Contract_Law_FULL - Deadweight Loss Problem 1 -Vera and Vladimir live in the Arctic. Vera is an expe

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Unit 1 Deadweight Loss Problem 1 2/2 points (graded)

Vera and Vladimir live in the Arctic. Vera is an expert ice fisher, and Vladimir is an excellent hunter. Neither is any good at the other activity – Vera is a terrible hunter, and Vladimir is awful at fishing.

Vera can only ice fish in the winter, but she can freeze what she catches to eat during the summer. Vladimir can only hunt in the summer, but he can’t freeze what he kills.

It’s winter, and all of the meat that Vladimir killed during the summer has been eaten or has spoiled. He’s hungry. He sees that Vera is still slowly but surely catching fish, and that she isn’t eating all of them – she’s freezing the extras. He asks her if he can have some of her extra fish, but she says no, because she needs to freeze them so she’ll have something to eat in the summer, when she can’t fish. As a result, Vladimir doesn’t have anything to eat.

What is the deadweight loss in this situation?

Vera is freezing her extra fish.

Vladimir has nothing to eat in the winter. correct Vera won't have anything to eat in the summer.

Vladimir will be unable to eat all of the meat he catches.

Answer Correct: You are correct. The food is inefficiently allocated between Vladimir and Vera, so Vladimir does not have anything to eat during the winter.

Why is this deadweight loss happening?

Vera and Vladimir do not trust each other; therefore, Vladimir cannot make a promise to give Vera meat in the summer in exchange for fish.

Vladimir cannot fish; therefore, Vladimir is going hungry.

They cannot agree on a fair price for fish, therefore Vera does not want to sell her fish.

They cannot trade, therefore they are unable take advantage of the surplus produced by the other. correct

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Answer Correct: This is the correct answer. If Vladimir and Vera figured out a way to trade their surplus food, they could both have enough to eat throughout the year.

Deadweight Loss Problem 2 2/2 points (graded)

Alex and Amy are at a company dinner, where there is exactly one roll of silverware per person.

Amy picks up a roll that accidentally contains two knives and no spoon, and discovers she has no way of eating her soup. Amy buttered and ate her bread.

Meanwhile, Alex opens his roll to see that he has two spoons and no knife. He has some trouble buttering his bread, but he figures out a way to butter it with the spoon.

This draws disapproving frowns from those around him. He has no trouble eating his soup.

The dinner is very large, and Amy tries to search the room for someone with an extra spoon. But there are too many people, so she gives up.

What are the deadweight losses in this situation? (Select 2 Answers) Amy could not eat her soup.

Amy ate her bread.

Alex made a mess buttering his bread.

Amy wasted her time looking for a spoon without any success.

Alex ate his soup. correct Answer Correct: Correct. If Amy had the extra spoon, she could have eaten her soup.

Correct. If Alex had Amy's extra knife, he could have buttered his bread without making a mess.

What is causing it? (Select 1 Answer) Each person has only one roll of silverware.

Alex has made both of his spoons dirty.

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The room is too large for Amy and Alex to find each other and trade. correct

Scenario 1 2/2 points (graded)

Albert is in the fourth grade and loves video games much more than he loves studying-so much so that he has consistently been getting 20% on his homework assignments.

Albert’s mother is concerned and tells him that she wants him to work harder in school.

She bribes him, saying that she will cook Albert whatever he wants for dinner Friday night if he gets 100% on all of his homework assignments for the week. On Friday afternoon, Albert comes home from school and proudly shows his mother his last homework assignment, with yet another 100% written at the top. He then requests that a seven course steak dinner.

What was the promise made?

Albert's mother promised him a new video game, if he stops getting only 20% on his homework assignments.

Albert’s mother promised to cook him whatever he wants for dinner Friday night if Albert got 100% on all of his homework assignments for the week. correct Albert’s mother promised to cook him whatever he wants for dinner Friday night if Albert got 100% on his last homework assignment for the week.

Was there an intent to create legal relations? Why or why not?

Yes, because there was bargain made between Albert and his mother. The parties have an formal relationship (mother and son) that could be considered legally binding Yes, because there was a bargain made between Albert and his mother.

No, because there was no bargain made between Albert and his mother. The parties have an informal relationship (mother and son) and do not intend to be legally binding correct

Scenario 2 2/2 points (graded)

Reconsider the invitation to dinner with slightly revised facts. Portia does not know Professor Fried, but still wants him to attend her dinner to impress Vincent. She emails Professor Fried, introducing herself, extending an invitation to dinner, and offering to immediately pay Professor Fried $500 if he will attend the dinner. Professor Fried accepts, but again decides not to attend the dinner at the last minute.

What were the promises made? Check All That Apply Professor Fried will attend dinner.

Vincent will meet Professor Fried.

Professor Fried will contact Portia if his plans change.

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Portia will pay Professor Fried $500 for attending dinner. correct Was there an intent to create legal relations? Why or Why Not? Yes, there was an intent to create legal relations because there was a bargain between Professor Fried and Portia. correct No, there no intent to create legal relations, because there was no formal agreement between Professor Fried and Portia.

Frolic and Banter?

1/1 point (graded)

The law won't enforce contracts that are merely "frolic and banter" -- that neither side takes seriously. Why do you think that is? Please choose the option you think is best, and explain your reasoning in the discussion below.

Courts do not like being in the business of determining what is a joke and what is not, so the burden should be on the people making the agreement to make it clear that the agreement is not a joke. correct People should be free to be silly without fear of legal retribution.

It would be ridiculous for courts to enforce contracts meant as jokes, and society wouldn't stand for it if courts tried to enforce them.

Other reason (please explain in the discussion below)

Legally Enforceable Contracts?

3/3 points (graded)

Which of these three situations could be a legally enforceable contract? Read through each situation and decide for yourself.

You and your father have been discussing Bill, a friend of yours whom your father has always considered quite dimwitted. You defend Bill's drive, capabilities, and prospects at his new job, but your father says to you, "If Bill ever gets promoted, I'll give you a million dollars."

Is this a situation that can be a legally enforceable contract?

Yes No correct You are a fan of Argentina's soccer team and your friend is a fan of Germany's. After heatedly discussing the strengths and weaknesses of the two teams for 45 minutes, you each make a bet with the other that if your team wins the World Cup, the other will pay

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you $500. You shake on it, and (laughing because you think your friend is going to end up paying you a lot of money) write down a short agreement on a napkin, which your friend signs.

Is this a situation that can be a legally enforceable contract?

Yes correct No You and your cousin decide to take a trip to Florida together. You've been calling each other to plan the details of your flights and hotels for weeks, and you agree that you will buy the plane tickets and she will reserve the hotel. After you reserve and pay for both tickets, your cousin cancels on you and refuses to pay because she found out you had made some disparaging remarks about her housekeeping skills a couple of years ago.

Is this a situation that can be a legally enforceable contract?

Yes correct No

Scenario 1 1/1 point (graded)

Mike has just received a job offer from Delivery Services, Inc. The employment contract Delivery Services gives to Mike includes the following clause as a description of Mike’s duties: EMPLOYMENT CONTRACT FOR NIGHT DRIVER The undersigned employee (“Employee”) shall work for Delivery Services, Inc. (“Company”) as a night driver in the state of Ames, relieving day drivers to drive a company truck on the package delivery routes designated by the Company between the hours of 10 p.m. and 6 a.m., Eastern Standard Time. The Company shall compensate the Employee $50 for each hour of work and shall ensure that the Employee is scheduled for at least three shifts a week.

The state of Ames, extremely troubled by the large number of car accidents that have been occurring at night, recently passed a regulation outlawing any person from driving between the hours of 9 p.m. and 7 a.m. each day. Mike signs and returns his employment contract to Delivery Services, Inc., but the company refuses to give him any shifts after learning of the regulation.

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If Mike sues Delivery Services, Inc. for enforcement of the contract, what is the result?

He would win the lawsuit. The agreement is both legal and moral. Delivery Services Inc. guaranteed at least three shifts each week between the hours specified.

He would win the lawsuit. The agreement is both legal and moral. Delivery Services Inc. is obligated to provide alternative work.

He would lose the lawsuit. The agreement is illegal but moral. Delivery Services Inc. is not obligated to perform its duties under the contract. correct

Which scenarios are enforceable bargains?

1/1 point (graded)

Read the scenarios presented below, and select the ones you believe to be enforceable bargains that the law will stand behind.

(Select 2 Answers) A) Caroline tells her sister Jean that if Jean will run Caroline's business for a month while Caroline is away on vacation, Caroline will make the down payment on a new car for Jean. Jean has wanted a new car ever since she got her Driver's License.

B) Mickey promises his son Michael, while he is dropping him off at his first day of college, that Mickey will give him $200 of spending money every month.

C) A grandfather tells his granddaughter that if she quits her job, he will provide her with an income.

D) Elsa promises her nephew Edgar that if he leaves his job to go back to business school, she will pay his expenses for the two years he is in school, as long as he chooses to attend a school in Boston, where Elsa lives, and agrees to visit Elsa once a week. correct

Scenario 1 2/2 points (graded)

Beth gets the following email from her best friend Anne: On Thursday, April 3, at 2:52 PM, annelovescookies@email.com wrote: Oh my gosh, Beth, I NEED your help. I forgot that I am hosting a party for my niece’s graduation this weekend. I don’t have any sort of food arranged. Because you are such an incredible baker (and the greatest friend in the world), would you be able to bake 100 assorted cookies for the event? I know it’s a huge favor, but I would be eternally grateful and would pay you $1,000,000 or whatever else your heart desires.

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If Beth responds, agreeing to bake the 100 cookies, can she hold Anne to her side of the bargain?

Yes No correct Why or why not? Apply the principles Professor Fried has discussed thus far.

Which two principles are most relevent to this case?

Is there an Intent to Create Legal Relations?

Are Both Sides Serious?

Is this a Gift or a Bargain?

Is this a Legal and Moral contract?

Multiple Choice 0/1 point (graded)

Why did Mrs. Demotsis argue that this was not an enforceable bargain?

The exchange rate was awful.

Mrs. Demotsis proposed the exchange and Mr. Batsakis agreed to it without asking for any additional terms, so there was no bargaining.

Mr. Batsakis hadn’t given the drachmae in exchange for anything, so this was a gift.

The two parties hadn’t intended to create legal relations.

Multiple Choice 1/1 point (graded)

The court decided that Mrs. Demotsis and Mr. Batsakis’ deal was a bargain (although maybe a bad one). What was Mr. Batsakis compensated for?

A. Bargaining expenses B. Compounding interest from the date he made the loan to Mrs. Demotsis C. Risk correct D. Litigation expenses

Drag and Drop 1/1 point (graded)

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Is an auction a fair way to settle on a price for something? Which details might imply that an auction is fair or unfair? Label each detail using fair or unfair.

Detail Advertising the Auction in a populous city

Advertising the Auction in a deserted area

Holding the auction in a deserted area

Holding the auction in a populous city

Fair or Unfair?

Fair

correct Unfair

correct Unfair

correct Fair

correct Unfair

Limited number of bidders

correct

Sellers Designating a minimum bid price for their items correct

Fair

Winning bid is much less than the item’s actual value

Unfair

correct

Numerical Input 2/2 points (graded)

General Average Problem You’ve just learned about the concept of general average. Try applying it to the following hypothetical:

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A cruise ship docks close to Rome for three days, giving the passengers plenty of time to shop and take in the sights. Unfortunately, the passengers are a bit overzealous in their purchases and fill the ship’s cargo beyond capacity. The ship’s cargo is worth $100,000. Amanda, one of the passengers, spent the full three days shopping in the stores along Via Condotti, Rome’s most fashionable street. Her cargo is valued at $20,000. Barry, another passenger, spent his three days filling a suitcase with keychains from souvenir stores. Barry’s cargo is valued at $200. To save the ship from sinking, the captain must throw cargo overboard. He begins with Barry’s suitcase and continues until the ship is no longer in danger, discarding $50,000 worth of cargo. Amanda is relieved—all of her designer clothes managed to survive the captain’s purge. Barry, however, is devastated—he had planned to add those keychains to his growing collection at home, which nearly fills the garage.

Use the rule of general average to calculate the net cargo value Amanda and Barry will each receive when the ship docks.

