L S 3323 - Exam 2

The amount in compensatory damages A will receive if B breaches a promise to sell A five computers for $1000 a piece when the market price for the computers is $1500 a piece

2500 bucks

When a contract entered into by a mentally incompetent person is void

when the person has been adjudicated incompetent and appointed a guardian

Evidence of oral communications/negotiations between the parties prior to the formation of a written contract is not generally allowed in court under this rule

Parol Evidence Rule

When parties to a K are discharged due to unforeseeable events that render the contract extremely difficult or costly to perform

Commercial Impracticability

Contract discharge involving the agreed substitution of a third party for one of the original parties to a contract

Novation

I say to you, "If you paint my house on Saturday, I will pay you $1,000." You don't respond, but on Saturday you come by and paint my house. Do we have a contract? Yes No - no offer No - no acceptance No - no legally sufficient value No - no bargained for exchange No - no capacity No - illegal

Yes (implied-in-fact ?)

Three ways in which an offer is terminated

any 3 of the following: rejection, revocation, counteroffer, and termination by law (time lapse, subject matter destruction, death, subsequent illegality)

Two types of promises that are enforceable without consideration

promises to pay debts barred by SOL, charitable subscriptions (if reliance), and/or promissory estoppel situations

A valid offer generally has these 3 elements

serious intent to be bound, certain/definite terms, and communication

Fred's beautiful painting of the Washington Monument is hanging in an art gallery. Bob is looking at it and Fred tells Bob he can purchase the painting for $1000. Bob says "NO WAY MAN! I can take my own picture for that price." The next day however Bob reconsiders after trying to take pictures and goes to the gallery and tells Fred he'll take it for $1000. Which is true? A) Fred can tell Bob that the price is now $1500. B) Fred must take the $1000 offer b/c it was an open offer. C) If they can't agree on the price a judge can issue an implied in law contract. D) Bob's acceptance of the $1000 is effective only if Fred had not yet revoked the offer. E) None of the above.

A) Fred can tell Bob that the price is now $1500.

Grady obtains a business loan from Farmers County Bank. To keep Grady in business, and thereby obtain the benefits of a deal between them, Dakota promises the bank's loan officer that she will repay the loan if Grady does not. To be enforceable, Dakota's promise A) need not be in writing. B) must be in writing because it benefits Grady. C) must be in writing because the bank is not a party to the other deal. D) must be in writing because it benefits Dakota .

A) need not be in writing.

Material breach involving an unequivocal declaration that performance will not be made prior to performance being due

Anticipatory Repudiation

Three types of illegal contracts

Any 3 of the following: Usurious Ks, Gambling Ks, Criminal Ks, certain Ks w/ unlicensed practitioners

Emily orders a wedding cake from Catie's Cakes for the agreed price of $400. After her wedding, Emily is short on cash so she sends Catie a check for $250 and marks it "paid in full". Catie cashes the check then sues Emily for $150. What is the likely result of Catie's lawsuit against Emily? A) Emily will win because the amount owed for the cake is an unliquidated debt. B) Catie will win because the amount owed for the cake is a liquidated debt. C) Emily will win because Catie cashed Emily's check. D) Catie will win because the amount owed for the cake was in dispute. E) Emily will win only if she proves her guests did not like the cake.

B) Catie will win because the amount owed for the cake is a liquidated debt.

Cheryl hired Golden Construction to build a house for her. The plans for the house were complicated and complex and required expert workmanship. After the house was completed, Cheryl liked it so much she promised to pay Golden a $25,000 bonus. Later, Golden demanded the money, but Cheryl refused to pay it. Golden sues. What is the most probable outcome? A) Golden wins, the promise was used to entice Golden to do an outstanding job, which is adequate consideration. B) Cheryl wins, the promise is based on past consideration. C) Golden wins; the promise is based on past consideration which is legally sufficient. D) Golden wins; the promise is based on detrimental reliance which makes it enforceable. E) Cheryl wins, the promise is legally sufficient consideration.

B) Cheryl wins, the promise is based on past consideration.

