law decks flash cards - contracts - 2007-2008

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AUTHORS

Vincent P. Loccisano, JDBased on years of analyzing and forecasting the topic coverage, fact patterns and questionformats covered on the MBE, as well as the Decks Corp. approach to flashcards, Loccisano hasdeveloped this series of flashcards you have before you. Using this systematical and scientificapproach to studying, he has passed numerous professional licensing exams, including theMassachusetts Bar Exam and the Federal Patent Bar Exam, all on the first try. Mr. Loccisanocurrently practices patent law in Boston, Massachusetts. Loccisano holds a J.D. from theIntellecutal Property Law Concentration program of Suffolk University School of Law and a B.S.in Mechanical Engineering from Lehigh University.

Candace Lombardi, MFALombardi is responsible for the creative attempts at humor, satire and diversity in your questions.She holds an M.F.A. in Creative Writing from Emerson College and a B.A. in English fromLehigh University. When she isn't thinking up creative ways to grasp your attention, Lombardiis a freelance travel writer, member of the Davis Square Writers Group, screenwriter, andchildren's book author.

CONTRACTSSuppose Cavo Co. is a general contractor preparing a bid for a large water main projectin Missouri. Cavo solicits various subcontractors for the excavation work and receivessub-bids from: Digit Inc. for $1 million, Earthy Co. for $1.2 million and GutDirt? for $1.3million. Cavo writes its bid for Missouri using the lowest sub-bid by Digit but still comesin higher than they had hoped for the total project. Cavo's president calls Digit and tellsthem: "We are not in the running for the project at these prices, but if you can lower yoursub-bid by $100 K, I'm sure we will get the job." Digit informs Cavo that there is no waythey can lower their bid, had in fact a computation error and that their bid should reallyhave been $1.1 million. Cavo loses the overall job and subsequently sues Digit. What isDigit liable for?

A. Breach of contract, because the mistake was not so unreasonably obvious as tomake acceptance of Digit's bid unconscionable.

B. Breach of contract, because the mistake was unilateral.

C. Nothing, because Digit rejected Cavo's counteroffer.

D. Nothing, because even though Digit lacked authority to renege on its bid, Cavosuffered no damages since no bidder was willing to do the work for $900,000.

Answer: CDigit is liable for nothing as there was no contract between Digit and Cavo. Contractformation requires an offer, acceptance and consideration. While the bid by Digit was anoffer, there was no acceptance. Following the offer by Digit, there was only a potentialcontract until Cavo either accepted the offer, rejected it, or terminated it. Here, the offerwas terminated by Cavo upon their counteroffer seeking the work at $900,000. Thiscounteroffer serves as both a rejection of the original offer and a new offer from theoriginal offeree. Following this new offer, Cavo is not in a position to accept or reject.Digit clearly rejected this counteroffer; therefore, there is no contract that is enforceable.

A and B are incorrect. As there was no contract between Cavo and Digit, the existenceof a unilateral or obvious mistake is irrelevant.

D is wrong for numerous reasons: First, it relies on the actual existence of a contract,and as stated above, there was no contract. Second, it assumes that Digit's offer couldnot be revoked and this is clearly untrue. An offer may be revoked at any point prior tothe acceptance of the offer. When dealing with a subcontractor sub-bid situation, a sub-bid is ordinarily deemed irrevocable for a reasonable amount of time under the theory ofdetrimental reliance. Here, Cavo learned of Digit's mistake before any reliance;therefore, the premise in Answer D is irrelevant.

©2007-2008 Law Decks

CONTRACTSBlackford mails the following offer to Sally: "I hereby offer to sell my Boston, MA propertyconsisting of a house and lot at 381 Isabella Street for $1 million. Terms: $300,000 cash upfront and the balance secured by a first mortgage upon closing. Please advise promptly ifinterested in accepting." This offer, sent via US Mail on January 1st, reaches Sally byJanuary 3rd. On January 7th Sally writes back: "Received your offer and am currentlyconsidering. Prefer a cash only deal. Consider an outright purchase for $950,000?" OnJanuary 9th, Blackford telegrams back saying "No." Sally receives the telegram on January10th. Upon receipt of the telegram, Sally telegrams back: "Received January 9th telegramand have decided to accept your original January 3rd offer. Please make out the deed tomy mortgage company: Boston Federal Bank and Savings." Assume that Blackford refusesto sell to Sally and she sues. How will the court rule?

A. A valid contract exists.

B. No contract exists. Sally's January 7th response terminated the original offer.

C. No contract exists due to the communication by Sally that altered the terms of the offer.

D. No contract exists because the offer relates to real estate, and the communications failto establish the terms of the proposed agreement with sufficient definiteness.

Answer: AFor a contract to exist you need mutual assent and valid consideration. Mutual assentrequires that a valid offer exist and an unequivocal acceptance occur before the offer iseither rejected by the offeree or revoked by the offeror. Here, we clearly had an offer fora sale of $1 million. Following the offer, we had an inquiry as to new terms (not acounteroffer, which would have severed the original offer) and there was no rejection ofthe original offer. In light of this, the original offer was still valid when Sally finallyaccepted it on January 10th. Having mutual assent and valid consideration; a contractexists. The terms in the acceptance directing the deed be made out to Sally's bank arenot additional language as these items are implicit in a land sale. We have an offer, aconsideration and an acceptance. Therefore, a valid contract was formed.

B is incorrect. As stated above, the January 7th communication was not a counterofferbut rather an inquiry. Thereby, the original offer was valid and could be accepted.

C is wrong. Both the first and second communications by Sally served merely to inquireas to different terms and to set forth answers implicit to land use questions. Neither ofthese serve to set forth additional terms.

D is also wrong. A contract dealing with the sale of property only needs to identify theland and contain a price term to be deemed definite.


CONTRACTSBlackford mails the following offer to Sally: "I hereby offer to sell my Boston, MA property consistingof a house and lot at 381 Isabella Street for $1 million. Terms: $300,000 cash up front and the balancesecured by a first mortgage upon closing. Please advise promptly if interested in accepting." This offer,sent via US Mail on January 1st, reaches Sally by January 3rd. On January 7th Sally writes back:"Received your offer and am currently considering. Prefer a cash only deal. Consider an outrightpurchase for $950,0007' On January 9th, Blackford telegrams back: "No." Sally receives the telegramon January 10th. Upon receipt of the telegram, Sally telegrams: "Received January 9th telegram andhave decided to accept your original January 3rd offer. Please make out the deed to my mortgagecompany: Boston Federal Bank and Savings." Assume that the day after Blackford mails his offer toSally, he mails a revocation that arrives one day after the offer was received. Assume also that whenthe postman delivers this revocation to Sally, he sees the red flag up on her mailbox and receives anoutgoing letter of acceptance of delivery to Blackford. What is the end result?

A. The revocation was effective upon mailing, and the acceptance would be treated as a counteroffer.

B. The acceptance was effective, assuming that Sally had no knowledge of the contents of the lettersetting for the revocation of the offer.

C. The outcome would hinge upon a court's analysis as to when Blackford's revocation was deliveredand when the postman retrieved Sally's outgoing letter from the flagged mailbox.

D. Flagging your mailbox for outgoing mail retrieval is not a proper posting of the acceptance.Therefore Sally's acceptance is not timely and the revocation is valid.

Answer: CHere we have a mailbox rule question, which states that an acceptance is effective upondispatch (e.g., upon mailing a properly addressed and stamped letter).Note: The mailbox rule does not apply to revocations, therefore, revocations areeffective only upon receipt. Additionally, that receipt does not require that a party knowthat there is a revocation in the letter, but merely must have the letter in her possession.Here, we are faced with a dicey question of which arrived first and which went out first.A court of law must evaluate the timeline of delivery and posting.

A is incorrect as revocation is effective only upon receipt, not mailing.

B is incorrect. The validity of the acceptance is contingent upon the receipt of therevocation, at what point it was received and taken into possession by Sally.

D is incorrect. The mailbox rule makes acceptance effective upon posting, and there isno valid reason that would make a properly addressed letter in a flagged mailbox a non-valid posting under the mailbox rule.


CONTRACTSChet owns a weight lifting supplement store in St. Louis. Dizzyroid manufactures many of thesupplements that Chet sells. They enter into an agreement on December 23rd. Dizzyroid willsupply any quantity of supplements that Chet needs at wholesale prices (as published in theircatalog) for 1 year as long as Chet only buys supplements from Dizzyroid. Additionally, thecontract contains the language, "Since Dizzyroid wishes to help pump up the Americanpublic, all payments for supplements bought by Chet during January should be directed tothe Miles and Miles Fitness Foundation." On January 1st, Chet buys $1,000 worth ofsupplements from Dizzyroid. On January 8th, Chet decides to open a bakery and sells hisstore to Fatkins Industries, a chain supplement store. He assigns his agreement withDizzyroid to Fatkins and notifies Dizzyroid of his sale. If the Miles and Miles FitnessFoundation sues Dizzyroid for the $1,000, what is Dizzyroid's best defense?

A. The promise between Chet and Dizzyroid lacked consideration and was, therefore,invalid.

B. Miles and Miles owes Chet $2,000 in funds.

C. The goods Chet received from Dizzyroid were not capable of being sold as they wereunmerchantable.

D. The agreement to pay Miles and Miles was only a gift from Dizzyroid.

Answer: DUsing the gift defense, Miles and Miles is viewed as a donee beneficiary incapable ofsuing. A donee beneficiary can only sue, in a situation such as this, if: 1) the promiseetells the beneficiary of the contract and should foresee reliance, and 2) the beneficiaryreasonably relies to their detriment. As a donee beneficiary, the gift defense prohibitsMiles and Miles from recovering.

Additionally, Answer A is incorrect. As long as Miles and Miles is viewed as a creditorbeneficiary, the promise between Chet and Dizzyroid to pay them does not effectDizzyroid's obligation to Miles and Miles. Additionally, the promise between Chet andMiles and Miles does not need separate consideration from the original agreementbetween Chet and Dizzyroid.

B and C are incorrect. The fact that Dizzyroid owes more than $1,000 to Chet, or thefact that the supplements were unmerchantable is meaningless. In the eyes of the court,Miles and Miles is viewed as a creditor beneficiary; therefore, they have the right topursue legal remedies from Dizzyroid.


CONTRACTSChet owns a weight lifting supplement store in St. Louis. Dizzyroid manufactures many of thesupplements that Chet sells. They enter into an agreement on December 23rd. Dizzyroid willsupply any quantity of supplements that Chet needs at wholesale prices (as published in theircatalog) for 1 year as long as Chet only buys supplements from Dizzyroid. Additionally, thecontract contains the language, "Since Dizzyroid wishes to help pump up the American public, allpayments for supplements bought by Chet during January should be directed to the Miles andMiles Fitness Foundation." On January 1st, Chet buys $1,000 worth of supplements fromDizzyroid. On January 8th, Chet decides to open a bakery and sells his store to Fatkins Industries,a chain supplement store. He assigns his agreement with Dizzyroid to Fatkins and notifiesDizzyroid of his sale. Assume that Chet and Dizzyroid learn that Miles and Miles is a fraud andboth agree in a separate agreement to eliminate the provision for payments to the foundation. Inlight of this, what effect does it have on Miles and Miles' right to sue for the $1,000?

A. None. The right of Miles and Miles vested when the contract was formed.

B. Miles and Miles can still sue, assuming that they can prove a detrimental reliance based on theagreement between Chet and Dizzyroid, prior to learning that the agreement was changed.

C. The subsequent agreement serves to cut off Miles and Miles' ability to sue.

D. Miles and Miles can sue if they learned of the original agreement before it was changed toexclude them.

Answer BIf Miles and Miles detrimentally relied on the original agreement, they are free to sue. A3rd party beneficiary is free to sue as long as their rights have vested. To vest, abeneficiary must prove that they: 1) manifested assent to the promise in a mannerinvited or requested by the parties; 2) brought suit to enforce the promise; or 3)materially changed position in justifiable reliance on the promise. In light of the thirdcondition, Answer B is clearly the correct answer.

A is incorrect in light of the correct answer, as a 3rd party beneficiary's rights only occurfollowing one of the three conditions. Absent one of these events, there is no vestingand no rights conferred to a 3rd party beneficiary.

C is incorrect for failing to address a situation where Miles and Miles, prior to the secondagreement, may have acted in a manner causing vesting in the original agreement.

D is also incorrect. Simply learning of an agreement, absent taking action that results investing, does not automatically result in a vesting right for a 3rd party beneficiary.


CONTRACTSChet owns a weight lifting supplement store in St. Louis. Dizzyroid manufactures many of thesupplements that Chet sells. They enter into an agreement on December 23rd. Dizzyroid will supplyany quantity of supplements that Chet needs at wholesale prices (as published in their catalog) for1 year as long as Chet only buys supplements from Dizzyroid. Additionally, the contract containsthe language, "Since Dizzyroid wishes to help pump up the American public, all payments forsupplements bought by Chet during January should be directed to the Miles and Miles FitnessFoundation." On January 1st, Chet buys $1,000 worth of supplements from Dizzyroid. On January8th, Chet decides to open a bakery and sells his store to Fatkins Industries, a chain supplementstore. He assigns his agreement with Dizzyroid to Fatkins and notifies Dizzyroid of his sale. Assumethat Fatkins sends a $200,000 purchase order from Dizzyroid on February 1st, requesting the sameterms as originally contracted by Chet, and Dizzyroid refuses to deliver. If Fatkins sues, the courtshould hold that:

A. Fatkins is free to enforce the original agreement, as Dizzyroid was given notice of theassignment.

B. The original agreement lacked the requisite mutuality of obligation so Chet had nothing to assignto Fatkins.

C. Fatkins cannot compel Dizzyroid to fill their order.

D. Fatkins is free to compel enforcement of the agreement as long as they pay upon delivery. Chet'scredit is not necessarily the same as Fatkins' from Dizzyroid's perspective.

Answer: CWhen faced with an assignment of rights that substantially changes an obligor's duties,the assignment is typically barred. Here, the substantial and disproportionate change inquantity ($1,000 to $200,000 worth of product) makes the contract unenforceable.Note: This assignment would have been enforceable had the product quantity beensimilar to the orders placed by Chet, as the obligor would not be put in a vastly differentposition.

A is incorrect. Simply providing notice does not remove the burden of inability to assigna requirement contract for fear of drastically changing the parties' obligation.

B is incorrect. Mutuality of obligation does exist in the current scenario since there wasconsideration of both sides —i.e., an agreement to sell the product in exchange for beingthe exclusive supplier.

D is incorrect for implying that a differing credit risk is enough to make the assignmentunassignable. As set forth in the correct answer (as well as in the common law), therights under a requirements contract are typically NOT assignable since the duties andobligations of the obligor may change. In light of the correct answer, the fact that thereis a different credit risk as compared to Fatkins is meaningless.


CONTRACTSTsitsi sells GPS-tracking computer systems to golf courses. Via phone, she agrees to sella system to Ousmane and provide his golf course with 24 hour support and maintenance.The term of the oral contract is 2 years, with a monthly charge of $1,000. Tsitsi andOusmane agree that $100 of the monthly charge is to be paid directly to Jean-Paul forpayment of a debt that Tsitsi owes to him. Tsitsi prepares a written copy, but inadvertentlyputs a $700 monthly price in, instead of $1,000. She also neglects to mention theagreement to make payments to Jean-Paul. Both Tsitsi and Ousmane execute theagreement not noticing the mistake and omissions. If Ousmane refuses to pay Jean-Paulmonthly, and Jean-Paul sues Ousmane; which of the following has the largest impact onthe final outcome?

A. Whether Jean-Paul was a party to the original agreement between Ousmane andTsitsi.

B. Whether the agreement between Tsitsi and Ousmane was a complete integration.

C. Whether Tsitsi was negligent in failing to note that the contract did not mentionpayments to Jean-Paul.

D. Whether Ousmane acted negligently when he failed to realize that the contract failed tomention payments to Jean-Paul.

Answer: BIf the writing embodies the entire agreement (i.e., it is completely integrated) then it isnot possible to introduce additional information to show a prior collateral oral agreement.

A is incorrect. Since Jean-Paul can be viewed as the third party beneficiary, he does notneed to be a party to the contract.

C and D are incorrect since the negligence does not change if the oral agreement canbe proved and enforced in a court of law.


CONTRACTSTsitsi sells GPS-tracking computer systems to golf courses. Via phone, she agrees tosell a system to Ousmane and provide his golf course with 24 hour support andmaintenance. The term of the oral contract is 2 years, with a monthly charge of $1,000.Tsitsi and Ousmane agree that $100 of the monthly charge is to be paid directly to Jean-Paul for payment of a debt that Tsitsi owes to him. Tsitsi prepares a written copy, butinadvertently puts a $700 monthly price in, instead of $1,000. She also neglects tomention the agreement to make payments to Jean-Paul. Both Tsitsi and Ousmaneexecute the agreement not noticing the mistake and omissions. If Ousmane refuses topay beyond the $700 price on the contract and Tsitsi sues for the $300 difference, whichof the following would be most beneficial to Tsitsi's case?

A. The parties made a mistake in the initial integration.

B. The writing was only a partial integration.

C. The writing was intended as a sham.

D. Bost Tsitsi and Ousmane had a misunderstanding as to the amount that the paymentper month was to be.

Answer: AWhere there is a mistake in integration a court will allow the mistake to be addressedand subsequently corrected.

B is incorrect as it is plausible that the payment term to Jean-Paul was inadvertently leftout, but the correction of the payment to Tsitsi (from $700 to $1,000) would be mostbeneficial to Tsitsi only.

C is incorrect. If the writing was a sham there would be no rights associated with thecontract.

D is wrong. If either Tsitsi or Ousmane made a mistake as to the monthly amount due,it would not necessarily result in potential relief in a court of law absent a showing ofadditional facts.


CONTRACTSTsitsi sells GPS-tracking computer systems to golf courses. Via phone, she agrees tosell a system to Ousmane and provide his golf course with 24 hour support andmaintenance. The term of the oral contract is 2 years, with a monthly charge of $1,000.Tsitsi and Ousmane agree that $100 of the monthly charge is to be paid directly to Jean-Paul for payment of a debt that Tsitsi owes to him. Tsitsi prepares a written copy, butinadvertently puts a $700 monthly price in, instead of $1,000. She also neglects tomention the agreement to make payments to Jean-Paul. Both Tsitsi and Ousmaneexecute the agreement not noticing the mistake and omissions. If Ousmane refuses topay Jean-Paul monthly, and Jean-Paul sues, which of the following is the most harmfulevidence to Jean-Paul's case?

A. The statute of limitations associated with the obligation between Tsitsi and Jean-Paulhas expired prior to the date of the agreement between Tsitsi and Ousmane.

B. Jean-Paul never notified Ousmane or Tsitsi of his acceptance of the agreement.

C. The agreement between Tsitsi and Jean-Paul was not supported by consideration.

D. Before Jean-Paul learned that there was an agreement between Ousmane and Tsitsi,Ousmane and Tsitsi agreed to pay the entire $1,000 payment to Jean-Paul.

Answer: D

The parties that enter into a contract benefiting a third party are free to modify thecontract before the third party learns of it and detrimentally relies upon it.

A and C are incorrect. So long as Tsitsi intended to benefit Jean-Paul through hercontract with Ousmane, Jean-Paul is a donee third party beneficiary who can seek toenforce the agreement regardless of whether an enforceable obligation existed betweenTsitsi and Jean-Paul.

B is incorrect. A third party beneficiary does not have to notify the other parties that heaccepts the benefit of the agreement.


CONTRACTSChet owns a weight lifting supplement store in St. Louis. Dizzyroid manufactures manyof the supplements that Chet sells. They enter into an agreement on December 23rd.Dizzyroid will supply any quantity of supplements that Chet needs at wholesale prices(as published in their catalog) for 1 year as long as Chet only buys supplements fromDizzyroid. Additionally, the contract contains the language, "Since Dizzyroid wishes tohelp pump up the American public, all payments for supplements bought by Chet duringJanuary should be directed to the Miles and Miles Fitness Foundation." On January 1st,Chet buys $1,000 worth of supplements from Dizzyroid. On January 8th, Chet decidesto open a bakery and sells his store to Fatkins Industries, a chain supplement store. Heassigns his agreement with Dizzyroid to Fatkins and notifies Dizzyroid of the sale. OnFebruary 12th, the Miles and Miles Fitness Foundation sues to collect their $1,000 owedfrom Chet's January 1st order. Who can they sue?

A. Chet only

B. Chet or Fatkins for the full $1,000

C. Fatkins only

D. Neither Chet nor Fatkins

Answer BBoth Chet and Fatkins remain liable for the full amount. As Miles and Miles is anintended 3rd party beneficiary for the contract (at least relating to Dizzyroid's Januarysales), they have a right against Chet, the promisor, and his subsequent assignee,Fatkins, as Fatkins assumed Chet's liability.Note: The Miles and Miles Fitness Foundation can only collect once from either Chet orFatkins.

A and C are incorrect for failing to include both Chet and Fatkins jointly in light of thecorrect answer.

D is incorrect based upon the correct answer explanation. As an intended 3rd partybeneficiary, the Miles and Miles Fitness Foundation can maintain an action in their ownright for January payments.


CONTRACTSKeiko sells glass-blowing equipment to Malik and they enter into a contract: Keikosupplies all the glass-blowing equipment that Malik needs for 5 years at a fixed monthlyprice. The parties further agree in writing not to assign the contract, and that paymentsshould be made to CatOn Bank, a creditor of Keiko. The following month, Keiko makesan "assignment of contract" to CatOn Bank as security for a $1 million dollar loan thatshe is taking on a new manufacturing facility. Keiko continues to sell to Malik. Malik paysas expected and has no idea that Keiko has assigned to CatOn Bank. Which is correct?

A. Both Keiko and Malik are now liable to Caton Bank for half the contract price.

B. Keiko is liable to CatOn Bank for the full contract price.

C. Malik is liable to CatOn Bank for the full contract price.

D. Neither Keiko, nor Malik is liable to CatOn Bank for any dollar amount.

Answer: BIf there has been an assignment and the obligor is not aware of the assignment, his dutyremains to simply continue paying the party with whom he originally contracted.Therefore, Malik must continue to pay Keiko, making Answer C incorrect. In light of this,Keiko is responsible to CatOn Bank for any monies she receives from Malik. In light ofthe correct answer, Answers A and D are incorrect. The only liability which exists is fromKeiko to Cat& Bank.


CONTRACTSGoGoJuice is a gas distributor who enters into several refineries to purchase their unleadedproducts. They contract with ColdPress Oil to purchase their entire unleaded product output forthe next 5 years at a price of 9%, the retail price at the time of delivery. This offer is contingent ona minimum weekly purchase of 1,000,000 gallons and GoGoJuice would be responsible for alldistribution. Upon signing the contract, GoGoJuice states in writing that they wish to buy1,000,005 gallons of ColdPress production. They continue to purchase all of ColdPress'sunleaded product for 12 months, at which point ColdPress develops a new refining processallowing them to double yearly production. ColdPress states to GoGoJuice that the excessproduction will be sold to various other retailers. GoGoJuice agrees and signs an addendum. Forthe next 12 months, GoGoJuice continues to buy half of all ColdPress's unleaded production untila foreign oil embargo makes it impossible for ColdPress to buy unrefined oil. ColdPress sends aletter to GoGoJuice informing them that delivery of their usual unleaded gas will now beimpossible in accordance with their contract. ColdPress is able to continue refining (using theimproved method) and continues to sell to others. If the original agreement was enforceable, thesubsequent modification was:

A. Enforceable, so long as GoGoJuice purchased gas from ColdPress.

B. Enforceable in all respects.

C. Unenforceable, for lacking valid consideration.

D. Unenforceable, for failing to state the amount of gas produced by ColdPress.

Answer: BConsideration is not required, here, as this is a contract for the sale of goods and isgoverned by the U.C.C. Under the U.C.C. a good faith modification is enforceable evenif there is a lack of consideration. In light of the correct answer, Answer C is clearlywrong. Answers A and D are illogical and are additionally wrong.


CONTRACTSKeiko sells glass-blowing equipment to Malik and they enter into a contract: Keikosupplies all the glass-blowing equipment that Malik needs for 5 years at a fixed monthlyprice. The parties further agree in writing not to assign the contract, and that paymentsshould be made to CatOn Bank, a creditor of Keiko. The following month, Keiko makesan "assignment of contract" to CatOn Bank as security for a $1 million dollar loan thatshe is taking on a new manufacturing facility. Keiko continues to sell to Malik and hepays as expected. Which answer states the legal ramifications of the covenant "not toassign" the contract?

A. The covenant was not breached, and the assignment to Cat6n Bank was effective.

B. The covenant made the assignment to Cat6n Bank ineffective.

C. Keiko's assignment resulted in a breach of her contract with Malik, but did serve totransfer Keiko's rights against Malik to CatOn Bank.

D. The covenant is effective if the parties can set forth a rational reason for including thecovenant in their agreement.

Answer: A

As we are dealing with merchants, the U.C.C. governs. Under the U.C.C., a restrictionon assignments is only applicable to the barring of Malik's assignment of duty to payanother party. It does not restrict Keiko's right to assign Malik's payment to a third partyrecipient. Keiko's assignment to CatOn Bank is only the assignment of the right topayments, and is not a breach of the contract with Malik. Answers B and C are,therefore, wrong.

D is wrong. The covenant would not stand or fall on this answer's rationale.


CONTRACTSThea advertises in the Daily Independent Gazette to sell her ranch for $2 million. Katinais interested in the place. She inspects the place with her home inspector and agrees tobuy it for the $2 million asking price. Katina and Thea sign a contract for sale, but thecontract fails to state the purchase price. Katina heads home and thinks about the placesome more. She changes her mind and refuses to complete the purchase. Thea sues.The court should find for:

A. Thea, because the Parol Evidence Rule will allow testimony stating that Katinaagreed to pay the $2 million.

B. Thea, as the requirements for the Statute of Frauds are satisfied if you combine theoriginal advertisement and the written contract.

C. Katina, since the Parol Evidence Rule prohibits the introduction of any evidence thatshe agreed to the $2 million asking price.

D. Katina, as the Statute of Frauds requires that a price term be evidenced in order forthe contract to be enforceable.

Answer: DHere we have a sale of land regulated by the Statute of Frauds. The Statute of Frauds,therefore, requires that the writing contain all essential terms, including a price term.

A is wrong. The Parol Evidence Rule may, in fact, allow additional facts to be enteredinto the case, but the failure under the State of Frauds clearly prohibits any potentialrecovery.

B is wrong. The introduction of Thea's unsigned advertisement is insufficient to mark anessential term like price under the Statute of Frauds. Additionally, since the ad was notattached to, or even referenced within the signed contract, its inclusion in the deal is notapplicable.

C is wrong. The Parol Evidence Rule may, in fact, permit the testimony to be introduced,but the contract is nonbinding absent the inclusion of all Statute of Frauds elements.


CONTRACTSEsther hires Candace to sing in her band that is leaving on a 10 month world tour.Candace accepts and turns down another potential job that was to occur at the sametime. Two days into the tour, Candace is sent to the hospital due to chicken pox. Estherthen hires Francie to fill in. A week later Candace has fully recovered, but Esther refusesto let her sing, as she likes Francie much more. Candace sues for breach of contract.Which of the following statements, if true, would be most detrimental to Candace'sactions against Esther?

A. The remaining band members also thought that Francie was a much better singer.

B. Esther had offered Candace a replacement job working the lighting at a higher salary,but she elected not to take it.

C. Esther could not find any other replacement except Francie, who required that shebe bound by a 10 month contract.

D. Candace was not actually happy with her future employment as she hated flying.

Answer: CEsther is allowed to search and hire a substitute for Candace. If the only way Esthercould get a substitute was via a 10 month contract, then Esther is free to hire Franciewith those conditions.

A is wrong. The band's opinion that Francie was better than Candace does not serve torelieve Esther of liability.

B is wrong. Candace is not obligated to accept a replacement job, even one at a higherpay, as her original contract was to be a singer in the band. She has no duty to attemptto mitigate damages.

D is wrong as this fails to excuse Candace from her liability under the contract sheentered into with Esther.


CONTRACTSTrapper learns of an upcoming bid for a new school in the town of Succasunna. Hoping forthe job, Trapper collects sub-bids from various needed subcontractors in an effort to estimatethe complete cost of the contract. Wiley, a subcontractor, comes in with a sub-bid of $20,000,$105,000 lower than any of the other sub-bids. Using Wiley's sub-bid, Trapper submits hisfinal bid to the town. Coming in $54,000 under other competing contractors, he is awardedthe contract. Realizing an error, Wiley contacts Trapper informing him that his sub-bid wastoo low. It should have been $120,000. Trapper, claiming that he was unaware of any erroron Wiley's part when collecting the sub-bids, has at this point already accepted the contractwith the town board. Wiley sues to rescind the contract. If his $20,000 sub-bid was sent viatelegraph and the error was due to the telegraph company's faulty transmission of $20,000instead of $120,000, Wiley's best argument to refuse to perform is:

A. The contract would be unconscionable.

B. The great difference between $20,000 and the next lowest sub-bid should have alertedTrapper that there was a mistake in the telegram.

C. Wiley would not be responsible for the negligence of the telegraph company.

D. Trapper was negligent in not checking out all of the sub-bids. Therefore, the contract isunenforceable.

Answer: BTrapper cannot accept Wiley's offer regardless of the fact that this is a unilateral mistake.Since Trapper knew, or had reason to know, of the mistake: the contract is void. Here, thesignificant gap between Wiley's sub-bid and the next lowest sub-bid would have alertedTrapper that a mistake was present. In light of this, Wiley is free to refuse to perform.

A is incorrect under the concept of unconscionableness. In the presence of a clause thatis so one-sided as to be unconscionable, as in a contract where one party has all of thebargaining power, enforcement of a contract will be voided. Here, however, there is noindication of a disparity in bargaining power or an unconscionable contract.

C is incorrect. Wiley will, in fact, be held to the amount stated in the telegraph unlessTrapper should have known that this was an error on Wiley's part. In a situation such asthis, where the offer is transmitted by a third party, law states that the transmittedmessage will be viewed as binding absent a showing that the other party knew, or shouldhave known, of the mistake.

D is also incorrect. Trapper's failure to investigate each sub - bid would not be enough torescind the contract containing a unilateral mistake. As set forth above, in the presenceof a unilateral mistake, only a showing that the other party knew, or should have known,of the error is sufficient to rescind the contract.


CONTRACTSOn January 1st, Jack borrows $1,000 from Dean. He records this in writing, as well ashis agreement to repay the amount in 1 year. In November, Jack realizes that there isno way he can repay Dean in time and approaches their mutual friend Alan with a deal.Jack offers Alan 200 hours of work at $5 an hour (all to be completed by January) if Alanagrees to pay Dean his $1,000. Alan agrees, but by January, Jack has only worked 100hours. Alan tells Jack, "I'm not paying Dean a cent. You haven't worked enough." Jackresponds: "Please. Hold on to your cash, and once I hit 250 hours, pay Dean." Alanagrees, as this seems reasonable. When Dean hears of this modification between Jackand Alan on January 1st, he sues Alan. What is the likely result?