Please only enter your number without $ , or .

Amanda

10000

correct

10000 Barry

100

correct

100

Label the Elements 5/5 points (graded)

Think about the cases of Jonah and the Whale (general average) and Batsakis v.

Demotsis. What do we learn about bargains? Which of the following, makes a good or happy bargain between two parties? What about a sad bargain? Label each element of a bargain below.

Element Allow some parties to benefit from pure luck

Good Bargain or Sad Bargain?

Sad Bargain

correct

Spread Risk Proportionately

Good Bargain

correct

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Take into account special and changing circumstances

Have unequal exchanges (something for nothing)

Good Bargain

correct Sad Bargain

correct Good Bargain

Take into account risk

correct

Comprehension Check 1/3 points (graded)

In Batsakis v. Demotsis, the circumstances that lead to the agreement were no fault of either party. In this case, who caused the difficulties that led to this bargain?

The Boyfriend and His Associates correct The Boyfriend's Associates incorrect The man who caused the car accident No particular party was at fault Answer Incorrect: The boyfriend's associates were not the only parties to complicate this bargain.

Explanation By contrast to Batsakis v. Demotsis, in the Car Accident, her boyfriend and his associates had caused the difficulties that led her to make the deal. The correct answer is boyfriend and associates, not just boyfriend.

In Post v. Jones, we learned about what makes a good bargain. When the woman sold her annuity, was this a good or bad bargain? Why? Good Bargain: The boyfriend's associates paid a lower price to account for the risk that they might not be paid.

Good Bargain: The woman received a fair price for her annuity.

Bad Bargain: The bargain was unequal, because the woman got nothing in exchange for the lower price she was paid. correct Bad Bargain: The boyfriend's associates benefitted from pure luck.

Answer

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Correct: Correct. The bargain was unequal because the associates paid far less than the annuity was worth-- she got nothing in return.

Based upon your answer to the two questions above and what you know from Batsakis v. Demotsis, how do you think this case worked out? Why? The contract was enforceable, because both parties were serious about this bargain and intended to create legal relations.

The contract was enforceable, because neither party was at fault for the circumstances and the value paid was fair.

The contract was unenforceable, because the boyfriend's associates benefited from pure luck when the woman sold the annuity for less than it was worth.incorrect The contract was unenforceable, because one party was at fault for the circumstances and the price paid was unfair. correct

Alaska Packers: Bargain?

1/1 point (graded)

What makes Alaska Packers look like a bargain? (Select Two Answers) A. The workers exchanged labor for payment.

B. The new contract price ($100) was the customary rate to pay summer workers.

C. The company and workers agreed to and signed new contracts.

D. Neither party was at fault for the causing the other to enter the agreement.

Are they the same?

1/3 points (graded)

The court in Alaska Packers decided that the workers’ new contract was not a bargain.

Using the court’s reasoning in deciding the case, which of the following situations are analogous?

A. Alfred offers to sell Betty his car for $1,000. Betty decides she wants to do some comparison shopping before she accepts Alfred’s offer, so she tells him she’ll get back to him. After a week, Betty still cannot find as good a deal as Alfred offered her. She calls Alfred and tells him she’ll buy his car. However, Alfred now tells Betty that he’ll only sell if she pays him $2,500. Betty accepts.

Is it analogous?

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Yes incorrect No correct Explanation A. Alfred and Betty’s situation is different because they have not formed a contract.

When Betty tells Alfred that she’ll get back to him, that is a rejection of his offer.

Although Betty later tells Alfred that she’d like to take him up on his original offer, Alfred is under no legal obligation to uphold this offer.

B. Alfred places an ad in the newspaper saying he’ll sell his car for $1,000. Betty calls Alfred and says she’d like to buy the car if it’s still available. Alfred tells her it is and to come by to pay and pick it up. When Betty gets to Alfred’s house, Alfred asks her if she’d like to take the car on a test drive. Betty says “Of course!” and they drive 30 minutes into the desert. The two pull the car over and get out to admire the sun setting across the deserted stretch of sands. Betty turns around to find that Alfred has gotten back into his car and locked the doors. Alfred rolls down the window and tells Betty that he’ll leave her in the desert unless she now agrees to pay $2,500 for the car. Betty accepts.

Is it analogous?

Yes correct No incorrect Explanation B. This situation is analogous to Alaska Packers because Alfred and Betty have formed a contract when Betty calls to buy the car and Alfred accepts her offer. By threatening to leave Betty stranded in the desert at nightfall unless she agrees to an increased price, Alfred essentially has her over a barrel and sells her the same thing twice, similar to the workers in Alaska Packers.

C. Alfred offers to sell Betty his car for $1,000. Betty accepts but tells Alfred she needs to sell her current car to get the money together, but will come to pay and pick up the car the next Wednesday and he says "Ok." When Betty shows up at Alfred’s door with the $1,000, Alfred tells her that he’ll only let her have the car if she pays him $2,500.

With no other way to perform her job as a pizza delivery person, Betty agrees to pay the increased price.

Is it analogous?

Yes correct No

Self Assessment 8/10 points (graded)

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Christmas Shop Manager: Open Response Bookmark this page

ALASKA PACKERS AND THE CHRISTMAS SHOP MANAGER

Different because both parties willingly invalidated their original contract before its execution and replaced with a new contract of $3500.

The cases are different. In the case of Alaska packers, the employees acted in bad faith, taking advantage of the situation where the chief could not refuse the increase of the offer because he was prevented due to the circumstances. The case of Christmas Shop Manager at first was not bad faith, since both parties decided to sign a new contract with new conditions. For those reasons I understand that the manager would not win the lawsuit to get his job back.

What Makes a Contract?

Use this module as a way to practice your ability to identify enforceable contracts.

Which of the following scenarios is an enforceable contract? If the scenario is not a contract, which of the 4 principles prevents it from being a contract?

A mom promises to give her child his lunch in exchange for a kiss.

No intent to create legal relations correct Both sides are not serious It is immoral or illegal

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It is a promise to make a gif It is an enforceable contract!

A Mafia don promises to pay his thug $200k in exchange for breaking certain windows.

No intent to create legal relations Both sides are not serious It is immoral or illegal correct It is a promise to make a gif It is an enforceable contract!

A professor says to his students, “If you solve this problem, which none of my students in 25 years has been able to do, I will eat my hat.”

No intent to create legal relations incorrect Both sides are not serious It is immoral or illegal It is a promise to make a gif It is an enforceable contract!

Victor says to his girlfriend, “If you come on vacation with my family next month, I’ll bring the pearl necklace we picked out for your birthday and I’ll give it to you then.” She goes on the vacation, but he forgets to bring the gif.

No intent to create legal relations Both sides are not serious It is immoral or illegal It is a promise to make a gif correct

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It is an enforceable contract!

A father says to his son, “If you make straight As every semester, I will pay for your college education.”

The son works hard and does make straight A every semester for his first three years. The father then decides to stop paying his tuition.

No intent to create legal relations Both sides are not serious It is immoral or illegal It is a promise to make a gif It is an enforceable contract! correct

Julissa promised Savannah $800 to take her university/college admissions exams, like the SAT, for her.

Savannah checked into the test as Julissa, using a fake ID, and acheived a perfect score on the test.

No intent to create legal relations Both sides are not serious It is immoral or illegal correct It is a promise to make a gif It is an enforceable contract!

A supervisor went out with his employees to a team dinner, and everyone was making fun of their stiff waiter. Afer a few bottles of wine, the boss says, “Anyone who can get that guy to crack a smile gets a $50,000 raise.”

No intent to create legal relations Both sides are not serious correct It is immoral or illegal It is a promise to make a gif

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It is an enforceable contract!

A few old college buddies were planning a fly fishing trip, and Dave mentioned to them that he was in the market for some new gear. Matt said that he had some old stuff in great condition, and he’d be happy to give to Dave, if they could take Dave’s boat to the spot where they planned to fish because it’s their only mode of transportation. Dave agrees.

No intent to create legal relations correct Both sides are not serious It is immoral or illegal It is a promise to make a gif It is an enforceable contract!

The women on Collinwood Street have, without setting up a formal system, taken turns for the last decade or so throwing an elaborate Christmas party every year for everyone on the street. This year, everyone expects that it is Amelia’s turn to throw the party, but on December 18, she drops into conversation that she doesn’t plan to throw the party this year. It is far too late for anyone else to plan anything.

No intent to create legal relations incorrect Both sides are not serious It is immoral or illegal It is a promise to make a gif It is an enforceable contract!

Angela and her friend Maria have had a couple of beers at a bar. While watching the game on the TV, they start talking and laughing about how much fun it would be to get season tickets together to the Yankees, and they decide that Angela should purchase them tomorrow and Maria will reimburse her. Maria gives Angela $25 as a sign that she is serious. The next day, Angela buys the tickets.

No intent to create legal relations

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Both sides are not serious It is immoral or illegal It is a promise to make a gif It is an enforceable contract! correct

Enforceable Bargains Bookmark this page

Multiple Choice 1/1 point (graded)

1. Amy sees an amazing shirt on sale for $10, marked down from $1000. The sale ends tomorrow, when the shirt will go back up to its original price. Amy must have the shirt, but realizes that she’s maxed out her credit card and doesn’t have any cash to pay for it.

She asks Becca to loan her $10, which she promises to repay with 20% interest as soon as she gets her next paycheck. Becca agrees.

Is the contract enforceable?

A. Yes, under the reasoning of Batsakis v. Demotsis. correct B. No, under the reasoning of Alaska Packers.

C. No, under the reasoning of the brother-in-law’s promise to let his deceased brother’s wife and family live in his extra house.

D. Yes, under the principal of general average.

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Hint Show Answer

Multiple Choice 0/1 point (graded)

2. Andrew and a bunch of his friends are going downtown for the night. Andrew invites his good friend Ben, and says that he’ll buy him a drink if he runs into him while they’re

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out. Motivated by that promise, Ben tracks Andrew down at the bars and orders the most expensive drink on the menu, which costs $300.

Does Andrew have to pay?

A. Yes, under the reasoning of Batsakis v. Demotsis.

B. No, under the reasoning of Alaska Packers. incorrect C. No, under the reasoning of the brother-in-law’s promise to let his deceased brother’s wife and family live in his extra house. correct D. Yes, under the principal of general average.

Explanation Similar to the case of the brother-in-law’s promise to his deceased brother’s wife, Andrew has only made a gratuitous promise to buy Ben a drink; it does not particularly matter to him whether or not he runs into Ben downtown.

Submit You have used 1 of 1 attemptSome problems have options such as save, reset, hints, or show answer. These options follow the Submit button.

Hint Show Answer Answers are displayed within the problem Review

Multiple Choice 1/1 point (graded)

3. There have been rumors that CI will stop manufacturing Hacky Honeys, their popular stuffed toy line, at the end of the year. Amanda offers Betty $800 for Betty’s limited edition Hacky Honey (retail value $10). If Betty agrees to the deal, is the contract enforceable if CI continues manufacturing Hacky Honeys?

A. Yes, under the reasoning of Batsakis v. Demotsis. correct B. No, under the reasoning of Alaska Packers.

C. No, under the reasoning of the brother-in-law’s promise to let his deceased brother’s wife and family live in his extra house.

D. Yes, under the principal of general average.

Explanation

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Similar to Batsakis v. Demotsis, Amanda and Betty’s deal takes into account risk. Thus, although this appears to be a bad bargain, Amanda has taken the risk that Hacky Honeys will continue to be manufactured; conversely, Betty has taken the risk that CI will stop manufacturing Hacky Honeys and prices will shoot up far beyond the price Amanda pays her.

Submit You have used 1 of 1 attemptSome problems have options such as save, reset, hints, or show answer. These options follow the Submit button.

Hint Show Answer Answers are displayed within the problem Review

Multiple Choice 0/1 point (graded)

4. Abby and Briana sign a contract saying that Briana will sublease Abby’s apartment for the year for $1500 per month, beginning the following week. Abby takes down all of her advertisements and signs a lease for a new apartment on the other side of town. The day before the lease starts, Briana tells Abby that she’s found another sublease that will only be $850 per month. She tells Abby that she won’t sublease from her unless Abby lowers the rent. Abby agrees. Is the new contract enforceable?