Tyler offers to sell a laser printer with a case of paper and extra cartridge to Joe for $200. Joe says "I'll take it, but that price seems high, how about no paper and no extra cartridge for 175?" Joe A) Has accepted the offer and will owe $175 instead of the $200. B) Has accepted the offer and in doing so he will owe the $200. C) Has rejected the offer and simultaneously made a counteroffer. D) Has rejected the offer without making a counteroffer. E) None of the above.

B) Has accepted the offer and in doing so he will owe the $200.

Erin receives an offer in the mail from Susan on July 14th that says, "I will sell you my vacation home for $80,000. You may accept this offer by signing the bottom of this letter and placing it in the mail so that it is postmarked by July 31st." Which is true? A) Susan will be liable for breach of contract if she sells that home to anyone else prior to July 31st. B) If Erin accepts the offer on July 20th by meeting the terms of the offer, she (Erin) can change her mind up until the 31st so long as Susan is notified by that date. C) Assuming Erin has not paid Susan for an option contract, Susan may revoke the offer at any time so long as she does so before Erin accepts. D) If Erin counteroffers with a price of $75K and Susan rejects this, Erin can create a contract by accepting the original offer by the 31st of July

C) Assuming Erin has not paid Susan for an option contract, Susan may revoke the offer at any time so long as she does so before Erin accepts.

Jana and Annie enter into a written agreement whereby Jana promises to sell and Annie promises to buy a certain parcel of land for $5000. There is adequate consideration, the contract is legal, and both parties have contractual capacity. The contract is fully performed by both parties on Jan. 1st. Which of the following best describes this contract? A) Express, formal, executed, valid. B) Express, informal, executory, valid C) Express, informal, executed, valid. D) Implied, informal, executory, valid. E) Implied, formal, executed, valid

C) Express, informal, executed, valid.

A fire breaks out in the College of Business building. The dean immediately calls the fire department and says that the CoB building is on fire, and if they come and put it out, the CoB will donate a brand new fire truck to the fire department. The fire department gets there in three minutes, and puts out the fire with little damage to the building. Is there a contract between the College of Business and the fire department? Yes No - no offer No - no acceptance No - no legally sufficient value No - no bargained for exchange No - no capacity No - illegal

No - no legally sufficient value (NO CONSIDERATION - NOTHING OF LEGALLY SUFFICIENT VALUE- PRE EXISTING DUTY)

Red announces that he plans to paint his Rolls-Royce pink. Walker, who cannot stand the sight of pink, especially on a car, offers to pay Red $500 to paint the car a more traditional color. Walker's promise to pay is: A) Unenforceable even if Red paints the car a more traditional color. B) Unenforceable because Red preferred the pink color to the more traditional color as evidenced by his prior statements. C) Unenforceable because Red didn't give up any consideration to make the promises binding. D) Enforceable because Red can agree to refrain from doing something that he is legally entitled to do. E) Enforceable b/c this is an implied in fact contract.

D) Enforceable because Red can agree to refrain from doing something that he is legally entitled to do.

John and Tom enter into a contract that is voidable. This means that if the contract is avoided, with respect to John and Tom's obligations under the contract: A) Both parties must perform. B) Only Tom must perform because he accepted. C) Only John must perform because he offered. D) Neither party performs. E) None of the above.

D) Neither party performs.

You buy a pair of very used skis for $50 from a store in Steamboat Springs. You learn later that Billy Kidd, a famous skier, owned the skis years ago. The store demands that you return them because it did not know that they once belonged to Billy Kidd. Which is true? A) The store can force you to return the skis based on mutual mistake. B) The store can force you to return the skis based on unilateral mistake. C) You can be forced to return the skis b/c you have defrauded the store owner b/c you learned of the skis' value. D) The store will not be able to force you to return the skis. E) The court would allow the store to force you to return the skis based on undue influence.

D) The store will not be able to force you to return the skis.

