Basic Contract Formation
A says to B, "I'll sell you my house for $100,000, if you give me a check right now for $10,000 and promise to pay the rest within 30 days." B replies. "Here is my $10,000 check, and I'll have the balance to you next week." Is there an offer and acceptance? If so, what is it?
Offer: I'll sell you my house for $100,000, if you give me a check right now for $10,000 and promise to pay the rest within 30 days.
Acceptance: Here is my $10,000 check, and I'll have the balance to you next week.
A says to B, his son, " In consideration for $1 paid and received, I promise to give you a car worth $10,000 four years from now. B gave A the $1.
Is this a contract?
No, under nominal consideration. Even though the $1 was paid, the court will probably conclude that A did not "bargain" for the $1 and that there is thus no consideration.
Insurer writes a home owner's policy on Owner's home. The policy says that in the event Owner suffers a loss, Owner must report the loss "in detail" and in writing to Insurer within 30 days. 28 days after Owner's home is burglarized, he submits a one sentence description of the loss to Insurer. Insurer says "Your description is not specific enough," but intentionally refuses to tell Owner what type of detail must be added to prevent Owner from submitting a claim meeting the requirements of the policy. The deadline passes without Owner's rewriting the description, and Insurer refuses to pay the claim.
Explain what Insurer's actions violate.
Implied obligation of good faith because the behavior was an attempt to deprive Owner of his reasonable expectation that his loss would be covered by the policy.
Client hires Lawyer to represent Client against criminal charges for a flat fee of $10,000. The night before trial begins, Lawyer tells Client, “ double the fee or I’m resigning from the case.” Client agrees.
Is there a way for Client to get out of this agreement?
Duress because at the time of Lawyer’s threat, the threat and/or ensuing bargain were abusive or oppressive.
A woman contracted to sell her ring to a coworker for $300. Both parties believed that the ring had a cubic zirconia stone and was worth $300. The parties agreed that the woman would bear the risk of any mistake regarding the worth of the ring. In reality, the stone in the ring was a diamond, and the ring was worth $2,000.
Upon learning of this mistake, the woman refused to sell the ring to the coworker for $300.
If the coworker sues to enforce the contract, is she likely to prevail?
a) No, because the woman was unaware of the actual worth of the ring.
b) No, because the woman would be unduly burdened by selling the ring for only $300.
c) Yes, because the woman agreed to bear the risk of a mistake regarding the worth of the ring.
d) Yes, because both parties believed the ring was only worth $300.
(c) is the answer. The woman agreed to bear the risk of a mistake regarding the worth of the ring. Remember that a party may bear the risk of a mistake based on allocation by party agreement, allocation by the court, or the party’s conscious ignorance of the truth. Here, as noted, the contract stipulated that the woman bore the risk of a mistake regarding the worth of the ring. Answer option A is incorrect because although the woman was unaware of the actual worth of the ring, she will not be able to avoid performance, because she agreed to bear the risk of this mistake. Answer option B is incorrect because the resulting imbalance in the contract’s favorability to the coworker will not override the terms of the contract, which the parties agreed included a term placing the risk of a mistaken valuation on the woman. Note that the difference between $300 and $2,000 is likely not great enough to raise a defense of unconscionability. Answer option D is incorrect because although both parties were mistaken regarding the actual worth of the ring, the woman agreed to bear the risk of this mistake.
A says to B, "If you walk across the Brooklyn Bridge by April 1, I promise to pay you $1,000 as soon as you finish."
Has A proposed a bilateral contract, unilateral contract, or netiher?
Unilateral Contract
Four times a year, Mississippi Tech University, college, conducts a fundraiser where students are asked to donate textbooks so incoming students can use them. During one of these fundraisers, Abby donated $500.00 worth of books. Based upon the fundraiser total, Mississippi Tech University signed contracts for books. Subsequently, Abby refused to pay the $500.00. Mississippi Tech University's best claim against Abby would be:
Charitable Subscriptions
Sub-contractor gives contractor a bid of $50,000 for electrical work. Contractor relies on this bid to prepare her own master bid for the entire project. Contractor gets the contract, enters into a sub-contract with the Sub-contractor. The sub-contractor then discovers that his $50,000 bid should have been $75,000, due to clerical error.
