Formation of Contracts Mutual Assent DIAGNOSTIC EXAM WORKSHOP: CONTRACTS PROFESSOR LISA MCELROY DREXEL UNIVERSITY SCHOOL OF LAW Question 1 (Exam Question 34) 4291 MBE CONTRACTS & SALES FORMATION OF CONTRACTS Mutual Assent A widow offered to sell her deceased husband's wedding ring to a friend at its fair market price. Although the widow did not objectively indicate otherwise, the friend knew that the widow would never actually be able to part with the ring. Regardless, the friend agreed to buy the ring. Does the friend's agreement constitute a valid acceptance of the widow's offer? (A) Yes, because the price for the ring was reasonable. (B) Yes, because, as judged objectively, the widow offered to sell the ring. (C) No, because the widow lacked the subjective intent to sell the ring. (D) No, because the friend was aware that the widow lacked the subjective intent to sell the ring. Answer choice D is correct. Although in contract law, intent is generally determined by an objective standard and not by the subjective intent or belief of a party, when an offeree is aware of the other's party's subjective intent not to enter into a contract, the offeree's agreement to enter into a contract does not constitute a valid acceptance. Answer choice A is incorrect. While the price to be paid for a good is an indication of the owner's intent to sell it, the reasonableness of the sale price does not override the putative offeree's knowledge that the owner lacks the subject intent to sell the good. Answer choice B is incorrect because, although the widow objectively offered to sell the ring, the friend was aware that the widow did not subjectively intend to do so. Answer choice C is incorrect because a putative offeror's subjective intent not to make an offer, by itself, does not prevent an otherwise valid offer from being accepted. However, the putative offeree's knowledge of such subjective intent can prevent the offeree's agreement from being an acceptance.
Question 2 (Exam Question 54) 4369 MBE CONTRACTS & SALES FORMATION OF CONTRACTS Mutual Assent A machinist was interested in purchasing high-grade aluminum stock from a metal distributor. The aluminum was used in the machining of custom valves. During a Friday evening dinner, the machinist said to the distributor, "Let me order 12,000 pounds of high-grade aluminum from you." The distributor orally accepted the order, then took a paper napkin and wrote "CONTRACT: 12,000 LBS HIGH-GRADE ALUMINUM FOR MACHINIST" and signed the napkin, which the machinist retained. Over the weekend the market price for aluminum rose from $1 to $1.25 per pound. First thing on Monday morning, the machinist called the distributor. The parties immediately became embroiled in an argument as to the price to be charged for the aluminum, and the distributor refused to deliver the aluminum. The machinist filed suit for breach of contract. Is there an enforceable contract between the distributor and the machinist? (A) Yes, because the parties' oral agreement sufficed to form a binding contract. (B) Yes, because of the napkin. (C) No, because the parol evidence rule will prevent the introduction of the oral agreement. (D) No, because the distributor and the machinist did not agree on a price term. Answer choice B is correct. Because the agreement involves a sale of goods, the UCC governs. Under the UCC, a contract is formed if both parties intend to contract and there is a reasonably certain basis for giving a remedy. The only essential term is quantity, and as long as the parties intend to create a contract, the UCC "fills the gap" if other terms are missing, such as the time or place for delivery, or even the price for the goods. Although under the Statute of Frauds a sale of goods contract for $500 or more must be evidenced by a writing in order to be enforceable, the writing need only i) indicate that a contract has been made; ii) identify the parties; iii) contain a quantity term; and iv) be signed by the party to be charged. These elements are satisfied by the writing on the napkin. Answer choice A is incorrect because the contract concerns the sale of goods for at least $500, and must therefore satisfy the statute of frauds; an oral argument will not suffice. Answer choice C is incorrect because, although the parol evidence rule applies to introduction of prior extrinsic evidence as to the terms of a written contract, the oral agreement in this case merely establishes the fact that there was an agreement and reflects the quantity term contained in the writing. Answer choice D is incorrect because, although the price term is missing, under the UCC, a court can fill in gaps in a contract when terms other than quantity are missing, including price. Here, because the court has an objective way of determining a reasonable price for the aluminum, the contract will not fail for want of a price term. 2 2016 Themis Bar Review, LLC Diagnostic Exam Workshop: Contracts
