: (A) Not enforce the option contract because the promise is illusory since the $100 would be applied to the sale of the car. (B) Return the $100 to Barbara based on a theory of restitution since letting Stan retain the money would result in unjust enrichment. (C) Enforce the promise because under the UCC it was a firm offer in writing and signed by the seller. (D) Enforce the promise as an option contract supported by consideration.

(D) Enforce the promise as an option contract supported by consideration. Rationale: Answer D is correct. Here, Stan and Barbara entered into an option agreement. An option is a contract that holds an offer open for a specified period of time. An option must be supported by consideration; otherwise, the offeror may revoke the offer. Here, Stan has promised to hold open until June 1 an offer to sell her car to Barbara for $5,000. The consideration is the $100 paid by Barbara to Stan. The fact that the $100 may be applied to the purchase price does not change the fact that the consideration is valid. Barbara waived a legal right to right to the $100 and cannot get it back. Another way to think about this is that the terms are really that Barbara had to pay $100 for the option and Stan was willing to sell the car to her for $4,900 if Barbara agreed to do so by June 1. It nets out to the same thing—i.e., Barbara waived a legal right to the $100 in exchange for the option. Therefore, Answer D is correct. Answer A is incorrect since Stan's promise is not illusory. Nothing in the facts suggests that Stan will not commit to either keeping the offer open or selling the car. Answer B is also incorrect. Because there was an effective option contract that was properly exercised—i.e., an acceptance of the underlying offer to purchase the car—there is no need for restitution of the $100. Restitution would be relevant if there was a failure of the underlying option contract for some reason—i.e., some defect in formation. However, no such defect is present. While Answer C has the right conclusion, it applies the wrong rule. Answer C refers to the UCC provision of the firm offer. Under UCC §2-205 one of the key elements of the firm offer rule is that the offer be made by a merchant. A merchant is defined under UCC §2-104(1) as "a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction. . . ." Here, Stan is just a neighbor of Barbara's and nothing in the facts suggests that he is a dealer in cars or has any expertise. On this alone, we can eliminate the Merchant's Firm Offer as being a relevant rule. Recommended Reading: Pages 222-225 of Templin, Contracts: A Modern Coursebook, Second Edition

A client enters into a signed and written agreement with a lawyer in which the lawyer promises to represent the client in a divorce proceeding in return for the client's promise to make one payment of $3,000 to be due when the divorce is granted. The agreement—drafted by the lawyer—provides that the lawyer will make all of necessary court appearances, file all necessary paperwork, and otherwise do all of the legal work necessary until the court grants the divorce. The $3,000 is the lawyer's normal rate for the average divorce. The lawyer, however, miscalculated how much time it would take for this particular divorce. The fair market value of the legal services that the lawyer provided was $20,000. When the court grants the divorce, the client presents the lawyer with a check for $3,000. Will the lawyer be successful if he refuses the $3,000 check as full payment and instead sues the client for the fair market value of $20,000? (A) No, because there was a fully negotiated express contract between the lawyer and the client (B) Yes, because it would be inequitable for the lawyer to receive less than the full value of the services he rendered (C) No, unless the lawyer provides sufficient proof that his services would be valued at $20,000 (D) Yes, because there is gross disparity in the consideration

(A) No, because there was a fully negotiated express contract between the lawyer and the client Issue: This problem tests on the adequacy of consideration rule. Rule: Mere inadequacy of consideration will not void a contract. There is no requirement that the things exchanged be of equal value. Gross disparity may be relevant to prove an affirmative defense to formation, such as duress, fraud, or unconscionability. However, if the purported consideration is nominal, then it is just a mere formality or pretense of a bargain and will not serve as consideration for a promise. Analysis: The correct answer is Choice A. You can get to this by the process of elimination. Choice B is wrong because the lawyer is not entitled to the fair market value of his services just because he entered into a contract at a price that is lower than his normal rate. Under the adequacy of consideration rule, courts do not inquire into unequal exchanges unless there was nominal consideration—i.e., the pretense of a bargain. Here, there is no indication that the lawyer was giving his services as a gift. Instead, the lawyer entered into a bargain where he made an incorrect valuation decision. Choice C is incorrect. It is not relevant whether the lawyer can provide proof that his services are worth $20,000. The lawyer entered into an agreement and is bound by the terms. Choice D may look tempting because it mentions gross disparity. Gross disparity may be evidence of an affirmative defense such as mistake. If the lawyer can prove an affirmative defense to rescind the contract, then he can seek restitution for the fair market value of the service that he conferred. However, unilateral mistake on the part of the lawyer would not be a valid defense on these facts. Unilateral mistake would require, among other things, a mistake of fact existing at the time of contract formation. Here, the lawyer made a mistake in his estimate of how much time it would take to complete the divorce. Such a mistake in judgment would not result in a rescission. Moreover, the defense of unilateral mistake also requires a number of other elements not present here. (See Restatement (Second) of Contracts § 153.) Therefore, Choice D is also incorrect. Recommended Reading: Pages 61-71 of Templin, Contracts: A Modern Coursebook, Second Edition

Seller is a manufacturer of beach umbrellas. On January 1, Seller sent the following signed email to Retail Store, "It is never too early to plan for the summer buying season. We are now offering a guaranteed discount price of $15 each on our beach umbrellas provided that you make a minimum order of 100 umbrellas. You must order the umbrellas by May 1; otherwise, this offer terminates." On April 30, Retail Store phoned Seller and told them that they wanted to purchase 100 umbrellas at the $15 price." Seller responded, "Sorry, but we ran out. You should have ordered earlier. You snooze, you lose." If Retail Store sues Seller for breach of contract what is the likely result? (A) Retail Store prevails because the offer was not revoked before acceptance. (B) Seller prevails because a Merchant's Firm Offer is only non-revocable for three months. (C) Retail Store prevails under the promissory estoppel exception to the Statute of Frauds. (D) Seller prevails because the Statute of Frauds is not satisfied since Retail Store did not send a signed writing.

(A) Retail Store prevails because the offer was not revoked before acceptance. Rationale: Answer A is correct. This problem tests the UCC §2-205 Merchant's Firm Offer. UCC §2-205 provides that "An offer by a merchant to buy or sell goods in a signed writing which by its terms give assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror." One issue that often arises is the length of the irrevocability. UCC §2-205 provides irrevocability lasts for the time is the "time stated but no longer than three months." In this problem, the Seller promised the that offer would be open for five months—from January 1 to May 1. However, because there is no consideration for the offer, the irrevocability period of the offer would only last for three months from January 1 to April 1. Consequently, after April 1, the offer became revocable and would expire on May 1. However, Retail Store accepted the offer before on the May 1 expiration and before Seller verbally revoked during their conversation on April 30. Therefore, a contract was formed on April 30. For these reasons, Answer B is incorrect. Answers C and D speak to the Statute of Frauds. The Statute of Fraud requires a signed writing as evidence of the contract by the party against whom enforcement is sought. Here, the party against whom enforcement is sought is Seller—not retail Store. Consequently, the fact that Retail Store accepted orally does not defeat the enforcement of the contract since Seller's January 1 memo is sufficient evidence of an intent to enter a contract according to the terms asserted. Recommended Reading: Pages 235, 238-242 of Templin, Contracts: A Modern Coursebook, Second Edition

The husband of a pregnant woman was murdered. On the night before the funeral, the widow had had little sleep and was physically and emotionally exhausted. Immediately after the funeral, four of her husband's brothers approached the widow about "an urgent matter." The widow assumed that the brothers would not approach her at this time if it were not important, and after talking with her for well over an hour, the brothers persuaded the widow to sign documents that transferred her complete interest in her late husband's estate to the husband's children from a previous marriage. The brothers deliberately approached the widow at this time because they thought it would be easier to convince her to deed the property when she was still in shock over the death of her husband. On what ground might a court allow the widow to rescind the transfer? (A) The brothers exerted undue influence in inducing the widow to transfer her interests. (B) The widow made a unilateral mistake in signing away her rights. (C) The brothers' statement that the matter was urgent was a material misrepresentation. (D) The widow was mentally incapacitated.

(A) The brothers exerted undue influence in inducing the widow to transfer her interests. Rationale: Issue: This problem tests your ability in issue spotting the correct defense. Rule: Restatement (Second) of Contracts § 177(1)-(2) (1) Undue influence is unfair persuasion of a party who is under the domination of the person exercising the persuasion or who by virtue of the relation between them is justified in assuming that that person will not act in a manner inconsistent with his welfare. 2) If a party's manifestation of assent is induced by undue influence by the other party, the contract is voidable by the victim. Analysis: Here, the correct answer is Choice A. The widow was in a weakened emotional and physical state because of the sudden death of her husband. Family members, who she presumably would trust, came to her with what they said was an urgent matter. Under the Restatement, she was "justified in assuming" that the brothers would not act in a manner inconsistent with her welfare. Whether the persuasion is unfair depends on the surrounding circumstances. The Restatement comment notes that factors to be considered include "the unfairness of the resulting bargain, the unavailability of independent advice, and the susceptibility of the person persuaded." Here, the brothers approached the widow at an inappropriate time when she was in a weakened physical and emotional state, and spoke with her for over an hour until she agreed to transfer her interest in the husband's estate to another without receiving any consideration. These facts clearly have the indicia of the element of unfair persuasion. Since the widow was justified in assuming the brothers would not act against her self-interest and they used a high degree of unfair persuasion, the most likely reason for rescinding the transfer is undue influence. Choice B is incorrect. While the widow may have made a mistake in judgment by transferring her rights, that is not the sort of mistake that results in the defense of unilateral mistake. To assert the defense of unilateral mistake, the mistake must have been a mistake of fact—not a mistake of judgment. Choice C is a poor answer choice because the defense of misrepresentation requires a misstatement about a fact existing at contract formation. Here, the brothers were offering their opinion that the matter was urgent. While they were doing so dishonestly, the better defense under these facts would be undue influence. Choice D is not a good answer choice because the facts do not clearly demonstrate that the widow could not understand or appreciate the nature of the contract. While the facts state that she was worn down, she had not yet reached a state of mental incapacity. Recommended Reading: Pages 323, 334-342 of Templin, Contracts: A Modern Coursebook, Second Edition

Uncle wants to make a binding promise to give Niece a gift of his $100,000 grandfather's clock when she turns 30 in two years. Uncle discusses the matter with Niece and they agree to make the promise look as if Niece has purchased the clock. Uncle provides Niece with a signed writing that states, "In consideration of $10 to be paid by Niece, I promise that when Niece reaches her thirtieth birthday I will convey to Niece my grandfather's clock.' Later, Uncle decides not to convey the grandfather clock to Niece. If Niece sues for breach of contract, what is the likely result? (A) Uncle will win, because the consideration promised by Niece was the pretense of a bargain. (B) Uncle will win, because his subsequent refusal to perform makes his original promise illusory. (C) Niece will win, because the promise is evidenced by a bargained-for exchange. (D) Niece will win, because courts generally will not inquire into the adequacy of consideration.

(A) Uncle will win, because the consideration promised by Niece was the pretense of a bargain. Issue: This problem tests on the adequacy of consideration rule. Rule: Mere inadequacy of consideration will not void a contract. There is no requirement that the things exchanged be of equal value. Gross disparity may be relevant to prove an affirmative defense to formation. However, if the purported consideration is nominal, then it is just a mere formality or pretense of a bargain and will not serve as consideration for a promise. Analysis: Uncle wants to make an enforceable promise to give a gift. To Niece, he makes that plain so that Niece cannot (and does not) reasonably believe that her uncle demands $10 in exchange for his promise. The $10 creates only the pretense of a bargain, and we call it 'nominal" or "sham consideration.' In truth, Uncle bargains for nothing, which means he proposes no true bargain, and that means he makes no offer. Where there is no offer there can be no acceptance and hence, no contract. Uncle promised Niece a gift of the grandfather's clock; he made a gratuitous promise, which is unenforceable. Choice A is correct. Choice B has the correct conclusion but the rationale is incorrect. An illusory promise is one that, by its terms, reserves to the promisor a choice to not go through with the purported action or forbearance. (See Restatement (Second) of Contracts § 77.) Here, Uncle's promise reserves no such right; therefore, the promise is not illusory. His refusal is merely the breaking of a promise. Choice C is incorrect since there is only the pretense of a bargain. The $10 was not given to induce the transfer of the clock, and the clock was not promised to induce payment of $10. Choice D states a common rule for the overarching rule of adequacy of consideration; however, Choice D is also incorrect since this problem illustrates the exception to the adequacy rule, which is nominal consideration. Nominal consideration will not normally enforce a bargain. Recommended Reading: Pages 37-38, 71-72 of Templin, Contracts: A Modern Coursebook, Second Edition

Wendy is in the business of helping couples plan their weddings in return for a fee. Wendy's busiest month is June since this is when many people get married. On March 1, Wendy emailed Florist and asked, "Can you provide up to 5,000 white roses on June 1? If so, at what price?" Wendy included her address for the purposes of delivery. In a signed email on March 2, Florist replied, "Yes. I can provide that quantity with delivery at that date at your address. At those quantities, the price would be $1 a rose, guaranteed. In order to provide that quantity of roses, you must inform us of the exact number by April 15." On May 1, Wendy called Florist and said, "I am in real need for 4,000 white roses by June 1. Can you deliver?" Florist replied, "I am not sure we can deliver that quantity in your time frame. You should have called earlier." Wendy replied, "Do your best. I really need those flowers." On May 2, Wendy sent a signed email to Florist stating, "I accept your offer to sell me 4,000 white roses at a $1 per rose with delivery by June 1." Florist did not respond and did not send the flowers by June 1. Wendy then sued Florist for breach of contract. How would a court rule on the cause of action? (A) Wendy loses because Florist's offer lapsed before Wendy tried to accept. (B) Wendy loses because the UCC Statute of Frauds is not satisfied even though an oral contract formed. (C) Wendy wins since she accepted an offer made under the Merchant's Firm Offer rule. (D) Wendy wins since her May 2 email satisfies the Statute of Frauds requirement under the Merchant's Confirmatory Memo exception.

(A) Wendy loses because Florist's offer lapsed before Wendy tried to accept. Rationale: Answer A is correct. This problem tests one of the basic rules of offer—i.e., when the power of acceptance is terminated. One way in which an offer lapses (i.e., the power of acceptance terminates) is that it automatically expires if there is a time stated by which the offeree has to accept. Here, the terms set out by Florist are clear. Wendy had to accept by April 15. Wendy called on May 1. The offer had lapsed by that time. This analysis makes Answer A the best answer. Answer B has the right conclusion but the wrong rationale. First, no contract formed for the reasons stated above. Even if a contract did form (i.e., there was a proper acceptance by Buyer in the correct time frame), the Statute of Frauds would have been satisfied by the offer letter signed by Florist. Answers C is wrong since there was no offer for Wendy to accept. While the March 2 email from the Florist meets the requirements of a Firm Offer under UCC 2-205, that provision of the UCC only makes an offer non-revocable for "time stated or if no time is stated for a reasonable time," and no longer than three months. Here, the time stated is April 15 and that time passed before Wendy tried to accept. Answer D is also incorrect since there was no offer to accept. The answer is misleading because it makes reference to an exception to the statute of frauds—the Merchants Confirmatory Memo—that would be relevant under these facts if Wendy had actually accepted when she still had the power of acceptance. However, since the offer expired, Answer D is also incorrect. Recommended Reading: Pages 203-208 of Templin, Contracts: A Modern Coursebook, Second Edition

Alan is an auctioneer whose principal business is selling off used cars. During an auction, Alan started the bidding of a ten-year-old sports utility vehicle at $2,000. Brice raised his card signaling that he wanted to bid that amount for the car. The fair market value of the car was $5,000. Alan raised the price to $5,000 and called for new bids. After three minutes without a bid, Alan began to bring down his hammer when Carla called out $5,000. Alan then reopened the bidding and eventually sold the car to Carla. Brice brings a breach of contract claim against Alan seeking damages. Which of the following best describes the likely outcome and reasoning? (A) Brice will win since courts do not inquire into the adequacy of consideration. (B) Brice will win since he accepted Alan's offer. (C) Alan will win because he did not accept Brice's offer. (D) Alan will win since there is no writing signed by the party to be charged.

(C) Alan will win because he did not accept Brice's offer. Rationale: The best answer is C. This problem tests on the acceptance rule as it applies to auctions under the UCC. In an auction, the bidder is the offeror, and the auctioneer is the offeree. (See UCC §2-328. Sale by Auction.) During an auction, the auctioneer typically calls out a price. The bidder who raises his hand (or whatever signal is used for that auction) is making an offer to purchase the item up for auction at that price. The acceptance occurs when the auctioneer's hammer falls. Under these facts, Brice was the offeror, and it was within Alan's discretion on whether to accept the bid. Since Alan's hammer did not strike, there was no acceptance of Buyer's offer. UCC §2-328(2) provides in part that "Where a bid is made while the hammer is falling in acceptance of a prior bid the auctioneer may in his discretion reopen the bidding or declare the goods sold under the bid on which the hammer was falling." Therefore, the best answer is C. Answer B is incorrect since it assumes that Brice was the offeree. Answer A misidentifies the issue. Regarding Answer C: A contract for the sale of goods of $500 or more is within the statute of frauds under UCC 2-201 and therefore, there would need to be a sufficient memorandum or an exception. Although there is no writing here, this is not the primary reason why the Alan is not liable. In other words, Answer C is not the "best explanation" for the outcome. (Note: The call of the question explicitly asks for the "best explanation.") The best explanation is that a contract was never formed since the Alan did not accept Brice's offer. In the hierarchy of the analysis, we would first analyze the formation requirements of "offer, acceptance, and consideration" before analyzing the Statute of Frauds. Recommended Reading: Page 208 of Templin, Contracts: A Modern Coursebook, Second Edition

Seller has listed a specific piece of land for sale. Buyer sends Seller a signed letter indicating that Buyer wishes to purchase Seller's land for its listed price of $300,000 to be paid by certified check at a closing in one month. Using a pen, Seller writes on Buyer's letter, "I will sell you the referenced property for $300,000 on the terms that you indicated in your letter.' At the bottom of that paper, Seller attempts to write her initials, but the pen has run out of ink. However, the tip of the pen does make, on the paper, an etching of her initials. By fax, Seller sends (an image) of the paper to Buyer. On the fax, as received by Buyer, Seller's initials are not at all visible. Buyer responds by telephone call. 'Thanks very much. I will see you in one month at the closing.' Before the closing date, Seller contacts Buyer and announces that Seller will not sell the land to Buyer. Buyer sues for breach of contract, and Seller pleads the statute of frauds as an affirmative defense. Assume that both the fax and the hard copy of the letter are admitted into evidence. What is the most likely result and rationale? (A) Seller wins, because a writing is not considered "signed" unless the signed copy is delivered. (B) Seller wins, because, to be effective, a signature must include the last name of the party to be charged and not just initials. (C) Buyer wins, because any writing, even if undelivered, is considered signed if there is a mark made to authenticate it. (D) Buyer wins, because of the doctrine res ipsa loquitur, i.e., the thing speaks for itself.

(C) Buyer wins, because any writing, even if undelivered, is considered signed if there is a mark made to authenticate it. Rationale: Issue: This is a statute of frauds question because it involves the sale of real property. The issues involve whether (1) initials are considered a signature, and (2) whether delivery of the signed writing is required. Rule: Court will enforce a contract that is subject to the statute of frauds only if the contract is set forth in a writing signed by 'the party against whom enforcement is sought' or if there is an exception. Analysis: In this case, Seller is the party against whom enforcement is sought. If Seller has 'signed' the writing, the contract is enforceable. Otherwise it's not. In this context, as to the word 'signature,' the law is very flexible. Almost any mark, stamp, or imprint is a signature, if it's intended to identify the party who makes it. There is no requirement that a full last name be used. Initials or even some other symbol can be used if the intent of the party making the mark was to authenticate the writing. Therefore, Choice B is a wrong answer. Additionally, if the etched letters are visible then a mark has been made. It does not matter that the pen ran out of ink so long as we can see the mark. An additional issue here is delivery. Buyer did not receive a copy of the acceptance that was "signed" since Buyer could not see the signature. However, Comment (b) of Restatement (Second) of Contracts § 133 provides that, "There is no requirement that a memorandum be communicated or delivered to the other party to the contract, or even that it be known to him or to anyone but the signer." Consequently, the fact that only Seller has a copy of the acceptance with a clear signature is enough to satisfy the writing requirement. According to the Restatement, the writing requirement under these facts could be satisfied even by a diary entry or a signed letter to a third party. Therefore, Choice A is wrong, and Choice C is correct. Choice D is not relevant to the issue presented. Res ipsa loquitur is Latin for "the thing speaks for itself" and is most commonly used in reference to the tort of negligence. This legal doctrine has no application here. Recommended Reading: Pages 272-274 of Templin, Contracts: A Modern Coursebook, Second Edition

Casper was a longtime employee at MegaCorp. After working at the company for 25 years, MegaCorp told Casper, "Because you have been such a loyal employee for many years, MegaCorp promises that you will be provided with a monthly pension of $4,000 for the remainder of your life." Casper then retired and MegaCorp began making monthly payments. After five years, MegaCorp stopped making the monthly payments to Casper. What would be Casper's best legal theory of recovery if he sues MegaCorp for not making the payments: (A) MegaCorp breached an express unilateral contract that formed by Casper's retirement. (B) MegaCorp was unjustly enriched by Casper by his many years of service. (C) Casper relied to his detriment on MegaCorp's promise of a pension by retiring. (D) MegaCorp's promise of a monthly pension of $4,000 for life lacks consideration.

