Contracts

Front 1

(CHAPTER 7) An uncle promises his 17 year old niece that if she refrains from drinking alcohol by the end of the year, he will give her $5,000. Is there consideration for this promise?

Back 1

No. Drinking is illegal under the age of 18 and therefore she does not give up a legal right.

Front 2

Publishing company hires a writer to submit a completed manuscript within weeks. P promises to publish it provided that it is found to be satisfactory and would then pay him a percentage of gross reciepts. During the first week, P has the right to cancel at any time with reasonable notice and after the 1st week has a right to cancel but must pay 1000. Writer no longer wishes to write the book. Can he escape his commitment?

Back 2

The first issue is that of satisfaction. Unless the contract made it clear that P would have the unbridled discretion to be dissatisfied, the satisfaction clause obliges P to exercise its discretion in either good faith or reasonably. If the agreement does not specify a standard, the court will determine whether it is subjective or objective. Because this is a commercial venture, the writer should not expect P to reject it on purely subjective reasons. The proper inquiry is whether a reasonable publisher would find the book up to the standard of gainful publication. This standard is not enough to make the promise illusory.

The second issue is the termination provisions. An unfettered termination right removes all commitment and makes the promise illusory. However, the right to terminate here is supported by consideration. The first, is supported by requirement of notice and the second by payment of $1,000.

Therefore, writer cannot escape the contract.

Front 3

Peters Pickled Peppers manufacturs pickled peppers and contracts wtih Hal Apeno, a farmer, to supply all the peppers it would need for its operations next season and told Hal of its average needs. Later, peter decided he didnt want to sell peppers but instead pickles. He has no need for the peppers and told Hal this. Hal sues Peter for breach of contract. Can he recover?

Back 3

Although the contract was for all that Peter needed, and he no longer needed any, a court will find there was an implied promise to purchase the required amount in good faith. The intent to deal exclusively with Hal was implied from the language of the contract.

Front 4

(CHAPTER 8) P aspired to become a lawyer but could not afford law school. He currently worked as a salesman. His aunt promised him $20,000 to help him pay for law school. P spent $600 applying and paying the deposit for law school and his aunt reaffirmed that she would still pay him the money. A week later she died. P showed his Aunt's promise to the estate who said it was merely a gift. P then quit his job, continued to begin law school, and sued to enforce the promise. Will he succeed?

Back 4

P gave no consideration for his Aunt's promise to pay him. Quitting his job and enrolling in law school could be seen as a detriment for consideration purposes, but this does not seem to have been a bargained for exchange. P's attendance of law school was merely a condition of the gift. Because the promise was gratuitious, his only basis for relief is promissory estoppel. His application and payment of deposit are justifiable under this doctrine because they are causually linked to the inducement of the promise. His further action of resigning from his job and entering law school were taken after it was clear that the promise would not be performed. The estate had the legal right to evoke a gratuitious promise.

Front 5

Tina owned a large motorbike and always left it at the front door upon arriving home. Her father having grown tired of nagging her about parking it in the garage, threatened to lock it up the next time she left it at the door. The next day, she once again left it at the door, her father saw it, and decided to deal with it after dinner. During dinner, the bike was stolen. Tina sues her father. Can she recover?

Back 5

Even if Tina's father did promise to remove her bike, there is no hint of consideration to her father for that promise. Also, his intent was to threaten punishment and not to make a promise. It is unlikely that he could reasonably seen his words as likley to induce reliance by taking the very action he proscribed. This is enough to eliminate a claim based on promissory estoppel. furthermore, there is no evidence tina relied on the promise and was induced to leave her bike at the front door.

Front 6

Tina had a low paying job and could no longer afford to pay insurance on her motorbike. Her dad offered to pay and took the insurance notice from her. Her father was known to break promises. A couple weeks later, her bike was stolen and she discovered her father never paid. Can she recover?

Back 6

Although there is no consideration for her father's promise, she may be able to recover under the doctrine of promissory estoppel. There is little doubt that her father reasonably should have expected Tina to rely on his promise. The promise did induce forbearance on Tina's part. Although one may argue that Tina would have let her coverage lapse anyway because she could not afford it, she could have adopted another course of action such as finding financial help from her mother. The mere possibility that she may have forborne even without the promise may not be strong enough to break the causal link between the promise and her forbearance.

Tina's reliance must have been justified. If Tina knew that her father had a record of breaking promises, she may not have been justified in relying on his word without checking to see if he made payment.

Front 7

Al Lumnis promises to pay 20,000 to his university to build a coffee shop in his student union because he remembers the closest coffee place was 10 blocks away. The school thanked him and consulted with an architech to begin plans. Al lumnis then changes his mind. Is is promise enforceable?

Back 7

Although there was no consideration for his promise, a court may acknowledge the doctrine of promissory estoppel. A court is unlikely to award the full $20,000 because construction has not begun, but may award the university the cost of consultation and the value of the time spent planning the venture.

Front 8

(CHAPTER 9) Sara is a street musician and plays her violin for a man sitting at a sidewalk table. He enjoyed her music, applauded, and asked for another tune. She plays again and says, "that will be $20 please." Is he bound? What is he obligated to pay if anything?

