MCQ Autopsy Sheets - Bar Prep - Kaplan (Contracts)

A community theater received a request from a local opera company to stage a production at the theater the following January. The theater director agreed to have a local designer design the sets for the opera. They signed a written contract that promised the designer $5,000 for the sets. The director had some specific ideas and insisted on some detailed specifications for the sets. However, the theater stage was smaller than was really needed, and it would be difficult to fit everything the director wanted into the production. Under the agreement, the designer was to provide all material and labor, and would begin work on October 1. The $5,000 would be paid upon completion of the sets. The designer was going to make a profit of $1,000. On September 15, the director called the designer and told her that it was impossible for the theater to stage the opera, and so she was going to cancel the production. Knowing that her contract was enforceable, the designer urged the director not to act hastily and to take some time to think about it. On September 17, the designer spent $1,500 on materials for the sets that she was to build according to the director's specifications. The materials were not suitable for anything other than the opera sets. If the designer sues the director for breach for contract, what is she entitled to recover? A - Nothing, because she is estopped from recovering damages due to her failure to mitigate. B - $1,000, as expectation damages. C - $1,000 as expectation damages and $1,500 as reliance damages. D - $5,000, as expectation damages.

The correct answer is: $1,000, as expectation damages. The contract between the director and the designer was an enforceable construction contract. In actions for breach of a construction contract, the standard measure of damages for the builder is the expected profit plus any costs expended in construction up to the time of the breach. When the builder learns of the breach, he must stop work. Here, the designer, as the builder, can expect the standard measure of damages. Because she expected a profit of $1,000, she can recover this amount. However, she cannot recover the costs of the materials because she failed to mitigate her damages by ceasing work after learning of the director's cancellation of the production. Because she did not cease work at that time, the designer cannot recover the $1,500 spent on materials. Discussion of incorrect answers: Incorrect. Nothing, because she is estopped from recovering damages due to her failure to mitigate. In actions for breach of a construction contract, the standard measure of damages for a builder is the expected profit plus any costs expended in construction up to the time of the breach. Although the designer will not be able to recover the cost of the materials because she failed to mitigate her damages, she will still be able to recover the expected profit from the production. Incorrect. $1,000 as expectation damages and $1,500 as reliance damages. The designer cannot recover the costs of the materials because she failed to mitigate her damages by ceasing work after learning of the director's cancellation of the production. Because she did not cease work at that time, the designer cannot recover the $1,500 spent on materials. Incorrect. $5,000, as expectation damages. Although the contract between the director and the designer was an enforceable construction contract, the designer cannot recover the full amount that she was to receive upon completion of the project because she never completed the work.

On April 1, a nurseryman offered to sell 500 ready-to-plant navel orange trees to an orange grower for $2,500. In return for $50, which the grower paid to the nurseryman, the nurseryman gave the grower a signed written statement that recited the offer and stated that the nurseryman promised not to revoke for a period of 45 days. Two weeks later, on April 14, the grower wrote to the nurseryman: "I have decided to purchase the trees, and I have enclosed my check for $2,500. I am not going to be able to plant the trees until September, however, so I will accept delivery at that time. I will, of course, pay you for their water and maintenance." How is a court likely to construe the grower's letter? A - As a counteroffer, because it changes the terms of the offer. B - As a counteroffer, because it was not a definite expression of acceptance. C - As an acceptance, and the nurseryman must retain and care for the trees but is entitled to the reasonable value of that service. D - As an acceptance, and the nurseryman may refuse to retain and maintain the trees.

The correct answer is: As an acceptance, and the nurseryman may refuse to retain and maintain the trees. Under UCC Section 2-207, where both parties are merchants and there is an acceptance which varies from the terms of the offer, the offer is deemed accepted and the new terms will be incorporated into the newly formed contract unless: (1) the offer was expressly limited to its own terms; (2) the offeror objects within a reasonable time; or (3) the new terms "materially alter" the contract. Here, both the nurseryman and the grower appear to be merchants (as to the practices involved in the contract), the nurseryman's offer was merely for the sale of the trees and included no care or storage terms. Terms "materially alter" the contract if they cause surprise or hardship to the other party. In this case, requiring the nurseryman to retain and care for the trees for five months would impose a hardship that was not contracted for. Thus, pursuant to UCC Section 2-207, the grower's new terms in the grower's letter would materially alter the contract and would not be incorporated into the contract. As such, the nurseryman would be free to refuse the newly proposed terms, to retain and maintain the trees

A businessman was scheduled to attend a two-week conference in a distant city. The local forecast for his town called for heavy snow during his absence, so he promised to pay his neighbor's son $10 a day if the neighbor's son promised to shovel his sidewalk and driveway while he was away. The boy said he would agree to do the shoveling but only if the man would pay him $15 per day. The man left for his conference without responding to the boy's price modification. The snow arrived as predicted, and the boy shoveled each evening for 14 days. When the man returned the boy requested payment, but the man refused. If the boy sues the man for services rendered, which of the following is true? A - The boy is entitled to $140, which is $10 for each day's work. B - The boy is entitled to $210, which is $15 for each day's work. C - The boy is entitled to reasonable payment for services rendered. D - The boy is not entitled to any payment.

The correct answer is: The boy is not entitled to any payment. A valid contract requires an offer, an acceptance, and consideration. In this case, no contract was ever formed. The boy's attempt to modify the price constituted both a rejection of the man's original offer and a counteroffer, which the man never accepted. Without a valid contract, the man is under no obligation to tender payment. Discussion of incorrect answers Incorrect. The boy is entitled to $140, which is $10 for each day's work. A counteroffer serves as a rejection of the original offer, so the man is not held to his offer to pay $10 per day. Incorrect. The boy is entitled to $210, which is $15 for each day's work. The man never accepted the boy's counteroffer, so he is not obligated to pay $15 per day. Incorrect. The boy is entitled to reasonable payment for services rendered. The "reasonable value of services rendered" is a standard used for quantum meruit, or quasi-contract. Here, no such standard is called for because the man was not aware that the boy had started to perform. Think Like a Lawyer - If the parties never agree on the offer and acceptance, there is no contract. Step by Step Walkthrough Step 1: A contract requires an offer, acceptance, and consideration. Step 2: Here, the man offered $10 per day. The boy rejected the offer and provided a counter-offer at $15 per day. The man did not accept the offer. There was no contract. Step 3: However, the boy voluntarily shoveled every day that the man was away. What is the boy owed? Nothing, because there was no contract for his services, and he provided them anyway, gratuitously. Select the answer saying that the boy is not entitled to any payment. Step 4: Ignore the answer options stating either $10 or $15 for a day's work, because there was no contract at either of these prices. Step 5: Ignore the answer option stating that the boy is entitled to reasonable payment for services rendered. This is a very tempting answer choice. The boy conferred a benefit on the man. Unfortunately for the boy, quantum meruit is available when there is a contract implied-in-fact, but perhaps not verbalized or set down in writing. In such a case, the provider will recover the reasonable value of the services provided. However, here, there was no contract of any kind. The man did not know about the benefit, and thus could not accept or reject the boy's performance as the days went on. It is just as if the two had never talked, yet the boy voluntarily shoveled the driveway. The boy may receive a nice gift, but legally he is entitled to nothing.

A man sent an email to a friend that stated: "Because you have been a great friend to me, I am going to give you a rare book that I own." The friend replied by an email that said: "Thanks for the rare book. I am going to give you my butterfly collection." The rare book was worth $10,000; the butterfly collection was worth $100. The friend delivered the butterfly collection to the man, but the man refused to deliver the book. If the friend sues the man to recover the value of the book, how should the court rule? A - For the man, because there was no bargained-for exchange to support his promise. B - For the man, because the consideration given for his promise was inadequate. C - For the friend, because she gave the butterfly collection to the man in reliance on receiving the book. D - For the friend, because she conferred a benefit on the man by delivering the butterfly collection.