Will the court likely find the sub-contractor’s mistake unconscionable?
No, probably not because the Contractor relied on the $50,000 sub-bid and the sub-contractor has not shown he will be severely harmed if forced to perform.
Susan is walking through the woods when she steps on a thorn. She languishes in pain for hours, screaming. Sarah walks by and sees Susan’s predicament. Acting as a good Samaritan, without any expectation of payment, Sarah removes the thorn. Susan, immensely relieved, says, “I am so grateful! I’m going to send you $1,000 a month as long as I live.” Is Susan’s promise supported by consideration?
No, consideration requires a bargained-for exchange. If the promise’s detriment occurred before the promise was made, then the promisor could not have bargained for that detriment. Here, Sarah has already performed by pulling out the thorn, so her performance wasn’t bargained for in exchange for Susan’s promise to pay her $1,000 a month.
The neighbor of a motorcycle collector inquired whether the collector, who was an expert mechanic and often rebuilt motorcycles, would be willing to trade the collector’s “red motorcycle” for the neighbor’s convertible. At the time of the neighbor’s inquiry, the collector owned only one red motorcycle, which he had recently purchased at an estate sale for $600. The collector had not yet inspected the motorcycle closely enough to know what it was worth, having purchased it under the assumption that he could use it for parts in other rebuilds if it turned out to be in bad condition. When the collector showed this motorcycle to the neighbor, the neighbor confirmed that this was the motorcycle that he had in mind. The neighbor had no mechanical knowledge but had previously told the motorcycle collector that he admired a similar red motorcycle that the collector had rebuilt and driven around the neighborhood. Unbeknownst to the neighbor, the collector had already sold the similar motorcycle. Knowing that the neighbor’s convertible was worth $10,000, the collector happily agreed to the trade. On the date of the agreed-upon exchange, the neighbor refused to tender the convertible when he discovered that the red motorcycle wouldn’t start and was not in fact the other motorcycle that he had previously admired.
Assuming the estate-sale motorcycle is in fact worth no more than $600, if the motorcycle collector sues the neighbor for breach of contract, which of the following doctrines, if any, would be potentially useful to the neighbor’s defense?
A) Unilateral mistake.
B) Mutual mistake.
C) Frustration of purpose.
D) The neighbor has no potential defenses, because there was no mistake and there is no requirement that contracts be fair and equally valuable to both parties.
Answer option A is correct.
On June 15, A mails an offer to B. On July 1, A mails a revocation to B. On July 3, B has a letter of acceptance hand delivered to A. On July 5, A's revocation is received by B.
Is A's revocation valid? Is B's acceptance valid?
B's acceptance is valid because A's revocation did not take effect until its received by B, which was later than then July 3 date on which B's acceptance took effect.
A promises to pay for B's college education as a gift if B will attend school full time. B gives up her good job and enrolls in college, incurring a liability of $5,000 for the first year. A then refuses to pay the bill.
What enforcement, if any, does B have against A?
Promissory estoppel because B actually relied on A's promise when she quit her job and enrolled in college full time. A could reasonably foresee B quitting her job to enroll in college full time.
A man received a phone call from a salesperson offering him a home alarm system for $5,000. The man was interested but stated that he needed to consult with his wife. The salesperson provided the man with the alarm system company’s address and told him to mail a letter of acceptance as soon as he decided. After discussing the offer with his wife, the man decided to accept. He placed an acceptance letter in the mail, but unbeknownst to him, he incorrectly wrote the zip code on the envelope. A postal worker at the post office corrected the zip code, and the company received the acceptance letter the next day.
At what point, if any, did the acceptance become effective?
