Contracts
PRACTICE EXAM QUESTIONS
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Question 1
Buyer called Seller and asked: "What’s your best price for Grade 2 stainless steel doomaflaches?”
Seller replied: "Seven hundred twenty-three dollars a gross."
Buyer: "If you can go seven hundred, I’ll take ten gross."
Seller: "Sold. Ten gross of stainless steel doomaflaches at seven hundred dollars a gross."
Buyer: "It’s a deal. I’ll send you a confirmation.“
Buyer sent Seller the following note:
This will confirm our purchase of ten gross of Grade 2 stainless steel doomaflaches at $700.00 per
gross, total price $7,000.00. This order is expressly made conditional on your assent to our
requirement that the doomaflaches be individually boxed for resale. If you fail to assent to this
requirement, this order will be null and void.
Seller normally sold doomaflaches boxed twelve to a box, and he shipped them to Buyer that way.
When the doomaflaches arrived, Buyer was in desperate need of doomaflaches to fill orders from
his customers, so at considerable expense, he had the doomaflaches boxed one to a box and resold
them. Buyer has sued Seller for breach of contract. It has been determined that if the contract does
not provide otherwise, doomaflaches may be shipped twelve to a box. How should the court
decide the case between Buyer and Seller?
Explain your reasoning. DOOMAFLACHES ARE "GOODS" AS THAT TERM IS DEFINED IN
THE UCC.
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Analysis
Was there an oral contract over the phone?
Was the note Buyer sent a “definite and seasonable expression of
acceptance” or a “written confirmation” under UCC 2-207(1)?
Was the acceptance “expressly made conditional” and subsection
(3) applies?
Are they merchants?
Is the packaging requirement “additional term” or “different term”
under subsection (2)? Does it materially alter the contract?
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•
§ 2-207. Additional Terms in Acceptance or Confirmation.
•
(1) A definite and seasonable expression of acceptance or a written confirmation which is sent
within a reasonable time operates as an acceptance even though it states terms additional to or
different from those offered or agreed upon, unless acceptance is expressly made conditional
on assent to the additional or different terms.
•
(2) The additional terms are to be construed as proposals for addition to the contract. Between
merchants such terms become part of the contract unless:
• (a) the offer expressly limits acceptance to the terms of the offer;
• (b) they materially alter it; or
• (c) notification of objection to them has already been given or is given within a reasonable time
after notice of them is received.
•
(3) Conduct by both parties which recognizes the existence of a contract is sufficient to
establish a contract for sale although the writings of the parties do not otherwise establish a
contract. In such case the terms of the particular contract consist of those terms on which the
writings of the parties agree, together with any supplementary terms incorporated under any
other provisions of this Act.
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Question 2
Slumlord owned an old apartment near a large university. Developer approached Slumlord and told him she was
interested in buying the house because she heard there was a lot of money to be made renting to students. In fact,
Developer wasn’t interested in renting to students. She was planning a condominium project.
Developer had been pretty tricky in this deal. She knew that Slumlord was a hard bargainer. She also knew that if she
told him she was buying the land for a condominium project, he would ask for much more than the property was worth
as rental housing. When Developer talked to Slumlord about Slumlord’s property, she pretended to be concerned about
whether the building had termites. Slumlord knew there were termites in the building, but he also knew that the termite
infestation and damage was in a place where it was very hard to detect. So when Developer asked if the building had
ever had termites, Slumlord told her: "This building has never had them.“ After some negotiating, the parties agreed
on a price of $200,000 for the property. A written contract satisfying the statute of frauds was signed by both parties.
After the contract was signed, but before the price was to be paid and the deed delivered, it was announced that a huge
condominium complex was going to be built in the neighborhood. Hearing this news, the bank that had been going to
finance Developer’s project backed out. Developer wasn’t able to come up with the $200,000 to buy the house (and
she wouldn’t have wanted to even if she could). Developer did NOT have a provision in the contract allowing her to
get out of her obligation to buy if she couldn’t get financing.
Slumlord sued for breach of contract. While preparing for trial, Developer’s attorney discovered that the building had
termites. Developer now seeks to avoid the contract on the basis of misrepresentation. At trial, it was shown that (1)
because of the importance of the property to Developer’s plans, she would have been willing to pay up to $250,000 to
get it, (2) if Developer had known about the termites, she probably would have been able to negotiate the price down
to $185,000.