The correct answer is: For the man, because there was no bargained-for exchange to support his promise. To constitute consideration, a return promise must be bargained for. A return promise is bargained for when it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise. Because the man's promise to give the rare book to the friend did not seek a return promise or performance, the friend's promise to give the man her butterfly collection did not constitute consideration for the man's promise. Accordingly, no contract arose between the parties, and the court should rule in favor of the man. Discussion of incorrect answers: Incorrect. For the friend, because she conferred a benefit on the man by delivering the butterfly collection. The fact that a promisee confers a benefit on a promisor does not create an enforceable obligation on the part of the promisor. The dispositive issue here is whether the friend's promise to give her butterfly collection to the man constituted consideration for the man's promise. Because the man's promise to give the rare book to the friend did not seek a return promise or performance, the friend's promise did not constitute consideration for the man's promise. Accordingly, no contract arose between the parties, and the court should rule in favor of the man. Note to self: LB to Por = ALT to the "LD to the Pee"'s part of the Consideration // NOT to the "Bargained-For" part (i.e. reciprocal inducement) part. Your first choice was right.

On September 1, a well known inspirational speaker, highly regarded for his willingness to share his story of addiction, criminal activity and eventual rehabilitation with troubled teens, sent a brochure to local high schools reading as follows: "I would be pleased to come and share my story with your students. I will charge only $200 plus expenses, but I reserve the right to have my lecture and the following question and answer segment videotaped. The video will not be used without the express written permission of your school principal. Please respond to this address on or before October 1 for scheduling purposes." On September 3, prior to receiving the brochure, the principal of Local High School #12 posted a letter to the speaker inviting him to speak at the school "at some point during the Fall semester." The principal's offer indicated that the school district could not afford to pay more than $200 plus expenses, but he was willing to allow the lecture and the question/answer session to be videotaped if he could have controlling rights over any potential future use. As of September 3, what is the status of the relationship between the speaker and the principal? A - A contract was formed when the principal posted his letter. B - A contract was formed if the speaker received the letter on or before October 1. C - No contract was formed, because neither party accepted the terms of the offer. D - No contract was formed, because the terms of the contract were not identical.

The correct answer is: No contract was formed, because neither party accepted the terms of the offer. This question illustrates the issue of "cross offers." An offeror and an offeree need to acknowledge their agreement to mutual terms. Where cross offers occur, even when the terms appear to be identical, neither party has actually accepted the other's offer, so no contract has been formed. Discussion of incorrect answers Incorrect. A contract was formed when the principal posted his letter. This answer is incorrect because the speaker had not yet received the letter, so there was no "meeting of the minds." Incorrect. A contract was formed if the speaker received the letter on or before October 1. This answer is incorrect because the question asks for the status of the contract as of September 3 Incorrect. No contract was formed, because the terms of the contract were not identical. This answer is incorrect because the terms offered by both the speaker and the principal were identical. Think Like a Lawyer - Contracts need both an offer and acceptance, supported by consideration. Step by Step Walkthrough Step 1: A contract requires offer, acceptance, and consideration. Step 2: Here, the speaker sent out an offer on September 1, that had not yet reached the principal. Therefore, the principal could not accept the offer, because he didn't even know that it existed. Step 3: The principal sent out an offer on September 3. The call of the question is what is the relationship between the speaker and the principal on September 3. The answer is that there are two offers outstanding, but neither one yet has been accepted. Thus, as yet, there is no contract. Step 4: Select that no contract was formed, because neither party accepted the terms of the offer. Step 5: This question really is that straight-forward. A contract requires a meeting of the minds, which has not yet occurred. On September 3, the two parties didn't even know that the other party was reaching out to him.

A retired stockbroker in her sixties is physically frail and relies on her two daughters to help her with shopping, medical appointments, and other activities outside her home. One day while her daughter is bringing her home from a visit with a friend, the daughter stops the car outside the woman's house and says to her, "I'm concerned about what will happen to your assets in the event that you need to go to a nursing home before you die. Don't you think you should give some money to each of your children to hold for you in case you have financial needs after a nursing home has taken all of your money?" She hands the retired stockbroker's checkbook to her. The retired stockbroker says, "You make a good point, but I want to look over my finances and think about it first." The next week, when the two daughters come to the retired stockbroker's house for a visit, she hands them each a check for $20,000. If the retired stockbroker later wants to void the checks, can she do so on the basis of undue influence? A - Yes, because she was frail and depended on her daughters to help her with her regular activities. B - Yes, because her daughter tried to get her to write a check immediately. C - No, because she gave checks to both daughters and not just the one who discussed the issue with her. D - No, because she had time to consider the issue.

The correct answer is: No, because she had time to consider the issue. Undue influence is judged by a variety of factors that show whether the aggrieved party was pressured by another party and whether the aggrieved party was vulnerable to that pressure. Here, the retired stockbroker is not extremely elderly. While she is frail, she does not seem to have any mental incapacity. Because of her previous profession, she is sophisticated in handling finances. Although her daughter did try to apply pressure to her by discussing the matter in the car and handing the retired stockbroker her checkbook, the retired stockbroker was apparently not susceptible to pressure. She had a week to consider the situation before taking action. Looking at these different factors, it does not appear that the daughter exercised undue influence.

On March 15, in a signed written contract, a manufacturer agreed to sell 40,000 pens at $1 each to a retailer, delivery to be made in two equal installments on April 1 and May 1. The contract was silent as to the time of payment, but on March 25 the two parties orally agreed that the entire purchase price was to be paid on delivery of the second installment. On April 1, the manufacturer delivered 20,000 pens, and the retailer accepted them. The manufacturer then demanded payment of $20,000. When the retailer refused to make the payment, the manufacturer sued the retailer for breach of contract. In its defense, the retailer proffered evidence of the March 25 oral agreement. Is the manufacturer likely to succeed in its action? A - No, because even though the March 25 oral agreement is not effective, payment is due at the time of the second installment. B - No, because the March 25 oral agreement was an effective modification of the written contract. C - Yes, because the parol evidence rule bars the introduction of evidence of an oral agreement modifying a written contract. D - Yes, because there was no consideration to support the modification.

The correct answer is: No, because the March 25 oral agreement was an effective modification of the written contract. (B) is the correct answer. The parties are free to modify their contract after initial formation, which they have done here to add the payment deadline. (A) is wrong, although tempting because of the possible applicability of the UCC Statute of Frauds as a defense, but the rationale of (A) is incorrect because there is no particular UCC default rule which would specify that payment was otherwise due at the time of the second installment. Rather, the general default rule in the absence of a specific time would be that payment was due at a reasonable time, which could vary depending on the facts, circumstances, prior course of dealing, or usages of trade. (C) is wrong because the parol evidence rule does not apply to extrinsic evidence that is subsequent to execution of a written contract, but rather, only to evidence that is prior to or contemporaneous with such execution. Finally, (D) is wrong because while under the common law, consideration is generally required to support a modification, under the UCC, no such consideration is required for modifications (as long as good faith is present).

After inspecting his neighbor's house, a housecleaner agreed in writing to clean it for $150. That night, the neighbor had dinner with his wealthy nephew, who said that he too was looking for a good housecleaner. The neighbor agreed in writing to assign his rights to the contract with the housecleaner for $150. The nephew paid the $150 and took the signed assignment with him to the housecleaner. After seeing the nephew's massive house, the housecleaner refused to honor the assignment. Did the housecleaner breach the contract? A - Yes, because the nephew was a third-party beneficiary. B - Yes, because the contract did not specify that assignments were void. C - Yes, because the assignment was in writing and supported by consideration. D - No, because the nephew's house was much larger than the neighbor's.

The correct answer is: No, because the nephew's house was much larger than the neighbor's. An assignment that materially changes the duty of the other party is invalid. The housecleaner created the contract with the neighbor based on the size of the neighbor's house. The difference in houses materially changed the duty to which the housecleaner had agreed. Therefore the assignment is unenforceable.

While a wealthy art collector was away, there was a burglary at her home, and her favorite Picasso painting was stolen. Although the painting was insured for $1,000,000, it had a market value of over $1,500,000. The collector returned from her trip and met with a detective employed by her insurance company to investigate the theft. During their meeting, the collector told the detective that she would pay him an extra $50,000 if he recovered the painting. For the next three weeks, the detective investigated the theft as part of his responsibilities with the insurance company. Within the course of this investigation, the detective learned who was responsible for the burglary. Consequently, the culprit was apprehended and the Picasso painting was recovered and returned to the collector. The detective then requested the $50,000 that the collector had promised to pay him. After the collector refused to make the payment, the detective sued the collector for breach of contract. For whom should the court rule? A - The collector, because her promise was gratuitous. B - The collector, because the insurance company owed her a preexisting duty to find the painting. C - The detective, because the collector's promise did not need to be in writing to be binding. D - The detective, because the market value of the painting exceeded its insured value, so there was sufficient consideration to support the collector's promise.