A. Judgement for Dean, as he knew of the original agreement and did not accept themodification.

B. Judgement for Dean, since he assented to the original agreement.

C. Judgement for Alan, as the original agreement was modified by Jack and Alan beforeDean's rights vested.

D. Judgement for Alan, as he has contracted with Jack not Dean.

Answer: B

Modifications to a contract are permissible, absent the consent of a third party, so longas the third party beneficiary's rights have not vested. Vesting occurs when the thirdparty beneficiary: 1) assents in a manner requested by the parties, 2) detrimentally relieson the contract, or 3) brings a lawsuit to enforce it. Here, Dean had assented and hisrights were vested. Therefore, the contract could not be modified without his consent. Inlight of this, Answer C and D are clearly incorrect answers.

A is a plausible answer, but fails for lack of details. Knowledge of the original agreementdoes not result in the vesting of these rights.


CONTRACTSEsther hires Candace to sing in her band that is leaving on a 10 month world tour.Candace accepts and turns down another potential job that was to occur at the sametime. Two days into the tour, Candace is sent to the hospital due to chicken pox. Estherthen hires Francie to fill in. A week later Candace has fully recovered, but Esther refusesto let her sing, as she likes Francie much more. Candace sues for breach of contract.What is the best legal theory for Candace to rely upon?

A. Upon accepting, Candace's reliance on the job and her declining of the other offercreated a setting of estoppel against Esther.

B. Candace's failure to perform for such a short period of time over such a long tourschedule was not a material breach that would allow Esther to discharge her duty toperform.

C. Candace's singing (for the time she was out with the chicken pox) was a physicalimpossibility.

D. Candace had no idea that her chicken pox infirmary would result in losing her job forthe remaining months of the tour.

Answer B

B is the best answer. The short period Candace was out (in comparison to the long 10month tour) is clearly not a total breach that would excuse Candace's performance.

A is wrong as estoppel is typically related to the contract formation. Here, we are startingwith a validly formed contract.

C is wrong as impossibility could result in the discharge of the entire contract. This isclearly not an avenue Candace would like to start down.

D is wrong. Esther does not have to warn Candace of the potential consequences of hermissing time (i.e., her breach).


CONTRACTSTrapper learns of an upcoming bid for a new school in the town of Succasunna. Hopingfor the job, Trapper collects sub-bids from various needed subcontractors in an effort toestimate the complete cost of the contract. Cassie, a subcontractor, comes in with a sub-bid of $20,000, $5,000 lower than any of the other sub-bids. Using Cassie's sub-bid,Trapper submits his final bid to the town. Coming in $4,000 under other competingcontractors, she is awarded the contract. Realizing an error, Cassie contacts Trapperinforming him that her sub-bid was too low. It should have been $35,000. Trapper, whowas unaware of any error on Cassie's part when collecting sub-bids, has at this pointalready accepted the contract for building the school. Cassie sues to rescind thecontract. Cassie should:

A. Lose, the mistake in Cassie's figures was made before the bid was accepted.

B. Lose, unless Trapper knew, or should have known, of the mistake involved.

C. Win, because the mistake was part of the basis of the bargain.

D. Win, because this was a unilateral, not a bilateral, mistake.

Answer: B

Cassie should not succeed as her error was a unilateral mistake. A unilateral mistake will notprevent formation of a contract absent a showing that the non-mistaken party had reason to beaware of the mistake. Unilateral mistakes such as these may be canceled in equity if the non-mistaken party has not yet relied on the contract. However, in the present case, Trapper did infact rely on the sub-bid when submitting his bid to the town board.

A is incorrect. The time at which the mistake was made is irrelevant. As outlined above, theconcern is whether Trapper knew, or should have known, of Cassie's mistake prior to submittinghis bid.

C is incorrect as it was not a mutual mistake that was part of the basis of the bargain. A mutualmistake could allow the voiding of the contract by the adversely affected party, if that party canshow that the mutual mistake concerned a basic assumption on which the contract was made.Here, we are dealing solely with a unilateral error.Note: There is a modern view of contract law that states an extreme unilateral mistakeoutweighing the other party's expectations is grounds for cancellation of the contract in equity.Cassie's sub-bid coming in $5,000 below the others does not indicate an extreme unilateralmistake that Trapper should have been aware of. Had Cassie's bid, for example, been $35instead of $35,000, cancellation would have been permissible.

D is wrong. A unilateral mistake is not a defense to contract formation absent a showing that theother party (the non-mistaken party) knew, or should have known, of the mistake.


CONTRACTSTsitsi sells GPS-tracking computer systems to golf courses. Via phone, she agrees to sell a systemto Ousmane and provide his golf course with 24 hour support and maintenance. The term of theoral contract is 2 years, with a monthly charge of $1,000. Tsitsi and Ousmane agree that $100 ofthe monthly charge is to be paid directly to Jean-Paul for payment of a debt that Tsitsi owes to him.Tsitsi prepares a written copy, but inadvertently puts a $700 monthly price in, instead of $1,000.She also neglects to mention the agreement to make payments to Jean-Paul. Both Tsitsi andOusmane execute the agreement not noticing the mistake and omissions. If Ousmane refuses topay Jean-Paul monthly, and Jean-Paul sues Ousmane; which of the following, if any, are correct?

I. Enforcement of the agreement for Ousmane to pay $100 a month to Jean-Paul is precluded bythe Statute of Frauds as the agreement was to answer for the debt of another.

II. Ousmane could successfully raise the Statute of Frauds because his agreement with Tsitsi couldnot (by its terms) be performed within one year.

A. I only

B. II only

C. Both I and II

D. Neither I nor II

Answer: B

Statement II only is correct. The portion of the Statute of Frauds which requires that acontract answer for the debt of another is only applicable to contracts that deal withsureties or guarantors; neither of which we have here. In regard to the performance ofthe contract within 1 year or less: as governed by the Statute of Frauds, the contractmust be in writing, regardless of the fact that the agreement to pay Jean-Paul can beviewed as collateral to the main contract for the sale of the computer system.


CONTRACTSPear Computers, builder of cutting edge computers, will introduce its newest product line at thesummer computer show in Seattle. Wanting to sell a complete package, they decide to include aPrintMe 20/20 printer with each computer. Their decision is based on PrintMe's color printing capabilityand speed. PrintMe and Pear sign a written agreement evidencing this deal and noting: "PrintMe's20/20 printers must print 20 pages per 20 seconds or more. PrintMe is to provide Pear with 1200 20/20printers at $100 each over a one year contract. Delivery is to occur at a rate of 100 printers per month.Pear is to pay for each printer upon delivery." The first shipment arrives. Pear pays PrintMe with acashiers check and brings one of the 20/20 printers into their lab for testing. Pear is troubled. It canonly get the PrintMe 20/20 to print 8 pages per 20 seconds. Pear tests the remaining 99 printers withthe same bad result. The extensive tests cost Pear $2,000. Pear has already made a contract withHospitium Hotels to deliver 10 systems by September 3rd. Pears informs Hospitium of the problem andpromises to install the 10 systems with the slower PrintMe 20/20 printers by the September 3rd date,and replace the 20/20s with working high speed printers by October 9th. Simultaneously, Pear notifiesPrintMe in writing that the shipment did not conform and that they will make no further payments. Pearcomputers has accepted:

A. None of the printers, because it has to replace the ten PrintMe 20/20s to Hospitium by October 9th.

B. The ten PrintMe 20/20 printers.

C. The entire first shipment.

D. The entire first order, because Pear has shown that they are capable of selling systems with slowerprinters.

Answer: BWhen faced with nonconforming goods, a buyer is free to accept all, reject all, or acceptsome commercial units and reject the rest. As Pear has sold ten systems with thenonconforming printers, they have been deemed as having accepted them; thereby,making Answer A wrong. There are, however, no facts indicating that a commercial unitwould be the entire first shipment of 100 printers, thereby, Answer C is clearly wrong.

Note: A commercial unit question will typically denote that you are dealing with acommercial unit and not require you to guess as to the case.

D is incorrect for misstating the law.


CONTRACTSPear Computers, builder of cutting edge computers, will introduce its newest product line at the summercomputer show in Seattle. Wanting to sell a complete package, they decide to include a PrintMe 20/20printer with each computer. Their decision is based on PrintMe's color printing capability and speed.PrintMe and Pear sign a written agreement evidencing this deal and noting: "PrintMe's 20/20 printers mustprint 20 pages per 20 seconds or more. PrintMe is to provide Pear with 1200 20/20 printers at $100 eachover a one year contract. Delivery is to occur at a rate of 100 printers per month. Pear is to pay for eachprinter upon delivery"The first shipment arrives. Pear pays PrintMe with a cashiers check and brings oneof the 20/20 printers into their lab for testing. Pear is troubled. It can only get the PrintMe 20/20 to print 8pages per 20 seconds. Pear tests the remaining 99 printers with the same bad result. The extensive testscost Pear $2,000. Pear has already made a contract with Hospitium Hotels to deliver 10 systems bySeptember 3rd. Pears informs Hospitium of the problem and promises to install the 10 systems with theslower PrintMe 20/20 printers by the September 3rd date, and replace the 20/20's with working high speedprinters by October 9th. Simultaneously, Pear notifies PrintMe in writing that the shipment did not conformand that they will make no further payments. How much can Pear recover from PrintMe for the 10 printersthey sent to Hospitium with their systems?

A. Nothing, because they were sold to another.

B. Nothing, because Pear accepted them knowing that they were defective.

C. The difference between the contract price and the printers' actual values.

D. The difference between the printers' actual values and the cost of the printers with which Pear will haveto replace the 10 defective nonconforming printers.

Answer: CSimply accepting the 10 nonconforming printers does not prevent Pear from collectingdamages for the defect in printing speed. In light of this, Answers A and B are clearlywrong. Since Pear has accepted the 10 nonconforming printers, Pear's availabledamages would be the difference between the value of the PrintMe 20/20's had theybeen warranted and their actually worth at the slower capacity, plus foreseeableincidental and consequential damages.

D is incorrect. Pear has entered into a separate agreement with Hospitium to protecttheir own interests, and this agreement was not foreseeable by PrintMe.


CONTRACTSPear Computers, builder of cutting edge computers, will introduce its newest product line at the summercomputer show in Seattle. Wanting to sell a complete package, they decide to include a PrintMe 20/20printer with each computer. Their decision is based on PrintMe's color printing capability and speed.PrintMe and Pear sign a written agreement evidencing this deal and noting: "PrintMe's 20/20 printers mustprint 20 pages per 20 seconds or more. PrintMe is to provide Pear with 1200 20/20 printers at $100 eachover a one year contract. Delivery is to occur at a rate of 100 printers per month. Pear is to pay for eachprinter upon delivery." The first shipment arrives. Pear pays PrintMe with a cashiers check and brings oneof the 20/20 printers into their lab for testing. Pear is troubled. It can only get the PrintMe 20/20 to print 8pages per 20 seconds. Pear tests the remaining 99 printers with the same bad result. The extensive testscost Pear $2,000. Pear has already made a contract with Hospitium Hotels to deliver 10 systems bySeptember 3rd. Pears informs Hospitium of the problem and promises to install the 10 systems with theslower PrintMe 20/20 printers by the September 3rd date, and replace the 20/20's with working high speedprinters by October 9th. Simultaneously, Pear notifies PrintMe in writing that the shipment did not conformand that they will make no further payments. With respect to the unacceptable but delivered printers, Pearmay recover:

A. Nothing

B. The money they have already paid for them, and they may keep the printers.

C. The difference between the value of the printers, and the price they could have sold them for on themarket.

D. The money they paid for the printers, but they may sell the printers and deduct the sale price from theamount owed to them.

Answer DA buyer, who has rejected goods as nonconforming, may either receive a refund of anyprepayment or, if faced with a situation where the seller refused to refund a prepayment,resell the goods and then deduct these proceeds from what is due to them from theseller.

Note: A buyer is entitled to only one of these remedies, and not both. Therefore,Answers A and B are wrong.

C is incorrect. It is a blatant misstatement of the law as explained in Answer D.


CONTRACTSKris owns a chain of donut shops across the US and decides to add chocolate cookies to hismenu. With 100 locations, he decides to mix the dry ingredients in a central Oklahoma location,and distribute them by truck to each store where then can be mixed with water and bakedindividually. Wanting to really wow his customers, he searches the world for the best chips forhis cookies, and learns that Chipper is renowned for making the tastiest chocolate chips. Whileexpensive, Kris decides to exclusively use their product. Kris contracts with Chipper to deliverone ton of chips on the 1st of each month to his Oklahoma location. Kris agrees to a price of$10,000 per ton of chips, to be paid by the 5th of the same month in which the chips aredelivered. The contract is for 1 year (12 deliveries). When Kris receives his first shipment, heinspects the ton of product and quickly realizes that 70% of the chips are not chocolate but ratherrat droppings. He informs Chipper of the problem instantly, and Chipper offers replacements.Kris is having 2nd thoughts about selling chocolate chip cookies, since he only knows donuts.He informs Chipper that he is canceling the contract. Chipper sues for enforcement, will theyprevail?

A. No, Chipper is in breach of the contract and Kris was entitled to a perfect tender.

B. No, because the damages are speculative.

C. Yes, because Kris was obligated to put his notice of breach in writing for it to be effective.

D. Yes, because Chipper has a right to cure the problem with the shipment.

Answer: DHere we have an installment contract, which under the U.C.C. provides that a buyercannot cancel the entire contract because of the defect in one installment as long as thedefect in the installment can be cured by the seller. In light of the U.C.C., Answer D isclearly the correct answer when dealing with an installment contract such as this.

A is wrong for setting the incorrect standard. The "perfect tender" rule is inapplicablewhen dealing with installment contracts, which is what we have here.

B is wrong. Damages could be measured by lost profits or standard contract measure.

C is wrong. A notification of rejection need not be in writing.


CONTRACTSKris owns a chain of donut shops across the US and decides to add chocolate cookies to hismenu. With 100 locations, he decides to mix the dry ingredients in a central Oklahoma location,and distribute them by truck to each store where then can be mixed with water and bakedindividually. Wanting to really wow his customers, he searches the world for the best chips forhis cookies, and learns that Chipper is renowned for making the tastiest chocolate chips. Whileexpensive, Kris decides to exclusively use their product. Kris contracts with Chipper to deliverone ton of chips on the 1st of each month to his Oklahoma location. Kris agrees to a price of$10,000 per ton of chips, to be paid by the 5th of the same month in which the chips aredelivered. Chipper and Kris are happily in contract for June and July. On August 2nd, shortlyafter Chipper makes their third delivery, Kris sends some of his cookies to the Chipper execs asa "thank you" gift. Tony, head of marketing at Chipper, tastes one and realizes that they are theworst cookies he has ever had. Fearing Chipper's reputation will be destroyed, Tony advises thepresident of Chipper to stop selling their chips to Kris. Chipper stops shipping their chips to Krisas of February 6th. Kris sues. What is the result?

A. Chipper wins, as they were not in breach when Kris filed the action.

B. Chipper will prevail as long as they can show that the cookies taste disgusting.

C. Kris wins as Chipper's actions can be deemed an anticipatory repudiation.

D. Kris wins, as the actions of Chipper can be viewed as a prospective inability to perform.

Answer: CHere we have a clear anticipatory repudiation. An anticipatory repudiation occurs in asituation where the promisor expressly indicates that they will not perform at some pointprior to the time of performance. Upon an anticipatory repudiation, the other party hasthe option to treat the repudiation as an immediate breach and sue for damages. In lightof such an explanation, Answer A is clearly incorrect.

B is wrong. The contract between Chipper and Kris makes no mention of a minimumgourmet quality that the cookies must maintain. Therefore, the fact that they are terribleis not a valid defense for Chipper to stop delivering their chips.

D is wrong for misstating the necessary requirements for a prospective inability toperform application. Under a prospective inability to perform, a conduct must be at issue;whereas here we have an expression at the crux of the suit.


CONTRACTSSteve, a homeowner, hires Matt to help with some home renovation. They agree to acontract price of $10,000 which is reduced to writing. Shortly after the contract is signed,Matt tells Steve: "Please address the $10,000 check to my wife when I am done with thejob. It's our anniversary and I want her to have the cash as a gift." Matt's wife is unawareof this arrangement. Just before the job is complete Matt tells Steve: "Uh, forget aboutpaying my wife; I think she has a gambling problem that is eating all of our money.Please just pay me instead." Against whom can Matt's wife enforce the agreement topay $10,000?

A. Steve, the homeowner

B. Matt, the builder

C. Either Steve or Matt

D. Neither Steve nor Matt

Answer: DAs her rights to collect were properly revoked, Matt's wife cannot enforce the contractagainst any of the parties. Since there was no consideration exchanged by Matt's wifefor the right to receive payment, we are dealing with a gratuitous assignment that isrevocable absent performance by the obligor, or if the person who receives theassignment has detrimentally relied on the assignment. Here, neither are true and Mattmay revoke either giving the notice to the obligor or the assignee. By giving notice to theobligor, the assignment is proper and Answers A, B and C are clearly erroneous.


CONTRACTSAircraft Co. is awarded the opportunity to sell military helicopters to Spain. Expectinglong and lengthy talks, Aircraft Co. hires Pasquale, who has a reputation as being the2nd best in the industry, as their contract negotiator. Under his contract, Pasquale is tostart meeting with Spain on February 1st. On January 1st Pasquale decides to take a jobwith McDonald Fairchild, another large aircraft manufacturer; thereby, disqualifyinghimself (due to a clear conflict of interest) from his proposed work with Aircraft Co.Pasquale calls Fred, his oldest buddy and the person known as "the best negotiator inthe business." Pasquale orally assigns his contract with Aircraft Co. to Fred, paying hima $500 bonus for taking the job for him. Assume that Aircraft Co. does not want Fred astheir negotiator, but rather wants Pasquale, and they sue Pasquale for damagesresulting from his breach. What will be the result?

A. Aircraft Co. will win, as Pasquale's assignment of Fred was oral.

B. Aircraft Co. will win, as Pasquale's performance was personal in nature.

C. Aircraft Co. will win, as Fred is a better negotiator and Aircraft Co. has no damages.

D. Pasquale will prevail as the damages here are speculative in nature.

Answer: BGenerally speaking, all contracts can be assigned. However, in a scenario like this one,where the contract is assigned in total, the assignment includes a delegation of duties.Any duty that calls for personal service can not be delegated. Here, we have a contractcalling for services of a negotiator, a position which may clearly be viewed as personaland, therefore, not a delegable duty.

A is wrong as there is no legal reasoning why an assignment cannot be oral in nature.

C is wrong. The damage is due to the fact that the negotiator whom Aircraft Co.specifically selected has been taken away from them.

D is wrong. The damages here are not speculative. Should they choose to do so, AircraftCo. can determine what hiring another skilled negotiator would cost and use thisestimate as a basis for damages.


CONTRACTSBorder City has numerous car thefts and offers a $20,000 reward for the arrest andconviction of anyone caught stealing cars. The local TV station broadcasts informationrelating to the thefts daily for two weeks. Jim hires Steve, a private investigator, to searchfor the thief that stole his pristine vintage Cadillac. Steve gets $100 a day for his search. Sixmonths later, the city decides to repeal its reward because they are tight for cash. Theybroadcast the repeal over the local radio station, because the local TV station had gonebankrupt. One month later, Steve finds the entire theft ring. They are all arrested andconvicted. He is paid by jim, who also mentions to Steve that he should claim the $20,000reward from Border City. Steve was not aware of the reward until now. Steve files for thereward and is denied. Steve asserts that he never heard Border City's repeal of the rewardbefore he attempted to claim it. Assume that Border City has no immunity from situationssuch as this. If Steve sues, which fact is least beneficial to Border City?

A. There was insufficient consideration by Steve in light of the Preexisting Duty Rule.

B. Steve was already compensated by Jim for the services he provided.

C. Border City's offer had effectively been revoked prior to Steve's acceptance of it.

D. Steve failed to communicate his acceptance to Border City.

Answer: DD is least helpful as we are dealing with a unilateral contract that did not require a noticeof acceptance: all that was necessary was performance.

A is helpful as Steve's existing contract might prove beneficial when evaluating hisduties under the Preexisting Duty Rule.

B is helpful under a quasi-contract theory, as Steve's compensation may be factored intoa court's decision.

C is clearly helpful as the broadcast of the revocation was enough to effectively revokeBorder City's offer.


CONTRACTSJoan owns the Rollers, a roller derby team in need of a new coach. Joan negotiates withCoach Cog. They agree on a salary of $1,000 per week and 5% of the take from ticket salesfor home matches. The 5% is to be paid at the end of the roller derby season. Coach Cogfurther agrees, in writing, to pay Joan a $500 a week penalty for every week he fails to coachthe Rollers. Coach Cog manages and coaches for 20 weeks. At the end of the first 20 weeks,Coach Cog finds out that the gate attendance has been terrible. He gets an offer to coachthe Fleets, a professional roller derby team with 10 weeks left in their season. Fleets' firedcoach, Coach Briggs, in turn agrees to fill in for Coach Cog in regards to the Rollers for theremaining 10 weeks. She works wonders with the team and by the end of the season theRollers are in first place, with box office numbers better than ever. At the end of the season,Coach Cog sues Joan for his 5% of ticket sale profits for the games he managed. Who willwin?

A. Coach Cog, as his breach was not substantial.

B. Coach Cog, as the only remedy available to Joan was the "penalty" clause.

C. Joan, as finishing the season was an implied condition that Coach Cog failed to meet.

D. Joan, as finishing the season with the Rollers was an expressed condition that Coach Cogfailed to meet.

Answer: CA court will look to the reasonable expectations of the parties when looking at thecontract. Here, Joan reasonably expected Coach Cog to finish out the season, eventhough this was not expressly included in the contract. In light of this, D is an incorrectanswer.

A is contrary to the facts as there were 10 weeks remaining on a 30 week contract(i.e., a substantial portion).

B is wrong. Joan's remedy has no effect on Coach Cog's right to payment.


CONTRACTSOn January 1st, Vin sends a fax on company letterhead to Vera requesting: "...the pricefor 10 carats of diamonds with no imperfections for delivery to my business." At 9:00 amon January 2nd, Vera faxes back on her own letterhead: "My best price is $10,000 acarat." Vin faxes back the following day (January 3rd): "Your price is fair. I'll take them.A confirmation letter will go out in today's mail." Vera gets this fax on January 4th at 9:00pm. Vera had also offered 10 carats of diamonds to Beth on the 3rd for $9,500 a caratand Beth immediately accepted. When Vera finally gets the message from Vin on the4th, she immediately faxes him back: "I cancel my offer. I sold the rocks to Beth." Thefirst two communications between Vin and Vera are best viewed as:

A. An offer and an acceptance

B. A request for an offer and an offer

C. An offer and a price quotation

D. A request for an offer and a price quotation

Answer: B

Vin's first fax was a request for an offer, so Vera's return fax can be construed as anoffer. To be deemed an offer, the document must be such that it creates a reasonableexpectation in the offeree that the offeror is willing to enter into a contract based uponthe terms of the document at issue. The first fax by Vin clearly fails to meet thisrequirement, as it appears to be nothing more than Vin price shopping. Vera's response,however, does serve to meet the requirement of an offer as the delivery terms etc. . . areimplied and it was clear enough to create a reasonable expectation for Vin.

A is wrong. The fax from Vin failed to meet the standard of an offer as it did not have therequired intent to be bound. In light of this, Vera's first fax cannot be viewed as anacceptance, since an acceptance only occurs in response to an offer.

Answers C and D are wrong in light of the correct answer explanation. Vera's fax wasnot a price quotation in light of the fact that her fax was in reply to a specific inquiry byVin.


CONTRACTSPear Computers, builder of cutting edge computers, will introduce its newest product line at thesummer computer show in Seattle. Wanting to sell a complete package, they decide to include aPrintMe 20/20 printer with each computer. Their decision is based on PrintMe's color printingcapability and speed. PrintMe and Pear sign a written agreement evidencing this deal and noting:"PrintMe's 20/20 printers must print 20 pages per 20 seconds or more. PrintMe is to provide Pearwith 1200 20/20 printers at $100 each over a one year contract. Delivery is to occur at a rate of 100printers per month. Pear is to pay for each printer upon delivery." The first shipment arrives. Pearpays PrintMe with a cashiers check and brings one of the 20/20 printers into their lab for testing. Pearis troubled. It can only get the PrintMe 20/20 to print 8 pages per 20 seconds. Pear tests theremaining 99 printers with the same bad result. The extensive tests cost Pear $2,000. Pear hasalready made a contract with Hospitium Hotels to deliver 10 systems by September 3rd. Pearsinforms Hospitium of the problem and promises to install the 10 systems with the slower PrintMe20/20 printers by the September 3rd date, and replace the 20/20s with working high speed printersby October 9th. Simultaneously, Pear notifies PrintMe in writing that the shipment did not conformand that they will make no further payments. Which answer expresses Pear's right to inspect?

A. Pear retained the right to inspect despite the prior payment.

B. Pear forfeited the right to inspect by paying for them without inspection.

C. Pear forfeited the right to inspect by accepting them without inspection.

D. Pear had no right to inspect because there was no such provision in the contract.

Answer AThe contract called for payment on delivery, which is governed by the U.C.C. (Section2-512(2)). Under the U.C.C., payment for a shipment is not deemed acceptance,thereby, allowing the buyer the right to inspect the materials within a reasonable amountof time after taking delivery. Answers B, C and D are all incorrect statements of the law.


CONTRACTSFrancie needs new glasses. She details to Iris, the optician, how she spends large amounts of timein front of the computer. Iris goes into the display case and brings out several samples of"ComputerEyes" glasses, that are renowned for Francie's vision situation. Francie tries them on butlikes none of them. She does notice a pair called "4eyes" that she likes and asks to try on. Iris bringsout a pair, explaining to Francie that the lenses are made from crystal and should easily last for 10years. Francie buys the glasses after trying them on. Assume that Francie buys the glasses and wearsthem for a week. She then tries to return them, feeling that they make her nose look big. Iris refusesto accept the return. If Francie sues to get her money back; what is the best theory if she were to win?

I. Breach of the implied warranty of fitness for particular purpose.

II. Breach of the implied warranty of merchantability.

III. Breach of express warranty.

A. I and II, but not III

B. I and III, but not II

C. II and III, but not I

D. None of the above

Answer: DHere, we do not have an implied warranty for a particular purpose. Iris did originally pickthe ideal goods for the buyer in light of her request, but Francie then subsequentlyrefused her pick. In light of this, there is no warranty created. The implied warranty ofmerchantability did in fact arise, but Iris's actions did not breach this warranty, as thiswarranty simply requires that the goods befit the ordinary purpose for which they will beused. Here, there are no facts indicating that the goods are not fit for ordinary purposes.When dealing with express warranties, there is an express warranty that the lenses aremade of crystal, but the facts fail to give any indication that this warranty was breached.In light of this, Answer D is correct, while Answers A, B and C are wrong.


CONTRACTSElla seeks to buy a pedigreed Vizsla, bred from Billie's show-winning dog stock, to helpbuild her name as a trainer of Vizslas and show dogs. Ella and Billie negotiate back andforth, eventually agreeing upon: "It is hereby agreed that Ella will have the right of firstrefusal to buy puppies born to my breeding stock for the next 2 years. Price to bedetermined based on size, weight and color at time of delivery. Billie." Six months later,the first puppies are born from Billie's stock, and Ella, seeing a winner, tenders $10,000to Billie for the litter. It is a good faith approximation of their value. Billie, however,refuses to deliver the puppies unless Ella pays her $20,000. Ella sues. Assuming thatBillie's defense is that there is no enforceable contract, the court will likely hold that:

A. There is no enforceable contract since Ella was not obligated to buy under the signedwriting.

B. There is no enforceable contract, since Ella is obligated to buy by implication.

C. Regardless of whether the writing was an enforceable contract, once Ella tenderedthe $10,000 in good faith, an enforceable contract was created.

D. The agreement is enforceable as a firm offer between merchants, as detailed underthe U.C.C.

Answer: CThe document at issue, standing alone, is probably insufficient to be deemed a valid contractdue to lack of consideration. However, once Ella tendered the $10,000, the contract becameenforceable. Prior to her tendering payment, the contract was merely an offer, which may havebeen easily revoked by Ella at any time. Note: Although there is an enforceable contract uponElla's tender of $10,000, the contract may not be enforceable at the $20,000 price if this pricemay be viewed as exorbitant compared to the generally acceptable price for the litter.

A is incorrect. Billie became obligated to sell once Ella accepted her offer to purchase bytendering funds.

B is incorrect. Ella is not obligated to buy by implication, but rather is given a right of first refusal.As the contract was clear to this right of first refusal, the courts will not contract this and statethat there was a contract for purchase. Ella was not obligated to buy, but rather was granted aright to buy (i.e., a right of first refusal). The original contract was unenforceable for lackingconsideration and was in essence merely an offer.

D is also incorrect under the U.C.C., because the U.C.C. states that merchants' offers areirrevocable for a maximum period of three months. Although we did not have consideration inthe present fact pattern, when dealing with a merchant's offer, the offer will be held open duringthe time stated or for a reasonable time if no period is stated, up to a maximum period of threemonths. Here, we can view Billie as a merchant, as she holds herself out as having a specialknowledge when dealing with Vizslas and Ella.


CONTRACTSElla seeks to buy a pedigreed Vizsla, bred from Billie's show-winning dog stock, to helpbuild her name as a trainer of Vizslas and show dogs. Ella and Billie negotiate back andforth, eventually agreeing upon: "It is hereby agreed that Ella will have the right of firstrefusal to buy puppies born to my breeding stock for the next 2 years. Price to bedetermined based on size, weight and color at time of delivery. Billie." Six months later,the first puppies are born from Billie's stock, and Ella, seeing a winner, tenders $10,000to Billie for the litter. It is a good faith approximation of their value. Billie, however,refuses to deliver the puppies unless Ella pays her $20,000. Ella sues. Assume thatthere is an enforceable contract. If Billie defines on the basis that there was no pricedetermined in the original contract, and that she and Ella cannot come to an agreement,the court will likely:

A. Hold that Ella is entitled to purchase at a price that the court feels is reasonable.

B. The provision in the contract setting forth a price to be determined can be establishedusing a third party arbitrator.

C. Ella can purchase at a price of $10,000.

D. Ella can purchase at the asking $20,000.

Answer: AFailing to state the price in the contract does not necessarily result in the contract beinginvalidated. As long as the intent to contract is clear, a situation where the price term isleft open will result in the court determining a reasonable price.

B is incorrect as the original contract has no arbitration clause. Absent this, a court isfree to set a reasonable price for the goods upon verification that there was a clear intentto form a contract.

C is incorrect. Although the $10,000 offer was a good faith tender, it may fail to bedeemed reasonable by the court in accordance with the terms of the correct answer.

D is also incorrect. Billie's $20,000 request does not appear to be a reasonable price inlight of the limited facts, as it was not a price deemed reasonable by the court. In lightof this, it is an incorrect answer. As discussed in the correct answer, the U.C.C. providesthat if the price term is left open and the parties fail to agree on it, the court will supplya reasonable price.


