Basick, Mary; Schindler, Tina. The MBE Decoded: CONTRACTS

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?

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

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

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

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

Answer explanation

Yes, this is the best answer choice because the prior relati onship, the document with the att ached note, ti ming of when the client would be back, etc. all lead to conduct where it would reasonable to infer a contract.

A buyer sent a signed letter to a seller that stated: “Ship 100 boxes of nails at $3 per box, the  price quoted in your circular.” The seller mailed the buyer a signed form acknowledgment  that agreed to the buyer’s terms and stated on the reverse side: “Disputes regarding quality  shall be arbitrated.” The buyer did not reply to the seller’s acknowledgment, and the  seller shipped the nails. When the buyer received the nails, it found their quality to be  unsatisfactory and sued the seller for breach of warranty. The seller has asked an attorney  whether the parties’ contract requires arbitration of the buyer’s claim. 

What is the best advice the attorney can provide?

• A. A contract was formed pursuant to conduct when the buyer received the nails, and a  court would exclude the arbitration provision from the contract.

• B. A contract was formed when the seller mailed its acknowledgment, and the arbitration  term became part of the contract. 

• C. A contract was formed when the seller mailed its acknowledgment, and the court must  decide whether the arbitration term should be excluded as a material alteration of the  contract. 

• D. No contract exists, because the arbitration term in the seller’s acknowledgment created a  counteroffer that the buyer never accepted.

Answer explanation

YES!!! This answer correctly states when the contract was formed AND it acknowledges that the court may or may not exclude the arbitration term depending on whether it materially alters the contract.

A debtor’s liquidated and undisputed $1000 debt to a creditor was due on March 1. On  March 15, the creditor told the debtor that if the debtor promised to pay the $1000 on or  before December 1, then the creditor wouldn’t sue to collect the debt. The debtor orally  agreed. On April 1, the creditor sued the debtor to collect the debt that had become due on  March 1. The debtor moved to dismiss the creditor’s complaint. 

Should the court grant the debtor’s motion? 

• A. No, because there was no consideration to support the creditor’s promise not to sue.

• B. No, because there was no consideration to support the debtor’s promise to pay $1000 on  December 1. 

• C. Yes, because a promise to allow a debtor to delay payment on a past debt is enforceable  without consideration. 

• D. Yes, because the debtor was bargaining for the creditor’s forbearance.

Answer explanation

Because debtor already owed the money to creditor, the agreement to pay the undisputed and liquidated debt late was not supported by consideration since the debtor had a preexisting duty to pay. 

On June 1, an appliance manufacturer telephoned a supplier to determine whether the  supplier could provide 300 washing machine motors of a particular model by October 1.  The supplier offered to do so at a price of $300 per motor (a total price of $90,000). The  manufacturer’s representative said, “Deal.” The next day the manufacturer’s representative  sent the supplier an unsigned note on company letterhead that stated, “I am happy that you  are going to supply us with the motors. I will call you soon to talk about another order.” The  manufacturer then sent catalogs to its regular customers advertising washing machines that  included the specified motors.  The manufacturer did not hear from the supplier until July 1, when the supplier called to say  that it would be unable to supply the motors because it was no longer carrying that model.  At that time, the manufacturer had received no orders for the machines with the specified  motors.  The manufacturer sued the supplier for breach of contract, and the supplier raised the statute  of frauds as a defense. 

Is the supplier’s statute of frauds defense likely to succeed? 

• A. No, because the manufacturer distributed the catalogs in reliance on the contract, making  the contract enforceable under the statute of frauds. 

• B. No, because the supplier failed to object to the contents of the note sent by the  manufacturer. 

• C. Yes, because the manufacturer’s note failed to contain a signature.

• D. Yes, because there is no writing that contains the quantity term of the contract. 

Answer explanation

The missing quantity violates the writing requirement under the SOF and no exceptions apply

A buyer agreed to purchase a seller’s house for $250,000 “on condition that the buyer obtain  mortgage financing within 30 days.” Thirty days later, the buyer told the seller that the buyer  would not purchase the house because the buyer had not obtained mortgage financing. The  seller asked the buyer where the buyer had tried to obtain mortgage financing, and the buyer  responded, “I was busy and didn’t have time to seek mortgage financing.” 

If the seller sues the buyer for breach of contract, is the court likely to find the buyer in  breach? 

• A. No, because the buyer’s performance was subject to a condition that did not occur. 

• B. No, because the promise was illusory since the buyer was not obligated to do anything. 

• C. Yes, because a promise was implied that the buyer had to make reasonable efforts to obtain mortgage financing. 

• D. Yes, because a reasonable interpretation of the agreement is that the buyer had an  obligation to purchase the house for $250,000 in 30 days

Answer explanation

It is implied under the good faith and fair dealing requirement that one will make reasonable efforts to fulfill contract conditions. Note how the answer hid the ball on the language of the actual duty, but that duty requires that parties try to fulfill conditions.