A. Yes, under the reasoning of Batsakis v. Demotsis.

B. No, under the reasoning of Alaska Packers. correct C. No, under the reasoning of the brother-in-law’s promise to let his deceased brother’s wife and family live in his extra house. incorrect D. Yes, the pair created a new contract with the same consideration.

Explanation Similar to Alaska Packers, Briana knows that she has Abby over a barrel and uses it to her advantage to renegotiate contract terms when Abby has no real power to insist on the original contract.

Submit You have used 1 of 1 attemptSome problems have options such as save, reset, hints, or show answer. These options follow the Submit button.

Hint Show Answer Answers are displayed within the problem

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Review

Multiple Choice 0/1 point (graded)

5. Annie and Bill sign a contract saying that Bill will rent Annie’s extra room for $500 per month, beginning next week and running through the summer. The day before he’s set to move in, Bill calls Annie and tells her that he’s just gotten another offer to rent a bigger room for the same period for only $400 per month. Worried that she’ll lose the rental income that she expected, Annie agrees to rip up the old agreement and the pair sign a new contract for the same term, requiring Bill to pay only $350 per month. Is the new contract enforceable?

A. Yes, under the reasoning of Batsakis v. Demotsis. incorrect B. No, under the reasoning of Alaska Packers.

C. No, under the reasoning of the brother-in-law’s promise to let his deceased brother’s wife and family live in his extra house.

D. Yes, the pair created a new contract with the same consideration. correct

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UNIT 2

Principles and Empty Bags Bookmark this page

PRINCIPLES AND EMPTY BAGS The agreement is not a bargain as nothing is exchanged and one party is under no obligation to do anything. Therefore this would come under the promise to make a gift, as one side is agreeing to do something for the other with nothing in return and is therefore not a legally enforceable contract.

That agreement is not a bargain because even though there is a compromise from the lumber mill of selling lumber at a fixed price, the lumber mill is not getting any compromise from the distributor in return: there is neither a compromise of exclusivity nor a compromise of buying x quantity of lumber in a year.

Even though both sides are serious, and what they are agreeing to is not illegal or immoral, it can only be considered a bargain if the two parties are making commitments to each other, but this is not the case from the distributor.

It is not a bargain because the distributer did not promise to place any order. The so-called deal is only an end to protect his interest in case he places an order. Even if it turns out that the lumber mill does not sell any lumber at the agreed price in the year, the mill cannot sue the distributor for not creating a condition (place an order) to honour the promise (price@$2.50). Also, the promise here, like promise to make a gift, does not involve productive exchange. It is only one-sided.

The agreement does meet the criteria to create legal relations, both parties are serious, buying and selling lumber in this case is legal and moral.

However an important component is missing. Was there a bargain? The answer is no.The mill received nothing in exchange from the distributor in consideration of the mill to sell to the distributor for a certain price. Therefore the basis for a bargain between the two parties is not satisfied.

This deal is not enough to be legally binding because there is nothing in exchange - it is just a promise to make a gift. And, as we have seen in the past classes, in US law the promise to make a gift is not legally enforceable. If the other party agreed to give something in return (let's say, pay 10 dollars to have this fixed price during the year), we could discuss the existence of an Option Contract. But, since there is nothing in return in this concrete case, then there is no contract.

A deadweight loss occurs when both sides are worse off because the contract is not enforced.

A model sends her headshots to the top agency in Paris. The agency tells her they have a lot of files to review and asks her not to send them to any other agency for one month.

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The model sends them to another agency, which says it will sign her, for a much smaller fee than the first agency would have, as they have a little bit of work for her. It turns out the first agency was looking for just this type of model and would have hired her and made her start with a lot of money. How could the first agency have prevented a deadweight loss?

A. There was not a deadweight loss because the model was signed by the second agency.

B. The first agency could have specified that the model had to leave the file exclusively.

C. The first agency could have promised to consider the file.

D. The first agency could have taken the model to dinner.

E. Both C and D are correct. correct

CONTRACT TO HOLD OPEN OFFER FOR SALE OF CAR This CONTRACT TO HOLD OPEN OFFER FOR SALE OF CAR (“Agreement”), is entered into this 13th day of June, by and between Frank Carseller (“Seller”) and Lisa Needsacar (“Buyer”).

Seller hereby agrees to hold open his offer to Buyer for Buyer to purchase Seller’s 2009 Jeep for $5,000 for a period of 100 days following the signing of this Agreement. If Buyer chooses to accept this offer, she shall immediately notify Seller to arrange payment.

Signed, Lisa Needsacar Frank Carseller

Is the above contract enforceable?

Yes No correct Why or Why Not?

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Both Lisa and Frank Signed the Agreement.

There is a Bargain in this Agreement.

This agreement is a gift to Lisa; therefore unenforceable.

This is an empty bag, Frank has agreed to do something for nothing. correct

One could say that Webb was selling something he had already given away. Why did the Court say this was an enforceable contract?

A. It does not matter that the benefits were conferred in the past—mutuality requirements are fulfilled as long as both parties exchange promises for something, regardless of timing.

B. Webb had exerted his best efforts to save McGowin.

C. The company had a moral obligation to Webb. correct D. Webb conferred a benefit on McGowin, and a party receiving a benefit must always uphold his return promise.

REQUIREMENTS CONTRACT This Requirements Contract is entered into this 8th day of December, between Johnny Appleseed and George Piebaker.

Johnny Appleseed agrees to supply George Piebaker with all his requirements for apples for a period of one year following the date above.

George Piebaker agrees to buy from Johnny Appleseed exclusively, and to pay Johnny Appleseed $80 per bushel of apples.

Signed, Johnny Appleseed George Piebaker

Is the above contract enforceable?

Yes correct

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No Why or why not?

Both George and Johnny signed the Agreement.

There is a Bargain in this Agreement. correct This agreement is a gift to George; therefore unenforceable.

This is an empty bag, Johnny has agreed to do something for nothing.

Carol submits her film to an independent film festival. She receives an automated letter that one of the festival’s programmers will watch the film within two months and let her know whether it has been accepted to the festival. The letter also asks her not to submit the film to anyone else for two months.

Empty Bag incorrect Full Bag Explanation This promise is not one-sided because the festival’s programmers have promised to watch the film within two months.

Sam is a planning a party for 100 people. She finds a venue she likes, but needs to review her guest list to make sure it is big enough. Sam offers the venue owner $50, which the owner takes, not to rent it to anyone until she can confirm her guest list. The next day, Sam calls the venue owner to officially book the room.

Empty Bag Full Bag correct Explanation This promise is not one-sided because Sam has offered the venue money in exchange for them holding the room until she can confirm her guest list.

Patrick has season tickets for his favorite baseball team. He agreed to sell the tickets to Adam for $50 per game, but only if Adam decided later that he wanted to go to the game. The baseball team was having a good season and became number one in their division, so the tickets were suddenly worth $500 per game. Adam tried to buy the tickets for $50.

Empty Bag correct Full Bag Explanation

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Adam’s promise to Patrick is an empty bag-- he has promised only to buy the tickets if he wants to. In this example, Adam has left himself completely open. If, for example, Adam had offered to give Patrick $10 to hold the tickets while Adam was figuring out whether his work schedule would allow him to attend the game, his promise would not have been one-sided.

Lindsay lives in New York and has an interview for a job in San Francisco. She found a wonderful apartment in San Francisco for $200,000 that will surely be sold quickly.

Since Lindsay will not find out if she got the job for a week, she explains the situation to the seller and asks him not to let the apartment to anyone else for a week.

Empty Bag correct Full Bag Explanation This is a one-sided promise. Lindsay has not offered the seller anything in exchange for his promise to hold the apartment for her. In effect, Lindsay hasn’t agreed to anything-if she finds another apartment within that week, she is free to purchase it.

Option Contracts Bookmark this page

OPTION CONTRACTS First, one of the parties is obliged to keep an open offer Second, the other party has the right but not the obligation to a accept the offer Third, the party making the offer assumes an exclusivity obligation: not to deal with third parties until open offer is rejected or the agreed time passes.

Fourth, there is a bargain, the beneficiary of the open offer gives or promises to give something in exchange for the exclusivity and his/her right to accept the offer.

In an option contract the seller offers to keep an offer open for a period while the buyer compensates the seller for keeping it open. Option contracts are not unusual in many industries. In manufacturing, a purchasing agent may procure thousands of pounds of raw materials. The price of the materials may fluctuate with a commodity market. A seller may offer the agent an option to purchase an amount of the material at a price that is at current market level. In return for holding the material and price, the purchasing agent agrees to pay a surcharge. This serves to protect the buyer against a volatile swing in prices.

The characteristic of an option contract which does make it legally enforceable is the consideration portion. If one party agrees to consider the submission, both parties are agreeing to do something.

Basically the difference between a bargain (full bag) and a simple promise (empty bag) is the mutuality of obligations established by the parties involved. It is perceived when a part gives

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something in order to receive another thing. This mutuality of obligations is what makes an enforceable contract. If you force yourself to do something without getting anything for it, this situation is not a bargain, but rather a simple promise you wanted to make.

For a bargain to exist, both parties must exchange something. In an option contract, A gives some value or amount to B in exchange for time to think about the deal. On the other hand, in an unenforceable promise B would give time in exchange for nothing at all, since there would be nothing that A is giving in return. Therefore, on the contrary of unenforceable promises, option contracts do have a bargain.

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UNIT 3

1. Two gentlemen, Charles and Jon, are walking near the waterfront in New York City, when Charles spies the Brooklyn Bridge a short ways away. Charles turns to Jon, a complete stranger, and says to him, “Sir, if you walk across that lovely bridge, I’ll give you a crisp $20 bill.”

Who is the offeror?

Charles correct Jon The bridge The $20 bill Answer Correct: Correct. Charles offered to pay Jon $20 if he walked across the bridge.

Who is the offeree?

Charles Jon correct The bridge The $20 bill Answer Correct: Correct. Charles approached Jon with the offer to walk across the bridge for $20.

What sort of exchange is this?

Promise for Promise Promise for Performance correct Performance for Performance None of the above 2. Jody owns an enormous house, with a lush, green lawn and a sparkling swimming pool, but her job is moving to another town in two months. So she places a For Sale sign in the yard,

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selling the house for $400,000. Adrian wanders by to see the place. Adrian is amazed by the spectacular home, but cannot really afford to pay for the entire thing then and there. Adrian tells Jody, “Hey, why don’t we make a deal? If you’ll give me this house when you move out, I’ll pay you $500 a week for 30 years, starting tomorrow.”

Who is the offeror?

Adrian correct Jody None of the above Answer Correct: Correct. Adrian could not pay the full price, but she offered to "pay $500 a week for 30 years, starting tomorrow."

Who is the offeree?

Adrian Jody correct None of the above Answer Correct: Correct. Jody is the offeree because Adrian made an offer to her.

What sort of exchange is this?

Promise for Promise correct Promise for Performance Performance for Performance None of the Above

3. Two businesses, Smith Industries and Hanson’s Paper, are longtime business partners: Hanson’s sells paper, which Smith makes into books. Hanson’s manager sends an email out to all of its customers, which says "Hello, everyone, we have a great deal on paper today. Get 10 cases for only $175. Let me know if you’re interested.”

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Smith’s purchasing manager is thrilled about the deal. So, he emails back, saying, “Yes, we’ll take the deal. I will have a check for $175 mailed to you as soon as your driver brings the 10 cases of paper. Hope all is well.”

Who is the offeror?

Hanson’s Paper Smith Industries correct Neither Answer Correct: Correct. Smith Industries is proposing the offers to buy 10 cases of paper by mailing a $175 check.

Who is the offeree?

Hanson’s Paper correct Smith Industries None of the above Answer Correct: Correct. Smith Industries offers to mail a $175 check if Hanson's Paper delivers the paper.

What sort of exchange is this?

Promise for Promise Promise for Performance correct Performance for Performance None of the above

SINGING CONTRACT The undersigned Singing Star agrees that she will be ready to embark on tour from Amestown on March 5. Singing Star further agrees that she will perform at the venues designated by management while on tour for the next four months.

The undersigned Music Manager agrees that she will pay Singing Star $8,000 at the end of each such performance.

