Contracts Review

Partial Performance-Liability: Merchant-Consumer

Since the mother and the daughter are not merchants, the memorandum provision does not apply, and the merchant will prevail. In this case, the Statute of Frauds did initially apply since the stereo costs more than $500. However, the merchant delivered the stereo and the daughter accepted the delivery, so the mother and the daughter will be liable according to partial performance. Any act inconsistent with the seller's continued ownership of the goods constitutes acceptance of the goods. The mother is jointly liable for the price, since the mother and the daughter jointly agreed to purchase the stereo.

Third Party Beneficiary-Rights of an Assignee

The basic rule concerning the rights of an assignee against an obligor is that an assignee gets whatever rights to the contract his assignor had and the assignee takes subject to whatever defenses the obligor could have raised against the assignor (e.g., lack of consideration, incapacity, fraud, duress, mistake.) Therefore, if the insurance company in this case can invalidate the agreement to pay the teenager the $15,000 on the basis of the teenager's fraud and incapacity, the insurance company can also assert these defenses against the hospital to whom the right to collect the $15,000 was assigned.

Unilateral Mistake-Meeting of the minds

This answer choice correctly captures the concept that there must be a "meeting of the minds" before a court will grant relief in these types of circumstances. The coal mining specialist made a unilateral mistake; although courts are sometimes reluctant to grant relief for unilateral mistakes, relief is almost always granted when the other party is aware of the mistake.

Warranty-Fitness for a Particular Purpose

This warranty grants that the goods being sold are fit for the particular purpose for which the buyer intends to use them. The warranty only applies where, at the time of contracting, the seller has good reason to know: (a) the particular purpose for which the goods are required; and (b) that the buyer is relying on the seller's skill or judgment to select or furnish reasonable goods. Here, the clerk did know the particular purpose for which the mechanic wanted to buy the part, but the clerk would not have good reason to know that the mechanic was relying on the clerk's skill or judgment, since the clerk knew that the mechanic was a trained specialist and would have more knowledge about car parts than the clerk. Furthermore, the mechanic decided to purchase the part before he spoke with the clerk and was not relying on the clerk's skill or judgment in purchasing the part. As such, the warranty of fitness for a particular purpose would not apply.

UCC: Merchant's Firm Offer

Under UCC section 2-205, where a merchant makes a written, signed offer to sell goods and includes a promise to hold the offer open, the offer is irrevocable for the period stated, or for a reasonable period, neither to exceed three months. A "merchant" is a person who has knowledge of the business practices involved in the contract (such as a nurseryman). Here, all of those elements were met and the offer was irrevocable--the grower's acceptance on May 10 was effective. Moreover, the grower's attempt to negotiate better terms during the period of irrevocability did not terminate the offer.

Doctrine of Impossibility-Subjective v. Objective impossibility

Under certain circumstances, the doctrine of impossibility will excuse a party from performing under a contract if, due to unforeseen or unforeseeable events, it becomes objectively impossible for him to perform his contractual duties. However, a party's performance is not excused where it is not objectively impossible for him to perform, but merely personally or subjectively impossible. Here, given that the roommate's performance became subjectively, not objectively, impossible for him to perform as a result of his termination, his performance is not excused under the doctrine of impossibility.

Third Party Beneficiaries-Vested Rights

Under contemporary law, third-party beneficiaries may have standing to sue the promisor for breach, even though the promise was made to the promisee and not to the third-party beneficiary. The question here is when do the beneficiary's rights vest. If an express term in a contract provides for vesting, then vesting with regard to an intended beneficiary will occur when that term is satisfied. In this case, the contract stated that the contract cannot be modified after three months, so the son's rights will vest after three months.

Gap-Fillers

Under the UCC, where there are pertinent terms missing, certain default provisions will supplant the contract. A missing time term exists if the contract is silent as to the date of delivery or any other date for action taken under the contract. The default rule for a missing time term is that contractual action must be taken within a reasonable time. In this contract, the two parties did not specify when the store must make delivery, so a default provision will be inserted into the contract. As such, the store must make delivery within a reasonable time.

Modification-Consideration (CL)

Under the common law, contract modifications must be supported by consideration. The ballet company's agreement to increase the orchestra's fee is not supported by consideration because the orchestra did not agree to do anything more in return for the increased fee than what it had already bargained to do: play at the ballet company's performance.

Liquidated Damages Clause-Unenforceable

While the musician is not certain to win on this premise, this is his strongest argument. Even if no actual damages have been suffered by the couple, it is not necessarily true that the liquidated damages clause is unenforceable, as long as it bears a reasonable relation to anticipated damages at the time the contract was entered. However, given the relatively small amount of damages in the clause and the substantial profit the couple made by not selling the house to the musician, a court might be reluctant to enforce the clause. However, this is the musician's strongest argument. Regardless of whether the parties characterize the payment as "liquidated damages" or a "penalty," the court will look at the actual intent and operation of the damages clause. Although a penalty clause bearing no relation to the amount of actual damages is unenforceable, a liquidated damages clause may be enforced if the amount of stipulated damages is reasonable in relation to the actual damages suffered or the anticipated amount of damages at the time the contract was formed.