(C) Casper relied to his detriment on MegaCorp's promise of a pension by retiring. Answer C is the best answer. This is an issue-spotting question that is based on promissory estoppel. Restatement (Second) of Contracts §90(1) provides: "A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires." The promise of the pension is based on past consideration. Since the pension was not bargained for, the best argument for the Worker would be Answer C, promissory estoppel—i.e., that Worker relied to his detriment by taking the action of retiring because of the promise and it was reasonably foreseeable to the Company that he would do so. This is similar to the case, Fienberg v. Pfeiffer Co. Answer A is incorrect since there was no consideration. MegaCorp did not request that Casper retire; therefore, Casper's retirement is not the sort of performance that would form a unilateral contract. Answer B is incorrect since Worker did not confer a benefit on Company that was unjust—i.e., Worker was paid for the work that he did. Answer D is not an argument in Casper's favor. It just describes the reason the promise is not enforceable as a contract. Recommended Reading: Pages 75-77, 117-123, 134 of Templin, Contracts: A Modern Coursebook, Second Edition

On March 1, Olivia contacts Bob and expresses interest in having him install a swimming pool in her backyard. On March 3, Bob responds with a signed written offer to build the pool. In the offer Bob specifies price, timetable, and all other relevant details. As for scheduling, the offer provides that Bob will begin work on April 1 and complete it by April 15. He writes, 'I have only those 15 days in which to install your pool, and I can only install one pool at a time. I am full with commitments before and after that period. You have one week in which to respond.' On March 4, Olivia learns from her neighbor, Nancy, that Nancy and Bob have formed a contract for the installation of a swimming pool on Nancy's property, with Bob to begin on April 1 and finish by April 15. Immediately on that same day, March 4, Olivia sends a signed email to Bob, stating, 'I accept your March 3 offer.' In response Bob advises Olivia that his offer is no longer open—that he has committed April 1-April 15 to building another party's swimming pool. Olivia maintains that Bob is in breach of contract—that he made her an offer on March 3, gave her one week in which to accept, and that within one week she accepted. Has Bob breached a contract with Olivia? (A) Yes, because Olivia accepted the offer before Bob attempted to revoke it (B) Yes, because any revocation has to be heard directly from the offeror to be effective (C) No, because Olivia lost her power to accept Bob's offer on March 4 when Olivia's neighbor spoke with Olivia (D) No, because the power of acceptance of an offer typically terminates at the end of a conversation

(C) No, because Olivia lost her power to accept Bob's offer on March 4 when Olivia's neighbor spoke with Olivia Rationale: Issue: This is a mutual assent issue that revolves around whether an offer has been revoked. Rule: The common law provides, generally, that an offeror may revoke his offer at any time before the offeree accepts it. The revocation may come directly from the offeror or indirectly. As to indirect communication of revocation, Restatement (Second) of Contracts § 43 provides, "An offeree's power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect." Analysis: Here, when Bob made Olivia his offer, he told her that he was 'booked,' except for the period April 1-April 15. Then, on March 4, before attempting to accept, Olivia learned that Bob had committed himself to Nancy for that same period. Bob took action inconsistent with the offer because (1) Bob could build only one pool during the time period in the offer to Olivia, and (2) Bob formed a contract with Nancy to build a pool during that time period. When Olivia came to know those facts, Olivia had indirect communication of Bob's revocation. Therefore, she lost the power of acceptance. For this reason, the best answer is Choice C. Although Bob made a promise that Olivia had a week to respond, the promise to keep the offer open is gratuitous, i.e., there is no consideration for the promise. Therefore, there is no express option agreement that Olivia could enforce against Bob. Choice A has the wrong conclusion. Although Olivia did accept before Bob directly informed her of his inability to perform, Olivia learned of his inability to perform indirectly and that is enough to destroy Olivia's power of acceptance under Restatement (Second) of Contracts § 43. Choice B is wrong because it misstates the law. Choice D describes a common law rule but the rule is not applicable to the facts. While the power of acceptance may typically be destroyed at the end of a face-to-face negotiation, this communication stating the offer was in writing. Moreover, an offeror can always specify how long an offer might be open, which is the case here. Again, the writing does not make for an irrevocable option because no consideration was paid to keep the offer open. Recommended Reading: Pages 203-205 of Templin, Contracts: A Modern Coursebook, Second Edition

Arlene posts this advertisement on a website that provides news and information to citizens of a certain city: "Leather handbag lost on downtown city bus; $100 reward for its return [address, telephone number, email address]." Jack lives in the city, but has not seen Arlene's posting. Riding the downtown city bus, he finds the handbag. In it, he discovers a writing that shows Arlene's home address, to which he then travels. Finding no one at the home, he leaves the handbag in Arlene's mailbox. Is Jack entitled to the $100 reward? (A) Yes, because the advertisement was an offer for a unilateral contract (B) Yes, because he lived in the city that the website targets (C) No, because he acted without knowledge of the advertisement (D) No, because he failed to deliver the handbag personally to Arlene

(C) No, because he acted without knowledge of the advertisement Rationale: Issue: This problem tests an issue in mutual assent—whether a party must have knowledge of the offer to accept it. Rule: Restatement (Second) of Contracts § 50(1) provides that, "Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer." Analysis: A person cannot manifest the intent necessary to accept an offer if he does not know that the offer exists. Most professors illustrate that principle with respect to reward offers, but it's true of every type of offer. Here, Jack's intent is to act as a good citizen—in essence, Jack is conferring a favor for Arlene with no intent to charge. It is as if Jack has given a gift to Arlene. Once the gift is given, the recipient has all rights to it. The correct answer is Choice C. Choice A correctly states that the advertisement is an offer for a unilateral contract; however, this statement is matched with an incorrect conclusion. The mere fact that this advertisement would be seen as an offer does not mean that the offer was accepted. Choice B is incorrect too. Unless an offer so provides, one's place of abode does not affect his power to accept it. Although Choice D has the correct conclusion, the reasoning is incorrect. If, without knowing of Arlene's offer, Jack had delivered the handbag personally to her—hand to hand—then still, he'd have no right to the reward. Recommended Reading: Pages 184-185, 198 of Templin, Contracts: A Modern Coursebook, Second Edition

Ana and Betty are roommates. Ana says to Betty, 'I am going to clean out the front closet today.' Betty responds, 'That's nice of you. In exchange, I'll clean out the back closet today.' Have Ana and Betty made enforceable promises to clean their respective closets? (A) Yes, because each party's promise served as consideration for the other party's promise (B) Yes, because together the two promises created a bargain (C) No, because neither party's promise was 'bargained for' (D) No, because neither party's promise confers a benefit on the other

(C) No, because neither party's promise was 'bargained for' Issue: Whether Ana and Betty entered into a bargained-for exchange. In other words, have these two promises formed a contract? Rule: Every contract requires consideration on both sides of the transaction. Consideration may be either a return promise or a performance; however, to constitute consideration, that promise or performance must be bargained for. Restatement (Second) of Contracts § 71(2) provides that, "A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise." Analysis: Under these facts, there is no bargained-for exchange; therefore, no contract formed. Choice C is correct. One classic test for a bargained-for exchange is that "the promise must induce the detriment and the detriment must induce the promise." In other words, there must be a quid pro quo. Nowhere in this short conversation does either woman say, 'I'll clean one closet if you'll clean the other.' Ana's statement does not show a promise being made to induce Betty to make a return promise or performance. Ana, asking for nothing in exchange, makes a gratuitous promise to clean the front closet. Likewise, Betty promises to clean the back closet, doing so because of Ana's promise, but not in exchange for it; she, too, makes only a gratuitous promise. Both promises are unenforceable since there is no consideration provided in exchange for the promise. Choices A and B are incorrect because there is no consideration for either promise. Choice D has the right conclusion but the wrong rationale. There is no requirement under the consideration rules that a promisor receive a benefit from his promise. See Hamer v. Sidway, which illustrates this point. (Although here it is likely that Betty and Ana would receive a benefit from the other's promise.) Choice D is incorrect. Recommended Reading: Pages 27-35 of Templin, Contracts: A Modern Coursebook, Second Edition

Mariah met with George and said, "Will you promise to paint the outside of my vacation home for $4000, to be completed in two weeks?" Mariah owned two vacation homes, one in Fort Lauderdale and the other in West Palm Beach. The one in Fort Lauderdale is much smaller than the home in West Palm Beach, and Mariah meant her larger West Palm Beach home. In Mariah's presence George called his partner Denny and said "Mariah wants us to paint her vacation home in Fort Lauderdale for $4000. Given how small the place is, I think we can do it for that amount and get it done in a week. Do you agree with my assessment?" Denny agreed. After he hung up the phone, George says "Yes, I agree." Four days later, George calls Mariah and says: "I am on my way to Fort Lauderdale right now to paint your house." Mariah responds, "You agreed to paint my West Palm Beach house; that is the one I intended when I made my offer. George says there is no way he can complete that size house by the next week and he would have charged $8,000 if she had meant that house. Do Mariah and George have an agreement to paint her vacation house in West Palm Beach? (A) Yes, Mariah made an offer and since the offeror is the master of the offer her understanding of the vacation home to be the West Palm Beach house is determinative. (B) Yes, because an ambiguity in an offer is resolved against the offeree since the offeree has an opportunity to ask clarifying questions. (C) No, they have an agreement to paint the Fort Lauderdale house for $4,000 since the meaning understood by George is controlling. (D) No, an offer containing any ambiguity cannot be the basis of a contract.

(C) No, they have an agreement to paint the Fort Lauderdale house for $4,000 since the meaning understood by George is controlling. Rationale: This case involves an instance when the parties attached different meaning to the same word. Restatement (Second) of Contracts §201(2) addresses such a situation. "Where the parties have attached different meanings to a promise or agreement or a term thereof, it is interpreted in accordance with the meaning attached by one of them if at the time the agreement was made (a) that party did not know of any different meaning attached by the other, and the other knew the meaning attached by the first party." In this case George clearly meant the Fort Lauderdale house and Mariah knew his meaning since she heard him make the phone call to Denny. As a result, the meaning attached by George resolves the interpretation of the contract and they have a contract to paint the Fort Lauderdale house and Answer C is correct. Answer D is too definitive. Although ambiguities can prevent the formation of a contract, not all do so. The rule in Restatement §201 is an example of a rule that resolves an ambiguity. Thus, answer D is incorrect. Although it is often said an offeror is the master of the offer, this does not refer to the intention of the offeror controlling. It means an offeror can include any terms and conditions desired. Answer A is incorrect. Ambiguities are not resolved based on which party can ask questions. This rule is not a principle in the common law and therefore answer B is incorrect. Recommended Reading: Pages 417-421, 429-438 of Templin, Contracts: A Modern Coursebook, Second Edition

Farmer decides to retire from farming. Employee, who had worked for Farmer for ten years, is interested in purchasing Farmer's tractor. The tractor is valued at $26,000, which is about the same amount as Employee earned in one year. Farmer intends to give Employee a bonus for the past year. After some discussion between the two parties, Farmer provides Employee with a signed writing that states, "In consideration of his long time employment, I promise to give my tractor to Employee." Farmer, however, later refuses to transfer title of the tractor to Employee. If Employee attempts to sue for breach of contract, which of the following is the most likely result? (A) Farmer wins, because there was no consideration for the bonus. (B) Farmer wins, because the fair market value of the tractor is greater than the reasonable bonus for an employee. (C) Employee wins, because courts do not inquire into the adequacy of consideration. (D) Employee wins, because the statute of frauds is satisfied.

(A) Farmer wins, because there was no consideration for the bonus. Issue: This problem tests on past consideration. Rule: A promise based on consideration received in the past is generally unenforceable since it was not bargained for. Analysis: Choice A is the correct answer because of the past consideration rule. Here, there is no bargain because the consideration for Farmer's promise is in the past. The promise is gratuitous and therefore may be revoked. Choice B suggests an unequal exchange. It implies that Farmer intended a bonus payment that was much less than the value of the tractor. However, the answer is irrelevant since there was no bargain for a bonus payment. If Farmer had told Employee that he was entitled to a bonus after a certain of period of time, and Employee continued to work for that period time, then Employee's work would be consideration for the bonus. However, the promise of a bonus—in the form of the tractor—was gratuitous because it came after Employee had performed his work. Choice B is, therefore, incorrect. Choice C is likewise not relevant. Since there was no bargain, the adequacy of consideration rule applied in favor of Employee is not at issue. Choice D is incorrect because it has the wrong conclusion. While the statute of frauds would certainly be satisfied in terms of holding Farmer accountable, that is not at issue since there is no consideration for the transfer. Recommended Reading: Pages 75-77 of Templin, Contracts: A Modern Coursebook, Second Edition

Shipco is a large shipping company. Shipco and Partsco form a contract under which Shipco is to move a cargo of industrial equipment 5,000 miles by sea from the United States to the nation of Estuania. On the day before it is to depart, military hostilities erupt between Estuania and the nation of Nutssia. In the Baltic Sea, Nutssian naval forces blockade all of Estuania's commercial ports. Unless it attempts to pass the blockade, Shipco cannot make its delivery for Partsco. Hence, Shipco's delays the shipment for Estuania. Alleging that Shipco is in breach of its contract, Partsco demands that it pay compensation for damages caused it by its failure to transport the cargo. As its reason for nonperformance, Shipco cites the blockade. If Partsco sues Shipco for breach of contract, Shipco's best defense lies with which doctrine? (A) Impracticability (B) Unilateral mistake (C) Mutual mistake (D) Frustration of purpose

(A) Impracticability Rationale: Issue: This problem requires students to distinguish between the defenses of mistake and the changed circumstances defenses of impracticability and frustration of purpose. Rule: Restatement (Second) of Contracts § 261 provides that "Where, after a contract is made, a party's performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary." "Impracticable" is defined as an extreme and unreasonable difficulty, expense, injury, or loss. Analysis: Here, the unforeseen/unanticipated/ unknown event—the blockade resulting from a state of hostility between two nations—arose after the parties formed their contract. Both mutual mistake and unilateral are therefore inapplicable. The mistake defense pertains to a mistake of fact existing at contract formation. Since the two nations were not in conflict at the time of contract formation, Choices B and C would not be effective defenses for Shipco. Of the two changed circumstances defenses, impracticability is better than frustration of purpose. Impracticability focuses on whether performance has become extremely and unreasonably more difficult, expensive, risky, or injurious. Frustration of purpose focuses on whether the principal purpose of the contract has somehow became meaningless. (Restatement (Second) of Contracts § 265 gives a useful illustration of frustration: "2. A contracts with B to print an advertisement in a souvenir program of an international yacht race, which has been scheduled by a yacht club, for a price of $10,000. The yacht club cancels the race because of the outbreak of war. A has already printed the programs, but B refuses to pay the $10,000. B's duty to pay $10,000 is discharged, and B is not liable to A for breach of contract.") Here, the issue is the difficulty of the performance. By running the blockade, Shipco would be taking on an extreme and unreasonable amount of risk, putting its employees and ships at risk of harm and injury. Consequently, Choice A is the best answer. In contrast, the principal purpose of the contract—i.e., shipping the goods to Estuania—has not become meaningless because of the blockade. There is still a purpose to be achieved in that Partsco still needs to move its products from the United States to Estuania. Therefore, Choice D is not correct. Recommended Reading: Pages 418, 429-430, 449-457 of Templin, Contracts: A Modern Coursebook, Second Edition

Cyrus is sitting on his rocking chair on his front porch one morning when Charlene drives up to his house. They have been friends and neighbors for years. Charlene says "Hey Cy, I painted my fence and have many cans of paint left over. If you will pay me $200, the cost of the paint, I promise to paint your fence for you right now." Cyrus's fence hasn't been painted in years and needs a new coat. Cyrus just keeps rocking in his chair and Charlene starts painting. Cyrus watches her paint the fence until she is about 90% finished. He then stands up and shouts "No thanks, I don't accept your offer to paint my fence. Leave now." If Charlene sues Cyrus for the $200, is a court likely to find they had formed a contract to paint the fence for $200? (A) Yes, Charlene made an offer and in this circumstance Cyrus's acceptance occurred by silence. (B) Yes, Charlene made an offer and between friends one can always presume acceptance by silence. (C) No, mere silence can never constitute acceptance of an offer. (D) No, Charlene never made an effective offer that is capable of acceptance.

(A) Yes, Charlene made an offer and in this circumstance Cyrus's acceptance occurred by silence. Rationale: Charlene's words clearly constitute an offer. She conveys all the material terms (she will paint Cyrus's fence in exchange for $200). She manifests an intention to be bound since she does not reserve any right to reconsider once Cyrus responds. Thus, answer D is incorrect. The next question is whether or not Cyrus accepted her offer. He says nothing explicitly nor does he use a gesture to signify acceptance. He remains silent. Restatement (Second) of Contracts §69(1)(a) states that silence operates as acceptance "[w]here an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation." Cyrus meets both prongs of this requirement. He is sitting there watching her paint and accepts her work. He could easily have said "Do not paint it" or "Stop." She tells him she expects compensation in the amount of $200. Answer C is too definitive since silence can in certain circumstances constitute acceptance. Answer B is incorrect. Although according to §69(1)(b) past dealings between the same people may create a situation in which silence operates as acceptance, the answer too broadly claims such is the case between all friends. Answer A correctly concludes an offer was made in these specific circumstances and was accepted by silence. Recommended Reading: Pages 208-210 of Templin, Contracts: A Modern Coursebook, Second Edition

Francis is the hiring manager for Bella Donna Restaurant. Tyrone often works as a part time waiter during shifts when the restaurant thinks it will have increased business. For the past two years this has happened 35 times. Each time Francis calls Tyrone and either says to him or leaves as a voicemail saying something similar to the following: "We could use you on Saturday night from 5:00 to midnight. If you want to work, show up before 5:00, work the shift, and we will pay you $6.00 an hour plus a proportionate share of tips that night." Tyrone, when he is able, arrives at the restaurant and either starts working or stops by Francis's office to say he is reporting for work. On February 12, Francis calls and leaves a message for Tyrone on his voicemail making the same offer for Valentine's Day. Tyrone never calls Francis back. Tyrone shows up on Valentine's Day and works from 5:00 to midnight. Francis has the night off so does not see Tyrone work. A few days later Tyrone calls Francis to ask when he can pick up his pay and share of the tips. Usually, Francis pays Tyrone a few days later after they have calculated his share of the tips. Francis says "Oh, I never heard back from you after I left my message, so I called Melanie who worked that night. We didn't really need you as a result, so I am not paying." Tyrone did see Melanie working but thought nothing of it as she sometimes works there on other occasions when he has worked. If Tyrone sues for his salary and proportionate share of tips, is a court likely to find that a contract has been formed? (A) Yes, Francis made a unilateral offer and Tyrone effectively accepted by rendering the required performance (B) Yes, Francis made an offer and due to their course of dealing, silence operates as acceptance. (C) No, Tyrone's acceptance is nullified since the offeree must notify the offeror of acceptance even if earlier silence is effective. (D) No, since Francis was not present to reject the proffered services on Valentine's Day, Tyrone's silence does not operate as acceptance.

(A) Yes, Francis made a unilateral offer and Tyrone effectively accepted by rendering the required performance Rationale: This question tests the ability to distinguish acceptance by silence (Restatement (Second) of Contracts §69) and Acceptance by Performance (Restatement §50). Restatement §30 makes clear an offeror can invite acceptance either by "an affirmative answer in words" or "by performing . . . a specified act," Restatement §32 makes clear the required "act" can be performance of the terms of the offered contract. The common law called such an offer to be an offer of a "unilateral" contract although the Restatement does not use this terminology. Under the facts of this problem, Francis is making a unilateral offer and asks for acceptance by performance (working as a waiter on Valentine's Day from 5:00 p.m. until midnight). Tyrone either did not have a duty to notify Francis of his acceptance by performance because Francis did not require notification of acceptance when making the offer (Restatement §54(1)) or Tyrone's call a few days later constituted "reasonable diligence to notify" Francis of acceptance by performance (Restatement §54(2)(b)). Answer A is therefore correct. Although Restatement §69(1)(b) makes clear a course of dealing between parties can create a situation in which silence can constitute acceptance, as already noted, this offer did not invite acceptance by silene but acceptance by performance. The past dealings do not demonstrate a history of accepting by silence but by performance so Answer A is incorrect. Although Restatement §54 specifies instances in which notice of acceptance is required, as noted previously Tyrone did give notice within a reasonable time. Having the ability to reject proffered services is relevant sometimes to silence constituting acceptance, in this case when performance was the invited method of acceptance, the ability to reject services is not relevant and therefore Answer D is incorrect. Recommended Reading: Pages 200-202 of Templin, Contracts: A Modern Coursebook, Second Edition

By signed writing, Seller and Buyer agree that Buyer will pay Seller a nonrefundable $1,000, and Seller, for two months, will hold open an offer to sell her a parcel of real property for the price of $1 million, which is the fair market value of the property. Buyer then pays Seller $1,000. One month later, Buyer tells Seller that Buyer wants to accept the offer and purchase the land. Buyer tenders a cashier's check for $1 million in accordance with the terms of the offer, but Seller refuses to convey title to the property. Is Seller in breach of contract? (A) Yes, because Seller sold Buyer an enforceable option to purchase the real estate (B) Yes, because an option for the sale of real estate requires no consideration (C) No, because the consideration from Buyer for the option is presumptively inadequate (D) No, because the Seller fails to provide consideration for the option

(A) Yes, because Seller sold Buyer an enforceable option to purchase the real estate Rationale: Issue: This problem tests the enforceability of option agreements. Rules: An offer is generally freely revocable at any time before it has been accepted if the offeree receives notice of the revocation. However, an offer may be made irrevocable for the time stated under a valid option contract. "An option contract is a promise which meets the requirements for the formation of a contract and limits the promisor's power to revoke an offer." Analysis: Two parties form an 'option contract" if one of them (the 'optionee') gives some value in exchange for which the other ('optionor') agrees, for some stated period, to hold open an offer. (Restatement (Second) of Contracts § 25). The optionor is the offeror of the underlying offer being held open. The optionee is the offeree of the underlying offer. Here, Seller and Buyer have formed a contract, under which Buyer has purchased Seller's irrevocable offer. Each must abide by his/her contractual obligation. Buyer must pay $1,000 (as she does), and Seller gives up the power to revoke the offer for two months. Seller must sell Buyer the real estate (for $1 million) if, within two months, Buyer "exercises the option"—i.e., accepts the underlying offer by tendering the $1 million. One month later, Buyer does exercise the option, but Seller refuses to sell it. Seller is in breach of the option contract, and so is in breach of the underlying contract to sell the property. Choice B has the correct result—that a contract formed for the purchase of the property, and Seller breached it—but the wrong reasoning. Under the common law, an option for real estate does require consideration. In some situations under the UCC Article 2, an offer from a merchant for the sale of goods may be held open without consideration; however, this contract is for the sale of real property, not goods. Similarly, Restatement (Second) of Contracts § 87(1) provides that an offer may be binding as an option contract if it is made in a certain manner, but those requirements are not met. Choice C incorrectly applies the adequacy of consideration rules to the wrong contract. There are two contracts (the option contract and the sales contract) and there are two sets of consideration. In the option contract, the $1,000 is given for the firm option; in the sales contract, the $1 million is given for the property. Neither the $1,000 nor $1 million is nominal in the context of the correct contractual exchange. Although the property is worth $1 million, the $1,000 is not nominal because it is only purchasing time to keep the offer open. There is nothing in the facts suggesting that the $1,000 represents the pretense of a bargain. Furthermore, many courts give some leeway in terms of consideration for option agreements. Nominal consideration under an option agreement could be sufficient if the underlying contract is fair. (See Restatement (Second) of Contracts § 87.) Under these facts, the $1,000 is not nominal. Furthermore, the underlying contract of $1 million for the property is a fair price. For these reasons, Choice C is incorrect. Choice D is wrong because the option does exact consideration from Seller. In return for the $1,000 Seller promises to not revoke the offer for two months. That promise curtails Seller's right to revoke an offer and is therefore consideration for the promise. Choice A is correct. Recommended Reading: Pages 222-225 of Templin, Contracts: A Modern Coursebook, Second Edition

