Contracts Review Themis Questions

UCC Firm offer requirements?

(i) The offeror is a merchant; (ii) There is an assurance that the offer is to remain open; and (iii) The assurance is contained in a signed writing from the offeror.

Under the UCC, when both parties are merchants, an additional term in the acceptance is automatically included in the contract, unless: (Name the 3 exceptions)

(i) The term materially alters the original contract;(ii) The offer expressly limits acceptance to the terms of the offer; or(iii) The offeror has already objected to the additional terms, or objects within a reasonable time after notice of them was received. Note: If any one of these three exceptions is met, the term will not become part of the contract, and the offeror's original terms control.

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

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

A contract is best characterized as a(n) _____________________________. A. Legally enforceable agreement B. Accepted promise C. Agreement governed by common law D. Agreement with bargained-for consideration

A

FILL IN THE BLANK. When both parties agree that another party will assume the contractual obligations of one of the parties, a __________ has occurred. A. novation B. delegation C. rescission D. cancellation

A

FILL IN THE BLANKS. When a party clearly and unequivocally anticipatorily repudiates its contractual obligations, the other party _______ ignore the repudiation and demand that the repudiating party perform _______________________. A. may, as called for in the contract B. may, immediately C. must, as called for in the contract D. must, immediately

A

Regarding the waiver of an express condition, which of the following statements is FALSE? A. An express condition can be waived only by express language. B. A party may waive an express condition by hindering its occurrence. C. A party may waive an express condition by wrongfully interfering with its occurrence. D. When the occurrence of an express condition depends on the actions of a party, the actions undertaken by the party are judged by a good-faith standard.

A

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

A Anticipatory repudiation occurs when one party to a contract clearly and unequivocally communicates (through words or conduct) to the other party that it will not perform. The other party can treat the repudiation as a breach and sue immediately. In contrast, mere insecurity about the party's prospective ability to perform is not a repudiation, but it does give the other party the right to demand assurance of performance. Under the UCC, which governs contracts for the sale of goods (e.g., tomatoes), the demand for assurances must be made in writing. Failure to provide adequate assurance within a reasonable time—not to exceed 30 days under the UCC—constitutes a breach. Here, the farmer told the chef that he was "unsure" whether he could deliver the full amount of tomatoes by August 1. Since the farmer did not state unequivocally that he could not deliver the tomatoes on time, this did not constitute an anticipatory repudiation (Choice C). However, it did provide the chef with reasonable grounds for insecurity about the farmer's ability to deliver the tomatoes by August 1. The chef then told the farmer that it was absolutely essential that he receive those tomatoes on time. But he did not make a written demand for assurances as required under the UCC, so the farmer was not required to provide such assurances (Choice D). As a result, the chef does not have legal grounds to cancel the contract and order tomatoes from another source. (Choice B) The 30-day time period would have been relevant had the chef given the farmer a written demand for assurances. However, the chef did not do so.

What three factors does a court use to determine if restitutionary recovery is available in a quasi-contract situation?

A court may allow restitutionary recovery if: 1. The plaintiff has conferred a measurable benefit on the defendant; 2. The plaintiff acted without gratuitous intent; and 3. It would be unfair to let the defendant retain the benefit because either > (i) the defendant had the opportunity to decline the benefit but knowingly accepted it, or > (ii) the plaintiff had a reasonable excuse for not giving the defendant such opportunity.

What is a novation? When can it be express or implied after delegation?

A novation is the substitution of a new contract for an old one when a party to the original contract agrees to release the other party (the delegator) and substitute a new party (the delegatee). A novation can be express or it can be implied after delegation if: the delegator repudiates liability to the other party to the original contract and that party accepts performance from the delegatee without reserving rights against the delegator.

Void vs. Voidable Contract?

A void contract results in the entire transaction being regarded as a nullity, as if no contract existed between the parties; the contract is unenforceable. A voidable contract operates as a valid contract unless and until one of the parties takes steps to avoid it.

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

A. Auction contracts Goods in lots Each lot of goods is sold in separate sale Type of auction Reserve (default type) - auctioneer may withdraw goods prior to completion of sale No-reserve (special announcement required) - goods cannot be withdrawn after auctioneer calls for bids unless no bid is received within reasonable time When seller bids Winning bidder can avoid sale, or pay price of last good-faith bid, if auctioneer:knowingly accepts bid by or on behalf of seller orprocures seller's bid to drive up price of goods Exceptions - seller can bid:at forced sale orif seller gives notice reserving right to bid Completion of sale When auctioneer announces end of sale (eg, by fall of hammer) If bid is made contemporaneously with end-of-sale announcement, auctioneer has discretion to continue bidding The UCC has special rules for goods sold at auction. If goods are auctioned in lots, each lot represents a separate sale. Whether the goods can be withdrawn once the auctioneer calls for bids depends on the type of auction: at a reserve auction—which is presumed unless a no-reserve action is announced—the auctioneer may withdraw goods from auction prior to completion of the sale at a no-reserve auction—which must be specifically announced—goods cannot be withdrawn from auction after the auctioneer calls for bids unless no bid is received with a reasonable time In either type of auction, a bidder may retract a bid until the auctioneer announces the completion of the sale (e.g., at the fall of the auctioneer's hammer). However, the bidder's retraction will not revive any earlier bids. Here, the auction was presumably held with reserve since there is no indication that a no-reserve auction was specifically announced. This means that the auctioneer permissibly withdrew the backhoe upon receiving the contractor's signal prior to bringing down her gavel, announcing the completion of the sale. As a result, the contractor remains the owner of the backhoe, and the court will likely rule in his favor. (Choice B) The way that auctioned goods are classified (e.g., as "equipment") is irrelevant to determining whether those goods can be withdrawn from an auction. (Choice C) The UCC does not prohibit a seller from communicating with the auctioneer using a prearranged signal. (Choice D) Had this been a no-reserve auction, the contractor would have lost the right to withdraw the backhoe once the auction began. But since this was a reserve auction, the backhoe was permissibly withdrawn.

A gardener and a carpenter contracted in writing for the carpenter to repair the gardener's four identical beehives for $500 each. The contract was signed by both parties and provided that the gardener would pay the carpenter $2,000 upon delivery of the fourth repaired beehive. The gardener immediately delivered all four beehives to the carpenter for repair. The carpenter repaired and delivered the first two beehives without any problems and without demanding payment. However, upon delivery of the third repaired beehive, the carpenter demanded a payment of $1,500. Is the gardener required to make the demanded payment at this time? A No, because she has no duty to pay the carpenter anything until the last beehive is repaired and delivered. B No, because the course of performance between the parties has established that payment is not due upon the delivery of each repaired beehive. C Yes, because the carpenter is entitled to the fair value conferred on the gardener. D Yes, because the contract is divisible with respect to the repair and delivery of each beehive.

A. The answer you selected is not the best choice in this situation. Answer choice A is correct Order of performances* Simultaneous performance possible Condition concurrent implied (ie, performance due simultaneously) One performance requires time Condition precedent implied (ie, durational performance due before respective duty triggered) *These rules apply unless express contractual language or circumstances indicate otherwise. When a party performs one part of a divisible or installment contract, that party is generally entitled to the agreed equivalent for that part—even if the party fails to perform the other parts of the contract. In other words, that party's performance of the entire contract is generally not a condition precedent to the other party's duty to perform. A contract is divisible if: the parties' duties can be broken down into at least two corresponding pairs of performances and those pairs of performances can fairly be regarded as agreed (i.e., bargained-for) equivalents. Courts prefer to interpret contracts as divisible for reasons having to do with fairness. However, courts will not do so if the contract expressly states that it is indivisible or payment is due upon completion of the entire contract. Here, the contract provided that the gardener had no duty to pay until the carpenter repaired and delivered all four beehives. As a result, the contract was expressly indivisible, and the carpenter's completion of the work on all four beehives was a condition precedent to her duty to pay (Choice D). Therefore, the gardener is not required to make the demanded payment for the first three beehives at this time. (Choice B) Course of performance is relevant to show a waiver or modification of any term that is inconsistent with the course of performance. But here, the course of performance is irrelevant because it has been consistent with the terms of the contract. (Choice C) A party who commits a material breach of contractual obligations would ordinarily be entitled to the fair value of any benefit conferred on the nonbreaching party. But here, there is no indication that the carpenter breached the contract, so the carpenter is not entitled to payment at this time.

A college student wanted to purchase a car so that he could visit friends at other nearby colleges. After looking at a few different cars, the student found one he liked and entered into negotiations with a salesman for the purchase of the car. The student, who was 19 years old, chose to finance the car through the dealership and negotiated with the salesman on the terms and monthly payments of the car loan. However, because the student had no credit history, the dealership would not finance the purchase unless the student was able to provide a surety for the loan. The student contacted his wealthy uncle, who agreed to guarantee the car loan for the student. The uncle accompanied the student to the car dealership and met with the salesman. The uncle stated, "I hereby guarantee the loan so that my nephew can buy this car and enjoy it." The salesman and the uncle shook hands, and the dealership provided the student with the loan necessary to purchase the car. The student took possession of the car but failed to make any payments on the loan. As a result, the entire amount has become due. Is the dealership likely to prevail in an action against the uncle to recover the entire amount of the loan? A No, because the uncle's agreement to guarantee the loan was not in writing. B No, because there was no consideration for the uncle's promise to pay the debt. C Yes, because the uncle agreed to guarantee the loan. D Yes, because the uncle is primarily liable on the loan.

