Contracts & Sales Missed MBE
Questions
A wholesaler of bicycle chains sent a retailer the following fax on December 1:
"Because of your continued loyalty as a customer, I am prepared to sell you up to 1,000
units of Bicycle Chain Model D at $7.50 per unit, a 25% discount off our original $10.00
price. This offer will remain open for 7 days." The fax lacked a full, handwritten
signature, but was on the wholesaler's letterhead and had been initialed by the
wholesaler's head of sales. On December 4, the wholesaler's head of sales called the
retailer and informed the retailer that he had decided to revoke his December 1 offer.
On December 5, the retailer placed an order for 1,000 bicycle chains, stating that he
would pay the discounted price of $7.50 per unit. What is the correct value of the order
placed by the retailer?
A. $7,500, because the wholesaler's revocation was not in writing.
B. $7,5000, because the wholesaler was bound to keep the offer open for 7 days.
C. $10,000, because the offer was not signed by the wholesaler.
D. $10,000, because the retailer did not provide consideration to hold the offer open. -
Answer Answer choice B is correct. Under the UCC's firm offer rule, an offer to buy or
sell goods is irrevocable if the offeror is a merchant, there is an assurance that the offer
is to remain open, and the assurance is contained in a signed writing from the offeror.
No consideration by the offeree is needed to keep the offer open. Here, all three
conditions are satisfied (note that letterhead and an agent's initials suffices as a
"signature"), and the wholesaler's offer was irrevocable until the offer period expired.
The retailer's order was within the 7-day window, and thus the order for 1,000 units is
priced at $7.50 each, or $7,500 total. Answer choice A is incorrect because the
wholesaler was bound by the UCC firm offer rule, and his offer was irrevocable
regardless of the method of his attempted revocation. Answer choice C is incorrect
because the initials of the head of sales on the letterhead are sufficient to constitute a
signed writing under the UCC. Answer choice D is incorrect because, under the UCC's
firm offer rule, no consideration was required to hold the offer open.
On May 10, the coach of a youth league baseball team sent a letter to a supplier asking
the supplier to promptly ship 20 red jerseys to him. On May 15, the supplier received
this letter and sent the coach a reply letter accepting the offer. On May 16, the supplier
realized that he had no red jerseys with which to fill the order, and sends the coach 20
blue jerseys with a note that the blue jerseys were tendered as an accommodation. The
coach received the jerseys and accommodation note on May 18, and received the
supplier's acceptance letter on May 19. On May 20, which of the following is a correct
statement of the parties' legal rights and duties?
Answers:
,A. The coach can either accept or reject the blue jerseys and, in either event, recover
damages, if any, for breach of contract.
B. The coach can either accept or reject the blue jerseys, but if he rejects them, he will
thereby waive any remedy for breach of contract.
C. The supplier's shipment of nonconforming goods constituted an acceptance of the
coach's offer, thereby creating a contract for the sale of the blue jerseys.
D. The supplier's shipment of the blue jerseys constituted a counteroffer. - Answer
Answer choice A is correct. A seller's shipment of nonconforming goods with a notice of
accommodation does not constitute an acceptance and breach, but rather a
counteroffer, which the buyer is free to either accept or reject. However, an offer calling
for prompt shipment can be accepted either by a prompt promise to ship or by the
prompt shipment of goods. Under the mailbox rule, an acceptance is effective when
mailed. Consequently, on May 15 when the supplier mailed his acceptance to the
coach, a contract for 20 red jerseys was formed, even though the coach did not receive
this acceptance until May 19. With regard to the May 16 shipment of blue jerseys by the
supplier that the coach received on May 18, the coach may accept or reject these
jerseys as nonconforming goods and, in either event, recover damages, if any. Answer
choice B is incorrect. Although a seller's shipment of nonconforming goods with a notice
of accommodation does not constitute an acceptance and breach, but rather a
counteroffer, which the buyer is free to either accept or reject, this is only true if the
seller has not already accepted the buyer's offer. Here, the supplier had earlier mailed
its acceptance of the coach's offer to supply red jerseys, so the supplier's shipment of
the blue jersey constitutes a breach of contract. Consequently, the coach may reject the
blue jerseys without waiving any remedy for breach of contract. Answer choice C is
incorrect because the supplier's shipment of the blue jerseys did not constitute an
acceptance of the coach's offer, but a breach of the contract that had already been
formed for the shipment of red jerseys. Answer choice D is incorrect because, although
typically an accommodation shipment constitutes a counteroffer rather than an
acceptance and breach of the contract, here the shipment, despite being designated as
an accommodation, cannot be a counteroffer because the supplier had already
accepted the coach's offer.
A homeowner entered into a contract with a landscaper. The contract specified that the
homeowner would pay the landscaper $10,000 upon completion of a list of projects. The
landscaper performed the work while the homeowner was away on vacation. When the
landscaper sought payment, the homeowner refused, noting that a tree had not been
trimmed as required by the contract. The landscaper responded that, since he would
now have to forego other work in order to trim the tree, he would do it but only if the
homeowner agreed to pay him a total of $10,500 for his services. The homeowner,
desperate to have the work completed, agreed. Once the work was completed,
however, the homeowner gave the landscaper a check for $10,000, and refused to pay
more. The landscaper sued for breach of contract. Is the landscaper likely to succeed in
his claim?
,Answers:
A. No, because an enforceable contract cannot be renegotiated.
B. No, because there was no consideration for the promise to pay $10,500 and no
unanticipated circumstances arose.
