CONTRACTS REVIEW ANSWERS 1.
ANSWERS TO REVIEW QUESTIONS
Ques.
No. Answer Explanation
1. FALSE An offer that looks toward the formation of a true unilateral contract can be
accepted only by the offeree's doing the requested performance. A promise
to perform is unavailing.
2. PROBABLY It is most doubtful that any court would interpret 1\s statement as the com
NOT 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 significance
beyond a mere general declaratory statement, they would probably be held as
merely evidencing a willingness to receive offers.
3. VERY Under the common law tests, such an exchange would be simply too in
DOUBTFUL 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 of
this policy (e.g., the parties can leave the determination of the price to be
fixed by a third party, some certain event, or a trade journal quotation; or
they may leave it to future agreement), but none of the exceptions by which
the price term can be made sufficiently certain are incorporated by the vague
terms of this agreement.
4. 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 a
court may arrive at the determination selected by the parties. Given the
unique subject matter, this would not fall under the rule that the court can
remedy the omission by supplying a "reasonable price."
5. YES Here, the essential quantity term is measured by the seller's output. Under the
U.C.c., this is specifically authorized as a sufficient basis to create a present
contract.
6. FALSE The revocation is effective if it is given the same notoriety as attended the
making of the offer. If this requirement is satisfied, then revocation is effec-
tive through the constructive notice, even as to individuals who do not
actually learn of it.
7. FALSE Under the common law view, such a revocation, is effective upon receipt by
the offeree.
8.a. YES At common law, an offer not supported by consideration or detrimental
reliance can be revoked at the will of the offeror, even if he has promised to
hold the offer open.
b. NOT NEC- Depends on whether the promise was in a signed writing. If it was, then
ESSARILY under the U.C.C., this would be a "merchant's firm offer" and as such, it is
2. CONTRACTS REVIEW ANSWERS CONTRACTS REVIEW ANSWERS 3.
17. YES This surprising
effectiveresult flows
for the fromperiod
stated a strictofapplication of the common
30 days without law of showing
the necessity
any independent consideration.
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-
9. FALSEtopped from
Todayenforcing
nearly allthecourts hold that once the offeree has begun actual perfor-
contract.
mance of the requested act (as opposed to steps taken in preparation for
18. TRUE Absent performance),
a situation in which there is apower
the offeror's recognized "duty to speak,"
of revocation thefor
is stayed off-a reasonable
eror cannot impose upon the offeree the peril of having silence treated of
period, thus giving the offeree further time to complete the act as acceptance,
a
at which
binding acceptance.point the contract is formed.
19. TRUE TRUEBrown'sIncase
10. might to
contrast not,
thehowever, survive Fox's
rules regarding defenseathat
acceptance, she made
rejection no
is effective upon
receipttoward
offer looking by theperformance
offeror. of a bargained-for act (coming to the
apartment), but merely stated a condition, the satisfaction of which would
11. YES positionDeath
Brownortodestruction
receive a gratuity. A gift is
of the subject revocable
matter of anabsent a union
offer that of executory
is still
terminates
do native intention the
plusoffer by operation
delivery, of law.
here refused.
20. NO The promise is supported only by past consideration which, at common
TRUE To this extent an offer is deemed "personal" to the intended offeree.
12. law, cannot bind a promisor who has changed his mind concerning the
PROBABLY
terms ofBecause of the subject
an executory matter (personal services), the more liberal U.e.C.
obligation.
13. NOT provisions would not apply, and B's qualification of his purported accep
21. TRUE It is supported
tance willonlybeby "moral as
regarded consideration"
a rejection andand, like "past consider-
counteroffer.
ation," is incapable of binding a now unwilling promisor to an executory
14. YES obligation.
The contract is for the sale of goods; hence, the U.e.e. rules apply. Under the
D.e.e., an acceptance containing additional terms is sufficient to form a
22. (B) Here is an example of "moral" consideration sufficient to support an execu-
contract unless the acceptance is expressly made conditional on assent to the
additional
tory promise to payterms.
a debtTherefore,
dischargeda contract was formed
in bankruptcy (but onlyin this case
as per thein spite of the
additional delivery
tenor of the new promise). term. Because the contract is between merchants, whether
the offeree's additional term has become a term of the contract depends on
23. TRUE Here is the
an example of bargained-for
court's determination of valuable
whether consideration. But for the
it materially altered this terms of the
proposal,offer. If it didwas
the mother notfree
materially
to namealter the terms
the child of the
anything sheoffer, it becomes
wished. In re- part of
the contract unless the offeror reasonably rejects it.