A. Suretyship is a three-party contract in which a surety promises to be secondarily responsible to a creditor (the obligee) for another's (the principal's) debt or other obligation if that person fails to perform. A suretyship falls within the statute of frauds and therefore must generally be in writing and signed by the party against whom enforcement is sought. However, a suretyship is excepted from the statute of frauds if it was made mainly for the surety's economic advantage or to indemnify (i.e., reimburse) the creditor for monetary loss. Here, a suretyship was created when the uncle (surety) orally agreed to guarantee (i.e., be secondarily responsible for) the student's (principal's) car loan. However, this oral agreement violates the statute of frauds. And the uncle's oral promise is not otherwise enforceable because he guaranteed the loan for the student's benefit (not his own) and never agreed to indemnify the dealership against losses arising from the transaction (Choice C). Therefore, the dealership is unlikely to prevail in an action against the uncle. (Choice B) The uncle's promise to pay the student's debt was supported by adequate consideration. In exchange for the uncle's promise, the dealership agreed to give the student a loan. Therefore, the loan itself provided consideration. (Choice D) The uncle was secondarily (not primarily) liable on the loan as a surety. So had the suretyship been enforceable, the uncle would have had to pay only if the student failed to do so.

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

A. Under the UCC perfect-tender rule, which applies to this contract for the sale of goods (shingles), a seller must strictly perform all contractual obligations or be in breach. Substantial performance will not suffice. Failure to tender (i.e., deliver) perfectly conforming goods constitutes a breach that, unless cured in the time remaining to perform, allows the buyer to accept or reject the goods. And the seller, as the breaching party, cannot recover damages under the contract for any rejected goods. Here, the contract expressly stated that delivery was to be made no later than noon. The store failed to perfectly perform this contractual obligation because it delivered the shingles at 1:00 p.m.—one hour late. And since the store could not cure its breach since the delivery deadline had passed, the builder had the right to reject the shingles. This means that the store, as the breaching party, can recover nothing from the builder in a breach-of-contract action.* *Although a breaching party cannot recover under the contract, it may be entitled to restitution for any benefit conferred on the nonbreaching party. However, restitutionary recovery is not available here since no benefit was conferred on the builder.

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

A. Under the UCC, a requirements contract is a contract under which the buyer agrees to purchase as many goods as the buyer requires from the seller. And under the perfect-tender rule, the goods and the seller's tender of those goods must fully conform with the terms of the agreement. Substantial performance will not suffice. Although goods must generally be tendered in a single delivery, this rule does not apply when the contract or circumstances indicate otherwise. For example, a single delivery would be unreasonable when the buyer would clearly have no room to store the goods if they were delivered all at once. In such an event, the buyer is entitled to reject the delivery for imperfect tender.

What are the rights of the assignee?

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

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

An assignment is the transfer of contractual rights to a third party. If an assignment is not supported by consideration, then it is a gratuitous assignment and is generally revocable (exceptions listed in the table above). A revocable assignment is automatically revoked upon the death, incapacity, or bankruptcy of the assignor. Here, the inventor assigned his right to receive payments under a licensing agreement to the corporation without receiving compensation or other consideration. Therefore, the assignment was automatically revoked upon the inventor's death, and the right to receive payment returned to his estate (Choice A). Aside from the stock, the inventor devised all of his property to his son, including the right to receive payment from the manufacturer under the licensing agreement (Choice B). Therefore, the manufacturer should make payments to the inventor's son.

What is the difference between an assignment and a delegation?

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

What is an implied-in-fact contract?

An implied-in-fact contract is a contract that results when a person's assent to an offer is inferred solely from the person's conduct. To be contractual bound, the person must not only intend the conduct but also know or have reason to know that the conduct may cause the offeror to believe the offer was accepted.

A farmer owned a tractor and offered his brother the chance to purchase it. The farmer told the brother that he had to decide whether he wanted to purchase the tractor within "six months of today's date." The brother paid the farmer $200 that day to keep the option open. The agreement was reduced to writing, signed by both men, and dated May 15. The farmer died on July 1. On August 15, the brother notified the executor of the farmer's estate that he wanted to accept the offer to buy the tractor. The executor refused to sell, and the brother filed suit for the enforcement of the contract. Is the brother likely to prevail? A No, because at the time of the farmer's death, the tractor went to his estate. B No, because the offer terminated on July 1. C Yes, because the brother made an enforceable contract to buy the tractor on May 15. D Yes, because the brother paid $200 to keep the option open.

An offer to form a contract generally remains open for the time stated in the offer or, if no time is stated, for a reasonable time. However, an offer will terminate prematurely if the offeror dies or becomes mentally incapacitated before the offer is accepted—with one exception. An option contract will not terminate under such circumstances because the offeree gave separate consideration to keep the offer open for a specified period of time.* Here, the farmer and the brother entered into a valid option contract on May 15 when the brother paid $200 in consideration to keep his option to purchase the tractor open for six months. This offer was irrevocable for the entire option period (six months) even though the farmer died on July 1 (Choice B). Since the brother exercised his option within the six-month period (i.e., before November 15), he is likely to prevail in his suit to enforce the option contract. *Under the UCC firm-offer rule, no consideration by the offeree is needed to keep the offer open. But this rule only applies in a contract with a merchant, which is not the case here. (Choice A) Although the tractor went to the farmer's estate at the time of his death, the tractor was still subject to the brother's option because he paid consideration to keep the offer open for six months. (Choice C) On May 15, the brothers merely agreed to keep the farmer's offer to sell the tractor open for six months. This formed an option contract that allowed the brother to accept the offer at a later date. The brother did so on August 15, forming a contract on that date.

What is an output contract?

An output contract is a contract under which a seller agrees to sell all that she manufactures of a product to the buyer. There is consideration in these agreements because the promisor suffers a legal detriment.

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

B

FILL IN THE BLANKS. For the parol evidence rule to apply, there must be a(n) __________________ agreement and a(n) ________________ written or oral statement about the agreement. A. Written, subsequent B. Written, earlier C. Oral or written, subsequent D. Oral or written, earlier

B

In which of the following circumstances is a court unlikely to grant specific performance? A. A contract to sell a house B. A contract to provide fitness training services C. A contract to buy a rare stamp D. A contract to purchase custom-made boots

B

Regarding the acceptance of an offer, which of the following is FALSE? A. An offeree cannot accept an offer directed to someone else. B. Unless the offer is open to all, the offeree must know about the offer in order to accept it. C. An acceptance must generally be communicated to the offeror to be effective. D. An offeree who performs the act necessary to collect a reward must also know about the offered reward.

B

With regard to the doctrine of mitigation, which of the following is FALSE? A. The nonbreaching party must take reasonable steps to reduce the damages from the breach. B. A failure to mitigate damages prevents the nonbreaching party from recovering any damages. C. The burden of proving a failure to mitigate damages rests on the breaching party. D. The mitigation efforts required to prevent loss are subject to a reasonableness standard applied in light of the original contractual duties.

B

A chemistry professor offered to sell her colleague an autographed first edition of a novel for $1,000. The professor provided her colleague with a signed written statement specifying the terms of the offer and stating that the offer would remain open for one week. Two days later, the colleague learned that the professor had sold the book to someone else in their department. The next day, the colleague showed up at the professor's office with $1,000, asking to purchase the book. The professor apologized, saying that the book had already been sold. Is the colleague likely to succeed in an action for breach of contract? A No, because an option contract is not valid unless the offeror is a merchant. B No, because the colleague learned that the book had been sold before accepting the offer. C Yes, because the professor did not revoke the offer prior to the colleague's acceptance. D Yes, because the offer was contained in a signed writing and thus could not be revoked.

B An offer can generally be revoked by the offeror at any time prior to acceptance. If the offeree acquires reliable information that the offeror has taken definite action inconsistent with the offer, then the offer is automatically revoked (i.e., constructive revocation). Once an offer is revoked, it can no longer be accepted and no contract can be formed. Here, the colleague learned that the professor had sold the book to someone else before the colleague accepted the offer. The professor's action was inconsistent with—and automatically revoked—the offer because the autographed first edition of the book was a unique item that the professor could not sell to both the colleague and someone else (Choice C). Since the colleague could not accept the revoked offer, the colleague is not likely to succeed in this breach-of-contract action.