CONTRACTSIsaac sells robots for use in assembling cars. Gibson places an order with Isaac for two"multi-axis robots" which are standard robots from Isaac's production line. He comes toan oral agreement with Isaac's order department for a total price of $1,000,000 for bothrobots. The first robot is to be delivered to Gibson on January 2nd, with a payment of$500,000 within 30 days. The second robot is to be delivered on March 17th, with theremaining $500,000 due within 30 days of the delivery. Isaac delivers the first machineon January 2nd. He attempts to deliver the second robot on March 17th, but Gibsonrefuses to accept delivery and refuses to pay for the first robot. Assume that it cost Isaac$300,000 to build each robot, and at best he could resell each robot for $300,000. IfIsaac sues Gibson on March 18th, what damages may he recover?

A. $300,000

B. $500,000

C. $800,000

D. $1,000,000

Answer: BWhile a promise for the sale of goods of $500 or more is not enforceable unless evidenced by a writingsigned by the party to be charged, an oral contract for goods is enforceable to the extent of the goods thatthe buyer actually accepts. In light of this, Isaac may recover the $500,000 dollars. Here, we have an oralagreement, and neither robot was specially manufactured for Gibson. Therefore, he is bound to pay the$500,000 contract price for one robot. Had each robot been specifically made for his needs, however,Gibson would be obligated to pay the difference between the contract price and resale price for bothrobots.

A is incorrect. Since Gibson has already accepted one robot, Isaac is free to recover the contract pricefor this accepted robot rather than the $300,000 restitution price.

C is incorrect. Isaac is not entitled to any sort of damages relating to the rejected robot. There is noenforceable contract for the second robot that Gibson failed to accept and no restitution damageallowable. Answer C would be correct if there was in fact an enforceable contract for the second robot.Isaac could recover $200,000, the difference between the contract price ($500,000) and the market orresale price ($300,000); plus the original $500,000 for the first accepted robot.

D is incorrect for the same reason is Answer C. Isaac is only free to recover for the contract price of theaccepted robot.

Note: Even if there was an enforceable contract for the second robot, Answer D would still be incorrect .The seller can only enforce goods on a buyer who has not accepted them if the seller is unable to resellthe goods, or if the goods have been lost or damaged after the risk of loss passed to the buyer. Here,Isaac can resell the second robot. Therefore, he cannot recover the full price of the second robot.

@2007-2008 Law Decks

CONTRACTSRotunda decides to slim down from her buxom 300 lbs. and contracts Dolores to convert herattic into an exercise room. The $10,000 contract price includes: reinforcing the floor, rewiringthe place for a treadmill and installing a shower in the bathroom. Dolores is to begin March15th, but on the 16th has yet to begin work. Rotunda, anxious to sweat off the pounds, callDolores who says: "/ have a multimillion dollar job with John, so I'm not interested in your lowbudget job. Leave me alone, fattier Rotunda calls several other contractors for the nextseveral months, but cannot find another willing to do the work for the $10,000 price. On April6th of the following year, Rotunda sues Dolores seeking specific performance. What isDolores's best defense?

A. Since Rotunda has waited over a year, an equitable remedy like specific performance isnot applicable under the Doctrine of Laches.

B. This is a personal services contract, and specific performance is an inappropriate remedy.

C. Since there are appropriate nominal legal damages that Rotunda may collect from Dolores,specific performance is an inappropriate remedy to apply.

D. Since Rotunda cannot find another contractor to do the job at $10,000; it can be implied thatthe original $10,000 price was unfair and specific performance is an inappropriate remedy.

Answer. BThis is Dolores's best argument. Specific performance requires a plaintiff (Rotunda) to show that the applicablelegal remedy is inadequate. In a contract where only one person can supply something rare, money damagesmay be inadequate and specific performance an appropriate damage award. Here, Dolores's personal servicesin the contract are not unique or rare; and money damages in the amount necessary to have another contractorcomplete the work would be appropriate.Note: Generally courts do not order a party to perform, as this requires court oversight to ensure that the workis being completed; thereby, tying up the court resources unnecessarily. Another reason courts shy away fromspecific performance is that ordering performance may be viewed as involuntary servitude and directly infringeon a party's rights.

A is incorrect. The Doctrine of Laches is inapplicable. It typically only applies in situations where the plaintiff hasunreasonably delayed bringing suit, and this delay has been prejudicial to the defendant. A laches applicationis not directly tied into a fixed time period, and may be applied in situations ranging from 6 months to severalyears. Here, Rotunda spent several months trying to find another contractor, not unnecessarily delaying hersuit, and Dolores has suffered no prejudice from this delay.

C is incorrect. A nominal damages award is only appropriate in situations where there is a breach, but no actualloss. Here, if nominal damages were awarded to Rotunda, they would fail to pay for the amount she would haveto pay another contractor above her original $10,000 price to get the job done. In light of this, specificperformance is an inappropriate remedy based on the assumption that nominal damages are available.

D is incorrect. While true, a court of equity might deem a contract unenforceable if it feels that the contract isunconscionable (i.e., Dolores vastly underestimated the price). This implication that Rotunda could not find areplacement contractor in a year long search, does not itself establish that the original contract wasunconscionable.

02007-2008 Law Decks

CONTRACTSBeth and Mandy negotiate for the sale of widgets over the phone, and finally come to anagreement that Mandy will buy from Beth for a fixed price. Beth writes up a contract,signs it and sends it to Mandy. It states that Mandy will buy from Beth 10,000 widgetsfor $10,000. Mandy signs the contract and puts it in the mailbox in front of her office forpickup. Before the contract arrives at Beth's office, Mandy realizes that she doesn'treally want widgets from Beth and calls her: "Beth. I'm not interested in your widgets.Thanks, but the deal is off." Beth replies: "No problem, Mandy, I totally understand.Maybe sometime later we can do the deal." The following afternoon, Beth receivesMandy's signed contract in the mail, and decides she does want to enforce it. Is itactually enforceable against Mandy?

A. Since acceptance occurred prior to rejection, it is enforceable.

B. Yes, under a Parol Evidence Rule application.

C. No, as Beth accepted the rescission offer, which in turn discharged the originalcontract.

D. No. The phone call rejection voided the mailed acceptance.

Answer AUnder a mailbox rule application, the contract is enforceable. Under the mailbox rule,acceptance occurs once the envelope is posted, absent a stipulation in the contractstating otherwise, or when dealing with an option contract. Here, the offeree sent anacceptance by post creating a contract that could not later be revoked by phone.

B is incorrect. The Parol Evidence Rule is inapplicable. While the Parol Evidence Rulecould, in fact, introduce the oral agreement between Beth and Mandy, this oral"agreement" is meaningless since there was a valid contract formed upon Mandy'sposting the envelope.Note: The Parol Evidence Rule only serves to prevent a party from introducing prior oralor written agreements that serve to contradict an integrated writing.

C is incorrect. A rescission requires that there is an express agreement between theparties to rescind — i.e., a meeting of the minds. Here, Beth did not know that Mandy hadalready accepted the contract by post, so the rescission did not result in a meeting ofthe minds rescission.

D is incorrect in light of the correct answer explaining that the telephone rescission failedto void the acceptance by mail due to the mailbox rule.


CONTRACTSLombar buys a machine from Machina for $96,000 with $48,000 due at delivery and $48,000paid monthly for 12 months. The machine is delivered but not wired to Lombar's electricalsystem. Lombar contracts Three Prongs Electric Co. to wire the machine, stating: "We need thiscompleted in 10 days." They both agree in writing for a price of $15,000. Three days into the job,Three Prongs estimates that it will take an additional $5,000 to complete the job due to a priceincrease on wire. They inform Lombar that upon further investigation, the job cannot becompleted for less than $20,000. After negotiating, Lombar signs an agreement stating they willpay Three Prongs the extra $5,000. Machina, upon hearing of the electrical installation costincreases, offers Three Prongs $3,500 to get the job done on time. Three Prongs accepts theoffer. If Lombar refuses to pay the extra $5,000, what is their best defense if sued by ThreeProngs?

A. Lombar had no duty to pay more than the original contract price as this was a contract forservices not goods.

B. Since Three Prongs knew of Lombar's need to have things running, the modification isvoidable in view of Three Prongs' taking advantage of Lombar's needs.

C. Machina's offer to pay the bonus resulted in Three Prongs certainty in making a profit.

D. During initial contract negotiations, Three Prongs told Lombar that the machine would be upand running for no more than $15,000.

Answer: A

The best argument revolves around the fact that this was a service contract and not agoods contract. Speaking generally, all modifications must be supported byconsideration. Here, we have a preexisting legal duty which is not viewed as validconsideration. Absent consideration we have no contract, making Lombar's agreementto pay an extra premium one-sided with no consideration returned by Three Prongs.This distinction runs counter to the U.C.C. (if this was a goods contract) which wouldenforce a good faith modification even without consideration.

B is a decent answer, but not as good as Answer A. The duress argument is only apotential defense. A court may, in fact, view this as Three Prongs taking advantage ofLombar's pressing need to get the machine running.

C is a poor answer. Profitability is irrelevant. As set forth in the correct answer, we aredealing with a preexisting legal duty and failure of consideration.

D is another poor answer. The Parol Evidence Rule would prohibit introduction of infodiscussed during negotiations as we have an integrated writing in the present factpattern; thereby, making prior and contemporaneous oral statements inadmissible tovary the terms of the integrated contract.


CONTRACTSLombar buys a machine from Machina for $96,000 with $48,000 due at delivery and $48,000 paidmonthly for 12 months. The machine is delivered but not wired to Lombar's electrical system.Lombar contracts Three Prongs Electric Co. to wire the machine, stating: "We need this completedin 10 days." They both agree in writing for a price of $15,000. Three days into the job, Three Prongsestimates that it will take an additional $5,000 to complete the job due to a price increase on wire.They inform Lombar that upon further investigation, the job cannot be completed for less than$20,000. After negotiating, Lombar signs an agreement stating they will pay Three Prongs the extra$5,000. Machina, upon hearing of the electrical installation cost increases, offers Three Prongs$3,500 to get the job done on time. Three Prongs accepts the offer. When Three Prongs requeststhe additional funds, Lombar throws them out and refuses to let them finish work. Lombar thenpromptly sues for breach of contract. Which of the following is correct?

A. Lombar has no cause of action, as Three Prongs did not unequivocally repudiate the contract.

B. Lombar would not have a cause of action, as Three Prongs was legally excused by the priceincrease of wire.

C. Lombar would have a good cause of action if it alleged and proved that Three Prongs would nothave lost money under the original agreement.

D. Lombar would have a good cause of action regardless of whether Three Prongs' cost estimatewas accurate.

Answer. ALombar has no cause of action as there was not an unequivocally repudiated contract.When Lombar refused to allow Three Prongs to perform under the contract, Lombarbreached the contract; thereby, excusing Three Prongs from performance. The only wayLombar could win is if they can establish that Three Prongs breached before they did.Which, based on the given facts, appears difficult.

B is incorrect. Difficulty in obtaining the wire necessary for the job is insufficient toexcuse Three Prongs from the contract. An impossibility argument (i.e., it would beimpossible to complete the work) is possible but there are no facts indicating that it wascompletely impossible to obtain wire, just that is was harder to get and pricier, makingthis a poor argument.

C is an illogical answer. It only serves to negate the alleged repudiation, but based onthe facts here, there was no actual repudiation.

D is incorrect for failing to state a valid reason for excusing Lombar from its duties.Absent a repudiation there is no breach and, therefore, no right to refuse to let ThreeProngs complete the work.


CONTRACTSFrancie needs new glasses. She details to Iris, the optician, how she spends largeamounts of time in front of the computer. Iris goes into the display case and brings outseveral samples of "ComputerEyes" glasses, that are renowned for Francie's visionsituation. Francie tries them on but likes none of them. She does notice a pair called"4eyes" that she likes and asks to try on. Iris brings out a pair, explaining to Francie thatthe lenses are made from crystal and should easily last for 10 years. Francie buys theglasses after trying them on. As Iris is ringing them up at the register a bandit comesinto the store, steals all the money in the register and takes Francie's glasses. After thepolice leave, Francie asks for a new pair of glasses. Iris says: "Not unless you pay foranother set." If a suit is brought, who will the court rule in favor of?

A. Francie, because she did not take possession of the glasses.

B. Francie, because the performance of the contract is rendered impossible by anunforeseen event.

C. Iris, as Francie had taken title of the glasses.

D. Iris, as the contract goods had already been identified.

Answer: AHere, we are dealing with a merchant and a non-merchant. In such an environment, therisk of loss does not pass to the buyer until the buyer takes physical possession. Franciehad not taken physical possession of the goods at the time of the robbery.

B is wrong as performance is still possible; Iris simply has to give Francie another pair.

C is a misstatement, as passage of title does not result in the shift of risk.

D is wrong. The risk of loss does not pass in the current situation simply because thegoods were identified.


CONTRACTSProfessor Talon decides to entice her students by offering a trip to Tuscany to the highestGPA in her class. She announces this to her classes and posts it on a university messageboard, noting a maximum award of $2,000. Sue emails Professor Talon: "Professor. I'mgoing to try my best to get this trip. I have purchased all the study guides available and I amstudying 8 hours a day for your class. Thanks, Sue." The dean of Garden State Universityfields numerous complaints from other professors who are questioning Professor Talon'smotivational method and angry that her students are neglecting their other classes. Thedean contacts Professor Talon with the dilemma and instructs her to rescind the offer as itis "improper in accordance with the school's written policy." Professor Talon informs herstudents of the situation and withdraws her offer both orally and in writing. This withdrawalof her original announcement on the university message board would most likely beinterpreted as:

A. Having no legal effect, because no offer had been made.

B. An effective revocation of the offer.

C. An ineffective revocation as to any student who failed to hear Professor Talon'sannouncement, or read the notice on the message board.

D. An ineffective revocation as to Sue, since Sue has relied on the promise.

Answer: DA unilateral contract is revocable until performance has begun. Here, Sue purchasednumerous outlines, in itself merely a preparation to her performance. However, thispurchasing of outlines and studying can be deemed as detrimental reliance on ProfessorTalon's offer, which in turn will make her promise binding and making the offerirrevocable as to Sue.

A is wrong, because the offer was invalid.

B is wrong with regard to Sue in light of the correct answer and her detrimental reliance.However, this would be a correct answer if we were dealing with a party who had notdetrimentally relied on the offer.

C is wrong. A revocation need only be published using the same means by which theoffer was promoted (in this case Professor Talon's class and the university messageboard). The fact that each student has not learned of the offer is insignificant.


CONTRACTSJoan contracts John to build a house for $1 million. John promptly assigns his right to allmonies due under the contract to Al's Bar, as repayment of his debt. Al has notified Joanof this assignment, and Joan has acknowledged this also. Assume that the house iscomplete, absent some minor fixes totaling $2,500. If Al sues Joan, he can recover:

A. $1 million (the amount assigned) and Joan can in turn go after John for theoutstanding $2,500.

B. The reasonable value of the labor and materials of John's job.

C. $1 million minus the outstanding $2,500, the value of John's substantial performance.

D. Nothing. Joan's duty to pay is subject to a constructive condition precedent namely,construction of the house to completion; and this condition has not been met yet.

Answer: CAl can recover the contract price less damages for John's minor breach, as well aswhatever rights his assignor would have against the obligor. As the repairs left are minorin relation to the $1 million contract price, John has substantially performed.Thisdischarges his duty to perform and obligates Joan to pay. In light of the existence of thisminor less-than-completed performance, Joan can offset the remaining work from thecontract price: $1 million minus $2,500 in damages.

A is incorrect. The obligor is free to offset damages directly against the assignee, Al.

B is incorrect because this answer is a quasi-contract remedy. As set forth in the correctanswer, Al has a contract recovery in light of the substantial performance.

D is also incorrect. The construction condition precedent to Joan's payment duties hasbeen met by John's substantial performance.


CONTRACTSLombar buys a machine from Machina for $96,000 with $48,000 due at delivery and $48,000 paidmonthly for 12 months. The machine is delivered but not wired to Lombar's electrical system.Lombar contracts Three Prongs Electric Co. to wire the machine, stating: "We need this completedin 10 days." They both agree in writing for a price of $15,000. Three days into the job, Three Prongsestimates that it will take an additional $5,000 to complete the job due to a price increase on wire.They inform Lombar that upon further investigation, the job cannot be completed for less than$20,000. After negotiating, Lombar signs an agreement stating they will pay Three Prongs the extra$5,000. Machina, upon hearing of the electrical installation cost increases, offers Three Prongs$3,500 to get the job done on time. Three Prongs accepts the offer. If Lombar refuses to pay theextra $5,000 and Three Prongs sues them, what is Three Prongs best argument?

A. Three Prongs owed Machina no preexisting duty to complete the job for Lombar. Such completionwas sufficient bargained-for consideration for Machina's promise to pay the additional $3,500.

B. Since the $3,500 payment was characterized as a bonus, no further consideration was required.

C. Three Prongs would not have completed the job except in reliance on Machina's promise to payan additional $3,500.

D. By completing the job, Three Prongs conferred a benefit on Machina worth at least $3,500, sincetheir performance assured Lombar's ability to pay Machina the balance on the installmentpurchase agreement.

Answer: AThree Prongs' best argument is that they owed no preexisting duty to Machina and their subsequentcompletion was enough to meet the bargained-for consideration hurdle of contract law. Three Prongs canfurther submit that their completion of the contract resulted in a detriment to themselves; thereby,enforcing their argument that this was a valid contract supported by consideration. In light of thisconsideration, the contract is duly bargained-for and acceptable.Note: Answer A seems flawed in view of the preexisting legal duty rule, which states that a preexistinglegal duty is not sufficient consideration. The catch, however, is that the preexisting legal duty rule hasdozens of exceptions, including those for situations when the preexisting duty is owed to someone otherthan the promisor. In light of this, A remains the best answer.

B is wrong because calling the promise to pay a bonus does not get us over the need-for-considerationhurdle.

C is wrong. Mere reliance on a promise, absent promissory estoppel, is not enough to make a contractenforceable. For reliance to substitute for consideration, the promisor must reasonably expect that it'spromise will induce reliance, and such reliance must reasonably be induced (i.e.,promissory estoppel).However, under an application of promissory estoppel, the promise will be enforceable only to the extentnecessary to prevent injustice. Here, Three Prongs has a preexisting duty to complete the work evenwithout the bonus from Machina, and there is no evidence to show that justice requires the extra paymentof $3,500.

D is wrong. As set forth in the correct answer, consideration is required (i.e., a bargained-for exchangeof something of legal value) for the contract to be enforceable. Answer A more clearly identifies theexistence of consideration.


CONTRACTSBIRCH needs new engineers for their staff. Since their software to train engineers is soexpensive, BIRCH contacts Leelow University. In exchange for offering a program for Leelow'sengineers in their software, BIRCH offers to supply them with the software for free. For every 10engineers enrolled, Leelow would receive 1 copy of the software. Leelow has a tight budget andthe day that BIRCH's letter arrives the dean has a budget meeting with various faculty. The deanannounces that in light of BIRCH's offer, the Engineering College needs no additional money thisyear. The following day, the dean receives a letter from BIRCH saying that the college engineerprogram is being cancelled and the company is being outsourced to India. The dean also learnsthat the university budget has been approved and the Engineering College is getting no money.The dean mails his acceptance letter anyway and BIRCH receives it the following week. If thedean sues on behalf of Leelow's Engineering College, who will win?

A. Judgement for Leelow's Engineering College, so long as the dean's refusal of university fundswas reasonably foreseeable from BIRCH's point of view.

B. Judgement for Leelow's Engineering College, as the dean's removal of funding requestsconverted BIRCH's offer into an express option.

C. Judgement for BIRCH, as the promise to supply software was not supported by consideration.

D. Judgement for BIRCH, as they revoked before the dean accepted.

Answer: AMost courts will now hold that if it can be reasonably foreseeable that the offeree willdetrimentally rely on the offer, an irrevocable option will be created.

B is wrong because the offer is converted into an equitable option, not an expressoption.

C is incorrect because consideration existed when Leelow's Engineering College(through the dean) agreed to expand its degree program to include a degree relating toBIRCH's needs.

D would be the correct answer if we applied the former rule of law shared by courts,wherein promissory estoppel was not viewed as an acceptable defense. The old rulewould simply state that revocation was received prior to acceptance, therefore, therewas not a valid contract at hand.


CONTRACTSOn January 1st, Knightly offers to sell his prize hunting dog to Ferrars for $10,000.Ferrars hands Knightly $100, and Knightly hands over a written statement that recitesthe offer and promises to leave the offer open for 30 days. Both Knightly and Ferrars arehunting dog trainers well known in the business. On January 10th, Ferrars writes andhand delivers to Knightly saying: "I've been selling all my possessions to come up withthe cash, but I'll take Doggo. Enclosed is my check for $10,000. I'm off to the world finalsin dog hunting, but will be back in 6 months to pick up Doggo. Just keep track of his billsand I'll pay when I arrive." This letter is:

A. A counteroffer, as it changes the terms of the offer.

B. A counteroffer, as it was lacking a definite expression of acceptance by Ferrars.

C. An acceptance, making Knightly responsible for boarding Doggo at a reasonable rate.

D. An acceptance, and Knightly is free to refuse to board Doggo for the requested 6months.

Answer: DWe are dealing with professional dog trainers so under the U.C.C. the proposal for newterms does not terminate the offer (as between merchants). These terms become partof the deal unless: 1) the offer is limited to its own terms, 2) the new terms materiallyalter the deal, or 3) the offeror objects within a reasonable time. In light of this, we havean acceptance and Knightly is free to refuse to board Doggo.

A and B are incorrect for describing the letter as a counteroffer, which clearly it is not.

C is wrong as we clearly have a material alteration of the terms of the original contract.Therefore, Knightly is not responsible for boarding Doggo if he chooses not to.


CONTRACTSNuttob sells buttons to numerous clothing manufacturers. They do about $200 million ayear in sales. Nuttob buys half of its buttons from ButtonUp, a Nevada corporation. OnOctober 9th, Nuttob orders $1 million in buttons from ButtonUp, with the terms that theorder will be paid in full within 30 days and delivery is to occur by November 5th, FOBUStrack depot #1, Las Vegas, Nevada (ButtonUp's city of business). On November 1st,ButtonUp delivers the chips to the railroad terminal, and notifies Nuttob that the buttonswill arrive by the 4th of November. On November 2nd ButtonUp learns that Nuttob hasdefaulted on payments to their other button suppliers and that there is a potentialinvoluntary petition for bankruptcy that may be filed against them. ButtonUp wires Nuttobdemanding immediate payment. Is this acceptable?

A. No, but ButtonUp is free to refuse to tender goods by stopping them in transit.

B. No, since the fact that the contract states FOB UStrack has resulted in the passing oftitle from ButtonUp to Nuttob.

C. No, since the payment terms were clearly outlined in the original order.

D. Yes, only if Nuttob was actually insolvent.

Answer: D

If Nuttob is actually insolvent, the U.C.C. provides that the seller can refuse to delivergoods ordered under the original contract, unless buyer is willing to pay cash uponreceipt. The fact that the title has passed to Nuttob upon dropping off the goods atUStrack is meaningless in light of this U.C.C. provision.

A is wrong on the basis that ButtonUp is free to stop the goods in transit under the aboveU.C.C. provision. They are also capable of demanding a cash payment.

B is wrong. The fact that the goods title has passed is meaningless in light of the aboveU.C.C. provision allowing ButtonUp to demand cash payment or stop delivery.

C is wrong. The U.C.C. allows the modification of the initial payment terms in a situationwhere the buyer has become insolvent.


CONTRACTSSong contracts Jin for construction of a home in accordance with the plans provided bySong's architect for $1 million upon completion. During the construction process, thereis a nationwide lumber shortage. Prices for lumber double; thereby, increasing the costto construct the home. Jin informs Song of the situation. They agree to hold off frombuilding the detached three car garage, which saves Jin $100,000. Song agrees to stillpay the original $1 million contract price. There new written agreement is:

A. Unenforceable for lack of consideration.

B. Enforceable as a novation.

C. Enforceable, as this is an agreement modifying a contract for the sale of goods andthere is no need for consideration to be binding.

D. Enforceable, as Jin elected to complete the job (as opposed to walk off it) in response

to Song's agreement to still pay the $1 million without the three car garage.

Answer: AThe agreement is unenforceable as this contract needs consideration to be enforceable.Here, we have a modification of the original contract solely for Jin's benefit with noconsideration offered by Jin. In light of this, the agreement is unenforceable.Note: In extreme circumstances, a court may find consideration where unforeseen hardshipmakes full performance impracticable. Here, the increase in construction costs fails to meetthe unforeseen hardship level.

B is incorrect. A novation occurs when a new contract places a new party in place of theoriginal party and holds this new party to the terms of the original contract. That is clearlynot the case in this situation.

C is incorrect. Modification of a contract for construction such as this requires considerationby both parties.Note: A sale of goods contract modification may occur without consideration under theU.C.C. Here, we are only tangentially dealing with the sale of goods, and the real thrust ofthe contract is a construction contract requiring a modification in light of consideration.

D is also incorrect. Jin is not giving up any right to breach, as it is not a valid right to beginwith. Jin has no legal right to walk off the job, so he is not offering any consideration to Songby refraining from doing so. In light of this, Jin supplies no consideration and the contractremains unenforceable.


CONTRACTSJoan owns the Rollers, a roller derby team in need of a new coach. Joan negotiates withCoach Cog. They agree on a salary of $1,000 per week and 5% of the take from ticketsales for home matches. The 5% is to be paid at the end of the roller derby season.Coach Cog further agrees, in writing, to pay Joan a $500 a week penalty for every weekhe fails to coach the Rollers. Coach Cog manages and coaches for 20 weeks. At the endof the first 20 weeks, Coach Cog finds out that the gate attendance has been terrible.He gets an offer to coach the Fleets, a professional roller derby team with 10 weeks leftin their season. Fleets' fired coach, Coach Briggs, in turn agrees to fill in for Coach Cogin regards to the Rollers for the remaining 10 weeks. She works wonders with the teamand by the end of the season the Rollers are in first place, with box office numbers betterthan ever. If Joan sues Coach Cog for the $5,000 penalty he owes her, what will theresult be?

A. Coach Cog prevails: penalty clauses are unenforceable.

B. Coach Cog prevails, since Joan was not harmed by his leaving.

C. Joan prevails, as Coach Cog willfully breached his contract and can be penalized.

D. Joan prevails, as the penalty is enforceable.

Answer DAlthough the $500 per week fee was denominated a "penalty" by the parties, it actuallyoperates as a reasonable liquidated damages clause. The parties to a contract maystipulate what damages are to be paid in the event of a breach if: 1) damages are difficultto ascertain at the time the contract is formed and 2) the amount agreed upon is areasonable forecast of compensatory damages in the case of a breach. Theseconditions have been met here.

A is wrong. While it is true that penalties will not be enforced, a court would not construethe provisions here as a penalty since it meets the requirements above.

B is irrelevant.

C is a misstatement of the law.


CONTRACTSBenson goes to see Smithers, a well known dentist. Smithers states that Benson needsa massive amount of work, estimated at "about $3,000 give or take a bit." Bensonaccepts and Smithers starts his work. Halfway through, Smithers decides to replaceBenson's front tooth with gold, as opposed to the porcelain he initially had planned onusing. When the job is finally done, Smithers sends Benson a bill for $3,500. Bensonsends a check for $3,000 with the words "payment in full" written on the back. Smitherssigns the check, deposits it, waits for it to clear and then files suit for the $500. WillSmithers win?

A. Yes, as the initial estimate was for around $3,000.

B. No, because there is an account stated.

C. No, because there has been an accord and satisfaction of the original debt.

D. Yes, if Smithers can prove that the use of gold was medically necessary and that hisprice was fair.

Answer CAn accord and satisfaction can excuse a contract. An accord is an agreement in whichone party to an existing contract agrees to accept, in lieu of the performance that theyshould have received, some other performance. Satisfaction is the performance of theaccord agreement. A good faith tender and acceptance of a check marked "payment infull," where there is a bona fide dispute as to the amount owed, can be viewed as anaccord. The clear language on the check followed by the evidence of a dispute and theacceptance of the check by Smithers, has resulted in an accord and satisfaction.

A is incorrect. Even if Smithers could have proved that the $3,500 was within the rangeof his original quote, cashing the check was an acceptance of the payment tendered.

B is also incorrect. An account stated is a contract where parties agree to an amount asa final balance due. This requires that the parties have had more than one transactionbetween them. Here there was only one transaction, making an account statedinapplicable.

D is incorrect. Following the accord and satisfaction, the duty of Benson to pay isexcused. The medical necessity of the gold is, therefore, inapplicable.


CONTRACTSOn January 1st, Knightly offers to sell his prize hunting dog to Ferrars for $10,000. Ferrarshands Knightly $100, and Knightly hands over a written statement that recites the offer andpromises to leave the offer open for 30 days. Both Knightly and Ferrars are hunting dogtrainers well known in the business. On January 10th, Ferrars writes to Knightly saying: "I'mstrapped for cash after my lady left. I can't pay a penny more than $8,000 for Doggo. If youcannot accept this figure, the deal is off." What Ferrars didn't know is that Knightly had soldDoggo to Darcy on January 9th. On January 15th, after Ferrars' lady came back with his boxof money, he writes Knightly again and says, "Good news! I'm drowning in cash. Here is mycheck for $10,000. I'll be by later to pick up Doggo and his toys." Knightly receives Ferrars'letter on January 29th, at which time 1 day was still open on the original deal. If Ferrars suesKnightly for damages, a court will likely find that:

A. There was no contract in effect, as Ferrars' letter terminated Knightly's offer.

B. There was no contract in effect, as Knightly had sold Doggo to Darcy and this was in effecta revocation of his offer to Ferrars.

C. A contract was in effect, as acceptance was effective prior to the passage of 30 days.

D. A contract was formed as Knightly had no right or power to sell Doggo to anyone else duringthe 30 day window.

Answer: CFerrars has an option to buy that remained open for 30 days. His counteroffer does notterminate this option, making Answer C the correct answer.

A is wrong as the counteroffer DID NOT terminate the contract. When Ferrars acceptedon January 27th, a contract was formed and valid.

B is wrong. The sale on the 9th is a breach of the option contract which was to remainopen for 30 days.

D is wrong. Knightly clearly had the power to sell, but he did not have the legal right tosell. Once he sells Doggo on the 9th, he is in breach of the option contract with Ferrars.


CONTRACTSOn January 1st, Knightly offers to sell his prize hunting dog to Ferrars for $10,000.Ferrars hands Knightly $100, and Knightly hands over a written statement that recitesthe offer and promises to leave the offer open for 30 days. Both Knightly and Ferrars arehunting dog trainers well known in the business. On January 10th, Ferrars writes andhand delivers a letter to Knightly saying: "I'm strapped for cash after my lady left. I can'tpay a penny more than $8,000 for Doggo. If you cannot accept this figure, the deal isoff." Knightly goes ahead and sells Doggo to Darcy on January 20th, figuring the dealis off. Ferrars learns of this deal on the 21st. Which answer describes Ferrars' ability toaccept the offer?

