Parol Evidence, Avoidance, Conditions, Anticipatory Repudiation

A homeowner entered into a written contract with a construction company to build a 12-foot-by-12-foot addition onto her house for $25,000. The contract conditioned the homeowner's duty to pay the entire contract price on the job being complete by March 30. Soon after the parties signed the contract, the city revised several zoning regulations. One of the revised regulations prohibited property owners in residential areas from building structures on their property less than three feet from their property line. If the construction company built the room according to the contract specifications, the addition would violate this regulation. To bring the project into compliance, the company instead built a room measuring 11 feet by 12 feet. The decrease in the size of the addition reduced the value to the homeowner by $1,000. The cost of paying another contractor to extend the room would be $5,000. If the construction company completed the project on time and conformed with all other contract specifications, to what amount is it entitled?

$25,000, less the construction company's cost and profit allocable to the "missing" foot. 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.

A soon-to-be motorist resides in a state that provides that the age of majority is 18 years of age. A month before his 18th birthday, the motorist agreed in writing to purchase a car for $4,500 from a car dealership. The market value of the car is $3,500. When he turned 18, the motorist wrote the car dealership the following letter: "I made a bad deal with you guys, and I'm not willing to pay the $4,500, but I will pay $4,000." Before the car dealership could respond, the motorist wrote them another letter telling the car dealership to "forget the whole deal." In an action by the car dealership against the motorist, what can the car dealership recover?

$4,000

A famous foundation was funding the construction of a massive new modern art museum. Because the museum would feature modern art, the foundation wished the architecture of the museum to be avant-garde. The foundation contracted with the firm of a renowned modern architect for the design of the museum building. The written contract entered into by the foundation and the firm contained a "compensation clause" specifying that the firm would be paid $400,000 to design the museum and prepare a complete set of building plans. In addition, the clause provides that the foundation will only make the payment to the firm upon the condition that the renowned architect himself supervises the design process. These provisions were the only references to compensation contained in the contract. A few months later, the foundation approved the building plans designed by the firm. Shortly thereafter, the firm sent the foundation an invoice in the amount of $600,000. In addition to the contract price of $400,000, the bill included a $200,000 fee for the architect's supervision of the design process. Refusing to pay the additional $200,000, the foundation sent the firm a check for $400,000. The firm then brought an action against the foundation to recover the $200,000 fee for the architect's work. At trial, the firm argued that, at the time the contract was written, the foundation agreed to pay a $200,000 fee for the architect's work over and above the $400,000 design fee. Which of the following would be the most persuasive argument in support of the firm's position?

According to customary trade usage among architecture firms, a $400,000 fee for a design and building plans means $400,000 in addition to supervision services provided by a firm's senior architect. Courts use a number of general rules of construction to interpret the terms of contracts. For example, to interpret a contract, a court may examine custom and trade usage in the particular business and the particular location where the contract is made or performed. Trade usage may be introduced to assist in interpreting contract terms or to supplement the agreement, but not to contradict the terms of the agreement. Evidence of trade usage may be introduced even if the contract is a complete integration. Trade usage is a specific application of the general common law concept of usages. According to the Second Restatement of Contracts, sections 220 & 221, a usage is employed to interpret or add terms to an agreement "(i) if both parties manifest assent that the usage shall be operative, or (ii) if one of the parties intends the usage to apply and the other knows or has reason to know of this intent or (iii) if each party knows or has reason to know that the other has an intent inconsistent with usage." Generally, this means that a party is bound by trade usage if he is aware or should be aware of it. Given these rules, this is the best answer. The most persuasive argument in support of the firm's position is that, according to customary trade usage among architecture firms, a $400,000 fee for a design and building plans means $400,000 in addition to supervision services provided by a firm's senior architect. This would permit the evidence to be admitted for the purpose of either interpreting the provision (by clarifying what the fee means in terms of customary trade usage) or to supplement it (by adding the customary additional fee).

A government official wanted to find a way to thank his butler for his many years of service. He therefore told the butler that the butler would receive 25 percent of any future earnings from the sale of the official's life story. Soon thereafter, the official had a heart attack and died. After his death, a newspaper obituary stirred up much interest in his career, and the executor of his estate quickly sold the rights to his life story for a substantial amount of money. When the executor refused to pay the butler one-fourth of the funds from that sale, the butler filed suit against the executor seeking his share. How is a court likely to rule?

Against the butler, because, under the circumstances, the assignment of future rights to the butler is unenforceable. The general rule is that all contract rights may be assigned. This includes future rights in existing contracts. However, a right expected to arise under a contract that is not then existing may not be assigned. (According to the Second Restatement of Contracts, "A purported assignment of a right expected to arise under a contract not in existence operates only as a promise to assign the right when it arises and as a power to enforce it.") Thus, as against the assignor, the assignee has rights "only to the extent that contractual remedies are available, as in the case of a promise to make a future assignment." This is interpreted to mean that if a purported assignment is supported by consideration, it will be enforceable against the assignor. However, like any promise to make a gift, a purported assignment that is made gratuitously is not enforceable against the assignor. Here, the assignment to the butler was made gratuitously, so it is unenforceable against the official's estate.

A housing developer decides to build a large housing development in a new neighborhood by the sea. He contracts with a construction company to begin construction work in one month. The parties agree that the company will receive $10,000,000 for its work. After only a month of construction, a large hurricane sweeps through the area, destroying roads and buildings. As a result, the company can no longer receive the supplies that it needs to continue the construction. Government officials are not certain as to when roads will be rebuilt and new supplies will become available. Which of the following statements is correct?

All duties under the contract are discharged and the company receives payment for the work it had done prior to the hurricane. The doctrine of impossibility excuses both parties from their obligations under a contract if the performance has been rendered impossible by events occurring after the contract was formed. In this case, performance did, indeed, become impossible because the company could not get the supplies it required for the work. Although technically the impossibility is not permanent, since roads one day will be restored, the impossibility will still be considered permanent since government officials are not certain when the restoration will take place. However, because part performance was rendered before performance became impossible, the party that rendered the performance will recover for its work in quasi-contract at the contract rate or for the reasonable value of its performance if that mode of calculation is more suitable. Therefore, the developer must pay the company for the work it did prior to the hurricane.

A rancher owned a cattle ranch and made an honest, if modest, living raising and selling cattle. The market for beef products expanded over the years, and the rancher built a small factory on his land to process meat and produce beef by-products. Sales continued to increase, but it was a hard life, and the rancher decided to sell the factory. He entered into an agreement with a businessman, whereby the businessman agreed to purchase the factory for a price of $320,000. The agreement further provided that for 10 years, the rancher had the right to purchase, at the then-current market price, all cowhides produced by the businessman. The businessman agreed to provide the rancher a minimum of 50 hides per month during the 10-year period, and the cowhides were to be delivered and paid for monthly. At the contract signing, the rancher's attorney handed the businessman's attorney a letter from the rancher stating that the letter was to serve as notification that until further notice, the rancher would purchase all cowhides produced by the businessman. During the next two years, the businessman delivered to the rancher all of the cowhides he produced, and the rancher paid for them. In time, the businessman's industry expanded. Soon, his factory was producing more than 200 cowhides per month. The market price for cowhides had increased significantly since the businessman and the rancher had entered into their agreement. As a result, the price that the rancher was paying the businessman was well below current market prices. The businessman contacted the rancher to suggest a new proposal: that the businessman would provide the rancher half of the total cowhides he produced every month, and the businessman would be permitted to sell the remaining cowhides at the highest price available on the market. The businessman assured the rancher that he would continue to provide him with at least 50 cowhides every month. The rancher agreed, and he and the businessman signed an agreement that was to run for the remainder of the original contract period. Following the new agreement, the businessman delivered to the rancher one-half of his cowhide production, and the rancher paid promptly. A year later, however, the businessman was seriously injured in an automobile accident. He never fully recovered. As a result of his injuries, the businessman was unable to personally run the ranch and factory, and he completely ceased providing the rancher with cowhides. Which of the following best described the businessman's failure to perform under the contract with the rancher?