Consideration-Promise not to pursue

A promise not to pursue a valid debt is unquestionably legally sufficient consideration to support a return promise, if the debt is either reasonable or objectively unreasonable but claimed in good faith. Because the store owner's claim is valid and therefore reasonable, the bank president's promise to pay the store owner for the parents' debt, if the store owner does not pursue the claim against the parents, is sufficient consideration to support the agreement.

SOL-promise to pay a past debt writing requirement

A promise to pay a past debt that is barred by the Statute of Limitations can be enforced even though it is not supported by any new consideration. However, most jurisdictions now require that in order to be enforceable, the new promise must be contained in a signed writing. The creditor's claim will be based on the new promise, and the creditor will be entitled to collect only the amount promised in the signed writing. Thus, the roommate's best defense is that, given that his promise to pay the analyst was an oral promise made over the phone, rather than contained in a signed writing, his promise is not enforceable by the analyst.

Unilateral Contract-Substantial Efforts

A unilateral contract is created when an offer seeks performance rather than a promise in return. An offer in a unilateral contract cannot be revoked once performance has begun. This answer is correct because the hiker undertook substantial efforts towards acceptance by performance of the breeder's offer to enter into a unilateral contract. All that remained was delivery of the puppy to the breeder. Therefore, the breeder cannot revoke her offer to enter into a unilateral contract once the hiker began performance.

Unilateral Contract-Acceptance by Performance

A unilateral contract is created when the offeror requests acceptance of the offer by the performance of an act rather than by a promise to perform the act. The offer is accepted only when the offeree performs the requested act. An offer is revoked by operation of law upon the death of the offeror. Here, given that the businessman's offer requested acceptance by performance rather than by a promise to perform, the dealership accepted the offer when it performed the act that the businessman had requested (i.e., extending his son credit). Therefore, the businessman's offer created a unilateral contract, which can be enforced against his estate. The fact that the dealership notified the businessman of its acceptance of the offer after his death is not the controlling factor; what is controlling is that by performing the requested act, the dealership validly accepted the offer before he died.

Accord & Satisfaction

An accord is an agreement in which the obligee of a separate contract accepts a lesser performance than was called for by the separate contract. A satisfaction is the consummation of the accord--when the stated, lesser performance is rendered. The (often criticized) rule of Foakes v. Beer provides that when a debt is liquidated and undisputed, there can be no accord and satisfaction, because no consideration supports the obligee's acceptance of a lesser performance. However, as to a bona fide disputed obligation, the compromise of the competing claims provides consideration for the accord, and upon satisfaction, the separation obligation will be extinguished. Under Article 3 of the UCC (UCC section 3-311) applicable to checks, a conspicuous "full payment" statement on a check for less than the disputed amount constitutes an accord; if the payee cashes the check, she is held to have agreed to accept the lesser payment in satisfaction of her contractual rights. Thus, when the designer/carpenter cashed the $18,000 check marked "Payment in Full," she was impliedly agreeing to accept $2,000 less than the contract price as a compromise of the dispute over the fourth cabinet with the homeowner. Having so agreed, the designer/carpenter cannot thereafter seek to enforce the full contract price.

Offers-Advertisements

An advertisement will constitute an offer only if it invites a respondent to take specific action without the need of further communication with the offeror (as in the case of reward offers). While the farmer's announcement indicated his interest in selling his farm land for "a reasonable price" on a "first come, first served" basis, the ad was not specific enough to allow the respondent real estate investor to take specific action to accept the terms of a contract. Instead, the investor would have needed to make an offer to the farmer for the farmer's consideration.

UCC-Modifications

An agreement modifying an existing contract for the sale of goods needs no consideration to be binding under the UCC. Instead, modifications may be made in good faith. In this case, the man's request for an additional $50 was made in good faith, as he did not know the true value of the vase when he initially agreed to sell it for $50. Thus, the modification is enforceable.

Option Contracts

An option contract may be established if the offeree gives consideration in exchange for the offeror's offer. The consideration given by the offeree may be minimal, and it may given in the form of services. Here, the customer's promise to meet with the hairdresser and hear her ideas, as well as the $100 consultation fee, constitutes valid consideration for the hairdresser's offer. The customer's right to refuse the hairdresser's services if she was dissatisfied with her ideas did not render her promise illusory. The customer must exercise her right to refuse with good faith. In addition, the promise to hear and evaluate the ideas in exchange for the hairdresser's offer, combined with the $100 consultation fee, provided the necessary consideration to establish a contract.

Breach of Contract-Failure to render performance

Any failure to render performance when it is due is a breach of contract. Where all conditions of the contract have been satisfied, there is generally an absolute duty to perform. In addition, where a condition of the contract is waived, a duty to perform may become absolute, even where all conditions of the contact have not been satisfied. There exist two primary circumstances in which a contractual condition will be excused: (1) a breach of contract by the other party; or (2) a waiver of the condition by the other party. Here, however, the facts do not support excusing any of the conditions of the original contract between the parties. The construction business did not waive the condition requiring payment, nor does it appear that it itself breached the contract. As long as the construction business properly or substantially reconstructed the building in accordance with the contract, the company had an absolute duty to perform. As such, the company's failure to pay constitutes a total breach of contract.

