Contracts Multiple Choice

When a contractor is under a contractual duty to construct a building and the building is destroyed by an act of nature while it is still a work in progress, the destruction __________.

will not discharge the contractor's duty to perform, but will extend the date of performance - further, he will not get payment for what he originally performed

Conditions v promises

Failure to meet condition = relieves non-breaching party from performance Failure of a promise = breach and rise to liability Condition = "provided,""if," "when" Promise = "promise" or "agree"

Price quotes as offers

Generally not offers Are offers when in response to an inquiry, and the inquiry stated a quantity

Destruction of Subject Matter/ Impossibility Under the UCC

Under the UCC, if a contract requires for its performance particular goods identified when the contract is made, and, before risk of loss passes to the buyer, the goods are destroyed without the fault of either party, the contract is avoided.

Which of the following would serve as sufficient consideration for a promise by a creditor to discharge an existing debt?

An alternative method of payment

Mutual mistake

Contract voidable if it 1. Concerns an existing fact, not a future happening 2. Concerns a basic assumption on which the contract is made 3.Mistake has a material effect 4. Party seeking avoidance didn't assume risk of the mistake - Mistake in value generally not a defenseF

Discharge by impracticability

Need not perform contractual duties if 1) Extreme and unreas difficulty and/or expense, and 2) Its nonoccurrence was a basic assumption of the parties - In sale of goods, seller discharged to the "extent of the imposibility or impracticability" Ex: shortage of raw materials or inability to make seller prd=oduct because of war, embargo, or shutdown of supplier Ex: increase in cost is RARELY sufficient to discharge If a seller is unable to perform, he must allocate his deliveries among customers

In a contract for a sale of goods priced at $500 or more, if the goods are _________ or __________, the contract will be enforced even if there is no writing.

Received and accepted; paid for - unique/ specially manufactured requires substantial beginning and no other market

void v voidable

Void: cannot be enforced Voidable: may be enforced by the aggreived party

Material Misrepresentation

Voidable by innocent party if they justifiably relied on the misrep and it was material

Revoking Published offers

When revocation is by publication, revocation of the offer is effective when it is published. This rule for the revocation of published offers differs from the general rule that a revocation is effective when received by the offeree.

Written or type provisions v. typed

Written or typed provisions prevail over printed provisions

Examples of voidable contracts

illegality Contract with minor Contract w mental incapacity Contract w intoxicated person Duress and undue influence

Objective v Subjective Impossibility

- A contractual duty to perform may be discharged by objective impossibility (i.e., no one could have performed), but subjective impossibility (defendant could not perform) is insufficient - ex: dont fly jet to advertise your product because ice storm = objective - ex: dont fly because i ran out of fuel = subjective

A homeowner orally agreed to sell her land to a buyer for $79,000. As a condition of the sale, the buyer orally agreed to pay $5,000 of the purchase price to a creditor of the homeowner. The buyer asked his secretary to prepare a formal, typewritten copy of the contract and, in so doing, the buyer's secretary accidentally left out the condition to pay the $5,000 to the creditor. Both the buyer and the homeowner read the document before signing, but neither noticed the oversight. The buyer refuses to pay the $5,000 to the creditor, and the creditor sues the buyer for the $5,000.In the creditor's suit against the buyer for $5,000, who will prevail?

- Answer: the creditor, because his rights as a third party beneficiary had vested - Once a third-party beneficiary's rights vest, he may enforce the contract, and here the creditor's rights vested when he brought suit. He is seeking reformation of the contract, because the written terms do not reflect the original agreement of the parties. Here, the original agreement called for a $5,000 payment to the creditor. Because the buyer will not be able to successfully claim the defense of the Statute of Frauds (see below), the creditor should recover the $5,000. Answer A: Buyer, because promise to pay debts of another must be in writing. (A) is wrong because the buyer is not promising to act as a surety when he promises to pay some of the money to the debtor. Generally, contracts do not have to be in writing to be enforceable; however, under the Statute of Frauds, certain contracts will not be enforceable unless they are evidenced by a writing signed by the party to be charged. One such contract is to pay the debt of another. In this case, *the buyer is not promising to pay another's debt, if the debtor fails to repay the debt to his creditor, but is merely paying part of the purchase price to the seller's creditor rather than to the seller himself, pursuant to the contract.* Thus, this is not a surety situation, and no writing is required on that ground. Answer B: Buyer, because promises concerning interests in land must be in writing. (B) is wrong because the buyer's oral promise to pay part of the land sale purchase price to the debtor does not itself concern an interest in land. Under the Statute of Frauds, a promise creating an interest in land must be in writing. An agreement that concerns only to whom payment of part of a land sale purchase price is to be made does not create an interest in land, but rather is a promise that is collateral to the land sale and would not fail because it was not in writing. Answer C: Buyer, because oral statements are inadmissible to alter unambiguous writings. (C) is wrong because reformation is available even if the written document is unambiguous, as long as it fails to reflect the terms originally agreed upon.

A store sold office equipment and supplies to various businesses in the area. The store entered into a written agreement with an electronics company to purchase all of its monthly requirements of printers for a period of five years at a specified unit price. The agreement contained a clause prohibiting assignment of the contract. Shortly thereafter, the electronics company assigned the contract to a finance company as security for a loan. The store subsequently ordered the printers from the electronics company, which were delivered on time.Which of the following accurately states the legal effect of the clause prohibiting assignment of the contract?

- Clause was not breached and assignment was effective Under the UCC, which governs this sale-of-goods case, "unless the circumstances indicate the contrary, a prohibition of assignment of 'the contract' is to be construed as barring only the delegation to the assignee of the assignor's performance." Here, the electronics company assigned to the finance company the right to receive payment on its contract with the store. There was no delegation of duties to the finance company (the assignee). Therefore, when the electronics company "assigned the contract" to the finance company, it assigned only the right to payments, and it did not breach its contract with the store.

Consequential Damages of a breach of warranty

- Consequential damages resulting from the seller's breach include any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise, and injury to person or property proximately resulting from any breach of warranty.

A manufacturer and a buyer entered into a written contract for the manufacturer to produce and sell to the buyer 2,000 widgets at a price of $20 per widget. The contract expressly provided that the buyer shall have no liability under the contract unless 2,000 widgets are delivered to the buyer at his place of business no later than July 1. On July 1, 1,800 widgets meeting the buyer's specifications were tendered by the manufacturer. The remaining 200 widgets were tendered on July 5. The buyer refused to accept any of the widgets. In an action by the manufacturer against the buyer, which of the following would best support the manufacturer's case, assuming it can be proven?