A. The offer was terminated when Knightly received Ferrars' letter of the 10th.

B. The offer was terminated when Knightly sold Doggo to Darcy.

C. The offer was terminated on the 21st when Ferrars learned of the sale.

D. The offer continued and remained open for the remaining 30 days, as Ferrar had paidto keep the option contract open.

Answer B Ordinarily, the rejection of the initial offer in an option contract does not result in thetermination of the offer and the loss of the power to accept by the offeree. In the presentsituation, however, the option, Knightly, has detrimentally relied on the rejection andwent ahead and sold his dog to Darcy based upon this detrimental reliance. In light ofthat, Answer B is the correct answer.

A is wrong. The rejection of the offer does not serve to terminate the option contract andsubsequent acceptance by Ferrars, absent a detrimental reliance as set forth in thecorrect answer.

C is clearly wrong, in light of the correct answer.

D is wrong as Knightly detrimentally relied on the rejection, thereby, terminating theoption contract earlier than the proscribed 30 days.


CONTRACTSBIRCH needs new engineers for their staff. Since their software to train engineers is soexpensive, BIRCH contacts Leelow University. In exchange for offering a program forLeelow's engineers in their software, BIRCH offers to supply them with the software for free.For every 10 engineers enrolled, Leelow would receive 1 copy of the software. The deanreceives this offer, and immediately responds by saying that he will provide a major in BIRCHsoftware for any student that is willing to apply. BIRCH writes back within a week revokingtheir offer: "So many schools have agreed to our program offer that we cannot supply softwareto all of you. We will only be selecting a few schools from those that responded." If Leelow'sdean sues on behalf of Leelow, what will happen?

A. Judgement for BIRCH, as the offer was not specific as to how many copies of the softwarethey would distribute.

B. Judgement for BIRCH, as Leelow's promises are illusory since no additional students willnecessarily apply to this program.

C. Judgement for Leelow, as BIRCH is a merchant under the U.C.C. and their offer wasirrevocable.

D. Judgement for Leelow, as the dean's letter was an acceptance and a contract was formed.

Answer: DFollowing the dean's letter of acceptance, there was an enforceable contract, making Dthe correct answer.

A is wrong because we are dealing with a requirements contract, and requirementscontracts are now recognized as sufficiently definite to be enforceable.

B is incorrect. Leelow's promise was not illusory as it agreed to expand its program toanyone who applied to learn BIRCH software.

C is a poor answer in light of Answer D as BIRCH's offer was accepted before there wasa revocation, so the revocability of the original offer is meaningless.


CONTRACTSOn January 1st, Jack borrows $1,000 from Dean. He records this in writing, as well as hisagreement to repay the amount in 1 year. In November, Jack realizes that there is no way hecan repay Dean in time and approaches their mutual friend Alan with a deal. Jack offers Alan200 hours of work at $5 an hour (all to be completed by January) if Alan agrees to pay Deanhis $1,000. Alan agrees, but by January Jack has only worked 100 hours. Alan tells Jack, "I'mnot paying Dean a cent. You haven't worked enough." Jack responds: "Please. Hold on toyour cash, and once I hit 250 hours, pay Dean." Alan agrees, as this seems reasonable.Without missing a beat, Dean learns of the deal between Jack and Alan and sues Alan for his$1,000. What is the probably outcome?

A. Judgement for Dean as a third party beneficiary to the original contract between Jack andAlan, since there was no consideration for the modification of the contract.

B. Judgement for Dean as a third-party beneficiary who did not agree to the modification.

C. Judgement for Dean as his contract was with Jack and is not liable for a debt owed toDean.

D. Judgement for Alan, as the original agreement has been modified before Dean even knewof the original agreement.

Answer: DWhen dealing with an agreement affecting a third party beneficiary, the agreement canbe modified without the third party's consent if his rights have not yet vested. If Dean hasno knowledge of the original agreements, his rights clearly have not vested; therefore,modification is permissible.

A is wrong. Even though Dean is a third-party beneficiary, Jack and Alan are free tomodify the agreement as they see fit.

B is wrong as Dean's rights have not yet vested, therefore, he does not have to agreeto the modification of the Jack/Alan agreement.

C is wrong simply because it is too broad. Under the present facts, it is possible forliability to flow from Alan to Dean under the proper circumstances. In light of this, C isclearly an incorrect answer.


CONTRACTSWantmor Oil enters into a contract with Speedy Oil, a car oil-change franchise. Thecontract states, "one tankload of oil, Speedy place of business FOB." The rest of thecontract states the grade of oil, and the contract price. A final term states that Speedymust obtain a "letter of credit from WaterBank at an interest rate of no more than 2.5%."Which statement would discharge Wantmor's duty and put Speedy in breach ofcontract?

A. WaterBank has recently become insolvent.

B. WaterBank offers a letter of credit at 3.5% and nothing otherwise.

C. Speedy never applied for a letter of credit.

D. Speedy obtained a 2.5% letter of credit from Mondo Bank, a bank similar toWaterBank.

Answer CIf Speedy fails to apply for a letter of credit, Wantmor's duty will be excused and Speedywill be in breach. Since the contract was made contingent on Speedy applying for a letterof credit; applying for the letter is a condition precedent. If Speedy fails to perform thecondition precedent, they are no longer offered the benefit of the condition.

Answers A and B are both wrong. Say Speedy had in good faith tried to secure a letterof credit as both Answers A and B suggest, but some external act happened (like abankruptcy, or availability only at a higher rate). In this case, the condition precedent tothe contract would have been fulfilled (i.e., Speedy's application for a letter of credit) butthe contract would fail as Speedy was not able to obtain a letter of credit.

D is incorrect as the need to obtain the letter from a specific bank would be viewed asa promise, not a condition. Breach of the promise discharges the non-breaching partyfrom the contract only if the breach is material. In the present case, the parties are likelymore interested in the type of bank that the letter was from, not the actual obtaining ofa letter. As Speedy obtained it from a different bank there was a breach, but the breachwas immaterial and would not discharge Wantmor from their duties.


CONTRACTSWantmor Oil enters into a contract with Speedy Oil, a car oil change franchise. Thecontract states,"one tankload of oil, Speedy place of business FOB." The rest of thecontract states the grade of oil, and the contract price. A final term states that Speedymust obtain a "letter of credit from WaterBank at an interest rate of no more than 2.5%."Assume that Speedy gets a letter from WaterBank at 3% and Wantmor refuses to ship.If Speedy sues, who will prevail?

A. Speedy wins, as the 2.5% is a material term of the contract.

B. Speedy wins, because the interest-rate term was included in the contract for thebenefit of Wantmor.

C. Speedy loses, because the .5% difference in rates is not material.

D. Speedy loses, unless a 2.5% interest rate was unavailable at a comparable bank.

Answer: BSpeedy wins, as the interest rate limitation existed for their benefit and they were free towaive it. There was a condition precedent in the contract that Speedy was to obtain aletter at no more than 2.5%. This interest cap was clearly for Speedy's benefit. If Speedyelects not to insist on fulfillment of the condition, the court will not deem the contractinvalid and will accept the waiver by Speedy.

A is incorrect because the 2.5% term was a term material to the condition precedent.The 2.5% term was not material to the contract itself.

C is incorrect as the additional .5% would be sufficient to prevent the contract and theliteral reading of the contract states that anything over 2.5% fails to meet the conditionalprecedent.

D is incorrect. The availability of a lower rate is immaterial, since Speedy waived theneed for a rate under 2.5% by accepting the 3% rate.


CONTRACTSVin needs his house painted and gets bids from $3,000-$4,000. His final bid from Jon isfor $2,800. Vin accepts this bid and enters into a contract with Jon. The day before Jonis supposed to start, he calls Vin and says: "My calculator is on the fritz, and adds upthe numbers incorrectly. My price should have been $3,500. I can't do the job for lessthan $3,500." Assume Vin sues. Who will prevail?

A. Vin, only if it is too late to accept the bid from the next low bidder at $3,000.

B. Vin, so long as he did not have reason to know of the error.

C. Jon, as he has yet to start performance of the contract.

D. Jon, if he asserts the defense of mistake.

Answer BIf Vin knew of the error, then the mistake would prevent the formation of a contract. Amutual mistake would prevent the contract formation (assuming the mistake was relatedto the heart of the bargain). If Vin did not know, then it is a unilateral mistake and thiswill not prevent formation of a contract. In either situation, if Vin knew or should haveknown of the mistake, he cannot take advantage of it. In the present fact pattern, thereis a unilateral mistake and the contract at $2,800 is enforceable so long as Vin had noreason to know of Jon's mistake.

A is incorrect as the ability to accept the next lowest bid is meaningless. Vin has alreadyaccepted Jon's bid of $2,800 and he is entitled to receive the benefit he contracted forat this price. If he accepted the next bid at $3,000, he could go after Jon for the $200 indamages.

C is incorrect. Jon is bound to perform the terms of the contract, regardless of whetherhe has started performance. If Jon learned of the error before Vin's acceptance he couldhave revoked his bid. However, once Vin accepted there was a valid contract and Jonbecame liable for breach.

D is incorrect as a mistake defense can only be asserted if Vin also knew of the mistake,or had reason to know of it. There are no facts indicating this.


CONTRACTSCarlton contracts with Angel to build a house for Angel for a price of $1 million. Carltonstarts and has incurred $300,000 in expenses when Angel completely breaches theircontract. Carlton needs to spend an additional $600,000 to complete the house. Whatamount is Carlton entitled to recover?

A. $100,000

B. $300,000

C. $400,000

D. $600,000

Answer: CCarlton can collect both his costs and his profits in a situation where an owner breachesa construction contract, even if construction is not yet completed.

A is incorrect because that amount only represents Carlton's lost profit, but fails to addhis costs to date.

B is incorrect because that $300,000 only reflects Carlton's expenses. He is also entitledto profits.

D is incorrect. Carlton is not entitled to recover the cost of completion since he has notdone the work.


CONTRACTSLuke, a builder, and Leroy contract to build a house for $999,000. The contract statesthat Leroy will pay Luke in thirds, based upon: 1) completion of excavation, 2) completionof foundation and 3) completion of the entire project. If Luke has completed the first 2milestones, but has stopped working because he is insolvent, he is entitled to recover:

A. $666,000 of the contract price.

B. $666,000 minus the cost of damages that Leroy has suffered in getting someone elseto complete the job.

C. Nothing, because Luke has committed a material breach of the contract.

D. Nothing on the contract, as the construction contract is not divisible. Luke's onlyrecovery may be in a quasi-contract forum.

Answer D

The question that needs addressing is whether this is a divisible contract. To be divisible,a contract must be such that: 1) the performance of each party is divided into two ormore parts under the contract, 2) the number of parts due from each party is the same,and 3) the performance of each party by one party is the agreed-upon equivalent of thecorresponding part from the other party. It is this 3rd condition that gives us problems,as there is no indication that the parts Luke is to perform are the monetary equivalent tothe payments that Leroy is to make. Here, it appears as if we are only dealing withprogress payments resulting in a non-divisible contract. Luke's best claim is, therefore,a quasi-contract recovery as he has, in fact, conferred some benefits to Leroy.

A is wrong in light of the correct answer. The contract here is not divisible. If this was adivisible contract, Luke remains wrong as Leroy would still be entitled to offset hispayments to Luke in the amount of his losses.

B would be the correct answer if the contract were divisible, but this is clearly not thecase in light of the correct answer explanation.

C is wrong. Although the breach was material, Luke has conveyed some benefits toLeroy and is entitled to recover under a quasi-contractual basis (see above).


CONTRACTSGeorgia graduates high school and can't determine if she wants to go into the oilbusiness or the Air National Guard. Her mom, a career military woman trying to promotewomen in the military, offers to buy Georgia a car and pay her living expenses if she joinsthe Guard. For every day that she shows up, mom promises to give her $1,000. Georgiaagrees. The next day Georgia's grandaddy, also a career military person, calls and saysthat if mom fails to pay up, he will, according to the same terms. Georgia attends theGuard and shows up 30 times. Her mom dies and the executor of her estate refuses topay Georgia the $30,000 for her showing up for duty. If Georgia sues, she will beunsuccessful in trying to enforce her grandaddy's promise because:

A. The contract was illusory.

B. The contract was oral.

C. There was no consideration flowing to Georgia's grandaddy.

D. The fact that Georgia learned to fly was sufficient compensation.

Answer: B

The Statute of Frauds requires that a promise to answer for a debt of another must bein writing.

A is wrong. The contract is clearly not illusory; as mom agreed to pay for attendanceand, if Georgia attended, she would be conferring the gift of knowing that Georgia wasin attendance to her mom.

C is wrong. Georgia's act of actually showing up was the consideration for hergrandaddy's promise.

D is incorrect because this was not the bargained-for exchange that Georgia expected.


CONTRACTSGeorgia graduates high school and can't determine if she wants to go into the oilbusiness or the Air National Guard. Her mom, a career military woman trying to promotewomen in the military, offers to buy Georgia a car and pay her living expenses if she joinsthe Guard. For every day that she shows up, mom promises to give her $1,000. Georgiaagrees. The next day Georgia's grandaddy, also a career military person, calls and saysthat if mom fails to pay up, he will, according to the same terms. Georgia attends theGuard and shows up 30 times. Her mom dies and the executor of her estate refuses topay Georgia the $30,000 for her showing up for duty. If Georgia sues her mom's estatefor $30,000, will she succeed?

A. Yes, because there was a bargained-for exchange between parties.

B. Yes, because her mom, had she been alive, would have paid Georgia.

C. No, because her mom's promise was personal and the obligation was extinguishedat her death.

D. No, because the agreement between Georgia and her mom was oral, making itimpossible to prove the terms after her mom's death.

Answer AGeorgia and her mom had entered into a valid contract, making her mom's estate liableto pay the $30,000.

B is an irrelevant answer.Note: Answers such as this, which are not supported by facts, are typically incorrect.

C is an incorrect answer as it misstates the law. The obligation of Georgia's momextends past her death.

D is wrong because Georgia could still prove the existence of the oral agreement, evenafter her mom's death.


CONTRACTSAircraft Co. is awarded the opportunity to sell military helicopters to Spain. Expecting long andlengthy talks, Aircraft Co. hires Pasquale, who has a reputation as being the 2nd best in theindustry, as their contract negotiator. Under his contract, Pasquale is to start meeting withSpain on February 1st. On January 1st Pasquale decides to take a job with McDonaldFairchild, another large aircraft manufacturer; thereby, disqualifying himself (due to a clearconflict of interest) from his proposed work with Aircraft Co.. Pasquale calls Fred, his oldestbuddy and the person known as "the best negotiator in the business." Pasquale orally assignshis contract with Aircraft Co. to Fred, paying him a $500 bonus for taking the job for him.Aircraft Co. is okay with Fred replacing Pasquale. Two weeks prior to the start of negotiations,Fred informs Aircraft Co. that he also has received a better offer and will not be working forthem. Aircraft Co. sues Fred for breach. What will happen?

A. Fred prevails. The only remedy available to Aircraft Co. is against Pasquale.

B. Fred prevails, because the consideration in the amount of $500 is grossly inadequateconsidering the multimillions of dollars Fred is negotiating for.

C. Aircraft Co. prevails, as there has been a novation.

D. Aircraft Co. prevails, as they are the intended 3rd party beneficiary of the Pasquale/Fredcontract.

Answer: D

Typically, when a duty is delegated, the obligee cannot force the delegate to perform asthe delegate has made no promise directly to the obligee. In the present situation,however, Fred's promise is supported by consideration in the amount of $500.Therefore, a contract results and the obligee (Aircraft Co.) becomes a 3rd partybeneficiary of that contract. In this situation, the obligee (Aircraft Co.) can, in fact,enforce the contract. Based on this analysis, Answer A is clearly wrong.

B is wrong. An inquiry into adequacy of the payment would typically not be of concernto a court and they would not address this matter.

C is also wrong 'as the facts have no indication that a novation has occurred.


CONTRACTSProfessor Talon decides to entice her students by offering a trip to Tuscany to the highest GPAin her class. She announces this to her classes and posts it on a university message board,noting a maximum award of $2,000. Sue emails Professor Talon: "Professor. I'm going to trymy best to get this trip. I have purchased all the study guides available and I am studying 8hours a day for your class. Thanks, Sue." The dean of Garden State University fields numerouscomplaints from other professors who are questioning Professor Talon's motivational methodand angry that her students are neglecting their other classes. The dean contacts ProfessorTalon with the dilemma and instructs her to rescind the offer as it is "improper in accordancewith the school's written policy." Professor Talon informs her students of the situation andwithdraws her offer both orally and in writing. Sue, mad at this, meets Professor Talon at heroffice hours. She protests that Professor Talon cannot withdraw as she has already started toperform. Upon scoring SUe's final exam, Professor Talon realizes that Sue is, in fact, thehighest GPA in the class. Sue demands performance. Assuming that Professor Talon'sannouncement to her class is an offer, it would be an offer for:

A. A bilateral contract.

B. A unilateral contract.

C. A bilateral contract or a unilateral contract, according to the offeree's attention.

D. A unilateral contract that became a bilateral contract when Sue began to perform.

Answer: BProfessor Talon's offer can only be accepted following the completion of performance byone of her students. Completion of performance occurs when one of her studentsachieves the highest GPA in the class: a unilateral contract was formed when Suereceived the highest grade. Answers A, C and D are, therefore, incorrect.


CONTRACTSPantaleo wants to have his brick walkway replaced, and solicits bids from numerousmasons in the yellow pages. Bids are in the range of $10,000 to $12,000. Philip submitsa bid for $9,500. Pantaleo accepts his bid and enters into a contract. Just before Philipis to start, he sends this email:To: [email protected] Subject: oops-bad estimateMy calculator batteries were low when I used it to estimate this job. Seems it caused anaddition error. I can't do the job for less than $10,300 without losing money. - PhilipIf Pantaleo sues for breach of contract, who will win?

A. Pantaleo, assuming it is too late for him to accept the bid of the next lowest bidder.

B. Pantaleo, assuming he had no reason to know Philip's bid was incorrect.

C. Philip, as he has not begun performance of the contract.

D. Philip, as he can use the defense of mistake.

Answer: BPhilip's only potential defense is one of unilateral mistake. However, a contract can onlybe rescinded for a unilateral mistake if the other party had reason to know of the mistake.Here, there is no indication that Pantaleo was aware of the mistake, resulting in AnswerB being correct and Answer D being clearly erroneous.

A is wrong as being irrelevant. The ability of a non-mistaken party to make an alternatecontract is meaningless.

The fact that the contract remains executory at this point is also meaningless. Therefore,Answer C is incorrect.


CONTRACTSNuttob sells buttons to numerous clothing manufacturers. They do about $200 million ayear in sales. Nuttob buys half of its buttons from ButtonUp, a Nevada corporation. OnOctober 9th, Nuttob orders $1 million in buttons from ButtonUp, with the terms that theorder will be paid in full within 30 days and delivery is to occur by November 5th, FOBUStrack depot #1, Las Vagas, Nevada (ButtonUp's city of business). On November 1st,ButtonUp delivers the chips to the railroad terminal, and notifies Nuttob that the buttonswill arrive by the 4th of November. On November 4th Nuttob picks the goods up at thelocal UStrack station. On the 6th ButtonUp learns that Nuttob is insolvent and cannot payits debts according to an article in Wealth magazine. ButtonUp seeks to reclaim thegoods. Can they?

A. No, as the payment date in the original contract has not yet passed.

B. Yes, unless Nuttob has made assurances to ButtonUp that it will be paid on time.

C. Yes, because ButtonUp initially relied upon Nuttob's assurances that they weresolvent and could pay.

D. Yes, if Nuttob was in fact insolvent.

Answer: D Under the U.C.C. a seller can reclaim goods within 10 days of receipt, if the seller learnsthat the buyer received the goods on credit while they were insolvent.

A is incorrect. The expiration of the payment period is not necessary under theReclamation of Goods Rule of the U.C.C. as explained above.

B is incorrect as the U.C.C. offers a seller greater flexibility than simply demandingassurance when dealing with an insolvent seller. As set forth above, Nuttob has the rightto reclaim goods should they choose to do so.

C is incorrect because the seller's reliance on the representation that the buyer issolvent is immaterial unless the 10 day period to reclaim goods, as noted in the correctanswer, has passed.


CONTRACTSNuttob sells buttons to numerous clothing manufacturers. They do about $200 million a year in sales.Nuttob buys half of its buttons from ButtonUp, a Nevada corporation. On October 9th, Nuttob orders$1 million in buttons from ButtonUp, with the terms that the order will be paid in full within 30 daysand delivery is to occur by November 5th, FOB UStrack depot #1, Las Vagas, Nevada (ButtonUp'scity of business). On November 1st, ButtonUp delivers the chips to the railroad terminal, and notifiesNuttob that the buttons will arrive by the 4th of November. On November 4th Nuttob picks the goodsup at the local UStrack station. On the 6th ButtonUp learns that Nuttob is insolvent and cannot payits debts according the an article in Wealth magazine. ButtonUp seeks to reclaim the goods andsucceeds. ButtonUp tries to resell the buttons, but (almost immediately) rival button manufacturersannounce the arrival of newer better buttons for use in next year's fall fashion collections making theones ButtonUp is trying to sell obsolete. Seeking to sell as fast as they can, ButtonUp sells the lot for$400,000 and seeks to recover the remaining $600,000 from Nuttob. Will ButtonUp win?

A. No, because once a seller reclaims his goods, he waives all other available rights and remedies.

B. No. The appropriate measure of available damages is the market value of the goods at the timeof delivery, not resale.

C. No, because the measure of damages is the market value of the goods at the time and date whenthey are paid for, not at resale.

D. Yes, because Nuttob's insolvency was a breach of the purchase contract.

Answer: AThe U.C.C. states clearly that once a seller seeks to reclaim goods, all other remediesthat may have been available are no longer. In light of this, Answers B, C and D areclearly wrong.


CONTRACTSNuttob sells buttons to numerous clothing manufacturers. They do about $200 million a year in sales.Nuttob buys half of its buttons from ButtonUp, a Nevada corporation. On October 9th, Nuttob orders $1million in buttons from ButtonUp, with the terms that the order will be paid in full within 30 days anddelivery is to occur by November 5th, FOB UStrack depot #1, Las Vagas, Nevada (ButtonUp's city ofbusiness). On November 1st, ButtonUp delivers the chips to the railroad terminal, and notifies Nuttobthat the buttons will arrive by the 4th of November. On November 4th Nuttob calls ButtonUp and rejectsthe entire shipment, as the buttons fail to meet the quality control standards annunciated in the purchaseorder. In fact, the buttons fail every test due to a manufacturing error by ButtonUp: none of the buttonshave holes in them. ButtonUp seeks to cure, offering to deliver conforming goods by the 5th. They dropoff a new shipment that meets the standards on the evening of the 5th. Nuttob refuses to accept thegoods. Can they?

A. No, once ButtonUp notified Nuttob of its intent to cure by providing conforming goods, any tender ofconforming goods by the contract date cures the previous tender.

B. Yes, because the right to cure an imperfect tender is waived in a situation where delivery of the goodsis to occur by way of a common carrier (like UStrack) as opposed to a direct delivery to the buyer.

C. No, unless Nuttob has gone out and bought conforming goods from another manufacturer beforeButtonUp tendered its replacement conforming goods.

D. Yes, because tender of the original nonconforming goods permitted Nuttob to rescind the purchasecontract.

Answer AUnder the U.C.C., when the seller tenders goods and is rejected due to nonconformanceof the goods at a point when the time for performance has not yet passed, the seller cannotify the buyer of their intention to cure and then deliver conforming goods prior to thetime of contract expiration. In light of the correct answer, Answer D is clearly incorrect.

B is factually false as the common carrier used has no effect on the right to cure.

C is incorrect as the seller has notified the buyer in a timely fashion of its intention tocure.


CONTRACTSColeman asks Quimby to construct an airplane built to her specifications. Coleman andQuimby orally agree to the price of $4 million, payment to be received within 30 days oftaking delivery. Additionally, they agree that Quimby will not subcontract any work.Quimby does subcontract with Earhart Co. for the airplane's instruments in the amountof $500,000, stating that she will pay within 10 days of Coleman receiving and payingfor the plane. Quimby does not mention her Earhart Co. agreement to Coleman. EarhartCo. delivers the instruments, Quimby builds the plane, and Coleman takes delivery ofher plane. Coleman's 30 day payment period expires, but Coleman finds herselfbankrupt following the collapse of her new line of women's aviation clothes. Earhart Co.demands the $500,000 from Quimby, but Quimby states: "Under our contract, you don'tget paid until I do." If Earhart Co. claims that a contract exists between them andQuimby, how much can they recover?

A. The fair market value of the equipment under a quasi-contract recovery.

B. The cost of materials and labor.

C. $500,000

D. Nothing

Answer: CEarhart Co. can recover the full $500,000 contract price in light of the acceptance of theirgoods by Quimby. Under the U.C.C. guidelines, their contract with Quimby isenforceable, despite the absence of a writing. Utilizing the Parol Evidence Rule tointroduce contract terms, Earhart Co. is free to recover the amount.

A is incorrect. Since the recovery is under the contract entered into by the parties, aquasi-contract recovery is unnecessary.

B is also incorrect as it implies another quasi-contract recovery. Such a recovery isinapplicable in light of the existence of a contract (as detailed in the correct answer)allowing Earhart Co. to recover the full contracted amount.

D is incorrect as Quimby's agreement is a promise, not a condition (if a condition,Quimby would be excused from payment until she herself was paid). Here, there is anagreement to perform a duty once an event occurs. However, because the event isoutside the control of the promisee, a court will typically rule that the provision is apromise (rather than a condition) because this supports the contract and preserves thereasonable expectations of the parties.


CONTRACTSAntoni owns Villa Familia Espiritoso and contracts its sale to his cousin Joselito for$400,000, further stating: "I'll drop a contract for sale in today's mail and will have myattorney draw up a deed." Antoni signs the contract, which only roughly describes theproperty and estate, absent a meters and bounds description. He forwards it to Joselito.Joselito receives the contract, but does not receive a deed as Antoni's attorney forgot tomail it. The next day Antoni receives another offer for $450,000 from his cousin Cid,Joselito's brother. Antoni calls his attorney: "Bring over the deed, along with a contractfor conveyance to Cid for $450,000." Cid signs the deed with a promise to deliver fundsin 2 days. Antoni's attorney writes Joselito stating: "Antoni has another offer. Yourcontract has been rescinded." The next day Antoni receives the signed contract fromJoselito. If Joselito wants to compel Antoni to convey the property to him for $400,000,can he demand specific performance?

A. Yes, as Antoni signed the land sale contract with Joselito.

B. No, because the land sale contract failed to legally describe the property.

C. No, because the deed was not signed by the party to be charged.

D. No, because the land contracts are governed by the Statute of Frauds.

Answer A

Specific performance is applicable, as a contract was formed upon the oral agreementto sell. This contract, however, was unenforceable as it was under the Statute of Frauds,was not reduced to writing containing the contract's essential terms, and was not signedby the party to be charged, namely Antoni. Upon signing the land sale agreement, Antonimet the burdens of the Statute of Frauds, namely: price, description of the propertyterms and a designation of the parties. Specific performance is applicable here, like mostland sale contracts, as damages would be inadequate in exchange for the family house.

B is incorrect. A description need not be a complete legal description to satisfy theStatute of Frauds, but rather may reasonably identify the subject of the contract. It issufficient that the property was identified by its name: Villa Familia Espiritoso.

C is incorrect. The signing of the deed is irrelevant since Antoni signed the land salecontract, which is sufficient under the Statute of Frauds.

D is incorrect. The Statute of Frauds was satisfied, here, by the written and signed salecontract.


CONTRACTSLead Belly is a mechanical pencil store. On Monday the store's owner realizes that theyare running low on blue mechanical pencils. They order 500 from Gravitas Pencil Co.,who promptly ships the pencils. The owner of Lead Belly opens the package andrealizes that there are pencils but no lead. He calls Gravitas who explains that they areout of lead, but have reduced the price they charged and will ship it overnight. This istheir typical practice when dealing with Lead Belly. Can Lead Belly cancel the contract?

A. Yes, because the store was entitled to a perfect tender.

B. Yes, because the time for performance has passed.

C. No, because the one-day delay is not material.

D. No, because Gravitas Pencil Co. has a reasonable amount of time within which tocure.

Answer: DGenerally, a buyer is entitled to perfect tender, but there are numerous exceptions. Onesuch exception occurs when the seller believes that the buyer will accept based uponpast dealings between the parties. In such a setting, the seller will be given a greaterperiod to cure beyond the time of acceptance. In light of this, Answers A and B areclearly wrong.

C would typically be correct under a perfect tender analysis, but in light of the exceptionnoted above, C is also incorrect.


CONTRACTSGeorge leases a house on lots of land from Cole. He asks Cole: "Did you ever think of selling thisplace?" Cole says: "Coincidentally, I'll be selling in a few months." George gives Cole $1,000saying: "Here is $1,000 to ensure that from this moment on I have the option to buy for $30,000(if this place is put on the market within the year). If you don't sell this year, return the $1,000 tome. No hard feelings." Two months later Cole calls George: "I'm selling, but I need to move quickly.Still interested at 30K?" George is interested and asks Cole to apply the $1,000 as earnest moneytoward the purchase. George draws up a contract, stating that time is of the essence and that thecontract date must be before June 15th at 12 pm. On June 15th, Cole gets a bank check for$29,000 from his bank and calls George: "I'm over-nighting your check right now, but I can't be atthe closing. Sorry, it's just one of those things. My flight home was delayed." It is 10 am when hecalls. At 11 am George gets a call from Ira offering to pay $40,000 in cash. At 1 pm Ira shows upwith the $40,000. George destroys the contract with Cole and writes and executes a new one withIra. On June 16th, Cole's check arrives and George mails it back to him, along with a personalcheck payable to Cole for $1,000. Ira takes possession of the property. If Cole sues for specificperformance, will he prevail?

A. Yes, as he tendered the money in a timely manner by mailing the check on June 15th.

B. Yes, because he had notified George that it was impossible for him to be at the closing.

C. No, because he did not tender the money at closing.

D. No, because it is not proper to accept an offer under an option contract using the mailbox rule.

Answer: CCole's failure to tender at closing was a breach of contract; thereby, releasing George from his dutyto perform. This was a material breach since the payment before 12 pm was a specifically agreedupon term in the contract. George, was thereby released from his contractual duties when Colefailed to perform and free then to sell his property to Ira.

A is a clear misstatement. Money was in fact NOT tendered in a timely manner in accordance withthe terms of the contract. Under the mailbox rule an acceptance is effective upon dispatch. Here,however, the tender of cash was not an acceptance of the contract as acceptance occurred whenthe parties bilaterally promised to exchange $29,000 for the property.

B is incorrect. Impossibility is only applicable when it is objective: namely, the condition cannot befulfilled by anyone. Here, there are no facts indicating that it was impossible for Cole to get themoney to George in time.Note: The notice that he would not be there in time is not a modification, as he gave noconsideration to obtain the modification, nor did George agree to the modification.