The correct answer is: The collector, because the insurance company owed her a preexisting duty to find the painting. This issue dealing with the preexisting duty rule is often tested on the MBE. It does not constitute legal detriment when a party performs an act that he is legally obligated to do. In this question, the detective was hired by the insurance company to investigate the theft. Because he had a preexisting duty to perform this service, his promise to the collector was not supported by consideration, and is therefore unenforceable.

A woman wants to buy furniture for her home. One day, she sees a new furniture set being produced by a famous furniture manufacturer. She immediately orders the furniture set by calling the manufacturer and orally agreeing to purchase the set for $3,000. The woman then sends a signed letter describing the transaction to the manufacturer. However, two days later, the manufacturer decides not to deliver the furniture set. Which of the following is correct regarding the manufacturer's obligation? A - The contract is enforceable, because the woman sent a signed letter describing the offer. B - The contract is not enforceable, because of the "main purpose" rule. C - The contract is not enforceable, because the manufacturer never signed the letter. D - The contract is enforceable, because there was a meeting of the minds.

The correct answer is: The contract is not enforceable, because the manufacturer never signed the letter. Contracts for the sale of goods at a price of $500 or more fall under the Statute of Frauds. If a contract falls within the Statute of Frauds, the general rule is that the contract is unenforceable unless evidenced by a writing signed by the party against whom enforcement is sought. Here, the contract is unenforceable, because it is for $3,000 and yet it cannot be evidenced by a signed writing by the manufacturer. The only writing that exists is the one by the woman, but enforcement is being sought against the manufacturer, not against the woman, so this letter is insufficient to satisfy the Statute of Frauds. Therefore, this answer is correct.

A man has recently lost his job so he decides to open his own business, which will be a grocery store. He contacts a grocery supplier and inquires as to the cost of groceries. He then signs a contract with the supplier by which the supplier will deliver groceries worth $1,000 in one month, conditioned on the man receiving a business loan from the bank to open his store. The man forgets to apply for a loan. Which of the following is correct? A - The contract is valid and the man must pay for the groceries, because the requirement that the man must receive a business loan is not a valid condition. B - The contract is valid and the man must pay for the groceries, because he conducted himself in bad faith. C - The contract is discharged, because the man did not receive a business loan from the bank. D - The contract is discharged, because the man receiving a business loan was an implied condition.

The correct answer is: The contract is valid and the man must pay for the groceries, because he conducted himself in bad faith. In some contracts, the obligation to perform is conditioned upon some event or action by the other party. A condition will be excused on the basis of bad faith conduct by the beneficiary of the condition. Thus, bad-faith conduct will excuse the condition where the benefiting party interferes with the fulfillment of a contract, or where the benefiting party fails to take steps necessary for the condition's fulfillment. Here, the obligation to perform was conditioned on the man receiving a business loan from the bank. That condition was not satisfied. However, the condition will be excused, because the man acted in bad faith in forgetting to apply for a business loan. As such, he will have to pay for the groceries. Discussion of incorrect answers: Incorrect. The contract is valid and the man must pay for the groceries, because the requirement that the man must receive a business loan is not a valid condition. The condition that the man receive a business loan is a valid condition. There is no law that would invalidate this condition. However, since the condition was excused by the man's bad faith conduct in forgetting to apply for a business loan, the contract is still valid and the man must pay for the groceries. Incorrect. The contract is discharged, because the man did not receive a business loan from the bank. The contract is not discharged even though the man did not receive a business loan from the bank, because the man acted in bad faith by forgetting even to apply for a loan. A condition will be excused on the basis of bad faith conduct by the beneficiary of the condition. Therefore the contract is valid and the man will have to pay for the groceries. Incorrect. The contract is discharged, because the man receiving a business loan was an implied condition. The contract is not discharged, because the man acted in bad faith and the condition that he receive a business loan is excused. Additionally, this is not an implied condition, but an express condition, because it is expressly included in the contract. Implied conditions are those created under common law or the UCC to address order of performance and rights upon breach when the parties have not done so expressly. Think Like a Lawyer - A client cannot escape his contract obligations through his own bad-faith failure to perform. Step by Step Walkthrough Step 1: Ordinarily, if there is a condition that must occur before a contract takes effect, and that condition does not occur, then there is no contract in force. The contract never became effective. Step 2: However, if the failure of the condition precedent was the bad-faith fault of the party responsible for making it occur, then the bad-faith party cannot escape liability under the contract. Step 3: Consequently, in this fact pattern, the supplier can still deliver the groceries and collect $1,000. The failure of the condition precedent was the man's own bad-faith fault, and the man cannot profit from that. Please note that this is a rare situation. Ordinarily, the failure of the condition simply voids the contract. Step 4: Select the answer choice where the man must pay for the groceries because he acted in bad faith.

The director of a nursing home was often contacted by the sales representatives of nursing and hospital supply companies. On November 1, a salesperson for a linens store made a sales call at the nursing home. During a meeting with the director, the salesperson offered to sell the director 500 white, 100% cotton bath towels for the nursing home for $10 per towel. The total contract price of $5,000 would be payable 60 days after the date of delivery. The salesperson stated that delivery could be made by November 20. The director orally accepted the offer. On November 3, the director mailed the salesperson a memorandum that read, "Re: Towels. Please be aware that I expect to take the standard 10% discount for cash payment within 15 days of delivery for a total contract price of $4,500. Signed, the director." The salesperson received the director's November 3 memo on November 6. On November 17, the salesperson faxed the director a memorandum reading, "Based on your correspondence dated November 3, it is evident that we have not formed a legally enforceable agreement. Therefore, the linens store will not deliver the towels." The director sued the salesperson and the linens store for breach of contract. Assume that at trial, the salesperson admitted to contracting to sell 500 bath towels to the director, thus waiving any Statute of Frauds defense, but argued that the director's 10% discount term was not included in the contract. What was the contract price for the towels? A - The contract price was $5,000, because the discount term included in the director's memo was a material alteration to the terms of the salesperson's offer. B - The contract price was $5,000, but only if the salesperson expressly limited acceptance of the offer to the terms contained in the offer. C - The contract price was $4,500, because the salesperson never expressly objected to the discount term. D - The contract price was $4,500 for cash payment within 15 days of delivery, because the director's memo integrated the agreement between the director and the salesperson.

The correct answer is: The contract price was $5,000, because the discount term included in the director's memo was a material alteration to the terms of the salesperson's offer. At common law, an offer must be accepted exactly as made. Any change to the terms of the offer that are proposed by the offeree will prevent the formation of a contract. The offeree's terms constitute a rejection of the offer and the proposal of a counter-offer. Article 2 of the UCC does not follow the common law mirror image rule. Under UCC Section 2-207, an acceptance or written confirmation which is sent within a reasonable time and which indicates the intent to enter into a contract is effective as an acceptance, even if it includes additional or different terms, unless acceptance is expressly made conditional on assent to the additional terms. Although a contract is made, the terms of the contract depend on whether both of the parties are merchants. If one of the parties is not a merchant, the contract includes only the terms contained in the offer. The additional or different terms are viewed merely as proposals that may be separately accepted or rejected. If both parties are merchants, as here, the additional terms become part of the contract unless they materially alter the offer or are timely objected to by the initial offeror. Thus, a contract was formed, but the contract price was $5,000 because the discount term included in the director's memo was a material alteration to the terms of the salesperson's offer.

In May, a cafe owner entered into a written agreement with a general contractor to build a cafe on the cafe owner's land by the following April for $2,000,000. During construction, the cafe owner realized that it would be too expensive to maintain the building if it were built as originally planned. The parties orally agreed to reduce the size of the cafe and to reduce the cafe owner's payment to $1,800,000. The contractor completed the cafe and demanded $1,800,000. However, the cafe owner refused to pay that amount, claiming that the reduction in the cafe's size was a breach of the original contract entitling her to damages, which would significantly reduce the amount owed on the contract by more than $200,000. If the contractor sues, who will prevail? A - The contractor, because the oral modification is enforceable. B - The contractor, because the court can determine the value of his services in quantum meruit. C - The cafe owner, because the oral modification is unenforceable pursuant to the Statute of Frauds. D - The cafe owner, because the oral modification is unenforceable pursuant to the parol evidence rule.