Question 3 (Exam Question 44) 4285 MBE CONTRACTS & SALES FORMATION OF CONTRACTS Mutual Assent A homeowner met with a contractor regarding remodeling the homeowner's kitchen. At the conclusion of their meeting, the contractor told the homeowner that he would charge her $9,000-$10,000 for the work, but that he would get back to her with a definite price once he returned to his office. When he arrived at his office, the contractor had a voicemail from the homeowner, saying that she would pay him $9,000 for the work they discussed. The contractor promptly returned her phone call, and left her a voicemail saying that he would do the work for $9,500, which the homeowner received. The next day, the contractor, having a change of heart, tried unsuccessfully to reach the homeowner by phone. He left her a voicemail that he would do the work for $9,000 after all, and that he would start the following day unless he heard otherwise from her. The next day, the contractor showed up at homeowner's house, ready to begin. What best describes the relationship between the parties? (A) A contract was formed when the contractor left the final voicemail. (B) A contract was formed when the homeowner received the final voicemail. (C) A contract was formed when the contractor showed up to begin work on the kitchen. (D) There is no contract between the parties. Answer choice D is correct. An offer is terminated by rejection. A modification of the terms of the offer acts as a rejection of the original offer and as a new counteroffer. In this case, the contractor's first voicemail served as a rejection of the homeowner's original offer of $9,000 and a counteroffer of $9,500. The original offer was terminated; the contractor could not later accept the homeowner's offer. Accordingly, no contract was formed. Answer choices A, B, and C are incorrect because the contractor rejected the homeowner's offer and thus there was no contract. 3 2016 Themis Bar Review, LLC Diagnostic Exam Workshop: Contracts
Question 4 (Exam Question 100) 4221 MBE CONTRACTS & SALES FORMATION OF CONTRACTS Mutual Assent A furniture maker and his wealthy client entered into a contract for the furniture maker to design and build a mahogany banquet table for $80,000. The furniture maker, who was renowned for his innovative designs, offered to produce a set of 12 matching chairs for an additional $30,000. The client responded that she would think the offer over. One week after executing the contract for the table, and before beginning work on it, the furniture maker died. If the furniture maker's estate fails to deliver either the table or the chairs, and the client demands the delivery of both, is the client's cause of action likely to be successful? (A) Yes with regard to both the table and the chairs. (B) Yes with regard to the chairs, but no with regard to the table. (C) No with regard to the chairs, but yes with regard to the table. (D) No with regard to both the table and the chairs. Answer choice D is correct. An offer terminates upon the death or mental incapacity of the offeror. Consequently, the offer with regard to the chairs terminated upon the furniture maker's death. Although there was a contract with regard to the table at the time of the furniture maker's death, the furniture maker's obligation to perform was likely discharged upon his death because the contract called for him to render unique personal services to design as well as construct the table. Answer choice A is incorrect because the furniture maker's unaccepted offer to make 12 chairs terminated upon his death and his contractual obligation to design and make a table was discharged as impossible. Answer choice B is incorrect because the furniture maker's unaccepted offer to make 12 chairs terminated upon his death. Answer choice C is incorrect because the furniture maker's obligation to design and make a table was discharged as impossible. 4 2016 Themis Bar Review, LLC Diagnostic Exam Workshop: Contracts
Consideration Question 5 (Exam Question 88) 4287 MBE CONTRACTS & SALES FORMATION OF CONTRACTS Consideration A homeowner entered into a contract with a landscaper. The contract specified that the homeowner would pay the landscaper $10,000 upon completion of a list of projects. The landscaper performed the work while the homeowner was away on vacation. When the landscaper sought payment, the homeowner refused, noting that a tree had not been trimmed as required by the contract. The landscaper responded that, since he would now have to forego other work in order to trim the tree, he would do it but only if the homeowner agreed to pay him a total of $10,500 for his services. The homeowner, desperate to have the work completed, agreed. Once the work was completed, however, the homeowner gave the landscaper a check for $10,000, and refused to pay more. The landscaper sued for breach of contract. Is the landscaper likely to succeed in his claim? (A) No, because an enforceable contract cannot be renegotiated. (B) No, because there was no consideration for the promise to pay $10,500 and no unanticipated circumstances arose. (C) Yes, because there was a valid modification of the contract. (D) Yes, because the landscaper suffered a detriment by foregoing other work. Answer choice B is correct. At common law, a promise to perform a preexisting legal duty does not qualify as consideration because the promisee is already bound to perform. In this case, the landscaper had a preexisting legal duty to trim the tree, and thus there was no consideration to support the homeowner's promise to pay an additional $500. Answer choice A is incorrect because an enforceable contract may be renegotiated. Even when there is a preexisting legal duty, there will be consideration if the promisee gives something in addition to what is already owed or varies the preexisting duty. Answer choice C is incorrect because modification of a services contract must be supported by consideration. Or some circumstances that were not anticipated when the contract was made must have arisen, and modification is fair and equitable in light of those circumstances. Answer choice D is incorrect because the fact that the landscaper had to forego other work would not serve as consideration in this case because the landscaper was under a preexisting legal duty. 5 2016 Themis Bar Review, LLC Diagnostic Exam Workshop: Contracts