D is also incorrect. While the mailbox rule does not apply to option contracts (namely, an offer thatcannot be accepted simply by mailing the acceptance), in the present case the tendering of the$29,000 was not the actual acceptance of an offer, but rather a condition to a bilateral contract.Acceptance of the option occurred when the parties entered into a bilateral contract for the sale ofthe land. In light of this, the mailbox rule is irrelevant. D is incorrect, but close. If the offer wasworded such that Cole had the option of purchasing the property by tendering the $29,000 beforenoon on June 15th, then acceptance would have occurred upon mailing the $29,000 check.


CONTRACTSColeman asks Quimby to construct an airplane built to her specifications. Coleman andQuimby orally agree to the price of $4 million, payment to be received within 30 days oftaking delivery. Additionally, they agree that Quimby will not subcontract any work.Quimby does subcontract with Earhart Co. for the airplane's instruments in the amountof $500,000, stating that she will pay within 10 days of Coleman receiving and payingfor the plane. Quimby does not mention her Earhart Co. agreement to Coleman. EarhartCo. delivers the instruments, Quimby builds the plane, and Coleman takes delivery ofher plane. Coleman's 30 day payment period expires, but Coleman finds herselfbankrupt following the collapse of her new line of women's aviation clothes. Earhart Co.demands the $500,000 from Quimby, but Quimby states: "Under our contract, you don'tget paid until I do." Is there an enforceable contract between Quimby and Earhart Co.?

A. Yes, both are merchants under the Uniform Commercial Code.

B. Yes, because Earhart Co. performed.

C. No, because Quimby had agreed not to subcontract.

D. No, because of the Statute of Frauds.

Answer B

There is an enforceable contract since Earhart Co. fully performed. The contract, here,is governed by the Statute of Frauds (over $500, sale of goods). A contract within theStatute of Frauds is generally unenforceable without a signed contract by the party beingcharged containing the contract's essential terms. The notable exception is for goodsreceived and accepted. Here, although oral, once Quimby accepted the goods, shebecame bound despite the general statute.Note: Quimby may also be bound if these instruments are deemed specificallymanufactured goods, not suitable for sale to others.

A is incorrect. The U.C.C. does not exempt merchants from the Statute of Frauds.

C is incorrect because it is irrelevant. The fact that Quimby agreed with Coleman not tosubcontract is only relevant in regard to their contract. It does not affect her contract withEarhart Co.

D is also incorrect. As stated above, this contract falls within an exception to the Statuteof Frauds (upon Quimby's acceptance of the Earhart Co. instruments) as set forth in thecorrect answer.


CONTRACTSBorder City has numerous car thefts and offers a $20,000 reward for the arrest and conviction ofanyone caught stealing cars. The local TV station broadcasts information relating to the thefts dailyfor two weeks. Jim hires Steve, a private investigator, to search for the thief that stole his pristinevintage Cadillac. Steve gets $100 a day for his search. Six months later, the city decides to repeal itsreward because they are tight for cash. They broadcast the repeal over the local TV station. Onemonth later, Steve finds the entire theft ring. They are all arrested and convicted. He is paid by Jim,who also mentions to Steve that he should claim the $20,000 reward from Border City. Steve was notaware of the reward until now. Steve files for the reward and is denied. Steve asserts that he neverheard Border City's repeal of the reward before he attempted to claim it. Assume that Border Cityhas no immunity from situations such as this. In which fact pattern could Border City's reward beactually accepted?

A. Only by an offeree's making the arrest and assisting in the successful conviction of the theft gangthat the original reward was to cover.

B. Only by the return promise of an offeree to make a reasonable effort to bring about the arrest andconviction of the car thieves.

C. By an offeree's communication of assent through the same medium used by the city in making itsoffer.

D. By an offeree's supplying information leading to the arrest and conviction of a car thief covered bythe original reward.

Answer DA court will look to the intended scope of the reward making D the correct answer.Border City's reward would not be taken literally; therefore, an actual arrest andconviction is not applicable, making A an incorrect answer.

B and C are clearly incorrect as they would result in a bilateral contract under which theofferee would be promising or assenting to Border City's proposal. In the presentsituation, the offer is a unilateral proposal that can be accepted only by performance.


CONTRACTSBorder City has numerous car thefts and offers a $20,000 reward for the arrest and conviction ofanyone caught stealing cars. The local TV station broadcasts information relating to the thefts daily,for two weeks. Jim hires Steve, a private investigator, to search for the thief that stole his pristinevintage Cadillac. Steve gets $100 a day for his search. Six months later, the city decides to repeal itsreward because they are tight for cash. They broadcast the repeal over the local radio station,because the local TV station had gone bankrupt. One month later, Steve finds the entire theft ring.They are all arrested and convicted. He is paid by Jim, who also mentions to Steve that he shouldclaim the $20,000 reward from Border City. Steve was not aware of the reward until now. Steve filesfor the reward and is denied. Steve asserts that he never heard Border City's repeal of the rewardbefore he attempted to claim it. Assume that Border City has no immunity from situations such asthis. Further assume that Border City's reward offer is revocable, how could the revocation be viewedby the court as effectively accomplished?

A. Revocation was made in the same manner as the offer, or by a comparable available medium andfrequency (e.g., radio ads instead of TV ads).

B. Revocation was made in the same manner as the offer was made.

C. Revocation occurred by simply passing the resolution, since this is a city reward and actions bythe city council are deemed public notice.

D. Notices were mailed to all residents of the city and all other reasonably identifiable potentialofferees.

Answer A

The only way to effectively revoke this reward is by a manner similar to which it wasoffered. It is not necessary, however, to use the exact same medium.

B is wrong. The local TV station went bankrupt, so it was impossible to use the samemanner to revoke.

C fails to go far enough, as it does not give notice to everyone who may have initiallyheard of the offer.

D is clearly wrong for being too encompassing, and potentially too difficult.


CONTRACTSBorder City has numerous car thefts and offers a $20,000 reward for the arrest and convictionof anyone caught stealing cars. The local TV station broadcasts information relating to the theftsdaily for two weeks. Jim hires Steve, a private investigator, to search for the thief that stole hispristine vintage Cadillac. Steve gets $100 a day for his search. Six months later, the city decidesto repeal its reward because they are tight for cash. They broadcast the repeal over the localradio station, because the local TV station had gone bankrupt. One month later, Steve finds theentire theft ring. They are all arrested and convicted. He is paid by Jim, who also mentions toSteve that he should claim the $20,000 reward from Border City. Steve was not aware of thereward until now. Steve files for the reward and is denied. Steve asserts that he never heardBorder City's repeal of the reward before he attempted to claim it. Assume that Border City hasno immunity from situations such as this. If Steve sues, which of the following is most helpful tohis case?

A. Border City has benefited by Steve's actions.

B. The attempted revocation of the reward was against public policy.

C. Border City's offer was a bounty so the elements of contract are not essential to the city'sliability.

D. Estoppel applies to Border City's actions. Therefore, denying Steve's reward is against thepublic interest.

Answer: CSteve cannot successfully use a contract theory as he had no initial knowledge of theoffer. To accept an offer, an offeree must at a minimum be aware of the offer. In light ofthis, there is no contract theory applicable. A bounty theory, however, is a good choice(especially when dealing with rewards) making C the best answer.

A is incorrect. Simply because a party has received a benefit, they are not liable for thereceived benefit.

B is wrong. Public policy cannot limit a party's right to revoke an offer.

D is incorrect. To assert an estoppel defense, a detrimental reliance is necessary. Stevecannot have detrimentally relied upon the offer, as he initially had no knowledge that theoffer existed.


CONTRACTSFrancie needs new glasses. She details to Iris, the optician, how she spends large amounts of time infront of the computer. Iris goes into the display case and brings out several samples of "ComputerEyes"glasses, that are renowned for Francie's vision situation. Francie tries them on but likes none of them.She does notice a pair called "4eyes" that she likes and asks to try on. Iris brings out a pair, explainingto Francie that the lenses are made from crystal and should easily last for 10 years. Francie buys theglasses after trying them on. She wears them for months, but after 2 months she develops a slightscratch on one of the lenses. When she takes it to a repair shop she learns that the lenses are plastic,not crystal. If Francie sues for a refund, what is the most applicable theory for her winning?

I. Breach of an express warranty that the lenses were made of crystal.

II. Breach of an express warranty that the glasses would last for years.

III. Breach of the implied warranty of merchantability.

A. I and II, but not III

B. I and III, but not II

C. II and III, but not I

D. I, II and III

Answer: BAn express warranty comes about by way of a statement of fact or promise. Iris has infact made such a statement when she stated that the lenses were crystal. This gives riseto an express warranty. The statement that the glasses would last for years is not astatement of fact, but rather is an opinion. This does not give rise to an express warrantyas it is simply "puffery" by a salesman. In light of this, Statement I is a good answer whileStatement II is not. Statement III is also a good answer as it is based on an impliedwarranty of merchantability. An implied warranty of merchantability arises when amerchant sells an item, as long as they don't disclaim the warranty. Here, we havegoods that clearly were not fit for the ordinary purposes, as they wore out in a month.Therefore, Statement III is also a good theory to base an answer on.


CONTRACTSFrancie needs new glasses. She details to Iris, the optician, how she spends largeamounts of time in front of the computer. Iris goes into the display case and brings outseveral samples of "ComputerEyes" glasses, that are renowned for Francie's visionsituation. Francie tries them on but likes none of them. She does notice a pair called"4eyes" that she likes and asks to try on. Iris brings out a pair, explaining to Francie thatthe lenses are made from crystal and should easily last for 10 years. Francie buys theglasses after trying them on. She wears them out of the store. She sits on a bench andimmediately notices a chip in one of the lenses. She returns to the store, seeking arefund. If Francie sues, who will prevail?

A. Francie, as this is a breach of contract.

B. Francie, as the law awards her a reasonable time to inspect the goods after purchase.

C. Iris, as Francie had accepted the goods as they were.

D. Iris, as Francie failed to give written notice of the breach.

Answer: COnce goods are accepted by a buyer, the right to reject for nonconformance is typicallyover and the only available remedy is a suit for damages. Generally acceptance is whenthe buyer takes possession, but in some cases a buyer can revoke acceptance if thereis a substantial breach and the buyer has a good reason for accepting the goodsoriginally. Simply failing to take time to inspect the goods is not enough. Here there wasacceptance, and the breach seems to only be minor in nature.

A is a damages only reward, not a full refund that is applicable.

B is a gross misstatement of the applicable law and is clearly incorrect.

D is wrong because written notice is not a necessary element, oral notice is enough.


CONTRACTSGoGoJuice is a gas distributor who enters into several refineries to purchase their unleadedproducts. They contract with ColdPress Oil to purchase their entire unleaded product output forthe next 5 years at a price of 9%, the retail price at the time of delivery. This offer is contingenton a minimum weekly purchase of 1,000,000 gallons and GoGoJuice would be responsible for alldistribution. Upon signing the contract, GoGoJuice states in writing that they wish to buy1,000,005 gallons of ColdPress production. They continue to purchase all of ColdPress'sunleaded product for 12 months, at which point ColdPress develops a new refining processallowing them to double yearly production. ColdPress states to GoGoJuice that the excessproduction will be sold to various other retailers. GoGoJuice agrees and signs an addendum. Forthe next 12 months, GoGoJuice continues to buy half of all ColdPress's unleaded production untila foreign oil embargo makes it impossible for ColdPress to buy unrefined oil. ColdPress sends aletter to GoGoJuice informing them that delivery of their usual unleaded gas will now beimpossible in accordance with their contract. ColdPress is able to continue refining (using theimproved method) and continues to sell to others. The original agreement between GoGoJuiceand ColdPress was:

A. Unenforceable, because of the failure to set a specific price for the gasoline.

B. Unenforceable, because it was for an unreasonable period of time.

C. Enforceable as to price, but not as to the amount of gasoline that would be sold.

D. Enforceable in all respects.

Answer DHere, we are dealing with an output contract which is generally enforceable. In light ofthis, Answer D is the correct answer.

A is incorrect. There is, in fact, a price term set by the contract, regardless of the factthat this term is dependent on future events.

B is incorrect as no facts are introduced noting that the 5 year term could be deemedunreasonable.

C is incorrect as the output contract, in which GoGoJuice agrees to buy a fixed numberof gallons weekly was enforceable. The further agreement to buy all output is alsoenforceable as an available output contract.


CONTRACTSHospitium Hotels, a major hotel chain, requests bids from building contractors to build a new hotelin Georgia. They receive bids for: $15.3 million, $15.2 million, $12 million and 5 for $15 million. The$12 million bid was submitted by Vilis Construction. Hospitium accountants review the bids,sending this report to the president: "We expected a low bid from Vilis since they tend to use illegalimmigrants for labor, but even given this fact there is no way that Vilis would make any money at$12 million." Cassius, the owner of Vilis, had actually worked three days straight and in a sleep-deprived stupor failed to include $3.5 million in electrical expenses in his bid. Anxious to open assoon as possible, Hospitium includes a liquidated damages clause, providing that their contractorbe liable $50,000 for each day the project runs over the proposed one year completion. After thecontract is signed, Cassius realizes his bid mistake and informs Hospitium. They agree to pay theadditional $3.5 million on the phone, but never reduce this to writing. Assume that Vilis completesthe job in 364 days and is paid $12 million. Can Vilis compel Hospitium to pay the additional $3.5million?

A. Yes, because Hospitium was on notice of the mistake.

B. Yes, but only if there was additional consideration for the agreement to pay the additional $3.5million.

C. No, because Vilis has a preexisting legal duty to complete the project for $12 million.

D. No, because the Parol Evidence Rule makes the introduction of facts relating to the additional$3.5 million impossible.

Answer: AVilis may use the defense of unilateral mistake to compel Hospitium to pay. While theunilateral mistake generally does not allow a contract to be set aside, here Hospitiumhas noticed that there was, or should have been, a mistake in the original bid.Hospitium's knowledge of this mistake allows Vilis to avoid the contract completely.Rather than void it, however, Vilis elected to reform the contract, regardless of the factthat it was not recorded. The reformed terms may be brought in as evidence in a courtof law, thereby requiring Hospitium to pay the additional $3.5 million agreed upon.

B is incorrect. Consideration is not required in modifying a contract when parties aremodifying merely to correct an error in the original contract. Additionally, it is not definitethat we are dealing with a modified contract, as the unilateral mistake that Hospitiumknows of serves to excuse Vilis from the contract altogether. In light of this, we can viewthe reformed contract as a new contract in itself.

C and D are clearly incorrect, in light of the correct answer, as Vilis can clearly compelHospitium to pay.


CONTRACTSHudson has allergies and cannot stand the poor air quality in Bakersfield. He sendsMiguel a letter on January 1st stating: "Friend. I am leaving your city for a cave inIceland. Do you want to buy my stuff? Price is $10,000." Miguel receives the letter onJanuary 2nd. On January 3rd he sends Hudson a letter accepting the offer. The next dayMiguel changes his mind. He calls Hudson and says: "the deal's off." Later that day,Hudson receives Miguel's letter from the 3rd in the mail. Is there an enforceable dealbetween them?

A. Yes, because the contract is for the sale of goods over $500, thereby, making this acontract governed by the U.C.C.; and Miguel's subsequent rejection was not inwriting.

B. Yes, Miguel's letter of acceptance was effective when mailed.

C. No, because Miguel's rejection was communicated to Hudson before his letter ofacceptance arrived.

D. No, because the description of the subject matter is too indefinite.

Answer: B

Under the mailbox rule, acceptance by Miguel occurred upon mailing the letter on the 3rd.We will assume that the mailing was properly addressed and stamped, as there are no factsto the contrary. In situations where there is both an acceptance and a rejection, anapplication of the mailbox rule will depend on the timing of the acceptance and rejection. Ifthere is an acceptance sent first, the acceptance remains effective upon mailing (and so acontract is formed) absent a change in the offeror's position in reliance on the rejection.Here, Miguel first accepted and then called with a rejection. The mailbox rule applies, andsince there is nothing in the facts to show that Miguel made any reliance on the subsequentrejection, a contract remains and is enforceable.

A is wrong. Rejection need not be in writing as this answer implied. Furthermore, in lightof the correct answer, the rejection (absent the required detrimental reliance set forthabove) has no effect on the contract.

C is wrong in light of the correct answer. The mailbox rule holds the arrival of theacceptance in relation to the rejection irrelevant. Contract formation occurred when Miguelsent his acceptance.

D is also wrong. The open-ended description (although somewhat ambiguous) is certainlyclear enough to be deemed acceptable; and can be supported, if need be, by extrinsicevidence.


CONTRACTSLarissa, a computer store owner, contacts Pear Computers requesting the price of their new Z4model. Pear replies by letter and encloses a retail price list for their computers and accessories.Pear states that they would love to do business with Larissa, but that their terms are cash within30 days of delivery. Larissa orders 10 Pear Z4s on March 5th enclosing a check for $50,000, theretail price for 10 units. When Pear receives the check, they immediately contact Larissa, informingher of a printing error in their catalog. "The actual price per computer is $6,000." Pear further statesthat they will gladly ship as long as Larissa agrees to pay the additional $10,000 upon receipt ofthe computers. Larissa replies by letter on March 15th: "Please ship the 10 computers. I'll gladlypay, but I need these units by April 1st as part of my contract with Leelow University." Pearproceeds to ship, making no reply to Larissa's letter. The Z4s eventually arrive on April 15th.Larissa accepts the delivery, but writes Pear: "Due to your failure to ship the computers here ontime, I will not pay the additional $1,000 per machine. Also be advised that if I lose any money onreselling these units I'm holding you liable." Regardless of their late arrival, Leelow Universityaccepts the units and pays Larissa for them. If this is a valid contract, is Larissa now obligated topay an additional $10,000 following her promise?

A. No, because Pear failed to ship the computers in time for Larissa's April 1st due date.

B. No, because it was only a counteroffer, which Pear did not accept.

C. No, because a preexisting legal obligation to ship the computer to Larissa existed.

D. Yes, it is enforceable.

Answer: DHere we have a contract governed by the U.C.C. as it is for the sale of goods. Under theU.C.C. a promise to modify an existing contract is enforceable even withoutconsideration, as long as the proposal to modify is made in good faith. Here, we havegood faith as this was to correct an error in the catalog. In light of this, the promise topay $10,000 more is enforceable.

A is incorrect. Even if late shipping was viewed as a breach of contract, it would not giveLarissa the unilateral right to decide to withhold a portion of the price. The late shippingbreach would only give her the right to: reject the computers and "cover" or cancel thecontract, or accept the computers and sue for damages.

B is incorrect. Even if Larissa's promise is viewed as the counteroffer, it is also anacceptance of Pear's offer to modify the existing contract. As this falls under the U.C.C.rules, a merchant that accepts another merchant's offer which includes additional ordifferent terms, has effectively accepted the contract containing these additional terms.

C is incorrect as a common law preexisting legal duty analysis is not applicable in aU.C.C. setting. The U.C.C. allows good faith modifications even without consideration.


CONTRACTSLarissa, a computer store owner, contacts Pear Computers requesting the price of their new Z4model. Pear replies by letter and encloses a retail price list for their computers and accessories. Pearstates that they would love to do business with Larissa, but that their terms are cash within 30 daysof delivery. Larissa orders 10 Pear Z4s on March 5th enclosing a check for $50,000, the retail pricefor 10 units. When Pear receives the check, they immediately contact Larissa, informing her of aprinting error in their catalog."The actual price per computer is $6,000." Pear further states that theywill gladly ship as long as Larissa agrees to pay the additional $10,000 upon receipt of thecomputers. Larissa replies by letter on March 15th: "Please ship the 10 computers. I'll gladly pay, butI need these units by April 1st as part of my contract with Leelow University." Pear proceeds to ship,making no reply to Larissa's letter. The Z4s eventually arrive on April 15th. Larissa accepts thedelivery, but writes Pear: "Due to your failure to ship the computers here on time, I will not pay theadditional $1,000 per machine. Also be advised that if I lose any money on reselling these units I'mholding you liable." Regardless of their late arrival, Leelow University accepts the units and paysLarissa for them. Is the provision in Larissa's March 15th letter, requiring delivery by April 1st, anenforceable additional term?

A. Yes

B. No, because it is not supported by sufficient consideration.

C. No, because it contradicts an implied term of shipment within a reasonable period of time.

D. No, because Pear did not reply to Larissa's March 15th letter.

Answer: AThe terms setting forth additional delivery terms is part of the contract under the U.C.C. TheU.C.C. allows for acceptance even if additional or different terms are presented in theacceptance. The only exception to this rule is if acceptance is made conditional on assentto those terms. This deviates from the common law which states that an acceptance withadditional terms is a rejection and a counteroffer. Under the U.C.C., the additional termsbare part of the contract when dealing with merchants unless: 1) the additional termsmaterially alter the original terms of the offer, 2) the offer expressly limits acceptance to theterms of the offer, or 3) the offeror rejects the additional terms within a reasonable time.Here, we are dealing with merchants, and the acceptance was not conditional upon assentto the added delivery terms. Therefore, the new delivery terms are included in theacceptance by Larissa.

B is incorrect. Under the U.C.C. a modification only needs to be made under good faith; itdoes not need to be supported by consideration.

C is incorrect as there was an implied term in the original contract stating that delivery wouldoccur in a reasonable period of time. Here, Larissa modified this terms to greater definewhen delivery should occur.

D is also incorrect. When dealing with merchants under the U.C.C., Pear becomes boundto Larissa's additional term by failing to object to it.


CONTRACTSLarissa, a computer store owner, contacts Pear Computers requesting the price of their new Z4 model.Pear replies by letter and encloses a retail price list for their computers and accessories. Pear statesthat they would love to do business with Larissa, but that their terms are cash within 30 days of delivery.Larissa orders 10 Pear Z4s on March 5th enclosing a check for $50,000, the retail price for 10 units.When Pear receives the check, they immediately contact Larissa, informing her of a printing error intheir catalog. "The actual price per computer is $6,000." Pear further states that they will gladly ship aslong as Larissa agrees to pay the additional $10,000 upon receipt of the computers. Larissa replies byletter on March 15th: "Please ship the 10 computers. I'll gladly pay, but I need these units by April 1stas part of my contract with Leelow University" Pear proceeds to ship, making no reply to Larissa'sletter. The Z4s eventually arrive on April 15th. Larissa accepts the delivery, but writes Pear: "Due toyour failure to ship the computers here on time, I will not pay the additional $1,000 per machine. Alsobe advised that if I lose any money on reselling these units I'm holding you liable." Regardless of theirlate arrival, Leelow University accepts the units and pays Larissa for them. Assume that Pear's$10,000 upon delivery and Larissa's due date of April 1st are enforceable terms. When Larissaaccepted the computer on April 15th, was there a duty to pay the $10,000?

A. No, but she retained the right to sue for damages.

B. No, but by acceptance she lost the right to sue for damages incurred because of the delivery delay.

C. Yes, but she retained the right to sue for damages incurred because of the delivery delay.

D. Yes, but by acceptance she lost the right to sue for damages incurred because of the delivery delay.

Answer: CHere we have a delivery of nonconforming goods prompting Larissa to pay the $10,000upon accepting the delivery, but further allowing her to sue for damages. Acceptanceoccurs when the buyer: 1) indicates that she will accept the goods after a reasonableopportunity to inspect them; 2) fails to reject within a proper time; or 3) commits any actinconsistent with the seller's ownership. In this case Larissa accepted the goodsknowing that they failed to meet the delivery instruction. When dealing withnonconforming goods like these Larissa has the right to either: 1) reject them and cancelthe contract or sue for damages; or 2) accept any commercial units, reject the rest, andsue for damages. Once the goods are accepted the buyer generally is bound by thecontract and it is too late to cancel, but she does retain the right to sue for damages forany nonconformity. So in this case, through her acceptance, Larissa, the buyer, putherself on the hook for the $10,000. In light of this correct answer, Answers A, B and Dare clearly incorrect.


CONTRACTSOn January 1st Mike enters into an agreement with Jim to paint the exterior of his housewith purple paint for the tidy sum of $10,000. Payment is due upon completion of thework. On January 10th, just prior to completion of his work, Mike sends Jim a registeredletter asking him to send payment to Lisa, the owner of a paint store, to whom Mike owes$10,000. Lisa is essentially a creditor of Mike, and Mike also sends a copy of theregistered letter to Lisa. On January 11th, Mike finishes all the work, but Jim does notpay. Assume that Lisa sues Jim for the $10,000. Which of the following will be Jim's bestdefense?

A. Lisa was not an intended beneficiary of the contract entered into between Jim andMike.

B. Lisa is not a painter herself, and is incapable of performing Mike's work.

C. The work performed by Mike was not completed in a workman-like manner.

D. On January 9th, Mike promised Jim that he would not assign the contract to a thirdparty.

Answer: CHere, we have an assignment by Mike to Lisa of his claim against Jim. If we assume thatLisa is now the assignee, she is subject to any defenses presented by Jim that Jim mayhave presented against Mike directly. In light of this, if Mike did not perform the work ina workman-like manner, Jim can submit this defense against Lisa.

A is wrong. Lisa is not holding herself out as a third party beneficiary, but rather is anassignee taking claim to Mike's rights in the original contract.

B is wrong as being immaterial. Simply because Lisa could not complete the workherself has no bearing on her right as an assignee to collect the agreed upon price fromJim.

D is wrong. A contract that prohibits assignments simply prevents the original party in thecontract (Mike) from assigning his duties to perform the contract to another. Thisprovision would prevent Mike from assigning Lisa the job of completing the work, butdoes not prevent the assignment of payment to Lisa.


CONTRACTSGoGoJuice is a gas distributor who enters into several refineries to purchase their unleaded products.They contract with ColdPress Oil to purchase their entire unleaded product output for the next 5 yearsat a price of 9%, the retail price at the time of delivery. This offer is contingent on a minimum weeklypurchase of 1,000,000 gallons and GoGoJuice would be responsible for all distribution. Upon signingthe contract, GoGoJuice states in writing that they wish to buy 1,000,005 gallons of ColdPressproduction. They continue to purchase all of ColdPress's unleaded product for 12 months, at whichpoint ColdPress develops a new refining process allowing them to double yearly production. ColdPressstates to GoGoJuice that the excess production will be sold to various other retailers. GoGoJuiceagrees and signs an addendum. For the next 12 months, GoGoJuice continues to buy half of allColdPress's unleaded production until a foreign oil embargo makes it impossible for ColdPress to buyunrefined oil. ColdPress sends a letter to GoGoJuice informing them that delivery of their usualunleaded gas will now be impossible in accordance with their contract. ColdPress is able to continuerefining (using the improved method) and continues to sell to others. Once the embargo is over,ColdPress sells its refinery to World Oil. What does this sale do to the original contract withGoGoJuice?

A. There is no obligation to sell to GoGoJuice as full performance has occurred.

B. ColdPress remains liable for damages if World Oil refuses to deliver to GoGoJuice.

C. The sale excuses ColdPress from performance as they have no refineries and no way of deliveringthe agreed upon goods.

D. There is a breach by ColdPress of its contract with GoGoJuice.

Answer: B

Here, we have a non-personal contract, so the contract is clearly assignable. In light ofthis, World Oil is obligated to deliver.Note: ColdPress remains liable should World Oil refuse to deliver.

A is incorrect as this is a contract for 5 total years and there is no indication that their 5year term has expired.

C is incorrect.Note: It would be correct if ColdPress went out of business and did not delegate itsduties to another.

D is wrong. In light of the correct answer, a party is free to delegate a personal contract.


CONTRACTSPantaleo wants to have his brick walkway replaced, and solicits bids from numerousmasons in the yellow pages. Bids are in the range of $10,000 to $12,000. Philip submitsa bid for $9,500. Pantaleo accepts his bid and enters into a contract. Just before Philipis to start, he sends this email:To: [email protected] Subject: oops-bad estimateMy calculator batteries were low when I used it to estimate this job. Seems it caused anaddition error. I can't do the job for less than $10,300 without losing money.- PhilipPantaleo is feeling generous. He calls Philip and agrees to his price, stating: "I'll pay theprice increase, but I think it is unfair." Philip replaces the walk, and Pantaleo hands hima check for $9,500 stating: "This is all that the job was worth and I'm angry you tried toget me to pay more." Philip sues. Will he collect the extra $800? Who will win?

A. Pantaleo, as Philip has a preexisting duty to do the work.

B. Pantaleo, since his promise for additional payment was not in writing.

C. Philip, as he detrimentally relied upon Pantaleo's promise to pay.

D. Philip, as the promise for the additional $800 was part of a settlement of good faith.

Answer: ASince Philip had a preexisting duty to repave the brick walkway for $9,500, the promiseby Pantaleo to pay an additional $800 to do the same work was not supported byconsideration and is not valid.

B is wrong. The Statute of Frauds requirement that a contract be in writing, is onlyapplicable to a service contract when its completion takes more than one year from thetime of contract formation.

C is wrong. Regardless of Philip's reliance it does not serve to cure the fact that there isa lack of consideration.

D is clearly wrong. There are no facts within the question to indicate that there was adispute between the parties.


CONTRACTSSean, a lawyer, has no skills outside of suing people. He orally contracts Zach to build him a 2nd storyaddition to his house. Price is $15,000 plus materials. Sean, about to get married, needs the new floor tohouse his wife's collection of vintage car parts. He informs Zach that "time is of the essence" and that theaddition must be complete by September 4th, their wedding day, as Sean will not allow his wife to put hergrimy parts in the living room. Zach agrees to have things completed by then "in a good and workman-like manner." On August 27th, the carpenter completes the addition and asks Sean for immediate paymentas he needs the money to complete another job. Sean refuses, stating that the addition was not strongenough to house car parts. The next day, Zach sends Sean a registered mail invoice detailing the $10,000in materials used, plus the agreed upon $15,000 in labor, for a total of $25,000. Sean calls in anothercarpenter who mentions that he can reinforce the addition for another $5,000 in materials and $1,000 inlabor. Sean purchases the recommended $5,000 in materials and contacts Zach asking him to completethe job as promised using the new materials and offering him $20,000. After no reply from Zach in aweek, Sean mails him a check for $20,000 with a note: "Payment in full for construction of a 2nd storyaddition." Zach cashes the check to get funds to complete his remaining job. Zach then sues Sean for$5,000: the difference between the agreed upon contract price and the amount paid. Sean bases hisdefense on an accord and satisfaction. The trial court should rule for:

A. Zach, as his cashing of the check was under duress.

B. Sean, as Zach cashed the check without objection or protest.

C. Zach, as long as he can establish that the addition was done "in a good and workman-like manner."

D. Sean, as Zach is only entitled to the reasonable value of his services, namely $20,000.

Answer: BUpon Zach's cashing of the check offered as "payment in fulf' by Sean, and in light ofthe bona fide dispute as to the amount owed; an accord and satisfaction is formedresulting in contract formation at the lower price indicated on the check. After cashingthe check, Zach has no remedy to sue for the remainder.

A is incorrect as a misstatement of the law. A mere economic duress is an insufficientreason by which to void a contract.

C is incorrect as it is too late to prove that the work was completed properly after Zachcashed the check. As set forth in the correct answer, once Zach cashed the check anaccord and satisfaction was formed in which the parties' original obligations under theoriginal contract were released.

