Appendix D | Contracts Problems

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Problem Set 1

  1. Fran agreed to purchase certain items on credit from the XYZ Corporation. The agreement called for the payment of substantial late fees and other charges and also called for a repossession of all items purchased if any individual payments were missed. Fran is a recent immigrant from Haiti who has great difficulty reading and writing English. In fact, Fran signed the contract using only a simple “X.” When the XYZ Corporation sought to enforce the contract after Fran defaulted, what defense might be available to Fran? Discuss.
  2. X and Y entered into an express oral contract for the purchase of a certain amount of wood saws. X delivered the saws to Y and Y refuses to pay for them, stating that there was no specific agreement as to price. Is there an obligation to pay? Why? What price?
  3. Carol read an ad in the local newspaper offering a baby grand piano for sale for $350.00. Carol visited the home of the offeror and gave the seller a check for $350.00, promising to return in the afternoon to pick up the piano. The seller then went off to church and after Mass, she stopped off at her good friend’s home where the general opinion of several of her friends was that the piano was worth much more than $350.00. The seller then had the piano appraised and found that it was indeed worth around $2,000.00. The seller then called Carol and said that “I’ve changed my mind and I’m not going to sell.” The seller mails the check back to Carol. Is there a contract? Can Carol get the piano? Why? Might the seller claim unconscionability?
  4. Tom is a local franchisee of the Popeye’s Chicken Corp. A provision in the franchise agreement calls for the payment of $2,000 if the franchisee “fails to perform any of the terms or conditions of the contract.” Tom runs into some economic difficulties and misses a one month payment of the franchise fee and the franchiser now seeks to enforce the $2,000 clause. Is such a clause enforceable? What standard?
  5. X and Y were involved in an automobile accident on South Orange Avenue, right near Center Street. Y claimed that X was responsible for the accident and X agreed to pay all of Y’s expenses and doctor bills rather than risk a potential lawsuit where X might lose his license. About a month later, X receives a letter from a Mr. Simeri (who lives on the intersection) in which Mr. Simeri says that he saw the entire accident clearly and Y definitely went through the red traffic light. X now refuses to honor his promise and Y sues for breach of contract. Who will win? Why? What test will the court apply?
  6. Rick Veldman, age 17, signs up for Karate lessons and agrees to a 36 lesson package at $50.00 each. After taking the lessons, Rick attempts to get his money back, claiming that he was a minor when the contract was entered into. Does Rick have a legitimate legal argument? Suppose that Rick had waited until 8 months after reaching his age of majority to try to get his money back ? What rule do courts apply today to service contracts?
  7. X, a 17 year old boy, agrees to pay back $1,000 to a local bank, in return for a loan to help pay a SAT tutoring course. Later, X receives a gift from his grandfather and attempts to cancel his contract with the bank. X not only wants to return the $1,000, but also wants to avoid paying the reasonable interest charges, claiming that he was a minor when he entered into the contract. Is X correct? What rule?
  8. X, an infant, signed an agreement with a baby-sitting contracting firm, whereby X would receive 8 jobs per month in return for paying 15% back to the babysitting company. After X worked for the company for 3 months, she received a bill for $37.50, the share she had promised to pay. X now refuses to pay the bill claiming that she is a minor. Is she correct? What rule should the court apply?
  9. X, a salesman for a natural gas company, falsely assured Y, a buyer of residential natural gas for home building purposes, that a certain minimum pressure would be all that would be needed to insure adequate home heating pressure. X knew that the specifications he had given out were false. However, Y was very knowledgeable in the area of natural gas and knew that X’s assurances were “probably unrealistic or false,” but Y went through with the deal because the “price was right.” Later, when the gas was shown to have improper pressure, Y sues X for fraud. What result? Reasons?
  10. Fred, a minor, bought an I-Pod from Best Buy at a cost of $150.00, financing the purchase over an 18-month period. Fred reached his 18th birthday (the age of majority) and made a payment on account. Then Fred tried to rescind the contract using age as a defense. Can he now do so?
  11. X and Y were both minors and entered into a contract for the purchase and sale of a motor bike. X later tries to rescind the sale. Is a minor’s contract with another minor voidable by whom?
  12. John owed $25,000 to his neighbor Jim at 4% interest. When Jim requested payment, John admitted that he was unable to do so. Jim then told John that if he did not make
    an immediate payment, he would be forced to sue John and possibly put a lien on John’s house. John thereupon agreed to re-finance the amount of the loan at a higher interest rate. Later, when Jim tried to enforce the new agreement, John defended on grounds that he entered into this agreement under “duress.” Who is right? Why?
  13. X went to work as president of a hat factory. X learned that the factory was having some difficulty in making its payroll, so X orally assured the workers that if the factory was unable to meet the monthly payments to its workers, X would do so personally. Later, X had a disagreement with his Board of Directors and quit his job. When the factory was unable to meet its payroll, the workers contacted X, reminding him of his earlier promise. Can X be compelled to honor his promise? What defense might be available? Would any exception to the general rule apply? Suppose that X were a partner in the hat factory. Might that change the result?
  14. X orally sold a piece of real estate to Y. Y moved on to the premises, put in an “in- ground” swimming pool, and made other improvements to the property. Later X tried to deny that a contract for sale had been entered into and claimed the Statute of Frauds as an absolute defense. Who is right? Why?
  15. Elvis Presley agreed orally to hire a booking agent to represent him for a three-year period or “until such time as you secure for me 12 major contract bookings.” Later, Elvis fires the agent and the agent sues for breach of contract. Elvis’ lawyer asserts the Statute of Frauds as a defense. Who is right? Discuss. Suppose the contract was for an 18-month period and contained no specific task assignment?
  16. Andrew entered into an oral contract for the purchase of $5,750 worth of sporting goods and other athletic supplies. Later, Andrew refused to accept the goods and was sued for breach of contract. What defense might be available to Andrew? Suppose the goods had been specially manufactured for use by Andrew. Might that change the result? What is a specially manufactured good?
  17. X sold Y a TV repair business. The contract contained a clause which prohibited X from opening up a similar business in a 10 mile radius for a period of 5 years. Is such a clause enforceable? Why or why not? What rule?
  18. X set his son up in a printing business. When his son began to experience some financial setbacks, X called various suppliers and orally promised:
    1. I’ll stand behind any losses my son incurs; or
    2. If my son can’t pay, just send me the bills and I’ll make good on them. Later, the business experiences real difficulty and various creditors contact X and seek payment.
    3. What defense might be available to X? How would you counter this argument? Discuss.
  19. Peter Grace promises the Trustees of the local University that he will be giving the University a $7 million dollar gift for the construction of a modern residence dormitory. Invited to the campus, Mr. Grace comes under attack by various student radicals for alleged involvement in covert CIA activities. Incensed, Grace cancels his pledge to the University. However, in the meantime, the University had expended considerable sums to hire an architect, draw up plans and break ground for the new structure, all costing around $2 million dollars. Is Mr. Grace’s promise to the University enforceable? On what showing? To what extent? Discuss.
  20. X contracted to purchase 100,000 bushels of apples from a certain fruit farmer in Spokane, Washington. Just prior to the delivery date, a major volcano erupts and the entire crop is destroyed. Might the farmer be compelled to honor his contract? Explain. What defense might be available?

