Contract Review

Richard, an employer states that in exchange for an Juanitas decade of service, he will give her a bonus of $5000; however, the next day he changes his mind and refuses to pay her. Can Juanita sue for breach of contract? Why or why not?

No, because Juanita provided no consideration the decades of work were all in the past and not bargained for.

John claims that Eric owes him $10,000 in bar tabs, but John has kept no records. Eric offers to pay $5000 in full payment, but after accepting the money, John sues Eric for the remaining $5000. Eric claims they had a contract limiting the debt, and it is paid in full. Is Eric correct?

Yes, since the amount of what was owed was in dispute, and the parties agreed on a figure (offer by Eric) and it was paid (acceptance by John), there is a binding contract to settle the debt for $5000.00. What is this called?

Kike has a contract with ABC Company (among others) to provide accounting services for one year, at the rate of $150.00 per hour. During the year, Kike becomes famous, and refuses to do the work for ABC and his other clients unless they agree to pay him $250.00 per hour. The clients agree. However, at the end of the year, ABC pays only $150.00 per hour. Can Kike sue and recover?

 No, because he provided no additional consideration for the increased price beyond the original bargained-for contract.

Max bought a motorcycle while still a minor, and paid 8 months payments on it before and 8 months after he turned 18. Is the contract now binding?

Yes, since he made payments on it after he turned 18, it would be considered a ratification of the contract. Ratification

JoAnn agrees to purchase a used piano from Meg for $200. Thereafter, they discover the piano is actually worth $2000.00. Can JoAnn escape the contract on the grounds of mistake? Can Meg?

No, because the mistake involved a matter of value and not of fact.

Julie likes to go to garage sales to buy clothes. At one garage sale she sees a pair of shorts she likes and negotiates a price for the short at $1.00. When she gets home, she finds a diamond ring in the pocket worth $8000 which the owner of the shorts forgot she put in there. Does Julie get to keep the ring?

 No. The contract was clearly for the shorts. It was a mistake that the ring was located in the pocket Julie did not buy the ring, and she needs to return it. Failure to do so would be a crime (theft).

Lisa threatens to sue Amy on a past due debt unless Amy agrees to enter into and sign a new contract to buy restaurant supplies from her. After signing, Amy tries to escape the contract for restaurant supplies, alleging duress. Is Amy bound by the latter contract? Was the contract signed under duress?

Threatening to sue is not considered duress. It is the legal right of the creditor. The restaurant contract is valid and enforceable.

A winemaker has a large vat he uses to cure his wine. The vat was damaged and suffered fifteen punctures. The repair company fixes fourteen of these and seeks payment under the contract. Is this substantial performance?

Probably not, because all the wine could leak out of the one remaining puncture. Fixing 14 of the punctures may not have provided much of a benefit to the winemaker. To determine whether it is minor or material breach look to the benefit that the innocent party received.

Leonard agrees to buy a house subject to his ability to obtain financing. After changing his mind about the house, Leonard makes no effort to get financing, and the seller threatens to sue to enforce the contract. Is the contract discharged for failure to secure financing?

 No, because Leonardo is required to make a good faith effort to obtain financing.

The Butterflies, a band, has a contract with The Kit Kat Nite Club to perform, but an electrical inspector finds, following a storm, that the wiring was affected by the storm and therefore the club does not meet code so it cannot admit customers. Must the club pay the band under the contract anyway?

No, because there is a frustration of purpose. The band was hired for the purpose of playing for customers, but since the club must be closed. The storm damage was not foreseeable.

Cohen Construction Co. has a contract to build offices on a certain lot. After nearly completing the task, the office building burns to the ground. Does this discharge the construction company from the contract?

No the building can still be built, by starting over. Cohen can (and must) still fulfill the contract he will, of course, need to be paid for the extra work

On Thursday, you contract with Gerry to mow your lawn that day. When he does not show up, you go ahead mow it yourself on Saturday morning. Then Gerry shows up Saturday afternoon. Must you pay him if he mows the lawn?

 Yes, unless you made clear that time was of the essence.

After you agree to purchase a new car on special order, the new car is delivered without the interior speakers matching the specifications you picked out. Can you reject the car; is this a breach?

Probably not, since the only flaw is the interior speakers. Unless you specifically made this a condition of the contract, you couldnt get out of the contract. You would be charged the cost of the car, less the cost of the speakers.

Lindsay was in the business of buying carpet from Boren, a wholesaler, and reselling it to her customers at her retail business. Because Boren failed to deliver the carpet, Lindsays customer cancelled their order and bought from XYZ store before Lindsay could find carpet from another supplier. Can Lindsay sue Boren for damages? If so, how would you determine how much she would be entitled to?

The amount of profit she would have made on the sale.

Lindsay found out that the customer who went to XYZ for their carpet had a party which was attended by the President of the Bigg Corporation, who liked the carpet (the same originally ordered from Lindsay) so much she bought 50,000 sq feet of the carpet for her corporate headquarters from the XYZ store. Can Lindsay sue Boren for these consequential damages?

 No it could not have been foreseeable by the supplier.

Jonathan, a home building contractor, has a contract to build a home for Julia. The home is built to completion; however, when Julia inspects the house, she finds that Jonathan put in windows which were not as specified in the contract, and were of an inferior grade. Does this breach of contract allow Julia to cancel the contract?

This would probably be considered a nonmaterial breach of contract, since the windows can be replaced fairly easily. Julia would be required to complete her end of the contract, but she would be entitled to reduce the amount owed by the cost of replacing the windows with the correct ones.

Some From : Business Law: Contracts by Frank B. Cross