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Signature: Singing Star Signature: Music Manager Date: January 5 Promise for Performance Promise for a Promise correct Performance for Performance None of the Above

LOST CAT:

$500 REWARD IF FOUND AND RETURNED Fluffy, adorable feline. All white and very furry. Sorely missed. Please call 800-CATLOVR if found. $500 REWARD IF FOUND AND RETURNED TO OWNER! What sort of exchange is this?

Promise for Performance correct Promise for a Promise Performance for Performance None of the Above

Question 1 1/1 point (graded)

1. A saleswoman from Sheehan Industries calls Bernstein Manufacturing and offers to sell one ton of iron rods to Bernstein for $10,000. Bernstein’s agent said that he would need time to think about the offer, and the phone call ends without either party mentioning anything about the longevity of the offer. Four weeks later, Bernstein calls back and says, “Yes, I’ll take the ton of iron for the price you mentioned.” Sheehan

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responds, “Great, thank you” and hangs up the phone. Was a contract formed? If not, why not? If so, who is the offeror and who is the offeree?

A. No — a contract was not formed. Bernstein’s acceptance was not the mirror image of Sheehan’s offer.

B. Yes — a valid contract was formed. Bernstein is the offeror, and Sheehan is the offeree of the contract that they formed. correct C. Yes — a valid contract was created. Sheehan is the offeror and Bernstein is the offeree.

D. No — a contract was not formed. Four weeks is too long for an offer to remain open, so no deal could be made.

Answer Correct: Correct. Bernstein's second call acted as a renewal, making it the offeror. Sheehan was then the offeree, who then accepted by saying "Great, thank you."

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Hint SaveSave Your Answer Show Answer Correct (1/1 point) Review

Question 2 0/1 point (graded)

2. Meghan is walking in her neighborhood one day and sees a home that she especially likes. When she sees the owner of the house outside cutting the grass, Meghan asks if he will sell her the house, but he politely declines. However, she tells him, “I understand that you don’t want to sell. But let me give you $100. If you ever decide to sell, I’d like the chance to match the best offer you receive.” The homeowner says, “Ok, sure. But $20 is enough.” Meghan hands him $20, and makes her way back home. Fifteen years later, the owner is ready to sell. Does he need to call Meghan? Has it been too long, or was a valid contract even formed when the money was exchanged?

A. No — there was no contract, as there was no mirror image. The offer was stated in terms of a $100 exchange, but only $20 was eventually paid. incorrect

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B. Yes — there was a valid contract formed. The man’s suggestion of $20, instead of $100, constituted a counteroffer, which Meghan accepted when she handed him the money. correct C. No — there was no contract. The owner was not ready to sell until fifteen years later, and that is too long.

Answer Incorrect: The parties eventually agreed on the counteroffer, $20. It does not matter that the initial offer was $100.

Explanation B. There was a contract here. Though fifteen years might seem like a long time, that is the time that the contract is in effect once the offer and acceptance have properly happened. In this unit, we were concerned about the time between the offer being made and the acceptance of the offer, saying that it acceptance needs to happen within a reasonable time. Here, the offer and the acceptance happened minutes, or even seconds, apart. Thus, there is no time problem, and there was a contract.

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Question 3 1/1 point (graded)

3. Marsha makes a loan to Kathy, for $10,000, on February 1, 2014. Kathy agrees to repay Marsha $600 a month for 20 months, to account for interest. After only 10 months, Marsha calls Kathy one Monday morning and says, “I’ll forget the rest of the interest if you show up at my work and pay me the balance you owe by Friday at noon.”

The next day, on Tuesday afternoon, Marsha sells the loan contract to Betty, a third party because she doesn't think Kathy will pay off the loan by Friday and she really needs the money. Eventually, on Thursday, Kathy shows up with the cash value of the balance of her loan, ready to pay Marsha. Marsha, having already sold the loan contract, does not want to accept the reduced amount, so she tells Kathy that the deal is off. Is Marsha right? Can she call the deal off after Kathy handed her the cash?

A. Yes — Marsha is right. She is the offeror and the master of her bargain. Kathy failed to properly accept it, so Marsha is not bound.

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B. No — Marsha is not right. Marsha’s offer to Kathy was for a reduction in the loan interest, if Kathy paid the balance by a certain time. Kathy did that, so Marsha is bound by her offer. correct C. Yes — Marsha is right. Kathy failed to comply with the terms of the offer. So, there was never a contract, since Kathy’s acceptance was not the mirror image of the offer.

Donut Shop Hypothetical: Part 1 Bookmark this page

DONUT SHOP HYPOTHETICAL In my opinion, a contract is formed In the first situation when Professor Fried ("The Offeror") returns to the shop and his offer is accepted by the dealer ("Offeree"), on the other hand, the other scenario where the Dealer ("Offeror") taps Prof. Fried ("Offeree") on the shoulders to inform him of his acceptance which establishes a new contract for the same bargains but with different roles of involved parties within a reasonable longevity of the offer in accordance with mirror image rule, additionally, in this situation Prof. Fried may have the right to accept or refuse Dealer's offer as he plays a different role although the longevity of the offer is acceptable.

There is a contract when the Professor Fried goes back to the antique shop because he was the offeror and by returning to the shop you can think that implicitly it means he still interested, the offer was still switched. On the other hand as the professor was the offeror, we learned that he is the master of the bargain, and when the dealer got to him outside the donut shop and accepted the deal, as the offeror the Professor could have said: "No thanks I changed my mind I don't want it anymore".

The offer switch in this situation may or may not be switched. Since the professor is the offeror, the mirror rule can be used to differentiate these two scenarios because is in the first case when the Professor returns to the antique shop and then the dealer says "I accept", so he will get what the Professor offered (the mirror rule). The second case might have a different answer from the professor so it wouldn't be an image mirror rule.

There is a contract formed because when Professor Fried returns to the antique shop is implicitly stating that the offer is still valid and it has been accepted within a reasonable time. Is important to remember that the offeror is the master of the bargain.

This is different from the scenario in which the antique shop owner taps Proffesor Fried on the should in the dount shop, since the offeror (Professor Fried) is the master of the bargain, it can be implied that the offer was valid only while he was in the shop (reasonable time) so is not expected that the offer is still standing after a reasonable time has passed (oferror still in the shop).

Professor Fried was in a position of the oferror (renewal of the ofer).

The mirror rule in the case where Professor Fried returns to the shop is he acting as the master of the bargain not so in the case in which the antique shop owner goes into the donut shop and says to Professor Fried that he accepts the deal in this scenario the shop owner is not respecting the image rule since the oferror made the ofer for a reasonable time (while Professor Fried was in the store) then is implicitly that he is not bound by this.

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In the snow shoveling scenario, the children were the offeror while Professor Fried was the offeree.

The contract was made during snow when Professor Fried was at home. The type of exchange was promise (to pay $20) for performance (snow shoveling). The contract was valid because what Professor Fried accepted was the mirror image of the offer. The performance was of one-off nature, and the contract was duly enforced and completed by Professor Fried's payment of $20 to the children after their work.

However, subsequent snow shoveling, a sort of promise, was not the subject of the said contract. To turn it into a valid offer and acceptance, the children may make a new offer of promise (to pay $20) for promise (to shovel snow under certain circumstances in the future) to Professor Fried. On the other hand, Professor Fried may also offer to engage the children in subsequent snow shoveling if he finds the previous work satisfactory. No matter which party initiates the new offer, it must be accepted by the other party as both switches must be closed for the light bulb to go on. Otherwise, Professor Fried is not obliged to pay for any future snow shoveling, and the children is not entitled to $20 for any subsequent work.

Event 1 : Professor (offeror) promises the children (offeree) that he will pay them $20 within certain time of their performance whenever they shovel his driveway if certain amount of snow falls. Note the offer is not conditioned on professor being present at the time and that payment doesn't have to be in person. The children accepts at the same time.

Type of Exchange : Promise for a Promise.

Event 2 : The children (offeror) proposes to Professor (offeree) that they will shovel his driveway whenever certain amount of snow falls for $20 in return paid within certain amount of time after the action. The offer is not conditioned on professor being present and the payment doesn't have to be in person. The professor accepts at the same time.

Type of Exchange : Promise for a promise .

First, for the bargain to be accepted when the homeowner is away I think the homeowner would be the offeror to the effect of "hey, while I am out could you shovel my driveway for the same price?"

The kids would either accept the bargain of promise for performance or decline if they felt it to risky.

If the kids became the offerors the homeowner would have agreed tot the price and either prepaid them or waited until he returned home to inspect. If the deal was " I will return on X date and I don't want my driveway to be shoveled until X date" it would make it very clear if the job was completed as agreed in the bargain.

Scenario 1 1/1 point (graded)

Read through the following email exchange.

On Tuesday, December 1, at 7:00 PM, oenophile@email.com wrote: To Whom It May Concern:

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I am a lover of all wines, but most particularly, I love the exquisite red blends of Amesville. I see that your shop carries a particularly rare vintage from 1873. Although I know it typically retails for $500 a bottle, I write in the hopes that you might accept my offer to pay $400 for you to ship me the bottle, as I see that you are liquidating your stock.

Hopefully yours, Oeno Phile ___________ On Wednesday, December 2, at 10:00 AM, varietywines@email.com wrote: Dear Oeno Phile, Thank you for your inquiry. As you noted, we are eager to sell our stock before closing up for the holiday season. We are willing to accept your offer of $400 if you can come to pick up the bottle by closing (6 PM) today.

Sincerely, Variety Wines Has there been a valid Offer and Acceptance Yes No correct

Scenario 1 3.75/5 points (graded)

Aaron, in immediate need of money to pay back his gambling debts, calls Blake, saying that he is looking to sell his car, and will give it to Blake if Blake pays him $5,000. Blake tells Aaron that he will think about it. Two weeks later, Blake tells Aaron that he’ll accept the offer and take the car.

Offeror: Aaron correct Blake

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Neither Offeree: Aaron Blake correct Neither

Type of exchange: Promise for a promise Promise for performance correct Neither incorrect

Valid offer and acceptance?

Yes No correct

Scenario 2 5/5 points (graded)

2. Ally posts a sign on the window of her car, “$5,000 or best offer.” Ben sees the sign and tells Ally that he’ll pay her $4,500 at the end of the month if she will give the car to him in two weeks. The parties agree to the deal.

Offeror: Ally Ben correct Neither

Offeree:

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Ally correct Ben Neither

Type of exchange: Promise for a promise correct Promise for performance Neither

Valid offer and acceptance?

Yes correct No

Part 2: Short Answer Bookmark this page

SHORT ANSWER In this case the children where the offeror because they set the price of $20 because they shoveled my driveway. As the offeree I could say yes or no, but in order to make this a valid offer and acceptance I would have had to talk to the children before I left and make it the other way around. I would be the offeror and say "I will pay yo $20 if you shovel my driveway while I am away", and the children as offerees could accept or not. This exchange would be a promise for a promise (I would pay them $20 if they shovel my driveway while I'm away).

In the light of what I know so far, there are three possible scenarios to make a valid bargain with those children as follows: if the children (Offeror") offer to shovel out the driveway for me ("Offeree") periodically for 20$ per each time no matter where am I without prior notice, then I will have to pay them as it represents a valid offer and acceptance circuit, or I may stipulate that the children ("offeror") should have my consent as ("Offeree") via an email or telephone to shovel my driveway prior to proceed which turns the whole issue to a conditional offer if I decide to have the work done until I come back, or if I

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("Offeror") asks the children ("Offeree") to shovel out my driveway before my return via any reasonable mean and they will be paid the said amount in return accordingly in terms of mirror image rule.

In this scenario, the children are the offeror and the driveway owner is the offeree. The type of exchange is a promise for performance.

Both parties could have agreed that the contract is still valid if the offeree is not at home.

Alternatively, both parties could have agreed that the driveway is to be cleared EVERY time it snows.

In both of these instances, the mirror image rule is fulfilled and the contract is valid.