Nat and Odessa are friends. Nat says to Odessa, "I'd like you to be exposed to classical music. If you promise to attend tomorrow night's Chopin concert, I will reimburse you for your ticket." Odessa replied, "Yes, thank you. I'll go to the concert." Odessa paid for a ticket and attended the concert; however, Nat refused to reimburse her for the cost of her ticket. Has Nat breached a contractual promise? (A) Yes, because the consideration for Nat's promise is Odessa's promise (B) Yes, because the consideration for Nat's promise is Odessa's performance of attending the concert (C) No, because promises between friends are considered gratuitous (D) No, because Nat did not benefit from the exchange

(A) Yes, because the consideration for Nat's promise is Odessa's promise Issue: Here, the issue revolves around whether there is consideration for the promise. Rule: Every contract requires consideration on both sides of the transaction. Consideration may be either a return promise or a performance; however, to constitute consideration, that promise or performance must be bargained for. In defining the term "bargained for," Restatement (Second) of Contracts § 71(2) provides that, "A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise." Analysis: Nat proposes an exchange of performances—a quid pro quo—a 'this' for a 'that'—a bargain. Nat promises Odessa to reimburse her costs if Odessa promises to attend the concert. While Nat is ultimately seeking to have Odessa attend the concert, Nat is specifically seeking Odessa's promise. It is the return promise by Odessa that is the consideration for Nat's promise. The contract forms at the point that Odessa makes the promise, i.e., when she says "Yes ... I'll go to the concert." Choice A is correct. Choice B is incorrect. Consideration could be the actual performance rather than a promise; however, that is not the case here. Nat sought a return promise to form the contract. If Odessa did not attend the concert, then she would have breached their agreement and Nat would not be obligated to perform. Choice C is incorrect. Promises between friends might be gratuitous—especially for things like social engagements. For example, a contract is not thought to arise if one friend accepts the other friend's invitation to dinner. However, that doesn't mean friends cannot form contracts. Here, there is a bargained-for exchange because Nat sought to have Odessa attend the concert by promising to pay for her ticket. Choice D is incorrect because it misapplies the consideration rule. The consideration rules do not require that the promisor receive a benefit in order to enforce the contractual promise. (Restatement (Second) of Contracts § 79(a).) This is demonstrated by the classic law school case, Hamer v. Sidway, in which an uncle promised a nephew $5,000 if the nephew refrained from drinking liquor, using tobacco, swearing, and playing cards or billiards for money until the nephew was 21 years old. The nephew assented and then performed. However, the uncle's estate refused to pay out on the promise arguing that the uncle did not benefit from the transaction and that the nephew was not harmed but benefitted. The court, however, found that the uncle's promise was enforceable. The focus of that court was that the nephew, at the request of the uncle, incurred a detriment by giving up his legal right to engage in these activities. Consequently, there was consideration that was bargained for despite the fact that the uncle did not benefit from the arrangement. This problem is similar to Hamer v. Sidway. Nat does not stand to benefit from his promise to reimburse Odessa for the cost of the ticket. Moreover, Odessa arguably stands to benefit by being exposed to classical music. However, Odessa does waive a legal right to not go to the concert. She could have done something else with her time; therefore, Odessa has incurred a legal detriment at the request of Nat. Most importantly, she incurred the legal detriment as part of an exchange—i.e., a bargain. The promise of reimbursement of the ticket induced her to incur the detriment of going to the concert and vice versa. Consequently, a bargain exists. Recommended Reading: Pages 27-42 of Templin, Contracts: A Modern Coursebook, Second Edition

A miner owns a silver mine. It is uncertain how much silver is contained in the mine, but the miner honestly thinks there could be as much as $60 million in silver. The miner borrows $500,000 from an investor to purchase equipment necessary to mine the silver. In a detailed and signed writing, the miner promises to pay the investor $20 million in return for his investment once the silver has been mined and sold. Is the $500,000 investment consideration for the future promise of $20 million? (A) Yes, because the investor's risk in losing the investment justifies receiving a greater reward (B) Yes, but the court should limit the return by determining the fair market return that an investment in a speculative silver mine should yield (C) No, because the disparity between the $500,000 investment and the $20 million payment renders the consideration nominal (D) No, because such gross disparity in value is absolute proof of fraud, duress, or unconscionability

(A) Yes, because the investor's risk in losing the investment justifies receiving a greater reward Issue: This problem tests the adequacy of consideration rule. Rule: Mere inadequacy of consideration will not void a contract. There is no requirement that the things exchanged be of equal value. Gross disparity may be relevant to prove an affirmative defense to formation, such as duress, fraud, or unconscionability. However, if the purported consideration is nominal, then it is just a mere formality or pretense of a bargain and will not serve as consideration for a promise. Analysis: The adequacy of consideration rule leaves the valuation of the things to the parties. Restatement (Second) of Contracts § 79, comment (c) states, "Valuation is left to private action in part because the parties are thought to be better able than others to evaluate the circumstances of particular transactions." In other words, courts do not generally possess the expertise to make valuation decisions. Even if the court admitted expert witness testimony, such valuation is often subjective. Choice B goes against the rationale of the rule. The policy behind the adequacy of consideration rule is the freedom of contract principle. Courts do not attempt to inquire into the valuation of consideration because it is up to the parties to decide how they value the bargain. Choice B is incorrect. Choice C is also incorrect. The exception of nominal consideration does not apply to these facts. To test for whether the consideration is nominal, you should ask yourself if the consideration is something "more than the pretense of a bargain." The focus is on intent. In other words, does the promisor intend to give a gift or enter into a bargain? These facts show that both parties are motivated to enter into a bargain. The miner needs money to purchase equipment to operate the silver mine. The miner is willing to part with a significant portion of the profits for the investment, but the miner—if he is correct—will also profit significantly. Choice D misstates the rule. Gross disparity is not absolute proof of fraud, duress, or unconscionability. The rule is that gross disparity may be relevant to prove an affirmative defense to formation, such as duress, fraud, or unconscionability. Here the facts suggest that the consideration would be adequate even though there is great disparity. The investor is taking a great risk that he will lose the entire $500,000 since it is uncertain how much silver is in the mine. Therefore, Choice A is correct. Recommended Reading: Pages 61-71 of Templin, Contracts: A Modern Coursebook, Second Edition

Carlos has a collection of rocks that he collected when he was a child. Carlos did not know if any of them were valuable. Carlos invited a mineral and gem dealer over to assess the worth of the collection. The dealer examined the collection, took some pictures, and later emailed Carlos stating, "I will purchase your entire collection for $475." The dealer signed the email. Carlos called the dealer on the phone and asked if the dealer would give Carlos $500 for the entire collection. The dealer agreed. Later the dealer came to pick up and pay for the collection; however, Carlos refused to complete the transaction. Carlos said he changed his mind and wanted to keep the collection as a memory of his youth. If the dealer brings a breach of contract claim against Carlos, can Carlos successfully assert the statute of frauds as a defense? (A) Yes, because the statute of frauds writing requirement has not been satisfied (B) Yes, but only if Carlos's expertise in minerals qualifies him as a merchant (C) No, because the dealer's email satisfies the statute of frauds as a merchant's confirmatory memo (D) No, because the statute of frauds only applies to sales for over $500

(A) Yes, because the statute of frauds writing requirement has not been satisfied Rationale: Issue: The issue is whether Carlos can assert the statute of frauds defense. Rule: See UCC § 2-201 Analysis: Under these facts, the transaction is subject to UCC § 2-201 statute of frauds because it involves the sale of goods for the price of $500 or more. Here, the sale was for exactly $500. Choice D is wrong because it incorrectly states the statute of frauds as requiring a transaction of over $500. Since the statute of frauds applies, UCC § 2-201 requires "some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought." However, Carlos never communicated with the dealer in writing; therefore, Carlos can use the statute of frauds as a defense to avoid the oral agreement. Choice A is correct. Choices B and C revolve around the merchant rules. First, Carlos is not a merchant. As a child, Carlos collected rocks but never knew their worth. Even if Carlos was a merchant, that would not be a rationale for being able to assert the defense. Choice B is incorrect for that reason. Choice C is also incorrect. The merchant's confirmatory memo exception under UCC § 2-201(2) provides that "Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received." This fails for two reasons. First, as noted above, Carlos is not a merchant. Second, even if Carlos were a merchant, the email was an offer and not a confirmatory memo of an oral contract. Moreover, in the phone call, Carlos proposed a counteroffer that terminated the dealer's offer. Recommended Reading: Pages 266, 271, 272, 285-286 of Templin, Contracts: A Modern Coursebook, Second Edition

Dealer is a used car dealer. Buyer wanted to purchase a new car and found one on Dealer's lot that had a price of $5,000 on the windshield. After a lengthy negotiation, Buyer and Dealer agreed to the sale of the car for a purchase price of $3,000, plus a trade-in vehicle that Buyer owned. Buyer signed a written agreement that provided all of these details—the car, the purchase price, and the trade-in. In addition, Buyer paid Dealer $50 cash as a deposit. Dealer did not sign the written agreement. Buyer returned one week later with the balance of the money due and the trade-in. However, Dealer refused to complete the transaction. Buyer sued for breach of contract. Dealer asserted a statute of frauds defense. If Buyer wins, it is mostly likely because a court determined that: (A) the $50 deposit satisfies the partial payment exception to the statute of frauds. (B) Buyer could be classified as a merchant given her expertise and knowledge about cars. (C) Buyer returned to complete the transaction within 10 days before Dealer objected. (D) Dealer's oral agreement is enforceable since the transaction involved only a $50 deposit and is therefore outside the statute of frauds.

(A) the $50 deposit satisfies the partial payment exception to the statute of frauds. Rationale: Issue: This is a statute of frauds problem that turns on whether the partial payment provision of UCC § 2-201(3)(c) applies. Rule: UCC § 2-201 Analysis: Under these facts, the transaction is subject to the requirements of UCC § 2-201 statute of frauds because it involves the sale of goods for the price of $500 or more. Here, the sale was for a car that was priced at $3,000 plus a trade-in. Since the statute of frauds applies, UCC § 2-201 requires "some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought." Dealer is the party against whom enforcement is sought; however, Dealer has not signed any documents evidencing the contract. If Buyer wins, it is most likely because a court holds that the partial payment exception applies. Under UCC § 2-201(3)(c), "A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable ... with respect to goods for which payment has been made and accepted or which have been received and accepted." The official comment notes that "Receipt and acceptance either of goods or of the price constitutes an unambiguous overt admission by both parties that a contract actually exists." If a buyer sends only a partial payment then the court might just enforce the sale to the extent of the goods purchased. For example, if the sale were for some commodity (e.g., fruits, vegetables, etc.) then the court might just enforce the sale to the degree that it was paid. However, this transaction is for one car which is not divisible. If Buyer wins at court, then the only logical rationale for that result (from the choices given) would be the partial payment exception. Consequently, Choice A is the correct answer. Choice B is incorrect because nothing in the facts suggests that Buyer has any expertise in cars. Choice C suggests facts that are not relevant. Choice D is incorrect since the sale price is well over $3,000 (when you include the value of the trade-in); consequently, the transaction is within the statute. The problem is based on Truex v. Ocean Dodge, Inc., 219 N.J. Super. 44, 529 A.2d 1017 (App. Div. 1987). Recommended Reading: Pages 266, 271, 279 of Templin, Contracts: A Modern Coursebook, Second Edition

Antonio owns several expensive paintings. On August 1, a burglar breaks into his home and steals his most prized painting. On August 2, Antonio publicly offers a reward of $10,000 to the person who provides information that leads to the return of the painting. On August 3, Bruno, a detective, calls Antonio and says, "I accept your offer. I promise to put all of my efforts into getting your painting returned." Bruno spent a substantial amount of time trying to locate the painting, but was unsuccessful. On August 20, Christina, an art dealer, contacted Antonio and provided information about someone who tried to sell the painting to her. The police were able to use the information that Christina provided to capture the criminal and return the painting to Antonio on August 20. Which of the following statements is correct? (A) A bilateral contract formed between Antonio and Bruno. (B) A unilateral contract formed between Antonio and Christina. (C) Both Bruno and Christina formed contracts with Antonio. (D) Neither Bruno nor Christina formed a contract with Antonio since it was the police who performed by returning the painting.

(B) A unilateral contract formed between Antonio and Christina. Issue: This problem focuses on what constitutes acceptance—a promise or performance. Rule: Restatement (Second) of Contracts § 30 provides that an offer can be accepted by a return promise or by performance. Analysis: As is typical with rewards, the contract can only be created, i.e., accepted, by the completed performance of the offeree. It has the character of a unilateral contract. When the contract forms, the offeree has no further duty and the only remaining duty is that of the offeror. Here, the offeror does not seek a promise to search for information that leads to the return of the painting. Rather, it is the actual performance—i.e., the giving of information that leads to the return of the painting—that binds Antonio to the obligation to pay the $10,000. Therefore, Bruno's promise on August 3 does not form a bilateral contract. When Christina provided information that led to the return of the painting, a unilateral contract was formed on August 20. Choice B is correct. Since no contract ever formed with Bruno, Choices A and C are incorrect. Choice D is incorrect because it ignores what constitutes performance. Here, it is the giving of information that leads to the return of the painting. Since Christina gave information that resulted in having the painting returned, Christina has fully performed. The police do not share in the reward since they are performing their legal duty as police officers. Recommended Reading: Pages 185, 200-202 of Templin, Contracts: A Modern Coursebook, Second Edition

Builder is in the business of constructing modest homes. Owner owns a piece of property on which he wants to build a house. At the request of Owner, Builder prepares an offer to build a house on the property in return for $100,000. The offer provides all of the key specifications needed to build the house. In reviewing the offer, Owner says to Builder, "I would like to keep your offer under advisement. Would you consider making the following modifications for the same price?" Owner then added dozens of changes to the specifications. Builder realized that Owner would be difficult to work with and that Builder might lose money on this deal. After Owner added yet another proposed modification, Builder reached across the table, took the copy of his original offer from Owner, and tore it up in front of Owner. Builder said, "I don't think I can do this." Owner replied, "I accept your offer." Which of the following best expresses the legal relationship between the parties? (A) Owner's request for changes to the specification was a counteroffer that destroyed Owner's power of acceptance as to Builder's offer. (B) Builder's statement of uncertainty and ripping up of the offer was, in effect, a revocation of Builder's offer. (C) Owner formed a contract with Builder according to the terms of Builder's original offer. (D) Owner formed a contract with Builder that incorporates Owner's proposed terms.

(B) Builder's statement of uncertainty and ripping up of the offer was, in effect, a revocation of Builder's offer. Rationale: Issue: This problem focuses on the mutual assent rules and revocation. Rule: An offer is generally freely revocable at any time before it has been accepted if the offeree receives notice of the revocation. The revocation may be communicated by words or by actions of the offeror. Analysis: Under these facts, Builder initially made an offer to Owner. Owner's response is to keep Builder's offer alive while exploring some proposed changes. Consequently, it is not likely that Owner's response is a counteroffer that destroys Owner's power of acceptance. See Restatement (Second) of Contracts § 39(2). Choice A is incorrect. However, Builder's ripping up of his offer would likely be seen as a revocation by conduct; thereby destroying Owner's power of acceptance. By stating, "I don't think I can do this," Builder no longer "manifests the intent to enter into a bargain," which is a key element to the existence of an offer. Choice B is the best answer. Choice C is incorrect since once the offer has been revoked, it can no longer be accepted. Choice D cannot be correct as the terms proposed by Owner were never accepted by Builder. Recommended Reading: Pages 203-205 of Templin, Contracts: A Modern Coursebook, Second Edition

Store bought newspaper advertising that said, "SATURDAY SALE - ONE DAY ONLY! Men's Fashion Watches on sale for $1 each. Limited Quantity Available. Only 500 watches available." Buyer was the first person at the Store on Saturday. As soon as the Store opened, Buyer told a Store employee that she wanted to purchase all 500 of the Men's Fashion Watches. Store employee told Buyer that she could only purchase 10 of the watches. Buyer purchased 10 watches. Which of the following is the best statement regarding the legal rights and duties of the parties? (A) Buyer was an identified offeree who properly accepted Store's offer since she was the first person at the Store. (B) Buyer's statement is an offer and the Store employee had the power to accept or not. (C) Buyer made a unilateral mistake that voided the contract since he should have known that Store did not intend to sell all 500 watches to one person. (D) Store can refuse to perform since the total price of Buyer's contract is $500 which makes the agreement within the statute of frauds and there is no writing signed by the party to be charged.

(B) Buyer's statement is an offer and the Store employee had the power to accept or not. Rationale: Answer B is correct. This problem tests the issue of whether the advertisement was an offer. An offer requires: (1) a manifestation of present intent to enter a bargain; (2) that it be stated in certain and definite terms; (3) that it be communicated to an identified person or persons; (4) that an offeree be able to reasonably understand that a contract would result if accepted. Typically, advertisements are not offers since they generally don't specify an identified person or persons as an offeree. However, an advertisement could be an offer if it meets all of the elements of an offer. For example, if the ad included some qualifying language—such as "first come, first serve" or another limiting language to identify the offeree—then the element would be met. Here, Store's advertisement fails as an offer since there is no language to indicate who would be the offeree. This is an ad targeted at the general public. Since Store's ad is not an offer, Buyer's statement that he will purchase all 500 watches is not an acceptance. However, Buyer's statement does prove all of the elements of an offer since he shows: 1) Intent to enter a bargain by stating that he would immediately purchase all 500 watches. 2) Certain and definite terms by specifying that he would pay the price of $1 each for the subject matter (watches) and stating a quantity of 500 watches. 3) Identified offeree because the employee was a representative of the company, Store. 4) Offeree reasonably understands that a contract would result if accepted. Therefore, Store has the power of acceptance. When the Store employee (as the agent of the company) refused but was willing to sell Buyer 10 watches, then Store can be deemed to have made a counteroffer that Buyer then accepted. This analysis illustrates that the statement that most accurately describes the legal rights of the parties is Answer B. Answer A is wrong because of the analysis above. Answer C is nonsensical in that it applies the defense of unilateral mistake to a fact pattern where there is no contract. Answer D is not an accurate statement since Buyer did not have a contract to purchase all of the watches for $1000. Recommended Reading: Pages 175-177, 184-185 of Templin, Contracts: A Modern Coursebook, Second Edition

Cleaner ran a cleaning service and ran advertisements in the local media stating, "I will clean any space that is 2,000 square feet or less for $250 no matter how dirty it is. Call now to accept this offer." The advertisement provided contact information for Cleaner. Owner owns an office building, and each floor measured exactly 2,000 square feet. Owner called Cleaner's phone number but got voicemail. Owner left the following message, "I accept your offer. If you can start cleaning tonight by 9:00pm and finish by tomorrow morning at 7:00am, I will pay you $300 per floor to clean each of the floors in my building." Owner provided the necessary details such as the building address and combination needed to unlock the doors. Owner then ended the voicemail saying, "You need not call back. Just show up and start working. I will pay." Cleaner received the voicemail and went to Owner's building that evening before 9:00pm, unlocked the doors, and started cleaning the first floor. Owner, who was working late, saw Cleaner and said, "Stop. I changed my mind. I don't want you to clean my building." Cleaner stopped working and later brought a breach of contract suit against Owner. Who will prevail in the lawsuit? (A) Cleaner, because Owner accepted Cleaner's offer by leaving a voicemail (B) Cleaner, because Owner's offer provides for acceptance by performance (C) Owner, because Cleaner never called back to accept Owner's offer (D) Owner, because Owner revoked before Cleaner promised to clean the building

(B) Cleaner, because Owner's offer provides for acceptance by performance Rationale: Issue: This is a mutual assent problem that focuses on the manner of acceptance. Rule: Restatement (Second) of Contracts §§ 32, 45 62 Restatement (Second) of Contracts § 32 Invitation of Promise or Performance In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as the offeree chooses. Restatement (Second) of Contracts § 62 (1) Where an offer invites an offeree to choose between acceptance by promise and acceptance by performance, the tender or beginning of the invited performance or a tender of a beginning of it is an acceptance by performance. (2) Such an acceptance operates as a promise to render complete performance. Analysis: Cleaner's advertisement would very likely not be construed as an offer. Although Cleaner states the terms under which she will work, there is no identified offeree. The offer is made to an unlimited number of people, demonstrating no intent to be bound to a particular one upon acceptance. Even if the ad is construed as an offer, Owner proposed additional and different terms that would amount to a counteroffer—not an acceptance that forms a contract. Owner's voicemail is an offer. He proposes certain and definite terms to Cleaner, the identified offeree. The objective meaning of Owner's language shows that he intends to enter a bargain; therefore, Cleaner had the power of acceptance. The offeror—as master of the offer—may specify whether he wants a return promise or performance as an acceptance. If the offer is not explicit, then the offeree may choose between either a return promise or performance. (See Restatement (Second) of Contracts § 32.) If the offeree accepts by performance, then it is the start of performance that forms the contract. (See Restatement (Second) of Contracts § 62.) Here, the offer specified that Cleaner did not have to call back to accept the offer, suggesting that Cleaner had a choice—to either accept by performance or by a promise. Cleaner chose to begin performance. By beginning performance, the offeree is in effect promising (through conduct) to complete performance under Restatement (Second) of Contracts § 62. Therefore, Cleaner accepted the offer and a contract was formed. Owner's refusal to allow Cleaner to work is a breach of the contract. For these reasons, Choice B is correct. Choice A is incorrect because, as explained above, Cleaner's advertisement was not an offer. Choice C is incorrect, because, as explained above, Owner's offer invited acceptance by performance or promise. By beginning performance, Cleaner formed the contract. Choice D is wrong for the reasons stated above. An offeror cannot revoke an offer after it has been accepted since the contract has been formed. Recommended Reading: Pages 184, 201 of Templin, Contracts: A Modern Coursebook, Second Edition

For years, the City had wanted to build a park in its center. On October 1, Diana, a prominent restaurateur, sends the following letter to the City Council. "I have lived in City all of my life and want to provide City with an opportunity to purchase property for a park at a very good price. To show my civic spirit and because I love this town, I offer to sell the property my restaurant is located on to City for $30,000—a price that is well below the fair market value. This offer is open until November 1. Sincerely, Diana" The restaurant property has a fair market value of $100,000. The City Council received the letter the following day. On October 15, Diana dies. Under Diana's will, her son Edward inherits all her property. Edward is also the executor of Diana's estate. The City Council knows that Edward is not as civic minded as Diana and will want to keep the restaurant property. The City Council quickly holds a meeting where they approve the purchase. The Council then sends an acceptance of Diana's offer to her address with a copy to Edward as executor of her estate. When Edward received the Council's acceptance, he wrote back to the Bergen City Council stating that as executor of Diana's estate, he would not sell the restaurant property for any less than the fair market value of $100,000. The City brings a breach of contract claim. What is the likely decision of the court and rationale? (A) Edward prevails as executor of Diana's estate because there was no consideration to keep the offer open. (B) Edward prevails as executor of the Diana's estate because the offer was revoked. (C) City prevails because the offer was made irrevocable through promissory estoppel. (D) City prevails because they accepted before the attempted revocation.

