Scan002 Review Answ

8/8/2019 Scan002 Review Answ

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Ques.

No.

1.

2.

3.

4.

5.

6.

7.

8.a.

b.

CONTRACTS REVIEW ANSWERS 1.

ANSWERS TO REVIEW QUESTIONS

Answer Explanation

FALSE An offer that looks toward the formation of a true unilateral contract can beaccepted only by the offeree's doing the requested performance. A promiseto perform is unavailing.

PROBABLYIt is most doubtful that any court would interpret 1\s statement as the comNOT munication of an "offer." It lacks evidence of a present manifestation of a

present willingness to enter a contract. If 1\s words have any significancebeyond a mere general declaratory statement, they would probably be held asmerely evidencing a willingness to receive offers.

VERY Under the common law tests, such an exchange would be simply too inDOUBTFUL definite for a court to regard it as the basis for a present contract. Under the

U.C.C., in contracts for the sale of goods, there has been some relaxation ofthis policy (e.g., the parties can leave the determination of the price to befixed by a third party, some certain event, or a trade journal quotation; orthey may leave it to future agreement), but none of the exceptions by whichthe price term can be made sufficiently certain are incorporated by the vagueterms of this agreement.

NO Again, a manifestation of agreement on the essential term (price) is missing,and the agreement by its terms does not set up the machinery by which acourt may arrive at the determination selected by the parties. Given the

unique subject matter, this would not fall under the rule that the court canremedy the omission by supplying a "reasonable price."

Here, the essential quantity term is measured by the seller's output. Under theU.C.c., this is specifically authorized as a sufficient basis to create a presentcontract.

YES

FALSE The revocation is effective if it is given the same notoriety as attended themaking of the offer. If this requirement is satisfied, then revocation is effec-tive through the constructive notice, even as to individuals who do notactually learn of it.

FALSE Under the common law view, such a revocation, is effective upon receipt bythe offeree.

At common law, an offer not supported by consideration or detrimentalreliance can be revoked at the will of the offeror, even if he has promised tohold the offer open.

NOT NEC- Depends on whether the promise was in a signed writing. If it was, thenESSARILY under the U.C.C., this would be a "merchant's firm offer" and as such, it is

YES


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17. YES This surprising result flows from a strict application of the common law rule-a contract was formed upon dispatch of the acceptance. However, if the offeror relies to his detriment on the rejection, the offeree will be es- topped from enforcing the contract.18. TRUE Absent a situation in which there is a recognized "duty to speak," the offeror cannot impose upon the offeree the peril of having silence treated as a binding acceptance.19. TRUE Brown's case might not, however, survive Fox's defense that she made no offer looking toward performance of a bargained-for act (coming to the apartment), but merely stated a condition, the satisfaction of which would position Brown to receive a gratuity. A gift is revocable absent a union of do native intention plus delivery, here refused.20. NO The promise is supported only by past consideration which, at common law, cannot bind a promisor who has changed his mind concerning the terms of an executory obligation.21. TRUE It is supported only by "moral consideration" and, like "past consideration," is incapable of binding a now unwilling promisor to an executory obligation.22. (B) Here is an example of "moral" consideration sufficient to support an executory promise to pay a debt discharged in bankruptcy (but only as per the tenor of the new promise).23. TRUE

Here is an example of bargained-for valuable consideration. But for this

proposal, the mother was free to name the child anything she wished. In re- sponse to the offer, she named the infant "John." This is a legal detriment. In such a case, the law will not inquire into the economic equivalency of the promise and the act.24. TRUE The bank will raise the objection of failure of consideration since Brown was already under an existing duty to repay the principal. However, the facts strongly imply an obligation on Brown's part to pay the 8% interest for the second year, and this is valuable consideration supporting the bank's extension promise.25. NO O's promise of the additional $100 was not supported by an exchange of valuable consideration. All C promised or did was to complete the installa- tion, but this was already his existing duty under the original executory contract. This case cannot, on the facts, qualify for the exception where performance is more onerous than foreseeably anticipated.26. YES A bargained-for promise to forbear the prosecution of any claim that is not patently groundless, and that the party in good faith believes to have merit, is another example of "valuable consideration."

2. CONTRACTS REVIEW ANSWERS

10.

11.

12.

13.

14.

15.

16.

9. FALSE

TRUE

YES

TRUE

effective for the stated period of 30 days without the necessity of showingany independent consideration.

Today nearly all courts hold that once the offeree has begun actual perfor-

mance of the requested act (as opposed to steps taken in preparation forperformance), the offeror's power of revocation is stayed for a reasonableperiod, thus giving the offeree further time to complete the act of acceptance,at which point the contract is formed.

In contrast to the rules regarding acceptance, a rejection is effective uponreceipt by the offeror.