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UNIT 4

Question 1 1/1 point (graded)

Professor Fried’s alma mater sends him a pamphlet in the mail, asking him to make a donation to support the school. The pamphlet promises that donors who give $10,000 or more will have their name put on a plaque with other school supporters. Professor Fried also knows from experience that if he makes any sort of donation, the school will send him a small thank you gift. Thrilled at the idea of having another piece of memorabilia to show his school spirit, Professor Fried pledges to donate $10,000 to the school at the end of the year. The school quickly sends a card thanking Professor Fried for his contribution, and promises that a token of appreciation will be sent shortly. A newspaper gets ahold of the list of the school’s continuous supporters and publishes the names, Professor Fried’s among them.

What factors might a court use to find that the scenario above formed an enforceable contract? (Select 2) The school promised to put Professor Fried’s name on a plaque in return for his donation of $10,000 Professor Fried expected, and the school promised, a small gift in return for his donation Professor Fried’s name was publicized for being a supporter in return for his donation The school sent Professor Fried a thank you card in exchange for his donation correct

Remember to select 2 answers.

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Question 2 0/1 point (graded)

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Which of the ideas that we have discussed might play a role in why courts are more eager to invent bargains in the case of charities than in personal relationships, like the brother-in-law’s promise? (Select 1) Intent to create legal relations correct Offer and acceptance incorrect Immoral exchanges Promises that are actually empty bags

Contrast the reasoning in Kirksey v. Kirksey with that of the case of the injured employee. Which factors made a difference in the injured employee court’s upholding the bargain? (Select 2) Kirksey promisor was alive and changed his mind about the promise, while in the case of the injured employee, the promisor showed intent to honor his promise, which was only dishonored after his death Injured employee suffered permanent disability while the widow did not The widow had not offered any benefit to her brother in law, while the injured employee had offered a benefit to the promisor

CHARITABLE SUBSCRIPTION TO THE UNIVERSITY OF AMES I, Jack Hollingsworth, in consideration of the promise of the University of Ames to use this subscription and other funds to create scholarships for international studies, shall pay $250,000 to the University of Ames, which is located at 1585 Ames Avenue in Cambridge, Massachusetts.

This charitable subscription is made on the following conditions: 1. This subscription shall be used only to create scholarships for students at the University of Ames to study in another country for a period of time no shorter than one academic semester.

2. This subscription will be paid in ten equal annual installments, commencing August 1, 2013, and continuing on the same date each subsequent year until fully paid.

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3. If the University of Ames cannot, or does not, for any reason, use this subscription to fund international studies, contractual relations between these parties will be terminated immediately and Jack Hollingsworth will not retain any obligations to continue payments.

Signature: Jack Hollingsworth Date: July 1, 2013 After promising this subscription to the University of Ames, Jack Hollingsworth made three installments, the first on August 1, 2013, the second on August 1, 2014, and the third on August 1, 2015. Unfortunately, Jack died later that month. His children, who inherited his estate, do not want to make the seven outstanding payments to the University of Ames.

Under the law of charitable subscriptions, is Jack’s estate obligated to continue making payments?

Yes correct No In which three situations could the estate terminate the agreement? Select all 3 answers that apply.

The University used the funds for a domestic internship program The University used the funds for a semester long international studies program The University used the funds to cover a short term operating budget shortfall The University used the funds to pay for international year-long studies The University was unable to award international studies schloarships, because partner institutions stopped accepting Amercian students.

Based upon the cases we have seen so far, what do you believe are the requirements of enforcing a promise through reliance? (Select 2) Reasonableness correct Bargained-for promise

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Foreseeability correct Moral Obligation Written Contract

In which of the following scenarios would a court likely enforce a promise on the theory of reliance? (Select 2) Jack had to go out of town for work last minute and announced to a group of friends he would pay someone a million dollars to watch his dog since all the boarding facilities were full. Henry volunteered to watch the dog, and then put a down payment on a new house the next day.

Mary knows that John would like to purchase a small tract of land, so she promises to give him $20,000 so that he can purchase it. Before Mary gives him the money, John makes arrangements to buy the land. The next day, Mary has a change of heart and withdraws her promise to John.

Elliot’s dad promised to pay for his tuition if he attended Ames Law School. Elliot received a full scholarship to Holt Law School, but decided to attend Ames Law School for $100,000 since his dad had promised to handle the bill. After Elliot graduated, his dad told him that he would not be paying for his tuition.

Reagan owns a restaurant, and a piece inside the oven broke. Reagan called the manufacturer of the oven to replace the broken piece. The manufacturer promised to ameliorate the problem immediately but took three days to supply the broken piece.

During that time, the restaurant was unable to prepare any meals, had to remain closed, and lost thousands of dollars in business.

Read the description below and decide if a court would likely award detrimental reliance damages to one of the parties. If you think it would, decide what amount of damages it would likely award.

Elizabeth is a schoolteacher in a small town, making about $50,000 a year. She has two children and a car note to pay too. In her school district, the teachers work on one-year contracts, and the principal decides each April which teachers she will renew for the following school year.

Earlier this year, Elizabeth was nervous about keeping her position, because her classroom was an absolute mess—students fighting, ungraded papers everywhere, along with other such maladies. But, in the beginning of February, the principal called Elizabeth and told her, “We know you’ve had some problems, but we might want to let

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you figure things out. We’ll see how things go, but your renewal is looking possible. Also know that there will be a raise next year for all teachers, to $60,000.”

Afterward, Elizabeth was thrilled, believing that the principal had basically promised to renew her contract. Anticipating another year at the school and a hefty pay increase, Elizabeth bought new supplies for her classroom, totaling $500, and booked a weekend trip to visit her brother Brandon. The trip cost $700, which she never could have afforded on her old salary.

In March, the principal called Elizabeth again. The principal said, “Elizabeth, we’ve done our review. We’re going to renew your contract when the time comes next month.”

Obviously, Elizabeth was ecstatic. She placed a $3,000 security deposit on a larger apartment, and bought $800 of new furniture to fill it.

When contract renewal time came in April, though, the principal had evidently felt a change of heart. She declined to renew Elizabeth’s contract and expressed the school’s displeasure in Elizabeth’s work.

Furious—not to mention terrified about trying to find another job before the next school year started—Elizabeth sued the school. She demanded $5,000: the $500 in classroom supplies, the $700 for the trip to visit Brandon, the $3,000 security deposit, and the $800 in furniture.

Could Elizabeth reasonably argue detrimental reliance?

Yes correct No

Let’s say that you want to open a lovely new sidewalk café on the nice Main Street of a small town somewhere. So you go to a landlord who rents out storefronts, and you start the process of renting a shop where you can open your restaurant. You and the landlord exchange a series of phone calls, text messages, and Tweets in an attempt to make your rental agreement.

Which of the elements below would need to be agreed upon before we should think that you had an agreement, such that someone could not thwart that agreement without having to pay you, as in the Texaco case? (Select 2) Duration (i.e., how long your rental will go) Amount of rent to be paid for the shop When rent will be paid (i.e., will you pay on the 1st of the month, on the 15th, etc.)

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The permissible uses for the shop (i.e., what can you do with the place)

PARENT-STUDENT COLLEGE CONTRACT Anne Ellison, of 3401 Peachtree Road, Atlanta, Georgia, promises to pay to Andrew Ellison, also of 3401 Peachtree Road, Atlanta, Georgia, $20,000 (twenty-thousand dollars) for successfully completing his college education at Story University.

Successful completion requires Andrew Ellison to do the following: 1. Attend classes regularly; 2. Maintain an overall grade point average of 3.0; 3. Earn no lower than a “C” grade in any course; and 4. Graduate with a Bachelor’s degree from Story University within four years.

Failure to abide by the enumerated conditions will result in the forfeiture of the aforementioned payment.

Signature: Anne Ellison Date: May 25, 2013 Upon graduating from high school in 2013, Andrew was accepted to several higher education institutions. Story University granted him a scholarship that covered 75 percent of his tuition, leaving him responsible for the outstanding $20,000. Another comparable school, Peabody College, awarded him a scholarship that would cover his entire tuition. Despite Peabody College’s offer, Andrew’s mother, Anne, hoped Andrew would attend her alma mater, Story University. To encourage him to do so, she drafted the above contract. Andrew agreed and took out $20,000 in student loans to cover his tuition (and some extra to cover his living expenses). But after three years of study, Anne called Andrew to tell him that she would no longer pay him $20,000 for successfully completing his Bachelor’s degree—her company had recently laid off hundreds of employees and she was worried her position was also in jeopardy.

Apply the reliance principles that Professor Fried has just discussed. If Andrew sues Anne, who would win the case?

Andrew correct

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Anne Assume that Andrew missed two classes each semester for various reasons: occasionally he fell ill, but sometimes he skipped to visit with friends. Does this change your analysis under the first question? Note: We will cover contract interpretation in more depth in a later unit.

Yes No correct

Law at the Margins Unit Test 2/8 points (graded)

Select one answer for each question. Answer all questions before checking.

1. Alma calls Bill and tells him to donate $100 to a charity for her birthday. When Alma’s birthday comes around, Bill doesn’t make the donation and instead gives Alma a $100 painting. Can a court require Bill to make the donation?

Yes, under the theory of charitable subscription Yes, under the theory of Ricketts v. Scothorneincorrect No, because Bill made no promise to rely on No, because Bill still gave Alma a gift of equal value

Explanation Here, although Alma has requested that Bill make a $100 donation to charity for her birthday, Bill has not done anything to signify his agreement to Alma’s request. Thus, if Alma took this to court, the court could not require bill to make the donation.

2. Alma calls Bill on behalf of a charity and asks him to make a $100 donation. Bill agrees and promises to do so. Can a court require Bill to make the donation?

Yes, under the theory of charitable subscription Yes, under the theory of Ricketts v. Scothorne No, because Bill made no promise to rely onincorrect

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No, because Bill might give Alma, instead of the charity, a gift of equal value

Explanation Here, Alma is acting as a representative of a charity. Because Bill has made a promise to make a donation to the charity, this is a typical situation in which a court would apply the theory of charitable subscription and uphold the promise without worrying about finding a bargain.

3. Adam and Bob make a joke that if Adam can run a marathon without stopping in the next month, Bob will pay Adam $1,000,000. Adam then decides to try to run a marathon.

He trains for hours every day for the next four weeks and finally runs a whole marathon without stopping, exactly one month after his and Bob’s conversation. Bob is at the finish line, cheering for Adam. Under the theory of detrimental reliance, must he pay Adam?

Yes, Adam relied on Bob’s promise Yes, Adam’s reliance on Bob’s promise was foreseeableincorrect No, Adam did not rely on Bob’s promise No, Adam’s reliance on Bob’s promise was not reasonable correct

Explanation Because Adam and Bob’s “deal” was a joke, Adam later deciding to rely on the exchange does not make it enforceable.

4. Bob promises Adam that he’ll give Adam $1,000,000 if Adam runs a marathon the next day. Adam was going to run the marathon anyway, and goes ahead and does so.

Under the theory of detrimental relaince, must Bob pay Adam?

Yes, Adam relied on Bob’s promise Yes, Adam’s reliance on Bob’s promise was foreseeable No, Adam did not rely on Bob’s promise correct No, Adam’s reliance on Bob’s promise was not reasonable

Explanation Here, because Adam was planning on running the marathon anyway, he did not rely on Bob’s promise to do so and thus cannot hold Bob to his promise based on detrimental reliance.

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5. AllCo wants to buy B. Co. The parties have not signed a finalized contract yet. Using the reasoning of the cases we’ve discussed, in which of the following scenarios would there likely be an agreement in principle?

Both companies had hired lawyers to negotiate an agreement Agreement in Principleincorrect No Agreement in Principle correct

Explanation Although both companies hired lawyers, because the majority of the details of the agreement still needed to be figured out, a court would not likely find an agreement in principle.

AllCo and B. Co. had gone through numerous negotiations and agreed on a price; all that the remained for the parties to do was sign the agreement Agreement in Principle correct No Agreement in Principleincorrect

Explanation If AllCo and B. Co. had gone through this time and expense to make the agreement and both intended to sign, they were the closest to having an agreement that they could be without signing it. This is the mostly likely scenario in which a court would find an agreement in principle.

AllCo and B. Co. had gone through numerous negotiations, and B. Co. had told AllCo that so long as AllCo invested $1,000,000 in B. Co.’s former partner company, they would agree to a deal. AllCo had done so, then B. Co. had said they actually needed to invest $5,000,000. AllCo invested the additional money.