A buyer contracted with an owner of commercial property located in a strip mall to purchase the property for $750,000. The contract called for closing and delivery of possession to occur on March 1. At the time of contracting, the owner informed the buyer that the current tenants were wrongfully refusing to vacate the premises and would not do so until March 31. The owner notified the current tenants, who ran a call center on the premises, that they would need to vacate the premises before April 1. Although the current tenants stopped operating the call center before April 1, they were not able to empty the space completely because they had attached numerous cubicles to the floor, and the cubicles occupied the entire space of the property. Shortly after entering the contract, the buyer ordered gymnastic equipment that was to be delivered on March 2. Unbeknownst to the owner, the buyer planned on using the property as a gymnastics studio. Due to the delay, the buyer was forced to rent a storage unit for this equipment for $1,000. By April 1, the fair market value of the property had risen to $755,000. In addition, the monthly fair market rental value of the property was $3,000. If the buyer files an action against the owner for damages, what will she likely recover? A Consequential damages of $1,000 in storage-unit costs, and expectation damages of $3,000 for the fair rental value of the property for the month of March. B Expectation damages of $3,000 for the fair rental value of the property for the month of March. C Nothing, because the delay was attributable to the tenants, not the owner. D Nothing, because the property increased in value during the month of March.

B In a real-estate contract that requires delivery of possession, late delivery is a breach that entitles the nonbreaching party to compensatory damages for actual economic losses. Compensatory damages consist of the following: expectation damages - the difference between the value of performance without the breach (i.e., what was promised) and with the breach (i.e., what was received) consequential damages - damages that do not flow directly and immediately from the other party's breach but are the foreseeable consequence of the breach (i.e., not too speculative) and incidental damages - commercially reasonable expenses incurred due to the other party's breach. Here, the buyer can recover expectation damages, which are measured by the fair market rental value of the property for the month of March that she was denied possession ($3,000). But the storage-unit costs ($1,000) are not recoverable because it was neither foreseeable (consequential) nor commercially reasonable (incidental) to schedule a delivery on March 2 after learning that the current tenants would not vacate until March 31 (Choice A). Therefore, the buyer will likely recover only $3,000 in expectation damages. (Choice C) Although the tenants caused the breach by failing to move out of the property on time, the owner contracted with the buyer to deliver possession on March 1. Therefore, the owner—not the tenants—is liable to the buyer for the breach. However, the owner may be able to recover damages from the tenants in a separate suit for wrongfully retaining possession of the property after the lease expired (i.e., holding over). (Choice D) The increase in the property's value would not affect the amount of compensatory damages the buyer can recover because she would have paid the same value to receive the benefit of the property's increase in value even if the owner had not breached.

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

B A party who substantially performs contractual obligations (i.e., commits a minor breach) can recover on the contract even though that party has not rendered full performance. The substantially performing party can generally recover the contract price minus any cost that the nonbreaching party incurred to receive full performance. In contrast, a party who commits a material breach by failing to substantially perform cannot recover under the contract. The breaching party can only recover in restitution for any benefit conferred on the nonbreaching party minus damages for the breach. Here, the dancer breached the contract because she could not perform for two weeks. However, she can argue that missing only two weeks out of a six-month period was a minor breach—especially if she could perform for the rest of the contract period. Therefore, her best argument is that her breach was not material, so she is entitled to the full benefit of the contract (minus any costs incurred due to her breach).

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

B. Under an accord and satisfaction, a party can fulfill its contractual obligation by rendering different performance than the one initially promised. This can be accomplished through a negotiable instrument (e.g., check) if three conditions are met: the obligation is unliquidated (i.e., uncertain in amount) or otherwise in dispute the obligor, in good faith, tenders the negotiable instrument with a conspicuous statement that the instrument is tendered as full satisfaction of the obligation and the obligee obtains payment of the instrument (e.g., by cashing the check). Here, the seller (obligee) cashed the buyer's (obligor's) $15,000 check, which contained a conspicuous statement that it was "in full and final satisfaction" of the buyer's obligation to purchase the car for $20,000. However, the buyer did not dispute the initial purchase price of the car for $20,000—a certain amount. Absent a dispute, the check could not have been offered in good faith. Therefore, the buyer's accord and satisfaction defense is unlikely to succeed. (Choice A) Under the UCC, which governs contracts for the sale of goods (e.g., car), a contract can be modified without consideration. Therefore, the fact that the buyer did not provide consideration is irrelevant. (Choice C) The buyer did not raise a substituted contract as a defense. But even if he had, the notation on the check is likely insufficient to form a substituted contract, which requires greater formality than an accord and satisfaction. (Choice D) For an accord and satisfaction, the seller need not actually know that the check was offered in full and final satisfaction of the buyer's obligation. Instead, the check needed to have a conspicuous statement to that effect, which it did. But the defense will still fail because the purchase price of the car was undisputed.

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

B. Special rules apply to installment contracts for the sale of goods (e.g., windows), which are governed by the UCC. Under the UCC, an installment contract is defined as a contract in which the goods are to be delivered in multiple shipments, and each shipment is to be separately accepted by the buyer. Payment by the buyer is due upon each delivery unless the price cannot be apportioned. Here, the parties formed an installment contract in which 100 identical windows were to be delivered to the construction company in four equal shipments on four separate dates. The price of these windows can be easily apportioned between the shipments. Therefore, the construction company is obligated to pay the manufacturer one-fourth of the full contract price upon each conforming delivery. (Choice A) Since this is an installment contract, payment is due upon each of the four deliveries—not when the final delivery is made. (Choice C) The doctrine of anticipatory repudiation applies when a promisor repudiates a promise before the time for performance is due. However, the construction company's refusal to perform earlier than required—by immediately paying the remaining contract price—does not trigger this doctrine. (Choice D) The contract did not grant the manufacturer the right to demand immediate payment of the full contract price on April 1. Therefore, the manufacturer did not waive any such right by failing to demand full payment at that time.

A mechanic and a farmer contracted in writing for the repair of the farmer's tractor, with a payment of $2,000 due upon completion. The mechanic called the farmer on April 15 to inform him that the work was complete. When the farmer went to pick up the tractor the next day, he told the mechanic that due to an unforeseen rise in feed costs, he could not pay the full contract price. The farmer paid the mechanic $1,000. The mechanic told the farmer that, if the farmer promised to pay the remainder by June 1, then the mechanic would not sue to recover the remaining $1,000. The farmer orally agreed. On May 1, the mechanic sued the farmer for the unpaid $1,000, and the farmer filed a motion to dismiss. Should the court grant the motion to dismiss? A No, because the new cost of feed is not an unforeseen difficulty that would allow for modification of the existing contract. B No, because there is no consideration to support the mechanic's promise not to sue. C Yes, because a promise to allow a debtor to delay payment on a past debt is enforceable without consideration. D Yes, because the payment of $1,000 was sufficient consideration to support the mechanic's promise not to sue.

B. The law permits the settlement of debts (e.g., by allowing a debtor to delay payment), but consideration is required for the settlement to be enforceable (Choice C). Consideration is evidenced by a bargained-for change in the legal position between the promisor and the promisee. This exists when there is a legal detriment to the promisee that supports the promise made by the promisor, which can take the form of an act, a return promise, or forbearance (i.e., refraining from exercising a legal right). However, under the common-law preexisting-duty rule, a promise to perform a preexisting duty is not consideration. That is because the promisee incurs no legal detriment by performing a duty that he/she is already bound to perform. Here, the farmer had a duty to pay the mechanic $2,000, which was due when the repairs were finished. Because the farmer was only able to pay $1,000 upon completion of the repairs, he attempted to settle the debt by promising to pay the remaining $1,000 by June 1 if the mechanic promised not to sue. But since the farmer had a preexisting duty to pay that amount, there was no consideration to support the mechanic's return promise (Choice D). Therefore, the court should deny the farmer's motion to dismiss the mechanic's suit for the unpaid $1,000. (Choice A) Modification of an existing contract without consideration is enforceable when (1) one party agrees to compensate the other when unanticipated difficulties arise and (2) the modification is fair and equitable. But here, the farmer has not agreed to compensate the mechanic for unanticipated feed costs (e.g., by paying more at a later date).

A math tutor entered into an agreement with a father to provide one month of tutoring for the father's son. The agreement stated that the math tutor would provide lessons for the son twice a week during the month for eight lessons at a total cost of $1,000. After signing the contract, the math tutor told the father that he planned to put the first $350 of the cost of the lessons toward purchasing study materials from a particular educational services provider. The father knew a salesman for the educational services provider and notified him that his company should expect a sale in the next week. As the educational services provider was a new company without many sales, the salesman was excited at the prospect. A week after the agreement between the math tutor and the father was executed, the math tutor informed the father that he would not tutor the son unless the father provided an additional $250. The father refused. The educational services provider subsequently brought an action against the math tutor for breach of the agreement between the math tutor and the father. Will the educational services provider likely prevail? A No, because the provider and the father were not in privity of contract. B No, because the provider was only an incidental beneficiary of the agreement. C Yes, because the father informed the provider's salesman of the agreement concerning its materials. D Yes, because the provider sustained $350 in lost-profit damages as a result of the math tutor's breach.