Promises Binding without Consideration Question 6 (Exam Question 69) 3176 MBE CONTRACTS & SALES FORMATION OF CONTRACTS Promises Binding Without Consideration A homeowner and his neighbor agreed that each would remove a dying tree from their yards. The homeowner entered into a contract with a tree service to cut down and remove his dying tree for $4,000. Through a mix-up, the tree service cut down and removed a similar dying tree on the neighbor's property. Upon coming home that evening, the neighbor discovered the absence of her tree and found the tree service's bill for $4,000 taped to her door. She called the tree service, revealed that she had planned to have the tree removed, and promised that she would pay the bill. The neighbor failed to pay the tree service. Of the following, which is the tree service's best argument to recover from the neighbor? (A) The tree service and the neighbor entered into a unilateral contract, which the tree service accepted by performance. (B) There was an implied-in-fact contract between the tree service and neighbor because the neighbor planned to have the tree removed. (C) The neighbor made a promise to pay for a benefit received. (D) The tree service was a third-party beneficiary of the agreement of homeowner and the neighbor. Answer choice C is correct. When a party performs an unrequested service for another party that constitutes a material benefit, the person may be entitled to recover to the extent that the other person has been unjustly enriched. Note that if the benefit to the neighbor from the tree service's actions is less than $4,000, the tree service could only enforce the neighbor's promise to the extent of that benefit. Answer choice A is incorrect because, while a unilateral contract is accepted by performance, at the time of the tree service's performance, the neighbor did not extend any offer for the service to accept. Answer choice B is incorrect because the neighbor's plan to have the tree removed did not create an implied in fact contract. The neighbor was not aware of the tree service's cutting down and removing her tree until after these acts had been completed and thus could not be said to have tacitly consented to them. Answer choice D is incorrect because, under the First Restatement approach, the tree service was neither a creditor nor donor beneficiary of the agreement between the homeowner and his neighbor, and under the Second Restatement approach, the tree service was merely an incidental beneficiary of the agreement. Consequently, the tree service did not have enforceable rights as a third party beneficiary of the agreement. 6 2016 Themis Bar Review, LLC Diagnostic Exam Workshop: Contracts
Question 7 (Exam Question 96) 4288 MBE CONTRACTS & SALES FORMATION OF CONTRACTS Promises Binding Without Consideration A local philanthropist, during a lecture to a class of high school students, promised to pay the college tuition of any student who received a perfect score on a college admissions test. Immediately after the lecture, a student told the philanthropist that he accepted the philanthropist's promise. The student thereafter signed up for a preparatory class for the test, hired a private tutor at significant expense, and quit all of his extracurricular activities. Shortly before the student took the test, the philanthropist's assistant contacted the student and told the student that the philanthropist withdrew his promise to pay for college. The student took the test and received a perfect score. The student sued the philanthropist based on the promise. Is the student likely to receive relief in his suit against the philanthropist? (A) No, because the philanthropist revoked his offer before the student received a perfect score. (B) No, because there was no consideration for the philanthropist's promise. (C) Yes, because the student detrimentally relied on the philanthropist's promise. (D) Yes, because the student accepted the philanthropist's offer prior to revocation. Answer choice C is correct. Promissory estoppel is referred to as a "consideration substitute." The doctrine of promissory estoppel (detrimental reliance) can be used under certain circumstances to enforce a promise that is not supported by consideration. A promise is binding if the promisor should reasonably expect it to induce action or forbearance, it does induce such action or forbearance, and injustice can be avoided only by enforcement of the promise. In this case, the student enrolled in a test preparation course, hired a private tutor, and quit his extracurricular activities in