Problem Set 2

  1. XYZ Corporation sent a letter to Harry Hotdog, in which it offered Harry employment as a managerial trainee at an annual salary of $35,000. Harry wrote back, stating: “I will accept, but would you consider raising the salary to $36,000? I don’t feel that I can work for any less than $36,000 per year.” Can XYZ Corporation now offer the job to someone else?
  2. Fly-By-Night Construction Company agreed to construct a one car garage for Innocent, who agreed to pay $7,500. Before the garage was built, Innocent promised to pay Fly-By- Night an additional $3,700 if it would build a two car garage instead of a one car garage. After Fly-By-Night had completed the two car garage, Innocent paid $7,500, but refused to pay any more. Fly-By-Night sues Innocent for the additional $3,700. Can Fly-By-Night collect? Is there a “consideration problem” here?
  3. For fifteen years, Jim has mowed John’s lawn on Friday afternoons during the months of April through October, and John has paid Jim ten dollars for each mowing. One Friday, Jim brings his mower to John’s house, says hello to John, and mows John’s lawn. During this time, John watches Jim but says nothing. Later, John refuses to pay, alleging that
    he and Jim had not entered into an express agreement for mowing the lawn. Can Jim collect? Upon what theory?
  4. Sonny borrowed $3,000 at no interest from his father. The loan was to be repaid January 1, 2017. On that date, Sonny called his father and said that he only had $2,000. He asked if his father would accept the $2,000 as full satisfaction of the debt. The father agreed. After having received the $2,000, the father asked for an additional $1,000. Sonny refused to pay it, and the father sued. Who will win, and why?
  5. Uncle promised 16-year old Nephew a gold watch if Nephew would refrain from smoking until his 21st birthday. Nephew did refrain from smoking until age 21, but when he tried to collect the watch, Uncle refused. Can the Uncle be compelled to pay?
  6. Craig wanted to stage a production of the well-known play, “Kick Your Dog Down a Dusty Road.” He wrote Natalie, a famous actress, offering her the lead in the play at $10,000 per week for six weeks. His letter also stated “Offer ends in one week.” Natalie received the letter the next day and immediately mailed an acceptance. Natalie’s letter was temporarily lost in the mail and did not arrive until five days after she had dispatched it. Craig, not hearing from Natalie, decided to abandon the project. If Natalie sues Craig, what will be the result?
  7. Jack offered to sell a prime piece of real estate to I.O.U., a private university. I.O.U. paid Jack $500 to keep his offer open for 6 months, from September I to March 1. In October, Jack wants to sell the property to a third party, Industrialist, for a higher price. May Jack do so?
  8. In January, Two & Two (an accounting firm of national reputation based in New York) procured lists of all senior accounting students in the nation who ranked in the top 10 percent of their graduating classes. Two & Two sent out form letters on firm stationary which congratulated each recipient on his or her fine academic record. The letter also stated, in pertinent part:

    Should this letter be characterized as an offer? Why or why not?
  9. Thrifty promised to donate $500 to his favorite charity, the Irwin Home for Impoverished Lawyers. In reliance on Thrifty’s pledge, the Home immediately ordered some badly needed three-piece suits for some of its inmates. Thrifty later changed his mind and refused to make the donation. Can Thrifty be compelled
    to make the donation? What showing?
  10. On June 1, 2016 the Management Group, Inc. offered Hillary a position as house counsel, to begin September 1, 2016. Hillary did not communicate with the Management Group until October 1, 2016, when she showed up at its offices and announced that she wanted the job. The Management Group had already hired someone else. Is Hillary entitled to the job.
  11. While Hank Homeowner is away on vacation, workmen from the Cosmo Construction Company erroneously re-surface Hank’s dilapidated driveway, mistaking Hank’s house for the house on which they were supposed to be working. Cosmo later bills Hank, and Hank refuses to pay. Cosmo then sues Hank, arguing that Hank received a benefit, and thus should be required to pay. Discuss Cosmo’s chances of success under both contractual and quasi-contractual theories.
  12. Farthing published an advertisement in the newspaper offering a reward of $500 for the return of her cat. After several weeks, she changed her mind, and posted several signs around town that stated that her offer was withdrawn. Goodguy saw the newspaper ad but did not see the signs. He returned the cat and claimed the reward. Must Farthing pay him?
  13. Black wrote to Berlin: “I have decided to sell my farm, Blackacre. I would want around $65,000 for it. Let’s have lunch next week and discuss it.” Has Black made an offer? Why or why not?
  14. Widow offered a reward of $50,000 for the apprehension of the person who had killed her husband. Sheriff Goodguy saw the reward offer. In the course of his duties, he apprehended the killer. Several days later, he claimed the reward, but the widow refused to pay. Should the Sheriff collect?
  15. The Klott’s signed an agreement to purchase a house owned by the Stewart’s. The day after the Klott’s moved into the house they became aware of malfunctioning water well in need of major repairs. During the negotiations for the sale of the house, no mention was ever made about the water supply. The Klott’s did not ask for any information; they had assumed the water came from the city well. Nor did the Stewart’s volunteer any information. The Klott’s sue the Stewart’s for damages, claiming that there was a fraudulent nondisclosure and concealment of the faulty well. Assuming the Stewart’s were aware of the faulty condition of the well at the time of the sale, are they liable for damages for not disclosing this information?
  16. Wilson had been working for the telephone company when Hayes and the Winslow Construction Co. promised her a job as a flag girl on a construction job. Wilson was told to quit her present job, which she did. Hayes and the Winslow Construction Co. did not fulfill their promise to employ Wilson, and she sues to recover lost wages during her period of unemployment. Are Hayes and Winslow Construction Co. liable on their promise? What theory?
  17. Rose, a minor under the age of 18, purchased an automobile from a Ford Motors dealer. Seven months later, Rose declared the contract invalid since, as a minor, she wasn’t permitted by law to make a contract for the purchase of an automobile. Rose demanded: (1) that the contract be declared invalid and (2) that the entire purchase price of the automobile be refunded to him. Will her demands be honored?
  18. Tovar, a Kansas physician, sought employment in an Illinois hospital as a resident physician. Terms of employment were agreed upon and Tovar signed a contract. After two weeks of employment with the Illinois hospital, Tovar was summarily dismissed on the grounds that he did not have a valid Illinois medical license. Tovar sues the hospital for wrongful termination of his employment contract, despite acknowledging that he did not have an Illinois license. Tovar claims that the license is not necessary to the fulfillment of the terms of the contract. Is the hospital liable on the contract?
  19. On October 20, 2016, Uscian and Blacconeri entered into a written contract for the sale of a certain parcel of land owned by Uscian. The contract was expressly contingent upon Uscian obtaining approval from the city to subdivide the property. Uscian’s application for subdivision was denied by the city. Thereafter, in December of 2016, the parties orally agreed to sell the property without first obtaining a subdivision. Later Uscian backed out of the deal. Blacconeri now sues for specific performance of the written contract. Uscian sets up the Statute of Frauds as his defense. Is this a valid defense? Explain.