D is incorrect. If Zach was still under the original contract (i.e., there was not an accordand satisfaction), he could recover the agreed upon contract price. There would be noadjustments based upon the reasonable value of the services he provided.


CONTRACTSSean, a lawyer, has no skills outside of suing people. He orally contracts Zach to build him a 2nd storyaddition to his house. The price is $15,000 plus materials. Sean, about to get married, needs the new floorto house his wife's collection of vintage car parts. He informs Zach that "time is of the essence" and thatthe addition must be complete by September 4th, their wedding day, as Sean will not allow his wife to puther grimy parts in the living room. Zach agrees to have things completed by then "in a good and workman-like manner." On August 27th, the carpenter completes the addition and asks Sean for immediate paymentas he needs the money to complete another job. Sean refuses, stating that the addition was not strongenough to house car parts. The next day, Zach sends Sean a registered mail invoice detailing the $10,000in materials used, plus the agreed upon $15,000 in labor for a total of $25,000. Sean calls in anothercarpenter who mentions that he can reinforce the addition for another $5,000 in materials and $1,000 inlabor. Sean purchases the recommended $5,000 in materials and contacts Zach asking him to completethe job as promised using the new materials and offering him $20,000. After no reply from Zach in a week,Sean mails him a check for $20,000 with a note: "Payment in full for construction of a 2nd story addition."Zach cashes the check to get funds to complete his remaining job. Assume that the trial court is calledupon to determine whether Sean is in breach of his contract with Zach. The court should conclude that:

A. There is total breach by Sean since Zach completed the addition "in a good and workman-like manner."

B. There is total breach by Sean regardless of the status of Zach's performance.

C. There is partial breach by Sean assuming that Zach has completed the addition "in a good andworkman-like manner."

D. There is partial breach by Sean regardless of the performance delivered by Zach.

Answer. C

Sean's only obligation here is to pay money. If he fails to pay anything at all to Zach wewould be dealing with a total breach. Here, Sean has paid most of the agreed uponmonetary sum, so a partial breach answer is in order. This instantly rules out incorrectAnswers A and B. Based upon the facts, Zach is obligated to perform "in a good andworkman-like manner." Performance such as this has been held to be specific enough(i.e., not too vague to be unenforceable) and is typically implied in a contract such asthis. In light of this, Sean is only obligated to pay if Zach's performance was inaccordance with the contract (i.e.,"good and workman-like") making Answer C thecorrect answer. In light of this analysis, Answer D is also incorrect as Zach'sperformance must meet the "good and workman -like" bar.


CONTRACTSSean, a lawyer, has no skills outside of suing people. He orally contracts Zach to build him a 2nd storyaddition to his house. The price is $15,000 plus materials. Sean, about to get married, needs the new floorto house his wife's collection of vintage car parts. He informs Zach that "time is of the essence" and thatthe addition must be complete by September 4th, their wedding day, as Sean will not allow his wife to puther grimy parts in the living room. Zach agrees to have things completed by then "in a good and workman-like manner." On August 27th, the carpenter completes the addition and asks Sean for immediate paymentas he needs the money to complete another job. Sean refuses, stating that the addition was not strongenough to house car parts. The next day, Zach sends Sean a registered mail invoice detailing the $10,000in materials used, plus the agreed upon $15,000 in labor for a total of $25,000. Sean calls in anothercarpenter who mentions that he can reinforce the addition for another $5,000 in materials and $1,000 inlabor. Sean purchases the recommended $5,000 in materials and contacts Zach asking him to completethe job as promised using the new materials and offering him $20,000. After no reply from Zach in a week,Sean mails him a check for $20,000 with a note: "Payment in full for construction of a 2nd story addition."Zach cashes the check to get funds to complete his remaining job. Sean files a cross-complaint to recoverthe $1,000 he paid to a second carpenter to complete the job up to his specs. The trial court shouldprobably rule for:

A. Sean. Zach accepted Sean's offer in replying to Sean's letter.

B. Sean. Zach accepted Sean's offer when he cashed the check.

C. Zach, because he received no consideration when Sean asked him to make further modifications forhis wife's car parts, and, therefore, there was no promise.

D. Zach, because he never accepted Sean's offer to make modifications.

Answer: B

When looking at a contract, the timeline surrounding the events is paramount. Here,Sean offered Zach a chance to do additional work to bring the job up to his level ofexpectations. Upon receiving Sean's check and letter, Zach cashed the check. In lightof this timeline, it can be safely assumed that Zach accepted Sean's offer to doadditional work on the project. In light of this, Answer B is correct. When looking at thistimeline of events, it becomes clear that Answer D is incorrect. Cashing the check withinsuch close proximity to receiving Sean's request to make modifications can be viewedas an acceptance to complete these modifications.

A is incorrect. Typically, an offer cannot be deemed accepted simply due to a party'ssilence. Here, Zach was NOT silent. Although he did not verbally accept the job tocomplete modifications, his actions spoke louder than words in cashing the check.

C is also incorrect as there is, in fact, a valid consideration in the given scenario. Zach'spromise to complete modifications to the job, in exchange for Sean's refraining fromsuing on a breach of contract claim, can be deemed valid consideration.


CONTRACTSWholesaler telegrams to Manufacturer: "Send 100 Superwide' chairs at your usual price."Manufacturer responds, also by telegram: "Will ship our last 500 Superwide' chairs at $50 perchair, our usual price. Please note that our Superwide' line is being discontinued." Manufacturerimmediately begins processing the order; boxing up chairs and printing shipping labels.Wholesaler wires back: "Cancel the order, your price of $50 is way too high." Wholesaler seeksanother source for `Superwide' chairs. They buy 100 chairs from Chair-e-o, who sells`Superwides' for $50. The day after Manufacturer receives Wholesaler's cancellation, they areable to go ahead and sell 100 `Superwide' chairs to Chair-e-o for $50 each. Manufacturer,unable to find a buyer for the remaining inventory, is forced to sell the last 100 chairs for scrapmetal prices at $1,000. If Manufacturer sues Wholesaler for damages, how much should theyrecover?

A. Nothing, because this was a contract between merchants and Wholesaler canceled within areasonable time.

B. The full contract price, because Wholesaler breached the contract and the price was fair, plusincidental expenses.

C. The full contract price plus incidentals less the $1,000 gained for salvage.

D. The full contract price less the $1,000 gained for salvage.

Answer: CManufacturer is entitled to recover the incidental damages plus the difference betweenthe contract price and the resale price. Upon a breach of contract by a buyer, a seller isentitled to recover incidental damages, plus either the difference between the contractprice and the market price, or the difference between the contract price and the resaleprice. Here, Manufacturer chose to resell the chairs at a salvage price; therefore, thedamages would be the difference between the resale price and the contract price, plusincidental damages. Thus, Manufacturer can recover $5,000 less $1,000 plus incidentaldamages.

A is incorrect. There is no U.C.C. provision that says contracts between merchantswould be deemed cancelable within a reasonable time.

B is incorrect. The U.C.C. remedy states that a seller is entitled to the differencebetween the contract price and the resale price, not just the contract price.

C is incorrect because it fails to account for the incidental damages incurred byManufacturer in this order. Under the U.C.C., Manufacturer has a right to the differencebetween the resale price and the original contract price, plus any additional incidentaldamages that may have accrued.


CONTRACTSA builder, contracts to build a house for Paul, with terms stating that the contract pricewill be paid upon completion. A day before half of the house is complete a windstormknocks down the structure. What can the builder recover from Paul under their contract?

A. Nothing

B. One-half of the contract price

C. One-half of the fair market value of what remains of the house.

D. Cost of materials and reasonable labor costs.

Answer A

The builder cannot recover anything. He has not performed his duty under the contract,since there existed a condition precedent, namely completion of the house, before aduty of Paul to pay. The condition precedent has not been eliminated by the knockingdown of the house, but has merely been made more difficult to complete and morecostly. Therefore, no recovery is available to the builder.

B is wrong. The contract is not divisible, therefore, the builder is not entitled to half of theprice.

C is incorrect as it is an incorrect measure of recovery. Under a quasi-contract theory,the builder might be entitled to recover the fair market value of what remained of thehouse as it is a benefit conferred to the owner. This, however, would not be half of thecontract price, but rather the value of the benefit conferred.

D is an incorrect contract recovery since the builder has not fulfilled the conditionprecedent. The answer is also an incorrect quasi-contract recovery which would entitlethe builder to the value of the benefit conferred upon his failure to complete the contract.


CONTRACTSWholesaler telegrams to Manufacturer: "Send 100 Superwide' chairs at your usual price."Manufacturer responds, also by telegram: "Will ship our last 500 `Superwide' chairs at $50 perchair, our usual price. Please note that our Superwide' line is being discontinued."Manufacturer immediately begins processing the order: boxing up chairs and printing shippinglabels. Wholesaler seeks another source for `Superwide' chairs. They buy 100 chairs fromChair-e-o, who sells `Superwides' for $50. The day after Manufacturer receives Wholesaler'scancellation, they are able to go ahead and sell 100 `Superwide' chairs to Chair-e-o for $50each. If Manufacturer sues Wholesaler for damages, how much can they recover?

A. Nothing, because this was a contract between seller and buyer, canceled within areasonable time.

B. Nothing, because Manufacturer was able to recover by selling the chairs at the same pricehey would have received from Wholesaler.

C. $5,000, the full contract price, because Wholesaler breached the contract and $50 per chairwas a fair price.

D. Manufacturer's incidental costs of preparing the paperwork and other office costs connectedwith preparing and packing the chairs for shipment to Wholesaler.

Answer: DWhen dealing with an offer for shipment of goods, acceptance can be by a prompt shipmentwith notice or by a promise to ship. In this case, Manufacturer's acceptance was by way of apromise to ship. Wholesaler canceling the order then allows Manufacturer to recover incidentaldamages, and either the difference between the contract price and the market price, or thedifference between the contract price and the resale price of the goods. Additionally, if neithermeans would put a seller in the same position as performance would have, a seller is allowedto recover lost profits. In this case, Manufacturer managed to resell the chairs at the same priceas the original contract price with no loss of profit. In light of this, the only damagesManufacturer can recover are those incidental shipping and processing costs.

A is incorrect. There is no applicable U.C.C. rule that would allow merchants that contract tocancel within a reasonable time.

B is incorrect. As indicated above in the correct answer, the U.C.C. allows a seller to recoverincidental damages.

C is also incorrect. The U.C.C. only seeks to keep the status quo for the non-breaching party

had the breaching party performed: therefore, awarding Manufacturer lost profits would placeManufacturer in a better position than if Wholesaler had gone through with the sale.Note: Had Manufacturer had more chairs to sell, the result would be different as Wholesaler'sbreach would have cost Manufacturer profit (e.g., a sale to Wholesaler and a sale to Chair-e-o).


CONTRACTSOn January 1st, Vin sends a fax on company letterhead to Vera requesting: "...the pricefor 10 carats of diamonds, with no imperfections, for delivery to my business." At 9:00am on January 2nd, Vera faxes back on her own letterhead: "My best price is $10,000a carat, offer to be held open for 48 hours." Vin is handed the fax at 12:30 pm on January2nd and faxes back the following day (January 3rd): "Your price is fair. I'll take them. Aconfirmation letter will go out in today's mail." Vera gets this fax on January 4th at 9:00pm. Vera had also offered 10 carats of diamonds to Beth on the 3rd for $9,500 a caratand Beth immediately accepted. When Vera finally gets the message from Vin on the4th, she immediately faxes him back: "I cancel my offer. I sold the rocks to Beth."Assume that when he faxed his acceptance back, Vin knew of the deal with Beth. OnJanuary 3rd what are Vera's obligations to Vin and Beth?

A. A contract with Vin only, as we are dealing with goods under the U.C.C.

B. A contract with Beth only, as we are outside the definition of goods under the U.C.C.

C. A contract with Vin and Beth, since the fax to Vin was a firm offer.

D. A contract with neither Vin nor Beth.

Answer C Since Vera's fax has a 48 hour window, it is deemed an irrevocable and firm merchant'soffer, addressed to Vin, during these 48 hours. Under the U.C.C., a written offer givenby a merchant that has a time period for which it will stay open is irrevocable. Veraclearly meets the merchant requirement: she is one who deals in goods of that kind thatare sold. Her offer was written, and also considered signed as it was on companyletterhead which is sufficient as a signature under the U.C.C. Additionally, Vera clearlyhas an offer and acceptance with Beth.

A is incorrect. While diamonds qualify as "goods," the result under the U.C.C. is asdescribed above. Also, Answer A would probably be incorrect even if diamonds were notgoods, since Vin's acceptance was effective under common law rules. Under thecommon law, Vera's offer was revocable despite the words of firmness (since noconsideration was given to keep the offer open), but it was not revoked until after Vinaccepted.

B is incorrect because diamonds qualify as goods under the U.C.C.

D is incorrect because, as explained above, Vera has a contract with both Beth and Vin.


CONTRACTSOn January 1st, Vin sends a fax on company letterhead to Vera requesting: "...the pricefor 10 carats of diamonds, with no imperfections, for delivery to my business." At 9:00am on January 2nd, Vera faxes back on her own letterhead: "My best price is $10,000a carat, FOB my place of business." Vin is handed this fax at 12:30 pm on January 2ndand faxes back the following day (January 3rd): "Your price is fair. I'll take them. Aconfirmation letter will go out in today's mail." Vera gets this fax on January 4th at 9:00pm. Assume that there is a valid contract between Vin and Vera at this point. Who mustpay the freight charge from Vera's business to Vin's?

A. Vera

B. Vin, unless he reasonable objects to the new freight term.

C. Vin, unless the new freight terms can be viewed as a material alteration to theagreement.

D. Vin

Answer D

Here, we have a contract governed by the U.C.C. (as it is for the sale of goods) and FOB(free on board), a U.C.C. term that means the seller of the goods has to get the goodsto the location indicated in the contract. Here, the term FOB is Vera's place of business,making Vera responsible for freight only to her location and no farther. Vin is, therefore,responsible from Vera's business to his location.

A is clearly incorrect in light of the correct answer set forth above.

Answers B and C are also incorrect since the only applicable question here is: did Vinaccept the terms of Vera's offer or not? There is no need to question if there was asituation where the acceptance included terms different than the offer, as it was Vin whoaccepted and Vera who initially offered.


CONTRACTSHospitium Hotels, a major hotel chain, requests bids from building contractors to build a new hotelin Georgia. They receive bids for: $15.3 million, $15.2 million, $12 million and 5 for $15 million. The$12 million bid was submitted by Vilis Construction. Hospitium accountants review the bids, sendingthis report to the president: "We expected a low bid from Vilis since they tend to use illegalimmigrants for labor, but even given this fact there is no way that Vilis would make any money at$12 million." Cassius, the owner of Vilis, had actually worked three days straight and in a sleepdeprived stupor failed to include $3.5 million in electrical expenses in his bid. Anxious to open assoon as possible, Hospitium includes a liquidated damages clause, providing that their contractorbe liable $50,000 for each day the project runs over the proposed one year completion. Hospitiumestimates losses of $100,000 for each day of delay. Assume that Vilis, failing to acquire the properpermit for installation of smoke detectors in the building, is delayed 30 days past the one yearcompletion mark while they go through a re-inspection process with the city fire marshal. Hospitiumcalls in an expert witness who states that the thirty-day delay resulted in a $300,000 loss; $100,000of which would have been profit. How much should Vilis be required to pay in damages?

A. $100,000, representing the hotel's lost profits.

B. $300,000, representing the hotel's lost income.

C. $1.5 million, representing damages provided in the contract.

D. $1.6 million, representing damages provided in the contract plus lost profits.

Answer: AHospitium is entitled to its lost profits of $100,000. Contract damages seek to put the non-breaching party in a position commensurate with the position they would have reached had thebreaching party performed. In light of this, an amount of $100,000 (the lost profits) is correct. Theliquidated damages provisions of the contract are not valid, since they are unreasonablecompared to the daily lost profits the hotel actually had.

B is incorrect. A payday of $300,000, the lost income, results in Hospitium being in a betterposition than if Vilis had finished on schedule. The award fails to take into account the $200,000in expenses Hospitium's own expert witness determined they would have had during those lastthirty days in addition to the $100,000 profits. The additional $200,000 would be extra profit toHospitium for Vilis's failure to complete the building on schedule.

C is incorrect. The Liquidated Damages Clause here would not be upheld in a court of law. Thatclause would only be enforceable if damages were difficult to estimate at the time the contractwas formed, and the amount agreed upon serves as a reasonable forecast of the damages thatwould result from a breach. Here, the amount agreed upon ($50,000 per day) is actually 5 timeswhat the hotel estimates as a daily loss; thereby, resulting in an unenforceable LiquidatedDamages Clause as the agreed upon price is wholly unreasonable.

D is wrong because it results in the combining of the actual damages with the liquidateddamages. Such an application is clearly erroneous, as a party may recover either actualdamages or liquidated damages, but not both.


CONTRACTSElaine, the owner of a brownstone apartment complex, contracts with Candace, apainter, to paint the exterior porches of each unit. The contract is in the amount of$10,000 and requires Elaine's good faith approval of Candace's job upon completion ofher work. Two weeks later, Elaine inspects Candace's job and in good faith feels herpaint job is horrendous. Candace protests and demands payment, as she is in need ofthe money. Elaine offers her $9,000 so long as Candace agrees to repaint the porcheswithin a week. Candace verbally agrees, receives her $9,000 check, endorses it: "underprotest, Candace Smith" and deposits the check. Candace never returns to repaint theporches. Elaine sues for specific performance, and Candace counterclaims for $1,000.Will Candace prevail?

A. Yes, because she endorsed the check "under protest."

B. Yes, but only if she repaints the porches.

C. Yes, because she performed the contract by painting the porches the first time.

D. No, even if Candace repaints the porches.

Answer DCandace will not recover her $1,000 counterclaim as she failed to satisfy the conditionprecedent to payment under the contract, namely the good faith approval of Elaine. Absentthe fulfillment of this condition precedent a party does not have a duty to perform, namelytender the initial $10,000 for the job. Additionally, one should note that the $9,000 offer is ineffect a new contract. By depositing the check Candace excused Elaine from the originalcontract and made her free to re-contract with new terms.

A is wrong. An endorsement of "under protest" does not change the end result here as thenew contract did not seek to discharge a preexisting contractual duty. Elaine was excusedfrom her duty to pay since the condition precedent was never met.

B is wrong. The old contract is no longer enforceable due to Candace's breach which in turnexcuses Elaine from an obligation to pay. In light of this, following the entering into a newcontract Candace is only entitled to a maximum of $9,000, which is the new term of the newcontract. At best, even had she repainted, Candace would only be allowed to recover amaximum of $9,000.

C is also wrong. Candace failed to perform her contractual duties. Candace had a duty topaint to Elaine's good faith satisfaction, which has been held by the court to be a validpromise (not an illusory one).


CONTRACTSJack works for the Daily Late Night Show spin-off called "Petsploitation" arranging stupidpet acts. Anne owns a cat, Ruskin, who has a repertoire of tricks. Jack and Annecontract to put Ruskin in an upcoming live show at Kenmoreway Park for $1,000. Justbefore the show, Ruskin contracts an illness and is too sick to perform. Jack demandsthat Anne either show up or pay him damages. Anne's best argument for not performingwith Ruskin would be based upon which of the following?

A. Statute of Frauds

B. Parol Evidence Rule

C. Impossibility of Performance

D. Failure of Consideration

Answer: CThe best defense is impossibility of performance as contractual duties will be dischargedwhere it has become impossible to perform them; so long as the impossibility is objectivelyimpossible (i.e., no one would be able to perform). Here, Rusking's illness results in anobjective impossibility as there is arguably no other cat like him and, therefore, no one elseeligible to perform.

A is incorrect. The Statute of Frauds is not applicable because we are dealing with a contractto perform which will be completed within a year. In light of this, this contract is not coveredby the statute and is enforceable without a writing.

B is a poor answer. The Parol Evidence Rule prohibits introduction of prior, or contemp-poraneous oral statements that serve to contradict a written contract. Here, we have noindication that we are dealing with a written contract. Even if we were to assume a writtencontract, Anne is not trying to contradict it and, therefore, the Parol Evidence Rule would stillbe incorrect.

D is incorrect. Failure of consideration is grounds for breach of contract; but only where anelement of the promised consideration cannot subsequently be given. Failure of considerationis not applicable in an instance where the contract lacked consideration when made. The factsfail to indicate that Jack cannot pay, so failure of consideration does not apply to Anne in thepresent situation.


CONTRACTSWilson lives in Wilmington. Vin lives 78 miles away in Bethlehem. They are old collegeroommates from Leelow University. On March 1st Wilson writes the following to Vin: "Dear Vin,Remember the convertible you always wanted me to sell you? Well the time has come for meto get rid of it and it's yours for the tidy sum of $15K, if you can complete the deal by April 1st.After that, the deal's off and I'm trading it in on a new SUV for the fam. Your pal, Wilson." Vinjumps online and researches the car. He finds out that a good price for the car is $18,000 anddecides to buy Wilson's for $15,000. On March 25th Vin leaves Bethlehem for Wilmington with$15,000 cash. As he is leaving, he receives a telegram: "Forget about my offer to sell. My car istoo precious to me. Wilson." Vin drives to Wilson's house anyway and notices that the "For Sale"sign is still in the car's window. Vin knocks. Wilson answers. Vin hands him the bag of cash anddemands the car. Wilson refuses. Vin brings an action for damages for breach of contract. Whatshould be the outcome of this litigation?

A. Vin will recover nothing, because the offer to sell was withdrawn before he accepted.

B. Vin will recover $15,000, for failure of performance by Wilson.

C. Vin will recover $3,000, because his tender of the purchase price was an acceptance ofWilson's offer.

D. Vin will recover $3,000, because Wilson's 1st letter created an enforceable option.

Answer AVin will not recover. There was no contract formation, as the acceptance of the offer occurredafter the contract's offer was terminated. In light of this, there is no valid contract. Wilson validlyterminated the offer by informing Vin, the offeree, that the offer was being revoked. Vin's lateracceptance was not effective in light of the effective termination.Note: An offeror can revoke an offer any time before an acceptance has occurred, even in lightof a promise to keep the offer open, unless: 1)consideration has been paid to keep the offeropen (an option contract), 2) the offeree reasonably relies on the offer to his detriment, or 3) theoffer is a merchant's firm offer. Here, there was no option contract, no detrimental reliance andwe are not dealing with merchants. Therefore, the revocation of the offer was valid.

B is incorrect as there was no contract between parties (in accordance with the correct answer).Even assuming that there was a valid contract, a recovery of $15,000 is inappropriate. As thisis a contract for the sale of goods, a valid recovery would be the difference between the contractprice, and either the market price or the cost of recovery, plus consequential and incidentaldamages. In light of this, a recovery of $3,000 plus traveling expenses is appropriate.

C is incorrect. As indicated above, Vin's power to accept was terminated by the revocation ofthe offer.

D is also incorrect. As indicated above, no option contract was created since Vin failed to payto keep the offer open.


CONTRACTSJason, a merchant selling widgets, calls Matthew, another merchant, and says: "I've gottwo tons of widgets collecting dust in my warehouse. They are yours for $10,000."Matthew agrees to buy them, but states that he wants one ton delivered immediately andone ton delivered the next month, since he doesn't have the space for two tons ofwidgets. The most likely result of the conversation between Jason and Matthew is:

A. A contract was formed to deliver one ton immediately and one ton next month.

B. A contract was formed to deliver two tons of widgets immediately.

C. No contract was formed, as Matthew's response was a counteroffer and a rejection.

D. No contract was formed, unless Jason notifies Matthew within a reasonable amountof time that he agrees to the change in delivery terms advanced by Matthew.

Answer: AHere, there is a contract for one ton of widgets immediately and one ton later. Under theU.C.C. (which governs the sale of goods between merchants) a contract is formedwhenever it appears from the parties' communications that they intended to enter into acontract. Here, the intent of the parties to contract is clear, regardless of the fact that theacceptance contained additional terms. Under the U.C.C., additional acceptance termsare included in a contract between merchants unless: 1) the additional terms materiallyalter the contract, 2) the offer expressly limits acceptance to the terms of the offer, or 3)the offeror objects within a reasonable time. Matthew's additional terms do not serve tomaterially alter the contract and are, therefore, a part of the contract.

B would be correct if one of the parties were not a merchant. Under the U.C.C. rules,when dealing with a contract that is not strictly between merchants, the terms of thecontract are the offer terms, and the additional terms would not be incorporated.

C would be correct only if the U.C.C. did not apply. A common law Mirror Image Ruletreats new terms in the acceptance as a counteroffer.

D is incorrect. Notice is not necessary under the U.C.C. for contract formation. Jasonwould have to provide notice, however, if he did not assent to Matthew's additional termsof acceptance.


CONTRACTSElaine, the owner of a brownstone apartment complex, contracts with Candace, apainter, to paint the exterior porches of each unit. The contract is in the amount of$10,000 and requires Elaine's good faith approval of Candace's job upon completion ofher work. Two weeks later, Elaine inspects Candace's job and in good faith feels herpaint job is horrendous. Candace protests and demands payment, as she is in need ofthe money. Elaine offers her $9,000 as long as Candace agrees to repaint the porcheswithin a week. Candace verbally agrees, receives her $9,000 check and endorses it:"under protest, Candace Smith," and deposits the check. Candace never returns to paintthe porches. Elaine sues for specific performance and Candace counterclaims for$1,000. Will Elaine prevail in her action for specific performance?

A. Yes, because there has been a novation.

B. Yes, because she honestly believed that Candace did a poor job.

C. No, because Elaine had a preexisting legal duty to pay.

D. No, because the services offered by Candace are not unique.

Answer: DElaine will not prevail as the services at issue (painting) are not unique and specificperformance is only available when the legal remedy of money damages is inadequate.Inadequate money damages may be found in situations when the services rendered areunique and not easily replaceable (e.g. _ a famous artist leaving a commissioned muralunfinished.) Additionally, courts seldom award a specific action claim that in turn forcessomeone to work. Absent a showing of a unique talent, an answer that forces a person toperform against her will is typically wrong.

A is wrong. A novation substitutes in a new third party upon the agreement of all partiesinvolved. There are no facts here indicating that a substitution is to be made. Had there beena novation agreed upon by all that the work would be completed by a different third party,Candace would have been released from her obligations. Elaine could not then forceCandace to do the work.

B is wrong. Although a good faith dissatisfaction with the job did serve to establish a breach,it is not enough for specific performance. A court will only award specific performance in asituation in which the legal remedy (money damages) is insufficient. Upon receipt ofmonetary damages, Elaine can re-contract the job to someone else.

C is wrong. Elaine has no duty to pay as Candace never satisfied the condition precedent:painting to Elaine's satisfaction.


CONTRACTSOn January 1st the Baltimore Mail prints an advertisement in its classified section for Cooter'sMechanics stating: "Anyone who comes in by January 3rd and orders a brake job will receive (atno extra cost) a set of golf clubs or a pair of Milano Frantic high heels." By midday Cooter's isflooded with people looking for brake jobs, and each leaves with a set of clubs or a pair of highheels. Within two hours, Cooter's gives away all the shoes but still has a few sets of clubs. Thatafternoon John drives his pristine car in for a brake job and tells the mechanic on duty that he wantsa pair of the heels for his girlfriend. Knowing they have no more heels, the mechanic tries to talkJohn into a set of golf clubs, but John is adamant. The mechanic then gives a quick look at thecar's brakes, and tells John that they are fine. John complains that they squeak and did not workin the last rain, resulting in several accidents. The mechanic tells John that fixing them would taketwo hours and that Cooter's closes in one hour, making it impossible for him to do the job. Herecommends another brake place down the street that stays open longer. John complains andleaves. The next morning he sues for breach of contract. What is Cooter's Mechanics' bestdefense?

A. The job could not have been completed in the time available before the shop closed.

B. The advertisement in the newspaper was merely an invitation to offer.

C. Since John never tendered payment for the brake job, there was no acceptance of the offer.

D. John did not have good faith in entering the contract when he refused to take the golf clubs asa replacement.

Answer: BWith the exception of advertisements that are extremely definite as to the terms of thedeal, which in turn may be viewed as actual offers; advertisements are generallyconstrued as simple invitations to contract. While it is not clear whether thisadvertisement is specific enough to be deemed an actual offer, or simply an invitation tocontract, Answer B serves as the best answer since the remaining answers are not validdefenses.

A is wrong in assuming that the advertisement is deemed an actual offer, because theadvertisement merely states that the brake job has to be ordered (not completed) beforeJanuary 3rd in order to be eligible for the free clubs or heels.

C is wrong because the offer in the advertisement, assuming again that it is an offer,deems ordering the brake job as valid acceptance and makes no mention of tenderingpayment to accept. In light of this, Answer C is clearly erroneous.

D is also wrong as it is clearly irrelevant. The advertisement offer gave John a choice ofclubs or heels, and did not require that he choose one over the other.


CONTRACTSJoe is an auto parts wholesaler working in ten neighboring states in the Midwest. Joeorders 1,000 $100 tires from Tirebarn, a tire manufacturer, for a total cost of $100,000.Tirebarn buys all of its rubber from RubberTreeMe, and currently owes them $100,000for past deliveries. Tirebarn assigns to RubberTreeMe in writing: "all proceeds from ourcontract with Joe." Tirebarn notifies Joe of this assignment, and ships him the 1,000tires. When they arrive, Joe instantly notifies Tirebarn that 100 of the tires are square,and defectively unusable. Joe sends Tirebarn a check for 90% of the contract price. Theowner of Tirebarn deposits the check. Realizing that his tire business is doomed, heleaves in the middle of the night for Cuba, a country that has no extradition treaties withthe US. He takes the $90,000 with him. RubberTreeMe sues Joe seeking payment. Willthey win?

A. Yes, since Joe had notice of the assignment to RubberTreeMe.

B. Yes, as long as the contract did not have a "no assignment clause."

C. No. Upon paying Tirebarn, Joe fulfilled his contractual obligations.

D. No, since RubberTreeMe failed to perform; namely, providing usable tires to Joe.

Answer A

RubberTreeMe can, in fact, recover the $90,000 from Joe since Tirebarn notified him ofthe assignment. Following this assignment, the assignee (RubberTreeMe) is allowed tocollect the debt owed to Tirebarn. They alone are entitled to performance. Once theobligor (Joe) received notice of the assignment, he was bound to perform to theassignee (RubberTreeMe), not to the assignor (Tirebarn). Since Joe breached his dutyto perform by paying RubberTreeMe, they are free to sue for damages and will likely win.

B is wrong. Prohibition of assignment of the contract is thought only to prohibit theassignment of duties — i.e., Tirebarn cannot ask another tire manufacturer to produceand deliver the contracted tires to Joe in their place. In the present situation, we aredealing with an assignment of the right to the proceeds. Note: Under the U.C. C. (whichis applicable since we are dealing with goods), the assignor may assign his rightsregardless of an agreement to the contract.

C is wrong in light of the explanation in the correct answer, as Joe had a duty to payRubberTreeMe once he knew of the assignment. His payment to a third party does notextinguish his duty to RubberTreeMe.

D is wrong as being totally irrelevant. There is no requirement that the assignee must beable to perform under the contract.