An unjustifiable breach of contract. An objective impossibility exists when no one else could possibly perform under the contract. Here, although the businessman was disabled, he could have delegated his responsibilities to another person, such as a factory manager or supervisor. As such, the businessman's injury and permanent disability did not make it objectively impossible for the businessman to perform his contractual duties. Thus, the businessman's failure to perform and failure to make a reasonable effort to make an alternative arrangement with the rancher constitute an unjustifiable breach of contract.

Shortly after his 16th birthday, a 16-year-old was drafted by a leading professional baseball team. He celebrated his signing by taking out an 8 year lease on an extremely high-end luxury car. 2 years later, while celebrating his 18th birthday, he crashed it. At that point, will he be allowed to disaffirm the K?

He will be able to disaffirm the lease, because he has just recently turned 18 years of age. While minors may enter into contracts, their contracts are voidable upon disaffirmance by the minor, barring certain exceptions, such as contracts for necessities (e.g., food, clothing, and medical services). Furthermore, even upon their attainment of the age of majority, minors may, within a reasonable period of time, disaffirm contracts entered into during their minority. Here, it is unlikely that a car would be deemed a necessity. In addition, while it is true that the baseball player is no longer a minor, the fact that the accident took place near his 18th birthday means that it will almost certainly be considered to have been a "reasonable" period of time within which he might effectively disaffirm his contract.

While browsing in an antiques shop, a collector of American antique furniture sees a highly rare vintage butler's secretary. She offers to purchase the secretary for $8,000, and the antiques shop owner agrees. The antiques shop owner and the collector draw up a written sales agreement. According to the terms of their written agreement, the collector is to tender payment to the antiques shop owner on the day she comes to pick up the secretary at the antiques shop. The day before the collector is due to pick up the secretary, a tornado destroys the antiques shop and its contents, including the secretary. At the time the secretary was destroyed, the risk of loss remained on the antiques shop owner. Shortly after the secretary was destroyed, the collector discovers that a secretary of the same age and design was recently sold at auction for $15,000. The antiques shop owner sues the collector to recover the contract price of $8,000. The collector countersues the antiques shop owner for $15,000. Who should recover on her claim?

Neither the collector nor the antiques shop owner should recover. According to the applicable UCC rule for sales of goods such as the secretary, when an event makes performance of a contract impossible, such as where the subject matter of the contract is destroyed through the fault of neither party, both parties will be discharged from performing under the contract. To be considered the subject matter of the contract, the item must have been essential to performance under the contract. Under this rule, if the subject matter of the contract is destroyed when the contract has been signed, but the risk of loss remains on the seller, both the buyer and seller are discharged from performing under the contract. The buyer does not have to pay the contracted purchase price, and the seller is not liable for breach. Given the rare nature of the secretary, which was the subject matter of the contract, and given the fact that neither the antiques shop owner nor the collector was responsible for the tornado that destroyed the secretary, both are discharged from performing. By the same token, neither is entitled to recover.

A 7th grader was unusually tall for his age. He was the only student over 6" tall in his grade. The boy and his friend loved sports cars. One day, while walking home from school, the two boys entered the local sports car dealership. They admired several vehicles and spoke with a zealous salesman. It quickly became apparent that the salesman believed the boy to be an adult, and the boy did not correct him. The dealership was running a special that allowed customers to purchase a car for zero down if they would make monthly payments. The boy identified a car he wanted and agreed to make the required $800-per-month payments. Then, the two boys drove off the lot in the new car. The friend, however, was terrified that they would get in trouble. Later that afternoon, he called the dealership and spoke with the salesman who had sold the car. The friend informed him that they were in the seventh grade. Meanwhile, the boy had been driving his car around the neighborhood and ended up damaging the front of the car. He then called the dealership and told them he wished to be released from the contract. Is the boy responsible for the front end damage to the sports car?

No, because as a minor he can disaffirm the contract. At common law, the age of majority was 21; in some states, it has been lowered by statute to 18. In any state, the young boy in the seventh grade would be considered a minor. While minors may form contracts, their obligations are voidable. Even a minor who misrepresents his age to the other party may disaffirm the contract. Disaffirmance is accomplished by words or deeds that objectively signify the election to avoid liability. Disaffirmance can occur prior to performance or even afterwards. Disaffirmance is personal to the minor or his legal representative. The boy effectively disaffirmed the sales contract by phoning the dealership and informing the salesperson that he wished to get out of the contract. This effectively signified the boy's election to avoid liability for the sports car sales contract. When a minor disaffirms after performance, he must restore any goods or benefits still in his possession. If the goods have been damaged or have depreciated, the minor's restitution obligation extends no further than returning the goods "as now." The seventh grader would not be liable for the front end damage to the sports car upon its return to the dealership.

A professional bodybuilder developed sports performance protein bars that he manufactured and used himself and sold to other bodybuilders and some endurance athletes. The performance bars were free of any substance that had been banned by the International Olympic Committee or any other athletic competition governing body; they also were very effective. Nearing retirement and needing a source of income, the bodybuilder entered into a lucrative contract with a sports agent--who represented athletes in many sports--to give the agent the exclusive right to purchase the performance bars. The agent thought he could build his client list by making access to these effective protein bars part of his services. He also anticipated that his clients' improved performance would lead to larger contracts and therefore more income for the agent. The contract provided that "The agent reserves the right to purchase all of the protein bars made by the bodybuilder during the next five years at the current market price at time of delivery, delivery and payment to be made at weekly intervals, and the bodybuilder agrees to supply in any event a minimum of 5,000 protein bars per year during that period." For three years the bodybuilder and the agent honored the contract as written, until one of agent's clients, a cyclist, was found to have violated the banned substances policy of the Tour de France. The agent blamed the bodybuilder's bars for the cyclist's positive drug test; the Tour had recently added more substances to its banned list, and the bars contain one of those ingredients. The agent refuses to accept delivery of any more bars. Is the agent's argument that he is excused from performing under the contract likely to prevail?

No, because the agreement is not commercially impracticable. Performance under a contract may be excused by mutual mistake, impossibility, impracticability or frustration of purpose. The only theory to excuse performance that might apply on these facts is impracticability. To demonstrate impracticability, the party seeking to be excused must show that because of events that neither party anticipated at the time the contract was executed, performance has become so commercially unreasonable that performance is impractical. Here, only one of the agent's clients has suffered bad consequences due to the bars. Even assuming that all cyclists should avoid the bars, the facts state that the agent represents clients in many sports. Furthermore, in the world of professional sports, where testing for performance enhancing substances is prevalent, it is foreseeable that an ingredient in the bodybuilder's protein bars might be banned by the governing bodies of one or more sports at some point during the five-year term of the contract. Therefore, the agent will not be able to show that the contract has become so commercially unreasonable that he should be excused from performing on the basis of impracticability.

A local Little League team hires a batting coach. His employment contract reads, "Coach will provide batting coaching to the team once a week for two months at a rate of $100 per session." At the end of the first week, the team tenders the coach a check for a $100. He refuses to accept the check, demanding cash instead. Is the coach entitled to demand cash payment?