Death or destruction of the subject matter of an offer that is still executoryterminates the offer by operation of law.

To this extent an offer is deemed "personal" to the intended offeree.

PROBABLY Because of the subject matter (personal services), the more liberal U.e.C.NOT provisions would not apply, and B's qualification of his purported accep

tance will be regarded as a rejection and counteroffer.

YES

TRUE

FALSE

a. YES

The contract is for the sale of goods; hence, the U.e.e. rules apply. Under theD.e.e., an acceptance containing additional terms is sufficient to form acontract unless the acceptance is expressly made conditional on assent to theadditional terms. Therefore, a contract was formed in this case in spite of theadditional delivery term. Because the contract is between merchants, whetherthe offeree's additional term has become a term of the contract depends on

the court's determination of whether it materially altered the terms of theoffer. If it did not materially alter the terms of the offer, it becomes part ofthe contract unless the offeror reasonably rejects it. If it did materially alterthe terms of the offer(e.g.,by materially shifting the economic advantage or risk of loss proposed by the offer), in the absence of theofferor's assent, it does not become a term of the contract and only theoffered terms will be included.

Since a bilateral agreement is formed by the exchange of promises, notice ofthe return promise is generally required. Any objective manifestation ofassent is sufficient for this purpose.

Ordinarily, acceptance is effective on dispatch. Only if acceptance is at-tempted by an "unauthorized" mode of communication is the effective datedelayed until receipt by the offeror.

But under the U.e.e., the rules have been even further liberalized in favor ofthe offeree-the offeree obtains the benefit of the "mailbox rule" (acceptanceeffective upon dispatch) if any mode of communication commer

cially reasonable under the circumstances is used./


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27. NO28. YES 29. YES 30. YES

Given the express reservation, A has given only an "illusion" of a promise.

Here, the key is that unless and until A gives the notice, his promise binds

him to regard B as an exclusive source of supply for the goods in question.

Although a minor's promise is voidable, it is held to impart valuableconsideration in a bargained-for exchange with an adult.

Under the trend of modem decisions prompted by section 90 of the SecondRestatement, a gratuitous promise made for the benefit of an intended thirdparty beneficiary, which induces reasonable reliance on the part of the in-tended beneficiary, may be enforced as against the promisor on a theory ofpromissory estoppel.

31.

32.

FALSE

YES

No recovery on the contract because of a mutual mistake concerning a basic

assumption of the contract. Here, both parties are held to have contracted forthe purchase and sale of a barren cow. Afterwards, this mutual assumption isdiscovered to be at variance with the fact of the cow's pregnancy. Such amutual mistake goes to the "essence of the transaction" in that it changes thevalue of the subject matter tenfold over the contract price. Suchcircumstances excuse the seller's executory obligation.

Here, there is a unilateral error as to the value as it is fixed in the mind of theseller. Such a mistake of judgment (as opposed to a unilateral mistake incomputation) generally does not prevent the formation of a contract betweenparties dealing at arm's length, even though the other party is of the wellfounded opinion that the offeror is mistaken in his judgment.

33.a.

b.

PROBABLY O can probably recover the $8,000. There is a unilateral mistake which isYES unknown to 0, who has accepted reasonably and in good faith.

PROBABLY If the disparity had been $38,000 ($12,000 vs. $50,000 as the next lowestNOT bid), there would still be a unilateral mistake, but here the facts strongly

suggest that 0 could not form a reasonable, good faith belief that the bidderwas not mistaken when he submitted such an obviously defective bid. Thelaw protects and rewards only commercially reasonable expectations enter-tained in good faith.

34.

35.

PROBABLY YES

YES

While there is a division of authority here, most courts hold that there is

a contract on the terms actually transmitted to the offeree unless themistake would be so obvious that no reasonable person in the position ofthe offeree could have assumed that it represented a correctmanifestation of an offeror's intention. Here, the error is two cents perpound on a 621tper pound item. A minority of courts would hold that nocontract was formed on a theory that the error in transmission preventedthe minds of the parties from meeting on an offer.

There is a binding contract, and it is for the sale of the house that A knew0 to own on Peck Road. 0 is guilty of using a patently ambiguous term asto


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i. CONTRACTS REVIEW ANSWERS

45.a. NO Such an attempted assignment of the insurance coverage would vary the riskof the promisor (insurer) in that the risk of a casualty loss would vary withthe habits and practices of the occupant of the insured premises.

b. YES If the fire has already occurred, the proceeds of ~ s claim are assignable.Here, there would be no enlargement of the insurer's obligation or risk.

46. NO Even though the debt in both instances will be secured by a mortgage on thesame land, A cannot be forced by this unilateral assignment to accept C'scredit risk in lieu of that of B, the original promisee.