(B) Edward prevails as executor of the Diana's estate because the offer was revoked. Rationale: Answer B is correct. This problem tests on the issue of termination of the power of acceptance by the death of the offeror. The problem is loosely based on G.R. v. Town of E. Bergen, 191 Wis. 2d 446, 529 N.W.2d 231 (1995). Under these facts, Diana has made an offer to City to sell her property. Diana states that the offer will be open until November 1. Under the mailbox rule, the offer became effective on October 2, the date of receipt. The City Council took no immediate action on the letter. When Diana died on October 15, the City Council's power of acceptance was terminated. (See Restatement (Second) of Contracts §48.) For this reason, Answer B is correct. Answer A has the right conclusion and correctly states the facts; however, the rationale is not the principal reason that the offer was terminated. It should be noted that if Diana's letter had been an option contract with consideration, then her death would not have terminated the City Council's power of acceptance. (See Restatement (Second) of Contracts §37.) That rule is not relevant since there is no consideration to hold her offer open. Even so, the lack of consideration is not the reason that the offer was terminated. As stated above, Diana's death terminated the offer. Answer C is incorrect since nothing in the facts suggests that the City relied to its detriment on Diana's promise to keep the offer open until November 1. While the City has always wanted a park in the city center, the City Council took no action or forbearance of action based on the offer letter. They were apparently just contemplating the transaction when Diana died. Answer D is also incorrect. It is true that the City tried to accept the offer stated in the October 1 letter before Edward refused to sell at the price stated. However, the City's purported acceptance was ineffective since the October 1 offer was revoked as explained above. Consequently, City's purported acceptance is really an offer. Edward's response is a rejection of City's offer and he proposes a counteroffer. For these reasons, Answer D is incorrect. Recommended Reading: Pages 203, 207-208 of Templin, Contracts: A Modern Coursebook, Second Edition

Jose contracts with Ines to completely rewire his home. The state in which the contract is formed makes it illegal "to perform, or enter into a contract to perform, electrical work unless the person performing the work is licensed" by the state. To become licensed an electrician must pass several written and skills tests and take at least 4 hours of continuing education each year. There is also an initial license fee of $300 and an annual fee of $50. Ines has never been licensed in the state although she has been working there for a few years. She thinks it is unreasonable to have to take tests and pay this money since she believes she knows what she is doing as a self-taught electrician. Pursuant to the contract Jose gave Ines a $1,000 deposit. Before the work was begun but after signing the contract and paying the deposit, Jose learned that Ines is not licensed. He claims the contract is void as against public policy. If this dispute over the contract were to go to court, what would be the likely outcome? (A) Because the law that applies to the contract charges fees that produce revenue for the state, the contract is still enforceable notwithstanding its violation of the law under the revenue exception. (B) The contract will be declared unenforceable, and a court will likely order restitution of the $1,000 deposit in these circumstances. (C) The contract will be declared unenforceable, but the court will not order any restitution by any party. (D) The contract is still enforceable since it only violates a statute not a policy.

(B) The contract will be declared unenforceable, and a court will likely order restitution of the $1,000 deposit in these circumstances. Rationale: Contracts that violate public policy are void. Contracts that violate public policy include, but are not limited to, contracts to perform criminal acts and contracts that do not require legally mandated licenses or permits to perform the work contracted. Some courts will enforce a contract that is subject to a licensing or permit requirement if the license or permit serves no regulatory function and can be obtained merely by tendering a fee to the applicable governmental unit. The statute in this state, although involving a license fee, appears to have a regulatory purpose as it seeks to ensure that those performing electrical services are qualified. Compliance involves more than a fee. Thus, answer A is incorrect. Entering into the contract—not merely performing the work—is explicitly declared contrary to law and is therefore illegal and contrary to public policy. Answer D creates a false dichotomy between statutes and public policy and is therefore incorrect. The contract will certainly be held void as contrary to public policy. As to restitution, traditionally the common law left the parties where they were and did not order restitution under an illegal contract. However, in more recent decades if one party is clearly at fault and that party is the subject of the regulation the courts will find the parties not to be in pari delicto (equally at fault) and may order restitution to restore the person whom the regulation is meant to protect. The Restatement (Third) of Restitution confirms this approach in §32 which states that a person "who renders performance under an agreement that is illegal or otherwise unenforceable for reasons of public policy may obtain restitution from the recipient . . . (2) as necessary to prevent unjust enrichment, if the allowance of restitution will not defeat or frustrate the policy of the underlying prohibition." In this case, the statute is meant to protect people like Jose from unlicensed contractors. Jose has not received any benefit under the contract and if the parties are left where they stand, Ines would be unjustly enriched. It is therefore likely a court would order restitution of the deposit. Answer B is therefore the best answer and answer C is not the best choice. Recommended Reading: Pages 391-397 of Templin, Contracts: A Modern Coursebook, Second Edition

Bentley owns two Rolls Royce cars. One is blue and the other is brown. Bentley says to Ford "I offer to sell you my light-colored Rolls Royce for $75,000." Ford accepted. Bentley meant his blue car, but Ford thought they were referring to the brown one. They are both a light color, but Bentley thought the blue one was lighter than the brown and Ford thought the brown was lighter. When they discover their mistake, Ford insists that he has a legal right to buy the brown one, but Bentley does not want to sell the brown one at any price. What is a court likely to do? (A) The court is likely to rule that Bentley as the seller bears the risk of any mistake and must sell the brown car. (B) The court is likely to find that their mutual mistake results in there being no enforceable contract to buy a car. (C) The court is likely to find that there is only a unilateral mistake on Ford's part (since Bentley cannot be mistaken about his own offer as the master of the offer) but that it is not unconscionable to enforce the contract and therefore the unilateral mistake does not excuse performance. (D) The court is likely to find that Ford as the buyer bore the risk of the mistake because the buyer in a sale can always ask questions before accepting and will therefore require Ford to buy the blue car.

(B) The court is likely to find that their mutual mistake results in there being no enforceable contract to buy a car. Rationale: The problem tests the rules governing mistakes. The problem presents a case of mutual mistake. Both of Bentley and Ford are mistaken about what the other understands by the phrase "lighter car." It is not a unilateral mistake and therefore answer C is incorrect. Courts will attempt to determine which party bore the risk of this mistake. When the mistake involves merely a mistake in valuing the object sold (for example when a seller thinks they are selling a cheap stone but are really selling a diamond) the courts will typically hold the seller bears the risk of that mistake. Likewise, if the thing sold turns out to be worth less than the buyer thinks, the buyer is typically found to bear that risk. This problem does not present a mistake about the value of the car. The mistake lies in identifying what is being sold. There is no reasonable basis to determine who bears this risk. Answers A and D are therefore incorrect. Both parties could have clarified the situation equally. The court would then have no basis to determine which party bears this risk and enforce the contract accordingly. The court would likely use the rule in Restatement (Second) of Contracts §201(3) to resolve the matter and find no enforceable contract at all. That section states: "Except as stated in this Section [when one party knows or has reason to know of the other's meaning], neither party is bound by the meaning attached by the other, even though the result may be a failure of mutual assent." Answer B is therefore correct. Recommended Reading: Pages 417-421 of Templin, Contracts: A Modern Coursebook, Second Edition

An employer sends a computer programmer an email stating, "I am making you a job offer to hire you for a one year contract at a salary of $100,000 a year." The email provided all of the relevant employment terms, including the details of the programmer's duties, job title, benefits, etc. The email ended by stating, "This offer will remain open for 60 days. Write or call me to accept." The programmer replied to the email, stating, "That is a very interesting offer. Let me consider that over the next couple of months. Would you consider hiring me for two years at a salary of $90,000 a year?" The employer did not reply to the programmer's email. Within the 60-day period, the programmer called and told the employer that he accepted the employer's original offer. Which of the following is the most accurate characterization of the parties' communications? (A) The programmer's email is a counteroffer. (B) The programmer formed a contract with the employer when he called the employer within the 60-day period. (C) Since the programmer only accepted orally, the programmer could use the statute of frauds as a defense if he changed his mind and wanted out of the agreement. (D) The employer's silence to the programmer's email was an acceptance of the two-year proposed contract, and the programmer's subsequent phone call is a proposal for a modification.

(B) The programmer formed a contract with the employer when he called the employer within the 60-day period. Rationale: Issue: This is a mutual assent problem in which you need to identify the legal impact, if any, of each communication. The main legal issue is whether the programmer's email was a counteroffer that destroyed the power of acceptance. Rules: For this problem, the key rule relates to Restatement (Second) of Contracts § 39 Counter-Offers. This problem is loosely based on Illustration # 3 in Restatement (Second) of Contracts § 39. Analysis: To solve this problem, identify the legal effect of each communication. The employer's email is obviously an offer since employer manifests intent to enter into a bargain. The essential terms are certain and definite because the salary, term, relevant duties and other employment terms are specified. Therefore, the programmer has the power of acceptance. Was the programmer's response a counteroffer that destroys his power of acceptance as to the employer's offer? Restatement (Second) of Contracts § 39(2) provides that "An offeree's power of acceptance is terminated by his making of a counteroffer, unless the offeror has manifested a contrary intention or unless the counteroffer manifests a contrary intention of the offeree." Here, the programmer has made what is often called "a mere inquiry" as to whether the employer would accept different terms—a slightly lower salary but a longer term. Because the programmer specifically asks to think the offer over before asking about these other terms, the programmer has sought to reserve his power of acceptance as to the employer's offer. Here, it is clear that the programmer does not intend to reject the original offer through a counteroffer. Since the employer specified that the offer was open for 60 days, the lapse of time has not destroyed the programmer's power of acceptance. Since the employer specified that the programmer could accept by phone or email, the programmer's phone call serves as acceptance of the offer since he agrees unequivocally to every term of the original offer. Consequently, Choice B is correct. Choice A is incorrect because the programmer's email is not a counteroffer for the reasons stated above. Choice C is incorrect because it misapplies the statues of frauds. A contract for over a year requires a signed writing to be enforced. Here, the contract is for exactly one year; therefore, the statute of frauds does not apply. The programmer would not have it as a defense. Choice D misapplies the "silence as acceptance" rules. Silence is not normally acceptance, but Restatement (Second) of Contracts § 69 provides some exceptions. However, nothing in these facts suggests that the parties had previously agreed that silence is acceptance. None of the other exceptions apply. Recommended Reading: Pages 205-206, 252 of Templin, Contracts: A Modern Coursebook, Second Edition

A 22-year-old man moved to the city from a rural area where he grew up to take a blue-collar job in the city that paid him $3,000 a month. It was the first time that he had been away from home. He had not completed high school but was of average intelligence. He went to a rental agency and told the agent he wanted a small, modest apartment that cost no more than $750 per month. The rental agent then showed the young man a series of luxury apartments that each cost $2,500 per month. While showing the apartments, the agent continually complimented the young man and told him how important it was for a young man's image to rent a luxury apartment. Later, the young man signed a three-year lease renting the apartment for $2,500 a month. If the young man sues the rental agency to rescind the agreement because it was unconscionable, which of the following additional facts would tend to help the rental agency? (A) The lease was written using complex legal terms that would be unfamiliar to the average person. (B) The young man took the lease home and consulted an attorney before signing the lease. (C) The $2,500 per month rental rate was 50% more expensive than the fair market value for such an apartment. (D) The contract was an adhesion contract.

(B) The young man took the lease home and consulted an attorney before signing the lease. Rationale: Issue: The problem tests whether students understand which facts are important in proving or disproving the unconscionability defense. Rule: A court may refuse to enforce a contract or term on a finding that it is procedurally and substantively unconscionable. Procedural unconscionability may be demonstrated by (1) gross inequality in bargaining power, or (2) unfair surprise. Substantive unconscionability may be shown by: (1) overly harsh allocation of risks not justified by the circumstances, or (2) great price disparity. Analysis: Students should note the call of the question. The question does not ask who wins but whether certain types of evidence would favor one party or the other. The correct answer is Choice B. Choices A, C, and D would all be evidence that would not help the rental agency disprove the defense of unconscionability. Procedural unconscionability is present when there is a defect in the bargaining process because of (1) gross inequality in bargaining power or (2) unfair surprise. Gross inequality in bargaining power can be shown when one of the parties lacks any ability to modify the contract. Choice D states that that contract was an adhesion contract. An adhesion contract is a standard form contract that is given to a party on a take-it-or-leave basis. An adhesion contract by itself is not unconscionable; however, it is a fact used to show that there was inequality in the bargaining power between the parties. Choice D would not help the rental agency. As to unfair surprise, one common example is when there are complex and hidden terms in a complicated legal document. If the average person cannot understand the document because of legalese, then courts may find that the transaction is procedurally unconscionable. Choice A states that the document has complex legal terms that would be unfamiliar to the average person. If this were a fact, then it would not help the rental agency. Such a fact would go to show that there may have been unfair surprise. This fact alone would not prove that the contract was unconscionable, but it would not help the rental agency. However, Choice B would help the rental agency. If the young man had an opportunity to show the lease to an attorney and get advice before signing it, then the young man would be less likely to have experienced any unfair surprise. Choice B is correct. Alternatively, if the written legal document was written in plain language and without legalese (as it was here), that would be evidence that suggests there was no unfair surprise. Choice C speaks to second element of unconscionability—substantive unconscionability. Substantive unconscionability can be shown by overly harsh allocation of risks or great price disparity. If the $2,500 monthly rent is 50% above the fair market value of the property, then that is evidence that there was a price disparity in value. The young man would be overpaying for the apartment. This fact alone may not prove unconscionability, but it would not help the rental agency. Therefore, Choice C is also incorrect. Recommended Reading: Pages 371-390 of Templin, Contracts: A Modern Coursebook, Second Edition

Byron and Amanda Coddleston were looking to buy a home in Philadelphia. While touring the home of Deborah Jefferson, the Coddlestons mentioned how much they loved old houses. They also stated they greatly admired Benjamin Franklin. To encourage them to make an offer Deborah Jefferson told them that her home was one of the oldest in Philadelphia (which is true) and that Benjamin Franklin lived in the house for a year (which is not true and which Deborah just made up to pique their interest). This fact pushed the Coddlestons over the edge as they could not resist owning a house in which their hero Benjamin Franklin lived. They signed a contract to purchase right then and there for $650,000. A month later and before they had completed the purchase of the house, they went to the Franklin archives and discovered that the records contained a list of all of Franklin's homes and the one they contracted to buy appeared nowhere on the list. The Coddlestons want to avoid their contract to buy the home. Do they have a good argument to avoid the contract? (A) Yes, the contract is procedurally unconscionable (it was signed right then and there) and substantively unfair since it does not meet their expectations of being a former residence of Franklin. (B) Yes, Deborah committed a fraudulent representation that entitles the Coddlestons to rescind the contract. (C) No, the Coddlestons could have easily examined the archives before signing the contract and thus bear the risk of their mistake. (D) No, the contract is not against public policy and therefore must be enforced.

(B) Yes, Deborah committed a fraudulent representation that entitles the Coddlestons to rescind the contract. Rationale: The question tests the relevance of various voidability defenses. The contract does not appear to be against public policy but that does not mean another voidability defense does not apply. Answer D is not a good answer. Determining which party bears the risk of a mistake is part of the analysis in applying the doctrine of mutual mistake. This question does not involve a mutual mistake, however. Deborah is not mistaken. Deborah untruthfully told the Coddlestons that Franklin lived there, and they believed her. Thus, answer C is not the correct choice. There is no evidence of either procedural or substantive unconscionability in the problem. Merely acting quickly to enter into a contract is not procedurally unfair when there is no evidence of coercion or unfair bargaining. There is also no term that appears to shock the conscience in the contract. Answer A is therefore incorrect. Deborah clearly made a fraudulent misrepresentation. She knowingly made an assertion not in accordance with the facts. The Coddlestons justifiably relied upon this statement in that it was reasonable to believe Deborah would know this fact. The fact induced them to buy the house. If a fraudulent misrepresentation is made, the one relying on the misrepresentation may either rescind the contract or sue for damages. Answer B is correct. Recommended Reading: Pages 347-358 of Templin, Contracts: A Modern Coursebook, Second Edition

Contractor is under contract to construct a large recreational area for a hotel. In order to fulfill her obligations, Contractor must secure the services of subcontractors. Contractor asks five separate plumbers to "bid on" the plumbing components of the project. Contractor expected the bids to be in a range from $1.5 million to $2.3 million. From four of the plumbers Contractor receives offers/"bids" for: (1) $2 million, (2) $2.1 million, (3) $1.96 million, and (4) $1.98 million. The fifth plumber determines to make a bid of $1.7 million, but in writing the bid, the plumber's clerk, by simple error, writes "$170,000. On receiving that plumber's bid, Contractor writes to the plumber stating, "We accept your bid/offer." When the plumber discovers its error, the plumber tells Contractor that he wishes not to perform the work. Contractor insists on holding the plumber to his bid. Can the plumber rescind the contract? (A) Yes, because Contractor has not yet relied on the bid (B) Yes, because Contractor had reason to know of the plumber's mistake (C) No, because Contractor accepted the plumber's offer (D) No, because a party always bears the risk of its own negligence

(B) Yes, because Contractor had reason to know of the plumber's mistake Rationale: Issue: This problem tests on the doctrine of unilateral mistake. Rule: Restatement (Second) of Contracts §153 provides, "Where a mistake of one party at the time a contract was made as to a basic assumption on which he made the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable by him if he does not bear the risk of the mistake..., and (a) the effect of the mistake is such that enforcement of the contract would be unconscionable, or (b) the other party had reason to know of the mistake or his fault caused the mistake." Analysis: This fact pattern illustrates the classic problem of a clerical error made by one party. The mistake relates to a basic assumption of the contract, i.e., the price. The mistake has a material effect on the plumber since it would result in the plumber receiving one tenth of what he expected. Furthermore, Contractor would unjustifiably benefit from the mistake. Unilateral mistake differs from mutual mistake by imposing an additional requirement under either Restatement (Second) of Contracts § 153(a) or (b). On these facts, Contractor would be charged with knowledge of the mistake. The error is said to be a "palpable mistake." Four other plumbers made bids, all of them within the same monetary 'ballpark.' The fifth plumber seemed to make a bid that was exponentially lower than the other bids. Contractor expected the bids to be in a certain range and the fifth plumber's bid was well below it. Given these facts, the knowledge element of Restatement (Second) of Contracts § 153(b) would be met in this case. Consequently, Choice B is correct. Choice A is a poor answer choice. Even if Contractor had relied on the bid, it is unlikely that a court would enforce the contract. Since Contractor knew that a mistake was made, it would not be reasonable for Contractor to take action to his detriment by relying on the bid. Choice C is incorrect. While Contractor did accept plumber's offer, the mistake allows the plumber to rescind the contract. Choice D overstates the risk bearing rules. A party does not always bear the risk of its own negligence. There are excusable mistakes that are allowed, such as the one illustrated here. Moreover, courts might allocate the risk to one party "on the ground that it is reasonable in the circumstances to do so." Restatement (Second) of Contracts § 154(c). Here, Contractor knew about the mistake, yet tried to take advantage of it by accepting the offer. In this case, a court would not allocate the risk to the plumber because the result would be unreasonable, unjust to the plumber, and a windfall to Contractor. Recommended Reading: Pages 429-438 of Templin, Contracts: A Modern Coursebook, Second Edition

Dealer is a truck dealer. A trucking company sent a written and signed offer to Dealer offering to purchase ten trucks (model X100) for $500,000. The offer included delivery dates and payment terms. Dealer responded in a signed writing accepting the trucking company's offer. Before delivery of the trucks could be arranged, the trucking company sent Dealer an email that stated, "We made a clerical error in our original offer as to the model of trucks. We meant to order the X200 model trucks for a total of $500,000. Can we make that change?" Dealer responded in a signed writing and stated, "That's fine. We'll deliver ten model X200 trucks at the same price as agreed upon." However, on the date of delivery, Dealer only delivered model X100 trucks and refused to deliver the X200. Has Dealer breached the contract? (A) Yes, because a court would likely reform the contract on the grounds of the trucking company's unilateral mistake (B) Yes, because Dealer agreed to modify the contract in a signed writing (C) No, because the modification is subject to the statue of frauds writing requirement (D) No, because the trucking company provided no additional consideration for Dealer's promise to supply the X200 model