Discuss the arguments that both sides will make as to whether Developer should be allowed to void the contract on the
basis of misrepresentation.
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Analysis
• Slumlord made a fraudulent misrepresentation
• Because a contract is voidable if the misrepresentation is either
fraudulent or material, it wasn’t necessary to discuss whether the
misrepresentation was material.
• Did the misrepresentation induce Developer to enter into the
contract? Should the misrepresentation allow Developer to void the
contract?
• It can be argued that Developer was the one who made the first
misrepresentation. She deliberately misled Slumlord as to her
intentions.
• Some people suggested that Developer should be allowed to void
the contract under the principle "fraud vitiates all."
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Question 3
Rachel was the star programmer at Bill’s Software. In May, Rachel worked three weekends in a row finishing up the
programming for the company’s newest product. On the Friday before the fourth weekend, Rachel’s part of the
project was finished and Rachel was looking forward to a weekend of rock-climbing. Then she heard the weather
report - there would be two inches of rain on Saturday. That meant the rocks would be too wet for climbing all
weekend. Rachel was wandering around the office complaining to anyone who would listen about her lousy lot in
life. "One weekend all month I get off, and it rains!“
Bill heard Rachel complaining and was disturbed. He wanted her to be happy and productive. But more than that, he
wanted her to shut up and stop ruining the morale of the rest of the troops. He said to her: "I’ll make you a deal. I’ll
pay you ten thousand dollars if it rains this weekend. That ought to pay for a nice vacation somewhere where it won’t
rain.“
"You’ve got yourself a deal," said Rachel.
Things went pretty much as expected, at least for a while. Rachel shut up and went back to work. It rained on
Saturday.
Rachel didn’t quit the company. Before Bill made his promise, she had been receiving calls from headhunters about
once a month on the average. Most of the jobs they wanted her to interview for were substantially comparable to her
job at Bill’s, so she never pursued them because she wanted to spend her limited free time rock climbing, not
sneaking around to be interviewed by Bill’s competitors. After Bill made his ten thousand dollar promise, Rachel
continued to turn down the headhunters, but she says that if it hadn’t been for Bill’s promise, she might have pursued
some of the job leads to try to find a job that would give her more free time.
Unfortunately, the software for which Rachel sacrificed three weekends didn’t sell. Because it didn’t sell, Bill’s
Software had some financial problems, and Bill was forced to lay Rachel off. He never paid her the ten thousand
dollars.
Rachel had sued Bill for the ten thousand dollars. Discuss the issues the court will have to decide in order to resolve
the case.
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Analysis
Consideration
Was there any consideration for Bill’s promise to pay the ten grand? He
didn’t bargain for anything in return. His promise was subject to the
condition that it rain. It wasn’t a promise or performance she could give.
Was there an implied condition that she stop complaining or that she
remain employed with the company for a certain period?
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Promissory Estoppel
In order to recover under promissory estoppel, Rachel must show (1) Bill made a promise, (2) Bill
should reasonably have expected that it would induce action or forbearance on Rachel’s part, (3) it
did induce such action or forbearance, and (4) injustice can be avoided only by enforcement of the
promise.
Bill made a promise. As to elements (2) and (3) there are several actions or forbearances involved.
The one that Bill should reasonably have expected is forbearance from complaining. He shouldn’t be
able to get away without paying simply because the promise doesn’t quite meet the requirements for
bargained-for consideration. Moreover, Bill can argue that with respect to the forbearance from
complaining, ten thousand dollars is a lot of money and the restatement says that "the remedy
granted for breach may be limited as justice requires." So maybe Rachel should only get part of the
ten grand.
There is also the fact that because of the promise, Rachel forbore from looking for other jobs. There
is no direct indication that Bill should reasonably have expected that his promise would induce this.
But on the other hand, he runs a software company. He probably is aware that headhunters are
contacting his programmers, particularly "star programmers" like Rachel. He also knew that Rachel
was unhappy. So it can be argued that he should have reasonably foreseen that his promise would
cause Rachel to stay on her job when she might otherwise have left. From this perspective, reliance
on Bill’s promise has cost Rachel a period of unemployment which she might have avoided if she had
jumped off Bill’s ship before it began to sink. Because of the inherent injustice in allowing Bill to avoid
a promise from which he seems to have received a benefit (Rachel ’s continued employment and the
productivity resulting from her better morale), the court may enforce Bill’s promise.
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