Agreement in Principle correct No Agreement in Principle

Explanation Here, again, AllCo and B.Co. have gone through much time and expense to come to an agreement; AllCo has done all that it can to fulfill its side of the exchange. Because B. Co. has made a conditional promise that they will enter the deal as long as AllCo invests, B. Co. has implied that it is willing to agree to the deal. Thus, both parties here have signaled their assent to terms; all that seems to be left is for them to sign the deal.

AllCo and B. Co. had gone through numerous negotiations and agreed to some details, but still largely disagreed on a price.

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Agreement in Principleincorrect No Agreement in Principle correct

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UNIT 5

That’s the rule about what’s called a mutual mistake—that is, both parties are mistaken about an important premise of the deal.

Brenda has three puppies—a golden lab, a poodle, and a pitbull. Anne agrees to buy one of Brenda’s puppies for $300, thinking that she’s buying Brenda’s poodle. Brenda, however, believes that Anne has agreed to buy her pitbull puppy. Is this a mutual mistake? (Select 1) A. Yes, under the theory of Sherwood v. Walker.

B. Yes, under the theory of Raffles v. Wichelhaus. correct C. No, because Anne still gets what she contracted for—a puppy.

D. No, because the contract terms were clear, so there was a meeting of the minds.

Classify the following scenario as an example of a unilateral or mutual mistake: A renowned violinist examined two violins, called them a Stradivarius and a Guarnerius, then offered the owner $8,000. The owner drafted a bill of sale, which referred to the violins as Stradivarius and Guarnerius. The famous violinist then discovered these were replicas and refused to pay the outstanding balance on the contract.

Unilateral Mutual correct

Scenario 1: The Land Indeed 1/1 point (graded)

THIS AGREEMENT OF PURCHASE AND SALE (“Contract”) is made and set forth on the 1st day of June in the year 2016 between Suzie Seller (“Seller”) and Penny Purchaser (“Purchaser”).

I. Sale and Purchase This Contract concerns the two-hundred and fifty (250) acre lot located at 825 Rittenhouse Circle in Piedmont, South Carolina (“Property”). Seller hereby agrees to sell Property to Purchaser, and Purchaser hereby agrees to purchase Property from Seller.

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II. Purchase Price Purchaser will pay Seller $2,000,000 for Property, inclusive of two pre-existing structures on the land: (1) the barn located on the northeastern edge of Property, and (2) the storage unit located in the southwestern corner of Property. Purchaser agrees to deliver Seller the full purchase price, upon closing, in cash or immediately available funds.

III. Delivery of Title Seller will deliver exclusive possession of the Property to Purchaser within seven (7) days of receiving the purchase price.

IV. Effective Date This Contract shall be considered effective immediately after execution by Seller and Purchaser.

Signature: Suzie Seller Date: June 1, 2016 Signature: Penny Purchaser Date: June 1, 2016 Suzie and Penny agreed to the $2,000,000 purchasing price because they believed the land contained large amounts of soil that was suitable to growing crops. This was especially significant to Penny, who was planning to use the tracts to expand her farming business (and could not do so without the proper soil). After entering into the above contract, Suzie discovered that her brother, Sebastian Seller, who she allowed to use the land before the sale, had cut down a substantial number of trees, causing the valuable soil to erode. **** Can Penny be excused from her contractual obligations?

Yes, this is a mutual mistake. Both parties were making this contract with incorrect information. correct No, this is a unilateral mistake. One party was gambling on information pertinent to the contract.

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Scenario 2 1/1 point (graded)

In May, Midwest Construction Group advertised the following post on www.contractingjobs.com: Want to be part of Missouri’s most environmentally-friendly new building? Midwest Construction Group is now accepting bids for its new project in Kansas City, Missouri!

For the full building specifications, contact bidding@midwestconstruction.com.

Contractors must submit their bids by May 28, 2016. **** Three contracting companies requested the specifications, and two ultimately submitted bids to Midwest Construction Group. The bids, from Connell Contractors and Burroughs Building, are exerpted in part below. **** PROPOSAL 1: Connell Contractors 123 Everett Street Kansas City, MO 913-555-4631 Proposal Submitted To: Midwest Construction Group Address: 123 Everett Street City, State: Kansas City, MO Job Name: Environmentally Friendly Building Phone: 913-555-5082 Email: builders@burroughsbuilding.com Date of Plans: May 27, 2016 Job Location: Kansas City, Missouri Dear Midwest Construction,

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Connell Contractors has fifty years of proven experience in this field. We would be delighted to work on this project with you, and hope to hear from you soon. Please review our submitted estimate for the project below.

Based on the provided building specifications, Connell Contractors proposes to furnish material and labor complete in accordance with the provided building specifications for the total of ONE MILLION TWO HUNDRED AND FIFTY THOUSAND DOLLARS ($1,250,000).

Payment to be made as follows: ● TWO PAYMENTS: $625,000 DEPOSIT, WITH OUTSTANDING BALANCE OF $625,000 DUE UPON COMPLETION OF CONTRACT. Authorized Signature: Connor Connell Please note that we reserve the right to withdraw this proposal if not accepted within 15 days. **** PROPOSAL 2: Burroughs Building 456 Maplewood Court Kansas City, MO 913-555-5082 Proposal Submitted To: Midwest Construction Group Address: 456 Maplewood Court City, State: Kansas City, MO Job Name: Midwest Construction Building Phone: 913-555-5082 Email: builders@burroughsbuilding.com Date of Plans: May 27, 2016 Job Location: Kansas City, Missouri Dear Midwest Construction,

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Burroughs Building Company is the proven leader in Missouri’s construction industry.

Our team would love the chance to work with Midwest Construction on this building, as we maintain a sincere commitment to the environment. Burroughs Building Company is dedicated to creating structures that utilize advanced technologies that comply with our environmental commitments.

In accordance with the building specifications we were provided, we would like to submit a bid of ONE MILLION AND FIVE HUNDRED THOUSAND DOLLARS ($1,500,000).

This figure includes the furnishing of labor and materials.

Payment required in 2 installments: $750,000 upon acceptance of the bid, and the $750,000 balance upon completion of the contract.

Let us know if you have further questions. We’ll look forward to learning your decision.

Thank you, Burroughs Building Company Authorized Signature: Bradley Burroughs Please note that we reserve the right to withdraw this proposal if not accepted within 30 days. **** After researching both companies, Midwest Construction Group determined that they had similar qualifications and decided to accept Connell Contractors’ bid since it was $250,000 lower. But on May 29, 2016, Connell Contractors realized the bid it submitted accidentally omitted an $200,000 item so that the real total should be $1,450,000. If they performed the bid as submitted, for $1,250,000, Connell Contractors would actually lose $100,000, rather than profiting $100,000. **** Is the contract voidable by Connell Contractors?

Yes correct No

A realtor has shown an attractive house in a good part of town to several people over the past week. One of the potential buyers, John, sees a spot on the ground that looks

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like it could have been caused by termites. Which of the following responses by the realtor would be fraudulent? (Select all 3 that apply) The realtor assures John the house has been inspected and did not have termites, even though the realtor knows the house inspection was positive for termites.

The realtor tells John that another family has made an offer on the house for more than its asking price even though no such family exists.

The realtor tells John that several people have seen the house, and none of them were worried about termites.

The realtor tells John that the concerned spot is water damage, even though the realtor knows it was identified in a report as termite damage.

The realtor tells John that the home is a really good deal irrespective of damage and will definitely sell soon if he does not act.

The realtor acknowledges that the recent report indicated termite infestation but tells John the price remains the same.

The realtor has read the report that says there is termite damage, but changes the conversation to the excellent local school system.

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Scenario 1 0/1 point (graded)

CONTRACT FOR LAND THIS AGREEMENT OF PURCHASE AND SALE (“Contract”) is made and set forth on the 1st day of June in the year 2016 between Maggie Toomey (“Seller”) and Kit Hildebrand (“Purchaser”).

V. Sale and Purchase This Contract concerns the land located at 2370 Ardmore Lane in Damascus, Maryland (“Property”). Seller hereby agrees to sell Property to Purchaser, and Purchaser hereby agrees to purchase Property from Seller.

VI. Purchase Price Purchaser will pay Seller TWO THOUSAND DOLLARS ($2,000) per acre for Property.

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VII. Effective Date This Contract shall be considered effective immediately after execution by Seller and Purchaser.

Signature: Maggie Toomey Date: June 5, 2016 Signature: Kit Hildebrand Date: June 5, 2016 **** During the course of negotiations, Maggie told Kit that the available land was 210 acres.

After both parties signed the contract included above, Kit hired a surveyor to survey the land to confirm Maggie’s estimate. The surveyor discovered that the property was actually 200 acres, rather than the 210 that Maggie had previously stated. Assume that Maggie knew all along that the land was actually 200 acres.

Is Kit bound by the contract?

Yesincorrect No correct

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Scenario 1 0/1 point (graded)

Rowen Realtor showed a house to Blair Buyer, who was impressed and determined that it met all of her stated specifications. While touring the home, Blair asked Rowen whether the house had ever been treated for termites. Rowen, knowing that the house was infested with termites five years ago, swiftly changed the topic of conversation to the idyllic neighborhood surrounding the home. Blair’s focus quickly shifted, as she assumed there was no termite problem of which she should be concerned.

Did Rowen have a duty to disclose the termite infection to Blair Buyer?

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Yes, without the response Blair assumes that there are no termites. correct No, there are no termites currently so there is no obligation to disclose the history of infestation.

No, Rowan is not the owner of the house, so Rowan is under no obligation to disclose the termite history of the house.

Let’s say that you are someone like Henry, and you want to get yourself out of a deal like the one with Krell. Which of the following elements seem necessary to prove frustration, allowing you to? Mark all answers that you think are needed. You must select all 4 correct answers to get this problem right.

(Select 4) The party claiming frustration is not at fault in causing the frustrating event Neither party has begun to perform his or her responsibilities under the contract (that is, neither side has started working to keep up its side of the bargain—everything is still yet to be performed) The contract contains no language that addresses what happens should the frustrating event occur Both parties did not think that the frustrating event would happen when making their contract, or at least did not account for it Neither party was aware that the doctrine of frustration could be used later to discharge his or her responsibilities when making the original contract The frustrating event has a material effect on how the parties’ deal would turn out, as compared to how they thought it would turn out (that is, it changes things substantially, more than just something slight)

Part 1: Identification 0/6 points (graded)

Match the concept to the situation. The book represents unilateral mistake, the cow represents mutual mistake, and the car represents fraud.

Madison lists a purse for sale on the Internet, knowing it is a replica of a designer bag. It looks just like the designer bag, the description claims that it is 100% authentic, and the price is 10% less than what the bag sells for in retail stores. Abigail purchases the bag and shows it to a

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friend, who works at the retail store that supposedly sells the bag. Abigail’s friend lets her know it is fake.

Mutual Mistake Unilateral Mistakeincorrect Fraud correct

Explanation This is a straightforward case of fraud. Madison told Abigail the bag was authentic when it was actually a replica. Because Madison’s statements were knowingly false, this contract is unenforceable.

Emma collects antiques and finds a teapot at a local antique shop priced for $15 that she believes to worth $200. It turns out the teapot is actually worth $300 and the shop owner wants Emma to return it.

Mutual Mistakeincorrect Unilateral Mistake correct Fraud

Explanation This mistake was one-sided: the shop owner was under an important mistaken impression and Emma was not. In the event of a unilateral mistake, the contract is still binding.

Liam is a reputable art dealer and sells Isabella what he thinks is an Andy Warhol painting for its market price of $5 million dollars. Isabella purchases the painting and then finds out that it is actually a reproduction, which, while still valuable, is worth only a fraction of the original.

Mutual Mistake correct Unilateral Mistake Fraud

Scenario 1 0/2 points (graded)

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1. A massive world war has broken out. Fighting is raging everywhere, especially on the high seas of the North Atlantic Ocean. But Thomas—a farmer in Iowa—grows wheat, which is desperately needed in the cities of Europe. Because Thomas also desperately needs to sell his crop, he contracts with HLS Shipping to transport a load of wheat by ship from Baltimore to Southampton, England.