Back 8

For a contract to be implied-in-fact the deliberate conduct of each party viewed reasonably from the perspective of the other under the circumstances must manifest an intent to enter into an exchange relationship. If it is a common practice for street musicians to charge for their service and he should have known this, his conduct in agreeing to the service could create the inference that he intended to pay. However, if no such common practice exists, it would not create an implication of a contract.

If no contract was made, Sara's only basis for recovery is unjust enrichment. (implied contract in law) She cannot recover if she is a volunteer musician or imposes her services without being asked where the person has the ability to ask. However even if she does impose her benefit without their request, she may recover if the recipient having the easy option to reject it, accepts it in the reasonable realization that compensation is expected. The fact that he requested an encore suggests he accepted the benefit. Again, he is only obligated to pay if there is a general understanding that street performers do not perform for free. He would have to pay the fair market value of the service since there is no express contract price. (the two parties did not expressly agree on the $20)

Front 9

A contracts with B for security services for 2 months at a rate of $5,000 per month and pays in full. B realizes it is understaffed and contracts with C for additional staff at $2,000 per month. A see's security guards patrolling the premises with C's logo but assumes they are associated with B. B can't pay C and C demands $4,000 from A. Can C recover from A?

Back 9

No. There is neither an implied-in-fact contract nor implied-in-law because the parties never dealt with each other. A contract can only be implied in fact where there is some conduct from which agreement can be inferred. A's conduct does not give rise to this inference because its contract was with B. There is no unjust enrichment because C expected compensation from B and not A. Also, A did not ask C to patrol, and C did not tell A it would have to pay. A paid B for the services and was therefore not enriched by anything C did. A had no reason to know of the transaction between B and C. B was not its intermediary.

Front 10

A contracts with B to design plans for an amusement park. A says "I will only pay you for the plans if we decide to go ahead and build the park." B designs the plans and A decides not to go through with it. Contract?

Back 10

Normally, where a person requests another to perform a service in the course of business, would would readily find an implied contract in fact for payment of services. However, the parties here expressly agreed that the services would be conditional. Although the parties may have had a contract in which Ben's services were exchanged for the commitment to make a good faith decision about developing the park, this contract contained a contingent payment term and the condition of payment was not satisfied. He is not unjustly enriched because he agreed to perform the services gratuitiously.

Front 11

Benny leaves his home for a 2 week camping trip. He accidently left is stove on causing a kitchen fire after he leaves. His neighbor Sam sees the fire, breaks into the house through a window, and extinguishes the fire. Worried that a burglar might get in with the broken window, he hires and pays a contractor to replace the window. He leaves benny a note asking for repayment of (1) the fire extinguisher (2) the money paid for the window and (3) his services. Will he recover?

Back 11

Here, relief is based on unjust enrichment. It is reasonable to infer that Sam intended to be reimbursed for the extinguisher and window. However, his claim for services is more likely intended to be altruistic and gratuitious.

Sam could not get benny's authorization, had no reason to believe benny would object, and conferred a benefit on benny.

Although he could have boarded up the window instead of replacing it, Benny accepted the benefit of it rather than returning it and must therefore compensate Sam.

Front 12

Sam enters Benny's home while he was away on vacation to attempt to douse a fire started in his kitchen. In the process he suffers burns and $4,000 in medical expenses and is in excruciating pain. Benny feels bad and promises to pay him $200 a month for the next three years as compensation. After a few months the payments stop. Is the promise enforceable?

Back 12

Sam was injured saving Benny's property and not his person (in contrast with Webb v. McGowan). However, there is also moral value in upholding a promise in recognition of property preservation. The material benefit rule of restatement section 86 provides a basis for relieve even though the promise was for past consideration.

Front 13

Rhonda takes her car to be repaired and tells the mechanic to call her for authorization of repairs exceeding $200. He fails to communicate this to his assistant which results in a $650 repair. The mechanic explains that the repair was in fact necessary and that $650 is a reasonable price. Is Rhonda unjustly enriched by the repair?

Back 13

No. She was given no opportunity to exercise this choice. She is only bound by the maximum price settled by the contract - $200

Front 14

Tiffany thought she had bought an authentic painting worth $1 million and paid a substantial amount of money. When she brought it to some experts, the prevailing opinion was it was merely a replica. Disgusted at this fake piece of work, she decides to sell it for $12,000 because it is really only worth $10,000. A buyer sees the work and thinks the experts could be wrong and buys it. It turns out, tiffany's experts were mistaken. She sold a masterpiece. Can she avoid the sale?

Back 14

Tiffany gambled that she was correct in believing it was a fake, in which she obtained a good price, above the market value. The buyer speculated that the experts might be wrong, in which case he would make a fortune. One party cannot be deprived of a good bargain, just because one of them made a bad judgment. This case is classified as a misjudgment on Tiffany's part rather than a mistake of fact.

When parties knowingly enter into a contract for the sale of a work of art of uncertain attribution, the risk must lie with the party whose judgment proves to be wrong.