sponse to the offer, she named the infant "John." This is a legal detriment. If it did materially alter
the terms of the offer (e.g., by materially shifting the
In such a case, the law will not inquire into the economic equivalency of eco
nomic
the promise and advantage
the act. or risk of loss proposed by the offer), in the absence of the
offeror's assent, it does not become a term of the contract and only the
24. TRUE The bank will raise
offered termsthewill
objection of failure of consideration since Brown
be included.
was already under an existing duty to repay the principal. However, the
15. TRUE facts strongly
Since aimply
bilateral agreementonisBrown's
an obligation formed by partthe
to exchange
pay the 8% ofinterest
promises, notice of
the return
for the second year,promise
and this is valuable
generallyconsideration
required. Any objective
supporting themanifestation of
assent is sufficient
bank's extension promise. for this purpose.
25. NO
16. FALSEO's promise of the additional $100 was not supported by an exchange of
Ordinarily, acceptance is effective on dispatch. Only if acceptance is at-
valuabletempted by an "unauthorized"
consideration. All C promisedmode or didof
wascommunication is installa-
to complete the the effective date
tion, butdelayed
this wasuntil receipt
already his by the offeror.
existing duty under the original executory
contract. This case cannot, on the facts, qualify for the exception where
a. YES performance
But under theonerous
is more U.e.e., the
thanrules have been
foreseeably even further liberalized in favor of
anticipated.
the offeree-the offeree obtains the benefit of the "mailbox rule" (acceptance
26. YES A bargained-for
effective promise to forbear
upon dispatch) the mode
if any prosecution of any claimcommer
of communication that is not
patentlycially
groundless, and that
reasonable underthethe
party in good faith
circumstances is believes
used. to have merit,
/
is another example of "valuable consideration."
4. CONTRACTS REVIEW ANSWERS
27. NO
Given the express reservation, A has given only an "illusion" of a promise.
28. YES
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.
29. YES
Although a minor's promise is voidable, it is held to impart valuable
30. YES consideration in a bargained-for exchange with an adult.
Under the trend of modem decisions prompted by section 90 of the Second
Restatement, a gratuitous promise made for the benefit of an intended third
party beneficiary, which induces reasonable reliance on the part of the in-
tended beneficiary, may be enforced as against the promisor on a theory of
promissory estoppel.
31. FALSE 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 for
the purchase and sale of a barren cow. Afterwards, this mutual assumption is
discovered to be at variance with the fact of the cow's pregnancy. Such a
mutual mistake goes to the "essence of the transaction" in that it changes the
value of the subject matter tenfold over the contract price. Such
circumstances excuse the seller's executory obligation.
32. YES Here, there is a unilateral error as to the value as it is fixed in the mind of the
seller. Such a mistake of judgment (as opposed to a unilateral mistake in
computation) generally does not prevent the formation of a contract between
parties dealing at arm's length, even though the other party is of the well
founded opinion that the offeror is mistaken in his judgment.
33.a. PROBABLY O can probably recover the $8,000. There is a unilateral mistake which is
YES unknown to 0, who has accepted reasonably and in good faith.
b. PROBABLY If the disparity had been $38,000 ($12,000 vs. $50,000 as the next lowest
NOT 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 bidder
was not mistaken when he submitted such an obviously defective bid. The
law protects and rewards only commercially reasonable expectations enter-
tained in good faith.
34. PROBABLY 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 the
mistake would be so obvious that no reasonable person in the position of
the offeree could have assumed that it represented a correct
manifestation of an offeror's intention. Here, the error is two cents per
pound on a 621t per pound item. A minority of courts would hold that no
contract was formed on a theory that the error in transmission prevented
the minds of the parties from meeting on an offer.
YES
35. There is a binding contract, and it is for the sale of the house that A knew
0 to own on Peck Road. 0 is guilty of using a patently ambiguous term as
to
CONTRACTS REVIEW ANSWERS 5.
her own understanding. A is not chargeable with such negligence; hence,
credence is given to A's construction of the term.
36. NO No recovery can be had either on the contract or in quasi-contract, because p
(the party who violated the statute) is seeking to enforce the contract; he is
not an "innocent" party. The courts take the position that activity by an
individual who proceeds without a mandatory license to traffic in the affairs
of such a calling or profession is "illegal."