B. A third-party beneficiary is a nonparty to a contract who receives some advantage or benefit from that contract. There are two types of third-party beneficiaries: intended - those who receive a direct benefit from the contract because the contracting parties so intended (e.g., the contract provides that payment will go directly to a third party) incidental - those who receive some indirect benefit from the contract even though there was no contractual intent to benefit them (i.e., all third-party beneficiaries who are not intended beneficiaries) Only intended beneficiaries—not incidental beneficiaries—have contractual rights and may sue to enforce them. Here, neither the father nor the math tutor entered into the tutoring agreement with the intent to benefit the educational services provider. Any benefit to the provider was indirect, so the provider was merely an incidental beneficiary of the agreement. This means that the provider has no right to enforce the agreement between the father and the math tutor and cannot recover damages for the math tutor's breach (Choice D). Therefore, the provider likely will not prevail against the math tutor. (Choice A) The doctrine of privity of contract used to prevent individuals from enforcing contracts to which they were not a party. This doctrine has since been eroded to allow intended beneficiaries to enforce contracts made for their benefit. So had the provider been an intended beneficiary, lack of privity with the father would not have defeated the provider's claim. (Choice C) The salesman's knowledge of the agreement does not change the provider's status as an incidental beneficiary. The focus is instead on whether the contracting parties intended to benefit a third party.

A motorcycle enthusiast purchased a custom-made motorcycle from a boutique motorcycle shop. The enthusiast paid $5,000 for the motorcycle, which was to be delivered to him in one month. One week after he purchased the motorcycle, the enthusiast decided that he no longer wanted it. He called up his best friend and told him that he would give him the motorcycle when it was finished. The enthusiast also instructed the shop to deliver the motorcycle to his friend. Three weeks later, the shop delivered the motorcycle to the enthusiast. The enthusiast accepted the motorcycle without protest and called to inform the friend that he had decided to keep the motorcycle. When the friend heard this, he sued the shop for its failure to deliver the motorcycle to him. Will the friend likely succeed? A No, because an assignee cannot force an obligor to comply with an assignment by the obligee-assignor. B No, because there was no consideration to support the enthusiast's assignment of the motorcycle to his friend. C Yes, because the enthusiast made a valid assignment of the motorcycle to the friend. D Yes, because the friend detrimentally relied upon the enthusiast's assignment.

B. An assignment is the transfer of rights under a contract. An assignment is valid so long as there is a present intent to transfer contractual rights. It need not be accompanied by consideration. But when an assignment is made without consideration (i.e., a gratuitous assignment), it is revocable by the assignor (i.e., the party assigning rights to another) unless: the obligor (i.e., the party obligated to perform) has already performed a document symbolizing the assigned right has been delivered to the assignee a written assignment signed by the assignor has been delivered to the assignee or the assignee (i.e., the party receiving assigned rights) has detrimentally relied on the assignment. Here, the enthusiast (assignor) validly assigned his right to the motorcycle to the friend (assignee) without consideration, so the assignment was gratuitous. But the assignment was also revocable because none of the above-listed exceptions apply (Choice C). A revocable assignment can be revoked by (1) the death, incapacity, or bankruptcy of the assignor, (2) a subsequent assignment of the same right, or (3) notifying the assignee or the obligor. Here, the enthusiast revoked the assignment when he notified the friend that he had decided to keep the motorcycle. Therefore, the friend will likely not succeed in his suit against the shop. (Choice A) An assignee can compel the obligor to comply with the assignment if it is valid and enforceable. But because the gratuitous assignment at issue here was revoked by the enthusiast (assignor), the friend (assignee) cannot force the motorcycle shop (obligor) to comply with the assignment. (Choice D) The friend did not detrimentally rely upon the enthusiast's assignment—e.g., by purchasing motorcycle gear. Therefore, the enthusiast had the right to (and did) revoke the assignment.

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

B. Contracts for the sale of goods (e.g., fresh flowers) are governed by the Uniform Commercial Code (UCC). Under the UCC, the risk of loss in the absence of a breach generally passes to the buyer when the buyer receives the goods. But if the contract requires the seller to deliver the goods through a third-party carrier (e.g., a national delivery service), the risk of loss passes to the buyer at different times depending on whether the contract is a: shipment contract - a contract that does not require delivery at a particular location, in which case the risk of loss passes to the buyer when the goods are delivered to the carrier and a proper contract for their shipment is made or destination contract - a contract that requires delivery at a particular location, in which case the risk of loss passes to the buyer when the goods are delivered at the named location.

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

B. The UCC governs contracts for the sale of goods. Under the UCC firm-offer rule, an offer to buy or sell goods is irrevocable if the offeror is a merchant who provides a signed, written assurance that the offer will remain open (as the supplier did here). The offer is irrevocable for the time stated in the offer or, if no time is stated, for a reasonable time—even without consideration from the offeree. However, the period of irrevocability cannot exceed three months unless the offeree gives consideration to keep the offer open longer. Here, the offer to sell "up to 10,000" tubes of toothpaste at $1.00 per tube was to remain open for 45 days. The retailer accepted the offer at $1.00 per tube when it ordered 6,000 tubes within this 45-day period (on Day 31). When the firm offer expired at the end of 45 days, the offer to keep the price at $1.00 per tube was no longer outstanding and the price had increased to $1.10 per tube. Because the retailer placed the order for 4,000 additional tubes after the firm offer expired, this second order was subject to the $1.10 price.

A widow offered to sell her small business, together with all of the business's assets, to a nonprofit organization. The organization accepted, and on June 1, it signed and executed a contract providing for the sale of the business for $25,000 at the end of the month. When the organization's agent signed the contract, she orally informed the widow that the organization's duty to purchase the business was conditioned on obtaining approval from a local zoning board to convert the business's primary office into an affordable-healthcare clinic. A week later, the woman received another offer to purchase her business for $35,000. At the end of the month, seeking to accept the other offer, the widow refused to honor the contract with the organization because it had neglected to request the necessary approval from the zoning board. The organization sued the widow for breach of contract. The organization presented clear evidence that it had the necessary funds to perform on the contract at the end of the month, and that the zoning board would have routinely approved the organization's plans for the office. Is the organization likely to prevail in its action against the widow? A No, because the express condition of the zoning board's approval had not occurred by the end of the month. B No, because the organization's failure to seek approval from the zoning board was a repudiation of the contract. C Yes, because the condition of approval by the zoning board has been waived by the organization. D Yes, because the condition of approval by the zoning board was not included in the written contract.

C

For a communication to be an offer, the communication must do which of the following? A. Induce a willingness by the offeree to accept the offer B. Create the power of acceptance in the offeror C. Manifest the offeror's willingness to enter into a contract D. Reveal the offeror's subjective intent

C

In which of the following circumstances may a party's silence be actionable as nondisclosure? A. Only when the party engages in active concealment. B. Only when the party owes a fiduciary duty to the other party. C. When the party engages in active concealment or when the party owes a fiduciary duty to the other party. D. A party's silence cannot give rise to a misrepresentation.

C

Regarding services contracts, which of the following is the minimum that must be done for the contract to satisfy the Statute of Frauds? A. Partial performance of the contract by one party B. Partial performance of the contract by both parties C. Full performance of the contract by one party D. Full performance of the contract by both parties

C

To establish the defense of mutual mistake, which of the following is NOT required? A. Both parties are mistaken about a fact at the time the deal is made. B. The mistake relates to a basic assumption of the contract. C. The party who is not seeking to assert the defense assumed the risk of mistake. D. The mistake has a material impact on the contract.

C

To satisfy the Statute of Frauds, which of the following is FALSE with respect to a sale of goods? A. The writing need not be the contract itself. B. The writing need only be signed by the party against whom enforcement is sought. C. The writing must contain the price of the goods. D. The writing must contain a quantity of goods sold.

C

When an offeree begins performance of a unilateral contract, which of the following statements is TRUE? A. The offeror can revoke the offer. B. The offeror need not give the offeree a reasonable time to complete performance of the contract. C. The offeror cannot require the offeree to complete performance of the contract. D. A contract has been formed.

C

A butcher and a seller entered into a written contract for the purchase and sale of a building to be used as a butchery. The closing was scheduled for June 1. On May 25, the seller was notified by the city that the building, which had previously been used as a butchery, had a number of significant city code violations. The seller immediately contracted with an electrician and others to correct the issues. Despite his best efforts, the seller realized that the building would not be brought up to code until at least June 10. The seller promptly sent written notification of this issue to the butcher and informed him that he would be unable to take possession of the building until June 10. Based on his agreement with the seller, the butcher had declined to renew his lease at his current location and was forced to remove his equipment and inventory from that location by the end of May. This included a large freezer that the butcher regularly used to store his inventory. Between June 1 and June 10, to prevent spoilage of his inventory due to the delay, the butcher had to rent space to store his equipment and inventory. He moved his freezer to the rented space to store his meat at a cost of $200 per day, plus the cost of electricity to run the freezer. The cost of electricity to operate the freezer would have been the same no matter where the freezer had been stored. On June 10, the building was up to code. The butcher paid the seller the agreed-upon purchase price of $300,000 and took possession of the property. What damages, if any, may the butcher recover from the seller? A Nothing, because the seller acted in good faith. B Nothing, because the contract did not contain a "time is of the essence" clause. C $2,000 for the rental cost the butcher had to pay from June 1 to June 10. D $2,000 plus the cost of electricity to run the freezer.