Front 15

Manny recently became rich and wants a potrait of himself painted by Leonardo, a high society painter. He looks in the phone book for leonardo and contracts to have his potrait painted for $250, a surprisingly low price. He then discovers from friends that the Leo in the phone book is the father of the real painter, and is not highly recognized. Manny wants to get out of the contract. Can he?

Back 15

Manny may argue that Leo fraudulently misrepresented himself by letting people think he is the famous painter when it is really his son. Yet daddy Leo could argue that his advertising in the yellow pages and modest fee indicate that he did not imagine there would be confusion. This seems to outweigh Manny's carelessness in not making proper inquiries.

Manny can also argue the contract was induced by unilateral mistake. The mistake did relate to Manny's assumption in entering the contract. Did the error materially effect the exchange of values? Manny got what he paid for but not what he bargained for. He also does not have much of a chance of reselling it. However, there does not seem to be strong reasons for shifting the risk to Leo because he did not have reason to suspect the error and exploit it.

Front 16

A is a general contractor who accepts a bid from B a subcontractor. When B is making his bid, he is distracted by the television and negligently bids lower than intended. A relies on B's bid to win a contract. B refuses because it would go out of business and A contracts with C with a 80% loss of expected profits. Is B bound?

Back 16

B will argue that although A will not recieve its expected profits on the contract, it is in a better position to absorb the risk of the unilateral mistake. It will also argue that it should have been aware there was a mistake if the bid seemed extremely low.

A will argue that the bid did not seem unreasonably low and that the mistake was due to B's negligence rather than innocence.

Front 17

Merlin, the magician contracted to perform a show on August 30 at the Pyro Theater for $10,000. On July 20, he jumps out of a plane and forgot his parachute. Can Pyro recover?

Back 17

Under the doctrine of impossibility, performance is excused by the death of a party whose continued existence was necessary for the perfromance.

Who bore the risk of death? Did his promotor insure his life. What are general community expectations and pertitnent considerations of public policy?

Front 18

Buck buys a ticket to Merlin's magic show for $50. His friend Fanny wanted to go so badly that she offered to buy his ticket for $150 because they were sold out. Merlin dies and Fanny is refunded $50 from the ticket office, and demands the extra $100 from Buck. Does he have to pay her?

Back 18

Her demand of $100 is a claim of restitution based on the contention that cancellation of the show frustrated the purpose of her contract.Merlin's death and he ensuing cancellation of the show were supervening events that defeated a shared basic assumption of the parties entering the contract, and neither was at fault in causing the event. Where is the risk allocated? Although a ticket promotor assumes the risk of refunding the tickets, it does not follow that a consumer seller would similarly assume that risk. However unjust enrichment may allow Fanny to recover the $100.

Front 19

Merlin, the magician contracted to perform a show on August 30 at the Pyro Theater for $10,000. However, after a successful parachute trick, he is a world sensation and is now able to command a fee of $500,000 for a booking. He wants to get out of the $10,000 contract. Can he escape?

Back 19

The only basis on which Merlin could escape the contract is to contend that his new found fame is a supervening event that defeats the basic assumption on which the parties contracted for. As a result his loss of the opportunity to make 50 times that of the contract price would be impracticable. however, impracticability should not be permitted as an excuse when the change in market conditions merely has the effect of making the performance more valuable than anticipated. Each party made a judgment in regard to price and neither party can complain if that turned out to be a bad bargain.

Front 20

Merlin, the magician contracted to perform a show on August 30 at the Pyro Theater for $10,000. However on July 20th he performed a parachute prank which was apprehended by the F.A.A. for failing to obtain permits. To avoid prosecution, Merlin contracted to never perform magic on land or sea or in the air. As a result he told Pyro he could no longer perform August 30. Does he have an excuse?

Back 20

Compliance with the law is generally regarded as a basis for excuse on grounds of impracticability. But because the bar on his performance resulted from his violation of the law, he should be denied relief.

Front 21

Merlin, the magician contracted to perform a show on August 30 at the Pyro Theater for $10,000. The Pyro theater burns down and they wish to move the act to a high school gym. Merlin says it is beneath his dignity to perform in a gym. Can he cancel the contract?

Back 21

If an alternative venue is equally suitable and may be obtained without undue hardship, the destruction of the Pyro theater does not defeat a basic assumption of the contract. If the basic assumption is that the venue would be of a particular quality or be equipped with special facilities, a school gym may fall short of the contemplated standard and would cause Merlin severe hardship or loss. However, a mere claim of offense to his dignity is not sufficient.

Front 22

Merlin, the magician contracted to perform a show on August 30 at the Pyro Theater for $10,000. However Pyro has only sold 30% of tickets by August 20th. Pyro takes the position that it is known to Merlin that its purpose in entering the contract was to make a profit, and this purpose is frustrated by the supervening lack of interest on the part of the public. Is this a good argument?

Back 22

Most commercial contracts are motivated by profit, so if Pyro's argument had merit, no party could ever be held to a contract once it becomes apparent that they made a bad judgment. Pyro bore that risk when it entered the contract.