reliance on the promise. Moreover, the philanthropist should have reasonably expected such actions. Accordingly, the student will likely receive some relief, although he may receive reliance damages (e.g., money expended to pass the test) rather than expectation damages (i.e., payment of the student's college tuition). Answer choice A is incorrect because, although an offer can generally be revoked at any time before acceptance, an offeror's power to revoke an offer is limited when an offeree has detrimentally relied on the promise. Answer choice B is incorrect because the doctrine of promissory estoppel would likely apply to allow the student some relief despite the absence consideration. Answer choice D is incorrect because the offer could be accepted only by performance, that is, by achieving a perfect test score. 7 2016 Themis Bar Review, LLC Diagnostic Exam Workshop: Contracts
Defenses to Enforcement Question 8 (Exam Question 4) 2398 MBE CONTRACTS & SALES FORMATION OF CONTRACTS Defenses to Enforcement A 16-year-old entered into a written agreement to buy a car from a dealership. He made a small down payment and took out a loan from the dealership for the remainder of the purchase price. The deal was fair in every respect, and the same as the car dealership would give any other customer. After the sale was finalized, the salesman's supervisor reviewed the contract, and upon researching the matter further, discovered that the boy was only 16. He told the salesperson to call the boy and cancel the contract, which he did. In a breach of contract action brought on behalf of the boy, the court held for the boy. What was the reason? (A) The contract is one for necessities. (B) The contract cannot be disaffirmed because of the boy's part performance. (C) The contract is not voidable because the terms were fair. (D) The dealer did not have the right to void the contract. Answer choice D is correct. Contracts with minors are voidable, but only by the minor. Answer choice A is incorrect because necessities include items that parents would provide, such as food, shelter, and in some cases educational expenses, but not a car. Answer choice B is incorrect because part performance does not prevent a contract from being voidable. Answer choice C is incorrect because even a fair contract may be voidable. 8 2016 Themis Bar Review, LLC Diagnostic Exam Workshop: Contracts
Defenses to Formation Question 9 (Exam Question 71) 6394 MBE CONTRACTS & SALES FORMATION OF CONTRACTS Defenses to Formation A set decorator working on a movie needed 100 yards of black silk fabric for a scene. In the early evening, the set decorator went to a fabric wholesaler to choose a fabric. After looking through the various choices, both the set decorator and the wholesaler chose a silk fabric. The wholesaler filled out a sales form that stated that the set decorator had purchased 100 yards of black silk fabric at $20 per yard, and both parties signed the document. The set decorator then took the fabric back to the movie set that evening. The next morning, the set decorator realized that the fabric was actually navy, not black. As between the set decorator and the wholesaler, which of the following is an accurate statement? (A) The set decorator's negligence in choosing navy instead of black prevents him from voiding the contract. (B) There is no contract between the set decorator and the wholesaler due to a misunderstanding. (C) The contract is voidable by the set decorator because both parties were mistaken as to the color of the silk fabric. (D) The contract is voidable by the set decorator because the wholesaler made a material and unintentional misrepresentation of the fabric color. Answer choice C is correct. Mutual mistake occurs when both parties are mistaken as to an essential element of the contract. In such a situation, the contract may be voidable by the adversely affected party upon proof of the following: (i) mistake of fact existing at the time the contract was formed; (ii) the mistake relates to a basic assumption of the contract; (iii) the mistake has a material impact on the transaction; and (iv) the adversely affected party did not assume the risk of the mistake. Here, both the set decorator and the wholesaler mistakenly believed that the silk fabric was black, not navy, at the time the contract was formed. The set decorator did not assume the risk that the silk fabric could be a color other than black. Finally, the mistake was made as to an essential element of the contract and thus materially impacted the contract. Therefore, the contract is voidable by the set decorator. Answer choice A is incorrect. A mistaken party's negligence with regard to a mistake does not prevent the mistaken party from avoiding the contract. Answer choice B is incorrect. A misunderstanding occurs when both parties believe that they are agreeing to the same material terms, but in fact they agree to different terms. If the misunderstanding involves a material term, and neither party knows or should know that there is a misunderstanding, then there is no contract. Here, the set decorator and the wholesaler were not agreeing to different terms. Both parties believed that the fabric was black, not navy, so there is no misunderstanding. Rather, there was a mutual mistake. Answer choice D is incorrect. A misrepresentation is an untrue assertion of fact (not merely of law or opinion) that can make the contract void or voidable. Misrepresentation can be innocent, negligent, or fraudulent. In addition, an unintentional misrepresentation must be material. Here, the fact that the fabric was navy and not black is material to the contract. However, there is nothing in the fact pattern to indicate that the wholesaler unintentionally misrepresented the color of the fabric to the set decorator. 9 2016 Themis Bar Review, LLC Diagnostic Exam Workshop: Contracts