HLS insists on an extremely high rate for the passage, due to the wartime conditions, and so Thomas insists on a special clause in the contract that says, “Parties agree that shipper’s obligation to deliver the wheat shall be absolute, however, and that no act of man or God shall release it of that obligation.”

Halfway through the voyage, the ship is torpedoed, and the grain is lost. HLS is willing to reimburse the shipping cost to Thomas but not the value of the lost wheat. HLS refuses to pay any other damages, arguing that delivery became impracticable once the ship was lost. Thomas says that HLS promised to deliver the wheat to England and that it did not, so he wants the cost of the voyage and the wheat across the Atlantic back as damages. Who should win that disagreement? (Select 1) A. Thomas — shipping the wheat is not impracticable at all; it could be recovered with submarines and HLS could simply put it on another ship.

B. HLS — in a time of war, a court would probably try to help a shipper who suffered a loss like HLS did, so the court would probably not hold HLS to its deal with Thomas.incorrect C. Thomas — the parties thought about the possibility of a wartime incident like the one that occurred, and they accounted for it in making their deal. correct D. HLS — this is a case of commercial impracticability: after the ship was gone, it would be unreasonable to expect that HLS would take whatever steps necessary to get the wheat transported, or to pay damages for failing to do so.

Explanation The parties here have specifically considered the possibility of the wartime conditions causing HLS to be unable to deliver the wheat and have included an explicit term in the contract that HLS shall be liable for the wheat no matter what. Accordingly, HLS cannot argue the parties had not considered this happening and that it should thus be released from its contractual obligation.

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Scenario 2 0/2 points (graded)

2. Parcel carriers do a major business in shipping goods across the country overnight via aircraft, as you know if you shop online. In addition to the new clothes that you purchase, though, these carriers ship critical parts and machinery that industrial companies often need sent to them quickly by suppliers thousands of miles away.

Freeman Motors is such a company, and Ames Widgets is such a supplier.

On September 10, 2001, Freeman’s machine broke, and it urgently needed a part from Ames. So, Freeman and Ames contracted for Ames to have the needed part shipped overnight on FedPSU, a well-known air carrier, to arrive at Freeman’s factory on the next afternoon. That next morning, however, the 9/11 tragedies struck, and the federal government grounded all flights nationwide.

That meant that the air carrier could not take off, and, as a consequence, that Ames couldn’t deliver as promised. Freeman—losing money by the minute—was furious (and fairly unreasonable and uncompassionate too, apparently). Eventually, Freeman sued Ames for failing to deliver as promised, and claimed great sums of damages. Who should prevail in that suit—will a court hold Ames to its promise to have the part delivered at the specified time? (Select 1) A. Yes — the court probably will. While there was certainly a tragedy, a deal is a deal. Ames promised to deliver, and it did not. That is all contract law looks to see, so Ames is liable to Freeman.incorrect B. No, not likely — This is a clear case of impracticability/frustration. Neither party anticipated that the airways would be completely closed on the day when the part needed to be sent. It would be unreasonable to hold Ames to its bargain given the circumstances. correct C. Yes — the court probably will. If Ames were worried about this sort of problem, it should have accounted for it in the contract. It is not the court’s job to bail it out of poor contract drafting.

D. No, not likely — Courts never uphold promises in a time of national security emergency, so a court would likely release Ames from its obligations to deliver on time.

Explanation Although Ames promised that the part would be delivered to Freeman by the next day, this agreement depended on an assumption by both parties that the airways would be open the next day, allowing the delivery to take place. In contrast to the scenario in question 1, the parties did not explicitly contract around the unforeseen occurrence, and thus a court would not likely think it was reasonable to hold Ames to the bargain.

Submit

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Hint Show Answer Answers are displayed within the problem Review

Scenario 3 0/2 points (graded)

3. After some discussion with the Dean of the school, David agrees to teach a class on copyright law at Acme Law School the following spring. David is not an expert in copyright law, though his scholarship in other areas is world-renowned. But he promises the Dean that he will teach himself copyright law during the fall, so that he would be ready to teach the Acme students come springtime. Knowing of his lack of knowledge in the area, though, David agrees to teach for very little money, instead gaining value from the opportunity to teach at Acme and to learn new things.

Unfortunately, though, David’s preparations did not go as he planned. A week before his class at Acme Law School was to start, he had not reviewed even the slightest bit of copyright law. He did not want to be embarrassed by trying to teach unprepared, so he tried to think up a scheme to get himself out of his contract without being in breach and incurring liability to Acme for failing to keep his end of the bargain.

So, he secures himself a different job, one that pays thousands and thousands and thousands of dollars more than the Acme job would. On the first day of class, David is not at Acme to teach, but is instead working this new job at a law firm in New York City.

The Dean of Acme Law School, furious, sues David for breaching his contract.

David, though, argues that keeping his contract with Acme would be commercially impracticable. "It pays next to nothing, and I have a family to care for," David argues. It would not only be impracticable for me to keep my end of the bargain, it would be unjust, as my family would be left to struggle just to satisfy this agreement I made with the Dean.

What result in this suit? Does the Dean of Acme Law School have a valid case for breach of the teaching contract? (Select 1) A. Yes, the Dean wins. David’s impracticability defense is a valid one, but no court would apply it to a contract of this sort, since that is reserved for contracts that do not involve services like teaching but instead involve more commercial applications like shipping and manufacturing.incorrect

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B. No, David wins. This is a contract for personal services, so the court cannot hold David liable for breach of contract in failing to keep his end of the bargain.

C. Yes, the Dean wins. David is at fault for creating this so-called situation of impracticability, and a court would not likely even consider this to be a case of impracticability.

Although a court may not order a person to do work he does not want to do, it does not shield him from paying damages for his breach of contract. correct D. No, David wins. This is certainly impracticability: no court is going to force David to pay damages when he took another opportunity that is much better financially not only for him but for his family as well.

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UNIT 6

Interpretation - Short Response Bookmark this page

SHORT RESPONSE

Contracts in writing help exclude ambiguity. It doesn't hinder interpretation. It settles dispute easily. written contracts help to interpret and clear up any misconceptions there may be.

As it turned out, the occurrence language made a great deal of difference. About $3.5 billion worth of difference. So why did it matter?

If the 9/11 attacks on the World Trade Center constitute one occurrence, the owners could collect ___; if the attacks on the two buildings are considered two separate occurrences, the owners could collect ___.

3.5 billion; 3.5 billion 3.5 billion; 7 billion correct 7 billion; 3.5 billionincorrect 7 billion; 7 billion What do you suppose happened?

As Professor Fried mentioned, the contract he investigated and represented, between the insurance copmany and the owner of the building, defined occurrence as “all losses or damages that are attributable directly or indirectly to one cause or to one series of similar causes. All such losses will be added together and the total amount of such losses will be treated as one occurrence irrespective of the period of time or area over which such losses occur.” Based on this definition, were the events on 9/11 one occurrence or two?

One Occurrence correct Two Occurrences

What do you think the judge, a very smart and fair-minded judge said?

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Which party do you think the judge sided with?

The Company correct The Investors Is it $2.00 per square foot covered with paint or is it something else? What are the 2 most reasonable ways, based on this description, that you see to charge for painting this room?

Select the two most reasonable ways this contract could be interpreted.

The painter charges an additional fee if the wall is not continuous (i.e., there are openings like doors and windows).

The painter calculates the surface area of the entire room (including ceilings and floors), regardless of what walls are actually going to be painted.

The painter charges $2.00 per square foot for the entire surface, counting openings like doors and windows in his calculation of square footage. correct The painter charges $2.00 per square foot for any surface covered with paint, and does not charge for the openings that will not be painted. correct

What could Duveen reasonably request in damages? $70,000 $15,000incorrect $35,000 $100,000 $30,000 correct

Multiple Choice 5/5 points (graded)

Which of the following is not an advantage of putting a contract in writing?

Written contracts convey intent to create legal relations.

The conclusions in written contracts convey the final results of negotiations between the parties.

All contracts need to be put in writing to be enforceable. correct

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When drafted carefully, courts can use the writings as a starting point for determining the parties’ intent.

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Hint SaveSave Your Answer Show Answer Correct (5/5 points) Review

Multiple Choice 5/5 points (graded)

Which of the following might affect contract interpretation?

Custom Ordinary Meaning of the Text Specialized Meaning of the Text Course of Conduct (Previous Dealings Between the Parties) All of the Above correct

Part 2: Short Answer Bookmark this page

SHORT ANSWER 1. jamie juner frequently argued with the director and is hard an individual to work with. and she hardly shows up for the filming for the sequel to begin and couldn't finish the film in time.

2. during first negotiation they agree to film the second sequel if the film was successful and the film did succeed because of jumie jumer. i think jamie jumer will win because they had a negotiation earlier before the film started filming.

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UNIT 7

Numerical Input 1/1 point (graded)

How many dollars can Professor Fried sue for in this example? You agree to pay the antique dealer $500 for the desk (which is actually worth $750) and he agrees to deliver it. However, the dealer never delivers the desk, as he sells it to someone else. You have not paid for the desk.

What amount can you sue the dealer for? Type the number into the box below (Please enter all digits and no commas).

250

correct

Multiple Choice 1/2 points (graded)

To review the basic measure of expectation damages, read the fact pattern described below and answer the questions that follow. The facts of this question are loosely based on a classic contract law case from the 1920s.

Harry is a young schoolboy, who one day suffers a most unfortunate accident. Playing with his friends, they move a little too close to an electrical transmission line. Somehow, Harry’s left hand is severely burned, almost beyond recognition.

He rushes to his parents, and they in turn rush him to the hospital. There, they all encounter a very self-confident doctor. Examining Harry’s hand, the doctor remarks, “Well, it is badly burnt. But I am an expert in this sort of issue and can promise you that, after my procedure, Harry will have a one hundred percent perfect hand.”

So the doctor does the surgery, but the product was well short of “one hundred percent perfect.” In fact, Harry’s hand turns out to be covered in thick, animal-like hair following the doctor’s procedure.

Harry and his parents are furious, and they decide to sue the doctor. For the sake of this problem, let’s make the following assumptions: Harry suffered serious pain and suffering from this procedure, and the court would give him damages of $75 for that, should it be forced to calculate them. Furthermore, Harry’s hand is worth $400 in its current state, covered with hair. A perfect hand would be worth $900 to him, however. The surgery cost $100 to perform, and the doctor billed Harry’s insurance company for his charges.

The insurance company paid promptly and as requested.

1. Accounting for all of that, do Harry and his parents have a suit that they could bring in contract? That is, do you see a promise that has been broken?

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Yes, Harry's parents have a suit. correct No, they don't have a suit.

Explanation Yes, the doctor promised a “one hundred percent perfect hand.” That was an offer, and Harry and his family accepted it by agreeing to the procedure. Thus, there was a contract. When the doctor delivered a hairy hand instead, he breached the contract.

2. Assuming that the doctor is liable —that he was in breach— what would Harry’s damages be?

400

incorrect

500 correct

Damages or Specific Performance?

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Scenario 1 3/3 points (graded)

Three summers ago, Brenda and Bart Buyers went to the home of Sarah and Sam Sellers in the Washington, D.C. suburb of Bethesda, Maryland. The Buyers were interested in purchasing the house as they were planning to move to the Washington area from their prior residence in Chicago. The Sellers, for their part, were interested in selling as they planned to move from the Washington area to a small town outside of Boston; Sarah and Sam had both accepted new jobs in Boston, and they discussed their new job plans with the Buyers when they first visited.

On June 18th, the Buyers offered to purchase the home for $500,000, and the Sellers accepted. The agreement was finalized in a document called the Contract of Sale. The Contract said that the closing date (that is, the day when the homebuyer pays the contract price to the seller and the seller gives possession of the home to the buyer) would be August 1st. At the time the Contract was signed, the Buyers paid a $10,000 deposit to the Sellers. Included also in that Contract was an addendum, which provided: A. Sale of the Home shall be contingent upon Buyers obtaining an expert inspection indicating that the heating system of Home (and all fixtures and appliances relating to said heating system) shall be in good working condition, and that no major repairs are needed to correct any condition in the heating system.

As we would expect, the Buyers hired an expert to inspect the heating system. The expert performed the inspection on July 12th, and he turned up something concerning.