Minors can do this up to the age of majority or for a reasonable time thereafter if they wish to avoid a contract they legally entered into

Disaffirm (or Disaffirmance)

The defense to enforceability based on illegal threats or coercion of one party toward another

Duress

This type of promise: I will buy your house unless I buy another house

Illusory Promise

These 5 types of contracts must be in writing to be enforceable

Marriage, Interests in Land, One-Year, Collateral Agreements, & Sale of Goods over $500 Ks

The type of breach that discharges a party's obligations to a contract

Material Breach

Courts generally presume contractual capacity except in these 3 situations

Minority, Intoxication, & Mental Incompetence

The type of mistake that makes a contract voidable

Mutual or Bilateral Mistake of Fact

I send you an unsolicited email offering to sell you my car for $10,000 and stating that if I do not hear from you by Thursday, I am assuming that you have accepted my offer. You read the email and delete it. I don't hear from you by Thursday. Do we have a contract? Yes No - no offer No - no acceptance No - no legally sufficient value No - no bargained for exchange No - no capacity No - illegal

No - no acceptance (NO ACCEPTANCE - GENERAL RULE, SILENCE IS NOT ACCEPTANCE)

I send you a letter offering to sell you my car for $10,000. Before the letter arrives, you send me a letter offering to buy my car for $10,000. My letter reaches you, and your letter reaches me, on the same day. Do we have a contract? Yes No - no offer No - no acceptance No - no legally sufficient value No - no bargained for exchange No - no capacity No - illegal

No - no acceptance (NO ACCEPTANCE - TWO OFFERS)

I say, "I am going to sell my car for $10,000." You say, "I will buy it. Here's a check for $10,000." Do we have a contract? Yes No - no agreement No - no legally sufficient value No - no bargained for exchange No - no capacity No - illegal

No - no agreement (NO OFFER - STATEMENT OF FUTURE INTENT; LACK OF DEFINITENESS (E.G., PARTIES NOT SPECIFIED); SECOND STATEMENT WOULD BE OFFER BUT THERE IS NO ACCEPTANCE)

Joseph Smith says to his son James, "In consideration of the fact that you received an A in your business law course, I will pay you $1,000 in two weeks." Is there a contract? Yes No - no offer No - no acceptance No - no legally sufficient value No - no bargained for exchange No - no capacity No - illegal

No - no bargained for exchange (NO CONSIDERATION - NO BARGAINED FOR EXCHANGE - PAST CONSIDERATION)

I invite you to me house for dinner and you accept my invitation. You show up at the appointed time, carrying a bottle of my favorite wine, which cost you $32.99. I'm not at home, having decided instead to go to Las Vegas. Did we have a contract? Yes No - no offer No - no acceptance No - no legally sufficient value No - no bargained for exchange No - no capacity No - illegal

No - no bargained for exchange (NO CONSIDERATION - NO BARGAINED FOR EXCHANGE)

I send you a letter on Tuesday offering to sell you my car for $10,000, giving you until Saturday to accept or reject my offer. The letter reaches you on Wednesday. On Friday, I am killed in an auto accident. On Saturday, not knowing that I have died, you deposit in a mailbox a letter that indicates acceptance of my offer. Is there a contract? Yes No - no offer No - no acceptance No - no legally sufficient value No - no bargained for exchange No - no capacity No - illegal

No - no offer (DEATH OF OFFEROR TERMINATES OFFER)

A clothing store advertised leather jackets in the following way: "Normally priced at $350, today only $150." You come to the store in response to the advertisement, select a jacket and take out $150 in cash to pay for it. The store clerk refuses to take your cash, saying that the price is $300. Was there a contract? Yes No - no offer No - no acceptance No - no legally sufficient value No - no bargained for exchange No - no capacity No - illegal

No - no offer (NO OFFER - GENERAL RULE, ADVERTISEMENTS ARE NOT OFFERS, ONLY OFFERS TO NEGOTIATE.)

I own an office equipment company and have had a very bad day. I say to you, my top sales person, "I will sell you this business for $25." You say, "I accept your offer." Do we have a contract? Yes No - no offer No - no acceptance No - no legally sufficient value No - no bargained for exchange No - no capacity No - illegal

No - no offer (NO OFFER - NO SERIOUS INTENT TO BE BOUND)

I say, "I want to sell my car." You say, "I want to buy it." Do we have a contract? Yes No - no offer No - no acceptance No - no legally sufficient value No - no bargained for exchange No - no capacity No - illegal

