Professor Sullivan/Professor Dimitriadis

Contracts
Spring 2020
Quiz 4

Question 1

A bottling company sent a purchase order to a wholesaler that stated, "Ship 100,000
empty plastic bottles at the posted price." Two days after receipt of this purchase order,
the wholesaler shipped the bottles and the bottling company accepted delivery of them. A
week after the bottles were delivered, the bottling company received the wholesaler's
acknowledgement form, which included a provision disclaiming consequential damages.
After using the bottles for two months, the bottling company discovered a defect in the
bottles that caused its products to leak from them. The bottling company recalled 10,000
of the bottles containing its product, incurring lost profits of $40,000.

Assuming all appropriate defenses are seasonably raised, will the bottling company
succeed in recovering $40,000 in consequential damages from the wholesaler?

A. No, because buyers are generally not entitled to recover consequential damages.

B. No, because the bottling company's acceptance of the goods also constituted an
acceptance of the terms included in the wholesaler's acknowledgement.

C. Yes, because the disclaimer of consequential damages is unconscionable.

D. Yes, because the wholesaler's acknowledgement did not alter the terms of an
existing contract between the parties.

Question 2

In a signed writing, an architect agreed to draw up the plans for and to supervise
construction of a client’s new house. In return, the client agreed to pay the architect a fee
of $25,000 to be paid upon the house’s completion. Upon completion, the client claimed
erroneously but in good faith that the architect’s plans were defective. The client orally
offered to pay the architect $15,000 in full settlement of the claim for the fee. The
architect orally accepted that offer despite the fact that the reasonable value of his
services was in fact $20,000. The client paid the architect $15,000 pursuant to their
agreement.

The architect subsequently sued the client for the remaining $5,000. In a preliminary
finding, the trier of fact found that there were no defects in the architect’s plans.

Will the architect be likely to prevail in his action against the client for $5,000?
 A. Yes, because payment of $15,000 cannot furnish consideration for the architect’s
promise to surrender his claim.

B. Yes, because the oral agreement to modify the written contract is not enforceable.

C. No, because the architect’s promise to accept $15,000 became binding when the
client made the payment.

D. No, because the architect’s acceptance of partial payment constituted a novation.

Question 3

A farmer who wanted to sell her land received a letter from a developer that stated, "I
will pay you $1,100 an acre for your land." The farmer's letter of reply stated, "I accept
your offer." Unbeknownst to the farmer, the developer had intended to offer only $1,000
per acre but had mistakenly typed "$1,100." As both parties knew, comparable land in the
vicinity had been selling at prices between $1,000 and $1,200 per acre.

Which of the following states the probable legal consequences of the correspondence
between the parties?

A. There is no contract, because the parties attached materially different meanings

Question 4

A car dealer owed a bank $10,000, due on June 1. The car dealer subsequently sold an
automobile to a buyer at a price of $10,000, payable at $1,000 per month beginning on
June 1. The car dealer then asked the bank whether the bank would accept payments of
$1,000 per month for 10 months beginning June 1, without interest, in payment of the
debt. The bank agreed to that arrangement and the car dealer then directed the buyer to
make the payments to the bank. When the buyer tendered the first payment to the bank,
the bank refused the payment, asserting that it would accept payment only from the car
dealer. On June 2, the bank demanded that the car dealer pay the debt in full immediately.
The car dealer refused to pay and the bank sued the car dealer to recover the $10,000.

In this suit, which of the following arguments best supports the bank's claim for
immediate payment?

A. The agreement to extend the time for payment was not in writing.
 B. The car dealer could not delegate its duty to pay to the buyer.
C. The car dealer gave no consideration for the agreement to extend the time of
payment.
D. The car dealer's conduct was an attempted novation that the bank could reject.

Question 5

While waiting in line to open an account with a bank, a customer read a poster on the
bank’s wall that said, “New Customers! $25 FOR 5 MINUTES. If you stand in line for
more than five minutes, we will pay you $25! We like happy customers! (This offer may
be withdrawn at any time.)” The customer started timing his wait and just as five minutes
was about to pass, the bank manager tore the poster down and announced, “The $25
stand-in-line promotion is over.” The customer waited in line for 10 more minutes before
being served.

In the customer’s action against the bank for $25, will the customer prevail?

A. No, because the bank withdrew its offer before the customer completed the
requested performance.
B. No, because the bank’s statement was a nonbinding gift promise.
C. Yes, because the bank could not revoke its offer once the customer had
commenced performance.
D. Yes, because the customer’s presence in line served as notice to the bank that he
had accepted.