C A closing date is not an essential term of a real estate contract. Therefore, a seller's performance is typically due at or within a reasonable time after the closing date—unless the real estate contract contains a "time is of the essence" clause (not seen here). Accordingly, the seller's failure to perform by the closing date is not a material breach that excuses the buyer's duty to perform—but it is still a breach. The buyer can therefore recover damages—even if the seller acted in good faith (Choices A & B). The goal of contract damages is to place the nonbreaching party in the same position as if the contract had been performed (i.e., expectation damages). This loss in value is measured by the difference between the value of performance without the breach (what was promised) and with the breach (what was received). For late delivery in a real estate contract, such damages are measured by the fair market rental value of the property for the time that the buyer (here, the butcher) was denied possession (here, $2,000). The buyer can also recover other losses, including consequential and incidental damages, minus any costs or losses avoided. Here, the butcher had to run his freezer at the rented space. But he did not incur a loss because he would have had to pay the same amount to run the freezer in the building he purchased had he been able to timely move in. Therefore, he cannot recover the cost of electricity to run the freezer (Choice D). The butcher can only recover the rental cost paid from June 1 to June 10.

A law student attended law school on a full scholarship. At the end of the law student's second year, she lost her scholarship. In order to fund her third year, she borrowed $50,000 from her rich uncle. They executed a written agreement stating that the law student would repay the loan two years from May 15, the date of her law school graduation. On May 15, two years after her graduation, the law student did not pay her uncle back because she had been unable to find a job as a lawyer. Instead, she was working as a server at a coffee shop. The uncle took no legal action. Four years later, the law student was still unable to pay the uncle back, but she did write him a signed letter stating that "I know I still owe you $50,000. I will repay you $50,000 if I get a law firm job." The statute of limitations for suits to collect debts in the jurisdiction is three years. Is the law student's promise contained in the letter to repay the loan enforceable? A No, because the promise to repay is not supported by consideration. B No, because the statute of limitations for collecting debts in the jurisdiction is three years. C Yes, because the promise was made after the statute of limitations had run. D Yes, because the uncle's foregoing of legal action constitutes consideration.

C A contract must generally be supported by consideration to be enforceable. However, there are circumstances in which a promise is enforceable without consideration. For example, a new promise to pay a debt after the statute of limitations has run is enforceable without any new consideration. When the new promise is an express promise, most jurisdictions require that the new promise be in writing and signed by the debtor to be enforceable. Here, the jurisdiction's three-year statute of limitations began to run when the law student failed to pay her uncle back by the original deadline—two years after her law school graduation. Four years later, the law student made a new promise to repay the loan that was not supported by consideration (Choice A). However, that new promise was made after the statute of limitations had run and in a signed writing as required by most jurisdictions. Therefore, the new promise is enforceable without consideration. (Choice B) Although the statute of limitations to enforce the law student's original promise to repay the loan has expired, this question asks whether the student's new promise contained in the letter is enforceable. Since the new promise to pay her debt was made after the statute of limitations had run, it is enforceable without new consideration. (Choice D) Foregoing a legal right can constitute consideration. But here, there is no indication that the law student made her promise in the letter in exchange for the uncle's promise not to sue her for the outstanding debt.

A charity, seeking to raise funds, held a legally permitted raffle in which the prize was a new automobile. A week before the raffle, the organizer of the raffle contacted a friend who had purchased a raffle ticket. The organizer promised to ensure that the friend would win the raffle if the friend gave the organizer $1,000. The friend agreed and gave the organizer $1,000. On the day before the raffle, the friend began to feel guilty. He went to the organizer, renounced the scheme, and demanded his $1,000 back. The organizer refused. The next day at the raffle, the automobile was awarded to someone else. The applicable jurisdiction makes it a crime to fraudulently conduct a contest, lottery, or prize drawing. If the friend sues the organizer for the $1,000, will the friend be likely to prevail? A No, because the agreement between the friend and the organizer was illegal. B No, because the friend failed to take any action to prevent the raffle from being held. C Yes, because the friend is entitled to a return of the $1,000 paid to the organizer. D Yes, because there was a valid contract between the organizer and the friend.

C. A contract to perform an illegal act (e.g., fraud) is void and unenforceable. However, restitution damages may be recoverable if the claimant conferred a benefit on the other party and: was justifiably ignorant of the facts that made the contract illegal* was less culpable than the other party (i.e., was not in pari delicto) or withdrew before the contract's illegal purpose was achieved and did not engage in serious misconduct (e.g., shockingly immoral, unethical, or unjust behavior). Here, fraudulently conducting a prize drawing (e.g., raffle) is a crime in this jurisdiction, so the parties' contract to ensure that the friend would win the raffle for $1,000 was illegal and therefore invalid (Choice D). However, the friend withdrew from the transaction prior to the raffle. And since there is no evidence of serious misconduct on his part, the friend is entitled to restitution of the $1,000 that he paid to the organizer (Choice A). Therefore, the friend will likely prevail. *However, recovery on this basis will be barred if the other party also was justifiably ignorant. (Choice B) The friend may be subject to criminal liability for failing to take action to prevent the raffle from being held. However, this would not affect the friend's right to restitution because he withdrew from the contract before its illegal purpose was achieved.

A homeowner contracted with a landscaper to tend the extensive gardens around the homeowner's home for $1,000 per month for one year. The landscaper completed the work to the homeowner's satisfaction for three months. Two days before the fourth month, the landscaper told the homeowner that he had to leave town unexpectedly. The landscaper asked for the homeowner's permission to assign his rights and delegate his duties under the contract to another gardener for the next two months. The homeowner was frustrated by being given such short notice, but she reluctantly consented. The gardener also consented to the delegation, but he performed very little work for the next two months, and most of the gardens died. Does the homeowner have a viable breach-of-contract claim against the landscaper? A No, because the homeowner must first seek recovery against the gardener. B No, because the landscaper was released from liability under the contract for two months. C Yes, because the homeowner's consent to the delegation did not create a novation. D Yes, because the landscaper did not give the homeowner adequate notice of the delegation.

C. A party's contractual obligations are generally delegable to a third party, but the delegator remains liable to the other party to the contract. Consequently, the other party can recover against the delegator if the delegatee fails to perform unless the other party released the delegator under the original agreement. This can occur through novation. A novation is a substituted contract in which the parties agree to replace an original contracting party with a new party. A novation may be express or implied after delegation if: the delegator repudiates liability to the other party and the other party accepts the delegatee's performance of the contract without reserving rights against the delegator. However, mere consent to a delegation does not create a novation. Here, the homeowner consented to the landscaper's (delegator's) delegation of his contractual duties to the gardener (delegatee). However, the landscaper did not repudiate liability to the homeowner, and there is no indication that the homeowner relinquished her contractual rights against the landscaper by accepting the gardener's services (Choice B). And because the homeowner's consent to the delegation did not create a novation, she has a viable breach-of-contract claim against the landscaper for the gardener's failure to perform. (Choice A) The landscaper (delegator) remains liable under the contract. Consequently, the homeowner need not seek recovery against the gardener (delegatee) before suing the landscaper. (Choice D) There is no requirement that the other contracting party receive notice of the delegation. Therefore, the homeowner will not prevail on this basis.

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

C. After a contract is breached, the nonbreaching party may seek compensatory damages. These damages primarily aim to put the nonbreaching party in the same position as if the contract had been performed so that the nonbreaching party receives the "benefit of the bargain". Compensatory damages primarily include all of the following (minus mitigable damages): expectation damages - the difference between the value of performance without the breach (what was promised) and the value of the performance with the breach (what was received) (Choice A) consequential damages - losses that arose from the nonbreaching party's special circumstances that were reasonably foreseeable to the breaching party when the contract was made incidental damages - reimbursement for commercially reasonable expenses that the nonbreaching party incurred as a result of the breach If such damages cannot be calculated with reasonable certainty, then the nonbreaching party may recover for any expenses incurred in reasonable reliance that the contract would be performed—e.g., the cost of the glass for the mosaic and the parking permit (Choices B & D).* However, recovery of reliance damages may be reduced by the amount spent by the nonbreaching party on materials that could reasonably be repurposed for another job—e.g., the painter's paintbrushes. Therefore, the painter is least likely to recover that cost.

A wedding planner contracted with a local bakery to make cupcakes for an upcoming wedding reception. The bakery was very experienced in making cupcakes and had a great reputation in the community. Although there were other comparably skilled cupcake makers in the area, the wedding planner eventually chose the bakery due to the price it quoted her for the cupcakes. A few months before the wedding reception, the bakery's head baker unexpectedly had to take a leave of absence to deal with a medical issue. The bakery subsequently assigned the contract to a pastry chef in the same community. The pastry chef also had an excellent reputation in the community and was at least equally as skilled at making cupcakes as the bakery. The bakery told the wedding planner about this assignment, and the wedding planner did not object. When the pastry chef fully performed on the contract and delivered the cupcakes, which conformed to the contract requirements, the wedding planner refused to accept or pay for the cupcakes. On these facts, has the wedding planner breached the contract? A No, because the bakery breached the contract first by assigning the contract to another party. B No, because the wedding planner only had a duty to accept performance by the bakery. C Yes, because the assignment of the contract was permitted and the pastry chef properly and fully performed. D Yes, because the bakery told the wedding planner about the assignment of the contract and the wedding planner did not object.