Option Contracts-Acceptance/MBR

Any offer that contains the offeror's promise to hold an offer open for a stated period of time cannot be revoked if it is supported by consideration. The retired performer did have a valid option contract with the collector. But the "mailbox" rule would not apply to her in this case under the majority view, which states that the exercise of an option requires the offeree to give notice of acceptance to the offeror within the time optioned. The collector had not received the retired performer's check by February 26 (the performance that would be required for the retired performer to have validly accepted the offer) when the collector sold the violin to the investment specialist. The collector's sale of the violin on February 26 would thus indirectly revoke the offer to the retired performer. As the offer period expired at midnight on February 25, the collector was free to sell the violin to the investment specialist on February 26. Disappointed though the retired performer may be, the violin belongs to the investment specialist.

UCC Modifications

Article 2 provides that in a contract between merchants, once a written contract is established, parties may modify the terms of the contract without producing additional consideration. In this instance, the modification was valid because a legitimate dispute arose between the restaurant and the software company, and the parties reached a good-faith agreement to resolve the dispute.

UCC: Knock-out Rule/Additional Terms

As a contract for the sale of goods, the contract between the store and the manufacturer is governed by the Uniform Commercial Code. Uniform Commercial Code section 2-207 allows additional terms in the acceptance or confirmation of an offer. Under UCC section 2-207(2), when both parties are merchants, new terms are considered to be additions to the contract and become part of the contract unless: a) the offer expressly limits acceptance to the terms of the offer; b) they materially alter it; or c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received. In this case, both parties are merchants, and the manufacturer's acceptance contained the arbitration clause that varied the terms of the offer. As the arbitration clause constituted a material alteration to the terms of the contract, the contract would be formed based on the original terms of the offer, which did not contain an arbitration clause. As such, the store would not be bound to arbitration under section 2-207(2). Under section 2-207(3) of the Uniform Commercial Code, conduct by the parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the parties' writings agree, together with any supplementary terms implied under the UCC. Here, the conduct of the parties in delivering and paying for the dining room table sets would be sufficient action to create a contract, even though the documents associated with the action did not. The contract terms would include those on which the writings of the parties agreed, along with any other supplementary terms. As the writings did not agree on the arbitration clause, and the UCC does not imply this type of a clause, the store would not be bound to arbitration under the conditions of UCC section 2-207(3).

UCC: Installment K-Acceptance/Liability

As a contract for the sale of goods, this contract is governed by the Uniform Commercial Code, Article 2: Sales. In sales contracts between merchants, a contract is generally not formed unless the offeree communicates his acceptance of the offer. In this case, however, the customer's receipt and subsequent sale of the first two truckloads of soap products indicated her acceptance of the terms of the installment contract. See UCC 2.612. Because the customer failed to reject the first load of goods within a reasonable time, she will be responsible for their payment under the terms of the valid installment contract. The customer will likewise be liable for the shipment of truckloads numbers three and four, given that the goods are substantially conforming. The customer will be liable for the remaining future truckloads of products as long as the goods are substantially conforming; if they are not, she may reject them and send them back.

Land Sale Contracts-Bona Fide Purchaser

Bona fide purchasers are thoroughly protected by the law. Once the seller actually gives the deed to the buyer, there is a presumption that a valid delivery has occurred, and an argument can be made that the seller cannot restrict the agency that he has given the buyer to record the deed. Moreover, even if the buyer could not prevail against the seller, the couple reasonably relied on the deed and the land records and appear to be bona fide purchasers. If the couple is deemed bona fide purchasers, the seller may be estopped from recovering title. The Statute of Frauds requires that a conveyance of real property or a contract to convey must be in writing. It serves as a defense to contracts or conveyances that are not in writing. The Statute of Frauds does not preclude the introduction of evidence of an oral agreement to convey land in a dispute outside the original transaction.

Damages-Present and Future value

Contract damages should give the aggrieved party what he expected from the bargain, and, to the extent that money can do so, the aggrieved party should be placed in the same position as if the contract had been fully performed. When an employee breaches an employment contract, the standard measure of damages equals any additional compensation paid for a substitute employee. Here, the newly formed law firm expended $500 extra for the substitute in both January and February, and would expend an additional $500 per month over the amount for which the lawyer had agreed to work. Therefore, the law firm may recover $1,000 in damages for the first two months (since that money has already been paid), as well as the discounted present value of $500 for the months of March through December (since that money has not already been paid).

Assignment

For an assignment to be valid, the assignor must manifest an intention to make the assignment and it must be for a present transfer, without further action by the assignor or the obligor. Such is the case here when the bartender told the guest that she would assign her right to payment from the family for her bartending services that day. The assignment in this case was gratuitous, in that the guest did not give consideration for the transfer. The guest then relied on the assignment by committing the money to pay for a sailboat rental. Once the guest relied on the assignment to his detriment, the assignor (the bartender) was estopped from revoking the assignment. Thus, the assignment was valid and irrevocable, even if the bartender later tried to argue that delivery of the gift had not been made when she gave the guest her copy of the contract. The family, as obligor, owes the payment to the guest as the assignee.

P.E.R.-Consideration of Extrinsic Evidence

Generally, the Parol Evidence Rule bars the admission of extrinsic evidence concerning the parties' negotiations or conversations prior to or contemporaneous with the signing of a written agreement that is fully integrated. However, courts can consider that extrinsic evidence in determining if an agreement is fully integrated. This is true even if the evidence would ultimately be barred under the Parol Evidence Rule if the court determines the agreement is fully integrated.