47. NO Here, there is an attempt to make a present assignment of future rights in anon-existing future contract. For the simple reason that a contract for thesale of Blackacre does not presently exist, there is no operable presentassignment. Note that since the assignment was for consideration, courts cantreat it as a contract to assign and under this rationale, impress a constructive

trust on any proceeds that A may realize from a sale of Blackacre in thefuture, thus protecting B's interest.

48. YES Here, the language of the agreement would be held to destroy only A's rightto make an assignment, but it does not destroy A's power to do so. Theassignment will be effective, and A will be liable for breach of the covenantnot to assign.

49. NO As a general common law rule, no formalities are mandatory to create apresent assignment. There is a major exception for assignments of land or aninterest in land. Here, the Statute of Frauds would be operable and wouldrequire a writing signed by the party to be charged (here, the assignor).

50. YES Since it is made without consideration, a gratuitous assignment is revocableby the assignor at any time before the promisor of the obligation that hasbeen the subject of the assignment renders performance to the assignee.

51. TRUE Such detrimental reliance, which is reasonably foreseeable to the assignor,will give rise to a substitute for valuable consideration and will function tocut off the assignor's power of revocation.

52. YES If a gratuitous assignment of a simple chose is in writing, the assignment isirrevocable.

53. TRUE The assignment to B, although first in time, was gratuitous and oral and,hence, revocable. Such revocation was automatically accomplished when A,as assignor, made the second assignment to C.

54. FALSE The general rule is that where an assignor makes two assignments of thesame right and the first assignment is irrevocable, the first assignee haspriority.


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63. TRUE

It establishes a prospective failure of condition, as much as actual preven-


55. YES Although some of the old cases required an express assent to the assump-tion of delegated duties, the prevailing modem view is that acceptance ofthe rights under an assignment that clearly is coupled with a delegation ofduties operates as legally effective assent to receive the delegation of duties

as well as assignment of rights.

56. DEPENDS A can show additional oral terms unless the writing was an integration of

all the agreements between the parties. Whether a writing represents suchan integration is a question of intention. If A and B came to regard the writ-ing as representing the full and final expression of the terms of their agree-ment, then for purposes of application of the parol evidence rule, the

writing is regarded as "integrated."

57. TRUE Parol evidence may always be offered for the purpose of establishing the

terms of a "collateral agreement." Here, the theory is that the partiesreached two agreements, only one of which was reduced to an integratedwriting. The proffer of parol evidence goes to the establishment of the

terms of the second agreement, which the parties intended to "rest in paro1."

58. TRUE The operation of the classic "condition subsequent" is to extinguish a

present contract obligation.

59. NO True "constructive conditions" arise on the theory that they are inserted by

operation of law in the interest of preserving fair and equitable dealings be-

tween the parties.

60. FALSE The plaintiff has the burden of pleading and proving that all conditions

precedentto orconcurrentwith the ripening of the defendant's duty ofperformance have either been performed or excused. Once this is estab-lished, the defendant, if he would rely on the escape possibility afforded bya condition subsequent, must allege and prove the happening of the eventor contingency that satisfied the condition subsequent as a matter of affir-

mative defense.

61. YES Here, it is likely that the condition will be held to have been excusedby

B's conduct. The key issue would be whether A can fairly be said to haveassumed the risk that B would dispose of the hotel by means that techni-cally were not a "sale." As a business creditor, it highly unlikely that A

would be held to have assumed this risk.

62. NOThe factor that prevents this from being a case of excuse by prospective in-ability to perform is the fact that in the July 1 conveyance to T, the vendorretained an option to repurchase "at any time." Clearly, such conduct on thepart of the vendor, who is under an executory contract duty.to convey to hisvendee on September 1, would give the vendee reasonable grounds forinsecurity and a right to demand of the vendor adequate assurance ofperformance. Failure of the vendor to respond with such assurances within acommercially reasonable period will ripen into a breach by the vendor thatwould then excuse the duty of counterperformance.


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tion.

64.a. NO Here, A's statement falls far short of an unconditional present repudiation ofhis executory contract obligation and thus fails to provide grounds for apresent breach by anticipatory repudiation.

b. NO65. TRUE66. TRU

E

For the simple reason that there exists no presentbreach of the contract onthe part of A, B does not have an immediate cause of action against A.

Nearly all American courts have allowed recovery of the restitution interestin an action premised on a theory of quasi-contract.

Under such circumstances, performance of the personal services that formedthe subject matter of the agreement has been rendered legally impossible.

67. TRUE If the default on the part of the other party amounts to only a minor breach,the aggrieved party is not relieved of a duty to render performance of hisown promise, but having done so, such a party may recover any conse-quential and ascertainable damages occasioned by even the minor breach.

68. TRUE The U.C.C. provides that the buyer may buy substitute goods and recoverthe difference between the contract price and the price of the substitutegoods.

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Scan002 Review Answ