- Delivery of the 200 widgets on July 1 was delayed by a storm which disrupted the shipper's activities, and was not the manufacturer's fault. - The storm delay would best support the manufacturer's case. The storm may have made delivery on time impossible, which may excuse performance under the doctrine of impracticability of performance. This defense can be used not only to excuse performance totally, but also to excuse the delay in full performance. Impracticability discharges the duty to perform to the extent of the impracticability; so if the storm rises to the level of impracticability and prevented the delivery of the 200 widgets, the manufacturer's duty to perform with respect to those widgets would be discharged. In other words, failure to make perfect tender would be excused to the extent of the short delivery. Of course, it is possible that the storm would not amount to impracticability or that the manufacturer assumed that risk, but this remains the manufacturer's best argument because it is the only one with any possibility to succeed

When does detrimental reliance make an offer irrevocable

- Detrimental reliance can limit an offeror's power to revoke where the offeror could reasonably expect that the offeree would rely to his detriment on the offer, and the offeree does so rely. However, this usually is limited to those situations in which the offeror would reasonably contemplate reliance by the *offeree in using the offer before it is accepted;* e.g., when a general contractor uses a subcontractor's bid in making its own offer.

Incidental Damages of a breach of warranty

- Incidental damages resulting from the seller's breach include expenses reasonably incurred in inspection, receipt, and transportation, care, and custody of goods rightfully rejected.

A homeowner hired a contractor to make some improvements on his house. They entered into a written contract providing that the contractor would do the improvements for $5,000. Shortly after the contract was signed, the contractor told the homeowner to give the money to his (the contractor's) daughter when the job was finished, adding, "She is getting married soon and I want her to have a nice wedding present from me." The daughter was aware that her father made this statement to the homeowner. She married, but soon thereafter the contractor told the homeowner to pay him the $5,000, and not the daughter, because his son-in-law had a gambling problem and would probably use the money to bet at the racetrack. What is the best argument in favor of the daughter's being able to enforce a contract for $5,000 in her favor?

- The daughter married in reliance on the promise. - The daughter's best argument to enforce the contract in her favor is that she married in reliance on the contract (detrimental reliance), although she will probably be unsuccessful. Here, the daughter was a gratuitous assignee (because she gave no consideration) and her rights under the contract were revoked. Thus, her strongest argument will be one that nullifies the revocation. Under the doctrine of detrimental reliance, a promise will be enforced to the extent necessary to prevent injustice if it was made with a reasonable expectation that it would induce reliance, and such reliance was in fact induced. The problem with this argument here is that it is not clear that the daughter relied on the promise to give her $5,000, because she already had planned to get married.

A proud grandfather who planned to take pictures of his grandson's graduation purchased a camera from a camera store. He used the camera on several occasions over the next few weeks without incident, but when he used it on the day before his grandson's graduation, it caught fire and exploded, burning him and destroying an expensive coat he was wearing. Although the grandfather was in a great deal of pain because of his injuries, he insisted on attending his grandson's graduation. However, because he no longer had a workable camera, the grandfather hired a professional photographer to take pictures of the special day. In a breach of warranty action, which of the following represents the most that the grandfather may recover?

- The difference between the value of the camera accepted and its value if it had been as warranted, medical costs for treating the grandfather's burns, and the cost to replace the grandfather's coat. - When a buyer accepts goods that turn out to be defective, he may recover as damages any "loss resulting in the normal course of events from the breach," which includes the difference between the value of the goods accepted and the value they would have had if they had been as warranted, plus incidental and consequential damages. Incidental damages resulting from the seller's breach include expenses reasonably incurred in inspection, receipt, and transportation, care, and custody of goods rightfully rejected. In this case, the grandfather incurred no incidental damages. Consequential damages resulting from the seller's breach include any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise, and injury to person or property proximately resulting from any breach of warranty. Here, the grandfather is entitled to breach of warranty damages for the loss of the camera-the difference between the value of the camera accepted and its value if it had been as warranted-plus damages for injury to his person (e.g., medical costs for treating the grandfather's burns) and property (i.e., the cost to replace his coat) because they were proximately caused from the breach of warranty.The difference between the value of the camera accepted and its value if it had been as warranted, medical costs for treating the grandfather's burns, and the cost to replace the grandfather's coat.

A professional baseball player visited a sick boy in the hospital. The player told the boy that in consideration of the boy's courage, he would hit a home run for him in his next game. As the player was leaving the hospital, the boy's father stopped the player and told him how important the home run could be in improving his son's spirits and health. The father told the player he would pay him $5,000 if he did hit a home run in his next game. The player agreed and took extra batting practice before his next game to improve his chances. In his next game, the player hit two home runs. The player's contract with his ball club does not forbid him from accepting money from fans for good performance. The player has now asked the father for the $5,000. If the father refuses to pay and the baseball player brings an action against him for damages, which of the following is correct under the prevailing modern rule in contract law?

- The player can recover the $5,000 because the preexisting duty rule does not apply where the duty is owed to a third person. - a duty is a preexisting duty only if it is owed to the promisee. Thus, a promise to perform a duty is valid consideration as long as the duty of performance is not already owed to the promisee. In other words, if the duty is owed to a third party, a promise to perform given to another is valid consideration as long as it was bargained for.

Must one know of an offer to accept it?

- Yes - The general rule on public offers is this: an offer of reward is an offer to enter into a unilateral contract, and if made to the public generally, it may be accepted by anyone to whom it becomes known. One who performs the requested act has done all that is necessary for acceptance, but if he does not intend that his acts constitute an acceptance, no contract results. Thus, where he has no knowledge of the offer, no act of his can be deemed an acceptance.

A debtor owed $50,000 to a creditor. One week before the statute of limitations was to expire, the debtor's mother sent the creditor a letter stating that she was sure that her son was about to pay the debt, and that if her son did not pay, she would. Relying on the mother's letter, the creditor allowed the statute of limitations to expire without bringing an action to recover the money. The debtor refused to pay the creditor. If the creditor brings suit against the mother for the $50,000, will he prevail?

- Yes, because the creditor reasonably and foreseeably relied on the mother's promise. - The mother made a gratuitous promise to the creditor; she received no consideration for it (she did not ask for anything in return for her promise). The creditor's reliance in allowing the statute of limitations to lapse was not exchanged for the promise. However, even without consideration, under section 90 of the Restatement (Second) of Contracts, the creditor could enforce the mother's promise because he reasonably and foreseeably relied on the promise in declining to sue the debtor within the limitations period.

If a Battle of the forms has a conditional acceptance term, it is

- a conditional acceptance, and therefore a rejection + counteroffer

Breach of Warranty: Damages

- difference of price between good as warranted and good delivered, plus damages as a result of breach relating to personal (medical damage, ex: it blew up and sent me to hospital for burns) and property damages (ex: when it caught flame, it burned my coat. get price of coat)

Material Benefit Exception to Past Consideration

- minority rule - while past consideration is not sufficient consideration, some courts will find it to be sufficient consideration when (i) K based on material benefit that was previously conferred by promisee on promisor and (ii) promisee did not intend to confer benefit as a gift - ex: I save your dog from a buring fire. In return you offer to give me $1k. This is past consideration. But if I didnt intend to save your dog as a gift, in the minority rule, I can recover full $1k

Will a firm offer with a stated term beyond three months be invalid?