No, because the contract was silent as to this condition. It is very common for contracts not to include specifications as to payment terms. In such cases, courts will impose a constructive term. Under the common law, when form of payment is not specified, a court will allow payment in the form of either check or cash, unless a different course of dealing has already been established. As such, the team was fully permitted to pay the coach by check. Thus, this answer is correct.

n inventor devised a new method to extract oil from water. This inventor had many different inventions and previously worked with a manufacturing company to patent those inventions and to market them. Under those prior deals, the manufacturing company was to pay the inventor a ten percent royalty on all products sold utilizing the inventor's patents plus $50,000 30 days after the agreement was signed. Despite the clear language in these prior agreements, the manufacturing company never paid the inventor a royalty but would pay him $100,000 for all of his rights to these inventions, which the inventor always accepted. In this new agreement for the oil extraction method, the parties were uncertain as to how successful it would be, or the costs needed to refine it and market it in a poor economy. Therefore, they expressly provided in this new contract that the inventor would receive no royalty and a payment of $25,000 30 days after the agreement was signed. Due to a subsequent oil spill in the Atlantic Ocean, the oil extraction method was instantly successful, earning millions of dollars for the manufacturing company. The inventor and the manufacturing company argued over payment of monies owed to the inventor. The manufacturing company refused to pay the inventor anything beyond the $25,000 in the last agreement. If the inventor sued the manufacturing company, is evidence of the parties' prior agreements and dealings admissible to show that the inventor is entitled to more than $25,000?

No, because the express terms of the contract limited him to $25,000. 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. This is therefore, the correct answer.

A wheat farmer contracts to sell an entire crop of wheat to a flour manufacturer. One day, while harvesting the wheat, the harvesting machine malfunctioned. The machinery would cost three times the farmer's annual salary to repair, and the wheat crop went unharvested. Can the farmer get out of the contract under the doctrine of impossibility?

No, because the farmer should have had a back-up plan in place if the machinery failed. When a contract is unable to be performed due to circumstances beyond the control of any of the parties, the contract could be excused by impossibility. If this were the case, it would be objective impossibility. However, since it is possible that machinery could break down in the middle of a harvest, the farmer could have avoided the breakdown by either properly maintaining the equipment or finding some equipment to borrow in order to harvest the crop, instead of failing to continue the harvest.

An investor inherited a large, but minority block of a public company's stock. The public company's chief executive officer and major shareholder, hired the investor as the public company's head purchasing agent and had the investor elected as a vice president of the public company. On June 1 of last year, the investor invited bids from several coal companies for ten lots of metallurgical coal. A coal mining specialist bid $750,000. This was an excellent price because it was substantially under the market price for metallurgical coal. The investor immediately made a written agreement to purchase the coal from the coal mining specialist. Delivery was to be on or before August 10. The CEO was very pleased with the deal that the investor had made and promised to have him elected to the public company's board of directors at the shareholders' meeting scheduled for August 15. The investor had always wanted to be a director so that he could better protect his interest in the public company. Several weeks before the coal was to be delivered, the coal mining specialist notified the investor that the coal mining specialist had made an arithmetical error in pricing the coal and that the price should have been $1,000,000. The coal mining specialist requested a price increase to $825,000, which the investor confirmed in writing after conferring with the CEO. When the investor received the coal mining specialist's bid for $750,000, the investor was reasonably certain that coal mining specialist had made an error in its calculations. Does the investor's acceptance of the bid result in an enforceable contract under the prevailing American rule?

No, because the minds of the parties had not met. 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.

A young woman was fascinated with cars and engines. She took auto shop classes in high school, but she also liked to hang around the local garage after school to watch the mechanics work on the cars. While she was there, she tried to help out by doing various odd jobs. The garage owner and the other mechanics found the woman to be a big help around the shop. The garage owner decided to offer to pay the woman for her work. One afternoon, when she arrived at the garage, the owner told her, "Hey, look, you've been doing such a good job, I'd like to pay you $50 per week to keep doing the work you've been doing around here." The woman accepted the offer and continued to perform odd jobs at the garage. The woman worked for the garage owner for a number of years, eventually becoming a mechanic and virtually running the business. She also became friendly with the garage owner's father, who owned the lot that the garage sat on. Although the garage owner paid her for her work as a mechanic, he did not pay her for her extra work in managing the business. One day the garage owner's father told the woman, "My son has never paid you enough for your work. When I retire, I'm going to give the garage's lot to my son, and the undeveloped lot across the street, to you. I consider you the daughter I never had." The woman replied, "Oh, that is not necessary. You don't owe me anything." She repeated this sentiment several times over the next few years. When the man retired, he did not give the woman the undeveloped lot. Instead, he sold it to a development company, because he'd discovered that the lot had appreciated substantially in value over the years. If the woman brings an action to get the lot that was promised to her, is she likely to prevail?

No, because the promisor was not the person who received a material benefit from the woman. The contract that the woman had with the garage owner was for payment to do mechanic's work, not managerial services. Furthermore, the arrangement was with the garage owner, not the garage owner's father who had promised her the vacant lot. The theory that comes closest to permitting the woman to recover from the garage owner's father is a promise for a benefit received. Unfortunately for the woman, even though she had arguably conferred a material benefit on the garage owner by undertaking a managerial role, the promisor in this case, the garage owner's father, was not the person who received the benefit. Any collateral benefit conferred on the father was merely sentimental. Therefore she would fail in an attempt to recover under this theory or any other against the father.

A seller contracted with a buyer for the sale of jewelry made out of jade. In order to create the jewelry for sale, the seller would have to purchase the jade from a seller in another state. Learning that the price of jade had increased in the months prior to the contract, the seller decided not to buy the jade needed to make the jewelry. At the time the contract was to be performed, the seller apologized to the buyer. The seller said that he could not provide the jewelry because no jade was available. The buyer brought suit against the seller to force the seller to provide the jewelry described in the contract. Can the seller be excused from performing the contract with the buyer?

No, because the seller did not buy the jade. Under the doctrine of impossibility, both parties to a contract may be excused from their obligations under the contract if performance has been rendered impossible by events occurring after the contract was formed. This doctrine requires that performance be objectively impossible and that the occurrence of the contingency be unknown to the parties at the time of the contract. Contracts may be objectively impossible or subjectively impossible. Only objectively impossible contracts will allow for performance to be excused. Here, performance on the contract is subjectively impossible because of some failure or fault on the part of the performing party. The seller chose not to purchase the jade from the out-of-state seller and as a result of that failure, the seller caused the impossibility. In such circumstances, the performance obligation is not excused and will be considered a breach of the contract.

When her father died, a college student returned home to manage his estate. She began placing items within the home for sale, including books located in the library. She placed an online advertisement for a set of old dusty hardcover books that she presumed to be worth very little. A coffee shop owner wanted to create a window display made of old books and he contacted the student about her advertisement. She agreed to sell the set of books for next to nothing and the coffee shop owner planed to pick the books up ten days later. The day after her conversation with the shop owner, an elderly man interested in buying furniture came to the house and saw the books. The elderly man told the woman that she was very lucky to be in possession of so many rare first edition books and offered to buy them at a much higher price than the one quoted to the coffee shop owner. The woman immediately contacted the coffee shop owner and told him that she was not going to sell the books at the price originally quoted. Finding out that the books were so valuable, the coffee shop owner sued the woman in an attempt to force the woman to specifically perform on the contract. Will the coffee shop owner's suit succeed?