The correct answer is: The contractor, because the oral modification is enforceable. The oral modification of the original contract between the two parties is enforceable, because it is supported by bilateral consideration (each party agreed to accept a lesser performance from the other) and because a written contract may be modified by an oral agreement. Therefore, this is the correct answer. Discussion of incorrect answers: Incorrect. The cafe owner, because the oral modification is unenforceable pursuant to the Statute of Frauds. The subject of the contract between the parties is the construction of a building on land owned by the cafe owner. Even though building materials are involved, this is primarily a service contract because the services are its predominant purpose. It is therefore not covered by the Statute of Frauds. Because the contract itself is not subject to the Statute of Frauds (despite its being in writing), a modification of the contract is also not subject to the Statute of Frauds and will be valid even if not written. Thus, this answer is incorrect.

A home improvement center contracts with a manufacturer for the delivery of 30 snow blowers on the first day of each month for a period of six months. The manufacturer makes timely deliveries for the first three months, but a fire destroys the assembly line, forcing the manufacturer to close his plant and suspend all future deliveries. The improvement center manages to obtain the remainder of the snow blowers from another manufacturer. If the center successfully sues the original manufacturer for breach of contract, which of the following is the proper measure of damages? A - Consequential damages only, because the breach was not intentional. B - Incidental damages only, because the center was able to obtain substitute goods. C - The difference between the contract price and the cover price only, because the fire was caused by an Act of God. D - The difference between the contract price and the cover price plus incidental and consequential damages because the manufacturer breached a contract for the sale of goods.

The correct answer is: The difference between the contract price and the cover price plus incidental and consequential damages because the manufacturer breached a contract for the sale of goods. This is an example of an answer choice that is correct "by default", primarily because all of the other choices are clearly wrong. According to UCC Section 2-715 the correct measure of damages when a default occurs under these circumstances is the difference between the contract price and the cover price at the time of the breach, plus incidental and consequential damages. Discussion of incorrect answers: Incorrect. Consequential damages only, because the breach was not intentional. This answer is incorrect because it states the wrong measure of damages. Also, the nature of the breach is not relevant to the call of the question. Incorrect. Incidental damages only, because the center was able to obtain substitute goods. This answer is also an incorrect measure of damages. Incorrect. The difference between the contract price and the cover price only, because the fire was caused by an Act of God. The answer says much the same thing as Choice (A) and is incorrect for the same reasons. Think Like a Lawyer - Where there is a breach of contract by a seller under the UCC, the buyer will win his foreseeable damages, which include the cost to cover, any incidentals, and the consequential damages that foreseeably flow from the breach. Step by Step Walkthrough Step 1: UCC 2-715 gives the buyer's remedies: (1) Incidental damages resulting from the seller's breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach. (2) Consequential damages resulting from the seller's breach include: (a) 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 (b) injury to person or property proximately resulting from any breach of warranty. Step 2: Here, the manufacturer could not deliver. The center covered, but it is not known whether the price to get the additional snowblowers was more or less than what the manufacturer was charging. If it was more, then the manufacturer is liable for the cost to cover. Step 3: In addition, the manufacturer is liable for any incidental and consequential damages related to the breach. Step 4: Under the facts given, the manufacturer has lost the lawsuit, and the call of the question is only about the damages owed to the center. Step 5: Select the answer stating that the center will win the difference between the contract price and the cover price plus incidental and consequential damages because the manufacturer breached a contract for the sale of goods. Step 6: Ignore the answer choices discussing how the breach occurred, because the facts given already state that the manufacturer has lost the lawsuit. The court has held that there was a breach, and that the manufacturer owes foreseeable damages.

A fisherman who needed to replace his small fishing boat entered into a written agreement with a marine outlet for the purchase of a larger fishing boat for a price of $190,000. The contract called for a 33% down payment ($62,700), with the balance due when the marine outlet delivered the boat. The contract had no liquidated-damages provision. Soon after the fisherman made the down payment, he was badly hurt in an accident and unable to continue in the commercial fishing business. The fisherman notified the marine outlet of his injury and stated that he did not intend to make any further payments because he no longer had any use for the boat. Because the marine outlet had an unlimited supply of boats, they subsequently sold the fishing boat to another purchaser for the same price of $190,000. The marine outlet had purchased the boat from the manufacturer for a price of $160,000. The fisherman then brought a restitution action against the marine outlet to recover his $62,700 down payment. Who will prevail? A - The marine outlet, because the standard measure of damages (the contract price less the resale price) would not adequately compensate the marine outlet for the fisherman's breach. B - The marine outlet, because a breaching purchaser is not entitled to restitution. C - The fisherman, for $32,700--the down payment less the profit the marine outlet would have realized from selling the boat to the fisherman. D - The fisherman, for the full down payment amount of $62,700, because his performance became impossible.

The correct answer is: The fisherman, for $32,700--the down payment less the profit the marine outlet would have realized from selling the boat to the fisherman. The Uniform Commercial Code's standard measure of damages is the difference between the market price and the contract price. If that is inadequate to put the seller in as good a position as he was prior to performance, the seller may recover the profit, including reasonable overhead, which the seller would have made from the buyer's full performance. Such damages are known as lost volume profits. Here, it is possible that the marine outlet was not adequately compensated by the sale of the boat to the second purchaser at a market price, because, if the fisherman had followed through with his purchase of the boat, the marine outlet could still have sold another boat from its stock to the second purchaser. In such a case, the marine outlet would have realized profits from two sales rather than one. Because the marine outlet is entitled only to lost volume profits and any incidental damages, it cannot retain all of the fisherman's down payment. The fisherman is seeking restitution--to be placed in the position he would have occupied had the contract never been formed. However, full restitution would ignore the marine outlet's right to lost volume profits, so the case cannot be resolved on the basis of restitution alone. For this reason, the court should rule that the fisherman is entitled to his down payment, less the profit the marine outlet would have realized from the sale.

An owner of a mansion and surrounding lands found that he could no longer afford to maintain the mansion on the rents paid by his workers. Rather than sell off the lands piecemeal, the owner agreed to sell the mansion and surrounding lands in its entirety to a purchaser. The two reached agreement while drinking at a bar. In order to memorialize their contract, the purchaser wrote the following on the blank backside of a menu: "The owner to sell the mansion and all the surrounding lands, platted as Mansion Estate, to the purchaser for $1,000,000, in earnest of which the owner hereby acknowledges receipt of $5,000." The purchaser gave the owner a personal check for $5,000, and both parties then signed the backside of the menu. Prior to closing, the owner received a letter from the purchaser stating that he would not be closing on the property and that the owner could keep the $5,000 earnest money. The land sale contract did not contain a liquidated damages provision. The owner had not cashed the check and instead of keeping it, he returned it to the purchaser, sold the mansion to someone else and sued the original purchaser for damages in excess of $10,000 to cover the difference between the sale price in the original contract and the sale price received later from the second buyer. The purchaser argued that the contract was void under the Statute of Frauds and even if not void, the $5,000 check in earnest money acted like a liquidated damages provision. How is the court likely to rule? A - The purchaser will be permitted to rescind the contract because it is void under the Statute of Frauds. B - The purchaser will only owe the owner the $5,000 in earnest money. C - The owner will be entitled to the $5,000 in earnest money plus expectation damages. D - The owner will be entitled to actual expectation damages, even if they exceed $5,000.

The correct answer is: The owner will be entitled to actual expectation damages, even if they exceed $5,000. Discussion of incorrect answers: Incorrect. The owner will be entitled to the $5,000 in earnest money plus expectation damages. This answer is false because without a contract provision to the contrary, the court will not award the owner more than the amount of his expectation damages (plus foreseeable consequential damages and reasonable reliance damages if sought). In other words, the owner will not be granted expectation damages and the $5,000 in earnest money as some sort of bonus. Had the owner kept the $5,000, the court would likely have subtracted that amount from the owner's total damages award. Think Like a Lawyer - One party, by fiat, cannot establish that a certain sum will represent liquidated damages, because both parties must agree on such a contract term. Step by Step Walkthrough Step 1: Where a contract does not contain a liquidated damages clause, and the contract is breached, the aggrieved party can sue for his expectation damages. Step 2: Here, the owner agreed to sell real estate for $1,000,000. The contract was in a signed writing, thus complying with the Statute of Frauds. The contract did not contain a liquidated damages clause. Step 3: The purchaser breached by refusing to close. The purchaser tried to make up his own rule that his $5,000 in earnest money would be all that the owner could collect for the breach. Unfortunately for the purchaser, that is not the law. The owner was within his rights to sue for the proper measure of damages for breach of contract, because the contract did not contain a liquidated damages clause. Step 4: Select the answer saying that the owner will be entitled to actual expectation damages, even if they exceed $5,000. Discard the option saying that the purchaser will only owe the owner the $5,000 in earnest money. Step 5: Discard the option saying that the contract is void under the Statute of Frauds, because this is not true. There is nothing wrong with using a menu as a place to write and sign a valid contract. A contract to purchase land must be signed by the party to be charged and must include the following essential terms: (1) description of the property; (2) description of the parties; (3) price; and (4) any conditions of price or payment if agreed on. All of those elements are met here. Step 6: Finally, discard the option saying that the owner will be entitled to both the $5,000 in earnest money plus expectation damages. He must elect one or the other. He cannot collect twice.