Problem Set 3

  1. Torbert accepted Jordan’s proposal that they go to the Fall Cotillion together. In return for Jordan’s willingness to purchase tickets and pay all expenses, Torbert set aside the time and restricted herself from doing anything else on the evening of the dance. Jordan cancels the date at the last minute. Any possible basis of recovery? How much? (What is the measure of the damages?)
  2. Faulkner, seventeen years old, realized that his contracts were not enforceable because of his age. He bought an expensive television set, for which he agreed to pay $47.50 per month for twelve months. The seller did not know that Faulkner was a minor. After using the set for two months, Faulkner refused to make additional payments, returned the set, and demanded return of all monies paid. General Rule? Exceptions? State law exceptions?
  3. Reynolds, a minor, purchased a winter coat at a reasonable price. After wearing the coat for more than three months, she returned it to the store and demanded her money back. Will she recover? Why or why not?
  4. Colby was unconscious as a result of a hit-and-run accident. He was taken to the hospital, where he underwent emergency treatment and surgery. After regaining consciousness, Colby denied any responsibility for the hospital charges, stating that he had been incompetent to contract while in an unconscious state. Could Colby be compelled to pay?
  5. Engineering Research, Ltd., hired Jacobs to work on a research project that would require at least three years to complete. The offer of salary and employment were oral and Jacobs accepted it. Is the agreement enforceable?
  6. Zabinsky, an artist, was commissioned to do a portrait of Governor Simms. When he was called to Europe to do portraits of several members of a wealthy family, he assigned the duty to a famous artist who had taught him in graduate school. Is such an assignment possible? Why or why not? What showing?
  7. Wendel, an Olympic Skater, turned professional skater and signed an agreement with Ice Shows. After four weeks of practice, Wendel suffered a broken ankle. Any further obligations required of either party? Can Wendel be sues for breach?
  8. Stolts orally agreed to buy an 18th century chest from Empire Antiques for $4700. When Stolts went to pick up the chest, Empire refused delivery, stating that the chest was going to be given to a museum. Can Stolts get the chest?
  9. Goldstein found a watch with no identification so he could not locate the owner. An advertisement in the paper on Tuesday identified the watch and offered a $25 reward. Goldstein responded to the ad and returned the watch. The owner refused to pay the reward stating that the ad was “merely an invitation to trade” and not a firm offer. May Goldstein recover the $25 reward?
  10. While intoxicated, Russ bought a fur jacket from Sam paying her with a check for $1,300. Several hours later, remembering what he had done, he stopped payment on the check. Sam sued Russ for the $1,300 and refused to accept the return of the coat. Will the suit succeed? Why or why not?
  11. In a state where gambling is illegal, Hopkins agreed to act as a bookie. Hopkins’ boss refused to pay him for work done in the bookie establishment. Hopkins sues. Will he collect?
  12. Mrs. Williams purchases various items from a local retail store totaling almost $1,800. She signs a printed form which provided for installment payments and forfeiture of all items purchased if one of the installments was not paid on time. Mrs. Williams sues to set the contract aside. What basis? Discuss.
  13. Freddy sends Larry an offer to purchase gasoline. Larry receives the offer on August 12 and immediately wires Freddy that he is not interested in the deal. Prior to the receipt of this wire, Larry calls Freddy and says that he accepts. Is there a contract? Why?
  14. Under what circumstances might a newspaper ad or one found on the television be considered as an offer?
  15. Gerry bids on a construction job as a subcontractor. The contractor receives his bid but prior to the awarding of the contract, Gerry notices that he has made a clerical error and attempts to notify the contractor of this fact. Are there any circumstances where a revocation at this point might be possible?
  16. Freddy calls his friend Joe on the phone and states: “Remember those three pieces of land in Arkansas you were interested in buying? I’ll make them available to you for three weeks.” Three days later, however, Freddy sent Joe a letter and says: Lots sold. Sorry.” Joe contends that he had a firm option for three weeks. Is he correct?
  17. How does the U.C.C. define “goods”? “merchant”? “unconscionability”?
  18. Offer: Will sell between 6 and 7 thousand tons of potatoes: Acceptance: Will purchase 6,550 tons of potatoes. Is there a contract?

 

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