(B) Yes, because Dealer agreed to modify the contract in a signed writing Issue: Whether there is an enforceable contract modification to change the model of truck from the X100 to the X200. Rule: This problem is governed by the UCC since the transaction involves the sale of a truck, which is classified as a good. The relevant portions of UCC § 2-209 are: § 2-209. Modification, Rescission and Waiver. (1) An agreement modifying a contract within this Article needs no consideration to be binding. ... (3) The requirements of the statute of frauds section of this Article (Section 2-201) must be satisfied if the contract as modified is within its provisions. Analysis: The parties originally formed a contract for ten X100 trucks. After formation, the trucking company realized it had made a clerical error and meant to ask for the model X200 trucks. The trucking company neither offered to pay Dealer more money nor provided it with any other sort of consideration. If the common law governed this transaction, the attempted modification would be ineffective. Dealer would not be obliged to deliver the X200 model. However, under the UCC the modification needs no additional consideration provided that it was made in good faith. (See official comment to UCC § 2-209.) Here, it appears that the trucking company made an innocent clerical error and requested the modification in good faith. The contract was effectively modified by Dealer's assent. Dealer's subsequent refusal to deliver the X200 is a breach. Choice B is correct. Choice A is not the best answer for a number of reasons. First, we don't have enough facts to determine if the trucking company could seek a remedy under unilateral mistake. There are a number of elements to prove and there are not enough facts. For example, we do not know—among other things—whether the mistake has a material effect on the agreed exchange. (See Restatement (Second) of Contracts § 153 for the other requirements of a unilateral mistake defense.) Second, even if the trucking company could prove the defense of mistake, the more likely remedy is rescission of the contract for the X100 and not reformation of the contract. In that situation, the trucking company would be free from purchasing the X100 but still would not get the X200. In any case, there is a much easier solution here than the theory of unilateral mistake. The trucking company merely has to say that there was an effective modification since (1) the UCC does not require consideration and (2) the statute of frauds' writing requirements are satisfied. Choice C has the wrong conclusion. Additionally, the statue of frauds does not prevent the enforcement of this modification. The statement in Choice C is correct—i.e., the modification is subject to the statute of frauds since this is a sale of goods of $500 or more. However, the statute of frauds writing requirement is satisfied. The emailed reply to the modification is a writing sufficient to indicate that a sale has been made for ten model X200 trucks, and the writing is signed by the party against whom enforcement is sought—Dealer. Choice D is incorrect because it applies the common law requirement of consideration for a modification rather than the UCC rule which is applicable to these facts. A good faith modification does not require consideration in a sale of goods. Recommended Reading: Pages 104-105 of Templin, Contracts: A Modern Coursebook, Second Edition

Buyer seeks to purchase a quantity of Fortex valves. Buyer asks Seller whether the valves he offers to sell have hinges that are composed of plastic or steel. Seller does not know the answer and says, 'Which do you want?' 'Steel,' Buyer responds. 'Well, you're in luck. These valves do have steel hinges.' By signed writing, the parties contract for the purchase of 100,000 valves for $200,000. The writing is exhaustively detailed, and includes a merger clause. It describes the goods to be sold as '100,000 Fortex valves.' It makes no mention of hinges. After the parties sign the writing, Buyer asks to see a few of the valves. He finds that their hinges are composed of plastic and alerts Seller to that fact. Seller responds, 'Read our contract, it calls for Fortex valves and says nothing about hinges.' Is Buyer entitled to rescind the contract? (A) Yes, because both parties were mistaken about the nature of the hinges (B) Yes, because Seller committed a fraudulent misrepresentation (C) No, because Seller's statement was an opinion on the quality of the valves (D) No, because the writing is a total integration

(B) Yes, because Seller committed a fraudulent misrepresentation Rationale: Issue: The issue is whether Seller has committed a fraudulent misrepresentation by making a representation when he did not know whether the statement was true or false and knowing that the statement would influence Buyer's decision. Rule: A contract is voidable if "a party's manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party upon which the recipient is justified in relying." Restatement (Second) of Contracts § 164(1). A fraudulent misrepresentation is defined as one where "the maker intends ... to induce a party to manifest his assent and the maker (a) knows or believes the assertion is not in accord with the facts, or (b) does not have confidence that he states or implies in the truth of the assertion, or (c) knows he does not have the basis that he states or implies for the assertion." Restatement (Second) of Contracts § 162(1). Analysis: Seller made a fraudulent misrepresentation under Restatement (Second) of Contracts § 162(1)(c) since he had no basis for stating the claim that the valve hinges were made of steel. Buyer may, therefore, rescind the contract under Restatement (Second) of Contracts § 164(1). Choice B is correct. Choice A is incorrect since Seller was not mistaken about the facts. Seller knew that he did not know the facts and made a representation upon which he had no basis to state the claim. Choice C is incorrect. A distinction is made between a statement of fact and an opinion. In some cases, a salesperson's statement about a product or service is considered an opinion—such as, "this is the best product ever." Opinions are generally not subject to the misrepresentation rules provided that the opinion is given in good faith. Here, the statement about the hinges is not an opinion, but a statement of fact about the hinges. Even if the statement were an opinion, the facts suggest that Seller is not honestly expressing himself in good faith since he knows he has no basis for making the statement. Choice D suggests that the writing controls under the parol evidence rule since it appears to be totally integrated. However, an exception to the parol evidence rule is when there is a misrepresentation upon which the contract can be rescinded. Therefore, Choice D is incorrect. Recommended Reading: Pages 347-358 of Templin, Contracts: A Modern Coursebook, Second Edition

Seller owns a truck with an engine she cannot start. Her mechanic advises her that the engine is broken and must be replaced. Seller then offers the truck for sale at a price of $1,000, whereas a usable truck of the same type, variety, and age would command a price of $15,000. On April 1, Buyer expresses interest in purchasing the truck and asks Seller why her asking price is so low. Seller explains that the truck's engine is inoperable and needs replacement. Buyer and his mechanic examine the truck. The mechanic advises Buyer, 'the engine is no good, but the truck is otherwise in great condition. It's easily worth $1,000. Replace the engine for $8,000 and you'll have a good deal.' By signed writing, Seller and Buyer form a contract under which Buyer is to pay Seller $1,000, with Seller to convey the truck to Buyer, the actual payment and transfer (the 'closing') to occur on May 1. Then, on April 30, Seller discovers that the engine is easily repairable with the replacement of a single $2 part. Seller contacts Buyer: 'It turns out this engine is fine. The truck is worth far more than $1,000. Our deal is off. I won't be at the closing tomorrow." Buyer objects and insists they go through with the transaction. Is Seller entitled to rescind the contract? (A) Yes, because under the defense of non-disclosure the buyer has a duty to disclose that the seller made a material mistake as to the worth of a good (B) Yes, because Seller does not bear the risk of a mutual mistake since she relied on an expert's opinion (C) No, because courts do not inquire into the adequacy of consideration (D) No, because sellers presumptively bear the risk, regardless of consulting experts

(B) Yes, because Seller does not bear the risk of a mutual mistake since she relied on an expert's opinion Rationale: Issue: This problem tests on the doctrine of mutual mistake. Rule: Restatement (Second) of Contracts §152(1) provides, "Where a mistake of both parties at the time a contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless he bears the risk of the mistake...." Analysis: Here, each party manifests to the other her/his certain belief that the engine is inoperable which affects the worth of the vehicle. However, both parties have the facts wrong. The engine can be repaired inexpensively. The mistake has a material effect since Seller would be selling a valuable truck at a very low price, and Buyer would be getting the truck at an incredible bargain. Neither expected this outcome. Hence, these parties were mutually mistaken as to a fact material to Seller's willingness to form the contract. Seller is entitled to rescind it provided that Seller did not bear the risk of the mistake. Under Restatement (Second) of Contracts § 154, one way that a party bears the risk of the mistake is through conscious ignorance. If Seller had not consulted with an expert as to why the truck was not running, then Seller might have to bear the risk of the mistake. However, Seller did consult her mechanic—an expert—and did not rely on her own uninformed opinion. In fact, more than one mechanic thought the engine needed to be replaced. Since both mechanics made the same mistake, we can reasonably conclude that Seller did not bear the risk of the mistake under Restatement (Second) of Contracts §154. Choice B is correct. Choice A misconstrues the facts. This is a mutual mistake problem. Buyer is also mistaken about the facts and does not know that a mistake was made at contract formation. The phrase "had reason to know of the mistake" is from the Restatement (Second) of Contracts §153(b), which covers a unilateral mistake. If the mistake was unilateral, then Seller would need to prove an additional element that either (a) the effect of the mistake would make contract enforcement unconscionable or (b) the other party had reason to know that there was a mistake. The additional elements are unnecessary here since the mistake was mutual. Even if it was a unilateral mistake, Seller could probably rescind since the mistake was so substantively unconscionable. That said, Choice A would be wrong since Buyer did not know of the mistake. Choice C states a well-known rule but has the wrong conclusion. It is true that courts leave valuation questions to the parties; however, the adequacy of consideration rule also states that gross inadequacy (as is the case here) is an indication that there might be a voidability defense such as fraud, duress, or mistake. Choice C is incorrect. Choice D overstates the risk bearing rules. Seller may rely on experts in order to avoid the risk of making a mistake. Recommended Reading: Pages 417-430 of Templin, Contracts: A Modern Coursebook, Second Edition

Milo likes to plan ahead. His son will be graduating from college in three years. He contacts Engaging Events, a venue that hosts and caters large parties. Milo and Rachel, an employee of Engaging Events, agree orally that Milo will host his son's graduation party at their venue on June 10, three years from the date of their conversation, for $20,000, to be paid on the day prior to the event. No writing satisfying the Statute of Frauds exists. A year prior to the agreed party date, Rachel calls Milo and tells him that they have a request for a wedding that will net the venue much more money and so they cannot host Milo's party. Can Engaging Events successfully raise the Statute of Frauds as a defense, assuming the applicable state has a Statute of Frauds that mirrors the Restatement (Second) of Contracts? (A) Yes, because the contract is for an amount greater than $500. (B) Yes, because the contract cannot be performed within one year. (C) No, because the contract will only take one day to perform and therefore can be performed within one year. (D) No, because the contract does not involve employment services that extend for more than one year.

(B) Yes, because the contract cannot be performed within one year. Rationale: This problem tests the application of the One Year Provision of the Statue of Frauds. Restatement (Second) of Contracts §130 (1) states that the writing requirement applies to a situation in which "any promise in a contract cannot be fully performed within a year from the time the contract is made." Even though performance will only take one day (June 10 in three years) to perform, that performance cannot be completed within one year of the time the contract is made. Thus, the One Year Provision can be used by Engaging Events as an affirmative defense and answer B is correct and answer C is incorrect. The $500 threshold is only relevant for sales of goods under UCC §2-201 and this contract does not involve a sale of goods. Thus, Answer A is incorrect. Although the One Year Provision is often an issue in contracts for employment, its scope is not limited to the employment contracts and thus Answer D is incorrect. Recommended Reading: Pages 265-270, 276 of Templin, Contracts: A Modern Coursebook, Second Edition

In January, Seller advertised on the Internet that he had a car for sale. Buyer was working overseas but planned to return home in February and would need a car. He read Seller's ad, and Buyer and Seller came to an agreement where Buyer would pay for the car and Seller would transfer title to the car immediately. Seller planned to park the car in front of Seller's house until Buyer could pick it up in February. After the sale was completed, Buyer expressed concern that the car might be harmed being parked on the street. Seller promised Buyer to insure the car until February. However, Seller did not obtain insurance on the car. Buyer could have insured the car but did not since Seller had agreed to do so. In late January, a hit and run driver ran into the parked car thereby destroying it. If either Seller or Buyer had insured the car, then the insurance would have paid out for the value of the car. What is the likely outcome if Buyer sues Seller for damages? (A) Seller will prevail, because Seller's promise was gratuitous. (B) Seller will prevail, because Buyer did not take any affirmative action to his detriment. (C) Buyer will prevail, since there was a bargained-for exchange. (D) Buyer will prevail, since Buyer reasonably relied to his detriment.

(D) Buyer will prevail, since Buyer reasonably relied to his detriment. Issue: This problem tests on the doctrine of promissory estoppel. Rule: Restatement (Second) of Contracts § 90(1) provides that "A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires." Analysis: After the sale was completed, Seller made a promise to insure the car until Buyer could return to pick it up. Since this promise was made after the transaction was complete, there is no consideration for the promise. Buyer's promise to pay for the car is not consideration for Seller's promise to insure the car, and Buyer made no other promise in exchange for the promise to insure; consequently, Seller's promise to insure is gratuitous. However, Buyer can assert the doctrine of promissory estoppel since Seller's promise induced forbearance on the part of Buyer. Buyer did not purchase insurance because Seller had promised to do so. Seller should have reasonably expected Buyer to not get insurance once Seller promised to do so. Buyer has suffered a detriment since Seller did not fulfill his promise, and the car was destroyed. Choice D is correct. Although Choice A has a correct statement (i.e., that the promise was gratuitous) the conclusion is incorrect since Buyer has recourse through a theory of promissory estoppel. Choice B is incorrect. The answer suggests that Buyer must act to detriment to assert a claim of promissory estoppel. However, under Restatement (Second) of Contracts § 90(1), the promise can induce either action or forbearance. Here, there was forbearance—i.e., the promisee did not act as a result of the promise. Choice C is incorrect because there was no bargain. Seller's promise to insure was gratuitous. Recommended Reading: Pages 38-39, 117-124 of Templin, Contracts: A Modern Coursebook, Second Edition

Ten years ago, Wanda needed to raise capital for her newly formed corporation, Wandaco, and offered Victor 40% of the Wandaco stock in exchange for $100,000. Victor accepted. Today the total value of all Wandaco stock is $100 million. Wanda approaches Victor and makes a signed, written offer to buy his share of the business for $40 million, which is the fair market value of the stock. Victor rejects the offer, wishing to hold on to the stock. Wanda's daughter, Ella, wishes that Victor would sell Wanda his Wandaco stock because she hopes to inherit it someday. Without Wanda's knowledge, Ella approaches Victor and says, "If my mother makes another offer to buy your Wandaco stock, you'll accept it. If you don't, I'll tell your wife that we have had an affair." In fact, Victor and Ella never have had any such affair. One week later, Wanda again presents Victor with her written offer to buy Victor's Wandaco stock for $40 million. Because of Ella's threat, Victor accepts the offer and signs a contract to convey the shares to Wanda. Is the resulting contract voidable at Victor's option? (A) Yes, because Victor could rescind the contract based on Ella's fraudulent misrepresentation (B) Yes, if Wanda had reason to know about Ella's threat to Victor (C) No, because Wanda's $40 million offer represented the fair market value of Victor's stock (D) No, because in making to Victor the same offer on two separate occasions, Wanda demonstrated her good faith

(B) Yes, if Wanda had reason to know about Ella's threat to Victor Rationale: Issue: The issue centers on whether the defense of duress applies, when the party exerting coercion is not a party to the contract. Rule: Restatement (Second) of Contracts § 175: "(1) If a party's manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim. (2) If a party's manifestation of assent is induced by one who is not a party to the transaction, the contract is voidable by the victim unless the other party to the transaction in good faith and without reason to know of the duress either gives value or relies materially on the transaction. Analysis: When one forms a contract because some other party subjects him to an 'improper threat,' and he had "no reasonable alternative," then he forms the contract under 'duress.' The contract is voidable at his option; he is entitled to honor it or not, according to his own wish. If the coercion is asserted by someone who is not a party to the transaction, then the contract is voidable only if the party to the transaction knows of the coercion. Therefore, Choice B is the best answer. Choice A is incorrect because the facts here do not raise the defense of fraudulent misrepresentation. The defense of fraudulent misrepresentation occurs "[i]f a party's manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party upon which the recipient is justified in relying ...." Restatement (Second) of Contracts § 164(1). The defense is based on deception—where the party entering the contract is deceived into believing something that is not true. Here, while Ella is threatening to make a fraudulent statement, Victor knows it is not true. Therefore, more appropriate defense is duress. Choice C makes a factually correct statement but has the wrong conclusion. It is true that the terms reflect the fair market value of the stock, but that does not change the fact that Victor was induced by duress to enter into the transaction. Choice D is also a poor answer choice. Even if Wanda were operating in good faith on both occasions, that is not a reason to enforce the contract. Also, it is not clear that Wanda was operating in good faith with the second offer. If Wanda knew of her daughter's actions then the second offer was in bad faith. The key factor here is whether Wanda knows of the coercion. Recommended Reading: Pages 323-333 of Templin, Contracts: A Modern Coursebook, Second Edition

Mi Lu offers to sell her vacation home to Henri Ghent. The offer is sent in the form of a contract to purchase real estate that includes all material terms and is signed by Lu. Upon receipt Ghent signs the contract and deposits it in the US mail addressed to Lu at the address listed in the contract. The next morning Ghent has second thoughts and takes a copy of the contract he had made before signing it and changes the purchase price by reducing it by 15%. He then signs this new version and brings it to the FedEx store and sends it to Lu overnight delivery. The next day Lu receives the second copy (with the reduced purchase price) and the day after that she receives the first copy Ghent sent in the mail. She notes the postmark on the mailed copy is a day prior to the date the FedEx package was sent. Lu calls Ghent and said she is holding him to the original contract and price, and he must perform. At this point does a contract exist between Lu and Ghent for the purchase of the vacation home at the original price? (A) Yes, once an offered contract is signed the acceptance is effective. (B) Yes, the acceptance was effective prior to the counteroffer and thus the contract was formed before the counteroffer became effective. (C) No, due to the battle of the forms provision in UCC §2-207, the written records contradict each other (one form shows a higher price and another a lower price) and therefore no contract was ever formed. (D) No, because Lu received the counteroffer before the acceptance, the counteroffer acted as a rejection and since Lu never accepted the counteroffer no contract was formed.

(B) Yes, the acceptance was effective prior to the counteroffer and thus the contract was formed before the counteroffer became effective. Rationale: This question tests the operation of the so-called mailbox rule on counteroffers and acceptances. Restatement (Second) of Contracts §63(a) makes clear that unless the offer stated otherwise, "an acceptance made in a manner and by a medium invited by an offer is operative and completes the manifestation of mutual assent as soon as put out of the offeree's possession." Since Lu sent the offer by mail, an acceptance sent by mail is effective since Restatement §65 makes clear that unless specified otherwise in the offer, using the same mode to transmit the acceptance as used by the offeror is a reasonable method of acceptance. Although Restatement §40 makes clear a counteroffer or rejection is effective once received by the offeror, a counteroffer cannot be effective if a contract has already been accepted. Thus, answer B is correct since the parties formed a binding contract as soon as Ghent put the acceptance in the U.S. mail. Mere signature on an acceptance is not sufficient as an acceptance unless the offer makes clear such an act will constitute acceptance in and of itself. Absent such specification execution must be followed by delivery or communication of the acceptance. Answer A is therefore incorrect. The contract involves the sale of land not goods; therefore, UCC §2-207 does not apply and answer C is incorrect. Although counteroffers are effective upon receipt, they are only effective if the offer has not been accepted. Since the offer was accepted upon mailing the acceptance, answer D is incorrect. Recommended Reading: Pages 210-212 of Templin, Contracts: A Modern Coursebook, Second Edition

On May 31, Seller sends a written and signed offer in the mail to sell a property that Seller owns to Buyer for $100,000. The offer contains all of the relevant details needed for a sale of property. Buyer receives the offer on June 1. On the same day, Buyer mails to Seller a written and signed acceptance of Seller's offer. On June 2, Buyer changes his mind and sends a second signed letter by overnight mail to Seller rejecting the offer. On June 3, Seller receives Buyer's rejection letter. On June 4, Seller receives Buyer's acceptance letter. Which of the following is the most accurate statement of the legal rights of the parties? (A) No contract formed, because Seller received the rejection before the acceptance. (B) No contract formed, because Buyer's power of acceptance was terminated by the subsequent rejection. (C) A contract formed on June 1. (D) A contract formed on June 4 since rejections are not effective until there is confirmation.

(C) A contract formed on June 1. Rationale: Issue: This is a classic mailbox rule problem where the offeree first sends an acceptance followed by a rejection, with the offeror receiving the rejection before the acceptance (the case of the overtaking rejection). Rule: An acceptance sent through the mail is effective on dispatch. Everything else (offers, rejections, counteroffers, and revocations) is effective on receipt. Analysis: Buyer received an offer from Seller on June 1. Although Seller sent the offer on May 31, Buyer does not have the power of acceptance until June 1 because a mailed offer is only effective on receipt. On June 1, Buyer sends an acceptance in the mail. Since an acceptance is effective on dispatch, a contract is formed on June 1. Consequently, Choice C is correct. Choice A is wrong. After the contract has formed, a rejection has no effect. Choice B is likewise incorrect for the same reason. Choice D is wrong because the contract formed on June 1 when the acceptance was sent. Additionally, the rationale misstates the rule. Rejections are effective on receipt. However, in this case a rejection of an offer has no effect if the offer has already been accepted. Recommended Reading: Pages 210-212 of Templin, Contracts: A Modern Coursebook, Second Edition

Zoe is moving across the country and wants to sell some of her things. Zoe sends an email to her friend Franco who she knows loves to read. The email reads, "I am thinking of selling all of my books (500 in total) for $1 a book. I offer to sell you any or all of my three bookshelves for $100 each." As soon as he received the email, Franco called Zoe and said, "I accept both of your offers. I will purchase all 500 of your books for $1 each. I will also purchase all three bookshelves for $100 each." What contract, if any, was formed? (A) A contract was formed for the sale of both the books and the three bookshelves. (B) No contract was formed because the transaction is within the statute of frauds, and Franco did not sign any writing. (C) A contract was formed for the sale of the three bookshelves but not the books. (D) No contract was formed for any item, because the parties did not agree on a delivery date or how payment would be made.