- no - court will write in a 3 month limit from the offer date

What are the requirements of a merchants firm offer

- offer by a merchant to keep it open for a stated time (if no stated time, a reas time within 3 months) - signed by merchant -

When the amount due on a debt is undisputed, what will not be considered sufficient consideration for a promise by the creditor to discharge the debt?

- payment of a portion of the debt - agreeing to pay someone other than the creditor, payment ebfore maturity, or payment in a different medium are sufficient

If a buyer rejects nonconforming goods before the delivery date, _____.

- the seller has a right to cure and the buyer must accept if cured

A buyer of goods does not have a right to specific performance if___

- they can buy the goods from another distributor (cover) and sue for the cover damages

When is a merchant's additional term in their acceptance "material?"

- when it changes the risks or remedies of parties - immaterial = delivery date - ex: if they respond disclaiming all warranties, that is material

When has someone "received" a rejection letter for purposes of the MBR?

- when it is in their physical possession - if Offeree sent R, then sent A, offeror receives and sets aside R, then receives and reads A, there is no contract b/c he received R first

is a gratuitous assignment revocable?

- yes. - A creditor's right to receive money due from a debtor is a right that can be assigned, regardless of whether the debt is evidenced by a writing. By telling the employee to pay the money to the nephew, the shopkeeper manifested an intent to transfer his rights completely and immediately to the nephew. Neither a writing nor consideration was required for this assignment to be valid. However, these factors do not affect revocability. This assignment was not given for value. Such a gratuitous assignment is generally revocable. An exception to this rule arises when the assignor is estopped from revoking because he should reasonably foresee that the assignee will change his position in reliance on the assignment and such detrimental reliance occurs. Here, there is no indication that the nephew in fact changed his position detrimentally in reliance on the assignment. Consequently, the general rule of revocability of a gratuitous assignment applies. One way in which a gratuitous revocable assignment may be terminated is by the assignor taking performance directly from the obligor. By accepting the money from the employee, the shopkeeper (the assignor) took direct performance from the obligor, thereby revoking the assignment. As a result, the nephew has no right to the money.

accord and satisfaction by check

-Common Law ruling: >If a debtor writes "Full Settlement" on a check, and the creditor (party performing the K) cashes it, the payment is in full whether or not it was the right amount.

A homeowner contracted with a local heating company to install two baseboard heaters in an addition to his home for a total cost of $3,500. This figure included the heaters and labor costs for installation. Upon completion of the installation, the heating company sent an invoice to the homeowner for the $3,500. The homeowner did not immediately pay the bill because the heaters were too noisy. The heating company sent a repair worker to the home to service the heaters, but after several attempts to fix the problem, the heaters were still too loud. The homeowner contacted a qualified repairman to find out how to fix the problem and was told it would cost an additional $300 for new blowers and $150 in labor costs to replace the faulty blowers. The homeowner mailed the heating company a copy of the repair estimate and a check for $3,050-the contract price less the cost of new blowers and labor to install them-and wrote prominently on the check "Payment in full for installation of two baseboard heaters." The heating company cashed the check upon receipt. The heating company then sued the homeowner for $450, the difference between the agreed contract price and the amount paid. Is the heating company likely to prevail in its suit seeking the $450 from the homeowner? Press Enter or Space to submit the answer

-No, because the heating company cashed the check. The heating company is not likely to prevail in its suit seeking to recoup the $450 from the homeowner. An accord is an agreement in which one party to an existing contract agrees to accept, in lieu of the performance that she is supposed to receive from the other party to the existing contract, some other, different performance. Satisfaction is the performance of the accord agreement. Satisfaction discharges not only the original contract but also the accord contract. If a monetary claim is uncertain or is subject to a bona fide dispute, an accord and satisfaction may be accomplished by a good faith tender and acceptance of a check when that check (or an accompanying document) conspicuously states that the check is tendered in full satisfaction of the debt. Here, there was a good faith dispute as to the amount owed. The check the homeowner tendered had a prominent notation that it was payment in full for the two baseboard heaters. By cashing the check, the heating company accepted it, and the accord and satisfaction was complete. The homeowner is discharged from any further performance under the contract.

Failure to include a price term

-Will only make a sale of land be unenforceable -Sale of goods w no price term has court fill in reasonable price at the time of delivery

Merchant's Confirmatory Memo

A memo that makes a previous oral contract valid under the SoF if: 1) made between merchants 2) signed 3) states the agreement and the quantity term, and 4) is not objected to in writing within 10 days

A yoga instructor entered into a valid written contract with a builder to construct a large yoga studio on some land she owned outside of town. She agreed to pay the builder $150,000 upon completion of the job. As work progressed, and due to substantial increased building costs, the yoga instructor and the builder orally agreed that the builder may omit installation of the koi pond planned for the atrium (saving the builder $1,000), and that the contract price would be reduced to $149,500. The builder completed the job (minus the koi pond) in reliance thereon. What would most courts likely hold this subsequent oral agreement to be?

An enforceable contract. - The agreement is enforceable because both the builder and the yoga instructor gave new consideration to support the modification. If parties agree to modify their contract, consideration is usually found to exist where the obligations of both parties are varied. It is usually immaterial how slight the change is, because courts are anxious to avoid the preexisting duty rule. Here, the obligations of both the builder and the yoga instructor are varied—he will not install the koi pond and she will pay a construction price reduced by $500. Consideration is therefore found in the promise of both parties to forgo their rights under the original contract—the builder's right to full contract price and the yoga instructor's right to the koi pond. - Even if the contract had prohibited oral modifications, parties in non-UCC cases may alter their agreement orally in spite of such a provision as long as the modification is otherwise enforceable - no SOF issue

A consumer purchased a new television set from an electronics store. When he got home, he opened the box and found an owner's manual that contained operation instructions, warnings regarding the danger of electricity, and a warranty that stated: "The store expressly warrants that this set shall be free of manufacturing defects for 30 days. If a set is defective, the store's liability shall be limited to the cost of repair or replacement of defective parts. The store "HEREBY DISCLAIMS ANY AND ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE WARRANTY OF FITNESS FOR PARTICULAR PURPOSE AND THE WARRANTY OF MERCHANTABILITY."" Five weeks later, after the set was properly installed, the consumer turned on the set, heard a crackling noise, and watched as his television exploded and was destroyed. Under which of the following theories will the consumer most likely recover?