No, because the student made a mistake. There are times when the assumptions included in a contract may be faulty and in such circumstances, the doctrines of mistake, impossibility, impracticability, and frustration of purpose can be used to excuse a party from performing on the contract. Here, the duty to perform is excused due to mutual mistake. Mistake is different from the other doctrines excusing performance because it requires faulty assumptions regarding present facts rather than assumptions regarding future facts. A mistake regarding the facts that exist at the time of contracting will excuse performance only where the mistaken facts are material to that contract. This requires that the mistaken facts will significantly impact the value of the transaction to one or both parties. The doctrine of mutual mistake allows a promisor to be excused from performing on a contract where both parties have labored under a common faulty assumption regarding the present facts. Here, the woman and the coffee shop owner both believed that the books lacked value at the time they entered into the contract. The true value of the books would have significantly impacted the value of the transaction to both parties. The woman would likely not have sold them for so little and the coffee shop owner may not have been interested in purchasing the books at their true value for use in a display. Thus, the doctrine of mistake applies and the woman is excused from performing on the contract. She does not have to sell the books at the original rate.

A 17-year-old high school student got her hair colored every month at the same salon and always charged it to her mother's account. One month after her 18th birthday, the student was surprised when the management presented her with a bill for services over the previous year, for which her mother had refused to pay. The student also refused to pay, claiming that she never agreed to be charged herself. Is a court likely to hold the student liable for the costs of the salon's services?

No, because the student was a minor at the time that the course of dealing began, and hair coloring is not a necessity.

A nonprofit group entered into a written contract with a builder to construct an after-school center in an urban neighborhood plagued by crime, on land that it owned. After the building had been completed except for exterior gutters and downspouts and interior painting, the entire structure was destroyed by a fire set by vandals. The builder's expenses had been so great, and the builder was so frustrated that his work was destroyed by hooligans, that he refused to rebuild the building. Under traditional contract law principles, what can the builder recover from the nonprofit group?

Nothing. The builder will recover nothing because his duty to construct the building for the nonprofit group is not discharged by the fire. Contractual duties will be discharged where it has become impossible to perform them. While contractual duties will generally be discharged if the contract's subject matter is destroyed, a contractor's duty to construct a building is not discharged by destruction of the work in progress unless the other party has assumed that risk. The rationale behind this rule is that the construction is not rendered impossible; the contractor can still rebuild. The risk of loss during construction, absent contrary provisions, lies with the builder, who is generally in a better position to acquire insurance during the construction process. Therefore, because there is no indication that the builder inserted a provision in the contract relieving him of liability in the case of fire, his duty to build the house is not discharged by the fire.

An art gallery entered into a contract with a prestigious museum. Under the contract, the museum commissioned three original pieces of artwork to be painted by the art gallery's top-selling painter and turned over to the museum in nine months to be displayed at the grand opening of a new exhibit at the museum. The contract was very specific about the content of the paintings and that they had to be painted by this particular painter. The painter began work on all three paintings but they had not been completed at the time the painter was unexpectedly killed in a freak skiing accident. In the two months before the paintings were to be turned over, the gallery had a different artist complete the paintings. Two weeks before the exhibit opening, the paintings were presented to the museum for review and the gallery informed the museum's curator that the paintings were the original work of the top-selling painter but that another artist had completed the paintings. The museum refused to tender payment or accept the paintings. Which of the following is most accurate?

The art gallery is not in breach, because the doctrine of impossibility applies. Under the doctrine of impossibility, both parties to a contract may be excused from their obligations if performance has been rendered impossible by events occurring after the contract was formed. This doctrine requires that performance be objectively impossible and that the occurrence of the contingency be unknown to the parties at the time of the contract. There are three main categories of impossibility: (1) destruction of the subject matter of the contract; (2) death or incapacity of a person necessary for the performance of the contract; and (3) illegality. If the existence of a particular person is necessary for the performance of a contract, then that person's death or incapacity will excuse both parties' obligations under the contract. In this fact pattern, the contract specifically contemplated the paintings being created by the gallery's top-selling painter. When that painter died, there was no way that the contract could be performed. It was impossible. Therefore, both the gallery and the museum are excused from performance and the museum is not required to tender payment for the paintings which were created.

A salvage company offered for sale Confederate dollars that had been recovered when the company recently raised a shipwreck off the coast of South Carolina. A purchasing agent for a private west coast museum purchased the bills, but he had represented that he was buying them for himself in hopes of obtaining a lower price. After purchasing the bills, the agent carefully packaged them and had them shipped to his museum. While the bills were in transit, the museum burned to the ground and its owner decided that she would not rebuild because most of her collections had been destroyed. When the bills arrived after the fire, the owner opened the package only to discover that the bills were too brittle for shipping by this method—three bills had disintegrated in transit. Undaunted, the owner took the remaining nine bills and had them mounted behind a glass frame so she could display them in her study. While the bills were being framed, the owner read on the Internet that a large cache of similar bills had just been discovered, and the market price for such bills had just been cut in half. Frustrated but still undaunted, the owner hung the framed bills in her study. Unfortunately, the salt water had reacted with the pigments in the bills in such a way that shortly after they had been exposed to indirect sunlight, all of the color in the bills faded almost completely away. No other Confederate bills raised from the ocean before had similar reactions; these bills appear to have been printed using substandard dyes. Which of the following facts would give the museum owner the best basis for rescinding the contract with the salvage company?

The bills' unusual reaction to indirect sunlight. The circumstances of (C) offer the best grounds for rescinding the contract based on mutual mistake. When both parties entering into a contract are mistaken about existing facts relating to the agreement, the contract may be voidable by the adversely affected party if (i) the mistake concerns a basic assumption on which the contract is made; (ii) the mistake has a material effect on the agreed-upon exchange; and (iii) the party seeking avoidance did not assume the risk of the mistake. Here, both parties probably believed that the bills would be suitable for display, like other bills that had been raised from the ocean. They had no reason to suspect that the bills would discolor when exposed to indirect sunlight. This occurrence probably rendered the bills nearly worthless, creating a material imbalance in the exchange. Finally, there is nothing to indicate that the museum owner/purchasing agent assumed the risk of what occurred.

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?

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.

A movie actor decides to build a casino in a major city that allows gambling. He signs a contract with a building contractor. However, one week before the work is to start, the city passes an ordinance prohibiting the building of new gambling establishments. The contractor never starts the job, and the actor sues the contractor for breach of contract. Which of the following is correct?

The contractor prevails, because the contract was discharged by illegality.

A homeowner owns a home and a large plot of land in the countryside. One day he decides to move to the city so he places an advertisement in order to sell his land. However, he still wishes to retain his home for vacation purposes. A buyer contacts the homeowner and the two parties orally agree that the buyer will buy the land, but not the house. They then exchange a number of letters where they discuss the contract. The two parties then sign a contract. The contract states that the buyer will "buy the homeowner's property for $50,000." However, after the contract is signed, there is a dispute over whether the house is included under the word "property" in the contract. Which of the following is correct?

The court may consider oral evidence of negotiations between the parties, because it is not barred by the parol evidence rule. Parol evidence is both oral and documentary evidence of negotiations and other communications between the parties that took place prior to or contemporaneous with the execution of the written contract. Parol evidence is always admissible to explain or interpret the terms of a written contract. In this case, the court may consider oral evidence of negotiations between the parties before the signing of the contract, because that evidence will be used to explain the meaning of the term "property." As such, this answer is correct.