Question 10 (Exam Question 2) 4226 MBE CONTRACTS & SALES FORMATION OF CONTRACTS Defenses to Formation An elderly woman and her friend went to a sewing shop frequented by quilters to buy a sewing machine. The salesperson showed the woman several models and allowed the woman to test the various units with small swatches of fabric. After using one machine, the woman turned to her friend and exclaimed, "This one sews like a dream; I can't wait to start quilting on it." The salesperson, who overheard the woman, knew that the sewing machine was appropriate only for lightweight fabrics and was not powerful enough for quilting, but said nothing. When the woman decided to purchase the machine, the salesperson informed her that all sewing machine sales were final. The salesperson encouraged the woman to read the machine's user's manual, but the woman replied, "Oh, I've given the machine a test run, and I'm happy with it. Besides, I haven't brought my reading glasses and I can't make out the tiny text in the user's manual." The woman purchased the sewing machine and was given a sales receipt that was stamped "FINAL SALE." When she brought the machine home, the woman realized the machine was not appropriate for quilting, and took it back to the store. The salesperson referred to the store's final sale policy and refused the return. Does the woman have a valid claim against the sewing shop? (A) Yes, because the salesperson owed a fiduciary duty to the woman. (B) Yes, because the salesperson failed to correct the woman's mistaken belief that the sewing machine was appropriate for quilting. (C) No, because the salesperson made clear that the sale was final. (D) No, because the salesperson did not make any misleading statements regarding the machine. Answer choice B is correct. A fraudulent misrepresentation gives the person defrauded the chance to avoid a contract with the person who made the fraudulent assertion. Nondisclosure of a known fact is tantamount to an assertion that the fact does not exist, if the party not disclosing the fact knows that disclosure would correct a mistake of the other party as to a basic assumption of the contract, and the failure to disclose would constitute lack of good faith and fair dealing. Here, the salesperson (1) made a false assertion about an existing fact (non-disclosure to the elderly woman of the fact that the sewing machine could not handle quilts); (2) which was fraudulent (i.e., knowingly and intentionally misleading) or at least material; and (3) the elderly woman actually and justifiably relied on the salesperson's assertion in entering the contract. Accordingly, the woman would be able to avoid the store's final sale policy. Answer choice A is incorrect because the salesperson owed a duty not to misrepresent facts to the woman, but not a fiduciary duty, to the woman. Answer choice C is incorrect because, although the salesperson informed the woman that the sale was final, the salesperson's bad-faith nondisclosure rendered the sale voidable at the woman's election. Answer choice D is incorrect because nondisclosure of a known fact is treated as an assertive misrepresentation in this case. 10 2016 Themis Bar Review, LLC Diagnostic Exam Workshop: Contracts
Question 11 (Exam Question 73) 3171 MBE CONTRACTS & SALES FORMATION OF CONTRACTS Defenses to Formation A deliveryman for a local bakery was making a delivery when the delivery truck's brakes failed, causing the deliveryman to lose control of the truck. In the resulting collision, the deliveryman sustained substantial injury. The deliveryman informed the bakery's manager that he would be forced to sue the bakery unless the bakery would pay his medical bills relating to the injury as they became due. The manager told him that the bakery would refuse, and threatened to wrongfully fire the deliveryman unless he accepted a payment from the bakery in exchange for signing a document that released the bakery from liability for injuries suffered by the deliveryman. In fear of losing his job, the deliveryman agreed. Subsequently, the deliveryman, upon learning that his injuries from the accident were far more extensive than he had first thought, sued the bakery for negligently failing to maintain a working delivery truck. The bakery moved to dismiss the suit on the basis of the release. The deliveryman, offering to return the payment received from the bakery, moved to set aside the release on the grounds of duress. Should the court grant the deliveryman's motion? (A) Yes, because the bakery's threat deprived the deliveryman of any meaningful choice. (B) Yes, because a contract entered into under duress is void. (C) No, because the bakery itself was not the source of the