CONTRACTSCandace owns the Scallion Estate, a large property made up of 100 acres of land and a trailer. OnJanuary 1st she decides to sell this property, take the earnings, and go on vacation for a year. OnJanuary 5th, she orally agrees to sell Scallion to Anne for $100,000, payment to be received byFebruary 1st. Candace owes Sam $50,000 and as a condition of the sale, Anne is to pay Sam $50,000to extinguish Candace's debt. Anne prepares a formal contract on January 20th, but mistakenly puts$90,000 as the purchase price instead of $100,000. Both Anne and Candace look the contract over,but neither catches the error. Additionally, the contract makes no mention of the $50,000 payment toSam. If Sam files suit against Anne for his $50,000, which of the following is a correct statement?

I.Anne can stand behind the Statute of Frauds as a defense because the agreement between she andCandace was to answer to the debt of another.

II.Anne can stand behind the Statute of Frauds as a defense because the Anne/Candace agreementwas for the sale of an interest in land.

A. I only

B. Il only

C. Both I and II

D. Neither I nor II

Answer: DStatement I is wrong because Anne is not acting as a guarantor when she promises topay some of the money to a third party, namely Sam. Statement II is wrong becauseAnne's promise to pay part of the purchase price to Sam, even though it was oral, willprobably not be viewed as directly related to the purchase of the Scallion Estate. This,therefore, is a collateral agreement to the land transaction and would need to be inwriting to be enforceable. Answer D is the correct answer.


CONTRACTSCandace owns the Scallion Estate, a large property made up of 100 acres of land anda trailer. On January 1st she decides to sell this property, take the earnings, and go onvacation for a year. On January 5th, she orally agrees to sell Scallion to Anne for$100,000, payment to be received by February 1st. Candace owes Sam $50,000 andas a condition of the sale, Anne is to pay Sam $50,000 to extinguish Candace's debt.Anne prepares a formal contract on January 20th, but mistakenly puts $90,000 as thepurchase price instead of $100,000. Both Anne and Candace look the contract over, butneither catches the error. Additionally, the contract makes no mention of the $50,000payment to Sam. Which of the following would be most important in deciding an actionby Sam against Anne for $50,000?

A. Whether Anne was negligent in not reading the written agreement carefully.

B. Whether the Anne/Candace agreement was completely integrated.

C. Whether Candace was negligent in not carefully reading the agreement.

D. Whether the omission of Sam from the written agreement was intentional oraccidental.

Answer: DD is the correct answer, yet it is easier to explain why in light of the explanations for theincorrect answers. Answer B is wrong. Even if the Anne/Candace agreement wascompletely integrated, if the omission of Sam from the agreement was accidental thenthe theory of mutual mistake allows the contract to be reformed. If the omission wasintentional, however, and the contract is completely integrated, Sam has no rights thathave vested. In this situation, the contract cannot be reformed. Answers A and C arewrong as the negligence of the parties signing the contract is not a valid reason for whichto effect the claim of Sam.


CONTRACTSCandace owns the Scallion Estate, a large property made up of 100 acres of land anda trailer. On January 1st she decides to sell this property, take the earnings, and go onvacation for a year. On January 5th, she orally agrees to sell Scallion to Anne for$100,000, payment to be received by February 1st. Candace owes Sam $50,000 andas a condition of the sale, Anne is to pay Sam $50,000 to extinguish Candace's debt.Anne prepares a formal contract on January 20th, but mistakenly puts $90,000 as thepurchase price instead of $100,000. Both Anne and Candace look the contract over, butneither catches the error. Additionally, the contract makes no mention of the $50,000payment to Sam. If Anne refuses to pay more than $90,000 and Candace brings suitagainst her to recover the additional $10,000, which of the following facts, if duly proved,would be of the most help to Candace?

A. There was a mistake in integration.

B. There was a misunderstanding between Candace and Anne in regards to the agreedupon purchase price.

C. The writing was only a memorial.

D. The writing was only a partial integration.

Answer: A

A court typically will grant relief in a situation where parties have made a drafting errorin integrating an agreement into writing. In light of this, A is clearly the correct answer.

B is wrong. The mere presence of a misunderstanding between parties is not enough todefinitely entitle one of them to relief (namely $10,000 and additional payment). Here,both parties have had a chance to review the written contract, and a party is burdenedwith the duty to ensure the contract they are entering into is correct.

C is incorrect as it is immaterial to the question asked. The mere fact that we are dealingwith a memorial means nothing here, and this answer simply serves to throw off astudent's thought process.

D is also wrong. A showing that the writing was only partially integrated is not necessaryto prove a drafting mistake. Under the Parol Evidence Rule, in a situation where therewas a mutual mistake by both parties to the contract, evidence showing this mistakecould be admitted.


CONTRACTSJoe is an auto parts wholesaler working in ten neighboring states in the Midwest. Joeorders 1,000 $100 tires from Tirebarn, a tire manufacturer, for a total cost of $100,000.Tirebarn buys all of its rubber from RubberTreeMe, and currently owes them $100,000for past deliveries. Tirebarn assigns to RubberTreeMe in writing: "all proceeds from ourcontract with Joe." Tirebarn notifies Joe of this assignment, and ships him the 1,000tires. When they arrive, Joe instantly notifies Tirebarn that 100 of the tires are square,and defectively unusable. Joe sends Tirebarn a check for 90% of the contract price. HasJoe properly rejected the original shipment?

A. Yes, because he has received a defective product.

B. Yes, as he has only partially paid.

C. No, because Joe has accepted the goods and failed to make a formal rejection toTirebarn.

D. No, unless the defects were substantial.

Answer C

Joe's acceptance without proper notice of rejection has resulted in a situation where hewill likely be obligated to pay for the entire shipment. While a buyer receivingnonconforming goods can accept all, reject all, or accept any commercial units andreject the rest; Joe has failed to properly reject the 10% defective tires. A properrejection would require notice to the seller within a reasonable time after delivery andbefore acceptance. Joe's failure to provide notice has precluded Tirebarn fromattempting to cure.

A is wrong. Regardless of the fact that the tires were defective, Joe has failed to rejectthe goods.

B is wrong. Joe's partial payment failed to serve as a proper rejection as set forth in thecorrect answer.

D is also wrong. A buyer can reject for any defect (substantial or minor) when grantedU.C.C. protection as in this case. Under the U.C.C. a buyer is entitled to perfect tender.


CONTRACTSVaDinchi is a renowned horse breeder known for finding a winner from sight alone. Once VaDinchipurchases a horse from a breeder, this mere fact alone typically raised the market value for anythingelse that the breeder will subsequently sell. VaDinchi looks over a horse from Fran, but is unsure if hewants to buy it. Fran offers him the horse for $20,000, and eventually the two enter an agreement: Franagrees to keep her offer open for 30 days, to expire on March 1st at 11:59pm, in exchange for $1,000from VaDinchi. On February 25th VaDinchi calls Fran and says: "The more I think about your horse, theless I like it." Fran responds simply: "Well that's you your opinion. So be it." On February 26th anotherhorse buyer approaches Fran offering her $30,000 for the same horse. On February 27th at 11:59pm,Fran writes VaDinchi and encloses a check: "Here is 100 bucks, which is 10% of what you paid me tokeep the offer open. I'm terminating that offer regarding my horse." VaDinchi receives the letter on the28th at 11:59pm. On February 29th at 8:00 am, VaDinchi mails a letter to Fran: "I changed my mind.Here is a certified check for $20,000. I'll take the horse." At noon Fran sells the horse to her secondbuyer for $30,000. On March 2nd, Fran receives VaDinchi's letter and certified check and immediatelymails them back. Can VaDinchi sue Fran and win?

A. Yes, because Fran sold the horse after VaDinchi's effective acceptance and before his revocationbecame effective.

B. Yes, because Fran failed to refund the entire $1,000.

C. No, because Fran revoked before VaDinchi accepted.

D. No, because VaDinchi's power to accept was terminated prior to his effective acceptance.

Answer: DTo accept, VaDinchi has to do so before midnight on March 1st. While this might seemcontrary, the mailbox rule is not applicable, here, as we are dealing with an optioncontract. When dealing with an option contract, acceptance occurs when the acceptanceis received by the offeror, not when the offeree deposits the acceptance in the mail.

A is clearly wrong in light of the correct answer. VaDinchi has clearly failed to timelyaccept.

B is a completely irrelevant answer. The return of consideration (partial or full) would notallow Fran to revoke the option contract.

C is also wrong. Revocation is only effective when received; as we are dealing with anoption contract, Fran's ability to revoke is limited.


CONTRACTSLarissa, a computer store owner, contacts Pear Computers requesting the price of their new Z4model. Pear replies by letter and encloses a retail price list for their computers and accessories. Pearstates that they would love to do business with Larissa, but that their terms are cash within 30 daysof delivery. Larissa orders 10 Pear Z4s on March 5th enclosing a check for $50,000, the retail pricefor 10 units. When Pear receives the check, they immediately contact Larissa, informing her of aprinting error in their catalog. "The actual price per computer is $6,000." Pear further states that theywill gladly ship as long as Larissa agrees to pay the additional $10,000 upon receipt of the computers.Larissa replies by letter on March 15th: "Please ship the 10 computers. I'll gladly pay, but I need theseunits by April 1st as part of my contract with Leelow University." Pear proceeds to ship, making noreply to Larissa's letter. The Z4s eventually arrive on April 15th. Larissa accepts the delivery, but writesPear: "Due to your failure to ship the computers here on time, I will not pay the additional $1,000 permachine. Also be advised that if I lose any money on reselling these units I'm holding you liable."Regardless of their late arrival, Leelow University accepts the units and pay Larissa for them. Assumethat Pear's $10,000 upon delivery and Larissa's April 1st due date are enforceable terms. In an actionagainst Pear for damages due to the delay in receiving their goods, will Leelow University prevail?

A. Yes, because Pear's actions caused Leelow University's damages.

B. No, because Larissa refused to pay the extra $10,000.

C. No, because Leelow University accepted the computers.

D. No, because Leelow University was only an incidental beneficiary.

Answer: DLeelow University in this case is only an incidental beneficiary and will not prevail. Broadlyspeaking, the suing party must be a party to the contract at issue to be eligible to sue for breachof contract, absent an exception, such as one for intended 3rd party beneficiaries. Intended 3rdparty beneficiaries can be determined by exploring whether the language of the contractindicates that the promisee intended someone aside from herself to be the beneficiary of theagreed upon contract. A court will consider: whether the 3rd party was designated in thecontract; whether performance was to be made directly to the 3rd party; whether the 3rd partywas specifically given any rights under the contract; and whether the 3rd party had such arelationship with the promisee as would indicate that the promisee wanted to benefit him. Here,we are not dealing with an intended 3rd party beneficiary. Larissa, at best, only mentions anunintended 3rd party beneficiary in her request for a specific delivery date needed by her client,Leelow University.

A is incorrect. Pear owed no duty to Leelow University directly, even if their delay in shipment toLarissa caused the university damages.

B is incorrect. Even if Larissa had paid the $10,000, Leelow University is still only an incidental

beneficiary and would not be entitled to recover damages.

C is wrong.The acceptance of the computers by Leelow University was non-conforming becauseof the late delivery, and non-conforming goods allow a customer to sue for damages even ifacceptance has been effectuated.


CONTRACTSKaren buys a fixer upper house in need of electrical repairs. She enters into a contract withSparky, an electrician. Karen has to be out of her apartment and into her new home by noonon October 1st and the contract contains a clause requiring that all work be completed by thistime. The price of the contract is $1,000. Assume Sparky intends to start work on September27th, so that he has adequate time to finish. On the 27th Sparky decides to play hockey withhis pals instead, and then goes out with the boys drinking. He is too hung-over on the 28th toget any work done at Karen's and doesn't show up until the 29th. He calls her: "I can't getthe job done on time, but might be able to if I recruit my buddy as an assistant. But his laborwill cost $100." Karen says: "Well, what am I supposed to do now?! I have to move in by noonon October 1st. Look, just please do whatever it takes to get this house ready." Working withhis friend, Sparky gets the job done by 10:00 am on October 1st and pays his friend the $100.Sparky sends Karen a bill for $1,100. She returns a check for $1,000, refusing to pay theextra $100. If Sparky sues, who will prevail?

A. Sparky, because Karen agreed to pay the $100.

B. Sparky, because he completed performance by noon on October 1st.

C. Karen, since her statement to authorize work was ambiguous.

D. Karen, as no new consideration was exchanged.

Answer: D The modification of the contract was not supported by new consideration, and amodification of a contract by the parties, which serves to discharge terms of the originalcontract, must be mutually assented to in order to be enforceable. Additionally,consideration is necessary to modify a contract. Here, there was only a promise toperform an existing legal duty; therefore, there was sufficient consideration. Sparky gavenothing in addition to what he already owed, nor did he vary his duty in any manner.Therefore, Karen's promise is unenforceable as modified. Answer A is, therefore,incorrect.

B is also incorrect. Completion before October 1st is meaningless since this duty wasoriginally owed to Karen.

C is incorrect. While not stating directly to pay the extra $100, Karen's statement was farfrom ambiguous. Regardless of this, it is the lack of consideration that is truly at issueas outlined in the correct answer.


CONTRACTSJim, an anchovy pizza delivery boy, makes minimum wage regardless of the fact that heis 42 years old. Oddly enough, Jim has managed to date the town's most eligiblebachelorette, Alex. Alex remains reluctant to marry Jim as he barely makes enough topay for his groceries each week. Jim tells his aged father of his dilemma. Jim's dad,anxious for Jim to move out, promises Alex that if she marries Jim he will pay all theirbills for 6 months and send Jim to a 6 month trade school. Alex and Jim aresubsequently married, and upon their return from their honeymoon "dear old dad" backsout of his offer. If Alex sues Jim's dad for damages and Jim's dad manages to prevail, itwill be because:

A. Alex's promise did not have valid consideration.

B. The contract is against public policy.

C. The contract was oral in nature.

D. Alex is happily married and has no detriment from her marriage to Jim.

Answer: CA contract in consideration of marriage requires that the contract be evidenced in writingin order to be deemed enforceable by a court. Here, the writing requirement was clearlynot met.

A is incorrect. A promise to marry has been found to be a sufficient detriment toconstitute valid consideration.

B is wrong. There is no public policy against encouraging, or discouraging for thatmatter, marriage.

D is wrong. Alex's happiness in her marriage to Jim is completely irrelevant whenaddressing if performance constitutes consideration.


CONTRACTSBob contracts with MaryAnne, a builder, to build a house for $1 million. Assume that Bobcommits total breach, and that MaryAnne had already incurred $300,000 in costs inbuilding the place. Further assume that MaryAnne could have spent another $600,000to finish the place, leaving a $100,000 profit. What can MaryAnne recover?

A. $100,000

B. $300,000

C. $400,000

D. $600,000

Answer: C MaryAnne, the builder, is entitled to her profits plus costs, namely $400,000. In aninstance where the owner has breached the contract after construction has started andbefore it is completed, the builder can recover profits lost plus costs incurred to date.Another way of saying it is simply: the contract price minus the cost of completion ($1million minus $600,000).

' A is incorrect as the amount is only MaryAnne's lost profits.

B is incorrect as the answer reflects the expense to date, and fails to add lost profits.

D is incorrect as MaryAnne cannot cover the cost of completion, since she has not yetperformed this work.


CONTRACTSBob contracts with MaryAnne, a builder, to build a house for $999,999. Assume that thecontract was worded such that Bob pays on 3 equal installments. The first payment uponcompletion of the foundation, the second upon the framing, and the third upon thefinished job. If MaryAnne finished the foundation and then stopped because she wentbankrupt, what can MaryAnne recover?

A. $333,333, the contract price.

B. $33,333 offset by whatever damages Bob suffered in getting the job finished byanother contractor.

C. Nothing because her bankruptcy was a material breach.

D. Nothing on the contract since the construction contract was not divisible. There is,however, a potential quasi-contract recovery.

Answer DA contract will be deemed divisible if: 1) the performance of each party is divided intotwo or more parts under the contract, 2) the number of parts due from each party is thesame, and 3) the performance of each part by one party is the agreed-upon equivalentof the corresponding part from the other party. In light of condition 3 the contract is notdivisible, as the payments are merely milestone payments and are not related directly tothe work that MaryAnne is doing. In light of MaryAnne's breach when she went bankrupt,there is no contract recovery. However, as she has conferred a benefit to Bob, there isa potential quasi-contract recovery.

A is wrong as the contract is not divisible and MaryAnne is not entitled to the contractprice.

B is incorrect. However, if the contract was divisible this answer would be correct. Toexplain again: the payments are not equivalent to the work performed, but are simplyconvenient benchmarks of when to pay each installment.

C is wrong. Although the breach was material, MaryAnne could recover something on aquasi-contractual basis as outlined in the correct answer.


CONTRACTSKris owns a chain of donut shops across the US and decides to add chocolate cookies to his menu.With 100 locations, he decides to mix the dry ingredients in a central Oklahoma location, anddistribute them by truck to each store where then can be mixed with water and baked individually.Wanting to really wow his customers, he searches the world for the best chips for his cookies, andlearns that Chipper is renowned for making the tastiest chocolate chips. While expensive, Kris decidesto exclusively use their product. Kris contracts with Chipper to deliver one ton of chips on the 1st ofeach month to his Oklahoma location. Kris agrees to a price of $10,000 per ton of chips, to be paidby the 5th of the same month in which the chips are delivered. Chipper and Kris are happily in contractfor June and July. On August 2nd, shortly after Chipper makes their third delivery, Kris sends someof his cookies to the Chipper execs as a "thank you" gift. Tony, head of marketing at Chipper, tastesone and realizes that they are the worst cookies he has ever had. Fearing Chipper's reputation will bedestroyed, Tony advises the president of Chipper to stop selling their chips to Kris. Chipper stopsshipping their chips to Kris as of August 6th. If Kris sues to force the sale of the chips, will he prevail?

A. Yes, only if Chipper's chips are the best in the market and there is no other substitute chip.

B. Yes, because Kris has detrimentally relied upon the sale of the chips from Chipper.

C. No, because specific performance is not available for a sale of goods contract.

D. No. If Kris's cookies are bad enough to harm Chipper's reputation, then forcing specificperformance would be inequitable, and only an equitable remedy is available.

Answer: AThe buyer may obtain specific performance where the seller has refused to sell thegoods to the buyer, the goods are of a unique nature, and the goods can not easily besubstituted by another vendor. Based upon the present facts, Chipper's chips, regardedas the best and tastiest chocolate chips out there, are not easily substituted.

B is wrong. If the chips were not unique and easily substituted, damages could becalculated by taking the cost of buying substitutes and subtracting the contract price.Additionally, if the goods are not unique, any other applicable U.C.C. remedy would beapplicable.

C is wrong. As set forth in the correct Answer A, specific performance may be orderedin a sale of goods contract if the goods are specialized enough so as to not be easilysubstituted.

D is incorrect as being a complete misstatement of the law.Note: Answers based on fairness or convoluted statements of "law" are typicallyincorrect.


CONTRACTSTodd offers to sell Seb a plasma television for $10,000. Seb has been to Todd's homebefore and knows that he has an ARC plasma television hung above his fireplace.Unknown to Seb, Todd also owns a CDB plasma TV that he intended to sell, regardlessof the fact that he knew Seb was only aware of the ARC TV. If Seb sues Todd to obtainthe ARC TV, who will win?

A. Seb, because Todd knew of the ambiguity.

B. Seb, because that was his objective intent.

C. Todd, because there was a mutual mistake.

D. Todd, because he subjectively intended to sell the CDB plasma TV instead of theARC TV.

Answer: AThe parties' contract seems clear on its face, but because of subsequent facts thecontract may be interpreted in more than one way, resulting in a latent ambiguity. In asituation where one party is aware of the latent ambiguity and the other party is not, acontract will be enforced in favor of the unaware party.

B is wrong because Seb did not express to Todd which TV he wanted.

C is wrong. Even though there is a latent ambiguity, there is also a mutual mistake. Inthis situation, the unaware party's intent controls.

D is incorrect as being a misstatement of the law.


CONTRACTSGoGoJuice is a gas distributor who enters into several refineries to purchase their unleadedproducts. They contract with ColdPress Oil to purchase their entire unleaded product output for thenext 5 years at a price of 9%, the retail price at the time of delivery. This offer is contingent on aminimum weekly purchase of 1,000,000 gallons and GoGoJuice would be responsible for alldistribution. Upon signing the contract, GoGoJuice states in writing that they wish to buy 1,000,005gallons of ColdPress production. They continue to purchase all of ColdPress's unleaded product for12 months, at which point ColdPress develops a new refining process allowing them to doubleyearly production. ColdPress states to GoGoJuice that the excess production will be sold to variousother retailers. GoGoJuice agrees and signs an addendum. For the next 12 months, GoGoJuicecontinues to buy half of all ColdPress's unleaded production until a foreign oil embargo makes itimpossible for ColdPress to buy unrefined oil. ColdPress sends a letter to GoGoJuice informingthem that delivery of their usual unleaded gas will now be impossible in accordance with theircontract. ColdPress is able to continue refining (using the improved method) and continues to sellto others. If there was a valid contract between GoGoJuice and ColdPress, and ColdPress refusesto deliver; this refusal is:

A. Justifiable, because ColdPress was not refining gas at the original refinery.

B. Justifiable, because the foreign embargo excused performance.

C. Justifiable, because GoGoJuice knew of the embargo when it entered into the agreement.

D. Not justifiable and a breach of contract.

Answer DThe lack of foreign oil was not a permissible reason for deeming this an objectiveimpossibility, as ColdPress is able to continue producing for sale to foreign markets evenin light of the embargo. In light of the correct answer, Answer B is clearly incorrect.

A is wrong as the contract was simply directed toward the production of gas with nocontract terms detailing which refinery (new or old) would do the production.

C is also incorrect as knowledge of a future embargo was not a condition in the originalcontract, but instead was the reason gas entered into the contract.


CONTRACTSSong contracts Jin for construction of a home in accordance with the plans provided bySong's architect for $1 million upon completion. During the construction process, thereis a nationwide lumber shortage. Prices for lumber double; thereby, increasing the costto construct the home. Song and Jin orally agree that Jin will refrain from building theoriginally planned detached three care garage (a savings of $10,000) and that Song willonly pay $995,000. Jin completes the job within the three month schedule predicted.This oral agreement is most likely viewed as:

A. Unenforceable, as the original contract was in writing and cannot be modified orally.

B. Unenforceable as a violation of the Statute of Frauds.

C. Enforceable

D. Unenforceable in lieu of the Parol Evidence Rule.

Answer CThe agreement is enforceable as both parties have exchanged a valid consideration thatsupports the contract modification. Courts typically look to see whether the duties andobligations of the parties have varied to determine if there is valid consideration. Here,there is clearly a varied set of duties for each Jin and Song (no garage and $5,000 offthe price) resulting in a valid contract.

A is incorrect. A written contract can in fact be modified orally as long as themodification does not result in a contract that falls under the protection of the Statute ofFrauds, or the original contract specifically prohibits oral modifications. Here, we haveno facts indicating that the original contract prohibited oral modification, nor does it fallwithin the realm of the Statute of Frauds (e.g., a contract for the sale of goods in theamount of $500 or more, or to be completed within one year).

B is incorrect as this modified contract does not fall under the Statute of Fraudsrequirements (not the sale of goods, and it is completed in less than a year).

D is incorrect for misstating the requirements of the Parol Evidence Rule. The ParolEvidence Rule prohibits the admission of relatable evidence that occurred prior to theentry into a written contract, as long as the written contract was a full and finalexpression of the bargain agreed upon by the parties.


CONTRACTSSong contracts Jin for construction of a home in accordance with the plans provided bySong's architect for $1 million upon completion. Assume that Jin has completed thework, but Song is protesting, claiming that Jin's work is "uncraftsman like." Assume Songsends Jin a check for $950,000 with "payment in full' written in the memo line. AssumeJin, in need of cash, endorses and cashes the check, and then subsequently sues torecover the $50,000 balance. A court will likely hold that:

A. Cashing the check was an accord and satisfaction, discharging Song's duty to paythe remaining $50,000.

B. Jin can recover the remaining $50,000.

C. Jin is estopped to sue for the balance as Jin's cashing of the check, knowing it wasfor "payment in full," prohibits his suit.

D. Jin's endorsement of Song's check was a written release which discharges theircontract.

Answer AWe do have an accord and satisfaction following Jin's deposit of the check. An accord is anagreement in which one party of a contract agrees to accept a performance different than whatwas originally bargained for. Satisfaction is the performance of the accord agreement. Here,there was a good faith dispute, and the check was a proposed accord. The new performancewas a decrease in contact price due to the "uncraftsman-like" work; Jin cashing the check wasa satisfaction. Upon cashing it, Jin discharged Song from his obligation to pay.

B is incorrect as we are dealing with a non-liquidated debt. Here, we have a bona fide dispute.In light of this, the $950,000 payment is deemed to be sufficient consideration for a promise bythe creditor to discharge the debt.

C is incorrect. There was no change of position by Song in light of a statement by Jin. In lightof this, promissory estoppel is inapplicable. Promissory estoppel requires that a party waive acondition before it is to happen, and that the opposite party detrimentally relies upon the waiverof that condition. In this situation, a court will hold this waiver binding since there is noindication that Song changed his position detrimentally based on Jin's cashing his check.Therefore, a promissory estoppel-based waiver is inapplicable.

D is also incorrect. A release is required to be in writing and supported by new considerationin order to be binding. These requirements were not met by Jin's endorsement of the check. Inlight of this, Jin's acceptance of the check can be potentially viewed as an accord andsatisfaction rather than a release.


CONTRACTSZeke, an advertiser, signs a deal with Sell-Out Films to advertise a new film called Rollin' on theHudson by placing a rolling billboard in motion around New York City. The billboard is to be in motionfor the two weekends prior to the movie opening. Zeke and Sell-Out Films agree in writing that the priceof the advertising is $1,500 per weekend. On the first Saturday of the contract, Zeke's billboard carriergets a flat tire and he can not drive around the city (the flat was completely unforseeable and not theresult of negligence by Zeke). Zeke immediately has a new tire installed but the billboard catches fire,again due to no negligence of either party, and is destroyed. A replacement billboard is not available intime for Zeke to advertise on Sunday. Assume that each party sues the other for damages. Whichanswer best states the rights and liabilities of the parties after the tire failure on the first Saturday?

A. Sell-Out Films can recover damages from Zeke since he failed to get the billboard in motion.

B. Zeke is free to recover the contract price as the tire failure was not his fault.

C. Neither party is entitled to recover damages against the other because the flat, inhibiting Zeke toget on the road on Saturday, discharged him from his contractual obligations; and, since the contractwas contingent on Zeke's advertising, Sell-Out films subsequently became discharged of their dutyto pay.

D. Neither party is entitled to recover damages against the other because SeII-Out's offer to pay wasin exchange for an act that was never delivered. As this act was not delivered, there was no validacceptance.

Answer: ASell-Out Films is free to recover from Zeke as this is a bilateral contract (moving billboard inexchange for cash) and Zeke breached by failing to get the billboard on the road on Saturday.A contractual duty to perform may only be discharged by objective impossibility — i.e., no onecould have performed. All roads in the city that Zeke was to travel being closed by police orderdue to an emergency would be an example of objective impossibility. Here, instead, we have asubjective impossibility. Zeke's flat tire does not discharge him from the contract since anotheradvertiser with a working billboard carrier could have done the job.

B is incorrect because SeII-Out's duty to pay was subject to the condition precedent of theagreed upon advertising by Zeke. This condition precedent was clearly breached by Zeke as setforth in the correct answer; therefore, SeII-Out's duty to pay never arose. A red herring is givenin the question when the question notes that the tire failure was not Zeke's fault, nor due to hisnegligence. Had this red herring been viewed as an objective impossibility defense (police orderto close roads) the contract would be discharged and each party would be excused fromperformance.

C is incorrect. As set forth above, we are only dealing with a subjective impossibility.

D is incorrect for suggesting that this is a unilateral contract and that the offer to pay could onlybe accepted by performance. The facts given indicate that Sell-Out Films accepted the terms ofthe advertising by signing the contract. In light of this, Sell-Out offered a promise to pay inexchange for a promise to roll resulting in a contract binding both parties.


CONTRACTSZeke, an advertiser, signs a deal with Sell-Out Films to advertise a new film called Rollin' on theHudson by placing a rolling billboard in motion around New York City. The billboard is to be inmotion for the two weekends prior to the movie opening. Zeke and Sell-Out Films agree in writingthat the price of the advertising is $1500 per weekend. On the first Saturday of the contract, Zeke'sbillboard carrier gets a flat tire and he can not drive around the city. (The flat was completelyunforseeable and not the result of negligence by Zeke.) Zeke immediately has a new tire installedbut the billboard catches fire, again due to no negligence of either party, and is destroyed. Areplacement billboard is not available in time for Zeke to advertise on Sunday. Assume that bothparties seek damages from each other. Which answer best states the rights and liabilities of theparties following the second Saturday?

A. Zeke can recover $1,500 from Sell-Out Films, less the costs and expenses he would haveincurred in performing the agreed upon advertising.

B. Sell-Out Films is entitled to nominal damages following the destruction of the billboard, as it wasnot Sell-Out's fault and resulted in Zeke's technical breach of contract.

C. Neither party is entitled to recover because the fire destroyed the subject matter of the contractand thereby rendered the offer by Sell-Out Films null and void, terminating the contract.

D. Neither party is entitled to recover because the fire excused Zeke's duty to drive the billboardaround, which was a condition precedent to receipt of payment.

Answer DNeither party is entitled to recover from the other following the destruction of thebillboard, as performance was impossible due to an objective impossibility (i.e., no onecould have performed). Due to this objective impossibility, Zeke's duty to advertise isexcused. Since Zeke cannot advertise the billboard, the condition precedent to paymentby Sell-Out Films will never be fulfilled, while SeII-Out's duty to pay will never arise andis excused.

A is incorrect. Following an excusal of performance by objective impossibility, thecontract is discharged excusing each party from any obligation they may have had(including payment).

B is also incorrect. When the subject matter of a contract is destroyed with no faultassigned to either party, the duties of all parties are discharged. There is, therefore, nobreach of contract.

C presents the right answer for the wrong reason as the fine does not make the offernull and void, but rather excuses performance due to impossibility.


CONTRACTSJack owns a tire distribution center and enters into an oral negotiation with Hue RichTires to be his only and exclusive dealership for their line of colored tires in all stateswest of the Mississippi. At the end of their initial negotiations, both parties agree to mostof the larger points of contention, but a few smaller issues still need to be resolved. Asboth parties are excited to start selling colored tires in this new market, Hue Richassures Jack: "Don't worry about it. We'll work these things out."Jack, assured they areon to something big, promptly leases an additional 50,000 square feet of warehousespace, buys several delivery trucks, and hires a new manager to oversee operations ata six-figure salary. Shortly after signing his new manager, Jack learns that Hue Rich hasgone with another wholesaler. If Jack sues and wins against Hue Rich, it will most likelybe because the court applies which of the following theories?