Breach of the implied warranty of merchantability. - The warranty will not be disclaimed because, to be effective, a disclaimer must be part of the offer and acceptance process or must be agreed to by the buyer as a modification. Here, the "disclaimer" was in the box, and the consumer did nothing to accept the disclaimer.

A wealthy sportsman purchased a large old wooden sailing ship for $200,000. Although the boat was a classic, the sportsman wanted it to be modernized and made more comfortable. To that end, the sportsman entered into a written contract with a marine architect-engineer to draw up and then execute the modernization plans, for $7,500. At the time the parties entered into the agreement, the sportsman told the architect-engineer that his modernization plan would be subject to the approval of the sportsman's sister, that they would, in fact, have no deal unless the plans meet with her approval. The architect-engineer agreed to this. He finished his drawings and submitted them to the sportsman, who was enthusiastic about the designs. The sportsman's sister, a famous yachtswoman, was engaged in a trans-Pacific yacht race at the time and was not expected home for a number of weeks. Cheered by the sportsman's enthusiasm, the architect-engineer went ahead and modernized the ship according to his designs. When he finished the work, he submitted a bill to the sportsman, who refused to pay, pointing out that his sister had never approved the designs. If the architect-engineer sues the sportsman, which of the following issues of contract law is most likely to be decisive in determining the outcome of the case?

Conditions precedent. - Where there is an oral condition precedent, evidence of the condition falls outside the parol evidence rule. The parol evidence rule provides that where the parties to a contract express their agreement in a writing with the intent that it embody the final expression of their bargain, any other expressions, written or oral, made prior to the writing, as well as any oral expressions contemporaneous with the writing, are inadmissible to vary the terms of the writing. Certain forms of extrinsic evidence are deemed to fall outside the scope of the parol evidence rule. For instance, a party to a written contract can attack the validity of the agreement. One way of doing so is by asserting that there was an oral agreement that the written contract would not become effective until the occurrence of a condition. Such a condition would be deemed a condition precedent to the effectiveness of the agreement, and evidence of the condition will be freely offered and received. Here, the sportsman and the architect-engineer have entered into a written agreement that apparently embodies the full and final expression of their bargain. However, the sportsman's statement at the time of entering into the agreement indicates quite clearly that the parties had no agreement absent the approval of his sister, and the architect-engineer agreed with this statement. Thus, there is an oral agreement that the written contract would not become effective until the occurrence of a condition precedent. As discussed above, evidence of this oral condition does not come within the purview of the parol evidence rule and is therefore admissible. Consequently, the sportsman can assert the nonoccurrence of a condition precedent as a way to avoid liability on the contract.

A building that is the subject of a contract between its owner and a contractor is completely destroyed by an act of nature. If the contractor was working on a renovation, the destruction _____________; if the contractor was constructing the building, the destruction ________________.

Discharges the contractor's duties by impossibility; does not discharge the contractor's duties - in the former, they can recover for the amount of work done - in the latter, they cannot

Mutual assent/meeeting of the minds

Even if both sides send identical offers to one another on the same day, it is not a contract bc no mutual assent without at least one of the parties manifesting acceptance of the terms of the offer, and communicating that acceptance to the other Why? An offer cannot be accepted if there is no knowledge of it.

Ads

Generally not an offer. But if there is an offer to the public, a reward is considered an offer of a unilateral contract which is accepted upon completing performance

Illegality

If consideration or subject matter of K is illegal, it is void Exception: P unaware illegality while D knew of illegality Exception: one party not as guilty as other Exception: illegality is failure to obtain license when license is for revenue raising purpose If only the purpose behind K is illgal, its voidably by party unaware of purpose or aware but didn't faciliate purpose and purpose didn't involve serious moral turpitude

Fraudulent Misrepresentation

If one party induces another to enter K via asserting info she knows is untrue, K voidable by innocent party if she justifiably relied on the fraud misrep Need not be express; can be inferred from conduct (falsely denying knowledge of a fact, frustrating investigation of a fact, concealing a fact)

On January 2, a retiree borrowed $1,000 from a friend, agreeing in writing to repay the loan within a year. In September, it became clear to the retiree that he would have difficulty meeting the deadline, and so he approached an acquaintance who owned a print shop with the following proposition: He would perform 200 hours of work for the print shop owner within six months at the special rate of $5 per hour, if the print shop owner would agree to pay $1,000 for the entire 200 hours to the retiree's friend on January 1. The print shop owner agreed. By January 1, the retiree had worked only five hours for the print shop owner, and the print shop owner refused to pay the retiree's friend because the retiree had not worked the agreed-upon number of hours. The retiree told the print shop owner that it was "no problem," and to just hold on to the money until he worked the full 200 hours, and then pay his friend. The print shop owner agreed. Subsequently, the retiree's friend learned of the arrangements between the retiree and the print shop owner and sued the print shop owner for $1,000. What is the probable result of this action?

Judgment for the print shop owner, because the original agreement had been modified before the friend knew of the original agreement. - It is true that the friend was a third-party beneficiary, but the retiree and the print shop owner were free to modify the agreement because the friend's rights had not yet vested. The fact that there may be no consideration for the modification may be an issue as between the two parties to the contract if one of them tries to enforce the modification, but it does not give the friend any right to challenge the modification because he is not a party to the contract.

On April 10, the owner of a small farm mailed a letter to a new resident of the area who had expressed an interest in buying the farm. In this letter, the farm owner offered to sell the farm to the resident for $100,000. The offer expressly stated that the offer expires on June 1, "if acceptance by the offeree has not been received by the offeror on or before that date." On the morning of June 1, the resident sent a written acceptance to the farm owner by messenger. However, through negligence of the messenger company, the acceptance was not delivered to the farm owner until June 2. On June 4, the farm owner entered into a contract to sell the farm to another buyer for more money but did not inform the resident of the transaction. When the resident followed up by phone on June 10, the farm owner told him that he had sold the farm to another buyer. Which of the following is the most correct statement?