duress. (D) No, because the deliveryman also threatened the bakery. Answer choice A is correct. A contract may be rescinded on the ground of duress when an improper threat deprives a party of any meaningful choice to refuse to enter the contract. The bakery's threat to fire the delivery person deprived him of any meaningful choice with regard to entering into the release. Answer choice B is incorrect because, unless the source of the duress is a threat to inflict physical violence, a contract entered into under duress is merely voidable, not automatically void. Answer choice C is incorrect because a contract may be voidable due to duress, even where the duress is not caused by a party to the contract. In any event, the manager's acts would likely be attributable to the bakery, itself. Answer choice D is incorrect because threatening a civil action is not improper here and does not constitute duress, because the party being threatened does have the meaningful choice of defending against the suit. 11 2016 Themis Bar Review, LLC Diagnostic Exam Workshop: Contracts
Conditions and Performance Question 12 (Exam Question 10) 6408 MBE CONTRACTS & SALES CONDITIONS AND PERFORMANCE Performance A membership-only warehouse club that sells a wide selection of merchandise contracted with a manufacturer of pool toys to purchase 20,000 bundles of pool toys for $3 per unit on May 1. The written agreement between the parties stated that the manufacturer was responsible for delivery of the toys to the club on or before May 15. The agreement did not include a "time is of the essence" clause. On May 16, the manufacturer delivered 20,000 bundles of pool toys to the warehouse club. The manufacturer did not notify the club with regard to this minor delay. The warehouse refused to accept the toys or make payment of $60,000. In a suit for breach of contract against the warehouse club, will the manufacturer succeed? (A) No, because the manufacturer failed to notify the club of the one-day delay. (B) No, because the pool toys were not delivered on May 15. (C) Yes, because the contract did not contain a "time is of the essence" clause. (D) Yes, because a one-day delay in delivery did not constitute a material breach. Answer choice B is correct. This is a contract for the sale of goods, pool toys. As such, it is subject to the "perfect tender" rule of the UCC. This rule requires not only that the goods themselves conform to the requirements of the contract, but also that their delivery does so as well. Since the contract called for delivery on May 15 and the goods were delivered on May 16, the warehouse club's refusal to accept the goods did not constitute a breach of the contract. Consequently, the club is not liable to the manufacturer. Answer choice A is incorrect because the manufacturer's failure to deliver the goods on time constituted a breach of the contract. Absent a provision in the contract to the contrary or other excuse (e.g., impracticability), the manufacturer's notification of a delay would not have prevented the delay from constituting a breach or forestalled the club's right to reject the toys. Answer choice C is incorrect. Unlike the common law, which generally treats a party's minor delay in performance as not giving the other party grounds for rejecting that performance unless the contract contains a "time is of the essence" clause, the UCC requires that the seller of goods make a "perfect tender" of the goods to the buyer. This includes, among other requirements, strict adherence to the time for delivery of the goods specified in the contract. Answer choice D is incorrect. Although the delay of a single day most likely does not constitute a material breach of the contract, the UCC requires the seller to make a "perfect tender" of the goods. 12 2016 Themis Bar Review, LLC Diagnostic Exam Workshop: Contracts
Question 13 (Exam Question 57) 4378 MBE CONTRACTS & SALES CONDITIONS AND PERFORMANCE Performance A grocery store and a farmer entered into a valid contract for 1,200 bottles of Grade A maple syrup, to be delivered over the course of a year in twelve equal installments of 100 bottles, delivered on or before the last day of each month, beginning in January and ending in December. From January to March the farmer delivered three shipments of conforming Grade A maple syrup. In April, on the last day of the month, the farmer delivered to the store 97 bottles of Grade A maple syrup. The grocery store rejected the syrup, and informed the farmer that the contract between them was canceled. Which of the following is a correct statement of the grocery store's actions? (A) The store's rejection of the 97 bottles of Grade A maple syrup and cancellation of the contract were proper. (B) The store's rejection of the 97 bottles of Grade A maple syrup was proper, but the store's cancellation of the contract was improper. (C) The store's rejection of the 97 bottles of Grade A maple syrup was improper, but the store's cancellation of the contract was proper. (D) The store's rejection of the 97 bottles of Grade A maple syrup and cancellation of the contract were improper. Answer choice D is correct. In general, the UCC requires perfect tender of goods, and substantial performance will not suffice. However, the UCC does permit substantial performance with