A. Implied-in-fact contract

B. Promissory estoppel

C. Unjust Enrichment

D. Quasi-contract

Answer BThe restatement of contract states that promissory estoppel, if the promisor should reasonablyexpect results in either action or forbearance by the promisee but he does not induce suchaction or forbearance, will be binding if injustice can be avoided only by enforcement of thepromise. The statement by Hue Rich "We'll work these things out," reasonably indicates thatthe meat of the deal has been ironed out and Jack should proceed in getting the warehousespace, trucks, salesmen etc. . . Jack's detrimental reliance would, therefore, be expected byHue Rich. Hue Rich is, therefore, liable under the promissory estoppel.

A is incorrect. An implied-in-fact contract occurs when assent is manifested by the conduct ofa party and not by oral or written language (the biases of an express contract). Here themajority of the deal had been discussed in detail with nothing outstanding but minor issues.There was nothing to be expected or implied.

C is incorrect as unjust enrichment is not an applicable theory. Unjust enrichment of a partyoccurs in situations where one party's actions serve to enrich another party by conferring abenefit with the expectation of eventually being compensated. If the other party retains thesebenefits without compensating the original party, you have unjust enrichment. Here, Jack hasmade numerous investments, but his investments have not conferred any benefit on Hue Rich.

D is incorrect. We are not dealing with a quasi-contract as we have sufficient details inexchanges between Hue Rich and Jack to have a binding contract.


CONTRACTSLynnell and Warner have adjoining ski chalets in Oregon. One winter break, Bailey, Warner's oldestdaughter, decides to spend the entire winter skiing and relaxing at the house with friends. One weekinto Bailey's vacation, the ski patrol calls Lynnell to inform her that Bailey crashed into Lynnell'sgarage while driving her snowmobile drunk and has done extensive damage. Lynnell calls Warner andasks him for Bailey's college address so that she can work out payment for the damages. Warner tellsLynnell that he is shocked, ashamed and sorry for his daughter's actions, and he doesn't want to haveany bad blood between neighbors. He happens to be on his way out of the country on business, butwould be happy to repair the damages if Lynnell agrees over the phone not to press charges againstBailey. Lynnell agrees, and as promised Warner immediately calls a local contractor to fix the garage.Unfortunately, the contractor is not very good and does a poor job. Lynnell is forced to hire her owncontractor to undue the shoddy repairs and sues Warner for these costs. Warner arrives in court andpresents this case, showing that the damages occurred after Bailey was back at college, and clearlycould not have been attributed to her. Assume that there is an enforceable contract between Lynnelland Warner. Would Lynnell have an action against the contractor that did the sloppy work?

A. No, because there was no agreement between the contractor and Lynnell regarding the repairs.

B. No, because Lynnell is an incidental beneficiary of the contract between Warner and his contractor.

C. Yes, because Lynnell is a creditor beneficiary.

D. Yes, because Lynnell is a donee beneficiary.

Answer C

Here, Warner entered into a contract with his contractor in order to discharge anobligation he had with Lynnell, making Lynnell a 3rd party creditor beneficiary. In light ofthis, Lynnell is free to sue Warner's contractor, also making Answers A and D wrong.Answer B is clearly incorrect as the contractor's performance clearly exists solely tobenefit Warner alone.


CONTRACTSOn January 1st XYZ Realty mails a written offer to LandMongrrr for the sale of a largeundeveloped parcel of land. The offer includes the following terms: "This offer expires onFebruary 1st 12:00 PM if the offeree has not caused an acceptance to be received bythe offeror on or before that date." On February 1st LangMongrrr telegrams XYZ anacceptance, but the telegram company is backed up with work. They fail to send thetelegram to XYZ until the 2nd of February. On February 4th XYZ contracts with anotherbuyer for sale of the land, and does not inform LangMongrrr of the transaction. As aresult, LangMongrrr contacts XYZ by phone on February 10th and is told that no contractbetween XYZ and LandMongrrr will be created. Which of the following statement is themost correct?

A. No contract between the parties arose on February 2nd.

B. A contract would have arisen if a letter of acceptance was mailed on February 1st.

C. XYZ's silence constituted an acceptance of LangMongrrr's February 2nd telegram.

D. A voidable contract arose on February 1st.

Answer: ANo contract arose on February 2nd because the offer to purchase expired at 12:00 PMon February 1st. When a period of acceptance is stated in an offer, the offeree mustaccept within that period to create a contract. The mailbox rule, which states that anacceptance is effective upon dispatch, is not applicable here as the offer explicitly statesthat the acceptance is effective only upon receipt. Additionally, arguing that the failure ofacceptance was due to the telegraph company is not applicable. By way of theirlanguage offer, the offeror has placed the burden of confirming receipt of acceptance onthe offeree.

B is incorrect. XYZ's requirement that acceptance be received by February 1st removesthe traditional mailbox rule of acceptance upon deposit in the mail (or at the telegraphoffice).

C is wrong. XYZ had no obligation to respond to a late telegram since the period foracceptance had expired, and the late receipt of the telegram created neither a contract,nor an obligation to respond to the telegram.

D is incorrect because no contract, voidable or otherwise, arose on February 1st sinceacceptance of the offer did not occur within the predetermined period of time.


CONTRACTSLynnell and Warner have adjoining ski chalets in Oregon. One winter break, Bailey, Warner's oldestdaughter, decides to spend the entire winter skiing and relaxing at the house with friends. One weekinto Bailey's vacation, the ski patrol calls Lynnell to inform her that Bailey crashed into Lynnell'sgarage while driving her snowmobile drunk and has done extensive damage. Lynnell calls Warnerand asks him for Bailey's college address so that she can work out payment for the damages.Warner tells Lynnell that he is shocked, ashamed and sorry for his daughter's actions, and hedoesn't want to have any bad blood between neighbors. He happens to be on his way out of thecountry on business, but would be happy to repair the damages if Lynnell agrees over the phonenot to press charges against Bailey. Lynnell agrees, and, as promised, Warner immediately calls alocal contractor to fix the garage. Unfortunately, the contractor is not very good and does a poor job.Lynnell is forced to hire her own contractor to undue the shoddy repairs and sues Warner for thesecosts. Warner arrives in court and presents this case, showing that the damages occurred afterBailey was back in college, and clearly could not have been attributed to her. Is Warner obligated topay Lynnell for the repairs?

A. No, because Warner never believed his daughter Bailey caused the damage.

B. No, because Bailey did not cause the damage.

C. No, because Lynnell wrongly accused Bailey, and, therefore, it is wrong to enforce an agreementbased on a mutual mistake of fact.

D. Yes

Answer D

Based on recent precedent, a court will hold that a promise to refrain from suing, asdirected to a suit in which the party potentially suing honestly believes that they have avalid reason to sue, is fair and adequate consideration to support an agreement,regardless of whether the original allegation of fault may be valid. In light of this,Answers A and B are wrong. Answer C is also wrong because the mutual mistake atissue only relates to the reason for entering into the original contract. There is no validreason why the contract should not be enforced based solely on the fact that there maynot have been a need for the original contract. There is no applicable mistake in theterms of the contract. Furthermore, the "unfair" issue in the answer choice isinapplicable, as Warner had every opportunity to further investigate the contract anddetermine if the reason for entering into it was applicable.


CONTRACTSLarissa, a computer store owner, contacts Pear Computers requesting the price of their new Z4model. Pear replies by letter and encloses a retail price list for their computers and accessories. Pearstates that they would love to do business with Larissa, but that their terms are cash within 30 daysof delivery. Larissa orders 10 Pear Z4s on March 5th enclosing a check for $50,000, the retail pricefor 10 units. When Pear receives the check, they immediately contact Larissa, informing her of aprinting error in their catalog "The actual price per computer is $6,000." Pear further states that theywill gladly ship so long as Larissa agrees to pay the additional $10,000 upon receipt of the computers.Larissa replies by letter on March 15th: "Please ship the 10 computers. I'll gladly pay, but I need theseunits by April 1st as part of my contract with Leelow University." Pear proceeds to ship, making noreply to Larissa's letter. The Z4s eventually arrive on April 15th. Larissa accepts the delivery, but writesPear: "Due to your failure to ship the computers here on time, I will not pay the additional $1,000 permachine. Also be advised that if I loose any money on reselling these units I'm holding you liable."Regardless of their late arrival, Leelow University accepts the units and pays Larissa for them.Larissa's letter of March 15th, that had an enclosed check for $50,000, may be viewed as:

A. Not an acceptance, because Pear's first communication stated terms calling for cash within 30days of delivery.

B. Not an acceptance, because of the mistake as to price.

C. Not an acceptance, because Pear's first communication did not constitute an offer.

D. An acceptance

Answer: D

Before addressing whether there was an acceptance, we must determine if an offer waspresented. An offer requires a reasonable expectation from the offeree (Pear) that theofferor (Larissa) is willing to enter into a contract on the basis of the offered terms. Broadstatements like those in catalogs are not typically considered offers, because it isunreasonable to assume the sender of the catalog intends to make offers to everyoneon their distribution list. Here however, the catalog was sent in response to a specificrequest about price. We have established that there was an offer, Larissa's acts can bedeemed as an acceptance to the said offer.

A is incorrect. Larissa's check is sufficient unless Pear demands legal tender and givesLarissa the time to obtain cash. Additionally, the check was mailed instantly, and Larissastill had time to tender cash should it have been demanded.

B is incorrect as there was a unilateral mistake. A unilateral mistake is not sufficient torescind a contract unless the non-mistaken party either knew, or should have known, ofthe mistake. Here, we have no facts (such as a large price discrepancy) indicating thatLarissa knew, or should have known, of the price mistake in Pear's catalog.

C in incorrect. Pear's letter and catalog were sent in response to Larissa's specificrequest for the price of their Z4 model and can, therefore, be deemed an offer.


CONTRACTSProfessor Talon decides to entice her students by offering a trip to Tuscany to the highest GPAin her class. She announces this to her classes and posts it on a university message board,noting a maximum award of $2,000. Sue emails Professor Talon: "Professor. I'm going to try mybest to get this trip. I have purchased all the study guides available and I am studying 8 hours aday for your class. Thanks, Sue." The dean of Garden State University fields numerouscomplaints from other professors questioning Professor Talon's motivational method. Theprofessors are also angry that their students are neglecting their other classes. The deancontacts Professor Talon with the dilemma and instructs her to rescind the offer as it is "improperin accordance with the school's written policy." Professor Talon informs her students of thesituation and withdraws her offer both orally and in writing. Sue, mad at this, meets ProfessorTalon during her office hours. She protests that Professor Talon cannot withdraw as she hasalready started to perform. Upon scoring Sue's final exam, Professor Talon realizes that Sue is,in fact, the highest GPA in the class. Sue demands performance. Professor Talon's offer of thetrip to her class orally, and the posting of it on a university message board can be interpreted as:

A. Preliminary negotiations

B. A promise to make a conditional gift.

C. A contractual offer, creating a power of acceptance.

D. A mere statement intended to induce the students to study harder.

Answer: C

Here, Professor Talon has set forth all that is necessary for this to be deemed an offer.The terms of the performance were addressed, and the terms of the offeree were clear(a trip under $2,000). In light of this Sue is free to accept Professor Talon's offer, makingAnswers A and D incorrect.

B is incorrect. Professor Talon wanted to get her class to study and courts have ruledthat: bargained-for consideration may be evident solely because one has induced adetriment in another. Here, the induced detriment can be viewed as the detriment instudying.


CONTRACTSBonnie owns a tool supply store and enters into an agreement with Bob to purchase10,000 right-handed screwdrivers. The agreement requires a payment at the time theorder is placed and Bonnie wires $20,000 into Bob's account. When the screwdriversarrive, Bonnie immediately inspects them and realizes that Bob has sent her 10,000 left-handed screwdrivers. Concerned, she immediately contacts Bob. Which answer bestsummarizes Bonnie's rights, having paid for the screwdrivers in advance of acceptingthem?

A. Paying for goods is an acceptance, and Bonnie has summarily waived her right toreject

B. Advance payment still allows Bonnie to object when faced with a total breach ofcontract, but it does act as an acceptance of the shipped goods as they substantiallyconform to her needs.

C. Advance payment is inconsequential. Bonnie still has her rights to both inspect andseek remedies in the case of a breach.

D. Acceptance of goods only occurs upon the notification of the seller by the buyer inwriting that the goods are acceptable. Advance payment means nothing.

Answer CUnder the U.C.C., regardless of advance payment, a buyer still has her right to inspectas well as her right to seek adequate remedies. Answers A and B are clearly wrong, asadvance payment is not considered an acceptance. Answer D is also incorrect, as theU.C.C. does not require that acceptance of goods be in writing.


CONTRACTSBonnie owns a tool supply store and enters into an agreement with Bob to purchase10,000 right-handed screwdrivers. The agreement requires a payment at the time theorder is placed and Bonnie wires $20,000 into Bob's account. When the screwdriversarrive, Bonnie immediately inspects them and realizes that Bob has sent her 10,000 left-handed screwdrivers. Concerned, she immediately contacts Bob. Assume the left-handed screwdrivers are nonconforming goods. What are Bonnie's remedies?

A. Bonnie has no remedies. Upon advance payment her remedies were waived.

B. Bonnie may demand delivery of the conforming goods (right-handed screwdrivers),but she does not need to return the nonconforming goods.

C. Bonnie's damages are limited to the difference between the contract price and theprice to buy conforming goods.

D. Bonnie is entitled to damages based on the difference between the contract price andthe value of the nonconforming goods received.

Answer CThe damages that Bonnie may recover are based upon the difference between thecontract price and the price to buy conforming goods. Incidental costs would also beavailable.

A is incorrect. Bonnie has not forfeited her entitlement to remedies upon payment inadvance.

B is incorrect. The facts do not indicate that the goods at issue are so unique that Bonniecannot purchase them elsewhere. Even assuming for a moment that they were uniquegoods (e.g., right-handed purple screwdrivers shaped like elephants) Bonnie still mustreturn the nonconforming goods to Bob.

D is clearly erroneous. It is an incorrect measure of available damages. Damagesavailable are limited to the cost to buy conforming goods minus the contract price.


CONTRACTSSong contracts Jin for construction of a home in accordance with the plans provided bySong's architect for $1 million upon completion. Assume that the entire house isdestroyed by a rogue wave that levels it to the foundation. What can Jin recover fromSong under contract law?

A. The full contract price, minus the value of the work remaining to be done prior to thehome's destruction.

B. The actual value of labor and materials, plus a percentage of the profits Jin wouldhave earned upon completion.

C. Nothing, unless Jin builds another house and completes it.

D. The reasonable value of Jin's labor and materials.

Answer: CJin's duty to complete the house is not discharged by the rogue wave; contractual duties areonly discharged in the event that the contract's subject matter is destroyed. As constructionhas not been rendered impossible, Jin is free to rebuild and the contract subject matterremains in effect. Additionally, as Jin was in a better position to guard against destruction(i.e., insurance); it's his obligation to rebuild or forfeit payment.

A is incorrect. Song has not breached his contract to pay upon completion and there areno facts indicating that Song has assumed the risk of wave damage.Note: If it was Song who had breached, Jin would be entitled to the contract price minus thecost of completion.

B is incorrect. Performance has not been rendered impossible, albeit costly. Additionally, ifJin was to be discharged of his responsibilities, an award including a percentage of hisprofits is clearly erroneous. Note: Answers awarding lost profits are generally incorrect.

D is also incorrect as it is a restitution for an impossibility discharge of the contract. If Jinwas discharged due to impossibility (i.e., the land washed away with the rogue wave and isnow under water) at best Jin would recoup a quasi-contractual remedy that puts him backat the original status quo to prevent unjust enrichment. Here, we are not dealing withimpossibility. The only way Jin can recover is if he builds a replacement house and sees itto completion.


CONTRACTSKaren buys a fixer upper house in need of electrical repairs. She enters into a contractwith Sparky, an electrician. Karen has to be out of her apartment and into her new homeby noon on October 1st and the contract contains a clause requiring that all work becompleted by this time. The price of the contract is $1,000. Assume Sparky intends tostart work on September 27th, so that he has adequate time to finish. On the 27thSparky begins work, but that evening (after he has left for the day) a flash flood rollsdown from the mountain taking Karen's house with it. Which describes the parties'obligations at this point?

A. Neither Sparky nor Karen are discharged from their obligations under the contract.

B. Karen must pay the $1,000 contract price.

C. Sparky is discharged from his obligation, but is entitled to recover the fair value of thework he performed prior to the flood.

D. Both Sparky and Karen are discharged from all contract obligations.

Answer CHere we have an impossibility situation, which discharges the duties of Sparky, but hemay still recover for the work that he had completed before the deluge. Impossibility isonly a defense in situations where there is a basic assumption by the parties making thecontract that the unexpected even might occur, and neither party has assumed the riskof the event's occurrence. Sparky's partial recovery for work completed is, under aquasi-contract analysis, the contract rate, or the reasonable value of his performance ifthat method of valuation is more convenient. Answers A and B are, therefore, incorrect.However, because Sparky rendered part performance, he may recover for the work thatwas performed. Answer D is incorrect because it fails to account for the fact that Karenwill have to pay Sparky for work already performed.


CONTRACTSSixteen year old Joe hears a radio ad for the Rancho 2000, a new model of car by AMXMotors, and contracts to buy a red model. The agreement he enters into requires a downpayment of $1500, with $5000 due in monthly installments made payable to AMXfinancing. Joe makes his first five payments on time, but upon the revocation of hislearner's permit he no longer needs a car. AMX sues for the remaining seven payments.The age of majority is 18 years of age. A court will likely rule that:

A. Joe is completely liable for the balance of the payments.

B. Joe's notification to AMX that he is making no additional payments and disaffirmingthe contract removes him from any liability so long as he returns the car.

C. Joe's liability is limited to the reasonable market value of the car.

D. Since Joe is a minor, he is able to avoid all liability for any remaining payments.

Answer: BThe court will rule for Joe. A minor is viewed by the court as lacking the capacity to enter into acontract binding on themselves. Disaffirmance discharges any of Joe's remaining liability underthe contract. As Joe is a minor, so long as he returns the car, he can avoid being liable for anyremaining payments.Note: Had Joe been of the age of majority, the theory of disaffirmance would not be anapplicable defense, thereby resulting in Joe being responsible for the contract he entered into.

A is wrong. As discussed above, the contract is voidable due to the fact that Joe is a minor uponhis disaffirmance to make any additional payments. Following this, all liability Joe may have isremoved.

C is incorrect as the Rancho 2000 is not a necessity. Precedent states that a contract betweena minor and an adult is generally voidable by the minor, but that the minor remains liable for thereasonable value of "necessities." Necessity is a grey term that is differently applied to all, andthere are no facts that indicate owning this car was a necessity for Joe. Absent a factual situationwhich states that the car was a necessity, Joe's status as a minor is sufficient to invalidate thecontract.

D is also incorrect because it fails to address the need of a minor to disaffirm his contract. Unlessa minor specifically disaffirms the contract, the contract will remain binding on both parties.Therefore, Joe's being a minor is not enough to remove him from any liability absent a showingof disaffirmance.


CONTRACTSOn September 13th Frankie, who owns a chain of inexpensive men's clothing stores, and Philomena, aworld renowned men's shoe designer, sign an agreement making Frankie the "sole distributor andreseller" for Philomena's new budget line of shoes. On October 9th, Frankie orders $1 million in shoesfrom Philomena to be delivered by November 24th. Philomena receives this order directly from Frankieover lunch. She does not sign an acknowledgement of receipt, but after lunch returns to her showroomand sets aside the ordered shoes, marking the boxes with Frankie's logo. Frankie launches a huge mediacampaign to showcase Philomena's shoes in his stores stating:"Arriving this Thanksgiving!" Anticipating ahuge turnout, Frankie makes costly improvements to the facade and interior of his stores. On November1st Philomena leaves Frankie a voicemail: "Hello dahling, it's Philomena. I know Bullseye is a competitorof yours, but they have just offered me twice your price for the new line. I'm strapped for cash and justcouldn't pass it up. Sorry." Frankie saves the voicemail and instantly files suit against Philomena. Assumean enforceable contract between Frankie/Philomena. What is the legal effect of this voicemail on thecontract?

A. It is a breach of contract by anticipatory repudiation, allowing Frankie to bring an immediate action forenforcement of the contract prior to the November 24th contract date.

B. A breach by anticipatory repudiation allows Frankie to sue if he demands adequate assurances ofperformance from Philomena first, and she does not provide them within a reasonable time.

C. It is anticipatory breach requiring Frankie to wait until November 24th, tender the purchase price, andthen sue after November 24th.

D. Its legal effect depends on whether Philomena's failure to perform occurred while attempting to act ingood faith. If she was acting in good faith, there is no breach until after November 24th.

Answer: APhilomena's voicemail is an anticipatory repudiation: the promisor, prior to the time set forperformance of her promise, indicates that she will not perform when the time comes,thereby, entitling Frankie to sue immediately. Anticipatory repudiation does not require thecontract to be executory on both sides and the repudiation is unequivocal. Here, Philomenahas clearly and unequivocally indicated that she will breach; the contract was executory onboth sides as Frankie had not paid for the shoes and Philomena has not delivered the shoes.Under anticipatory repudiation, one of Frankie's options is to sue immediately.

B is incorrect because demanding assurances before suing on the contract is not necessaryin light of the explanation of the correct answer. Demanding assurance, however, would beapplicable if Philomena's statement was unclear as to whether it was a repudiaton. IfPhilomena's voicemail was not so clearly a repudiation, Frankie would have to demandassurance and wait for a response delivered in a reasonable time under the U.C.C.

C is also incorrect because anticipatory breach and anticipatory repudiation aresynonymous. The non-breaching party is not obligated under either to choose any oneparticular option. Therefore, an immediate suit as set forth in the correct Answer A is viable.

D is incorrect because the good or bad faith breach is irrelevant. Upon a breach the non-breaching party is entitled to U.C.C. remedies, including a suit prior to November 24th.Motive for breach is never a valid reason to allow a breach under the U.C.C.


CONTRACTSIn January, Frank enters a contract for the sale of his house to MaryAnne for $100,000,with a closing date of March 1st. On February 1st, MaryAnne begins to have secondthoughts about the neighborhood and the purchase of Frank's house. She writes him: "Ihave cold feet about such a large investment and will not buy your house unless yourepaint the exterior green and install an alarm system with an 8 foot chain link fencearound the perimeter." If Frank elects to treat this as a breach of contract:

A. Frank may sue MaryAnne upon receipt of her letter.

B. Frank may sue MaryAnne only on or after the set March 1st date, if she fails topurchase.

C. Frank may sue MaryAnne only if he refuses in writing to comply with the alarm, fenceand painting requests.

D. Frank cannot sue as all of the promises are executory at this stage.

Answer: AFrank may sue upon receipt of the letter as there exists anticipatory repudiation upon its receipt.Anticipatory repudiation occurs when a promisor indicates that they will not perform the contractprior to the time set for performance. Anticipatory repudiation is only applicable in light of ashowing that: 1) an executory bilateral contract exists with executory duties on both sides; and 2)the words or conduct of the promisor unequivocally indicate that they cannot or will not performwhen the time comes. Here, both requirements are met: the letter from MaryAnne clearly indicatesthat she will not perform, allowing Frank to treat the contract as being breached and sueimmediately.

B is incorrect. As stated in the correct answer, Frank is free to sue upon receipt of the letter underthe concept of anticipatory repudiation.Note: Anticipatory repudiation would NOT apply if both sides did not have executory duties toperform. A non-repudiator must wait to sue until the time originally set for performance by therepudiating party. Here, Frank's duty was still executory at the moment of MaryAnne's repudiation.

C is incorrect. Frank does not need to expressly refuse before he may sue. He is under noobligation to perform any additional requests excluded in the original contract, and the partieshave not agreed to any modification of said contract.

D is incorrect. The promises of Frank and MaryAnne are still executory, thereby, allowing theapplication of the concept of anticipatory repudiation. (Frank still must deliver a deed andMaryAnne must still pay the amount agreed upon.)


CONTRACTSSteve, a homeowner, hires Matt to help with some home renovations. They agree to acontract price of $10,000 which is reduced to writing. Shortly after the contract is signed,Matt asks Steve: "Please address the $10,000 check to my wife when I am done withthe job. It's our anniversary and I want her to have the cash as a gift." Matt's wife,Lauren, is aware of this arrangement. Just before the job is complete Matt tells Steve:"Uh, forget about paying my wife; I think she has a gambling problem that is eating allof our money. Please just pay me instead." What is the best argument in favor of Laurenbeing able to enforce the contract?

A. the Statute of Frauds

B. the Parol Evidence Rule

C. Lauren was an intended third-party beneficiary.

D. Lauren has relied on the promise and purchased a new car in advance of payment.

Answer D

Here, Answer D serves as the best political answer for this question. The best argumentis one based on detrimental reliance, yet even this argument is unlikely to be successful.Here, Lauren is a gratuitous assignee whose rights are easily revocable by the assignor.Under a detrimental reliance analysis, a court may enforce the promise if it finds that anassignee relied on a promise to her detriment; even if it was revoked in order to preventinjustice.

A is clearly erroneous as the Statute of Frauds is a defense when dealing with contractsthat do not have a writing. Here, the Statute of Frauds is inapplicable as Lauren is seekingthe enforcement of the contract as opposed to its prevention.

B is incorrect as the Parol Evidence Rule prevents the introduction of prior oral statementsthat contradict the terms of the written contract. Here, the promise to Lauren, as well asthe revocation of this promise, were both oral statements making parol evidencecontradictory and inapplicable.

C is inapplicable. Lauren was not an intended third-party beneficiary, and therefore, notawarded enforcement rights as held by an intended party in the contract. Lauren, anassignee, was not a contemplated party when the contract was entered into, but ratherwas transferred rights from an intended party. She has no rights to enforce the agreement.


CONTRACTSApartment hunting Kara stumbles across a vacant unit that piques her curiosity as it is architecturallydistinct from anything else she has seen. Kara contacts the management company, Chambers4You,and reserves the apartment, though she plans to continue looking at other places in town. She signstheir agreement which states: "Renter agrees to pay $200 to Chambers4You on January 1st, andupon receipt Renter is granted the opportunity to agree to lease apartment at any point prior toFebruary 1st. If Renter does not respond on or before February 1st, Chambers4You is free to keepthe deposit. If Renter agrees before February 1st, Chambers4You has 10 days to process andaccept, or reject, Renter's application. If accepted, the $200 deposit shall be applied toward lastmonth's rent. If rejected, the deposit will be fully refunded." Kara gives Chambers4You the $200deposit by January 1st. On January 5th, Chambers4You rents the apartment to a squatter. OnJanuary 6th, Kara contacts Chambers4You notifying them that she will take the apartment.Chambers4You informs Kara that it has already been rented and returns her $200. Assume that thecourt has determined that Chambers4You is, in fact, in breach of the contract. Kara seeks to have acourt compel Chambers4You to rent her the apartment. Is compelling Chambers4You an appropriateresponse?

A. Yes, Chambers4You was obligated not to rent the apartment on January 5th.

B. Yes, Chambers4You should not have rented the apartment to another before February 1st.

C. No, because the contract was unconscionable.

D. No, because Kara has not suffered any irreparable harm.

Answer: AIn dealing with an option contract the court should order Chambers4You to rent the apartmentto Kara as they were obligated to consider her application to rent as long as it was receivedprior to February 1st. When they rented to the squatter on January 5th Chambers4You wasin breach of this option contract by anticipatory repudiation. Since we are dealing with aunique apartment (architecturally different), specific performance is a viable option for Kara.With no other apartments like this one, money damages would be insignificant.

B is wrong. The option contract in this case only requires that Chambers4You keeps theapartment open until February 1st, at which point they may evaluate Kara's application for upto 10 days. They need not take the full 10 days and are free to reject Kara's application in lessthan 10 days. In light of this, Chambers4You is free to rent to someone else prior to the 10days after the last day of application, namely: February 11th.

C is not factually supported. There is no indication that we have an unconscionable contract.A contract is unconscionable only if at the time of formation the contract was extremely one-sided. Here, the contract does not require Chambers4You to rent to Kara, but simply for themto hold the apartment open until at least February 1st. Therefore, the contract is notexceedingly one-sided.

D is wrong. There is irreparable harm, here, as this is a unique apartment and Kara cannotrent another like it elsewhere.


CONTRACTSJason, a merchant selling widgets, calls Matthew, another merchant, and says: "I've gottwo tons of widgets collecting dust in my warehouse. They are yours for $10,000."Matthew agrees to buy them, but states that he wants one ton delivered immediately andone ton delivered the next month, since he doesn't have the space for two tons ofwidgets. Assume that Jason responds to Matthew's request for separate deliveries twoweeks apart by stating that he will ship the entire two tons immediately. If Jason tendersthe two tons of materials, Matthew can:

A. Reject the entire delivery.

B. Must accept the entire delivery.

C. May demand that Jason deliver only one ton immediately and one ton later.

D. Must accept or reject the entire delivery.

Answer BIf Jason objected to the delivery terms over two weeks in two shipments, this term is notpart of the contract and Matthew must accept the entire two ton delivery at once. As thiscontract is for the sale of goods, the U.C.C. applies. Ordinarily when dealing withmerchants, the existence of an additional term in the contract that is due to anacceptance not mirroring the terms of the offer traditionally becomes part of the contract.Had the additional terms been considered part of the contract, Answers A, C and Dcould have been correct. However, this is merely a general rule to which there areseveral exceptions. For example, if the offeror notifies the offeree within a reasonabletime after receiving the acceptance that he objects to the new terms, the contract isformed according to the terms of the original offer (i.e., the new terms are not included).In light of this exception, Answer B is the correct answer.


CONTRACTSKeiko sells glass-blowing equipment to Malik and they enter into a contract: Keiko supplies allthe glass-blowing equipment that Malik needs for 5 years at a fixed monthly price. The partiesfurther agree in writing not to assign the contract, and that payments should be made to CatOnBank, a creditor of Keiko. The following month, Keiko makes an "assignment of contract" toCatOn Bank as security for a $1 million dollar loan that she is taking on a new manufacturingfacility. Kieko continues to sell to Malik. Malik pays as expected and has no idea that Keikohas assigned to Cat& Bank. After Malik has made his first payment to Keiko, Malik terminatesin writing: he has decided to no longer sell glass vases and pitchers. He is now getting intothrowing pottery. Assuming that Cat& Bank sues, which is beneficial to Malik's defense?

A. Malik has, in good faith, ceased to have a need for the contracted goods.

B. Keiko's assignment to Cat& Bank is a delegation of Keiko's duties to Malik transferred toa third party, namely Cat& Bank. These duties were personal in nature, therefore, thedelegation was not proper.

C. Keiko's dealings with Malik were personal and non -assignable.

D. The original contract between Keiko and Malik is unenforceable for lacking consideration.

Answer AAs we are dealing with a requirements contract, the buyer is charged with a duty to actin good faith. Under the U.C.C., if there is in good faith no need for the contracted goods,then this is the most beneficial answer to Malik's defense.

B and C are wrong since we are dealing with rights that are not personal — i.e., paymentof money is not personal and clearly assignable.

D is wrong. Under the U.C.C. a requirements contract is deemed supported by sufficientconsideration.


law decks flash cards - contracts - 2007-2008

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