(C) A contract was formed for the sale of the three bookshelves but not the books. Rationale: Issue: The problem revolves around the issue of whether Zoe has made an offer. Rule: Restatement (Second) of Contracts § 24 defines an offer as "An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it." Analysis: Under these facts, Zoe has not manifested intent to enter a bargain as to the books since she says that she is only "thinking about" selling the books. Since she has reserved the possibility of not selling the books, Franco would not be justified in thinking that his acceptance creates a contract. In contrast, however, Zoe's express use of the words "I offer to sell you" does show intent to enter a bargain as to any or all of the three bookshelves. Consequently, Zoe has made an offer to Franco for the sale of the bookshelves but not the books. Franco's oral communication as to his willingness to purchase the three bookshelves at $100 each is an acceptance of Zoe's offer. Therefore, Choice C is correct and Choice A is incorrect. Choice B incorrectly states that the transaction is within the statute of frauds. Since the only offer is for the bookshelves, Franco only entered a contract for the bookshelves. The total price for the bookshelves is $300, which is below the $500 threshold needed for a sale of goods to be within the statute of frauds. Choice D suggests that the terms of the contract are too uncertain to enforce the agreement. However, the UCC provides some flexibility when it comes to missing terms. UCC § 2-204 provides that "Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy." Here, the most important terms are included in the contract: the subject matter (Zoe's bookshelves), the quantity (3), and the price ($300 total). This is enough to provide a basis for a remedy in case of breach. The rest of the terms—such as whether to pay by cash or check and the time transfer of the goods—can be implied or left open for further good faith negotiation. Recommended Reading: Pages 175-176 of Templin, Contracts: A Modern Coursebook, Second Edition

On January 1, Accountant sent a letter to each of her clients offering to prepare their tax returns by April 15, the tax deadline. The letter stated the services that she was offering, the rates she charged, and a list of documents that she would need from the client to prepare the tax return. The letter stated, "If you want to hire me to do your taxes by April 15, then you must let me know and send me all of your tax documents by February 15." Laura is one of Accountant's clients and received Accountant's letter. On March 1, Laura called Accountant asking her to prepare her tax returns. Accountant replied, "I am not sure that I can do that. I needed your documents earlier, and I have many commitments between now and April 15." Laura sent Accountant by overnight mail copies of her tax documents and a signed letter that stated, "I accept your offer of January 1. Enclosed are copies of my tax documents. I look forward to having my taxes prepared by April 15." Accountant did not respond to Laura's letter and did not prepare Laura's taxes by April 15. Laura brings a breach of contract claim against Accountant. Which of the following is the most accurate statement about the outcome of Laura's lawsuit? (A) Laura will win, because Accountant did not unequivocally revoke her January 1 offer during the March 1 phone call. (B) Laura will win, because Accountant's offer was substantially accepted without material alteration by March 1. (C) Accountant will win, because Laura did not have the power of acceptance when she mailed her acceptance and tax documents. (D) Accountant will win, because although the parties formed a contract, Accountant can raise a statute of frauds defense.

(C) Accountant will win, because Laura did not have the power of acceptance when she mailed her acceptance and tax documents. Rationale: Issue: This problem tests on the fundamental rules surrounding offer, acceptance, and termination of the power of acceptance. Rule: Common law rules of mutual assent. Analysis: In a mutual assent problem, it pays to examine each communication/event chronologically and then evaluate the legal effect, if any, of the communication. January 1 letter from Accountant: The letter is an offer from Accountant (offeror) to each of her clients (the offerees). The terms are certain and definite with specific duties listed for each party. Since the offeror is the master of the offer, Accountant has specified what constitutes acceptance, which is to notify Accountant and send her the required tax documents by February 15. February 15 Deadline: Laura missed the deadline to accept Accountant's offer and therefore loses the power to accept Accountant's offer after the deadline passes. Two provisions of the Restatement are applicable. Restatement (Second) of Contracts § 41 specifies that the "offeree's power of acceptance is terminated at the time specified in the offer." However, even if Laura told Accountant that she accepted, Laura would also have had to send the documents. Restatement (Second) of Contracts § 35(2) specifies "an offeree's power of acceptance is terminated by the non-occurrence of any condition of acceptance under the terms of the offer." Delivery of the documents would be considered a condition of acceptance. March 1 Phone Call: Looking at the overall context of the communications, Laura's phone call can be construed as an offer to Accountant. The parties would understand that the terms of Laura's offer would be the same as those in the January 1 letter, modified only to the extent that delivery of the documents would need to be immediate. Accountant's response: To the extent that Laura made an offer, nothing in Accountant's response suggests a manifestation of assent or acceptance. However, Accountant also does not outright reject the offer. If there is anything definitive in Accountant's response, it is that she is not manifesting any intent to commit to doing Laura's taxes by April 15. Laura's overnight passage: Although Laura uses the words "accept your offer," there is no offer by Accountant to accept, and Laura does not have the power of acceptance; therefore, the purported acceptance is ineffective. Instead, Laura's letter reaffirms her offer that Accountant prepare her taxes by April 15 according to the terms in the January 1 letter. Accountant's nonresponse: Since Accountant did not accept Laura's offer, no contract ever formed. Choice C is the best answer because it accurately reflects that Accountant's offer had lapsed or terminated and Laura did not have the power of acceptance when she sent her acceptance letter on March 1. Choice A is incorrect because Accountant's January offer was already terminated by March 1. Choice B is incorrect because (1) Laura did not have the power of acceptance on March 1, and (2) the answer misstates the law by suggesting a standard that an offer be "substantially accepted." An acceptance under the common law by definition must be a mirror image of the offer. An acceptance that does not mirror the terms would be considered a counteroffer or, in this case, a new offer altogether. Choice D is wrong because it (1) incorrectly states a contract formed between the parties, and (2) it suggests that the statute of frauds applies to these facts when it does not. Recommended Reading: Pages 203-208 of Templin, Contracts: A Modern Coursebook, Second Edition

Gerard enters into a contract with Mildred, who travels weekly for her work to distant cities by airplane, to drive her to the airport on Monday morning and pick her up at the airport on Thursday evening. The contract is for two years, and Mildred agrees to pay Gerard $50 a week for both trips. Eight months into the performance of the contract the price of gasoline rises to $15 a gallon, a price which was not expected by either party. Together with paying the tolls that the contract obligates Gerard to pay, the cost of gasoline now results in Gerard losing money each week as his cost to make the two trips is $55 and he is only paid $50 by Mildred. Gerard informs her that he will no longer perform since his whole purpose "was to make some extra money" and since it seems like the price of gas is not declining. "I just cannot continue losing this money each week." Is it likely a court would find Gerard has an excuse for his non-performance? (A) Yes, since both parties were mistaken about their predictions of the price of gasoline, Gerard is excused due to mutual mistake. (B) Yes, since Gerard's purpose in entering into the contract was to make some extra money and that purpose is entirely frustrated by the cost of gas, his performance is excused. (C) No, there is no intervening event that makes Gerard's performance impractical and the purpose of the contract is not frustrated. (D) No, a contract's purpose must be frustrated at the time of making the contract for an excuse to exist and the price of gas changed after the contract was formed.

(C) No, there is no intervening event that makes Gerard's performance impractical and the purpose of the contract is not frustrated. This problem tests application of the excuse of frustration of purpose which is addressed in Restatement (Second) of Contracts §265. That section makes clear that "[w]here, after a contract is made, a party's principal purpose is substantially frustrated without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his remaining duties to render performance are discharged, unless the language or the circumstances indicate the contrary." The section contemplates a frustration of purpose that occurs after a contract is formed and thus answer D is incorrect. Mistakes of fact are mistakes made about facts existing at the time of the formation of the contract. Mistakes about predictions of future events are not relevant to the doctrine of mutual or unilateral mistake and therefore answer A is incorrect. The very purpose of the actual performance must be frustrated in order for the defense of §265 to apply and comment a. states, "It is not enough that the transaction has become less profitable for the affected party or even that he will sustain a loss." If a contract merely becoming economically unattractive were sufficient, every party that enters into a bad bargain would be able to avoid enforcement. Gerard contracted to bear the risk of gasoline prices rising as they agreed to a fixed price contract for the term. Answer B is therefore incorrect and answer C is correct. Recommended Reading: Pages 443-444, 449-457 of Templin, Contracts: A Modern Coursebook, Second Edition

Book Club sends three recently published novels to Camila. All three novels are on the list of "best sellers." The letter accompanying the packages states that Alison may purchase the books for only $20, which is 30% below the retail price. The letter also states, "If you do not want the books, then please return the books within five days and you will not owe us anything. If we do not receive the books within five days, then we will consider the books to have been purchased and we will bill you for $20." Book Club did not include return postage. Camila does not respond to Book Club within five days. Instead, Camila puts the three novels on her bookshelf unread, so that she can return the books if Book Club sends return postage. Has a contract formed between Book Club and Camila? (A) Yes, because it was reasonable for Book Club to expect that Camila would understand that silence is acceptance (B) Yes, because Camila has exercised dominion over the books by putting the books on her shelf (C) No, because a discount of only 30% is not enough to characterize the $20 as nominal consideration (D) No, unless Book Club can show that there are prior dealings with Camila that justify Book Club in thinking that her silence would be acceptance

(D) No, unless Book Club can show that there are prior dealings with Camila that justify Book Club in thinking that her silence would be acceptance Rationale: Issue: The issue here is whether silence is acceptance. Rule: Restatement (Second) of Contracts § 69 (1981) (1) Where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance in the following cases only: (a) Where an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation. (b) Where the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction, and the offeree in remaining silent and inactive intends to accept the offer. (c) Where because of previous dealings or otherwise, it is reasonable that the offeree should notify the offeror if he does not intend to accept. (2) An offeree who does any act inconsistent with the offeror's ownership of offered property is bound in accordance with the offered terms unless they are manifestly unreasonable. But if the act is wrongful as against the offeror it is an acceptance only if ratified by him. Analysis: Here, none of the exceptions applies. Nothing in the facts suggests that Camila has said anything to Book Club where the company would be reasonable in understanding that Camila's silence would be acceptance. It is also not reasonable to expect Camila to return the books at her own expense; therefore, Choice A is wrong. Additionally, Camila has not exercised dominion over the books since she has not read them or benefited from the books in some way, such as giving it as a gift to another. Moreover, by putting the books on her shelf, Camila is merely preserving them—waiting for Book Club to send postage. Therefore, Choice B is incorrect. The best answer Choice is D. As explained above, Camila has no duty to respond to the offer and has not benefitted from the books. Therefore, there is no contract, unless Book Club and Camila had prior arrangement, i.e., other contracts where silence was acceptance. Choice D is correct. This mirrors the result of Illustration 8 in Restatement (Second) of Contracts § 69. Choice C is meant to be a distractor—i.e., facts and legal concepts that are unrelated to the underlying concept. It rejects the notion that a 30% discount would result in there being nominal consideration. While it is likely true that a mere 30% discount would not result in consideration being characterized as nominal, that is not the issue presented and is not relevant to these facts. Recommended Reading: Pages 208-210 of Templin, Contracts: A Modern Coursebook, Second Edition

On October 1, Seller and Buyer entered into a signed and written contract for the sale of Seller's 1968 Pontiac Le Mans convertible for $5,000. The closing date for the sale was to be on November 1. The contract stated the vehicle identification number of the car, contained provisions concerning how much mileage Seller could put on the car prior to closing, and provided that the sale of the car was "as is"—without any warranties, express or implied. On October 15, there was an earthquake. The building in which the car was stored collapsed, thereby destroying the car, making it worthless. Which of the following is an accurate statement? (A) Seller will be in breach of contract on November 1 when he fails to deliver the car. (B) On October 15, Seller repudiated the contract through conduct since the destruction of the car makes it impossible to perform. (C) Seller's duty to sell the car is discharged. (D) Seller will not be in breach if he finds another 1968 Pontiac Le Mans convertible with the same mileage to deliver on November 1.

(C) Seller's duty to sell the car is discharged. Rationale: Issue: This problem involves the defense of impracticability / impossibility. Rule: Restatement (Second) of Contracts § 261 provides that "Where, after a contract is made, a party's performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary." "Impracticable" is defined as an extreme and unreasonable difficulty, expense, injury, or loss. Analysis: Here, there was a supervening event that occurred after contract formation that destroyed the car—,the subject matter of the contract. The event occurred without the fault of Seller. It was a basic assumption of the contract that the car would still be in existence on November 1. However, now it is literally impossible (and hence impracticable) for Seller to perform the contract since the car is destroyed, thereby discharging Seller of his obligation. Choice C is the correct answer. (Note that the contract called the sale of a specific 1968 Pontiac Le Mans, mentioning the vehicle identification number; if the contract instead was for the sale of a 1968 Pontiac Le Mans—without a specific vehicle identification number—then Seller would have had to purchase another car of the same year, make, model, and mileage to avoid being in breach.) Choice A is wrong. Seller would not be in breach since his duty is discharged. Choice B misapplies the repudiation by conduct rules. Choice D is incorrect for the reasons stated above. Recommended Reading: Pages 444, 449-453 of Templin, Contracts: A Modern Coursebook, Second Edition

Distributor purchases food from farmers, packages it, and then resells it to grocery stores. Supermarket is a large supermarket chain. On January 2, Supermarket and Distributor negotiate an oral agreement where Supermarket will purchase and Distributor will sell 200 metric tons of packaged oranges for $500 a ton. Under the agreement, Distributor is to deliver the oranges to Supermarket's warehouse on January 30, at which time Supermarket will pay Distributor the agreed price. On January 10, Supermarket sends Distributor by email a written "purchase order" confirming the terms of the oral agreement and which is signed by Supermarket. Distributor receives the purchase order the same day and reads it, but does not respond. At the end of January, Distributor refuses to deliver the oranges. If Supermarket brings a breach of contract suit against Distributor, what is the likely outcome? (A) Distributor wins, because no contract ever formed since Distributor never accepted the offer made by Supermarket when Supermarket sent the January 10 purchase order. (B) Distributor wins, because Distributor can use the statute of frauds as a defense since the agreement was oral. (C) Supermarket wins, because under the UCC, the purchase order was a confirmation of an oral agreement and therefore satisfies the statute of frauds. (D) Supermarket wins, because Distributor's silence was acceptance of Supermarket's purchase order.

(C) Supermarket wins, because under the UCC, the purchase order was a confirmation of an oral agreement and therefore satisfies the statute of frauds. Rationale: Issue: This problem focuses on the statute of frauds under the UCC and the merchant's confirmatory memo exception. Rule: UCC § 2-201 Analysis: Under these facts, the transaction is subject to the requirements of UCC § 2-201 statute of frauds because it involves the sale of goods for the price of $500 or more. Here, the sale was for 200 metric tons of oranges for $500 a ton; consequently, the transaction is for well over the threshold amount. Since the statute of frauds applies, UCC § 2-201 requires "some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought." Here, Distributor is the party against whom enforcement is sought; however, Distributor has not signed any documents evidencing the contract. However, Supermarket may use the merchant's confirmatory memo exception. UCC § 2-201(2) provides that "Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received." Both Distributor and Supermarket are merchants because through their occupation, they hold themselves "out as having knowledge or skill peculiar to the practices ... involved in the transaction." Additionally, Supermarket's January 10 purchase order would be satisfactory to hold Supermarket accountable if Supermarket were in breach. The purchase order has all of the relevant terms and is signed by Supermarket. Distributor received and read the purchase order but did not respond with an objection within the 10-day time limit. Consequently, Supermarket can use the merchant's confirmatory memo exception to satisfy the statute of frauds writing requirement. Supermarket wins and Distributor cannot escape liability through a statute of frauds defense. Choice C is correct. Choice B is incorrect for the reasons stated above. Choices A and D are incorrect because both treat the January 10 purchase order as an offer. In fact, the purchase order was a confirmation of an oral agreement—not an offer. Recommended Reading: Pages 235-242, 266, 271, 285-286 of Templin, Contracts: A Modern Coursebook, Second Edition

Mariah is a law student and is struggling to make ends meet. She tells her uncle Morris that the bookstore will not let her purchase books on credit anymore since she has not made payments for the past two months. She needs her books for this semester as the first class is approaching. The owner of the bookstore knows Uncle Morris as they are old friends, and he knows that Morris is quite wealthy. Morris calls the owner and says, "If you will let my niece Mariah buy her books on credit, I promise that if she does not pay her bill with you by the end of the academic year, I will pay you the balance." The owner of the bookstore agrees. Morris writes a quick thank you note to the owner on his personal stationary that includes his initials at the top of the card. The note says: "Thank you for agreeing to continue to sell on credit to my niece in exchange for my promise to honor her debts." He neglects to sign the note. If the bookstore sues to enforce Morris's promise what is the likely outcome if Morris raises the Statute of Frauds as a defense, assuming the applicable state has a Statute of Frauds that mirrors the Restatement (Second) of Contracts? (A) The court will deny enforcement of the oral contract because there is no writing signed by Morris that memorializes the contract and this type of contract falls within the Statute of Frauds. (B) The court will dismiss such a defense because the Statute of Frauds does not apply to Morris's promise. (C) The court will dismiss Morris's defense, because Morris's thank you note meets the requirements of a signed written memorandum. (D) The court will determine that the Statute of Frauds applies and was not satisfied but will dismiss the defense because the store partly performed by selling books to Mariah before Morris called.

(C) The court will dismiss Morris's defense, because Morris's thank you note meets the requirements of a signed written memorandum. Rationale: Restatement (Second) of Contracts §130 brings promises to answer for the debts of another (suretyships) into the Statute of Frauds. Morris promises to pay the debt of Mariah and becomes a surety. The contract is within the Statute of Frauds; therefore, answer B is not correct. The contract is originally made orally but then Morris records its essential terms in his thank you note. Although he does not sign the note, it is written on a notecard with his initials on it. According to Restatement (Second) of Contracts §134, "The signature to a memorandum may be any symbol made or adopted with an intention, actual or apparent, to authenticate the writing as that of the signer." Comment a. confirms that the symbol may even be "impressed into the paper" as on stationary. Thus, the signed writing requirement is satisfied, and Answer A is incorrect. For a part performance exception to apply, the party must partly perform the obligations of the oral contract after the oral promise is made. The past sales of books by the bookstore cannot therefore be part performance that would excuse compliance with the statute. Answer D is therefore incorrect. Even though the Statute of Frauds applies, it has been satisfied and therefore Morris's attempt to raise the Statute of Frauds as a defense will likely fail. Answer C is correct. Recommended Reading: Pages 272-274 of Templin, Contracts: A Modern Coursebook, Second Edition

Maria Burza lost an expensive gold watch. She placed an ad in the local newspaper that read: "Reward of $400 offered to the person that finds and returns to me at 125 Main Street my gold watch with initials MB and the date 6-3-82 engraved." Dr. Watson recently hosted a party in his apartment which Maria attended. When dusting an end table, he found the gold watch lying behind a large lamp. He immediately recognized it as Maria's due to the date and initials that he had seen previously. He does not read the local paper and did not see the above quoted ad that appeared in it the day prior to his finding the watch. On his way to return the watch he encountered his friend, Sherlock. Upon mentioning to Sherlock that he was returning Maria's watch that he had just found, Sherlock pulled out the prior day's paper and showed Watson the ad. Watson exclaimed with joy, "That is great as I could really use the reward." When he returned the watch, he told Maria about his encounter with Sherlock and learning of the reward. She replied that since he did not know about the reward when he found the watch, he did not accept her reward offer. She refuses to pay him the reward. If Watson were to sue Maria for the reward, what would be the likely outcome? (A) The court will find no contract was formed because the offer was not communicated to Watson at the time he began performance. (B) The court will find no contract was formed because advertisements are not offers. (C) The court will likely find a contract was formed because Watson learned of the offer before completing the requested performance. (D) The court will likely find a contract was formed because offers for unilateral contracts are formed once performance is begun and Watson began performance by finding the watch.

(C) The court will likely find a contract was formed because Watson learned of the offer before completing the requested performance. This question involves an offer for a unilateral contact in which one party (Maria) promises something (the reward) in exchange for performance (finding and returning the watch). This type of offer is often called a reward offer. An offer requires: (1) a manifestation of present intent to enter a bargain; (2) that it be stated in certain and definite terms; (3) that it be communicated to an identified person or persons; (4) that an offeree be able to reasonably understand that a contract would result if accepted. Typically, advertisements are not offers, but if the advertisement meets all of the criteria for an offer it can be found to be an offer. Reward offers are a type of advertisement that courts typically find to be offers because they are capable of acceptance only by those who perform the act meriting the reward. Answer B is therefore not a good choice because it too definitively states that advertisements are not offers. An offer of a unilateral contract is formed by the completion of the requested performance. The offer must be communicated to the offeree to be accepted. The Restatement (Second) of Contracts §45 provides for the creation of an option contract so that an offeror cannot revoke an offer of a unilateral contract after an offeree has begun performance so that the offeree has the opportunity to complete performance and accept the offer. It is true that an option contract may have been formed under §45 when Watson begam performance but he did not accept the offer until he returned it to Maria. Answer D is therefore not the best choice. Restatement §51 states that "Unless the offeror manifests a contrary intention, an offeree who learns of an offer after he has rendered part of the performance requested by the offer may accept by completing the requested performance." This section makes clear that a reward offer can be accepted so long as the offeree learns of the requested performance before completing that performance. Watson clearly learned of the reward before he completed the two-part performance requested in the ad: (1) find the watch and (2) return it to Maria at her home. Watson accepted the offer once he returned the watch with knowledge of the offer. Answer C is correct and answer B incorrectly states that Watson must know of the offer when beginning performance. Recommended Reading: Pages 173-185, 200 of Templin, Contracts: A Modern Coursebook, Second Edition

A hotel is building a luxury hotel where the plans include an elaborate outdoor garden. The hotel engaged in a long negotiation with a landscaper to design and construct the garden according to a detailed list of written specifications by a certain date. In return for designing and constructing the garden, the hotel will pay the landscaper $500,000. The specifications list 100 different varieties of flowers to be planted. One of the 100 different varieties of flowers was for roses, however, the entry did not specify what color the roses should be. The number of rose bushes to be included occupies roughly the same amount of space as the other types of flowers. The hotel and landscaper sign the written agreement. Before construction begins, the hotel repudiates the contract. The landscaper brings a breach of contract claim. At trial, the hotel asserts as a defense that no contract ever formed because of the lack of certainty as to the color of the roses. Which of the following is the most likely result? (A) The hotel wins, because to be enforceable a contract must provide explicit detail on every duty. (B) The hotel wins, because the missing color term means that a court could not determine whether there was a breach. (C) The landscaper wins, because uncertainty as to incidental matters is unlikely to be fatal to the formation of the contract. (D) The landscaper wins, because color should always be left to the discretion of the designer.