No contract between the farm owner and the resident arose on June 2. - No contract arose on June 2 because the farm owner's offer expired on June 1, when the farm owner did not receive the resident's acceptance. If a period of acceptance is stated in an offer, the offeree must accept within that period to create a contract. Failure to timely accept terminates the power of acceptance in the offeree (i.e., a late acceptance will not be effective and will not create a contract). Under the mailbox rule, an acceptance generally is effective upon dispatch (i.e., the acceptance creates a contract at the moment it is mailed or given to the delivery company). However, the mailbox rule does not apply where the offer states that acceptance will not be effective until received. In the latter case, acceptance is effective only upon receipt. Here, the farm owner's offer specifically stated that the acceptance must be received by June 1 to be effective. Thus, the farm owner opted out of the mailbox rule, and no contract was created by delivery of the acceptance on June 2. Note that the resident will not be able to successfully argue that the acceptance was valid because the late delivery was the messenger company's fault. This would be a valid argument if the mailbox rule applied here, because the acceptance would have been effective on June 1, when the message was given to the messenger company. However, by opting out of the mailbox rule, the farm owner put the burden of any negligence in delivery on the resident. Thus, there was no valid acceptance

A wholesaler persuaded a retailer to order a line of dolls for the Christmas season, even though the retailer was skeptical of the dolls' marketability. The contract provided that the retailer would pay $1,500 for its order of 100 dolls if they sold during the Christmas season. Some dolls did sell, but on February 12, the retailer had 80 of them in inventory. He sent the wholesaler notice that he would be returning the 80 dolls. The wholesaler replied that it did not want the dolls back, that the retailer should continue to try to sell them. Despite this reply, the retailer sent the wholesaler a check for $300 and shipped the dolls to the wholesaler, who refused to accept them but did accept the check. Thereafter, the retailer held the dolls at his warehouse. The wholesaler brought an action to recover the $1,200 balance. Will the wholesaler likely recover?

No, because sale during the Christmas season was a condition precedent to payment.

After a difficult divorce, a mother wrote to her son and daughter the following: "In consideration of your emotional support for me during that trying time and your love and affection for me, I promise to divide my estate between you in equal shares. You know you can count on your mother's word." The daughter thereafter continued her usual practice of calling her mother once a week and visiting her at Christmas and on her birthday until her mother died three years later. Shortly after the funeral, the daughter learned that the mother's will made the son the sole legatee. If the daughter sues the executor of the mother's estate for one-half of that estate, based on the mother's letter to her, will she win?

No, because the mother's promise was not supported by consideration. - Promises to make gifts in the future are unenforceable even if they are in writing and are intended by the promisor to be enforceable.

A woman decided to have a painting done of herself. She contracted in writing with an artist, who agreed to paint the woman for $10,000. The fee was payable on completion of the painting, provided that the painting was to the woman's "complete and utter satisfaction." On the same afternoon that the artist entered into the contract with the woman, he assigned the contract to his cousin. The artist then painted the woman's picture. After the job was done, the woman told him, "That's a very good likeness of me, but it shows my defects, so I'm not satisfied." She refused to accept the painting or to pay the artist or his cousin. Can the cousin recover from the woman?

No, because the woman was not satisfied with the painting. - When one of the original parties to a valid contract assigns his rights under the contract to a third party, the assignee may enforce his rights against the obligor directly but is generally subject to any defenses that the obligor had against the assignor. As long as the defense is inherent in the contract, such as failure of a condition, it is always available against an assignee because it was in existence when the contract was made (even if whether the obligor would be able to utilize it was uncertain). Here, the artist (the assignor) and the woman (the obligor) had a valid contract-her promise to purchase the painting only if she was satisfied with it is not illusory because she has to exercise her right of rejection in good faith. When the artist assigned his rights under the contract to his cousin (the assignee), his cousin became subject to the condition in the contract that the woman be satisfied with the painting. Her dissatisfaction with the painting excuses her duty to pay for it; this is a defense inherent in the contract that precludes the cousin's recovering from the woman.

The owner of an apartment building contracted with a painter to paint the porches of the apartments for $5,000. The contract was specifically made subject to the owner's good faith approval of the work. The painter finished painting the porches. The owner inspected the porches and believed in good faith that the painter had done a bad job. The painter demanded payment, but the owner told him that the paint job was poor and refused to pay. The painter pleaded that he was desperately in need of money. The owner told the painter that she would pay him $4,500, provided he repainted the porches. The painter reluctantly agreed, and the owner gave the painter a check in the amount of $4,500. The painter went to his bank, indorsed the check "under protest" and signed his name, then deposited the check in his account. He never returned to repaint the porches. The painter sues the owner for $500, which he believes is still owed to him on his contract to paint the porches. Will he prevail?

No, even if he repaints the porches. - A party does not have a duty to perform if a condition precedent to that performance has not been met. Here, the parties made the owner's satisfaction with the painter's paint job a condition precedent to the owner's duty to pay the $5,000. Because the owner was not satisfied with the paint job, her duty to pay the painter never arose. The fact that the owner offered to give the painter $4,500 if he repainted the porches has no effect on this analysis, because the offer constituted a new contract, the owner having been excused from the old one. (A) is wrong because it does not matter whether the painter indorsed under protest. The indorsement will not change the result here because the new contract did not seek to discharge any contractual duty-the owner was already excused from her duties because the condition precedent was never met.

An elderly woman regularly corresponded with her only niece (her sister's daughter), who lived out of town. One day she sent her niece a letter telling her that she planned to leave everything she owned to the niece upon her death. When the woman died, her will left her entire estate valued at $200,000 to her nephew (her niece's only brother). The nephew wrote his sister a letter telling her that he felt bad about being the only person named in their aunt's will, and added, "I'm going to share her estate with you. We can discuss the details at the funeral." The niece spent $800 on a round-trip ticket to attend her aunt's funeral. After the funeral, she spoke with her brother, who told her that he had changed his mind about sharing their aunt's estate with her. He went on to say that he would be willing to share the estate with her if she were willing to share their mother's estate with him when their mother passed on. The niece responded by telling him that their mother had already signed over all the property to her. He replied that, given her attitude, he would keep their aunt's estate for himself. Later, after the two had returned to their respective homes, no longer on speaking terms, the niece sued the nephew for a 50% share of their aunt's estate. What amount, if any, should the niece realize from her suit?

Nothing, because the aunt's will left everything to the nephew, and the nephew's letter is an insufficient basis to compel him to share. - The niece should not recover in her suit because there is no enforceable promise (i.e., no contract) between the nephew and the niece. Generally, a contract will not be enforced unless consideration has passed between the parties. Consideration is defined as a bargained-for exchange of a benefit to the promisor or a detriment to the promisee. Here, the nephew offered the niece half of their aunt's estate, which is certainly a detriment to him, but the niece offered nothing in return. While the nephew told the niece that they would discuss the details at the funeral, the niece's purchasing a ticket to attend the funeral is not a bargained-for detriment to her (i.e., it is not the price of the exchange) because it does not appear that the nephew's motive for the promise was to induce the niece to come to the funeral. Rather, the nephew's offer was simply to make a gift. Thus, his offer was not an enforceable promise. - no promissory estoppel for $800: Here, the nephew did not promise to give the niece half of their aunt's estate if she came to the funeral; rather, he only promised to share the estate and said they would talk about it at their aunt's funeral. It is not reasonably foreseeable that, based on the promise, the niece would make a special trip to attend the funeral. Indeed, it is not clear that the niece was induced to go to the funeral by the promise; she may have been planning to attend in any case.

