Contracts Practice Exam – Number 1
Owner runs a yoga studio that provides the highest quality private yoga instruction in the country.
Recently, he has dabbled in cooking and has a recipe for chili that has won several contests in the
greater New York City area, and could possibly be the highest quality chili in the country.
Ideaman approached Owner about bottling his chili for sale across the country and Owner
seemed interested.
Owner said that he would be willing to sell his chili recipe for $100,000 and Ideaman replied that
he would consider the offer.
After meeting to play tennis the following week, Ideaman told Owner that he accepts the offer
and will pay $100,000 for the rights to the recipe for bottling and selling in the United States.
Owner replied that it was too late, but that he would sell the rights for $150,000. Ideaman
replied, “I don’t know. Let me speak to my lawyers at Lawyer, Lawyer's Son & Lawyer's
Daughter. Give me a week.” Owner said that to keep the offer open for a week, Ideaman would
have to pay for lunch that day. Ideaman agreed.
They drafted a memorandum memorializing their agreement on Owner’s Blackberry Torch and
printed it out on Owner’s portable printer that he keeps in his tennis bag. The memo said,
“Ideaman will pay Owner $150,000 for the rights to sell the chili in the USA if Ideaman pays
Owner within 30 days of accepting the offer. The memo also said that the offer will remain open
for seven days because Ideaman is paying for lunch. Owner signed the memorandum with his
fountain pen, and Ideaman borrowed Owner’s pen to sign the memorandum as well. Owner then
says, “If you can’t give me the $150,000 right away, I would be willing to take $120,000 plus
40% of the profits in the first two years.” Ideaman replied: “I’ll think about that too.”
When the bill for lunch came, Ideaman, as was his habit, searched his pockets for his wallet and
could not find it. Owner, as was his habit, picked up the check saying, “I’m glad we came to an
agreement, I can tell that this is going to work out for both of us.”
Two days later, Owner e-mailed Ideaman and told him, “I’m cancelling the contract.” Ideaman
said, “What do you mean you’re cancelling. I am telling you now that I accept your offer of
$120,000 right away plus 40% of the profits in the first two years.” Owner shook his head and
walked away.
Ideaman returned to Lawyer, Lawyer’s Son & Lawyer’s Daughterto talk about what just
happened. Discuss the legal implications of the memorandum and the discussions between
Owner and Ideaman.