Restitution

Given that the car owner was unaware that the brooch was in the car, there had been no bargain over it. Restitution is appropriate where one party receives a benefit, not bargained for, and it would be unconscionable for him to keep the benefit. Here, the co-worker bargained for a car, not for the car owner's wife's brooch. Under the circumstances, it would be unconscionable for the co-worker to retain this benefit to the car owner's detriment. As such, the court will likely rule in the car owner's favor.

Anticipatory Repudiation-Time of the essence

If the contractor had not so clearly stated an anticipatory repudiation, the fact that contractor did not attempt to commence construction until March 20 would probably not be a sufficient breach in order for the owner to refuse the tender of performance. At the time of tender on March 20, the contractor promised to complete construction by the original contract date, September 15. In determining whether a breach was total or not, the important date was that of completion, not that of commencement. However, by March 10, the contract had already been totally breached when the owner relied upon the contractor's repudiation by engaging a substitute contractor.

Strict Liability - Exception: Provider of Services

In a suit for strict products liability, commercial suppliers at all levels of the distribution chain (i.e., manufacturer, distributor, retailer) are all potential defendants. However, this rule only applies to sellers of goods. Generally, providers of services are not held strictly liable for injuries received by their customers. If defective goods are supplied along with services, strict liability is still not applicable, so long as the goods supplied were merely "incidental" to rendition of the services. Service providers such as hairdressers, doctors and, in this case, manicurists are usually regarded as primarily providing services, so defective products (medicines, hair dyes, acrylic nails, etc.) provided are incidental and not subject to strict liability.

Breach of K-Damages

In breach of contract cases, the correct measure of damages is those required to put the injured party in the same position he would have been had the breach not occurred. Damages are not intended to allow the injured party to profit or create a loss to punish the other party. In this case, given that the pool builder's breach was nominal, and the pool was still usable for the swimmer's intended use, to permit her to recover the full amount that she paid to the pool builder would allow her to profit from his nominal mistake.

Revocation + Intent to Refuse Offer

In general, an offeror can revoke an offer at any time prior to acceptance; once the offer terminates, the offeree has no power to accept the offer. Here, in stating, "I'll get back to you," the Web site designer indicated an intent to refuse the graphic artist's offer until further notice. The graphic artist's subsequent e-mail operated as a revocation of his offer. Given the lack of acceptance by the Web site designer and the graphic artist's subsequent revocation of his offer, no contract existed between the parties. The graphic artist would prevail in an action against him for breach of contract. In stating, "I'll get back to you," the Web site designer indicated an intent to refuse the offer until further notice--her response was thus not a counteroffer, but rather a refusal. In fact, the graphic artist's subsequent e-mail revoked the offer.

Modification-Unforeseen Circumstance (CL)

In general, contracts governed by the common law may not be modified unless there is consideration to support the modification. An exception to this rule is where an unforeseen circumstance renders performance substantially more burdensome than reasonably anticipated by the parties when they entered the contract. The strike in this question was an unforeseen circumstance, but according to the fact pattern, it only moderately increased the prices of flights. It did not render performance substantially more burdensome to the orchestra. Therefore, the general rule applies: because there was no consideration to support the modification of the contract (the orchestra agreed to do no more than what it initially contracted to do), the modification is unenforceable.

Employment Contracts-Default Rule

In practically every jurisdiction, the employment-at-will rule is the default rule for duration of an employment contract; absent agreement to the contrary, an employer may dismiss, and an employee may quit, at any time for any reason. However, in a majority of jurisdictions, oral or written assurances of job security made to an individual employee, as well as assurances contained in policy documents distributed to the workforce, may suffice to take the contract out of the default rule. Here, the company representative made oral assurances to the engineer that he would be hired for at least 6 months. Therefore the contract is not at-will and will be taken out of the default rule.

Third-Party Beneficiaries-Creditor Beneficiary

In the event that the promisor fails to deliver the promised performance to a creditor beneficiary, the beneficiary can elect to sue either the promisee on the prior obligation or the promisor on the third-party beneficiary contract. But satisfaction of the claim by one operates as a release of the other's obligation. In this case, the friend failed to deliver the cash payment, so the brother, as the creditor beneficiary, can sue either the man or the friend. As such, this is the correct answer.

P.E.R.-Explanation of Terms

It is true that, under the parol evidence rule, parol evidence is admissible to explain what the parties meant by the terms used in the integrated written contract. But here, the evidence of the oral agreement between the restaurant and the plumbing company is not being offered to interpret a term contained in the written contract, because the subject of overtime was not addressed by the written agreement at all. Thus, this argument will not help the plumbing company get evidence of the oral agreement admitted.