An elderly man had recently been placed in a nursing home because he was no longer able to care for himself. The only family member who regularly visited him was his nephew. The man had been declared legally incompetent in 1996, and his daughter had been given control of his legal affairs. The man owned a parcel of land in a nearby town that covered about 58 acres. The daughter had been contacted by a company about selling the parcel. They wanted to build a large medical center and regional hospital on the site. The daughter decided it was best for her to sell the parcel on behalf of her father. Just before she and the company were to sign the papers to sell, the nephew recorded a lis pendens, indicating his ownership interest in the parcel. The man had handwritten a note to his nephew in which he gave him his interest in the parcel in return for a promise to continue visiting him regularly at the nursing home for the rest of his life. The nephew had also signed the paper, indicating his acceptance four months prior to his recording the lispendens, although the nephew did not believe that their agreement would be enforceable. When the daughter learned of the nature of the nephew's claim, she agreed to pay him $100,000 if he would cancel the lis pendens and not claim ownership in the parcel. The nephew then canceled his lis pendens, and the daughter completed the sale of the parcel to the company. The nephew demanded his payment from the daughter once the title had been transferred, but she refused. The nephew then brought an action for damages for the sum of $100,000 against the daughter for breaching their agreement. Who would prevail if the court follows the majority rule on the dispositive issue?

The daughter would prevail, if the nephew held to the belief that he had an unenforceable contract with his uncle. The nephew's promise not to pursue an invalid claim is not sufficient consideration to support a return promise. A promise to surrender a valid legal claim is legally sufficient consideration to support a return promise if it was bargained for. A promise to refrain from asserting a defense to a legal action is also legally sufficient consideration to support a return promise if it was bargained for. The problem of insufficient consideration arises when the claim is invalid. A promise to refrain from asserting an invalid claim would be considered sufficient consideration, or adequate legal detriment, only if the promisor acted in a good-faith belief that he or she possessed a valid legal claim. This is the modern rule of disputed claims. The traditional rule held that a disputed claim would be held to be sufficient consideration, if the claim was objectively reasonable and held in good faith. If the nephew did not believe he had an enforceable contract with the his uncle, then his bargain to forgo that claim, which he did not believe was reasonable or hold in good faith, is not sufficient consideration. The claim does not appear to be valid under either the modern rule or the traditional rule. The nephew's promise to forbear pursuing his claim is not sufficient consideration, and, therefore, the daughter's promise to pay him $100,000 is not enforceable.

After a hail storm destroyed his entire crop, a farmer submitted a claim to his insurance company. The insurance adjuster told the farmer that his policy provided that he "must spray his crop with a recognized pesticide before April 1 of each year the policy is in effect." The insurance adjuster denied the farmer's claim after the farmer admitted that he had not sprayed his crop that year. If the farmer files suit against the insurance company to enforce the policy, the court should find in favor of which party?

The farmer, because as a matter of contract interpretation, the insurance company still had an absolute duty to perform. 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.

A manufacturer of down coats and jackets entered into a written agreement with a distributor, whereby the distributor agreed to distribute the manufacturer's products statewide for a one-year period to begin on June 1. Before the manufacturer signed the distribution contract with the distributor, the distributor told the manufacturer that their deal was exclusive, but nothing to that effect was in the written agreement. However, in the outerwear industry it has been a custom for many years for distributors to distribute only one brand of outerwear. On September 1, the distributor began distributing coats and jackets manufactured by one of the manufacturer's chief competitors. These coats and jackets were sewn with man-made fabrics, were as warm as the manufacturer's jackets, and were less bulky. The competitor's advertising campaign throughout the state emphasizes that "you don't have to look fat to stay warm." Seasonally adjusted sales figures showed that the manufacturer's sales in the state dropped 6% after its competitor's products were introduced. The manufacturer of the down coats and jackets complained to the distributor, demanding that it stop distributing the man-made coats and jackets made by the manufacturer's competitor. The distributor refused, and the manufacturer of the down coats and jackets brought suit against the distributor. Which of the following facts would provide a basis for the manufacturer's best case against the distributor?

The long-standing custom in the outerwear industry for distributors to distribute only one brand of outerwear. One of the general rules of contract construction, including contracts for goods under the UCC, is that courts will look to see what custom and usage are in the particular business and in the particular locale where the contract is either made or to be performed. The manufacturer could claim that when he and the distributor entered into the distribution contract, both parties implicitly understood that the custom of distributing only one brand of outerwear would be followed in their transaction. Under such circumstances, the manufacturer may be able to successfully assert that the distributor's distribution of the competitor's outerwear constitutes a breach of contract.

A mother and her adult daughter shopped for a stereo set that the daughter intended to use in her new apartment. The mother and the daughter jointly orally agreed to purchase a set for $800 from a merchant. The merchant delivered the set to the daughter's new apartment, and the daughter accepted. Despite an understanding among the three that the daughter would pay for the set, she refused to do so, and the merchant sued the mother. The mother raised the Statute of Frauds as a defense. What is the most likely outcome?

The merchant will prevail, because the daughter accepted the delivery. Because 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, as the stereo cost more than $500. However, the merchant delivered the stereo and the daughter accepted the delivery, so the mother and the daughter will be liable because the merchant fully performed. 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, because she and her daughter jointly agreed to purchase the stereo.

A man of seemingly modest means died, leaving his nephew as his sole heir. Among the items inherited by the nephew were some old oil paintings. The nephew knew nothing about art and had no place to put the paintings in his home. He placed an ad in the paper offering to sell the paintings at a price to be mutually agreed upon. A buyer for an art gallery responded to the ad. The buyer did not identify himself as an art gallery buyer or tell the nephew that he was knowledgeable about art. Rather, he concocted a story about wanting the paintings for his country estate. The nephew, for his part, revealed his lack of knowledge about art when he told the buyer that his uncle had probably painted the pieces himself. From the signature and the style, the buyer recognized that the artist was a renowned 19th century American portrait artist. The nephew and the buyer agreed upon a price and executed a contract. However, before the nephew delivered the paintings to the buyer, or the buyer paid him, he sought to rescind the contract. The buyer insisted that the nephew deliver the paintings to him and threatened to sue for breach of contract if he did not. Which argument would give the nephew the best basis for rescinding the contract with the buyer?

The nephew told the buyer that his uncle had probably painted the paintings himself. The nephew may be able to rescind the contract on the grounds of unilateral mistake if the buyer was aware that the nephew was mistaken about the identity of the artist. Where only one of the parties is mistaken about facts relating to the agreement, the mistake usually will not prevent formation of the contract. However, if the non-mistaken party is aware of the mistake made by the other party, he will not be permitted to snap up the offer

The owner of a large social function hall hosts various banquets, meetings, and other types of community events in the social function hall. An entrepreneur is in the business of running bingo games sponsored by charities, a legal form of gambling in the state in which the social function hall is located. Without disclosing his intended use for the hall, on June 1, the entrepreneur entered into a one-year lease of the social function hall commencing on July 1. On June 15, a scandal erupted in the state in which the social function hall was located concerning corruption in bingo games sponsored by charities, and the state legislature passed legislation, effective June 30, outlawing bingo games. Upon passage of the legislation, the entrepreneur purported to cancel the lease. In a suit by the owner against the entrepreneur, what is the most likely outcome?

The owner will prevail. Because neither the doctrines of impossibility nor frustration of purpose will excuse the entrepreneur's performance, and the subsequent illegality of bingo games will have no effect on the lease, the owner will prevail.