Illusory

Reservation of an unqualified right to cancel or withdraw from a contract at any time may amount to an illusory promise. However, the promise is not illusory, and there is a valid consideration, if the right to cancel is restricted in any way. - ex: Here, the right of either party to cancel is restricted because it must be preceded by reasonable notice to the other party, which was provided. Therefore, the promises are not illusory, and both parties are bound.

Accomodation

Shipment of nonconforming goods is acceptance and breach of a contract unless seller seasonably notifies buyer shipment of nonconforming goods was offered only as an accomodation - Buyer not required to accept accomodation goods - If buyer rejects accomodation, seller NOT in breach because he never accepted buyers offer for current/prompt shipment of goods - NOTE: accomodation only *available if shipment is used as acceptance* If party accepts order by promising to ship, then ships an "accomodation," he had accepted and breached

Replevy

The UCC authorizes the buyer to seek replevin (i.e., an action to recover the goods) of goods identified to the contract when the buyer is unable to cover (i.e., unable to secure substitute goods after reasonable effort). There is no requirement for replevin that both parties be merchants. Prepayment of all or part of the purchase price is another ground for replevin if the seller has become insolvent or the goods were purchased for personal, family, or household purposes.

Upon graduation from high school, a young man wanted to enroll in a nine-month program at a community college to study to be an electrician, but he could not afford tuition and the costs of being unemployed for that time period. His uncle told him that if he enrolled and participated in the program, he would pay his tuition and living expenses for the time involved, and that he would also pay him a $1,000 bonus for each "A" he earned as a final grade in a class. The young man told his uncle that he would enroll in the program. The next day, the young man's grandfather called and told him that he had learned of the uncle's offer and that if the uncle failed to pay the young man as promised, he (the grandfather) would. The young man attended the program and earned "A's" as final grades in three classes. Shortly thereafter, the uncle died, and the executor of the uncle's estate refused to pay the young man the bonus for each of the three "A's." When the young man told his grandfather that the uncle's estate refused to pay, his grandfather sympathized but said he no longer thought it was a good idea to pay for grades. He too refused to pay. If the young man brings suit against his grandfather for breach of contract, which of the following represents his grandfather's best defense?

The contract was oral. - The young man will not succeed in trying to enforce his grandfather's promise because the promise was not in writing, as is required under the Statute of Frauds. Generally, contracts do not have to be in writing to be enforceable; however, under the Statute of Frauds, certain contracts will not be enforceable unless they are evidenced by a writing signed by the party to be charged. One such contract is to pay the debt of another, such as the grandfather's promise here to pay the uncle's debt if he does not pay.

A high-volume pleasure-boat retailer entered into a written contract to sell a customer a power boat for $120,000. The retailer could obtain from the manufacturer, for $90,500, as many of these boats as it could sell. As the contract provided, the customer paid the retailer $40,000 in advance and promised to pay the full balance on delivery of the boat. The contract contained no provision for liquidated damages. Prior to the agreed delivery date, the customer notified the retailer that he would be financially unable to conclude the purchase; the retailer thereafter resold the boat that the customer had ordered to a third person for $120,000 cash. If the customer sues the retailer for restitution of the $40,000 advance payment, which of the following should the court decide?

The customer's claim should be upheld in the amount of $40,000 minus the amount of the retailer's lost profit under its contract with the customer.

A customer selected a new wallet at a local department store that the salesperson said was made of the finest calfskin and was stitched by hand. After having an opportunity to inspect the wallet, the customer bought it and left the store. A few moments later, he took out the wallet to transfer his cash and credit cards into it. On closer inspection, he noticed a small nick in the leather. He immediately went back to the department store and demanded a refund. The salesperson refused. If the customer sues for a refund, who will prevail?

The department store, because the customer accepted the goods. - Once a buyer has accepted goods, his right to reject for nonconformity generally lapses and his only remedy is a suit for damages. Acceptance usually occurs when the buyer takes possession of the goods. In some cases, the buyer can revoke acceptance, but the breach must be substantial and the buyer must have a good reason for accepting the goods (i.e., something more than not taking the time to carefully inspect). Here, the customer accepted the goods and the breach appears minor.

A smoothie retailer and a fruit processor entered into an oral agreement that provided that the processor would deliver to the retailer 100 barrels of fruit each month at a price of $10 per barrel, with delivery on the first of the month and payment of the $1,000 to a creditor of the fruit processor on the 15th of each month. However, when the agreement was reduced to a writing, the fruit processor's manager inadvertently wrote $20 per barrel, and neither party noticed before signing. The creditor first learned of the agreement between the parties when he received a copy of it the day after it was signed, showing that he was to receive $2,000 per month. One day later, the retailer discovered the mistake and alerted the food processor. The parties prepared a revised writing reflecting the correct contract price of $10 per barrel, and also agreed in writing that the retailer would receive a $2 per barrel discount the first month because it discovered the mistake by the fruit processor. The first delivery under the contract was made two days late, on the third of the month. On the 15th of the month, the creditor demanded payment of $2,000 from the retailer according to the terms of the original writing. If the retailer contends that it is not liable to pay the full $2,000, which of the following would NOT be relevant to its defense?

The fruit processor owed its creditor only $1,600. - Any defense that the fruit processor might have with respect to the money it owed to the creditor would not provide the retailer with a defense. If the promisor has made an absolute promise to pay the third-party beneficiary (and not simply a promise to pay whatever the promisee owed him), the promisor cannot assert the promisee's defenses. Hence, the fact that the processor owed only $1,600, even if it could be asserted as a defense by the processor against the creditor, cannot be asserted as a defense by the retailer A: The parties had modified the contract to provide for a $2 per barrel discount the first month.(A) is incorrect because the promisee and promisor in a third-party beneficiary contract are free to modify their contract until the third party's rights have vested. While the creditor learned of the agreement before the processor and the retailer modified it, he did not (i) manifest assent, (ii) bring suit, or (iii) materially rely on the agreement before it was modified; thus, his rights did not vest. Assuming the processor has performed and the retailer's duty to perform is now absolute, the retailer would be liable to the creditor for only $800 under the contract as modified. Therefore, (A) is a partial defense. B: The parties had originally agreed that the price per barrel would be $10, and neither party noticed before signing that the manager of the fruit processor had inadvertently written $20 in the contract. (B) is also a partial defense. When a third-party beneficiary sues the promisor on the contract, the promisor may raise any defense he would have had against the promisee. Under the doctrine of reformation, either of the parties to the contract may ask a court in equity to modify the terms of the contract where the writing, through mistake or misrepresentation, does not incorporate the terms orally agreed upon. Here, the parties' mistake in memorializing the contract permits the retailer to have the contract reformed to show the parties' original agreement. This provides a partial defense that the retailer can use against the creditor to show that it is not liable for the full $2,000 D: he fruit processor was late with its first delivery.(D) is incorrect for a similar reason. The processor's failure to perform according to the terms of the contract may be asserted as a defense by the retailer. The retailer's liability to the creditor would be offset by whatever lost sales the retailer incurred as a result of the fruit processor's late delivery.