UCC-offers to buy goods for prompt shipment

Offers to buy goods for prompt shipment "shall be construed as inviting acceptance either by prompt promise to ship or by the prompt or current shipment of conforming or nonconforming goods." (UCC Section 2-206). Thus, even a shipment of nonconforming goods operates as an acceptance. (It is also a breach of contract.) However, the shipment of nonconforming goods will not operate as an acceptance if the seller "seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer." In such a case, the shipment of nonconforming goods is considered a counteroffer, which the buyer may either accept or reject. If the buyer rejects the nonconforming shipment, no contract is formed, and the buyer has no rights against the seller. In this question, the owner sent the nonconforming goods in response to the businessperson's offer, accompanied by notice indicating that the nonconforming goods were offered as an accommodation. The businessperson may accept the shipment of chocolate ducks and pay the owner the catalog price or she may reject the shipment, thereby preventing the formation of a contract.

Third Party-Assent to K/Intended Beneficiary

Parties to a contract are free to modify or rescind it by mutual consent, and they may modify or rescind a third-party beneficiary provision without the beneficiary's consent unless and until the beneficiary's rights under the contract have vested. An intended beneficiary's rights vest when the beneficiary assents to the contract at the request of either the promisee or the promisor. In this case, the secretary assented to the contract at the contractor's request, so the friend can no longer rescind the contract.

Prior Course of Dealing-Non-ambiguous terms

Parties' prior course of dealing and course of performance may be admissible to supplement the terms of a contract or to clarify ambiguous terms in a contract. However, here the parties expressly agreed that the inventor would only receive $25,000 for the Phoenix. This term is unambiguous. Therefore, the parties' course of dealing is not admissible to contradict the express terms of the agreement between the inventor and the manufacturing company.

Buyer's Remedy After Acceptance

Section 2-714 of the UCC provides that where the buyer has accepted goods and given notification, he may recover as damages the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted. Here, the installation and test-marketing of the 75 engines constituted acceptance of these goods. As such, the entrepreneur is entitled to recover as damages the difference between the value of the 75 engines he contracted to purchase ($50 each) and the value of the seventy-five engines delivered ($35 each), for a total of $1,125.

Land Sale K-SOF/Acceptance/MBR

The Statute of Frauds requires that contracts for the sale of land be in writing and signed by the party to be charged. In order for there to be a valid contract between, there must have been an offer and an acceptance. An acceptance consists of an expression of present, unequivocal, unconditional assent by the offeree to each and every term of the offer. Here, the facts state that the neighbor offered to sell Lot A for $100,000 and Lot B for $80,000. As such, the grandfather expressed a present, unequivocal, unconditional assent to the terms of the offer for Lot B when he sent a check for $80,000 with the inscription "For land" in the memo field. The signed check, coupled with the inscription in the grandfather's handwriting, satisfies the Statute of Frauds. Thus, in this case, in enforcing the contract, the neighbor would be enforcing the written check against the grandfather. While the grandfather may argue that he canceled his acceptance before the neighbor received the checks, the mailbox rule provides that an acceptance is effective upon dispatch and a rejection is effective upon receipt. Thus, on Monday, the neighbor accepted the offer for Lot B, and therefore, the grandfather will not be successful in his action seeking the return of the money he sent for Lot B.

Impossibility-Supervening Illegality

The building of a 12-foot-by-12'-foot addition was an express condition of the contract. However, a change in the law prevented the construction company from lawfully fulfilling this condition. Thus, a supervening illegality made performance illegal according to the original terms of the contract. A supervening illegality is viewed as a type of impossibility. If impossibility prevents the occurrence of an express condition that is not a material part of a bargain, the condition may be excused. Here, the requirement of building the addition to measure 11 feet by 12 feet, instead of 12 feet by 12 feet, would not likely be considered a material part of the bargain because the essential purpose of the contract could be accomplished by a room measuring 11 feet by 12 feet. Because the condition may be excused, and the company performed all of its other responsibilities under the contract, it would be entitled to payment of the entire contract price of $25,000, less the cost and profit allocable to the "missing" foot. The allocable cost and profit would be subtracted from the contract price, because it would not be fair for the company to benefit from being excused from performing.

UCC: Merchant's Firm Offer/Effect of Counter Offer

The candy shop owner paid $50 to the manufacturer to keep the offer open for 45 days, so the offer may be characterized as an option. Where an offeror's promise to hold an offer open is supported by consideration of any value, the offer may not be revoked for the period agreed. A counteroffer made during the period such option is exercisable does not terminate the option unless the offeror changes position in reasonable reliance thereon. A counteroffer itself does not cause the option to be terminated; only when such counteroffer is combined with the change in position in reliance on that counteroffer does the termination occur. Here, the manufacturer reasonably relied on the candy shop owner's letter of June 14 containing the counteroffer for a 10 percent decrease. The manufacturer changed his position, believing that the candy shop owner would be unable to accept the offer, and sold the candy bars to another.

Breach of Contract-Failure to render performance

The company committed either a full breach of contract, or it did not breach the contract at all. An absolute duty to perform will usually arise because all conditions of a contract have been satisfied. However, a duty to perform may also become absolute even where all conditions have not been met, if a condition is excused--generally because the other party has either breached the contract or waived the condition. A contractual condition may be excused for many reasons, but the facts in this case do not suggest any of them. The company had a duty to perform because the construction business had substantially performed. Even if the construction business committed a minor breach of contract, such as failing to complete the doorways, the company would have been required to pay first and seek damages afterwards. As such, the company's failure to pay constitutes as a total, not a partial, breach.