A local hiking club arranged to rent all of a tour company's rafts for a whitewater ride during the first weekend in April. The club entered into a written contract whereby the tour company owner agreed to provide the club members the tour for a price of $3,200, including a $1,200 deposit. The contract allowed the tour operator to cancel the tour "in the event weather or other natural conditions not under operator's control render the river unsafe for navigation by raft." The hiking club paid the $1,200 deposit, as well as a $500 deposit for space at a local campsite the weekend of the trip. On the Thursday before the weekend set for the rafting trip, a helicopter crashed in the river gorge, and aviation experts were still retrieving the wreckage and examining the crash site on Saturday. The hiking club showed up at the dock for the tour as scheduled on Saturday morning, but the representative of the tour company refused to put rafts in the river, citing the unsafe conditions caused by the possibility of submerged wreckage. What effect did the helicopter crash have on the performance of the contract?

The parties are relieved of their contractual obligations, because of impossibility. Where an event occurs that is not foreseen, and it is not possible for parties to perform their duties under a contract, their contractual responsibilities are discharged under the doctrine of impossibility. Here, it would clearly have been extremely dangerous and unreasonable to attempt to take the rafts out on the river when there was a possibility of encountering submerged wreckage. As neither the tour company nor the hiking club assumed the risk of the river's being unnavigable because of foreign objects, neither party was at fault. Because the performance of the contract was impossible under the circumstances, both the hiking club and the tour company were excused from their contractual obligations. Given that both parties' duties were completely excused, the hiking club is entitled to a full return of its deposit.

A landowner advertised in the newspaper that he wished to sell 40 acres of land at $10,000 per acre. A rancher who was looking to expand his holdings was interested, so he came out to inspect the property. After the inspection, the rancher agreed to purchase the land for $400,000. A contract for the sale of the 40 acres was prepared and signed by the landowner and the rancher. The contract failed to state the purchase price. Later, the rancher had a change of heart and refused to complete the purchase. In the landowner's lawsuit for breach of contract, for which party would the court likely hold?

The rancher, because the Statute of Frauds would require the contract to contain the price in order to be enforced. Under the Statute of Frauds, contracts for the sale of land must be in writing. The writing must contain all essential terms, and the price is considered an essential term.

A contractor agreed to build a new restaurant for an up-and-coming chef in accordance with detailed plans and specifications. In return, the chef agreed to pay the contractor $100,000 for the restaurant upon completion. The written contract included the following provision: "The chef's liability is expressly conditioned on use of purple marble from the Acme Mountain Range in Country A to floor the foyer." While the restaurant was under construction, the president of the United States, acting under proper legal authorization, banned all further trade with Country A. No other country had such purple marble. There is an illegal secondary market in Acme Range purple marble, but its cost has quadrupled from the cost before the president's action. The contractor used a similar fine-quality mauve marble from the United States in the foyer instead. Other than the foyer floor, the restaurant was completed according to the plans and specifications contained in the contractor-chef contract. If the chef refuses to pay the contractor because of the contractor's failure to meet the requirement that Acme Range purple marble from Country A be used in the foyer, and the contractor sues on the contract, which of the following is the contractor's strongest argument?

The requirement is an express condition, which is excused by the supervening illegality resulting from the president's ban on imports from Country A. Events or circumstances arising after formation may render performance of an absolute duty impossible. Such events or circumstances generally fall into one of three areas: (1) illegality; (2) death; or (3) destruction. Where government action occurring after formation but before the time specified for performance makes such performance illegal, the promisor is discharged from his absolute duty to perform. Here, the president's ban on importing products from Country A excused the contractor's obligation to use the Acme Range purple marble in the foyer.

A grocery store and a farmer entered into a valid contract for 1,200 bottles of Grade A maple syrup, to be delivered over the course of a year in twelve equal installments of 100 bottles, delivered on or before the last day of each month, beginning in January and ending in December. From January to March the farmer delivered three shipments of conforming Grade A maple syrup. In April, on the last day of the month, the farmer delivered to the store 97 bottles of Grade A maple syrup. The grocery store rejected the syrup, and informed the farmer that the contract between them was canceled. Which of the following is a correct statement of the grocery store's actions?

The store's rejection of the 97 bottles of Grade A maple syrup and cancellation of the contract were improper. In general, the UCC requires perfect tender of goods, and substantial performance will not suffice. However, the UCC does permit substantial performance with regard to an installment contract. In addition, when there is a nonconforming tender or a tender of nonconforming goods under one segment of an installment contract, the buyer may cancel the contract only if the nonconformity substantially impairs the value of the entire contract to the buyer.

A veterinarian entered into a written contract by which a contractor agreed to construct an animal hospital on the veterinarian's land within 10 months in exchange for $500,000. The contractor completed all work on the animal hospital except the painting of the exterior, the interior, and installation of built-in appliances. A fire, not the fault of either the veterinarian or the contractor, then destroyed the entire construction. Which of the following best describes the rights of the parties at this point in time?

The veterinarian is excused from paying the contract price, unless the contractor constructs a new animal hospital in conformance with the original contract. When a contract calls for construction of a new building and the building is destroyed before completion through no fault of the parties, the party obligated to construct the building is still obligated to do so--her obligation is not discharged by the destruction. (The rule is the opposite if the party has contracted only to repair or remodel an existing building, or subcontracted to construct a portion of a new building. If the work is destroyed before completion, the repairer or subcontractor's obligation is discharged by impossibility.) Thus, the contractor is still obligated to construct a new animal hospital, because the first new construction was destroyed before it was completed.

A female horse won the most competitive horse race in the United States three years ago. Since her retirement, her owner has not been able to successfully breed her. A veterinarian specializing in new techniques for breeding animals that have not been able to conceive approaches the horse owner, explaining that the veterinarian has always been a devotee of horse racing and has had a lifetime ambition to own a winning horse. These facts are true, but the veterinarian does not tell the owner that the veterinarian wishes to try this technique on the female horse. The owner sells the female horse to the veterinarian for $50,000, a generous price for a sterile, retired racehorse, but far less than the worth of the horse if she can bear offspring. Soon after the veterinarian purchases the female horse, the veterinarian extracts eggs from her ovary, fertilizes them in a test tube, and implants the fertilized egg in her womb. When the owner learns that the female horse is pregnant and the sire is another winner of the most competitive horse race in the United States, the owner sues the veterinarian to rescind the sale. Which party is likely to prevail in the action?

The veterinarian will prevail, because the owner has no legal basis on which to rescind this valid contract. This answer choice is correct because the contract was properly formed, and thus, there is no legal basis to rescind this contract.

An interior decorator asked a woodworker she met at a crafts fair to build a curly maple armoire. They entered into a written contract, with a contract price of $6,500 to be paid upon the decorator's receipt of the armoire. When the work was completed, the woodworker shipped the armoire to the decorator. After inspecting it, the decorator felt that it was not of the same high level of workmanship as she was expecting, given the other furniture that the woodworker had showcased at the fair, and a good faith dispute arose between the parties as to the workmanship. The decorator sent the woodworker a check for $4,000 marked "payment in full." The woodworker indorsed and cashed the check, then sued the decorator to recover the $2,500 balance. What would most courts likely hold?

The woodworker's cashing of the check constituted an accord and satisfaction, discharging the decorator's duty to pay the balance.