(C) The landscaper wins, because uncertainty as to incidental matters is unlikely to be fatal to the formation of the contract. Issue: This problem focuses on the degree of certainty needed to make a contract enforceable. Rule: Restatement (Second) of Contracts § 33 (1) Even though a manifestation of intention is intended to be understood as an offer, it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain. (2) The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy. (3) The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance. Analysis: In defense of its repudiation, the hotel wants to assert that no contract ever formed because of a lack of certainty, which is a requirement to the formation of all contracts. Restatement (Second) of Contracts § 33 provides a standard that the terms "are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy." The offer need not contain all of the terms needed to perform the contract—just the essential terms. Comment (a) to Restatement (Second) of Contracts § 33 states that any "uncertainty as to incidental or collateral matters is seldom fatal to the existence of the contract" if the parties otherwise show an intent to enter into an agreement. Here, the contract seems to have all of the essential terms—i.e., the price, a detailed list of specifications, and the due date. The color of the roses is only an incidental matter. The roses are only one of 100 different flowers. Moreover, the amount of space that the roses are to occupy is about the same as the other flowers. That means the roses are only 1/100 of the flowers in the garden. This likely makes the choice of color as to the roses not material enough to cause a court to declare the contract void for lack of certainty. The focus here should be on whether the parties intended to enter into a binding agreement. On these facts, it appears that they did. There was a long negotiation and a long list of specifications. Courts are unlikely to void the agreement just because one term is uncertain. Therefore, Choice C is the best answer. Choice A states the common law incorrectly. While duties have to be spelled out with some certainty, there does not necessarily have to be explicit detail. Choice B overstates the degree of uncertainty in this contract. As already noted, the essential terms are included. Choice D is not relevant legally. Which party gets to choose a color would be subject to the parties' agreement. It is likely they just forgot to include it. Recommended Reading: Pages 177-184 of Templin, Contracts: A Modern Coursebook, Second Edition

A company is in the business of manufacturing high-end pots and pans. It hires a consultant to build a website for a payment of $20,000. The contract provides that the consultant must finish the website by September 1; however, the payment will not be due until October 1. The consultant finishes the website in a competent manner by September 1. However, the company informs the consultant that because of lower than expected sales, it will not be able to pay the $20,000 by October 1. After some negotiations, the parties enter into a settlement agreement under which the consultant will cancel the $20,000 debt the company owes in return for $17,000 worth of the company's pots and pans to be given to the consultant by September 15. The company agrees to the change and both parties sign an agreement to that effect. On September 15, the company is ready to transfer $17,000 worth of pots and pans to the contractor; however, the contractor now insists on receiving the $20,000. Will the company be able to enforce the settlement agreement? (A) Yes, because the pots and pans are goods and the UCC does not require consideration for a settlement agreement made in good faith (B) No, because the company had a pre-existing legal duty to pay $20,000 in value, not $17,000 (C) Yes, because the settlement agreement is supported by consideration (D) No, because the consultant fully performed and there is no dispute over the quality of his performance

(C) Yes, because the settlement agreement is supported by consideration Issue: This problem tests students on (1) the pre-existing legal duty rule and (2) a type of settlement agreement called an accord and satisfaction. Rule: Restatement (Second) of Contracts § 281 Accord and Satisfaction (1) An accord is a contract under which an obligee promises to accept a stated performance in satisfaction of the obligor's existing duty. Performance of the accord discharges the original duty. (2) Until performance of the accord, the original duty is suspended unless there is such a breach of the accord by the obligor as discharges the new duty of the obligee to accept the performance in satisfaction. If there is such a breach, the obligee may enforce either the original duty or any duty under the accord. (3) Breach of the accord by the obligee does not discharge the original duty, but the obligor may maintain a suit for specific performance of the accord, in addition to any claim for damages for partial breach. Restatement (Second) of Contracts § 73 (1981) Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute is not consideration; but a similar performance is consideration if it differs from what was required by the duty in a way which reflects more than a pretense of bargain. Analysis: On these facts, the company is an obligor which owes the consultant (the obligee) a duty to pay $20,000 for services the consultant has already rendered. If the consultant had agreed that the company could pay $17,000 instead of $20,000 on October 1, then the consultant's promise would be unsupported by consideration because of the pre-existing legal duty rule. (See Restatement (Second) of Contracts § 73.) However, these parties have engaged in what is called an accord and satisfaction, which is a type of settlement agreement. The accord is a contract where the obligee agrees to accept some sort of substituted performance to satisfy the duty owed by the obligor. Since the accord is a contract, the rules of contract formation apply—including the pre-existing legal duty rule. In order to constitute consideration, the substituted performance must differ enough from the original duty that it "reflects more than a pretense of bargain." Two ways in which the duty can change to qualify as a substituted performance include: (1) payment at an earlier time or (2) payment in a different medium. (See Illustration # 7 Restatement (Second) of Contracts § 73.) In this problem, both of these methods of substituted performance are used. The payment is at an earlier time (September 15 instead of October 1), and the medium is different (pots and pans instead of money). Consequently, the substituted performance of providing the pots and pans is different enough from the original duty that it qualifies as consideration. For these reasons, Choice C is the correct answer. Choice A is incorrect because the contract is not governed by the UCC Article 2. This is a contract for services—building a website—and not for the sale of goods. Although the contractor is accepting goods as payment for his services, that settlement agreement does not change the underlying nature of the original contract. Choice B is incorrect for the reasons cited above. If the modification involved a payment in cash of a lesser amount on the same date, then it would be unenforceable. However, because the consideration was paid earlier and in a different medium, the promise to accept the pots and pans is not gratuitous. Choice D has the wrong conclusion. It is true that the consultant has fully performed and there is no dispute over his performance. If there had been a dispute, then settlement of the dispute by paying a lesser amount than what is owed would be enforceable. However, just because there is an absence of those facts does not result in the settlement being unenforceable. For the reasons stated, the agreement is enforceable because the consultant agreed to a substituted performance. Recommended Reading: Pages 89-100 of Templin, Contracts: A Modern Coursebook, Second Edition

An elderly woman had a large collection of hats, numbering over 1,000. Sometimes, she sold a few of her hats to earn a little money; however, she mostly collected. The woman was famous locally for her collection and was an acknowledged expert on the subject of hats. She often told her nephew—the sole heir to her estate—that he should be sure to take care of the hats when she died, because the hats were quite valuable. However, the nephew thought his aunt was just sentimental about her collection. When the woman died, the nephew decided to sell the hats. He could have hired an expert to help him price the hats, but instead looked at some random receipts of hat purchases, which his aunt had made in the last year of her life, and based on those receipts, priced each of the hats in the range of $25 to $100. At the hat sale, a neighbor, who knew nothing about hats, came across a finely woven straw hat in pristine condition. He liked the hat, but found the price of $75 to be a little too expensive. He was able to negotiate the price down to $50. The neighbor later learned that the hat was a particular type of Panama hat that took three months to weave and was worth $25,000. When the nephew heard that the hat was worth $25,000, he tried to return the $50 to the neighbor in exchange for the return of the hat; however, the neighbor refused. The nephew sued the neighbor to rescind the agreement. Who will prevail in this lawsuit? (A) Nephew wins, because the neighbor had reason to know of the nephew's mistake. (B) Nephew wins, because the contract would be unconscionable if it were enforced. (C) Neighbor wins, because the widow would likely be considered a merchant and should have kept better records for her nephew. (D) Neighbor wins, because nephew was consciously ignorant of the true value.

(D) Neighbor wins, because nephew was consciously ignorant of the true value. Rationale: Issue: This problem tests on the doctrine of mutual mistake. Rule: Restatement (Second) of Contracts § 152(1) provides, "Where a mistake of both parties at the time a contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless he bears the risk of the mistake...." Analysis: In this problem, the nephew will try to assert the defense of mistake. Whether nephew tries to assert mutual or unilateral mistake, he will likely lose. Nephew bore the risk of the mistake by not investigating the value of the hats. Here, both parties at contract formation made a factual mistake about a basic assumption of the contract, i.e., the worth of the hat. The mistake has a material effect on the transaction in that the nephew is deprived of the full value and the neighbor experiences a windfall. However, these facts illustrate a situation where the courts will likely shift the risk to the seller. Under Restatement (Second) of Contracts § 154, the nephew was "aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient." In other words, the nephew was consciously ignorant of the value of the hats. His aunt had told him the hats were valuable and he had an opportunity to hire an expert to value the collection, but did not do so. For these reasons, the correct answer is Choice D. Choice A suggests that the nephew wins under the doctrine of unilateral mistake. If the mistake was unilateral, then the party asserting the defense would need to prove an additional element that either (a) the effect of the mistake would make contract enforcement unconscionable or (b) the other party had reason to know that there was a mistake. Choice A is wrong because it incorrectly states that the neighbor had reason to know of the mispricing. The neighbor was as ignorant about the value as the nephew was. Choice B states that the contract would be unconscionable. Under these facts, the term "unconscionability" could refer to the defense of unconscionability or the use of unconscionability as an element of unilateral mistake. For the unilateral mistake defense, courts tend to interpret this element as being "substantively unconscionable." Here, there is such a wide difference in value that it shocks the conscience; thereby, qualifying as unconscionable. However, Choice B has the wrong result since the nephew bore the risk of the mistake by not investigating the value when he had been informed that the hats were valuable. As to the defense of unconscionability, the nephew would have to prove not only substantive unconscionability but also procedural unconscionability. Procedural unconscionability deals with unfairness in the bargaining process, such as an inequality in bargaining power or the imposition of unfair surprise by one party on the other. Nothing in the facts suggests any procedural unconscionability. The nephew was in control of the pricing and, if anything, was in a superior bargaining position as the seller. Choice C is a distractor. The problem states that the widow was an expert in hats and had both bought and sold hats. This qualifies her as a merchant under UCC § 2-104. Should she have kept better records for her nephew? Perhaps. However, the statement is not relevant to the legal issue. The widow has passed away, and the nephew is the seller of the goods. Thus, Choice C is also incorrect. Recommended Reading: Pages 417-431 of Templin, Contracts: A Modern Coursebook, Second Edition

Company relies on software that is written in an obscure programming language. If the software stops working, Company risks going out of business. The software, in fact, stops working. Company contacts Programmer, an independent contractor who is one of the few programmers with experience to fix this software. Programmer is willing to take on the job but demands a premium because he will have to cancel his planned vacation. Programmer offers to fix the software at a cost to the company of $100,000, which is roughly 50% higher than the usual rate. Company objects to the price, and Programmer says, "Take it or leave it." Company accepts Programmer's offer because Company cannot find another programmer who is willing to fix the software immediately. Programmer fixes the software and submits a bill for $100,000. If Company later tries to avoid paying the higher fee, will it be successful? (A) Yes, because Programmer's improper threat resulted in duress (B) Yes, because Company had no reasonable alternative (C) Yes, because the contract was procedurally and substantively unconscionable (D) No, because Programmer performed the services required under the contract

(D) No, because Programmer performed the services required under the contract Rationale: Issue: This problem tests on the elements of duress and unconscionability. Rule: Duress. Restatement (Second) of Contracts § 175(1) provides "If a party's manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim." Unconscionability. A court may refuse to enforce a contract or term on a finding that it is procedurally and substantively unconscionable. Procedural unconscionability may be demonstrated by (1) gross inequality in bargaining power, or (2) unfair surprise. Substantive unconscionability may be shown by: (1) overly harsh allocation of risks not justified by the circumstances, or (2) great price disparity. Analysis: Under these facts, the defenses of duress and unconscionability are not available to Company. Choice D is correct. Choices A and B speak to elements of the duress defense. As to Choice A, nothing suggests that Programmer has engaged in an improper threat—one of the basic elements of duress. (See Restatement (Second) of Contracts § 176.) Programmer is demanding a premium because he will need to cancel his vacation. Programmer is an independent contractor and can charge what he likes for his services. These actions by Programmer are not threats to commit a tort or a crime or any of the other types of improper threats listed by the Restatement (Second) of Contracts § 176(1). Additionally, Programmer does not owe any duty to Company, so there is no bad faith being exerted. Other types of improper threats under Restatement (Second) of Contracts § 176(2) —a use of power for illegitimate ends—is not suggested by the facts. This is more a case where Programmer has some leverage because of market forces—i.e., the unavailability of other programmers. Also, it cannot be said that the exchange is unfair. Programmer is asking for a premium on his time because he was planning to go on vacation. This is analogous to a worker getting overtime pay of time and a half. Therefore, Choice A is incorrect. As to Choice B, Company may go out of business if it does not hire Programmer but the lack of alternatives alone does not constitute duress. There also must be an improper threat. As noted above, that element is missing; therefore, Choice B is incorrect. Choice C is also incorrect. Programmer's "take it or leave it" offer alone does not make the contract unconscionable. Company knows or should know that it relies on a program written in an obscure programming language and that there are few programmers who know how to program in that language. Consequently, it should come as no surprise that hiring such a programmer may be expensive. Furthermore, it is unlikely that the $100,000 charge would be considered substantively unconscionable. The charge is 50% more than normal. However, Programmer is giving up his vacation. In essence, Programmer is charging a reasonable rate of time and half for his services. That sort of charge does not shock the conscience to the level needed to be substantively unconscionable. Recommended Reading: Pages 332-333, 371-387 of Templin, Contracts: A Modern Coursebook, Second Edition

A city employee works for the Department of Animal Control, which is in charge of catching stray dogs and taking the animals to a facility to be euthanized. Before euthanizing the animals, the Department's policy is to attempt to find the owner of the animal and reunite them. One day a dog owner was accidentally separated from his dog. The owner posted notices of a reward of $5,000 for the return of his pet. The owner also notified the Department of Animal Control that the dog was lost. The city employee found the owner's dog. Because the owner had informed the Department of the missing animal, the employee was then able to contact the owner and return the dog. Can the city employee claim the $5,000 award? (A) Yes, but only if the city employee knew of the owner's offer for a reward before he returned the dog (B) Yes, because the city employee fully performed a unilateral contract (C) No, because returning the dog is inadequate consideration for $5,000 (D) No, because the city employee had a pre-existing duty to return the animal

(D) No, because the city employee had a pre-existing duty to return the animal Issue: This problem tests on the pre-existing legal duty rule. Rule: Restatement (Second) of Contracts § 73 provides that "Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute is not consideration...." Analysis: This problem puts forward a classic problem where public employees perform duties that are part of their jobs. The employee may not receive a reward or demand additional compensation for doing something that is part of his public job. Here, the city employee's job was to locate stray dogs. The policy of the department was to attempt to reunite dogs with owners before euthanizing the animals. Since returning the animal was part of the city employee's job, the city employee may not claim the reward. Choice D is correct. Choice A suggests an issue that arises in offer and acceptance—that an offeree must know of an offer before engaging in the performance that constitutes acceptance. The rule is irrelevant since it would not matter if the city employee knew of the offer before returning the dog. Whether he knew or not, the city employee could not collect because of the pre-existing duty rule. Thus, Choice A is incorrect. Choice B is tempting because rewards are typically a type of unilateral contract, and the city employee did perform by returning the animal to its owner. However, Choice B incorrectly concludes the contract is enforceable; under the facts, the pre-existing duty rule mandates the conclusion that there is no consideration for the reward since the city employee has a legal duty to return the animal. Choice C misses the issue. The value of the animal to the owner could very well be equal to $5,000—either in terms of the actual value of a show dog or the value that the dog represents as a companion. In any case, the well-used rule states that courts do not inquire into the adequacy of consideration. Choice C is incorrect. Recommended Reading: Pages 91-93 of Templin, Contracts: A Modern Coursebook, Second Edition

On May 9, an owner of an airplane and a mechanic enter a signed agreement under which the mechanic will rebuild the owner's airplane engine in return a payment of $30,000. Among other terms, the written agreement provides that (1) on or before May 15, the owner will pay the mechanic a 'first third' of the total fee, $10,000, and (2) on May 16, the mechanic will begin her work. The document's last paragraph provides that 'If at any time, in her sole discretion, the mechanic decides that she does not wish to perform the duties hereinabove described, then she need not do so.' On May 14, the owner advises the mechanic that he has decided not to have his engine rebuilt, that he will not pay the mechanic, and that the mechanic should not, therefore, begin her work. The mechanic responds, insisting that she stands ready to perform the work and that she expects to be paid for it. Does the mechanic have viable cause of action against the owner for breach of contract? (A) Yes, because the mechanic has to pay a cancellation fee (B) Yes, because the parties had reduced their contract to a total integration (C) No, because the terms are unconscionable (D) No, because the mechanic's promise to perform is illusory

(D) No, because the mechanic's promise to perform is illusory Issue: This problem tests on the illusory promise rule. Rule: Restatement (Second) of Contracts § 77 A promise or apparent promise is not consideration if by its terms the promisor or purported promisor reserves a choice of alternative performances unless (a) each of the alternative performances would have been consideration if it alone had been bargained for; or (b) one of the alternative performances would have been consideration and there is or appears to the parties to be a substantial possibility that before the promisor exercises his choice events may eliminate the alternatives which would not have been consideration. Analysis: An illusory is one where the promisor does not commit to either some action or forbearance. It may have the appearance of a promise, but if the promisor does not actually make a commitment, then the promise is said to be illusory and will not serve as consideration. Here, the mechanic has reserved the right to not perform the contract. Since she has not made any commitment, her promise is illusory. Since there is no consideration for the owner's promise, he may terminate the agreement. Choice D is correct. Choice A suggests that the mechanic had paid some consideration to cancel the contract. This would mean that the mechanic does have a duty—i.e., an alternative performance that would be consideration. However, Choice A misstates the facts. Nothing suggests that there is such a fee. Choice B suggests that because the writing was so detailed, it was an integrated agreement under the parol evidence rule. However, the parol evidence rule is not at issue since there is no contract because of the illusory promise. Choice C is incorrect since there is nothing in the fact pattern that suggests that the price is unfair or that there was unfair surprise in the formation of the agreement. Recommended Reading: Pages 62, 71-75 of Templin, Contracts: A Modern Coursebook, Second Edition

A niece is enrolled to start college in the fall. Her aunt tells her, "I promise to give you $30,000 to help you pay tuition for your first year; however, I won't have the money until the end of your first semester. You can count on me; however, I will give you a check in December." Because of her aunt's promise, the niece defers the start of her freshman year until January. During the fall, the niece travels to Europe, where she stays at expensive hotels, eats at expensive restaurants, and spends her nights dancing at clubs. The niece charges $20,000 on her credit cards for the trip, expecting to be able to pay them off in December when her aunt gives her the money she promised. However, when the niece returns home, the aunt refuses to pay niece the $30,000. The niece brings a lawsuit against her aunt seeking the $30,000 that was promised. Will the niece recover any amount from the aunt? (A) Yes, for $30,000, the amount the aunt promised (B) Yes, but for only $20,000, the amount the niece relied to her detriment on the aunt's promise (C) Yes, because the niece's trip to Europe was consideration for the aunt's promise (D) No, because the niece's actions were not reasonably foreseeable

(D) No, because the niece's actions were not reasonably foreseeable Issue: Can the niece enforce the promise through the doctrine of promissory estoppel? Rule: Restatement (Second) of Contracts § 90(1) provides that "A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires." Analysis: Under these facts, the aunt has made a gratuitous promise to the niece. Since there is no consideration for the promise to pay the niece $30,000, the aunt is not legally bound to perform her promise unless the doctrine of promissory estoppel creates liability. However, promissory estoppel is not established under these facts. Although the niece took action in reliance on the aunt's promise, the action was not reasonably foreseeable to the aunt. The aunt promised the niece $30,000 to help the niece pay tuition for college. However, the niece spent the money on a lavish European vacation. Because the niece's actions were not foreseeable, Choice D is the best answer. Choices A and B are both incorrect because there is no basis for liability under promissory estoppel. The action was not reasonably foreseeable; therefore, no amount of recovery is justified. Choice C is incorrect since the aunt did not request that the niece take a trip to Europe; therefore there was no bargain and the trip was not consideration for the aunt's promise. Recommended Reading: Pages 37-38, 117-124 of Templin, Contracts: A Modern Coursebook, Second Edition

Connie is an independent truck driver. Dan is a shipping agent. Dan wants Connie to move cargo a distance of 2,000 miles, beginning the trip that same day. Connie responds, 'I can do that, but my trucking operator's license expired yesterday, and I have not yet renewed it.' Driving a commercial truck under an expired license subjects the driver to a civil fine of $50, but is not a criminal violation. In response to Connie, Dan shrugs his shoulders. Then by signed writing, the parties form a contract. Before she begins loading the cargo, Connie learns that she can take another hauling job and earn more money. Connie repudiates her contract with Dan. Dan sues Connie for breach of contract. Connie asserts the defense that the contract was void because of illegality. Will Connie be successful in voiding the contract with Dan based on illegality? (A) Yes, because a contract, the performance of which breaks the law, is presumptively void (B) Yes, because both parties would have been complicit in a crime (C) No, because Dan—the wronged party—would not have committed any illegal act (D) No, because the policy of enforcing contracts is more important than the public policy behind the licensing law that would have been broken

(D) No, because the policy of enforcing contracts is more important than the public policy behind the licensing law that would have been broken Rationale: Issue: The issue is whether Connie's violation of the licensing laws in performing a contract is the type of illegality that provides a valid defense to breach of the contract. Rule: A contract or a provision of a contract may be void or voidable if the subject matter or consideration of the contract is either illegal or against an established public policy at the time of contract formation. Analysis: A contract involving the commission of a crime (such as a contract to murder another party) is clearly illegal. Such contracts are void as a matter of public policy. Some contracts, however, involve an act that may break a law in the performance of the contract. However, courts may still enforce the contract by balancing the interest of enforcing the contract against the strength of the public policy. The facts here are similar to Illustration #4 of Restatement (Second) of Contracts § 178: "A and B make an agreement for the sale of goods for $10,000, in which A promises to deliver the goods in his own truck at a designated time and place. A municipal parking ordinance makes unloading of a truck at that time and place an offense punishable by a fine of up to $50. A delivers the goods to B as provided. Because the public policy manifested by the ordinance is not sufficiently substantial to outweigh the interest in the enforcement of B's promise, enforcement of his promise is not precluded on grounds of public policy." Choice D is the correct answer because a court would likely find that the violation of the licensing law with a fine of only $50 is relatively minor when compared to the breach of a shipping contract worth $50,000. Another reason for not allowing the defense is that the party who would be violating the law (Connie) should not be able to profit from that illegal conduct by using it as a shield from contractual liability. Choice A overstates the common law rule regarding the defense of public policy. Not all contracts that break a law are rendered void. Choice B misstates the facts since the violation of this licensing law is not a crime, as stated in the facts. Choice C has the right conclusion but the wrong rationale. A contract could be void for public policy even though one of the parties does not commit an illegal act. Recommended Reading: Pages 392-398, 410-411 of Templin, Contracts: A Modern Coursebook, Second Edition

Landscaper sent a letter to Nursery on August 1 stating, "I need to purchase 100 evergreen trees. Are you able to deliver this many trees and how much would it cost?" Landscaper included details about the specific type of evergreen tree and the size required. Landscaper also signed the letter. Nursery replied to Landscaper with a signed letter dated August 5 that stated, "Mr. Landscaper, we can provide you with 100 evergreen trees according to your specifications for the price of $500, which is $5 per tree. This price is good for six months." Landscaper received the letter on August 10. Which of the following is the best description of the legal effect of Nursery's letter? (A) Nursery's letter is an offer, but only if Landscaper accepts it within six months. (B) Nursery did not make an offer because the term concerning the six-month period is over the three-month limit under the UCC's Merchant's Firm Offer provision. (C) Nursery only gave a price quotation, which is not an offer (D) Nursery made an offer on August 10.