Revocation-after giving window of time to accept

The defendant's lawyer indicated the offer was "good for 24 hours," but the general rule is that an offeror may revoke the offer at any time for any reason as long as the revocation occurs prior to acceptance and is effectively communicated. Because the defendant's lawyer told plaintiff's lawyer personally that the offer was revoked, before the release was presented, both of those conditions are met here. Thus, the plaintiff's acceptance came too late, after revocation.

Third Party-Modification and Rescission

The friend cannot rescind the contract, but the fact that the secretary is an intended beneficiary is not sufficient to prevent rescission. Parties to a contract are free to modify or rescind it by mutual consent, and they may modify or rescind a third-party beneficiary provision without the beneficiary's consent unless and until the beneficiary's rights under the contract have vested. Therefore, if the secretary's rights had not vested (which they did when he assented to the contract), the friend could have rescinded the contract even though the secretary was an intended beneficiary.

P.E.R.-Collateral Agreements

The parol evidence rule is based on the belief that a completely integrated contract should contain all agreements of the parties at the time at which it was executed. For this reason, the rule does not permit the admission of evidence of contemporaneous or earlier agreements that contradict or vary the terms expressed in the integrated writing. However, the parol evidence rule does not apply to agreements between the parties that are entirely distinct from the written contract at issue. Evidence of such collateral agreements is admissible. Here, the subject of overtime was not addressed by the written contract. Therefore, the oral agreement regarding the payment of overtime is separate and collateral to the partially integrated written contract. As a result, the plumbing company should argue that evidence of the oral agreement is admissible as a collateral agreement.

SOF-Land Sale Ks

The statute of frauds requires that any contract for the sale of real property be in writing in order to be enforceable. An oral contract for the purchase of real property is enforceable only where there has been at least partial performance of the contract or circumstances justifying an assertion of promissory or equitable estoppel, which are not present in this question. The failure to satisfy the statute of frauds eliminates the need to even consider whether the farmer's announcement was a valid offer, whether the real estate investor validly accepted the offer, and if so, whether the farmer could withdraw his offer after the investor purported to accept it. Here, there was no written contract, and no partial performance of any purported contract, and so the statute of frauds is a complete defense to any claim by the investor.

Warranty of Fitness for a Particular Purpose

The warranty of fitness for a particular purpose is implied when a buyer relies upon the seller to select the goods to fit a specific purpose. For instance, if a customer in an electronics store asks a sales clerk for a waterproof CD player, the warranty will be considered breached if the CD player provided by the clerk is not indeed waterproof. However, in order for this warranty to apply, the clerk must know of the customer's specific purpose. Here, because the store sold all types and brands of athletic shoes, and not all of its customers would be seeking the same type of shoe for the same purpose, the hiker would not have a viable cause of action against the store. Furthermore, while the hiker told the clerk of his plan to hike that weekend, the clerk had no way of knowing that the hiker intended to use the purchased shoes to climb the mountain.

SOF-Suretyship Agreements

The woman's agreement with her father needed to be in writing. Any suretyship agreement, such as this, where one party undertakes to answer for the obligation of another, must be in writing to satisfy the Statute of Frauds. The father's agreement with the woman was oral. His obligation is a collateral one. If it were not collateral, it would not have to be in writing. Hence the agreement is not enforceable. Consideration does flow to the father. The consideration is that the woman would render the performance required of her in her unilateral contract with the aunt. In this case the woman's performance acts as a legal detriment since she was under no legal duty to engage in such performance. This legal detriment to the promisee is consideration. The woman's performance provided consideration to both the aunt and the father.

UCC-Assignments and Subsequent Modification

There is no reason, on these facts, to believe that the assignment of the contract from the agent to the racer was not valid. Therefore, this is not the correct answer choice. The contract was assignable, and the modification did not require consideration because the contract falls under the UCC, which requires good faith in contract modification. The breeder and the racer agreed to a contract modification. The breeder decided that he wanted the younger dog, and the racer agreed to deliver that specific dog for an additional $200 over the original contract price. The agreement regarding the modification was put into writing. The UCC does not require consideration to support modification of a sale of goods contract. Because this contract involves the sale of a dog (a good), it is within the UCC. The modification is effective without consideration as long as it is made in good faith. There is no indication of bad faith, thus the modification is effective.

Third Party Beneficiaries

Third parties who are to receive the performance of one of the original parties and who were present at the formation of the contract are third-party beneficiaries. A third-party beneficiary whose rights have vested may enforce the contract in an action against the promisor without joining the promisee. Here, as a third-party beneficiary of the pet-store manager/groomer contract (which was both an assignment and a delegation), the breeder can compel from the groomer whatever performance the breeder expected from the groomer's delegator, the pet-store manager. A third party who is to receive the performance of one of the original parties and whose rights arise after formation of the contract is an assignee. The breeder is not an assignee of the pet-store manager/breeder contract, since the breeder is one of the original parties to that contract. Neither is the breeder an assignee of the pet-store manager/groomer contract; rather, the breeder is a third-party beneficiary. As a beneficiary, the breeder has a direct cause of action against the groomer.