A manufacturer of high-speed computers entered into a written agreement with a distributor whereby the distributor would purchase a specified computer from the manufacturer for $50,000. The parties had orally agreed that the delivery date would be November 4. However, when the agreement was reduced to writing, a glitch in the word processor caused the printout to show the delivery date as "12/4" instead of "11/4." Both parties signed the paper without noticing the incorrect delivery date. Before reducing their agreement to writing, the parties had also orally agreed that the agreement would not become binding unless the distributor notified the manufacturer, in writing, by October 7, that it (the distributor) had obtained a buyer for the computer. On September 25, the distributor found a buyer who needed the computer for her business and who agreed to buy it from the distributor. However, the distributor did not inform the manufacturer that it had found a buyer until October 30. In the meantime, due to a strike at the manufacturer's leading competitor, the price of high-speed computers rose rapidly during the month of October. By the end of the month, the market value of the computer in question was $70,000. Because of the increase in the value of the computer, the manufacturer does not want to deliver the specified computer to the distributor for $50,000. Which of the following provides the manufacturer the best defense if the distributor sues to enforce the contract?

There has been a failure of a condition precedent.

A law school professor was known among students and colleagues for her extravagant collection of hats. She had dozens of them, ornate and plain, recent and antique. As her retirement approached, her colleagues decided to commission a hat that would summarize her career. The assistant dean researched which hatmakers the professor favored and signed a contract with the professor's favorite hatmaker on October 5 with the following terms: "Hatmaker to create an artistic interpretation of Professor's career and deliver it on or before December 8. Assistant Dean to pay $700 within two days of receiving the finished hat." When the hatmaker delivered the hat, all of the faculty members who saw it thought it was great. However, the assistant dean hated the hat, which she thought did not emphasize the role of law school in the professor's life strongly enough, and refused to accept it. What is the correct characterization of the parties' duties?

Under the contract, the hatmaker's performance was a condition precedent to the assistant dean's duty to pay the $700. A condition precedent must occur before the obligation to which it is attached becomes an absolute duty. The duty to pay did not arise until after the hatmaker's performance, therefore making the performance a condition precedent.

An aunt wanted to encourage her nephew to do better in school. So for years, every time she saw her nephew, the aunt would say, "If you work hard in school and graduate with a B+ average, I will buy you a car." On the nephew's 16th birthday, the aunt and nephew signed a written memo stating "Per our conversations, I will buy my nephew a car of his choice." The nephew doubled his efforts to get the best grades he could but graduated with a B- average. The aunt did not buy her nephew a car, and the nephew sued his aunt, claiming that she had made a promise in writing to buy him a car. The aunt asserts the defense that she told the nephew she would buy the car if he graduated with a B+ average and that he failed to do so. Are the aunt's oral statements about the B+ average requirement admissible?

Yes, based on the language of the written document. The written document directly refers to the prior conversations. The parol evidence rule generally prevents the introduction of evidence concerning prior or contemporaneous communications to contradict or vary the terms of a contract. The parol evidence rule applies when a written agreement is fully or partially integrated. That means the document is a complete and exhaustive statement of the parties' agreement. When an agreement is not fully integrated, the parol evidence rule will not bar the admission of extrinsic evidence that can explain or supplement the written document. In this case, the written document clearly states, "Per our conversations, I will buy my nephew a car of his choice." The reference to prior conversations indicates that this document is not the complete agreement. Therefore, the agreement was not fully integrated and extrinsic evidence about those prior conversations, and the conditions on the aunt's obligation to pay for the car may be admissible.

Two years ago, an expert gemologist told the owner of a sapphire ring that the ring was probably worth about $6,000, although the gemologist never gave a formal appraisal. The ring's owner now is in need of cash and offered to sell it to his friend. She liked the ring but had no idea of its value. She therefore suggested that the owner take it to a reputable jeweler for an appraisal, and if the price was not too high, she would buy it from him. The owner did not tell his friend about the gemologist's opinion because he hoped the ring's value had increased. The owner took the ring to a reputable jeweler, who told the owner in good faith that there was a tiny flaw in the stone that reduced the ring's value to $4,800. The jeweler noted that if the stone were perfect, the ring would be worth $6,200. Although the ring's owner was disappointed, he told his friend that she could have it for its appraised value: $4,800. Unbeknownst to the friend or the ring's owner, the jeweler was suffering from a minor eye infection that caused him to find a "flaw" where none, in fact, existed. After she purchased the ring from its owner for $4,800, the friend sought her own appraisal for insurance purposes. A reputable jeweler issued the friend an appraisal document accurately stating the ring's value at $6,200. The ring's (now-former) owner learned of this and demanded return of the ring in exchange for the money she had paid for it. The friend refused. If the original owner of the ring sues his friend to replevy the ring, will the court rule in his favor?

Yes, because both parties mistakenly relied on an inaccurate appraisal in determining the ring's value.

A woodsman agreed to purchase two cords of red cedar firewood from a local seller at a price of $1 per pound on the first of the month, and they signed a written contract to that effect. Before the seller actually delivered the firewood, cedar firewood flooded the local market and the price dropped to around 75 cents per pound. The woodsman notified the seller that the woodsman would not accept delivery of the firewood on the first of the month. The seller then sued the woodsman for breach of contract. The woodsman argued that the actual number of pounds for which they were contracted was not included in the contract, and that as a result, there was no way to determine the amount of the seller's damages. The seller proposed to show that a cord of wood is commonly known in the industry to weigh 3,300 pounds. Would this offer of proof be admissible?

Yes, because evidence of trade usage is admissible to interpret a contractual term. In Uniform Commercial Code cases and most common law cases, evidence of trade usage is admissible to help interpret an agreement. Trade usage is evidence of a practice or method of dealing among the majority of businesses engaged in a trade or commercial venture. Such evidence can be used to supplement the contract terms or give meaning to ambiguous terms in a contract. Here, the seller's offer to show the customarily accepted weight of a cord of wood would help interpret the written agreement with the woodsman, and that evidence is therefore admissible.

A homeowner hired a contractor to remodel her kitchen, pursuant to the design of a famous architect. The contract specifies that the homeowner shall pay the cost of the materials up front, but the labor costs of the contract price will be due only upon the architect's certification of satisfaction that the contractor's work is in compliance with the architect's designs and specifications. The architect had worked with the contractor on another project, and was not satisfied with the contractor's work on that project. In fact, that project is currently involved in litigation. Although the homeowner's kitchen was remodeled according to the architect's designs and specifications, the architect withheld the certificate of satisfaction unless the contractor would make certain concessions in the unrelated litigation, which the contractor refused to do. The homeowner, not knowing about the litigation between the architect and the contractor, refused to pay the contractor without the architect's certification. The contractor is now suing the homeowner for payment under the contract. Will the contractor prevail?

Yes, because the architect has withheld certification of satisfaction in bad faith. When a contract calls for the satisfaction of a designated third party, that third party must function in a strictly neutral fashion, and must determine satisfaction based only upon the grounds set forth in the contract. Here, even though the contractor has completed the kitchen remodel in accordance with the architect's designs and specifications, the architect has withheld certification of satisfaction because of an unrelated dispute with the contractor. This is not a proper basis upon which to withhold certification, and in these circumstances, the architect is considered to be acting in bad faith. Bad faith, however, does not necessarily imply malice, and there is no requirement that the complaining party prove malice where certification of satisfaction has been improperly withheld. Moreover, if the third party has acted in bad faith, as is the case here, then the satisfaction condition is excused and payment is required. The contractor will prevail in his action against the homeowner.