No - no offer (NO OFFER - STATEMENT OF FUTURE INTENT; LACK OF DEFINITENESS (E.G., NO CONSIDERATION SPECIFIED))

Suppose you come to my office with the dead body of Jesse James. I congratulate you for capturing such a public menace. On the way out of my office, you see the reward poster for the first time, and come back asking for the $5,000. Was there a contract? Yes No - no offer No - no acceptance No - no legally sufficient value No - no bargained for exchange No - no capacity No - illegal

No - no offer (OFFER NOT COMMUNICATED, SO NO ACCEPTANCE)

Two situations in which an offer becomes irrevocable

Option Contracts, partial performance, and/or promissory estoppel

Two situations in which courts will find consideration to be inadequate

Pre-existing duty, past consideration, moral/gratuitous consideration, and/or nominal consideration

Generally, additional terms in an acceptance do not constitute a counteroffer under this law

UCC (Uniform Commercial Code)

A promise for an action is this type of contract

Unilateral Contract

Debts that may be settled through accord and satisfaction

Unliquidated Debts (where amount is in dispute)

The two components of a valid agreement

Valid Offer & Valid Acceptance

I send you a letter on Tuesday offering to sell you my car for $10,000, giving you until Saturday to accept or reject my offer. The letter reaches you on Wednesday. On Friday, I am killed in an auto accident. On Saturday, not knowing that I have died, you deposit in a mailbox a letter that indicates acceptance of my offer. Same facts, except I was killed on Sunday and your acceptance letter reaches my house on Monday. Is there a contract? Yes No - no offer No - no acceptance No - no legally sufficient value No - no bargained for exchange No - no capacity No - illegal

Yes

I'm the sheriff of an old western town. The town's bank has just been robbed by Jesse James. I post a notice saying "Wanted Dead or Alive - Jesse James. $5,000 Reward." The next day, you see the reward poster, find and shoot Jesse James, and bring his body to my office. Was there a contract? [Do not worry about legality here]. Yes No - no offer No - no acceptance No - no legally sufficient value No - no bargained for exchange No - no capacity No - illegal

Yes

You're interested in buying my car. We talk on the phone and I tell you that I will consider what price I want to sell the car for, and will send you an offer by email. In our phone conversation, we agree that if you don't respond to my offer by Friday, I can assume that you have accepted my offer. I immediately send you an email offering to sell my car for $10,000, which states our understanding that if I don't hear from you by Friday, I can assume that you have accepted my offer. You read the email and throw delete it. I don't hear from you by Friday. Do we have a contract? Yes No - no offer No - no acceptance No - no legally sufficient value No - no bargained for exchange No - no capacity No - illegal

Yes

Two requirements of a legal covenant not to compete

a reasonable time frame/geographic area and/or ancillary (secondary) to a valid K

Consideration has 2 requirements; it must have legally sufficient value and this

bargained-for-exchange

With respect to fraud, two exceptions to the general rule that there is no duty to volunteer facts

cases involving serious defects, fiduciary relationships (also, some employee contracts), and if specifically asked about a fact, you cannot lie

A clause in a contract for the sale of a house that reads, "House must pass inspection before buyer pays purchase price" is an example of this

condition precedent

Foreseeable costs that flow from the breach of a contract and that are caused by circumstances beyond the terms of the contract

consequential damages

Doctrine that allows termination of a party's contractual obligation when duties are performed in good faith and most of the benefits promised are conferred

doctrine of substantial performance

Barb bought a 1968 Plymouth Valiant with 24,000 miles (the miles are correct) from Jolly John's Gently-Used-Cars. John told Barb that this car was used by a little old lady who only used it to go to church on Sundays. A couple of months later, Barb learns that the little old lady's Sunday trips were to the bingo parlor and not to church as John had told her. Barb also learns that John knew this all along. Based on this information, Barb could probably: a. Get out of the contract due to undue influence. b. Get out of the contract due to fraud. c. Get out of the contract due to unilateral mistake. d. Get out of the contract due to mutual mistake. e. Not get out of the contract based on any of these reasons.

e. Not get out of the contract based on any of these reasons.

The first 3 elements of fraudulent misrepresentation

material misrepresentation, intent to deceive, and justifiable reliance by innocent party