A seller and a buyer have dealt with each other in hundreds of separate grain contracts over the last five years. In performing each contract, the seller delivered the grain to the buyer and, upon delivery, the buyer signed an invoice that showed an agreed-upon price for that delivery. Each invoice was silent in regard to any discount from the price for prompt payment. The custom of the grain trade is to allow a 2% discount from the invoice price for payment within 10 days of delivery. In all of their prior transactions and without objection from the seller, the buyer took 15 days to pay and deducted 5% from the invoice price. The seller and the buyer recently entered into a contract for a single delivery of wheat at a price of $300,000. The same delivery procedure and invoice were used for this contract as had been used previously. The seller delivered the wheat and the buyer then signed the invoice. On the third day after delivery, the buyer received the following note from the seller: "Payment in full in accordance with signed invoice is due immediately. No discounts permitted. s/Seller." Which of the following statements concerning these facts is most accurate? A - The custom of the trade controls, and the buyer is entitled to take a 2% discount if he pays within 10 days. B - The parties' course of dealing controls, and the buyer is entitled to take a 5% discount if he pays within 15 days. C - The seller's retraction of his prior waiver controls, and the buyer is entitled to no discount. D - The written contract controls, and the buyer is entitled to no discount because of the parol evidence rule.

The correct answer is: The parties' course of dealing controls, and the buyer is entitled to take a 5% discount if he pays within 15 days. The Uniform Commercial Code controls in this situation. UCC Sec. 2-202, which is the UCC embodiment of the parol evidence rule, explicitly provides that, while a final written expression of agreement may not be contradicted by any prior agreement, it may be explained or supplemented "by course of dealing or usage of trade or by course of performance." A course of dealing, when inconsistent with a usage of trade, controls under UCC Sec. 1-303. Therefore, the agreement in this case should be interpreted to embody the parties' course of dealing, which provides for a 5% discount if payment is made within 15 days. Discussion of incorrect answers: Incorrect. The custom of the trade controls, and the buyer is entitled to take a 2% discount if he pays within 10 days. The Uniform Commercial Code controls in this situation. UCC Sec. 2-202, which is the UCC embodiment of the parol evidence rule, explicitly provides that, while a final written expression of agreement may not be contradicted by any prior agreement, it may be explained or supplemented "by course of dealing or usage of trade or by course of performance." A course of dealing, when inconsistent with a usage of trade, controls under UCC Sec. 1-303. The agreement in this case should be interpreted to embody the parties' course of dealing, which provides for a 5% discount if payment is made within 15 days. Incorrect. The seller's retraction of his prior waiver controls, and the buyer is entitled to no discount. This question does not raise an issue of waiver or retraction of a waiver, because there is no indication that payment within 15 days at a 5% discount is inconsistent with the parties' agreement. In fact, the seller's invoice is silent on the matter. Instead, the question goes to the meaning of the agreement made by the parties. The Uniform Commercial Code controls in this situation. UCC Sec. 2-202, which is the UCC embodiment of the parol evidence rule, explicitly provides that, while a final written expression of agreement may not be contradicted by any prior agreement, it may be explained or supplemented "by course of dealing or usage of trade or by course of performance." A course of dealing, when inconsistent with a usage of trade, controls under UCC Sec. 1-303. Therefore, the agreement in this case, which is silent on the discount matter, should be interpreted to embody the parties' course of dealing, which provides for a 5% discount if payment is made within 15 days. Incorrect. The written contract controls, and the buyer is entitled to no discount because of the parol evidence rule.

A seller was in the lumber business. On January 1, the seller and a lumber buyer entered into a written contract where the seller would deliver to the buyer 100 solid pine 2"x 4"s on the first day of each month for one year. For the first five months, the seller shipped and the buyer received the agreed-upon lumber. In early June, however, the seller found himself in a unique situation. Nationwide, the demand for lumber had increased and the supply of lumber had decreased. However, the seller had amassed a substantial supply of lumber over the past several years. Hoping to cash in on his large inventory, the seller wanted to take stock of his existing contracts to see what excess lumber he could sell. The seller learned from a reliable source that the buyer had lost a number of contracts due to some labor disputes and had concerns whether the buyer would be able to afford the lumber for the rest of the year. On June 15, the seller sent a letter to the buyer indicating that he was suspending his shipment of lumber until the buyer provided assurances that he would be able to honor the contract. The buyer did not respond and the seller did not deliver the contracted-for lumber on August 1. The buyer filed suit against the seller seeking performance of the agreed-upon delivery. Which of the following best addresses the obligations of the parties on August 1? A - The seller is in breach, because the buyer's financial situation was not unambiguous. B - The seller is free to sell the lumber to another buyer regardless of the buyer's needs, because his belief that the buyer might not perform was reasonable. C - The buyer may sue the seller, but must wait until September 1, when the next performance is due. D - The buyer must cover and the seller is obligated to pay the difference between the contract price and the market price.

The correct answer is: The seller is free to sell the lumber to another buyer regardless of the buyer's needs, because his belief that the buyer might not perform was reasonable. Discussion of correct answer: This question deals with the sale of goods. UCC Section 2-609(1) states, "When reasonable grounds for insecurity arise with respect to the performance of either party, the other party may, in writing, demand adequate assurance of due performance." If the proper assurances are not given, he may suspend his own performance. In this situation, the seller had reason to believe that the buyer would be unable to perform, sought the required assurances in writing, and received no response. The UCC further provides that after a reasonable time not exceeding 30 days has passed, the party seeking the assurances can treat the contract as repudiated.

A seller sold paraphernalia used for smoking marijuana. In the seller's state, the smoking or selling of marijuana was illegal, but the sale of the type of paraphernalia used for smoking it was legal. The seller met with a buyer, who wanted to order items to sell at his store. When they met, the state legislature was in a special session. On the published agenda was the issue of the sale of drug paraphernalia in the state. Before the special session ended, the buyer bought 50 items to be delivered in two weeks. Before the time for delivery, the legislature had passed a law making the sale of drug paraphernalia illegal. The law had to be signed by the governor, and it was expected that the governor would sign, rather than veto, the law sometime in the next three months, thereby making it official. On the day of delivery, the buyer refused to accept the items from the seller, who then sued the buyer for breach of contract. The buyer claimed impossibility due the pending law criminalizing sale of the merchandise. The seller claimed that the buyer knew that legislature was addressing the issue when they executed the contract, and, therefore, should be precluded from claiming impossibility. How is the court likely to decide? A - The buyer will prevail, because the pending law has made performance impossible. B - The buyer will prevail, if he can prove that he did not know of the legislative agenda regarding drug paraphernalia. C - The seller will prevail, because performance of the contract has not been made impossible. D - The seller will prevail, if he can prove that the buyer was aware of drug paraphernalia's being on the legislative agenda.

The correct answer is: The seller will prevail, because performance of the contract has not been made impossible. Impossibility excuses performance by both parties when performance has been rendered objectively impossible and the contingency that arose was unknown to both parties. Objective impossibility requires that performance be literally impossible, not just difficult or risky. Of course, all kinds of contingencies may be addressed in the contract itself but, absent any allocation of risk of the contingency in the contract, the doctrine of impossibility is available as a defense under its very restricted application guidelines. Here, the buyer is using impossibility as a defense to a charge of breach of contract, but he will fail. Performance has not yet been, and may never be, rendered impossible. Where a change in the law renders performance illegal, impossibility may be a valid defense to breach of contract. Here, the law has not yet changed, and it remains to be seen whether the governor will sign or veto the law. The seller is still able to legally deliver the contracted items, and the buyer is still able to legally sell the items in his store. Had the law been enacted by the governor prior to the delivery date, the question of the knowledge of the parties would come into play. Here, because performance is not impossible, it is irrelevant whether the buyer did or did not know about the legislative agenda.