A programmer agrees to provide his customer with a computer software program that will make a customer's accounts receivable easier to manage and more efficiently allow the customer's staff to stay on top of and collect delinquent accounts. The programmer and the customer sign a memorandum of understanding in which the programmer promises to create the program and install and integrate the program into the customer's existing computer systems. The customer agrees to pay the programmer a flat fee of $10,000 in two equal payments. The first payment is due upon installation and integration of the program. The second payment is due six months later, provided the customer determines at its discretion that the program does in fact improve the customer's accounts receivable process to its satisfaction. After installation and integration of the new program is completed, the customer makes the first payment, but six months later he refuses to pay the programmer the second payment. The customer claims the accounts receivable processes have not improved enough. In fact, the customer's processes have improved so that within six months, accounts receivable averages are reduced from an average of 180 days to only 90 days, and collections on receivables overall have increased 30 percent. The programmer sues the customer for breach of contract for failing to pay the fee. Is the programmer likely to prevail?

Yes, because the customer must act in good faith in determining whether the program is successful. Contracts include an obligation to act in good faith in performing a contract; i.e., the party cannot act unreasonably or unfairly. When a contract leaves a key term such as "satisfaction" to the discretion of one party, that party must act in good faith and reasonably determine if the other party performed satisfactorily. In this case, the customer had the right to determine if the program successfully improved its accounts receivable process. The customer had an obligation to act in good faith in making that determination. The customer in this case, however, did not make a reasonable and good-faith determination. The program reduced time for collection of accounts receivables by 50 percent and improved the amount of collections by 30 percent. The customer's determination that the program was not successful would most likely be found to be unreasonable; therefore the programmer will most likely prevail.

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?

Yes, because the mason indicated his acceptance of the promise to rebuild a portion of the wall by depositing the track owner's check.

he owner of a piece of land near a shopping center is selling his land for $150,000. A real estate agent offers to purchase the property for $150,000 and also offers to pay $500 for a 30-day option to buy the adjacent property, owned by the same landowner. The agent and landowner agree, and they enter into a detailed written contract that includes a merger clause and states there can be no oral modification of the agreement. The written contract documents the sale of the first property for $150,000, but makes no mention of the 30-day option orally agreed to for the adjacent property. Can either the agent or landowner offer evidence of the oral agreement regarding the 30-day option?

Yes, because the parol evidence rule does not bar admission of evidence of 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.

A woman inherits a parrot from her father. Not knowing anything about parrots, the woman puts the parrot up for sale for $50, describing it as a male parrot. A young man purchases the bird for his mother, a bird enthusiast who specifically wanted a male bird. A subsequent examination reveals "he" is a "she," and is therefore worth $4,500. When the seller learns the truth, she files a lawsuit seeking the return of the bird. Will she succeed?

Yes, because the parties made a mutual mistake. While a mutual mistake as to the value of an item sold does not negate the validity of a contract, a mutual mistake going to the "heart of the agreement" does. Here, the seller advertised the bird as male, and the buyer specifically sought a male bird; thus, the sex of the bird was a crucial element of the contract. Given the parties' mutual mistake as to this essential element of the contract, the court will likely hold that no enforceable contract existed and thus rule in the seller's favor.

A travel agent wants to obtain a business office in Las Vegas. The travel agent visits Las Vegas, takes a tour of foreclosed homes, and decides to buy a condo near the airport from which to conduct his travel agency business. The seller is a real estate broker, who had purchased foreclosed homes at steep discounts, including the condo, hoping to sell them quickly at a profit. The broker agreed to sell the condo to the travel agent. The broker agreed to the sale on the express condition set forth in the contract that the travel agent secure sufficient financing for the purchase. The contract executed by the parties states that the $10,000 down payment would to be applied towards the purchase price or be kept as liquidated damages in the event of the travel agent's breach of the contract. On the day before the scheduled closing, the travel agent tells the broker that he never sought financing. He demanded the refund of his $10,000 down payment. The broker refused to return the monies. If the broker seeks a declaratory judgment as to ownership of the $10,000, will the court allow the broker to retain the $10,000?

Yes, because the travel agent acted in bad faith. Generally, the failure of an express condition will discharge the performance obligation of the party who stood to benefit from the condition. However, a condition will be excused on the basis of bad faith conduct by the beneficiary of the condition. For example, in a contract for the purchase of real property, the buyer's performance is conditioned on his success in securing financing. If the buyer neglects to seek financing, he has acted in bad faith and the buyer's performance obligation becomes absolute.

A producer of organic wine in upper New York State decided to sell his wine outside of the state. He did not have a distribution network or a website. In order to pursue his expansion plans, the wine producer entered into a written agreement with a marketing company, by which the marketing company agreed to design and operate a website and arrange to market the organic wine outside of New York State. The written agreement had a clause stating that the agreement represented the entire understanding between the parties governing the subject matter therein, that there could be no oral modifications to the agreement, and that all changes to the agreement of whatever nature had to be by the written consent of both parties. After the agreement was executed, the parties entered into an oral agreement in which the marketing company agreed that its marketing efforts on behalf of the wine producer would include the design of a logo for the wine. The marketing company failed to produce the logo and the wine producer sued the marketing company for breach of contract. Can the marketing company use the parol evidence rule to prevent the wine producer from offering evidence of the oral agreement at trial?

Yes, because there is a no oral modification clause in the original agreement. Extrinsic ("parol") evidence may not be introduced to supplement the terms of a completely integrated (i.e., final) contract. While the parol evidence rule generally does not apply to subsequent agreements, the inclusion of a "no oral modification" clause may bar the introduction of such evidence. There is such a clause in the original agreement. Therefore, this is the best answer.

Wanting to spend his 18th birthday somewhere exciting, a teenager traveled from his home in a rural part of the state to the city. He arrived in the city a couple of nights before the big day. While he could have spent the night with friends, the teenager wanted to live it up, and he checked into one of the best hotels in the city. The following morning, the teenager informed the management that he was a minor and, in fact, could not pay for his lodging. While frustrated, the manager let the teenager go, because he felt it would be too difficult and time-consuming to recover the lost fees. Six weeks later, the teenager felt guilty about what he had done. He phoned the manager and promised to pay the bill if the manager would send him a new copy. When the bill arrived, however, the teenager realized that he still could not afford to cover the high cost of his hotel stay. Is the teenager's promise to pay enforceable?

Yes, it is fully enforceable. While minors may form contracts, their obligations are voidable. Minors may disaffirm contracts, and where the contract was for something that is not returnable (such as a service), the minor will have no further obligation on the contract. The minor may alternatively ratify the contract upon reaching the age of majority. Such ratification does not require new consideration. Once ratified, the obligation once again becomes enforceable. Here, the facts state that the teenager was still a minor when he checked into the hotel. Thus, at the time of contract formation, he could effectively disaffirm his liability. However, while the teenager admitted that he could not pay for the hotel stay, he did not disaffirm the contract by refusing to do so; he merely admitted that he would be unable to perform. As such, when he later made a new promise to pay the hotel bill after he reached the age of 18, the teenager ratified his previous promise, and will now be fully obligated to perform.

A homeowner and a builder entered into a written contract to build a sauna in a spare room in the homeowner's home at a cost of $3,000. The contract contained a clause stating that the builder will not begin construction without prior approval of the plans by the homeowner's certified public accountant. The builder submitted his designs to both the homeowner and the accountant. The homeowner liked the plans, but the accountant did not and withheld his approval. The builder asked the homeowner whether she wanted him to submit new designs. The homeowner told the builder orally, "No! Your designs are great! My accountant is crazy! You go right ahead and construct the sauna." The builder constructed the sauna. The homeowner now refuses to pay the builder, citing the clause requiring approval by the accountant. If the builder sues the homeowner, what will the builder likely recover?

he full contract price, because once the builder began building the sauna after speaking to the homeowner, the homeowner did nothing to stop the builder.