Gratuitous Promise v. Executed Gift

This answer is correct because of the difference between a gratuitous promise and an executed gift. Because there is no consideration for a gratuitous gift, a promise to make one is unenforceable. However, an executed gift, which is delivery of an item with an intention to bestow a gift, is enforceable. The uncle has promised the student three more years of tuition but has not delivered the funds. Therefore, that part of his promise is unenforceable as a gratuitous promise. The funds already delivered for the first year's tuition constitute a completed or executed gift, and the student is entitled to keep those funds, but she may not enforce the other gratuitous promises.

Equitable Remedies-Specific Performance

This answer is correct because the courts will be reluctant to order specific performance over a long period of time, such as the two-year period in the contract in this case. Such an order would require continuing supervision and enforcement by the courts and for that reason would be disfavored. Even a contract involving unique objects may not be specifically enforced when the specific performance would require the two parties to cooperate over a long period of time. In this case, the contract would require the parties to cooperate for a two-year period and, therefore, a court could deny specific performance.

Time of the essence

This choice misstates the modern trend by making it too strong, and erroneously applies the principle of time of the essence. Even where time is of the essence, the purchaser must ordinarily give the seller an opportunity to correct any title defects and to tender performance--conveyance of good and marketable title-- on the date specified in the contract. Only where there appears to be little likelihood that the title defects will ever be cured may the buyer rescind the contract prior to the time set for performance by the seller.

Unilateral Offer-Acceptance

This is a unilateral offer that was accepted when the inventor performed as required by the offer and developed the friction-reduction process. If the offeror requests acceptance of the offer by the performance of an act, then it is deemed a unilateral contract, which can only be accepted when the offeree performs the act called for. The offeree's promise is not sufficient to create an acceptance. Because this is unilateral offer, the communication of a return promise by the inventor is not needed to create an effective acceptance of the offer. What creates acceptance is when the inventor performs by developing his new process. The company did not promise to make a conditional future monetary grant. This is a unilateral offer that was accepted when the inventor performed as required by the offer and developed the friction-reduction process. An offer is a promise to make an exchange of performances, and the promise the company makes is to pay $250,000 for a friction-reduction process. This is a contractual offer, and an offer does not contain a promise to make a future grant. A grant is voluntary and cannot be enforced by the recipient.

UCC-Installment Contracts

This is an installment contract under Section 2-612 of the UCC. The only circumstance under which the retailer can terminate the entire contract for breach of the shirtmaker's obligations under the first installment is if that breach substantially impairs the value of the whole contract. Since the primary purpose of the sweatshirts was for Christmas sales, it is unlikely that the delivery of 70 conforming sweatshirts (30 fewer than required) six days late in early September would substantially impair the entire contract.

Third Party Beneficiaries-Right to Sue

This is the correct answer, because as an intended third-party beneficiary, the mechanic may sue to enforce the full amount in the contract. A third party is considered an intended beneficiary of a contract where (1) the contracting parties agree that one of the duties specified must be performed for the intended beneficiary directly, as opposed to being performed for one of the contracting parties; and (2) that was the conscious intention of the contracting party who would otherwise be entitled to the benefit. In this case, the mechanic was named in the contract, and the friend's payment of $2,500 for the race car driver's car was to be paid to the mechanic. Furthermore, the race car driver intended for the mechanic to receive the $2,500 because the race car driver wanted to pay off a debt to the mechanic and give himself a $300 credit. As a result, the mechanic's status as a creditor of the race car driver is not what determines the amount to which he can recover from the friend. Instead, the mechanic's status as an intended third-party beneficiary entitles him to the full amount listed in the contract for $2,500, and his rights become vested when he sues.

UCC: SOF-Part Performance Exception

This question involves a contract for the sale of goods priced at $500 or more, so it is required under section 2-201 of the UCC to be evidenced in writing. However, the UCC Statute of Frauds has an exception for part performance. Under this exception, no writing is required to enforce a contract for the sale of goods to the extent that the goods have been received and accepted. This exception applies here: Because the customer received and accepted the first two machines from the engineering firm, it will be compelled to pay the engineering firm $30,000 for the two machines delivered and accepted. Partial performance of a sale-of-goods contract affects only that portion of the contract performed, not the whole contract. As such, the parties' oral contract will be enforced for the two machines the customer received and accepted, but the customer will not be liable for the undelivered third machine. Note that this differs from the real property "to the extent of performance" rule: If either party to an oral agreement conveying an interest in land has partly performed, this is considered clear evidence of a contract and no writing is required and the entire contract is removed from the purview of the Statute of Frauds. Here, however, the parties' contract involved goods, not real property. Therefore, the parties' partial performance makes enforceable only that portion of the contract performed.

Fitness for a Particular Purpose-Negated

This warranty of fitness for a particular purpose grants that the goods being sold are fit for the particular purpose for which the buyer intends to use them. The warranty only applies where, at the time of contracting, the seller has good reason to know: (a) the particular purpose for which the goods are required; and (b) that the buyer is relying on the seller's skill or judgment to select or furnish reasonable goods. The warranty may be negated: (a) where the negation is in writing and conspicuous; and (b) the language used to negate the warranty is in a form that a reasonable buyer would understand. Here, the store did know the particular purpose for which the homeowner was going to use the cable and the store knew that the homeowner was relying on the clerk's skill and judgment. However, the store also negated the warranty when it handed the homeowner a letter which stated that it was not responsible if the goods sold did not fit a customer's particular purpose. The letter seems to be in a form that a reasonable buyer would understand. As such, the cable is not covered by the warranty.