A 16-year-old girl purchased an expensive pair of designer jeans at a retail store. She paid for the jeans by writing a check in the amount of $150, although she was aware that her account had less than $100 in it. The following day the girl wore the jeans to school. During her fourth period art class she spilled a bottle of paint thinner on herself, ruining the jeans in the process. After school she went home and threw the jeans in the trash. Several days later the store manager discovered that the girl's check had been returned marked "insufficient funds." The store promptly sued the girl and her parents for $150 based on breach of contract. Which of the following is true? A - The store has no legal claim against the girl, but they are entitled to recover $150 from her parents. B - The store may recover $150 from the girl, but they have no legal claim against her parents. C - The store may recover $150 from either the girl or her parents, but it may make only one recovery. D - The store cannot recover from anyone.

The correct answer is: The store cannot recover from anyone. This question addresses the liability of a minor who fails to complete a bargained-for exchange. Typically, contracts involving a minor are voidable at the minor's option. Minor is only obligated to return any goods, but is not liable for damages or the reasonable value of the goods, unless the contract involves necessaries--food, clothing, medical care, or shelter--. If the K involves necessaries: the other party will be entitled to the reasonable value of the goods or services in quasi-K. While the jeans qualify as clothing, they do not meet the standard definition of a "necessary," as they were purchased for pleasure rather than out of need.

A seller sent an email to a potential buyer, offering to sell his house to her for $150,000. The buyer immediately responded via email, asking whether the offer included the house's front porch swing. The seller emailed back: "No, it doesn't." The buyer then ordered a front porch swing and emailed back to the seller: "I accept your offer." The seller refused to sell the house to the buyer, claiming that the offer was no longer open. Is there a contract for the sale of the house? A - No, because the buyer's initial email was a counteroffer. B - No, because the offer lapsed before the buyer accepted. C - Yes, because the buyer relied on the offer by ordering the swing. D - Yes, because the buyer's initial email merely asked for information.

The correct answer is: Yes, because the buyer's initial email merely asked for information (= mere inquiry). A reply to an offer that merely requests information regarding the offer constitutes an inquiry rather than a counteroffer. The buyer's response asking whether the seller intended to include the front porch swing in his offer was an inquiry rather than a counteroffer. The buyer's subsequent email stating "I accept your offer" was an acceptance that created a contract between the parties. Therefore, the seller's attempted revocation of his offer was ineffective. Discussion of incorrect answers: Incorrect. No, because the buyer's initial email was a counteroffer. A reply to an offer that merely requests information regarding the offer constitutes an inquiry rather than a counteroffer. The buyer's response asking whether the seller intended to include the front porch swing in his offer was an inquiry rather than a counteroffer. The buyer's subsequent email stating "I accept your offer" was an acceptance that created a contract between the parties. Therefore, the seller's attempted revocation of his offer was ineffective. Note to self: not an invitation to make an offer because mail was sent from seller to buyer (1 on 1 conversation = offer).

The owner of a retail garden supply store ordered 500 terracotta flower pots from a wholesaler for a total price of $2,500. Under the contract, the wholesaler is to deliver the flower pots to the store on May 5. On May 1, the wholesaler delivers the flower pots to the store. Upon delivery, the owner of the store inspects the shipment. Although the wholesaler's catalog stated that the flower pots had drainage holes, the flower pots which were delivered did not. The store owner immediately notifies the wholesaler that the flower pots are defective. The wholesaler offers to replace the flower pots with a shipment of conforming flower pots to be delivered on May 4. The store owner refuses the wholesaler's offer and tells the wholesaler that he has decided to buy flower pots from a different wholesaler. Which of the following is the most accurate description of the parties' rights? A - The store owner had the right to reject the flower pots, subject to the wholesaler's right to cure, but only if the wholesaler delivered conforming pots immediately upon learning of the defects. B - The store owner had the right to reject the flower pots, subject to the wholesaler's right to cure. C - The store owner had the right to reject the defective flower pots under the UCC's perfect tender rule. D - The store owner was required to accept the flower pots, because they were still of merchantable quality.

The correct answer is: The store owner had the right to reject the flower pots, subject to the wholesaler's right to cure. When a buyer has contracted to purchase goods under a single delivery contract and the seller delivers nonconforming goods, the buyer has a right to reject the goods and sue for damages. (In the alternative, the buyer may keep the goods, or a portion of the goods, and sue for damages under the contract.) However, the buyer's right to reject nonconforming goods is subject to the seller's right to cure. To cure, the seller must notify the buyer of the intention to cure and then deliver conforming goods to the buyer. Generally, the conforming goods must be delivered within the originally contracted period for performance. Thus, under the facts presented, the store owner had a right to reject the nonconforming flower pots, but the wholesaler has a right to cure the defect. The wholesaler's actions were therefore consistent with Uniform Commercial Code requirement--the wholesaler gave the store owner reasonable notice that it intended to cure the defect and offered to deliver conforming goods within the original contract period. Discussion of incorrect answers: Incorrect. The store owner had the right to reject the flower pots, subject to the wholesaler's right to cure, but only if the wholesaler delivered conforming pots immediately upon learning of the defects. The store owner had the right to reject the flower pots, subject to the wholesaler's right to cure, but only if the wholesaler delivered conforming pots immediately upon learning of the defects. This fact pattern relates to a sale of goods, which is governed by the Uniform Commercial Code. Under the UCC, if a tender or delivery by the seller is rejected by the buyer as nonconforming goods and the time for performance has not yet passed, the seller may notify the buyer of the seller's intention to cure and may deliver conforming goods within the original time for performance. In this case, because the wholesaler delivered the pots in advance of the original contract date for performance, the wholesaler would remain in compliance with UCC requirements, and not in breach, so long as it made the conforming delivery on or before May 5. The wholesaler was not required to deliver the conforming goods "immediately." Thus, this answer is incorrect.

A high school student was deciding which college she would attend the following year. Her grandmother told her, "If you will follow in my footsteps and attend my alma mater, there will be a shiny new sports car waiting in the driveway on the day you graduate." The granddaughter promised to consider the offer. She did eventually enroll at her grandmother's alma mater but only because of a very attractive scholarship offer, coupled with the fact that her current boyfriend was planning to attend. Several weeks prior to the student's graduation, the grandmother died. Her will made no mention of any gift to her granddaughter. Immediately after her graduation, the student sued her grandmother's estate for the cost of a popular sports car. What is the most likely result? A - The student will win, because she fulfilled her part of the bargained-for exchange. B - The student will win, because she relied to her detriment on her grandmother's promise. C - The student will lose, because her grandmother's promise was gratuitous. D - The student will lose, because no specific car was selected and agreed upon.

The correct answer is: The student will lose, because her grandmother's promise was gratuitous. This is a variation on a popular MBE question--the promise of a future gift in exchange for a present act. While it is true that the student did attend her grandmother's college, she did so "only because" of independent benefits, not because of grandmother's offer. There was no bargained-for exchange. The grandmother merely alluded to a possible future gift; such promises are gratuitous and, therefore, unenforceable. Note: Remember!!! - What's the promise? - Is it enforceable? - the alleged consideration is... - Was it sufficient consideration? - Turns on whether there was (2) Bargained-for / (1) LD to Pee - LD to Pee = giving up of a choice // Alt: LB to Por - Bargained-for = reciprocal inducement // Alt: Promissory Estoppel

A store owner operates a retail store specializing in ethnic crafts and other tourist items. The store owner executed a written contract in March with a supplier whereby the supplier would deliver 1,000 hand-carved fertility statues, a popular item with the seasonal tourist crowd. Delivery was set for May 1, and the contract price was $1,000 for the lot. In early April, the supplier called the store owner to let him know that the wood carvers had unexpectedly gone on strike. The supplier wasn't sure that he would be able to deliver all of the 1,000 pieces on May 1 as scheduled. Because there was still time for the store owner to find an alternative distributor, the store owner asked the supplier during that same phone call for assurances that the supplier could deliver all of the 1,000 statues on schedule. If not, the store owner wanted to cancel the contract. The supplier said that he'd have to check. The next day, the supplier called the store owner and told him that he would do his best to have the 1,000 statues on schedule, one way or another. Still insecure after the supplier's uncertain spoken assurance, the store owner called the supplier on April 12 and told him that he would be going elsewhere for his statues. He then ordered 1,000 statues from a different distributor. On April 15, the store owner received a letter from the supplier asking for assurances that the store owner would accept delivery of the statues on May 1. The store owner called the supplier and reiterated that he was not going to be getting his statues from the supplier. On April 20, the supplier filed suit for damages for breach of contract. The store owner retracted his repudiation on April 25. Who is likely to prevail in the lawsuit? A - The supplier will prevail, because the store owner anticipatorily repudiated the contract. B - The supplier will prevail, because the store owner breached the contract. C - The store owner will prevail, because the supplier anticipatorily repudiated the contract. D - The store owner will prevail, because the store owner retracted his repudiation prior to the contract delivery date.