A contractor agreed to remodel a homeowner’s garage for $5000. Just before the parties  signed the one-page written contract, the homeowner called to the contractor’s attention the  fact that the contract did not specify a time of completion. The parties orally agreed but did  not specify in the contract that the contractor would complete the work in 60 days, and then  they both signed the contract. The contract did not contain a merger clause. The contractor  failed to finish the work in 60 days. The homeowner has sued the contractor for breach of  contract. 

Is the court likely to admit evidence concerning the parties’ oral agreement that the work  would be completed in 60 days? 

• A. No, because the court must ascertain the meaning of the agreement from the terms of the  written contract. 

• B. No, because the oral agreement was merely part of the parties’ negotiations. 

• C. Yes, because the contract is ambiguous. 

• D. Yes, because the time limit is an additional term that does not contradict the partially  integrated written contract.

Answer explanation

The contract was only partially integrated and the date for completion only supplements (not contradicts) the contract. To answer correctly, you had to start by looking at whether the contract was partially or totally integrated and go from there.

Collection of a debtor’s $2000 debt to a creditor was barred by the applicable statute of  limitations. The debtor sold and delivered his car to a buyer under a written agreement,  signed by the buyer, in which the buyer promised to pay the $2000 purchase price to the  creditor “in satisfaction of [the debtor’s] debt to [the creditor].” 

Can the creditor recover the $2000 from the buyer?

• A. No, because payment of the $2000 to the creditor would undermine the statutory public  policy against enforcement of stale claims. 

• B. No, because the creditor’s rights as an intended beneficiary are subject to any defenses  available to the contracting parties between themselves. 

• C. Yes, because the buyer’s promise to pay $2000 to the creditor is enforceable by the creditor regardless of whether the debtor was legally obligated to pay the creditor anything. 

• D. Yes, because the buyer’s promise to pay $2000 to the creditor revived the uncollectible  debt.

Answer explanation

The creditor is an intended beneficiary under the agreement between the debtor and  the buyer and has nothing to do with the original agreement between debtor and creditor (or  the SOL).

A mill and a bakery entered into a written contract that obligated the mill to deliver to the  bakery 1000 pounds of flour every Monday for 26 weeks at a specified price per pound.  The mill delivered the proper quantity of flour in a timely manner for the first 15 weeks.  However, the 16th delivery was tendered on a Tuesday, and amounted to only 800 pounds.  The mill told the bakery that the 200-pound shortage would be made up on the delivery due  the following Monday. The late delivery and the 200-pound shortage will not significantly  disrupt the bakery’s operations. 

How may the bakery legally respond to the nonconforming tender? 

• A. Accept the 800 pounds tendered, but notify the mill that the bakery will cancel the  contract if the exact amount is not delivered on the following Monday. 

• B. Accept the 800 pounds tendered, but notify the mill that the bakery will deduct from the  price any damages for losses due to the nonconforming tender. 

• C. Reject the 800 pounds tendered, but notify the mill that the bakery will accept delivery  the following Monday if it is conforming. 

• D. Reject the 800 pounds tendered, and notify the mill that the bakery is canceling the  contract.

Answer explanation

This is exactly what the bakery is permitted to do since the nonconforming tender did not substantially affect the contract. It must accept the 800 pounds, but can deduct any damages.

A builder contracted in writing to construct a small greenhouse on a homeowner’s property  for $20,000, payable upon completion. After the builder had spent $9000 framing the  greenhouse and an additional $1000 for materials not yet incorporated into the greenhouse,  the homeowner wrongfully ordered the builder to stop work.  The builder then resold the unused materials that he had already purchased for the  greenhouse to another contractor for $1000. At the time the homeowner stopped the work, it  would have cost the builder an additional $5000 to complete the project. The partially built  greenhouse increased the value of the homeowner’s property by $3000. 

In a suit by the builder against the homeowner, how much is the builder likely to recover?

• A. $3000, the increase in the value of the homeowner’s property.

• B. $10,000, the total cost expended by the builder at the time of the breach.

• C. $14,000, the total cost expended by the builder ($10,000) plus the builder’s expected  profit ($5000), minus the loss avoided by the resale of the unused materials ($1000).

• D. $15,000, the contract price ($20,000) minus the costs saved by the breach ($5000).

Answer explanation

This represents builder’s expectation damages and takes into account his duty to mitigate his damages. This would put him in the position he would have been in had the contract been completed.

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?

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

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

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

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

Answer explanation

Note the answer choice does not mention reformation due to fraud or  misrepresentation nor does it mention the PER. They hide the ball and mention that the employer made a unilateral mistake (which is true but a tricky way to phrase the answer choice given that it  was based on reformation through fraud or misrepresentation).