Contracts

During an ice storm, a man’s car slipped down an embankment and became lodged against a large tree. The man called a towing company and toldthe company’s manager that the car was 100 feet down the embankment. “That’s lucky,” said the manager, “because our winch only goes 100 feet.” After the manager and the man agreed on a price, an employee of the company attempted to reach the car but could not because the car turned out to be 120 feet down the embankment.

Is the towing company’s performance excused on the grounds of mistake?

• No, because both parties were uncertain about the distance.

• No, because the towing company assumed the risk by the manager’s failure to examine the distance himself.

• Yes, because at the time of contracting,both parties were mistaken about a basic assumption on which the contract was based.

• Yes, because the agreement did not allocate the risk of mistake to either party.

An employer offered to pay a terminated employee $50,000 to release all claims the employee might have against the employer. The employee orally accepted the offer. The employer then prepared an unsigned release agreement and sent it to the employee for him to sign. The employee carefully prepared, signed, and sent to the employer a substitute release agreement that was identical to the original except that it excluded from the release any age discrimination claims. The employer signed the substitute release without reading it. Shortly thereafter, the employee notified the employer that he intended to sue the employer for age discrimination.

Is the employer likely to prevail in an action seeking reformation of the release to conform to the parties’ oral agreement?

• No, because the employer acted unreasonably by failing to read the substitute release prior to signing it.

• No, because the parol evidence rule will preclude evidence of the oral agreement.

• Yes, because the employee’s fraudulent behavior induced the employer’s unilateral mistake.

• Yes, because the parties were mutually mistaken regarding the contents of the signed release.

A national distributor of windows selected a retailer to sell its windows in a specified geographic area. The parties negotiated a written distribution agreement, which stated that any order for windows placed by the retailer would be binding on the distributor “only when expressly accepted by the distributor.”

For the next two years, the retailer forwarded orders to the distributor, and the distributor always filled the orders. In the third year, the distributor accused the retailer of overcharging customers to install the distributor’s windows. The retailer responded that the distributor had no control over the retailer’s installation prices. When the distributor received the retailer's next order for windows, it refused to fill the order.

If the retailer sues the distributor for breach of contract, will it be likely to prevail?

• No, because the retailer’s forwarding of orders to the distributor did not give rise to an obligation on the distributor's part to fill the orders.

• No, because the retailer’s practice of overcharging customers excused the distributor's refusal to fill the order.

• Yes, because the distributor’s claim regarding overcharging customers is independent of its obligation to fill the retailer’s order.

• Yes, because the parties’ course of dealing binds the distributor to fill the retailer's order.

A buyer expressed interest in purchasing an industrial air-conditioning system manufactured by the seller. The parties agreed orally on a price of $100,000 for the system, but continued to negotiate over several points. When all matters regarding the air-conditioning system were finally settled, the parties signed a written agreement. It provided that the price for the system, which would be delivered on June 1, would be $110,000. The written agreement, a lengthy form contract, did not contain a merger clause.

The seller delivered the system on June 1, but the buyer refused to pay more than $100,000, citing the earlier oral agreement as to price.

The seller sued the buyer for the additional $10,000 under the written agreement.

Is the court likely to admit the evidence of the orally agreed price of $100,000?

• No, because the buyer assumed the risk of any mistake as to price.

• No, because the oral price term would contradict an express term in the written agreement.

• Yes, because the oral price term is relevant to whether the writing should be reformed.

• Yes, because the written agreement did not contain a merger clause.

A well-established paper mill and a logging company signed a written contract in which the mill agreed to buy from the company all the logs the mill would need for one year. The company was unable to keep up with the mill’s needs, and its log deliveries fell short by 10% to 15% in each of the four quarters of the year. The mill paid the company on time for all delivered logs.

The mill paid an attorney $2,000 for advice concerning its options in enforcing the contract. It paid a broker a reasonable fee of $5,000 to find additional logs to make up for the company’s shortfall. The mill also incurred reasonable costs of $25,000 to transport the additional logs to its facility. Despite the mill’s efforts to mitigate damages, it sustained $200,000 in losses because of the company’s failure to timely deliver enough logs.

The mill has sued the company for breach of contract.

If the court finds for the mill, how much should it award in damages?

• $205,000.

• $225,000.

• $230,000.

• $232,000.

An attorney received a document at his office with an attached note from a client for whom he had just finished drafting a will. The note read as follows “Do you think this contract of sale for my boat complies with state law? I would have talked to you in person about this, but I’m on my way out of town. I will be back next week.”

The attorney reviewed the document and wrote a one-page letter to the client stating that the document complied with state law. The lawyer included a bill for $500, which was a reasonable fee.

The client refused to pay the attorney anything, arguing that she had never agreed to retain the attorney and that she had received nothing of value from the attorney because the sales transaction was never concluded.

Assume that there is no applicable statute or rule governing the formation of attorney-client relationships in the jurisdiction.

If the attorney sues the client for the $500, will the attorney be likely to prevail?

• No, because even if the parties had an agreement, that agreement was discharged under the doctrine of frustration of purpose.

• No, because the attorney and the client never agreed on the essential terms of a contract.

• Yes, because the attorney took action on the client’s note to his detriment.

• Yes, because the client’s note and the attorney’s performance created an implied- in-fact contract.