C. Nondelegable contractual duties Delegation not permitted when: other contracting party has substantial interest in having delegating party perform (eg, in personal-services contract involving taste or special skill) or delegation is prohibited by contract An assignment of a contract that is not limited to contractual rights is typically treated as both an assignment of rights and a delegation of duties. Contractual duties can generally be delegated to another (the delegatee), and the other party to the contract must accept performance by the delegatee or be in breach. However, delegation is not permitted when: delegation is prohibited by the contract (e.g., contract says "this contract may not be assigned") or the other contracting party has a substantial interest in having the delegating party perform (e.g., in a personal-services contract involving taste or a special skill)

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

C. Rationale: Ways to discharge contractual obligations Full performance of contractual obligations Impossibility, impracticability, or frustration of purpose Release (in writing only) Mutual rescission Substituted contract Contract or covenant not to sue Accord & satisfaction Novation Mnemonic: FIRM SCAN An existing contractual obligation can be discharged by an accord agreement. Under this agreement, a contracting party agrees to accept performance that differs from what was promised in an existing contract in satisfaction of the other party's existing duty. When a claim is unliquidated or otherwise subject to dispute, it can be discharged by accord and satisfaction if: 1. the person against whom the claim is asserted tendered a negotiable instrument (e.g., a check) the instrument was accompanied by a conspicuous statement indicating that it was tendered as full satisfaction of the claim (e.g., "payment in full") and 2. The claimant obtained payment of the instrument. Here, the rugmaker sent the supplier a check for $15,000 (instead of $20,000) after receiving yarn made of 90% wool (instead of 100% wool). The check clearly stated that it was being tendered as payment in full for the supplier's shipment of the lesser-quality yarn. The supplier then obtained payment by depositing the $15,000 check. Therefore, the rugmaker's best defense is that there was an accord and satisfaction that discharged the rugmaker of any further duty to pay the remaining $5,000 for the shipment.

A library contacted a local artist expressing an interest in purchasing a particular one of the artist's sculptures for display at the library. The library's agent and the artist executed a written contract that was signed by both parties and provided that the library would purchase the sculpture for $1,000 due upon delivery of the sculpture to the library. Just before they signed the contract, the agent told the artist, "Plan on delivering the sculpture in 10 days, but please remember that the library's obligation to purchase the sculpture will be conditioned on the approval of the chairperson of the Artistic Patronage Council, as it will be providing the library with the funds for this sale." The chairperson of the Artistic Patronage Council orally approved the sale the next day. However, 10 days after the contract was executed, the artist decided that he did not want to sell the sculpture. If the library sues the artist for breach of contract, is the library likely to prevail? A No, because the library's agent made an illusory promise. B No, because there was no mutuality of remedy when the contract was executed. C Yes, because the agreement was supported by good consideration even though it was conditioned on an uncertain event. D Yes, because the artist waived any lack of consideration by signing the contract.

C. To be enforceable, a contract must generally be supported by valuable consideration, as evidenced by a bargained-for change in the legal position between the parties (i.e., "mutuality of consideration"). Consideration can take the form of a return promise to do (or not do) something or the actual performance (or nonperformance) of some act. Such performance can be made contingent upon a condition. There are two types of conditions: Condition precedent - where a party's duty to perform arises upon the occurrence or nonoccurrence of an uncertain future event (i.e., the event creates the duty) Condition subsequent - where a party's duty to perform is released upon the occurrence or nonoccurrence of an uncertain future event (i.e., the event extinguishes the duty) However, a promise based upon a condition that is within the control of the promisor may be illusory if it essentially promises nothing because the promisor can choose whether to honor that promise. Here, the library promised to pay $1,000 in exchange for the artist's sculpture, so their contract was supported by valuable consideration. The library's obligation to purchase the sculpture was contingent upon a condition precedent—the approval of the chairperson of the Artistic Patronage Council. But this condition did not make the contract illusory because there is no indication that the chairperson's approval was within the control of the library or its agent (Choice A). Therefore, the library is likely to prevail in its breach-of-contract action. (Choice B) Mutuality of remedy is not a requirement to form a valid contract. (Choice D) The basic concept of consideration is that there must be something of substance given in exchange for the promise that is to be enforced. Courts generally will not review the adequacy of the consideration supporting a contract, but the requirement of some form of consideration cannot be waived.

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

C. Obligations under a contract can generally be delegated to another.* However, the person delegating his/her duties (the delegator) is not released from liability unless there is a novation. A novation is the substitution of a new contract for an old one when a party to the original contract agrees to release the other party (the delegator) and substitute a new party (the delegatee). A novation can be express or it can be implied after delegation if: 1. the delegator repudiates liability to the other party to the original contract and 2. that party accepts performance from the delegatee without reserving rights against the delegator.

A maker of perfume contacted a manufacturer about supplying 1,000 readily available glass bottles for retail sales of perfume. The manufacturer offered to supply the bottles and to ship them within one week. The perfumer responded, "Ship them as soon as possible." The manufacturer shipped 1,000 bottles to the perfumer five days later. The perfumer accepted the bottles and filled them with perfume. Without waiting for the manufacturer's invoice, the perfumer sent a payment to the manufacturer based on a price of $2.50 per bottle. Prior to receiving this payment, the manufacturer sent the perfumer an invoice that reflected a charge of $3.50 per bottle. When the perfumer refused to pay $3.50 per bottle, the manufacturer returned the payment to the perfumer and initiated an action for the price. The court determined that a reasonable price for the bottles at the time of delivery was $3.25 per bottle. What amount should the court award the manufacturer per bottle? A Nothing, because no contract was formed in the absence of a price term. B $2.50, because the perfumer, as offeror, was master of the offer. C $3.25, because this was a reasonable price for the bottles at the time of delivery. D $3.50, because the manufacturer, as offeror, was master of the offer.

Contract terms must be sufficiently certain and definite for the court to determine the existence of a breach and give an appropriate remedy. While the common law requires that all essential terms be covered in the agreement, the UCC—which governs contracts for the sale of goods—is more liberal. The UCC encourages contract formation by providing "gap fillers" for many missing terms. For example, if a contract omits a price term—or if the parties agree to set the price in the future but fail to do so—then the UCC supplies a reasonable price at the time of delivery. Therefore, the court should award the manufacturer $3.25 per bottle, which was the reasonable price for the bottles at the time of delivery.

Under the UCC, even if the terms of a written contract for the sale of goods appear to be unambiguous, what evidence can be presented to explain or supplement the contract? (3 things)

Course of performance, course of dealing, and trade usage. Note: If the express contract terms are inconsistent with the course of performance, or trade usage: express terms > course of performance > course of dealing > trade usage.

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

D

FILL IN THE BLANKS. A contract for the transfer of a real property interest can satisfy the Statute of Frauds if any _________ of the following have occurred: payment, _________, or improvements of the property. A. one, reliance B. one, possession C. two, reliance D. two, possession

D

Regarding consequential damages, which of the following is FALSE? A. Consequential damages are damages that are unique or special to the plaintiff. B. Consequential damages may be recovered in addition to general damages. C. Unforeseeable consequential damages are not recoverable unless the breaching party had some reason to know about the possibility of these damages. D. Incidental damages are a subset of consequential damages.

D

Regarding the "perfect tender" rule, which of the following is FALSE? A. A seller who has not made a perfect tender of the goods has a chance to cure the tender if there is time left on the contract. B. The perfect tender rule does not apply to an installment contract. C. If the seller tendered nonconforming goods under a reasonable understanding that the buyer would accept the replacement goods, the buyer must allow for cure of the defective tender. D. Once a buyer has accepted the goods, the buyer cannot revoke his acceptance and return the goods.

D

When an indivisible contract involves both the delivery of goods and the rendering of services (i.e., a mixed contract), which of the following is TRUE? A. The common law always applies to the entire contract. B. The UCC always applies to the entire contract. C. The common law always applies to issues stemming from the delivery of services, and the UCC always applies to issues dealing with the delivery of goods. D. The predominant purpose rule applies to determine whether the contract is governed by the UCC or the common law.

D

When the paying party breaches a building contract at a time that the building is only partially complete, which of the following is TRUE? A. The builder may usually complete the building. B. The builder is entitled to the full contract price. C. The builder's recovery need not take into account any amount already paid to the builder. D. The builder's recovery must take into account the cost of completing the building.

D

Which of the following is NOT a requirement of a quasi-contract? A. A measurable benefit is conferred by one party on another. B. The benefit is conferred with the expectation of payment. C. Retention of the benefit without compensation would be unfair. D. Absence of mistake by the party conferring the benefit.

D

A man was moving to another state and decided that he wanted to give away some of his belongings. The man knew that his brother had always expressed interest in the man's antique desk. The man called the brother and said, "I'm going to be moving in two weeks. I would like to give you the antique desk as a gift. I'll drop it off at your house on my way out of town." The brother told the man that he was very grateful for the gift and was looking forward to having the desk in his home office. The brother, in reasonable reliance on the man's promise, immediately disposed of his old desk and made room for the antique one. A couple of days later, an appraiser, who was a friend of the man, visited the man's house for dinner. While at his house, the appraiser saw the antique desk and informed the man that it was worth well over $20,000. The man decided to keep the desk and did not drop it off at the brother's house on his way out of town. The brother brought suit against the man to recover the antique desk. If the court finds in favor of the man on these facts, what is the most likely reason? A A promise to make a gift in the future cannot be enforced. B The brother did not rely to his detriment on the man's promise. C The man's promise was not in writing. D The man's refusal to give the antique desk did not cause injustice.

