Contracts MBE

At an auction without reserve, the auctioneer called for bids for an antique chair.  The first bidder, a consumer without specialized knowledge about antique furniture, bid $10,000.  Her bid was acknowledged by the auctioneer.  The second bidder bid $11,000, which was also acknowledged by the auctioneer.  Before the auctioneer announced the sale of the item to the second bidder, she withdrew her bid.  The auctioneer then announced that the chair was sold to the first bidder for $10,000.

Can the first bidder successfully challenge this sale?

• 1. Yes, because the first bidder was not a merchant.

• Yes, because the withdrawal of the highest bid did not reinstate the next highest bid.

• No, because the auctioneer accepted the first bidder's bid.

• 1. No, because the auction was without reserve.

In response to a phone query by a manufacturer of fans, a supplier of motors offered to sell the manufacturer up to 10,000 motors at the price of $15 each.  The supplier assured the manufacturer before ending the call that this price was good for 60 days.  One month later, the manufacturer ordered 5,000 motors from the supplier.  The supplier informed the manufacturer that the price was now $20 per motor.

Of the following, which is the manufacturer's weakest argument that the price is $15 per motor?

• The supplier's assurance of the $15 price was irrevocable for 60 days.

• 1. A month is a reasonable time in which to accept the offer.

• The supplier could reasonably foresee that the manufacturer would rely on the supplier's offer.

• 1. The supplier had not revoked its offer.

In need of money, the owner of a ring prepared an email one evening proposing to sell the ring to a friend for $500, but only if he responded within 24 hours.  Unable to bring herself to send the email, the owner, who normally was a teetotaler, began drinking.  When she was thoroughly intoxicated, she sent the email without realizing it.  After the owner sobered up the following afternoon, she called her friend and said that she had never meant to send the email, but her friend informed her that he had already responded by email, agreeing to the transaction.

Does a valid contract exist?

• Yes, because the friend accepted the owner's offer to sell the ring.

• 1. Yes, because the friend had 24 hours in which to respond.

• No, because the owner lacked capacity at the time that she made the offer.

• 1. No, because the contract was executory.

At the beginning of the month, an aunt called her niece who lived in a distant city.  During the conversation, the aunt promised to give a family heirloom worth $50,000 to her niece if the niece came to the aunt's home to retrieve it.  The niece promised to come.  The following day the niece bought an airline ticket to fly to the city where her aunt lived at the end of the month.  The day before the niece was to make the trip, her aunt died.  Under the terms of the aunt's will, the heirloom was left to someone else.

Can the niece acquire the heirloom by enforcing her aunt's promise against the aunt's estate?

• Yes, under the doctrine of promissory estoppel.

• 1. Yes, because there was an exchange of promises.

• 1. No, because the aunt's promise was oral.

• No, because the aunt promised to make a gift.

Based on an honest belief, an employer terminated a bookkeeper for embezzlement.  The employer also threatened to file a criminal complaint unless the bookkeeper agreed to repay the stolen funds.  The bookkeeper, seeking to avoid criminal prosecution, agreed, and signed a promissory note payable to the employer in the amount of the embezzled funds.  The bookkeeper subsequently admitted to having embezzled the money.

Can the bookkeeper avoid the promissory note?

• 1. No, because the bookkeeper admitted to embezzling from her employer.

• No, because the employer's threat was based on an honest belief that the bookkeeper was an embezzler.

• Yes, because the bookkeeper signed the note under duress.

• 1. Yes, because the employer terminated the bookkeeper.

A hardware store owner observed a customer looking at a display of chain saws.  The customer asked the owner which of two brands he would recommend.  The owner said, "I swear by Brand X.  In my opinion they make the best chain saws."  In making this statement, the owner had no intent to offer the customer a warranty.  The customer purchased a Brand X chain saw.  On the customer's sales receipt, was printed, "All warranties, express or implied, are hereby disclaimed."  The chain saw malfunctioned, resulting in serious injury to the customer.  The customer sued the store owner for breach of an express warranty.

Of the following, which would be the store owner's best defense?

• 1. The store owner did not use the words "warranty" or "guarantee."

• The store owner did not intend to offer a warranty.

• 1. Any express warranty was disclaimed by the sale receipt.

• The store owner's words constituted his opinion.

An attorney entered into a valid contract with a client to provide legal services for a set fee of $5,000.  The contract provides that rather than paying the attorney, the client is to pay the fee to the attorney's daughter.  The daughter, upon learning of the contract from her father, decided to donate this money to a local animal shelter.  She told the manager of a local animal shelter that she planned to donate $5,000 to the shelter.  The manager, relying on this, purchased $5,000 worth of pet supplies and medicine.  The lawyer rendered the legal services, but the client ultimately failed to pay the daughter, who in turn did not donate the money to the shelter.  The animal shelter files suit against the client for breach of contract.

Will the animal shelter prevail in its action against the client?

• 1. Yes, because of the animal shelter's detrimental reliance.

• Yes, because the shelter is a donee beneficiary.

• No, because the attorney had no intention to benefit the animal shelter.

• 1. No, because delegation of duties is not permitted under a services contract.

The owner of a new and unnamed store selling musical instruments was talking by telephone with a famous violinist who was known for her signature red violin.  The owner asked whether the violinist would be able to perform at the store's opening and the violinist agreed.  The next day, the owner and the violinist executed a valid written contract for the violinist to perform at the opening.  The contract contained a clause stating that the contract was the complete and final agreement between the parties.  When the violinist appeared at the store to perform, the owner refused to let her play.  The violinist sued the owner for breach of contract.  The owner moved to introduce evidence that during the telephone conversation, the owner had told the violinist that he would need her services only if he was able to secure the rights to use "theredviolin.com" as the domain name of the store; the violinist objected that the evidence was inadmissible.  The contract contains no mention of this condition.

Is the court likely to admit evidence of the conversation regarding the domain name?

• Yes, because the conversation is evidence of a condition precedent to the existence of the contract.

• 1. Yes, because this evidence does not contradict the written contract.

• 1. No, because the parol evidence rule prohibits the introduction of prior extrinsic evidence.

• No, because the written contract was a complete integration of the parties' agreement.

A homeowner hired a roofer to install a new roof on his house.  The homeowner scheduled the installation to take place during a week when he was to be on vacation.  Although the contract specified that the color of the shingles was to be brown, the homeowner returned to find that the roofer instead had installed red shingles.  Although the new roof was structurally sound, the homeowner refused the pay the roofer.  The roofer sued the homeowner.  The fact-finder determined that the roofer had materially breached the contract.

Under what theory of damages is the roofer most likely to recover?

• 1. Expectancy damages.

• Restitution damages.

• 1. Reliance damages.

• None, because the roofer materially breached the contract.

A tool distributor sold a retailer an assortment of tools on credit.  Immediately prior to the sale, the distributor, concerned about the retailer's financial health, telephoned the retailer to ask if the retailer would be able to pay for the tools.  The retailer assured the distributor that it was solvent, even though the retailer knew it might not be before it paid for the tools.  Twelve days after the retailer received the tools, the distributor learned that the retailer was insolvent and immediately sought to reclaim the tools.

Can the distributor do so?

• No, because the retailer had retained the tools for twelve days.

• 1. No, because the retailer had received the tools.

• Yes, because the retailer had falsely assured the distributor that it was solvent.

• 1. Yes, because the distributor acted immediately upon learning that the retailer was insolvent.