(D) Nursery made an offer on August 10. Rationale: Answer D is best answer. Normally, price quotations are not considered offers but are merely invitations to bargain unless the surrounding facts and circumstances meet the elements of an offer. Although, Landscaper asked Nursery for a price quote, this is not just an invitation for a bargain because the elements of an offer are proven. There is intent to enter a bargain because the objective meaning of the words show that Nursery is willing to ship the tree immediately; thereby, indicating that Nursery wants to sell the trees to Landscaper. The terms are certain and definite because Nursery states the subject matter (the evergreen trees), the price $5 per tree), the quantity (100), and the delivery time (immediately). This is more than enough to determine what would be a breach and what would be a remedy if either party were to breach a contract based on the offer. Furthermore, offers are only effective upon receipt when sent through the mail. Therefore, Answer D is the best answer. Answer C is incorrect for the reasons stated above. Answer B has an incorrect analysis. If a Merchant's Firm Offer states a time over the three-month limit, that does not destroy the power of acceptance. The offer would be firm for the three-month limit and then convert into a revocable offer. Answer A is not a correct answer. It is not the acceptance by the offeree that makes a communication an offer. An offer creates the power of acceptance in the offeree. To determine if an offer exists, you have to analyze the elements as stated above. Recommended Reading: Pages 184-185 of Templin, Contracts: A Modern Coursebook, Second Edition

A high-end furniture maker uses a particular type of wood called "curly maple" to make its furniture. To make sure that it has a sufficient supply of curly maple wood, the furniture maker enters into a contract with a lumber company. The contract provides that the furniture maker will purchase and the lumber company will sell all of the curly maple that the lumber company produces for five years at a specific price. For the first two years, the lumber company produces 100,000 board feet of curly maple a year, which the furniture company purchases. For the third year, the lumber company thinks that it can produce up to 200,000 board feet of curly maple. Which the following best describes the rights and duties of the parties? (A) The lumber company is not required to sell any of its curly maple wood to the furniture maker if there are large variations in the quantity that it produces. (B) The lumber company must sell at least 100,000 board feet of curly maple wood to the furniture maker and may sell anything in excess to another buyer. (C) The lumber company must sell its curly maple wood exclusively to the furniture maker and the furniture maker must purchase curly maple exclusively from lumber company. (D) The furniture maker is not obligated to purchase a quantity that is unreasonably disproportionate from the previous output of 100,000 board feet.

(D) The furniture maker is not obligated to purchase a quantity that is unreasonably disproportionate from the previous output of 100,000 board feet. Issue: The problem tests on the application of the rules surrounding output contracts under the UCC. Rule: UCC § 2-306. Output, Requirements and Exclusive Dealings (1) A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded. (2) A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale. Analysis: This question is best approached by the process of elimination in order to find the best answer. It is important for students to first recognize the contract as an output contract where the buyer agrees to purchase all of seller's output. Choice A is incorrect in its application of a rule governing variations for an output contract. For output contracts, UCC § 2-306(1) provides that the lack of quantity term is not determinative, but it does provide a guideline for measuring that quantity. In an output contract, a buyer is not required to purchase an "unreasonably disproportionate" quantity. The fact that the seller may be able to double the output in the coming year, however, does not mean that the seller is suddenly released from its obligations. The seller is still obligated to tender an amount reasonably proportional to what came before, and the buyer is obligated to accept that amount. However, the furniture maker could reasonably refuse to purchase the entire output if it doubled since the variation in quantity is likely unreasonably disproportionate to what was sold in the past. Choice B is not necessarily correct. The furniture maker may choose to take the disproportionate quantity offered under UCC § 2-306. Therefore, the statement that the seller "may sell anything in excess to another buyer" is incorrect. The seller is bound to sell all of its output to the buyer and the buyer can then decide whether to take the larger disproportionate quantity. Choice C incorrectly describes an output contract. The buyer must purchase all that the seller produces; however, the buyer is free to also purchase from other suppliers. Choice D is the best answer. This describes the limits on large variations in output. The answer choice speaks directly to UCC § 2-306(1) in that the buyer is not required to purchase a quantity that is unreasonably disproportionate to the prior output of 100,000 board feet. Recommended Reading: Pages 74-75 of Templin, Contracts: A Modern Coursebook, Second Edition

A husband enters into an agreement with his neighbor on the following terms: (1) the husband will pay the neighbor $25,000, (2) the neighbor will kill the husband's wife, and (3) the husband will then pay the neighbor an additional $75,000 upon the successful killing of the wife. The husband pays the neighbor the initial $25,000. Although the neighbor makes a good faith attempt to kill the husband's wife, the neighbor fails to do so. The husband then demands a return of his $25,000 from the neighbor. With respect to the husband's demand, among the following judicial statements, which is most suitable? D (A) The husband recovers the $25,000 because the neighbor would otherwise enjoy an 'unjust enrichment.' (B) The husband recovers the $25,000 because the neighbor materially breached the agreement. (C) The husband does not recover the $25,000 because the neighbor made a good faith attempt to perform. (D) The husband does not recover the $25,000 because these parties are in pari delicto.

(D) The husband does not recover the $25,000 because these parties are in pari delicto. Rationale: Issue: To what extent would public policy result in the non-enforcement of an agreement? May a party seek restitution of money paid under such an agreement? Rule: If a contract is voided by public policy, a party generally has no claim in restitution for performance that he has rendered. Analysis: Courts will not enforce an illegal contract. Here, a contract for murder would obviously not be enforced. For example, the neighbor could not sue the husband for breach of contract if the neighbor was successful in killing the husband's wife but the husband did not pay the additional $75,000. Similarly, criminals who enter into an agreement cannot expect to maintain a suit for restitution of money paid. Under the common law principle of in pari delicto (Latin for "in equal fault") courts leave the parties without a restitutionary remedy for illegal contracts. Restitution is an equitable concept and it would not further the goals of equity to reward a party with restitution when both parties acted illegally. Choice D is the best answer. Choices A, B, and C all suggest that there is an enforceable agreement, which is incorrect given the illegality of the contract. Recommended Reading: Pages 392, 397-398 of Templin, Contracts: A Modern Coursebook, Second Edition

Meteorologists predict that a spectacular meteor shower will be visible at a certain city in the desert. Jasmine lives 900 miles from the city, and in order to see the meteor shower, she makes plans to travel there with her children. She contacts a hotel in the city. The hotel has raised its rates significantly for the event. Jasmine tells the hotel manager that she is making the reservation in order to see the meteor shower. The manager responds, 'Yes, we understand; why else would you travel 900 miles to the desert?' Jasmine makes a non-cancelable reservation at the hotel. One day before Jasmine is to begin her travel, meteorologists correctly predict that on the night of the meteor shower, a violent storm will fully obscure the city's skies so to make the spectacle invisible. Jasmine abandons her plans to travel and wants to cancel her obligation with the hotel; however, the hotel refuses. If Jasmine sues to avoid her duty under the contract and wins, what would be the best rationale for such outcome? (A) It would be impossible for Jasmine to perform the contract. (B) Both parties made a material mistake when they formed the contract. (C) It is extremely more expensive for Jasmine to perform the contract. (D) The principal purpose of the contract is substantially frustrated.

(D) The principal purpose of the contract is substantially frustrated. Rationale: Issue: This problem tests on a student's ability to distinguish between the changed circumstances defenses of impossibility, impracticability, and frustration of purpose. Rule: Restatement (Second) of Contracts §265 provides, "Where, after a contract is made, a party's principal purpose is substantially frustrated without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his remaining duties to render performance are discharged, unless the language or the circumstances indicate the contrary." Analysis: Here, the focus is on an event that occurred after contract formation—the violent storm that obscured the meteor shower. This fact triggers the changed circumstances doctrine. There was a basic assumption by both parties that a spectacular meteor shower would be visible in the city on a certain date. The principal purpose of the contract was to view the shower, as Jasmine informed the hotel manager of her purpose, and the manager's acknowledgement of Jasmine's purpose. The violent storm was a supervening event that both parties assumed would not occur. The call of the question asks for the best rationale for a court decision that relieves Jasmine of her duties. Given that the unanticipated event negates the principal purpose of the contract, the correct answer is Choice D—i.e., that the contract is substantially frustrated. Choice B is wrong because it focuses on the mutual mistake doctrine. To apply mutual mistake, the mistake must be a mistake of fact existing at contract formation. Here, there was only a prediction (i.e., an opinion) that the city would be a good place to view the meteor shower on a certain date. Therefore, the mistake doctrine would not apply. Choice A is wrong because it is not literally impossible for Jasmine to perform the contract. Her duty is to pay for the room. Nothing in the facts suggests that the violent storm makes it impossible for her to do so. Likewise, Choice C is also wrong. Choice C uses the phrase "extremely more expensive to perform the contract." This suggests the related doctrine of impracticability. Impracticability might also discharge a party's performance duties under Restatement (Second) of Contracts §261. The comment to the Restatement defines impracticability as an "extreme and unreasonable difficulty, expense, injury, or loss...." Here, the event of the storm would not have made it any more expensive for Jasmine to perform her obligation (to pay for the hotel room). Recommended Reading: Pages 418-419, 443-464 of Templin, Contracts: A Modern Coursebook, Second Edition

TireCo manufactures bicycle tires. BikeCo manufactures high-end bicycles for professional racers. The president of BikeCo met with the head of TireCo, and the two parties agreed that TireCo would design and manufacture the tires for a new experimental bicycle that BikeCo planned to build. The tires were of a unique size and shape and only fit the BikeCo's experimental racing bicycle. After a prototype tire had been designed, BikeCo's president called the head of TireCo and ordered 1,000 sets of the tires at an agreed upon price of $100,000. TireCo manufactured 500 sets of the tires. BikeCo's president then called the head of TireCo and told him that he was halting manufacture of the new bicycle because he found out that professional racing rules restricted the overall size of bicycle tires. BikeCo's president refused to pay for any of the tires TireCo had manufactured. TireCo is unable to sell the tires to any other party since the tires do not fit any other type of bicycle. TireCo sues BikeCo for breach of contract. As a defense, BikeCo asserts the statute of frauds. What would be TireCo's best response to the statute of frauds defense? (A) TireCo relied to its detriment on BikeCo's promise to pay for the tires. (B) BikeCo was operating in bad faith by repudiating the contract. (C) BikeCo acted negligently by not checking the racing rule before asking TireCo to manufacture the tires. (D) TireCo had made substantial progress in manufacturing unique goods that were not suitable for sale to other parties.

(D) TireCo had made substantial progress in manufacturing unique goods that were not suitable for sale to other parties. Rationale: Issue: This problem asks students to evaluate the strength of different defenses and identify the best argument under the UCC to satisfy the statute of frauds requirement. Rule: UCC § 2-201(3)(a) Analysis: The contract is for the sale of goods of $500 or more; therefore, under UCC § 2-201 there either needs to be a sufficient memorandum or one of the exceptions must be present. Here, the entire agreement was oral. However, the specially manufactured goods exception found in UCC § 2-201(3)(a) will allow TireCo to enforce the oral contract. UCC § 2-201(3)(a) provides for enforcement "if the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller's business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement." Here, TireCo is halfway through the manufacture of the order and the goods cannot be sold elsewhere given the nonstandard size. Consequently, TireCo will be able to enforce the oral agreement through the specially manufactured goods exception in UCC § 2-201(3)(a). Choice D is correct. Choices A, B, and C all make correct factual statements; however, these facts do not give rise to an exception to the writing requirement. Recommended Reading: Pages 266, 271, 284-286 of Templin, Contracts: A Modern Coursebook, Second Edition

A major league baseball team ran advertisements in the local media in order to increase ticket sales. The promotion stated, "Anyone who attends Saturday's baseball game wearing our team's jersey gets one free hot dog." Is the team's advertisement for a free hot dog an offer? (A) No, because advertisements are generally not considered offers (B) No, because the advertisement does not identify an offeree (C) Yes, because the advertisement invites acceptance by a promise (D) Yes, because the advertisement invites acceptance by performance

(D) Yes, because the advertisement invites acceptance by performance Rationale: Issue: The issues are (1) whether the advertisement is an offer and (2) if it is an offer, is it an offer for a bilateral or unilateral contract. Rule: Although advertisements are normally not construed as offers, if an advertisement satisfies the elements of an offer, then it will be treated as an offer. Restatement (Second) of Contracts § 33 defines an offer as "the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it." Additionally, offers also normally require certain and definite terms and an identified offeree. Analysis: Here, the major league baseball team placed an advertisement in the local media communicating its intent. The totality of the advertisement shows that the team has intent to enter a bargain. The baseball team is a business that is seeking customers to purchase tickets (and presumably team jerseys as well). The free hot dog is an incentive to come to the game wearing the team's jersey. The team is benefited by fans who wear jerseys since it shows to others the heightened sense of loyalty to the team. Most advertisements fail as offers because of the lack of an identified offeree. However, there are identified offerees under these facts. The team was very specific as to who could accept the offer. A person is an identified offeree for this offer so long as they attend the game and wear the team's jersey. The terms are also certain and definite. In exchange for wearing the jersey and attending the game, a person receives the hot dog at no cost. Thus, Choices A and B are incorrect. The advertisement is not seeking a return promise from fans to attend the game wearing a jersey; therefore, Choice C is incorrect. Instead, this is a unilateral contract where the advertisement invites acceptance by performance. In other words, in order to accept the offer, a fan has to actually perform his duties by showing up at Saturday's game wearing a jersey. Choice D is correct. Recommended Reading: Pages 175-176, 184-185, 200-203 of Templin, Contracts: A Modern Coursebook, Second Edition

A general contractor was planning to bid on a government project to build a bridge. The general contractor solicited bids from subcontractors for a variety of jobs including dredging work. The general contractor informed all of the subcontractors that their bids would be used for the general contractor's bid for the government bridge project. Among the bids for the dredging work, the lowest was $100,000, and the general contractor used this bid in making his overall bid to the government. The general contractor was awarded the government contract. Before the general contractor could contact anyone, the subcontractor who made the $100,000 bid called the general contractor to say that it was revoking its offer because it had made a mistake. The subcontractor was willing to do the work for $120,000. The general contractor refused and then found another subcontractor to do the dredging work for $110,000. If the general contractor sues the subcontractor who initially bid $100,000 and wins a breach of contract lawsuit, it is probably because the court held: D (A) that the parties formed an express option contract to keep the subcontractor's $100,000 offer open for a reasonable time and the general contractor accepted within that time frame. (B) that the subcontractor made an express offer for a unilateral contract where the beginning of performance was the general contractor's submission of his bid to the government. (C) that an express conditional contract had formed where if the general contractor won the government bid, then the contract for dredging work would form. (D) that the general contractor relied to its detriment on the subcontractors' bid.

(D) that the general contractor relied to its detriment on the subcontractors' bid. Rationale: Issue: This fact pattern tests the promissory estoppel doctrine. Rule: Restatement (Second) of Contracts §§ 90 and 87(2) Analysis: Under these facts, you could have used the process of elimination to get to the correct answer. Choices A, B, and C are all incorrect since the facts do not show that the parties negotiated for an "express" option agreement, an "express" unilateral contract, or an "express" conditional contract. An "express" contract would require that the parties bargained for one of these types of contracts. An option contract might be implied by law under a theory of reliance, however an express option contract would require that the optionee (the general contractor) exchange consideration for the option. That is not in the facts. Similar, there is not an express offer for a unilateral contract and no facts suggest an express conditional contract. This leaves Choice D, which is correct. The subcontractor made a promise by making its bid. It was foreseeable to the subcontractor that the general contractor would rely to its detriment on the subcontractor's bid. The general contractor did, in fact, rely to its detriment. Using either Restatement (Second) of Contracts §§ 90 or 87(2), a court could justify enforcing the promise. In Drenna v. Star Paving, the court used Restatement (First) of Contracts § 90. Under Restatement (Second) of Contracts § 87(2), an option contract is created when "the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance." Here, the reliance on the bid would likely be considered "substantial." As a result, an option contract was created and the offer became irrevocable for a reasonable period of time during which the general contractor accepted. Recommended Reading: Pages 117-123, 226-228, 231-235 of Templin, Contracts: A Modern Coursebook, Second Edition

A general contractor was planning to bid on a government project to build a bridge. The general contractor solicited bids from subcontractors for a variety of jobs including dredging work. The general contractor informed all of the subcontractors that their bids would be used for the general contractor's bid for the government bridge project. Among the bids for the dredging work, the lowest was $100,000, and the general contractor used this bid in making his overall bid to the government. The general contractor was awarded the government contract. Before the general contractor could contact anyone, the subcontractor who made the $100,000 bid called the general contractor to say that it was revoking its offer because it had made a mistake. The subcontractor was willing to do the work for $120,000. The general contractor refused and then found another subcontractor to do the dredging work for $110,000. If the general contractor sues the subcontractor who initially bid $100,000 and wins a breach of contract lawsuit, it is probably because the court held: (A) that the parties formed an express option contract to keep the subcontractor's $100,000 offer open for a reasonable time and the general contractor accepted within that time frame. (B) that the subcontractor made an express offer for a unilateral contract where the beginning of performance was the general contractor's submission of his bid to the government. (C) that an express conditional contract had formed where if the general contractor won the government bid, then the contract for dredging work would form. (D) that the general contractor relied to its detriment on the subcontractors' bid.

(D) that the general contractor relied to its detriment on the subcontractors' bid. Rationale: Issue: This fact pattern tests the promissory estoppel doctrine. Rule: Restatement (Second) of Contracts §§ 90 and 87(2) Analysis: Under these facts, you could have used the process of elimination to get to the correct answer. Choices A, B, and C are all incorrect since the facts do not show that the parties negotiated for an "express" option agreement, an "express" unilateral contract, or an "express" conditional contract. An "express" contract would require that the parties bargained for one of these types of contracts. An option contract might be implied by law under a theory of reliance, however an express option contract would require that the optionee (the general contractor) exchange consideration for the option. That is not in the facts. Similar, there is not an express offer for a unilateral contract and no facts suggest an express conditional contract. This leaves Choice D, which is correct. The subcontractor made a promise by making its bid. It was foreseeable to the subcontractor that the general contractor would rely to its detriment on the subcontractor's bid. The general contractor did, in fact, rely to its detriment. Using either Restatement (Second) of Contracts §§ 90 or 87(2), a court could justify enforcing the promise. In Drennan v. Star Paving, the court used Restatement (First) of Contracts § 90. Under Restatement (Second) of Contracts § 87(2), an option contract is created when "the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance." Here, the reliance on the bid would likely be considered "substantial." As a result, an option contract was created and the offer became irrevocable for a reasonable period of time during which the general contractor accepted. Recommended Reading: Pages 117-123, 226-228, 231-235 of Templin, Contracts: A Modern Coursebook, Second Edition

A real estate developer wished to purchase coin-operated washing machines and dryers for laundry rooms in its residential properties. After some negotiation with a manufacturer of washing machines, the manufacturer provided the developer with a signed and written offer letter that stated that the manufacturer would sell and install up to 500 washing machines and 500 dryers of a certain make and model at a price of $300 each. The offer letter was dated July 1 and stated that the offer would be held open until September 30. Before making the sale, the developer wanted to shop around, although it was not able to find a better deal. On September 1, the manufacturer told the developer that it would now have to charge $350 for each machine since the developer took two months to decide. The developer immediately sent an acceptance of the manufacturer's July 1 offer placing an order for 500 washing machines and 500 dryer at $300 each. The manufacturer refused to honor the July 1 offer. If the developer sues the manufacturer for breach of contract and the developer wins it will probably be because: (A) the building company had no reasonable alternative but to purchase the machines from the manufacturer. (B) the increased price was unconscionable. (C) the court invoked the common law doctrine of promissory estoppel. (D) the manufacturer's offer was deemed irrevocable until September 30.

(D) the manufacturer's offer was deemed irrevocable until September 30. Rationale: Issue: This is an issue spotting problem that tests whether a student can identify that the offer is being held open under the Merchant's Firm Offer rules of UCC § 2-205. Rule: Under the UCC rules of a Merchant's Firm Offer (UCC 2-205), "an offer by a merchant to buy or sell goods in a signed writing which by its terms give assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months." Analysis: All of the elements of UCC § 2-205 are met here; consequently, there does not need to be consideration to make the offer irrevocable so long as the UCC applies to this transaction. This contract involves both the sale of goods (washing machines and dryers) and a service (installation). To determine whether the UCC applies, the court uses the "predominant purpose" test. Here, the predominant purpose is the sale of goods, and the service of installing the machine is incidental. By determining that the contract is within the UCC, it does not matter that there is no consideration for the irrevocable offer. Consequently, Choice D is correct. Choice A relates to an element of the defense of duress. However, the buyer is not seeking to rescind a contract with a defense, but to enforce a contract on an offer that it accepted before revocation, and Choice A is therefore not correct. Choice B is incorrect because the buyer is not seeking to rescind an unconscionable contract; therefore, the defense is not applicable. Even if the buyer were seeking to rescind based on the unconscionability doctrine, a price increase from $300 to $350 is generally not enough to shock the conscience enough to be substantively unconscionable. Choice C refers to the common law doctrine of promissory estoppel. Here, there is no need to rely on the common law doctrine since the UCC provides an explicit provision to resolve the issue. Recommended Reading: Pages 222, 235-242 of Templin, Contracts: A Modern Coursebook, Second Edition