C. Yes, because there was a valid modification of the contract.
D. Yes, because the landscaper suffered a detriment by foregoing other work. - Answer
Answer choice B is correct. At common law, a promise to perform a preexisting legal
duty does not qualify as consideration because the promisee is already bound to
perform. In this case, the landscaper had a preexisting legal duty to trim the tree, and
thus there was no consideration to support the homeowner's promise to pay an
additional $500. Answer choice A is incorrect because an enforceable contract may be
renegotiated. Even when there is a preexisting legal duty, there will be consideration if
the promisee gives something in addition to what is already owed or varies the
preexisting duty. Answer choice C is incorrect because modification of a services
contract must be supported by consideration. Or some circumstances that were not
anticipated when the contract was made must have arisen, and modification is fair and
equitable in light of those circumstances. Answer choice D is incorrect because the fact
that the landscaper had to forego other work would not serve as consideration in this
case because the landscaper was under a preexisting legal duty.
A maker of hand-woven rugs contracted with a supplier to provide yarn made from
sheep's wool. The written contract specified that, for four years, the supplier would
provide the rug maker with 2,000 spools of yarn made from 100% sheep's wool per
month, at $10 per spool, for a total of $20,000. Two years into the contract, the supplier
sent 2,000 spools of yarn to the rug maker made from 90% sheep's wool and 10%
synthetic fiber. The rug maker sent a check to the supplier for $15,000 for the shipment,
and added a clear note on the check stating that the payment was in full for the
shipment, but was $5,000 less due to the synthetic fiber in the yarn. The supplier
promptly deposited the check, and then four months later filed suit against the rug
maker for the remaining $5,000. The supplier has submitted evidence of the written
contract, and the rug maker has submitted evidence of the deposited check. What is the
rug maker's best defense in this situation?
Answers:
A. The rug maker's and supplier's good faith dispute over the yarn composition
suspended the rug maker's obligation to pay the remaining $5,000.
B. The act of knowingly depositing the check for $15,000 by the supplier was a novation
that relieved the rug maker from any further liability.
C. The supplier deposited the check for $5,000 less than the contract price, thereby
discharging the rug maker of any further duty to pay the remaining amount for that
month's shipment.
D. By depositing the check, the supplier was estopped from claiming that the rug maker
owed him an additional $5,000. - Answer Answer choice C is correct. This is considered
an "accord and satisfaction," which discharges both the original contract and the accord
contract. Under an accord agreement, a party to a contract agrees to accept a
performance from the other party that differs from the performance that was promised in
the existing contract, in satisfaction of the other party's existing duty. Generally,
, consideration is required for an accord to be valid. By compromising, each party
surrenders its respective claim as to how much is owed. If a claim is subject to dispute,
it can be discharged if the person against whom the claim is asserted in good faith
tenders a negotiable instrument (e.g., a check) that (i) is accompanied by a conspicuous
statement indicating that the instrument was tendered as full satisfaction of the claim
(e.g., "payment in full"), and (ii) the claimant obtains payment of the instrument. Here,
the rug maker compromised by accepting the 90% wool yarn, and the supplier
compromised by accepting $15,000 rather than $20,000. Thus, there was an accord
and satisfaction and the rug maker is not liable for the remaining $5,000. Answer choice
A is incorrect, because the good-faith dispute did not suspend the duty of the rug maker
to pay for the yarn supplied. In the context of an accord and satisfaction, it is only the
existence of an accord agreement that suspends the original duty of a party. Answer
choice B is incorrect, as this is not a novation. A novation is the substitution of a new
contract for an old one when the original obligor is released from his promises under the
original agreement and a new obligor becomes liable. Here, there are only two original
parties-the rug maker and the supplier. Answer choice D is incorrect because estoppel
requires not only an assertion by a party but also justifiable reliance on the assertion by
the party to whom the assertion is made, to that party's detriment. Here, even assuming
that the supplier's deposit of the check constituted an assertion, there is no evidence
that the rug maker has relied on this assertion to his detriment.
While attending a rodeo on August 20, a hat maker entered into a valid, written
agreement with the rodeo manager to make 500 leather cowboy hats for an upcoming
rodeo event at a price of $75 per hat. Per the agreement, the rodeo manager agreed to
pay one-fourth of the total purchase price to a tannery owner to whom the hat maker
owed a debt for a previous leather order. On August 25, the hat maker changed his
mind about paying one-fourth of the purchase price to the tannery owner. The hat
maker and rodeo manager subsequently executed a valid modification of the original
agreement. The rodeo manager's brother was also present on August 20 when the
original agreement was executed, but he did not know about the August 25 modification
of the agreement to no longer pay the tannery owner. On August 30, the brother, who
was friends with the tannery owner, called and told him that his debt from the hat maker
would finally be paid off. However, the rodeo manager refused to pay one-fourth of the
purchase price to the tannery owner. If the tannery owner sues the rodeo manager for
one-fourth of the purchase price, will he recover?
Answers:
A. No, because the tannery owner did not rely on the August 20 agreement between the
hat maker and the rodeo manager.
B. No, because there was no consideration for the promise to pay the tannery owner by
the hat maker and the rodeo manager.
C. Yes, because the tannery owner had the right to sue the rodeo manager to enforce
the contract between the rodeo manager and the hat maker.
D. Yes, because the rodeo manager agreed to pay one-fourth of the purchase price to
the tannery owner on August 20. - Answer Answer choice A is correct. If performance of
a promise would satisfy an actual, supposed, or asserted duty of the promisee to a third
party, and the promisee did not intend to make a gift to the third party, then the third