D A contract must be supported by consideration—i.e., a benefit bargained for and received by the promisor from a promisee. Since a promise to make a gift does not involve a bargained-for exchange, it is generally unenforceable. But under the doctrine of promissory estoppel, a gift promise is enforceable if three requirements are met: the promisor should reasonably expect the promisee to rely on the promise the promisee detrimentally relies on the promise and injustice can be avoided only by enforcement of the promise. In this case, the man's promise to gift the antique desk to his brother will only be enforced if all three of these requirements are met. The facts indicate that the brother did reasonably and detrimentally rely on the promise by disposing of his old desk (Choice B). Therefore, if the court finds in favor of the man, the court must have concluded that the man's failure to give the antique desk to the brother as promised did not cause injustice. (Choice A) A promise to make a gift in the future can be enforced if the requirements for promissory estoppel are met. (Choice C) A writing is not required to enforce a promise to make a gift under the doctrine of promissory estoppel. Therefore, the lack of a writing would not be dispositive here.

A father, hoping to build a new playground for his children, invited a friend whose hobby was woodworking to lunch. During the lunch, the two men discussed an arrangement in which the woodworker would build and deliver a swing set to the father for $2,000 within two weeks. Later that day, the woodworker sent an email to the father restating what had been discussed. The father immediately responded in a signed email stating, "We have a deal. But please deliver the set within one week instead." The woodworker did not respond but began working on the swing set that day. Eight days later, the father called the woodworker to ask why the swing set had not been delivered. The woodworker stated that he intended to deliver the swing set within the two-week period originally discussed. He began to work more quickly to complete the swing set sooner and delivered the swing set two days early, but the father refused to pay him for it. Under the UCC, is the woodworker entitled to recover the $2,000? A No, because the parties did not agree to all essential terms. B No, because the woodworker did not deliver the swing set within one week. C Yes, because the goods were specially manufactured. D Yes, because the woodworker delivered the swing set within two weeks.

D The UCC, which governs contracts for the sale of goods (here, a swing set), uses the battle-of-the-forms rule for contract formation. Under this rule, an acceptance that contains new or revised terms is still an acceptance (not a counteroffer) so long as it does not require assent to new or revised terms. And if at least one party is a nonmerchant, then the new or revised terms are merely treated as proposed additions to the contract. Here, the father's email accepted the woodworker's offer but revised the delivery time from two weeks to one week. Since the father did not condition his acceptance on this revised term, the offer was accepted and a contract was formed. The revised term was merely a proposed addition to the contract because the father is a nonmerchant. The woodworker did not accept the proposed one-week deadline, so he timely delivered the swing set by the original two-week deadline (Choice B). Therefore, he is entitled to $2,000. (Choice A) Under the UCC, the only essential term is the quantity of goods to be sold. The parties agreed to this term when they arranged for the construction of one swing set, so a valid contract was formed. If other terms are missing, then UCC gap-fillers will be applied. (Choice C) One exception to the statute of frauds allows an oral contract for the sale of specially manufactured goods for $500 or more to be enforced. But this exception is unnecessary here because the father and the woodworker had a written contract—as evidenced by their emails—that set forth the terms of their agreement.

A refrigeration-unit manufacturer contracted with a kitchen appliance store to sell and deliver 100 refrigeration units to the store at a price substantially lower than market value. The written and signed contract included the term "F.O.B. kitchen appliance store, on or before March 30." The shipping company that the manufacturer normally used to deliver its refrigeration units experienced an unforeseen strike at the end of March. As a result, the manufacturer personally delivered the units to the store on April 18. The store suffered no material harm due to the delay. The refrigeration appliance industry generally allows appliance manufacturers a 30-day leeway for any contractually specified time of delivery, unless such leeway is expressly prohibited by the contract. If the store brings suit against the manufacturer for breach of contract, which of the following facts provides the manufacturer with the strongest defense to the store's claim? A The delay was caused by an unforeseeable strike. B The manufacturer believed that due to the price at which it offered the refrigeration units, the store would accept a late delivery. C The store suffered no material harm from the delay. D There is evidence of a trade usage in the refrigeration appliance industry allowing a 30-day leeway for appliance deliveries.

D Under the UCC parol evidence rule, evidence of a prior or contemporaneous agreement cannot be used to contradict the terms of a final written agreement. But evidence of the parties' course of performance, course of dealing, or trade usage can be used to explain or supplement those terms—even when the terms appear unambiguous. Trade usage is any practice or method of dealing in the particular business or industry that is observed with such regularity so as to justify an expectation that it will be observed in the instant case. Here, the contract stated that delivery was due on or before March 30. However, the refrigeration appliance industry generally allows appliance manufacturers a 30-day leeway for a contractually specified delivery date unless expressly prohibited by the contract (not seen here). Therefore, this evidence of trade usage would provide a strong defense against the store's breach-of-contract claim because it shows that the manufacturer was not in breach when it delivered the units on April 18—within 30 days of March 30.

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

D Under the UCC parol evidence rule, which applies to contracts for the sale of goods (e.g., T-shirts), evidence of prior or contemporaneous agreements cannot be used to contradict the terms of a final written agreement. However, a course of performance can be used to explain or supplement those terms. A course of performance is a sequence of conduct that is relevant to understanding an agreement between the parties if: the agreement involved repeated occasions for performance by a party and the other party accepted performance without objection and with knowledge of the course of performance. Here, the manufacturer entered into a final written contract with the clothing store to sell 1,000 T-shirts per month for two years. The contract stated that non-coquelicot T-shirts could be returned but was silent with regard to the return of coquelicot T-shirts. This means that the contract's terms can be supplemented with evidence that the store had returned coquelicot T-shirts over the past year without objection and received a refund. Evidence of this course of performance is therefore admissible.

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

D. A contracting party may generally avoid performance if a condition precedent—i.e., an uncertain future event that must occur before performance becomes due—has not occurred. The nonoccurrence of a condition may be excused, however, if the party who would benefit from the condition waives it by words or conduct. And the waiving party cannot retract the waiver once the other party has detrimentally relied on it. Here, the buyer's duty to pay under the original contract was conditioned on the seller's delivery by February 20. However, the buyer waived the original delivery date by orally agreeing on February 3 to postpone delivery to March 1. The seller detrimentally relied on that waiver by delivering the widgets on March 1, so the buyer cannot retract the waiver. Therefore, the seller will likely succeed in this breach-of-contract action.

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

D. An offer can be accepted at any time before the offer is revoked. The offeror can revoke the offer by manifesting an intent not to enter into the proposed contract. This can occur in two ways: expressly - when the offeror communicates the revocation directly to the offeree constructively - when the offeree acquires reliable information that the offeror has taken definite action inconsistent with the offer Here, the owner offered to sell the yacht to the first buyer and then sold the yacht to a second buyer. However, the owner never revoked the offer made to the first buyer, and the first buyer did not otherwise learn of the sale prior to accepting the offer.* Therefore, a valid contract was formed when the first buyer accepted the offer on November 20, and the first buyer can bring a successful suit against the owner for breach of contract. *Had the first buyer learned of the sale from a reliable source prior to acceptance, then the offer would have been terminated through constructive revocation.

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

D. Contract formation requires both an offer and an acceptance (i.e., mutual assent). The offeror can dictate the manner and means by which the offer may be accepted. But if the offeror does not do so, then the offeree can accept the offer in any reasonable manner and by any reasonable means—e.g., delivering the acceptance by mail. Under the mailbox rule, an acceptance sent by mail or similar means is generally effective upon dispatch, while a rejection is effective upon receipt. Here, the woman did not dictate that an acceptance must be mailed to her business address; she merely welcomed the friend to mail it there. Therefore, the friend could accept the offer by another reasonable means (Choice A). The friend did so by immediately mailing her acceptance to the woman's home address. Since that acceptance was effective upon dispatch, the friend accepted the woman's offer before the one-week deadline had passed (Choice B). As a result, the friend will likely succeed in her breach-of-contract action. (Choice C) An option is an independent promise to keep an offer open for a specified period of time. But unless the option is supported by separate consideration, the offeror may revoke the offer at any time prior to acceptance. However, that is of no consequence here because the friend accepted the woman's offer before it was revoked.

A recent college graduate offered to buy all of the computers from a failing online retailer for which he had been an intern during college, and the retailer accepted. The terms of the written agreement were such that the graduate would pay $10,000 for a "reasonable number of computers" since the retailer was winding up its business and no longer needed them all. Due to his internship with the retailer, the graduate knew that there were 50 computers in the office and that nearly all of them were unused, so he believed that he would receive all 50 computers once the retailer closed. He gave the retailer a check for $10,000 and, in return, took 10 computers from the office that day. With the help of the $10,000 and a sudden upswing in the online retail market, the retailer became profitable. When the graduate demanded the remaining 40 computers, the retailer refused. Instead, the retailer returned the $10,000 to the graduate and demanded the return of the 10 computers that were in the graduate's possession. The graduate sued the retailer for breach of contract. The retailer has moved to dismiss the suit, arguing that no valid contract existed. How is the court likely to rule? A Deny the motion, because the court may supply missing terms in a contract. B Deny the motion, because the parties formed a requirements contract. C Grant the motion, because the retailer's increased profitability constituted a supervening event. D Grant the motion, because there was no agreement as to quantity.