37.a. YES Because the agreement is with a minor, it is voidable at the option of the
nunor.
b. YES The landlord may always recover in quasi-contract for necessaries had and
received. Recovery is measured by the market value and not the contract
pnce.
38. MAYBE Contracts induced by duress are voidable, but merely taking advantage of
another's economic need generally is not duress.
39. (D) Under the majority view, termination is not the equivalent of performance
and so does not take a contract out of the Statute of Frauds. The minority
view is contra. The remaining obligations are capable of being discharged
within one year. The lifetime employee may die, requirements or output may
cease, and the lease may be terminated within a period of one year following
the making of these oral promises. Since performance is technically possible
(however unlikely), the Statute of Frauds has been held not to apply.
40. TRUE The price set by the terms of the contract is determinative.
41. FALSE Under the majority view, such a contract would be voidable at the option of
the party to be charged. The party would have to raise the Statute as an
affirmative defense.
42.a. YES C can enforce the obligation of A on the theory that C was an intended third
party beneficiary of a direct obligation of performance created in the A-B
contract.
b. NO D is only an incidental beneficiary. D might be economically benefited by
A's performance, but this is insufficient to vest in D enforceable rights.
43. NO Such a beneficiary would have an enforceable right to sue for the promisor's
performance, but generally has no remedies against the donor-promisee, who
is under no existing obligation. The donor-promisee has simply attempted a
gift.
44. NO Such a contract right to scholarship funds would be considered nonassign-
able in that it would vary the promisor's obligation or undermine the confi-
dence that induced selection of the original promisee as the beneficiary of
the scholarship assistance.
i. CONTRACTS REVIEW ANSWERS
45.a. NO Such an attempted assignment of the insurance coverage would vary the risk
of the promisor (insurer) in that the risk of a casualty loss would vary with
the 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 the
same land, A cannot be forced by this unilateral assignment to accept C's
credit 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 a
non-existing future contract. For the simple reason that a contract for the
sale of Blackacre does not presently exist, there is no operable present
assignment. Note that since the assignment was for consideration, courts can
treat 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 the
future, thus protecting B's interest.
48. YES Here, the language of the agreement would be held to destroy only A's right
to make an assignment, but it does not destroy A's power to do so. The
assignment will be effective, and A will be liable for breach of the covenant
not to assign.
49. NO As a general common law rule, no formalities are mandatory to create a
present assignment. There is a major exception for assignments of land or an
interest in land. Here, the Statute of Frauds would be operable and would
require a writing signed by the party to be charged (here, the assignor).
50. YES Since it is made without consideration, a gratuitous assignment is revocable
by the assignor at any time before the promisor of the obligation that has
been 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 to
cut off the assignor's power of revocation.
52. YES If a gratuitous assignment of a simple chose is in writing, the assignment is
irrevocable.
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 the
same right and the first assignment is irrevocable, the first assignee has
priority.
8. CONTRACTS REVIEW ANSWERS CONTRACTS REVIEW ANSWERS 7.
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 of
the rights under an assignment that clearly is coupled with a delegation of
duties 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 such
an 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 parties
reached two agreements, only one of which was reduced to an integrated
writing. 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
precedent to or concurrent with the ripening of the defendant's duty of
performance have either been performed or excused. Once this is estab-
lished, the defendant, if he would rely on the escape possibility afforded by
a condition subsequent, must allege and prove the happening of the event
or 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 excused by
B's conduct. The key issue would be whether A can fairly be said to have
assumed 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. NO
The 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 vendor
retained an option to repurchase "at any time." Clearly, such conduct on the
part of the vendor, who is under an executory contract duty.to convey to his
63. TRUE vendee on September 1, would give the vendee reasonable grounds for
insecurity and a right to demand of the vendor adequate assurance of
performance. Failure of the vendor to respond with such assurances within a
commercially reasonable period will ripen into a breach by the vendor that
would then excuse the duty of counterperformance.
It establishes a prospective failure of condition, as much as actual preven-
tion.
64.a. NO Here, A's statement falls far short of an unconditional present repudiation of
his executory contract obligation and thus fails to provide grounds for a
present breach by anticipatory repudiation.
b. NO
For the simple reason that there exists no present breach of the contract on
TRU the part of A, B does not have an immediate cause of action against A.
65.
E
Nearly all American courts have allowed recovery of the restitution interest
TRU in an action premised on a theory of quasi-contract.
66.
E
Under such circumstances, performance of the personal services that formed
the 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 his
own 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 recover
the difference between the contract price and the price of the substitute
goods.