The correct answer is: The supplier will prevail, because the store owner anticipatorily repudiated the contract. In this case, the written contract was for the sale of goods and, therefore, the provisions of the UCC are applicable. The UCC requires that demands for adequate assurances be in writing. The store owner asked the supplier for assurances over the phone and, therefore, did not satisfy the requirements under the UCC. As a result, although he did receive a response from the supplier, even if the supplier had failed to give any assurance, the store owner was not in a position to treat the supplier as though the supplier had anticipatorily repudiated the contract. He had no grounds to cancel the contract with the supplier and, therefore, when he indicated to the supplier that he would not accept the supplier's statues, it was the store owner who was threatening anticipatory repudiation. By asking for assurances in writing, the supplier satisfied the requirements of the UCC. Therefore, when the store owner confirmed that he was not going to honor the contract, the supplier was in a position to treat the situation as a breach of contract and sue for damages or specific performance. Once an aggrieved party has filed suit, it is too late for the repudiating party to retract the repudiation of the contract so the store owner's action on April 25 has no effect.

A hotel chain was building a new luxury resort adjacent to an unspoiled beach and across the street from a golf course. The hotel was scheduled to be completed and open for business on May 1. On February 1, a travel agency entered into a written contract with the hotel chain to book a five-day convention at the resort. The contract stipulated that the travel agency would hold the convention between June 1 and July 1. In accordance with the agreement, the travel agency paid a deposit of $40,000 to reserve 100 rooms at the resort. On May 15, the hotel chain notified the travel agency that due to construction delays, the resort would not be open for business until July 15. The travel agency demanded a refund of its $40,000 deposit. The hotel chain refused to return the deposit. The contract between the hotel chain and the travel agency did not contain any provision regarding the refund of the prepaid deposit. The travel agency sued the hotel chain to recover the $40,000 deposit. Judgment should be for whom? A - The travel agency, because the hotel committed a total breach. B - The travel agency, because the hotel chain's performance is nonconforming, and it is unreasonable to believe that the travel agency would accept the nonconforming performance. C - The hotel chain, because the deposit may be retained as liquidated damages. D - The hotel chain, because the inability to open the resort on time was due to an unforeseen intervening event.

The correct answer is: The travel agency, because the hotel committed a total breach. The hotel chain committed a total breach by failing to open the resort in time for the convention. As a result, the travel agency would be entitled to restitutionary damages for the value of the benefit conferred on the resort, which in this case is the $40,000 deposit. Discussion of incorrect answers: Incorrect. The travel agency, because the hotel chain's performance is nonconforming, and it is unreasonable to believe that the travel agency would accept the nonconforming performance. The doctrine of nonconforming tender applies to UCC sale of goods contracts. However, this doctrine would not apply on these facts. Under the UCC, "goods" are movable items. Hotel rooms are not movable items, and therefore, the UCC would not apply.

On May 1, an uncle mailed a letter to his adult nephew that stated: "I am thinking of selling my pickup truck, which you have seen and ridden in. I would consider taking $7,000 for it." On May 3, the nephew mailed the following response: "I will buy your pickup for $7,000 cash." The uncle received this letter on May 5 and on May 6 mailed a note that stated: "It's a deal." On May 7, before the nephew had received the letter of May 6, he phoned his uncle to report that he no longer wanted to buy the pickup truck because his driver's license had been suspended. Which of the following statements concerning this exchange is accurate? A - There was a contract as of May 3. B - There was a contract as of May 5. C - There was a contract as of May 6. D - There is no contract.

The correct answer is: There was a contract as of May 6. The uncle's original letter was not an offer. It was merely a statement indicating a possible interest in selling the truck, and a suggestion as to a price that might be acceptable. It would be regarded, if anything, as an invitation to make an offer. The nephew's letter, mailed on May 3, constituted an offer to buy the pickup. The uncle's note, mailed on May 6, constituted an acceptance of the nephew's offer and was effective when mailed (upon dispatch). A contract arose on May 6.

A computer researcher developed a new computer chip that would triple the speed at which computers could process data. The researcher orally agreed to sell 50,000 chips to a startup computer company for $2 million. The company orally agreed to pay $200,000 of the purchase price to the researcher's supplier for outstanding invoices owed by the researcher. The researcher later dictated the agreement to his secretary, who was not familiar with typing contracts. As a result, the secretary failed to include any provisions relating to the payment to the supplier. Neither the researcher nor the company noticed the omission. Both signed the agreement as it was typed. If the supplier subsequently sues the company for the $200,000 owed it by the researcher, which of the following issues should the court consider to be the most important? A - Whether the company and the researcher were negligent in not having carefully read the written agreement. B - Whether the oral agreement contradicts the terms of the written agreement. C - Whether the supplier was a party to the contract. D - Whether the researcher-company agreement was completely integrated.

The correct answer is: Whether the researcher-company agreement was completely integrated. The company's agreement to pay the researcher's supplier the $200,000 it was owed was not included in the written agreement. Thus, the only way in which the supplier can prevail in its lawsuit is by introducing evidence of the oral agreement. However, the parol evidence rule excludes any oral or written statements of the parties made prior to or contemporaneous with the signing of the contract where those statements would vary or contradict the written contract. Evidence offered to supplement the terms of the contract will be admissible under this rule depending on whether the contract is partially or completely integrated. If the contract is partially integrated, the evidence will be admissible to add to the terms of the contract; if the contract is completely integrated, the evidence will be inadmissible. A contract is partially integrated where the parties intend a writing to be the final and complete expression of their agreement as to certain matters but intend other matters to be the subject of a separate agreement. Therefore, the most important issue for the court to decide is whether the researcher-company agreement was fully integrated, as that answer will determine whether evidence of the oral agreement benefiting the supplier should be admitted.

A builder and a homeowner entered into a contract for the builder to remodel a house. The work was to be performed in four stages, and the homeowner was to pay a portion of the fee as each stage was completed. After the first stage was done, the homeowner told the builder she was unable to pay him right away, but that she could pay him shortly. The builder continued to work, until the homeowner did not make the second payment as scheduled. The builder then stopped working, and the homeowner claimed that the builder had breached the contract by failing to complete the project. Has the builder breached the remodeling contract? A - No, because the homeowner did not make payments as required. B - No, because there was no consideration given for a modification of the contract. C - Yes, because the builder is acting in bad faith. D - Yes, because he waived his objection to the homeowner's failure to make payments.

The correct answer is: Yes, because he waived his objection to the homeowner's failure to make payments. Generally, a failure of the occurrence of an express condition will discharge the performance obligation of the party who stood to benefit from the condition. This means that the builder would ordinarily be excused from further performance when the homeowner failed to pay as required. However, the failure of the condition may be excused without discharging the beneficiary's performance obligation if the beneficiary waives the right to be discharged and performs anyway. When a condition is waived, the waiving party's obligation becomes absolute because it is no longer subject to the condition. Thus, when the builder continued to perform despite the missed payment, the condition that the homeowner make periodic payments no longer applied.

An elderly woman entered into a written contract with a roofer. The contract stated that (1) the roofer agreed to repair the woman's old, cracked roof by Memorial Day for $300; and (2) the woman agreed to pay the roofer the $300 in advance. The contract stated that it was "fully integrated" and memorialized all the terms of the agreement between the parties. While they were signing the contract, the roofer said, "I can't start the work until you get the appropriate permit required by your town." The woman agreed to get the permit. By July, the roofer had not done any work on the roof, so the elderly woman sued him for breach of contract. The roofer raises as a defense the fact that he told the woman he could not do any work until she got the required permit and she never got the permit. Under the parol evidence rule, would this evidence be admissible? A - No, because the contract included a merger clause. B - No, because it contradicts the contract terms. C - Yes, because it helps interpret the terms of the agreement. D - Yes, because it is proof of a condition precedent.