regard to an installment contract. In addition, when there is a nonconforming tender or a tender of nonconforming goods under one segment of an installment contract, the buyer may cancel the contract only if the nonconformity substantially impairs the value of the entire contract to the buyer. Here, the farmer made a tender of three fewer bottles of syrup than called for under the contract. However, shipping 97 out of 100 bottles of maple syrup likely qualifies as substantial performance, and the grocery store was not entitled to reject the shipment. Further, the shortfall of three bottles likely does not substantially impair the value of the entire contract to the grocery store. Answer choice A is incorrect. Because the threebottle shortfall likely did not substantially impair the value of the April installment, the grocery store's rejection of the farmer's tender of 97 bottles was improper. In addition, since this shortfall likely does not substantially impair the value of the entire contract to the grocery store, the store's cancellation of the entire contract was improper. Answer choices B and C are incorrect for the same reason. 13 2016 Themis Bar Review, LLC Diagnostic Exam Workshop: Contracts
Breach of Contract and Remedies Question 14 (Exam Question 33) 6017 MBE CONTRACTS & SALES BREACH OF CONTRACT AND REMEDIES Breach of Contract A restaurant owner entered into a valid, written contract with an artist to paint a mural on one of the walls in the restaurant for $10,000. After the artist completed 30 percent of the mural, she told the owner that she had run into financial trouble, and demanded a payment of at least $2,500 from the owner to continue the job. The owner refused to pay the artist anything, and the artist left. If both parties sue for breach of contract, what is the likely outcome? (A) Each party can recover any damages because both parties are in breach. (B) Only the owner can recover any damages because only the artist is in breach. (C) Only the artist can recover any damages because only the owner is in breach. (D) Neither party can recover any damages because neither is in breach. Answer choice B is correct. When only one party's performance of its contractual obligation is to take place over a period of time, that party must complete its performance before the other party is required to perform, unless the contractual language or circumstances indicate otherwise. Here the contract did not require the owner to make progress payments to the artist. Therefore the artist was required to complete performance before the owner was obligated to pay for any of the work the artist had performed. The artist's refusal to complete the mural constituted a wrongful repudiation of her contractual duty. As a consequence, the owner may sue for breach of contract. Answer choices A and C are incorrect because the owner's duty to perform was only due upon completion of the mural. His refusal to make a partial payment of the contract price to the artist does not constitute a breach. Answer choice D is incorrect because the artist's financial difficulties are not an event sufficient to discharge his duty to perform, and therefore the artist wrongfully repudiated by abandoning the unfinished mural. 14 2016 Themis Bar Review, LLC Diagnostic Exam Workshop: Contracts
Question 15 (Exam Question 27) 5988 MBE CONTRACTS & SALES BREACH OF CONTRACT AND REMEDIES Restitution and Reliance Recoveries A homeowner entered into a written contract with a furniture maker to construct ten identical custommade chairs for her kitchen at a cost of $500 per chair. The chairs were to be paid for upon delivery. After the furniture maker had made three of the chairs at a cost to the furniture maker of $300 per chair, the homeowner cancelled the contract. The furniture maker sold the three chairs to a third party for a total of $700. The furniture maker then sued the homeowner for restitution. What is the maximum monetary award to which the furniture maker is entitled in this action? (A) Nothing (B) $800 (C) $900 (D) $1,500 Answer choice A is correct. An action in restitution is based on the restoration to the plaintiff of the benefit conferred on the defendant. Here, the homeowner did not receive a benefit from the furniture maker; the chairs had not been delivered to the homeowner. Consequently, in a suit seeking restitution, the furniture maker is not entitled to any recovery. Note that a real-world plaintiff would likely sue for the legal remedy of breach of contract and demand $800 in damages. Answer choice B is incorrect because $800 represents the difference between the contract price for the three chairs ($1,500) and the amount received from selling those chairs ($700), not the amount of the benefit received by the homeowner from the furniture maker. Answer choice C is incorrect because $900 represents the amount that the furniture maker expended in reliance on the contract, not the amount of the benefit received by the homeowner from the furniture maker. Answer choice D is incorrect because $1,500 represents the pro rata contract price of the three chairs that the furniture maker did construct, not the amount of the benefit received by the homeowner from the furniture maker. 15 2016 Themis Bar Review, LLC Diagnostic Exam Workshop: Contracts