M.B.R.-Inapplicable due to acceptance terms

Under the "mailbox rule," an acceptance is generally effective upon dispatch. Thus, had the applicant merely mailed the contract, the applicant's acceptance of the college's offer would have been effective upon his mailing of the contract on June 28, and a valid contact would have been formed on that date. However, because the applicant expressly stated that his acceptance of the contract would be effective when the college notified him it had received his letter and contract, the mailbox rule does not apply. Given that the college revoked its offer before the applicant effectively accepted it, no enforceable contract was formed.

Anticipatory Repudiation-Time of the essence

When one party to a bilateral contract, prior to the time specified for performance, indicates by words or conduct that he does not intend to perform, such an anticipatory repudiation may amount to a total breach of the contract entitling the aggrieved party to terminate the agreement and sue for breach. A total breach of the contract occurs when a material breach (i.e., one precluding a finding of substantial performance) is not cured within a reasonable time. On these facts, where time was clearly of the essence of the contract, in that the completion date was specified and the reason therefore was actually included in the agreement, the contractor's outright repudiation is manifestly a total breach. While the contractor could have retracted his repudiation and performed under the contract before the owner hired another builder or otherwise acted in reliance on the repudiation, the facts tell us that this did not happen. Thus, the owner was entitled to terminate his agreement with the contractor and make substitute arrangements.

Time of the Essence

When parties to an agreement for the sale of goods specify a delivery date for the goods and declare that "time is of the essence," the buyer will be entitled to recover damages resulting from the seller's failure to timely deliver the goods. Where such a breach occurs, the buyer may recover the "consequential damages" that reasonably flow from the breach, which include lost profits (but not punitive damages). Here, given that the parties agreed that time was of the essence, and given that the wholesaler was late in his delivery, the retailer is likely to prevail in a lawsuit to recover his lost profits.

Ambiguities-Trade Usage

When the terms of an agreement are not specific as to what is or is not permitted under the contract or whether there are ambiguities in the contract, courts may examine evidence of trade usage to interpret the contract. That means the court can consider the standard practice or regular behavior of a majority of the entities in the same business or industry to interpret the contract. This contract did not expressly prohibit the store owner from selling other manufacturers' appliances. The contract did require the store owner to use best efforts to sell the large corporation's appliances. The store owner can best defend himself by producing evidence that it is customary in the trade or industry for appliance dealers to sell competing products from different manufacturers. Additionally, the owner can use evidence of trade usage to show that similar "best efforts" provisions are used in these types of contracts in the industry and have not created exclusive arrangements preventing a store owner from selling other manufacturers' products. Thus, the store owner would argue that it is industry practice to sell more than one corporation's appliances even with such a "best efforts" provision in the contract, and therefore the store owner did not breach the obligation to use best efforts in good faith to sell the large corporation's products under the contract.

Assignment-Multiple Assignees

Where two assignees claim the right to collect from the obligor, the majority rule is that the first assignee wins. Under the Restatement, however, if the second assignee has paid value and took the assignment in good faith, the second assignee will prevail if she has also obtained payment from the obligor, recovered a judgment on the debt, entered into a new contract with the obligor, or received delivery of a tangible token or writing from the assigner that must be surrendered under the obligor's contract. In this case, the second assignee paid $50 in good faith for the assignment and took the computer, which she was required to surrender to the obligor under the contract. Therefore, in a minority Restatement jurisdiction, the second assignee will prevail, so this is the correct answer.

Obligations v. Conditions

Whether a contract provision is an obligation (i.e., promise) or a condition is sometimes a matter for interpretation by the court, and is determined by the intent of the parties. If a court were to find that the provision that "the farmer must spray his crop with a recognized pesticide before April 1 of each year the policy is in effect" was a condition precedent to the insurance company's obligation to pay, the farmer would not be able to recover, since he did not have his crop treated in that manner. However, if the court were to find that the provision was an obligation, the farmer would be found to have breached that obligation, and the insurance company would be obligated to perform its duty to pay the proceeds of the policy, less any set-off for damages attributable to the farmer's breach. Here, finding that the provision is an obligation would be most equitable under the circumstances, particularly since the farmer's failure to spray his crop, although technically a breach, was not the cause of the loss. The crop was damaged by a hail storm, not by blight or insect infestation.

P.E.R.-Exception: Collateral Agreements

While the owner and agent didn't reduce the option agreement for the adjacent property to writing, admission of evidence concerning this oral agreement is permissible under the Parol Evidence Rule because it concerns an entirely distinct agreement from the written contract for the first property. Therefore it can be admissible as a collateral agreement, an exception to the Parol Evidence Rule's ban on admission of oral statements made prior to or contemporaneous with the signing of an integrated written agreement. A collateral agreement exists when the parties essentially have two agreements that are entirely distinct, only one of which is reduced to an integrated writing. Here, the parties agreed to sale of the first property to the agent for $150,000 and the purchase of an option to buy the adjacent property. These are distinct agreements because they concern two different properties. Therefore, the evidence is admissible as evidence of a collateral agreement and this answer is correct.