D. For a contract to exist, the terms of the contract must be sufficiently certain and definite for the court to determine if there has been a breach and give an appropriate remedy. The UCC, which governs contracts for the sale of goods (e.g., computers), encourages contract formation by providing gap-fillers for many missing terms, but not for the following: identity of the contracting parties subject matter of the contract quantity of goods to be sold A contract must therefore specify a quantity that is certain or determinable by reference to objective facts, such as the buyer's actual requirements or the seller's actual output in a requirements or output contract. If it does not, the contract fails for indefiniteness. Here, the parties did not form a requirements contract since the graduate did not agree to buy all the computers he would require from the retailer—only a reasonable number (Choice B). Additionally, a "reasonable number" is not an objective fact through which the quantity term can be determined. And since the court cannot supply the missing quantity term, the terms were too indefinite to form a contract (Choice A). Therefore, the court will likely grant the retailer's motion to dismiss. (Choice C) A duty to perform a contract may be discharged when, for example, a supervening event or change in circumstances after contract formation makes the contract impracticable to perform or frustrates its purpose. But here, no contract was formed, and the retailer's increased profitability would have made a contract more practicable to perform.

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

D. When nonoccurrence of condition is excused: Performance is generally due once a contract is formed, but a duty to perform can be delayed or discharged by a condition—i.e., an uncertain future event that must occur before performance becomes due or is discharged. There are two types of conditions: condition precedent - delays performance until a specified event occurs condition subsequent - excuses performance once a specified event occurs A condition precedent will be excused if a party whose performance is subject to that condition wrongfully prevents or interferes with its occurrence—e.g., by breaching the duty of good faith and fair dealing (which includes the duty to cooperate) that is implied in every contract. When this occurs, the condition no longer needs to occur for the interfering party's performance to become due.

What is the formula for expectation damages?

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

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

Factors considered to determine material breach 1. Extent to which nonbreaching party will suffer loss 2. Extent to which nonbreaching party can be adequately compensated for loss 3. Extent to which breaching party will suffer forfeiture Likelihood of cure by breaching party 4. Absence of good faith or fair dealing by breaching party Under common law, which governs contracts for services, a material breach allows the nonbreaching party to withhold its own performance. A breach is material when the nonbreaching party does not receive the substantial benefit of its bargain. As a result, substantial performance—i.e., less-than-full performance that, while imperfect, does not defeat the contract's main purpose—does not typically constitute a material breach.

What is Fraud in the Factum? (Fraud in the Execution)

Fraud in the factum (or fraud in the execution) occurs when the fraudulent misrepresentation prevents a party from knowing the character or essential terms of the transaction. Effect: No contract is formed, and the apparent contract is VOID.

Define fraud in the inducement, and state its effect on a contract.

Fraud in the inducement occurs when a fraudulent misrepresentation is used to induce another to enter into a contract. Effect: Contract is VOIDABLE by the adversely affected party if she justifiably relied on the misrepresentation in entering into the agreement.

The owner of a bed and breakfast hired an artist to paint nature-themed murals in each of the five bedrooms. The contract provided that payment was due upon the satisfactory completion of all five rooms. The owner told the artist that each mural should relate to the name of the bedroom, but she otherwise gave the artist broad discretion in designing each mural. When the owner checked the artist's progress a few weeks later, she found that although the murals in the three completed rooms related to the theme of the rooms, the color choices clashed with the overall décor of the bed and breakfast. The owner told the artist that she would accept his performance on the first three rooms, but she asked him to incorporate a different color palette in the remaining rooms. The artist, unwilling to compromise his artistic autonomy, refused to paint the remaining two rooms and immediately terminated the contract. What is the artist entitled to recover from the owner of the bed and breakfast? A Nothing, because the contract expressly provided that payment would be due upon the completion of all five rooms. B Nothing, because the murals in the three completed rooms clash with the overall décor of the bed and breakfast. C The artist's expenditures in painting the first three rooms and the artist's anticipated profit for painting the last two rooms. D The reasonable value of the artist's services in painting the first three rooms, less any damages the owner may suffer from the artist's failure to paint the last two rooms.

Here, the artist breached the contract when he refused to paint the remaining two rooms and terminated the contract after the owner asked him to use a different color palette. As the breaching party, the artist is entitled to recover restitutionary damages for: the reasonable value of the work performed before the breach less any damages suffered by the nonbreaching party due to the breach. This ensures that the nonbreaching party is not unjustly enriched by the work performed by the breaching party prior to the breach. As a result, the artist is entitled to recover the reasonable value of his services in painting the first three rooms, less any damages the owner may suffer from the artist's failure to paint the last two rooms. (Choice A) A breaching party who has partially performed under a contract may recover restitution for the benefit conferred upon the nonbreaching party, regardless of when payment was due under the contract. (Choice B) Although the completed murals clashed with the overall décor of the bed and breakfast, the owner decided to accept the artist's performance. Therefore, this does not bar the artist's recovery. But since the owner's aesthetic taste determines whether the artist satisfactorily completed the murals, the owner could have rejected the artist's performance and refused to pay. (Choice C) Compensatory damages are used to place a nonbreaching party in the same position as if the contract had been performed. Here, the artist is the breaching party, so he cannot recover his expenditures in painting the first three rooms or anticipated profit for the last two rooms.

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

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

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

Once the goods are delivered to the carrier

What is an intended beneficiary?

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

At what point can repudiation no longer be retracted?

Repudiation may be retracted until such time as the promisee (i) acts in reliance on the repudiation, (ii) signifies acceptance of the repudiation, or (iii) commences an action for breach of contract.

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

The answer you selected is not the best choice in this situation. Answer choice D is correct Consequential damages Damages for losses stemming from nonbreaching party's special circumstances if breaching party: knew of those special circumstances OR could have reasonably foreseen harm caused by breach The primary goal of contract damages is to put the nonbreaching party in the same position as if the contract had been performed. This is typically done by compensating the nonbreaching party for actual economic losses. Such losses include consequential damages, which arise from special circumstances unique to the contracting parties rather than directly from the transaction itself. To be recoverable, consequential damages must have been reasonably foreseeable to the breaching party when the contract was entered. Here, the crane company breached its contract with the port authority when one of its defective cranes dropped a container and injured an individual. Due to its special circumstances as the dock operator, the port authority suffered damages from the individual's negligence suit. It was reasonably foreseeable that a defect in the crane might cause personal injury and that the port authority, as the dock operator, would be sued for that injury. Therefore, the port authority will likely prevail in its breach-of-contract suit to recover the settlement cost.

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

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

What doctrine comes into play when an unexpected event arises that destroys one party's purpose in entering into the contract, but performance of the contract is not rendered impossible? What is the party raising the doctrine entitled to?

The doctrine of frustration of purpose. The frustrated party is entitled to rescind the contract without paying damages. Note: The event that arises must not be the fault of the frustrated party, and its nonoccurrence must have been a basic assumption of the contract.

What is the Implied Warranty of Merchantability? How is it disclaimed?

The implied warranty of merchantability is implied whenever the seller is a merchant. The disclaimer can be oral, but must use the term "merchantability" and must be conspicuous if in writing. Language that indicates there is no implied warranty is sufficient (e.g., "for instance" or "with all faults").

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

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

What is parol evidence?

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

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

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

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

The perfect tender rule requires (1) perfect goods and (2) perfect delivery. "Perfect" means in accordance with the contract provisions or in accordance with the UCC if the contract is silent on tender.

When satisfying a condition, when are objective and subjective standards applied?

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

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

The primary goal of contract damages is to place the nonbreaching party in the same position it would have been in had the contract been performed. This includes recovering consequential damages for losses arising from the nonbreaching party's special circumstances if the breaching party: 1. knew about those circumstances or 2. could have reasonably foreseen the harm that would result from a breach. However, contracting parties are free to set their own terms and can therefore agree to limit or exclude the recovery of consequential damages (unless the limitation or exclusion is unconscionable).

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

The warranty of fitness for a particular purpose is implied whenever the seller has reason to know that (i) the buyer has a particular use for the goods, and (ii) the buyer is relying upon the seller's skill to select the goods. A disclaimer must be in writing and be conspicuous.

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

The writing must: (i) Be signed by the party against whom enforcement is sought; and (ii) Contain the essential elements of the deal.

What is the four corners rule?

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

What is the Material Benefit Rule?

Under the material benefit rule, when a party performs an UNREQUESTED service for another party that constitutes a material benefit, the modern trend permits the performing party to enforce a promise of payment made by the other party after the service is rendered, even though, at common law, such a promise would be unenforceable due to lack of consideration.

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

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

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

Yes, as long as it does not contradict the writing.