The correct answer is: Yes, because it is proof of a condition precedent. This is the correct answer because the evidence is being used to show a condition precedent has failed and thus the parties' obligations under the contract are discharged. A condition precedent is a contingency that must be completed before liability or obligations under the contract become effective. The parol evidence rule does not bar extrinsic evidence from being admitted to prove such a condition precedent was agreed to or that the condition failed where both parties' obligations would be discharged if the condition failed. In this case, evidence that roofer told the woman she must get the permit first and the woman agreed, and evidence that the woman never obtained the necessary permit are offered to show that the obligation to perform under the contract did not attach to the roofer as a result. Thus, this evidence would be admissible to show a failure of a condition precedent and would not be barred by the parol evidence rule.

A seller borrowed $5,000 from a bank. Soon thereafter the seller filed for bankruptcy, having paid nothing on his debt to the bank. Five years after the debt had been discharged in bankruptcy, the seller contracted to sell certain goods to a buyer for $5,000. The contract provided that the buyer would pay the $5,000 to the bank. The only debt that the seller ever owed the bank is the $5,000 debt that was discharged in bankruptcy. The seller delivered the goods to the buyer, who accepted them. If the bank becomes aware of the contract between the seller and the buyer, and the buyer refuses to pay anything to the bank, is the bank likely to succeed in an action against the buyer for $5,000? A - No, because the buyer's promise to pay the bank was not supported by consideration. B - No, because the seller's debt was discharged in bankruptcy. C - Yes, because the bank was an intended beneficiary of the contract between the buyer and the seller. D - Yes, because no consideration is required to support a promise to pay a debt that has been discharged in bankruptcy.

The correct answer is: Yes, because the bank was an intended beneficiary of the contract between the buyer and the seller. The buyer and the seller entered into a bargained-for exchange for the sale and purchase of goods. Because their agreement provided that the buyer would pay to the bank the $5,000 that the buyer had promised to pay for the goods, the bank was an intended beneficiary of the enforceable agreement between the seller and the buyer, and the buyer is obligated to pay the bank. Discussion of incorrect answers: D is incorrect because. It is true that a promise by a debtor to pay a debt that has been discharged in bankruptcy requires no consideration to be enforceable. In this case, however, the discharge of the seller's debt is irrelevant. Here, the seller and the buyer entered into a bargained-for exchange for the sale and purchase of goods. Because their agreement provided that the buyer would pay to the bank the $5,000 that the buyer had promised to pay for the goods, the bank was an intended beneficiary of the enforceable agreement between the seller and the buyer, and the buyer is obligated to pay the bank.

An employer offered to pay a terminated employee $50,000 to release all claims the employee might have against the employer. The employee orally accepted the offer. The employer then prepared an unsigned release agreement and sent it to the employee for him to sign. The employee carefully prepared, signed, and sent to the employer a substitute release agreement that was identical to the original except that it excluded from the release any age discrimination claims. The employer signed the substitute release without reading it. Shortly thereafter, the employee notified the employer that he intended to sue the employer for age discrimination. Is the employer likely to prevail in an action seeking reformation of the release to conform to the parties' oral agreement? A - No, because the employer acted unreasonably by failing to read the substitute release prior to signing it. B - No, because the parol evidence rule will preclude evidence of the oral agreement. C - Yes, because the employee's fraudulent behavior induced the employer's unilateral mistake. D - Yes, because the parties were mutually mistaken regarding the contents of the signed release.

The correct answer is: Yes, because the employee's fraudulent behavior induced the employer's unilateral mistake. (C) is the correct answer. Although the parol evidence rule applies in certain instances to bar extrinsic or oral evidence of contract terms when the agreement has been reduced to writing, there are certain exceptions that apply when the validity of the agreement is at issue. Reformation is available when the parties reduce their agreement to written form, but as the result of mutual mistake or fraud, some provision or language was omitted from, inserted, or incorrectly stated in the instrument intended to be the expression of the actual agreement of the parties. In this case, the employee has acted fraudulently in the stealth exclusion of the release of age discrimination claims, and thus reformation will be available. (B) is wrong because reformation is an exception to the parol evidence rule.

A horse track owner and a mason entered into a written contract for the mason to build a low brick wall surrounding a courtyard at the track. The contract called for the mason to build the brick wall according to the track owner's particular specifications and satisfaction in exchange for payment of $1,500. Upon completion of the work, the horse track owner, in good faith, maintained that the mason did not complete the work properly and refused to pay him anything. The nature of the mason's construction business was such that his work was highly seasonal. On November 8, he sent a telegram to the track owner advising him that he desperately needed the $1,500 payment and requesting that the track owner send the money within the next two weeks. On November 12, the track owner replied with a telegram indicating that even though he was unhappy with the work, he would pay the mason $1,250 if the mason would repair the portions of the wall with which the track owner was least satisfied. The mason made no response to the track owner's telegram. On December 4, the track owner mailed a check for $1,250 to the mason with a note stating, "Payment in full for the decorative wall construction contract as per telegram of November 12." The mason received the letter and the check on December 7, and, in dire need of cash, deposited the check in his checking account that same day. The mason refused to undertake any further work for the horse track owner. The track owner filed an action against the mason for damages arising from the mason's failure to repair the wall. Will the track owner succeed? A - Yes, because the mason accepted his offer by not responding to the November 12 telegram. B - Yes, because the mason indicated his acceptance of the promise to rebuild a portion of the wall by depositing the track owner's check. C - No, because even if the mason is found to have made a promise to the track owner, no consideration exists to support the mason's promise. D - No, because the mason never accepted the track owner's counteroffer made in the November 12 telegram.

The correct answer is: Yes, because the mason indicated his acceptance of the promise to rebuild a portion of the wall by depositing the track owner's check. When two parties have entered into an agreement, they may modify the contract prior to full performance by both parties. In order to make a valid mutual modification, both parties must agree to the modification and new consideration must exist to support the modification. It can't look like a mere pretense of a new bargain for pre-existing duties. The mason accepted the check he received on December 7 and deposited it after receiving the track owner's proposal to change the terms of the parties' contract. The track owner's new consideration was tendering the check to the mason, even though the mason had failed to perform to the track owner's good-faith satisfaction, as required in the original contract. He dropped his dispute in exchange for the new promise to fix at least the worst portions of the wall. By accepting the check without objection, the mason indicated his acceptance of the modification to the parties' contract and incurred an obligation to make repairs. He dropped his dispute in exchange for the new promise to pay. As such, the track owner will prevail in his action. Discussion of incorrect answers: Incorrect. Yes, because the mason accepted his offer by not responding to the November 12 telegram. Here, the question is whether the mason assented to the modification proposed by the track owner, despite the fact that the mason never expressly communicated to the track owner his acceptance of the proposed modification. A proposed modification to a contract cannot be accepted by silence. As such, while the mason may, by his actions, have impliedly accepted the track owner's proposed modification, it was not the mason's lack of response to the track owner's telegram that constituted acceptance of the modification. It was the depositing of the check. Incorrect. No, because even if the mason is found to have made a promise to the track owner, no consideration exists to support the mason's promise. At the time that the track owner promised to make payment to the mason for less than the original contract amount, there was an ongoing dispute between the track owner and the mason concerning the mason's right to payment under the contract. The track owner proposed a resolution to that dispute, which would provide the mason with the money he desperately needed and would provide the track owner with some repairs to the wall. As such, there existed valid consideration for the proposed modification to the contract. Thus, while it still must be determined whether the mason accepted the proposed modification, the modification will not fail for lack of consideration. Incorrect. No, because the mason never accepted the track owner's counteroffer made in the November 12 telegram. In order to make a valid modification to a contract, both parties must agree to the modification, and new consideration must exist to support the modification. In this case, at the time that the track owner promised to make payment to the mason for less than the original contract amount, there was an ongoing dispute between the track owner and the mason concerning the mason's right to payment under the contract. The track owner's proposed resolution was to settle the dispute for $1,250, in exchange for the mason's promise to provide some necessary repairs to the wall. While it is true that the mason never expressly accepted the track owner's offer, by accepting and depositing the track owner's check without objection, the mason indicated his implied acceptance of the modification to the parties' contract.