A) When the man placed the acceptance letter in the mail.
B) When the postal worker corrected the zip code.
C) When the company received the acceptance letter.
D) The acceptance never became effective.
Answer option A is correct. The acceptance became effective when the man placed the acceptance letter in the mail. Under the mailbox rule, a properly addressed acceptance becomes effective upon dispatch. An improperly addressed acceptance is effective upon dispatch only if it is received within the time that a properly addressed acceptance would have been received. Here, even though the man incorrectly addressed the acceptance letter, the company still received the letter the next day. Because a properly addressed letter would have been received at the same time, the acceptance was effective upon dispatch, i.e., when it was placed in the mail. Answer options B, C, and D are necessarily incorrect for this reason.
Shelia, a resident of Florida, was very concerned that her twelve year old nephew, Tim (also a resident of Florida), was smoking crack cocaine. Accordingly, Shelia wrote a letter to Tim telling her that if he agreed to not smoke cocaine until he was twenty-one she would give him $50,000. Tim received his aunt’s letter and replied that he did not drink alcoholic beverages but agreed to the terms of his aunt’s letter to not drink alcoholic beverages until he was twenty-one. Is there a binding contract between Shelia and Tim?
No. There is a failure of consideration
A husband and wife attended a timeshare presentation. Neither of them had graduated from high school, and neither of them was financially savvy. A sales representative of the timeshare company pressured the couple to purchase a timeshare at the presentation, telling the couple that the sales contract was an unusually good deal and that a timeshare purchase was an excellent investment. The couple eventually signed a contract, even though they did not understand that, under the contract’s terms, they would be charged a 20% interest rate and that they would forfeit their entire investment if they were ever late with a payment. Two weeks later the couple tried to cancel the contract, and the timeshare company sought to enforce it.
Which of the following defense(s) to enforcement might the couple have?
A) Duress only.
B) Unconscionability only.
C) Both duress and unconscionability.
D) Neither duress nor unconscionability.
Answer option B is correct.
Jeweler gives Consumer a signed document stating, "For the next 120 days, I agree to buy your two-carat diamond antique engagement ring for $4,000."
Is the Jeweler's offer revocable within 120 days?
No, the Jeweler is a professional that sells or buys goods of that kind (merchant), the offer was signed, and the Jeweler explicitly assures the offer will be held open for 120 days.
Stephanie filed for bankruptcy. After all of her debts were discharged in bankruptcy, Stephanie wrote to its main creditor, Capital One, that she intended to repay all the money it owed to Capital One prior to the bankruptcy discharge. Two days later, Stephanie had a change of heart. What is Capital One's best argument to recover the money owed to it by Stephanie?
Promissory Restitution
Sub-contractor gives contractor a bid of $50,000 for electrical work. Contractor relies on this bid to prepare her own master bid for the entire project. Contractor gets the contract, enters into a sub-contract with the Sub-contractor. The sub-contractor then discovers that his $50,000 bid should have been $75,000, due to clerical error.
Will the court likely find the sub-contractor’s mistake unconscionable?
No, probably not because the Contractor relied on the $50,000 sub-bid and the sub-contractor has not shown he will be severely harmed if forced to perform.
RentalCo, a car agency, sticks a clause in the fine print that says the renter is liable for four times the actual cost of any damage to the car, even if the renter is completely without fault.
Is there anything the Renter can do to avoid enforcement?
Under the reasonable exception rule in Contract Interpretation because this clause is so unusual and burdensome that its presence would thwart the renter’s “reasonable expectations.” Therefore, this clause would probably be held unenforceable, even without the renter having to show it being unconscionable.
A homeowner contracted with a groundskeeper to plow a large area of overgrown garden in preparation for new landscaping. The work was to be performed the following Friday. On Tuesday, the groundskeeper twisted his ankle. On Wednesday, the groundskeeper’s ankle was still in pain. He called the homeowner and said, “I don’t know if I am going to be able to plow your land on Friday.”