A homeowner owed a contractor $1,400 for work that the contractor did on her home. Pursuant to the contract between the parties, the $1,400 was due on September 1. After the homeowner told the contractor that she probably would not be able to pay the $1,400 on September 1, the contractor agreed to extinguish the debt if the homeowner, who was the manager of an appliance store, purchased a washer and dryer that the contractor's mother wanted and had it delivered to the mother's home and set up by September 15. Because the homeowner's manager discount would allow her to pay only $1,000 for the washer and dryer, which had a list price of $1,200, she agreed and the parties signed a writing to that effect on August 26.Is the new agreement between the homeowner and the contractor legally enforceable?

The new agreement between the two parties is enforceable as an accord. An accord is an agreement in which one party to an existing contract agrees to accept, in lieu of the performance that he is supposed to receive from the other party, some other, different performance. Generally, an accord must be supported by consideration, but the consideration may be of a lesser value than the originally bargained-for consideration in the prior contract, as long as it is of a different type or the claim is to be paid to a third party. Here, the homeowner's obligation to provide the contractor's mother with a new washer and dryer was of a lesser value to the homeowner than the originally bargained-for consideration in the prior contract, but it was of a different type and the claim was to be paid to a third party (the contractor's mother). Thus, it was sufficient new consideration to form a valid accord.

A landowner orally agreed to sell 100 acres of land to a buyer for $10,000. As a condition of the sale, the buyer agreed to pay $5,000 of the purchase price to the landowner's creditor. The buyer's attorney drafted the contract, which both the landowner and the buyer read before signing. The signed document made no reference to the payment to the landowner's creditor, and neither party noticed the oversight. In an action by the creditor against the buyer for $5,000, which of the following facts, if proved, would be most important?

The omission of any reference to the creditor from the written document was accidental. even if the landowner-buyer agreement was completely integrated, the contract could still be reformed for mutual mistake if the omission of any reference to the creditor from the written document was accidental. Under the parol evidence rule, completely integrated writings cannot be contradicted or supplemented by either written or oral expressions made prior to the writing or oral expressions made contemporaneously with the writing, but the parol evidence rule does not apply if a party to a written agreement alleges facts that entitle him to reformation of the agreement.

The owner of an art gallery entered into a written contract with an avid art collector whereby the art collector agreed to buy and the gallery owner agreed to sell for $7,500 any painting in the gallery by artist Alpha. The contract was to be executed on July 6 according to its written terms. The art collector went to the gallery on July 6 with a certified check in the amount of $7,500. The art collector pointed out a painting by a different artist hanging on the wall, and told the gallery owner that that was the painting he wanted, and that he would also take its old-fashioned $250 gilt frame to go with it. The gallery owner responded that the painting was by the artist Beta, but that the art collector could have it with the frame if he was willing to pay $250 extra for it. This enraged the art collector, and he filed suit against the gallery owner, asserting in his pleading that he remains able and willing to tender $7,500 to the gallery owner. He also asserts that prior to signing the contract, the parties agreed orally that the art collector could have a painting by Beta for the same price in lieu of one by Alpha, and that the gallery owner would throw in the frame for whatever painting he chose. The gallery owner denied that any such conversation took place. There are no other witnesses. About which agreements should the court allow the art collector to testify?

The oral agreement for the frame, but not the oral agreement for the painting. - Contractual terms that are set forth in a writing intended as a final expression of the parties' agreement cannot be contradicted by evidence of any prior agreement or contemporaneous oral agreement. Although this parol evidence rule prohibits contradicting the writing, the terms of the writing may be explained or supplemented by consistent additional terms, unless the court finds from all the circumstances that the writing was intended as a complete and exclusive statement of the parties' agreement. To determine whether the parties intended the writing to be the complete and exclusive statement of their agreement, it must be determined whether parties situated as were the parties to this contract would naturally and normally include the extrinsic matter in the writing. Here, the writing at issue states clearly that the painting subject to sale is any painting by Alpha. The art collector's assertion of a prior agreement allowing him to buy a painting by Beta clearly contradicts the terms of the writing. Consequently, the parol evidence rule will render inadmissible testimony as to such an alleged agreement. (A) and (C) are therefore incorrect. The assertion that the parties agreed prior to signing the writing that the art collector could have a $250 frame at no additional cost does not contradict any of the terms of the writing. However, it does supplement those terms. As noted above, such supplementation is permitted unless there is a finding that the writing was intended by the parties as a complete and exclusive statement of the terms of their agreement. Under the UCC, which applies here because a sale of goods is involved, a writing is presumed not to be the complete and exclusive integration of all of the terms of the agreement. While the presumption may be overcome if the parties actually intended a total integration or it is certain that similarly situated parties would have included that term, there is no indication of that in these facts. Given that the subject of the contract was a $7,500 painting, a promise to throw in a frame priced at a fraction of the cost of the painting is likely to be found to be a consistent additional term. Given this finding, evidence of the alleged agreement regarding the frame will be admissible for the purpose of supplementing the terms of the writing.

A publisher entered into a contract with a paper manufacturer who used very fine materials, whereby the publisher was given the right to purchase all paper refined by the paper manufacturer for the next five years at a price set at 95% of the domestic market price at the time of delivery. The publisher agreed to purchase no less than 1,000 pounds of paper a week. At the time this contract was signed, the publisher gave written notice to the paper manufacturer that it intended to buy all paper produced by the paper manufacturer until further notice. The paper manufacturer then sold its business to a lumber-processing company. What is the effect of this sale on the paper manufacturer's obligation to the publisher?

The paper manufacturer is liable for damages if the lumber processing plant fails to deliver paper to the publisher. - Because delivery of paper is not personal in nature, that duty can be delegated. The quantity will be measured by the paper manufacturer's original output. However, when a duty is delegated to a delegate, the delegator remains liable should the delegate fail to perform.

The owner of a television agreed to sell it to a neighbor for $250. The neighbor made a down payment of $70, took possession of the television and agreed to pay the outstanding balance in nine equal $20 installments, beginning on June 5, with subsequent installments due on the fifth of each month until the balance was paid in full. The neighbor's friend owed her $200. On May 20, the neighbor and her friend entered into an oral agreement whereby the friend agreed to make the nine $20 installment payments to the seller in exchange for the neighbor's promise to forgive the friend's $200 debt. On June 7, the seller called the neighbor to ask her where his first $20 installment payment was, and she told him at that time of her agreement with her friend. The friend has made none of the installment payments. If the seller files suit against the friend demanding payment, who will prevail?

