Chapter 10
AGREEMENT
Practice Test
1. Arnold owned a Pontiac dealership and wanted to expand by obtaining a Buick outlet. He spoke with
Patricia Roberts and other Buick executives on several occasions. He now claims that those
discussions resulted in an oral contract that requires Buick to grant him a franchise, but the company
disagrees. His strongest evidence of a contract is the fact that Roberts gave him forms on which to
order Buicks. Roberts answered that it was her standard practice to give such forms to prospective
dealers, so that if the franchise were approved, car orders could be processed quickly. Is there a
contract?
No. The plaintiff must show that both sides intended to make a contract and that they agreed on
definite terms. Here, there is no indication that Roberts intended to make a final deal. Merely
handing out order forms is neither an offer nor an acceptance. Further, virtually no binding terms
were discussed. Arnold Pontiac-GMC, Inc. v. General Motors Co., 786 F.2d 564 (3d Cir. 1986).
3. Arturo hires Kate to work in his new sporting goods store. “Look,” he explains, “I can only pay you
$9.00 an hour. But if business is good a year from now, and you’re still here, I’m sure I can pay you a
healthy bonus.” Four months later Arturo terminates Kate. She sues.
(a) Kate will win her job back, plus the year’s pay and the bonus.
(b) Kate will win the year’s pay and the bonus.
(c) Kate will win only the bonus.
(d) Kate will win only her job back.
(e) Kate will win nothing.
(e). Kate will win nothing. The only thing Arturo obligated himself to do was to pay $6.00 an hour
while Kate worked. He did not promise her a year's employment. The statement about the bonus was
too indefinite to be enforceable: there is no way to measure whether “business is good” or what a
“healthy” bonus is.
5. Northrop is a huge defense firm, and Litronic manufactures electronic components such as printed
wire boards. Northrop requested Litronic to submit an offer on certain printed boards. Litronic sent
its offer form, stating a price and including its pre-printed warranty clause, which limited its liability
to 90 days. Northrop orally accepted the offer, then sent its own purchase order form, which
contained a warranty clause holding the seller liable with no time limit. Six months after the goods
were delivered Northrop discovered they were defective. Northrop sued, but Litronic claimed it had
no liability. Was there a contract? If not, why not? If there was a contract, what were its warranty
terms?
The case is governed by UCC §2-207. Litronic offered to sell at a particular price, with a specified
warranty. Northrop accepted, but provided a warranty with a different time limit. Yes, there is a
contract. Pursuant to §2-207, Northrop intended to accept and create a contract, and the fact that
it proposed a different warranty period does not prevent formation of a contract. The question then
becomes, what is the warranty period? The conflicting warranty terms cancel each other out and will
be replaced by the appropriate Code provision. In this case, the Code provides a “reasonable time”
(UCC §2-309). The court found that six months was within the reasonable time, and Northrop won.
Northrop Corp. v. Litronic Industries, 29 F.3d 1173, 1994 U.S. App. LEXIS 17736 (7th Cir. 1994).
7. Consolidated Edison Co. of New York (Con Ed) sought bids from General Electric Co. (GE) and
others to supply it with two huge transformers. Con Ed required that the bids be held open for 90
days. GE submitted a written bid and included a clause holding the bid open for 90 days. During that
period, Con Ed accepted GE’s bid, but GE refused to honor it. Is there a contract?
Yes. GE made a “firm offer,” governed by UCC §2-205. When a merchant signs a written firm offer,
the offer may not be revoked within that period or three months, whichever is less. Here the offer
was for three months, so it is irrevocable. Consolidated Edison Co. v. General Electric, 555 N.Y.S.2d
355, 1990 N.Y. App. LEXIS 5774 (N.Y. App. Div. 1990).
9. ETHICS Bill Brown Trucking specializes in hauling oversize loads, those that cannot fit on
ordinary tractor-trailers. Brown met with James Wofford, an agent for Glens Falls Insurance, and
asked Wofford for a “full coverage” policy. Brown showed Wofford photos of the kinds of loads his
trucks hauled. Wofford issued Brown a policy, telling him, “You’ve got full coverage.” One of
Brown’s trucks was hauling a large “asphalt dryer” on a tractor-trailer. The dryer itself struck a
bridge overpass, but the truck was unhurt. Glens Falls refused coverage, pointing out that the policy
was limited to accidents involving the “conveyance,” meaning the truck. Brown sued. Assume that
the policy clearly limited coverage to the “conveyance.” Did Brown have a case? Regardless of the
legal issues, does the insurance company have an ethical obligation to help one of its insured, or is it
free to dispute any claim if the company believes it has a chance to win? Insurance contracts are
drafted by the company, not the insured. Does that affect ethical considerations?
Not for contract, since the written contract excludes this accident. But he has a winning case under
promissory estoppel. Wofford, understanding the types of loads that Brown carried, promised that he
had full coverage. Wofford knew that Brown would rely on the promise, as he did. The only way to
avoid injustice is to enforce Wofford's promise, which in this case nets Brown as much money as the
policy itself would have provided. Bill Brown Construction Co. v. Glens Falls Insurance Co., 818
SW.2d 1, 1991 Tenn. LEXIS 426 (Tenn. 1991).
11. Rebecca, in Honolulu, faxes a job offer to Spike, in Pittsburgh, saying, “We can pay you $55,000 per
year, starting June 1.” Spike faxes a reply, saying, “Thank you! I accept your generous offer, though I
will also need $3,000 in relocation money. See you June 1. Can’t wait!” On June 1 Spike arrives, to
find that his position is filled by Gus. He sues Rebecca.
(a) Spike wins $55,000.
(b) Spike wins $58,000.
(c) Spike wins $3,000.
(d) Spike wins restitution.
(e) Spike wins nothing.
(e). Spike wins nothing. Although he used the phrase, “I accept,” he included a counteroffer, which is
a rejection of Rebecca's offer. She has no obligation to him.