Can the homeowner sue the groundskeeper for a remedy on Thursday?
A) No, because the groundskeeper provided sufficient notice that he would be unable to plow the land.
B) No, because the groundskeeper has not expressly repudiated the contract and the time for performance has not passed.
C) Yes, because the groundskeeper’s statement constitutes an anticipatory repudiation.
D) Yes, because the groundskeeper’s statement fails to provide the homeowner with adequate assurance of his ability to perform.
Answer option B is correct. Although the groundskeeper expressed doubt in his ability to perform, a mere expression of doubt is not sufficient to constitute an anticipatory repudiation, which would allow the homeowner to bring a cause of action before the due date of performance. Thus, the homeowner cannot sue the groundskeeper until he actually fails to perform
Seller 1 sends a purchase order to Seller 2, which does not mention how disputes are to be resolved. Seller sends a disclaimer of warranty that changes parts of the contract, an acknowledgement form back to Consumer, which correctly recites the basic terms of the deal (price, quantity, etc.), and then says, "All disputes are to be arbitrated."
Is the disclaimer of warranty and acknowledgement clause apart of the contract?
No; under the UCC, there are exceptions to the rule that if both parties are merchants, the additional term automatically becomes part of the contract. Here, the disclaimer of warranty materially altered the contract, making it not apart of the contract. The second exception (that is not applied here) is if the offeror objects to having the additional terms apart of the contract.
Paige works at Walmart Law firm, an employment agency. Paige's manager, Shawn, has told her employees that they will be eligible for a bonus at year-end (December 31st) of $1,000 for commissions in excess of $20,000; $1,000 for commissions in excess of $40,000 and $1,500 for commissions in excess of $60,000. Paige works until December 15th but must quit due to health problems. As of December 15th she has earned $57,000 in commissions. Is she entitled to the bonus?
1.) Yes. She can assert promissory estoppel.
2.) Yes. She may assert part performance as sufficient acceptance
3.) No. This was a unilateral contract that required full performance.
4.) No. There was no intent to be bound.
Yes. She may assert part performance as sufficient acceptance.
Troy Bolton promises Disney Channel that she will act in Disney’s movie. The movie is scheduled to commence in the United States on July 1. On June 1, Troy announces to the press that he is going to live abroad for a year beginning the next day and will not do the movie.
What actions can Disney Channel take against Troy Bolton?
Anticipatory Repudiation because Troy has made it clear, even before his performance is due, that he cannot or will not perform.
Jake agrees to sell Grant a goose for $20. Both parties think it’s a regular goose, which Grant wants for breeding. Before the goose is transferred or the $20 was paid, the goose bagn laying golden eggs, which makes her priceless. Jack refuses to uphold the agreement, and Grant sues to enforce the contract. Who wins?
Jack, due to mutual mistake. A mistake by both parties, which falls under the basic assumption on which the contract was made will generally be grounds for avoidance. Here, the standard is satisfied when the parties thought they were bargaining for a regular goose when in fact they were bargaining for a vastly more-valuable goose that lays golden eggs.
A homeowner contracted with his neighbor to buy the neighbor’s “working lawn mower” for $150, with the mower to be delivered and the payment to be made the following month. The contract contained no terms related to which party would maintain the lawn mower prior to the date of performance or related to which party bore the risk of loss in the event that the lawn mower was destroyed prior to the date of performance. After the contract was made and unbeknownst to the neighbor, the neighbor’s son continued to use the lawn mower and didn’t change the oil, severely damaging the mower’s engine and rendering the lawn mower useless on the date that the homeowner and the neighbor had agreed to perform the contract.
Can the homeowner avoid buying the lawn mower from his neighbor?
A) Yes, due to impossibility.
B) Yes, due to impracticability.
C) Yes, due to frustration of purpose.
D) No, because the contract did not require the neighbor to maintain the lawn mower, and the neighbor didn’t cause the damage.
Answer option C is correct.