The seller, because he was a third-party beneficiary of the agreement between the neighbor and her friend. - The neighbor has delegated her duties under the agreement with the seller to her friend, and the friend has agreed to assume the duties by agreeing to make the installment payments to the seller. Where a delegate's promise to perform the delegated duty is supported by consideration, there results a third-party beneficiary situation, so that the nondelegating party to the contract can compel performance or bring suit for nonperformance. The friend's promise to make the payments to the seller, totaling $180, was given in exchange for the neighbor's promise to forgive the $200 debt owed by the friend to her. The neighbor thus relinquished her right to take action against her friend for the full amount owed, thereby incurring legal detriment. Consequently, the promise of the friend was supported by consideration, and a situation arose in which the seller became a third-party beneficiary of the agreement between the neighbor and her friend, and able to enforce performance of the friend's promise to pay. - this also means she was a TPB and NOT an assignee

A young woman went to her local shoe shop and selected a pair of shoes. She gave the salesperson cash for the shoes. As the salesperson was putting the shoes into a bag, a robber brandishing a gun entered the store, forced the salesperson to put all of the money in the register into the bag with the shoes, and fled with the bag, the money, and the shoes. After the police had come, the young woman asked the salesperson to get her another pair of shoes. He told the young woman that she would have to pay for them again. The young woman refused. If the young woman sues the shoe shop for another pair of shoes, who will prevail?

The young woman, because she did not yet have possession of the shoes. - Merchant seller, risk of loss does not pass to buyer until buyer takes possession - No FoP issue: performance was not impossible; the young woman had already performed and the shoe store could perform by tendering another pair of shoes - identification of goods nor passage of title have any bearing on this trans; ignore these distractors

A new college graduate entered into an oral agreement with a freshman to lease the freshman her mini-refrigerator for a term of four years. The freshman was to pay the graduate $20 a month, of which $10 of the monthly charge was to be paid directly to the graduate's parents, in satisfaction of a debt the graduate owed her parents. While the graduate was putting the agreement into writing she accidentally failed to include the agreement to pay her parents directly. The freshman also failed to notice that the direct payment provision was missing before she signed the contract, which the graduate signed. If the parents bring an action against the freshman, which of the following will have the greatest effect on the outcome?

Whether the agreement between the graduate and the freshman was completely integrated. - The effect of a completely integrated agreement, meaning that the writing embodies the entire agreement of the parties, is that evidence could not be introduced to show a prior or collateral oral agreement.

The owner of a semi-pro baseball team offered a former player a position as the team's manager. During negotiations, the owner agreed to pay the manager $1,000 per week, but insisted that if the manager quit during the season, he would have to pay a "penalty" of $500 per week for each week that he did not manage the team, because it would cost the owner several thousand dollars to replace the manager during the season. The parties agreed in writing to those terms. The manager managed the team for 14 weeks with only mixed success. Nevertheless, with 10 weeks left in the season, he was offered and accepted a job as manager of a professional minor league baseball team. Fortunately for the owner of the semi-pro team, the manager's replacement had great success with the team, causing attendance to skyrocket. If the owner of the semi-pro team brings suit against the manager to recover $5,000, the amount due under the "penalty" provision, is the owner likely to prevail?

Yes, because the "penalty" provision is enforceable. - Although the $500 per week damages was denominated a "penalty" by the parties, in fact it operates as a reasonable liquidated damages clause. The parties to a contract may stipulate what damages are to be paid in the event of a breach if (i) damages are difficult to ascertain at the time the contract is formed, and (ii) the amount agreed on is a reasonable forecast of compensatory damages in the case of a breach. These conditions have been met here. The owner stated that if he had to replace the manager in the middle of the season, it would cost several thousand dollars, which seems to be a reasonable forecast of the compensatory damages.

A woman purchased a bottle of hair dye at a drugstore. The bottle was labeled "ash blonde," but due to a packaging mistake at the factory, the bottle actually contained a "rose gold" shade of dye. The two colors appear identical while still in the bottle, but are noticeably different once applied to hair. The woman discovered the mistake later that week when her hair turned to a perfect shade of rose gold after applying the dye. Can the woman recover damages from the drugstore for breach of the implied warranty of merchantability?

Yes, because the bottle was mislabeled.

A homeowner and a carpenter entered into an oral agreement, under which the carpenter agreed to construct an addition to the homeowner's home, using materials supplied by the homeowner, in exchange for $20,000. After the work had been completed but before the homeowner had made any payment, the carpenter called the homeowner and instructed him to pay the $20,000 due on the addition work to a creditor of the carpenter. If the homeowner fails to pay the creditor, and the creditor thereafter brings an action against the homeowner for $20,000, is the creditor likely to prevail?

Yes, because there has been a proper assignment by the carpenter. - The general rule is that all contractual rights can be assigned, and all the carpenter assigned here was his right to payment - assignment of a right to receive payment is permitted, even in a personal service contract - There is no requirement that the performance of the contract be executory on both sides for a valid assignment. The carpenter could validly assign his right to payment even though he had completed his performance.

Two neighbors owned summer homes adjacent to each other on the lake. After a week-long stay by the son of one of the property owners, the neighbor called the owner and said that his boat dock had been badly damaged and was told by another resident that the owner's son and some friends had gotten drunk and accidentally crashed their boat into his dock. The owner was surprised at the accusation because he was sure that if his son had caused the damages, he would have told him. However, he did not want to get into a dispute with his neighbor, so he told his neighbor that he would have the dock repaired and pay for the repairs if the neighbor agreed not to bring a claim against his son for the damage to the dock. The neighbor agreed, and the owner hired a local carpenter to do the work. Later, however, the owner discovered that his son did not damage the dock because the damages occurred after his son had returned to college. Is the owner obligated to pay for the repairs?

Yes. - Modern courts would hold that a promise to forbear suit on a claim that the promisor honestly and reasonably believes to be valid is good consideration to support an agreement, even if the claim ultimately turns out not to be valid. - mutual mistake is not a defense when the adversely affected party bore the risk that the parties' assumption was mistaken. To be a defense, it must be a true mistake, not merely an uncertainty. Here, the owner always had the right to investigate the truth of the facts before he agreed to pay for the dock.

How can a merchant disclaim implied warranties?

the disclaimer must be part of the offer and acceptance process or must be agreed to by the buyer as a modification ex: In every sale of goods, unless expressly disclaimed, there arises a warranty that the goods will be merchantable, which means that they will be fit for the ordinary purposes for which such goods are used. A television that explodes after five weeks of use likely breaches this warranty. The warranty will not be disclaimed because, to be effective, a disclaimer must be part of the offer and acceptance process or must be agreed to by the buyer as a modification. Here, the "disclaimer" was in the box, and the consumer did nothing to accept the disclaimer.