He found evidence that the property contained an old underground oil tank, perhaps

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used as part of the home’s heating many years before. It was not, however, attached to the home’s current systems at all and was instead buried some distance away from the house itself.

Mr. Buyers, however, apparently had environmental concerns about the underground tank. Despite the inspector telling him that the underground tank should be of no concern and that was certainly not part of the “heating system” of the home, Mr. Buyers refused to go forward with the home purchase as scheduled on August 1st. Before saying that the sale was off, Mr. Buyers bought a special metal detector for $700, intending to use that to investigate the underground tank himself.

Meanwhile, the Sellers were planning their move to Boston. On July 10th, they rented a home in Cambridge (just across the river from Boston); they were to take possession of the rental house on July 28th and live in it until they could purchase a new home in that area. They also made some repairs to their home in Bethesda: the front curb was repaired ($1,200) and the lights in the bathroom were rewired ($150).

So on August 1st, the sale was not finalized, as Mr. Buyers stringently said it could not be given the tank situation. Instead of moving to Boston, the Sellers decided to remain in their home in Bethesda until it sold to someone else, even though their new jobs were starting in Boston. The home did sell to someone else on May 15th of the next year (over 10 months later). The new purchase price was $476,000. This sale came after the Sellers worked tirelessly to sell the house to someone else; they showed it over 50 times and incurred $600 in costs to provide refreshments to the visitors seeking to view the house.

Between August 1st and May 15th, the Sellers made several repairs to their home, to try to make it more appealing to new buyers. First of all, they had the underground tank removed ($5,000) and did some other work inside the home (totaling $2,500).

Having decided to remain in Bethesda, the Sellers paid $4,000 to get out of their lease in Cambridge and to avoid a dispute with that landlord. They both commuted to Boston for work (after all, their new jobs would not wait), returning to Bethesda on the weekends. For the period from August 1st to May 15th, the total amount of their commuting costs was $21,000.

Had the Buyers paid the purchase price on August 1st as planned, the Sellers planned to put the proceeds into a mutual fund account managed by National American. The funds in that account would earn a return for a while as the Sellers house hunted in Boston and lived in the rental house, and the return would allow them to spend a little more on their new home. As it turned out, the mutual fund that they planned to use skyrocketed in value between August 1st and May 15th, gaining 40% for those invested in it. Of course, the Sellers did not get that return as they never received the money they planned to put into it.

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Eventually, later in the year after the house sold to the new purchasers, the Sellers sued the Buyers for not purchasing the house as agreed on August 1st. The court determined that the Buyers had breached the contract and that the underground tank problem was no excuse. As such, the court was forced to determine a remedy to attempt to make the Sellers whole.

What general type of remedy, damages or specific performance, should the court use?

Damages correct Specific Performance Are the Sellers entitled to any damages based on the sale prices in the breached agreement with the Buyers and the final May 15th agreement?

Yes correct No Should the Sellers be allowed to collect the $600 they spent for refreshments while showing the house to new prospective buyers?

Yes correct No

Which Third Party?

Mary Jones lived in the City of Langdell for her entire life. Her entire family lived there and died there, and Mary intended to be buried in a serene plot of the Langdell Cemetery when she eventually passed away.

Unfortunately for Mary, that time came far sooner than expected. While she was vacationing in East Dakota, Mary died, miles and miles away from her home and family in Langdell. Distraught but determined to get dear Mary’s remains back to Langdell, Mary’s children and other heirs contacted Langdell’s finest funeral home, Omega Funerals. Omega agreed to arrange for Mary’s return as part of its package for funeral services. The agreement between Omega and Mary’s children was made into a formal written contract and signed by the parties.

Omega, in turn, contacted a shipping company in East Dakota. The shipping company—Diamond Transportation—contracted with Omega to transport Mary’s

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remains from the facility where she was housed in East Dakota to Omega’s facility in Langdell.

Given that East Dakota was so distant from Langdell and since Diamond Transportation had no trucks that would soon be traveling in the direction of Langdell, it decided to pay for a commercial airline to fly Mary’s remains to the Langdell International Airport, where Omega would take over the process. As it had done many times before, Diamond secured a spot for Mary in the cargo bay of a National Airlines flight, specifically National Airlines flight 3201 from East Dakota Regional Airport to Langdell International Airport. A representative of Diamond delivered Mary to the airport and there signed on Diamond’s behalf National Airlines’ standard Contract of Carriage and Agreement to Ship. The signature portion of that contract showed:

This Agreement subscribed to this thirtieth day of June , two-thousand sixteen .

Signature: William Nelson On behalf of Party National Airlines

Signature: George Carey On behalf of Party Diamond Transportation

In yet another unfortunate twist, National loaded Mary onto the wrong plane.

Instead of being flown directly to Langdell, where her funeral service would be held shortly thereafter, she was instead flown on a series of flights to the cities of Ames, Thayer, Pound, Landis, and Griswold, before she finally arrived in Langdell three days later than expected.

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After the funeral was finally held and an appropriate period of grieving had passed, Mary’s family decided that someone needed to pay for the extremely disturbing incident of her remains arriving days later than expected.

Question 1 1/1 point (graded)

Against which party does the family have the strongest contract-law case?

Diamond Transportation correct National Airlines Omega Funerals

Multiple Choice 0/1 point (graded)

1. Bonnie owns a restaurant, and Tom is a food supplier. They make a contract whereby Tom will provide Bonnie with various provisions, which she will then prepare and sell to her hungry patrons. The contract is for a term of two years. After six months, Tom’s deliveries cease, and Bonnie has no food to cook for her customers. If Bonnie sued, what would be her likely damages?

A. Specific performance: the court would force Tom to deliver the food as he had originally promisedincorrect B. Money damages: the court would award Bonnie a sum of money that would approximate her promise from Tom correct Explanation B. There is nothing special about food supplies, such that the court would demand that Tom provide his food as he promised. Instead, Bonnie could seek out another food supplier and then sue Tom for the difference in cost between the new supplier and the rate he had promised in the contract. There would be a possibility of other damages (like the costs of actually finding and contracting another supplier), but those would be comparatively small and you should not worry about those.

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2. David is a farmer in a remote area of Iowa. Richard, also a resident of that same remote area, owns a special machine for harvesting wheat. In fact, Richard has the only wheat-harvesting machine of that sort for hundreds and hundreds of miles. For obvious reasons, the two contract for David to rent Richard’s special machine. Under the contract, David will take use of the machine on November 1st, just as his crop reaches maturity, and use it until the harvest is complete. On October 25th, though, Richard declares his intention to break the contract. He has found another farmer who will pay more for the machine, so he tells David to look elsewhere. However, David is unable to find a substitute, given that Richard’s machine is one-of-a-kind. The crops rotting on in the field will create a smell and lasting damage that is hard to calculate, not to mention David's credibility as a grain supplier. So, David goes quickly to the court. What should the court order in response to Richard’s breach?

A. Specific performance: the court should force Richard to deliver the machine to David’s farm on November 1st as promised correct B. Money damages: the court would only award David the lost profits from his harvest Submit You have used 1 of 1 attemptSome problems have options such as save, reset, hints, or show answer. These options follow the Submit button.

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Multiple Choice 1/1 point (graded)

3a. Sal owns a building just on the Manhattan side of the Queens Midtown Tunnel in New York City, and it has a fantastic space for a billboard advertisement. This space is very valuable to advertisers, given the thousands and thousands of people who drive past the spot and have no choice but to look at the billboard as they emerge from the tunnel. Sal makes a contract with James—an advertiser—for James to place a billboard on that spot on the side of Sal’s building for a thirty-year term.

But, five years later, Sal promptly cancels James’s lease contract, even though it had many years remaining. This is obviously a breach of contract, so James sues Sal. Can James force Sal to place the billboard, or can he only receive money damages?

A. Specific performance: the billboard location is real estate, and extremely unique and commercially valuable real estate, at that. This is clearly a case for specific performance.

B. Money damages: James is losing out on a commercial enterprise and should simply receive the value of that. The court should not involve itself in enforcing this promise specifically. correct

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Numerical Entry 0/1 point (graded)

3b. Assuming, then, that James would be awarded money damages, we can do an exercise in calculating what those damages would be. Below are some relevant facts and numbers. Read them, calculate what James’s damages against Sal should be, and type that answer in the box below.

• James can reasonably show that he lost $450,000 in profit once he was kicked off of the billboard space • Using the alternate billboard space, James could make $300,000 in projected earnings over the next 25 years • Sal must pay $35,000 to clean the space after James’s billboard is removed before he can use that side of the building again • The contract was breached after exactly 5 years had passed, leaving 25 years remaining on the lease • James must incur $1,000 to find the new location, and $10,000 to erect his sign, neither is included in his projected earnings • Sal and James both paid legal fees, but these should not be added to calculate the damages.

What are James’s damages against Sal? (Please enter all digits and no commas).

5000

incorrect

161000 correct

Multiple Choice 0/1 point (graded)

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To review the basics of contract third party beneficiaries, select the best answer to the two questions.

1. Samantha is a cat breeder who sells hundreds of cats every month. She of course needs to feed those kittens before selling them, though, and for that she purchases enormous quantities of cat food from Alexander. After failing to pay her bill from Alexander for a while, she racked up a debt of $10,000 to him.

One Monday, Corey walks into Samantha’s shop and requests the finest kitten in the entire place. As it turns out, Samantha’s best cat comes from a champion pedigree and sells for $4,000. When Corey offers to buy the $4,000 cat, Samantha—remembering her substantial debt to Alexander—asks if Corey would agree to pay the $4,000 to Alexander instead of her, in exchange for the special feline. Corey agrees, and Samantha hands over the cat.

But Corey never pays Alexander the $4,000, nor does Samantha pay any of her part of the debt to Alexander. So Alexander sues Samantha for $10,000—her total unpaid debt to him. Who wins that suit? And what can Samantha do about Corey’s promise? Be sure that both parts of the answer that you select are correct.

A. Alexander wins the suit against Samantha; Samantha cannot recover anything based on Corey’s promise, since he made that promise to Alexander, not herincorrect B. Alexander wins the suit against Samantha; Samantha can then sue Corey for the $4,000 that he had promised to pay Alexander on Samantha’s behalf correct C. Samantha wins in Alexander’s suit; Samantha does not need to recover based on her promise with Corey, but Alexander should sue Corey instead D. Samantha wins in Alexander’s suit; Samantha cannot obtain any money from Corey, but she could reclaim her cat if she wanted Submit You have used 1 of 1 attemptSome problems have options such as save, reset, hints, or show answer. These options follow the Submit button.

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Multiple Choice 0/1 point (graded)

2. Colin is very fond of his niece Anna. Unfortunately, though, Colin finds himself on his deathbed. So Colin asks his wife Beth to draw up a will for him, and she does so.

However, Beth—who is not too fond herself of Anna—writes nothing for Anna into the will. When Beth presents the will that she drafted to Colin, he is highly upset to see that Anna is missing from it.

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But time is short, and Colin is fading fast. So instead of redoing the will completely, Beth makes an oral agreement with Colin: if you sign this version of the will, I will give $20,000 to Anna within a reasonable time from the part that is left to me under the will.

Colin thinks that Beth’s proposal sounds reasonable, so he agrees and promptly dies.

Three years pass, though, and Beth hasn’t paid a single cent to Anna. So Anna sues Beth for the $20,000, claiming that she is a third-party beneficiary to the oral contract that Colin made with Beth from his deathbed. Should the court find that Beth is liable to Anna for the $20,000?

A. No — Anna should sue Colin’s estate in order to collect on the provision in the will, not sue Beth personally B. Yes — Anna was a party to the contract made on Colin’s deathbed, since she was mentioned when the deal was struckincorrect C. No — it would not be fair to make Beth answer a suit made by Anna, who Beth does not like and never intended to help D. Yes — Anna meets the definition of third-party beneficiary, so she can collect based on the contract made between Beth and Colin correct

Fire!

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OPTIONAL PEER ASSESSMENT QUESTION

yes he should be able to collect for the damages since he is a residents of cambridge, Massachusetts

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UNIT 8

What deadweight losses are avoided if Professor Fried sells your promise to pay $100 in October to Betty Banker for $90 immediately?

Select All Answers That Apply

The buyer needs the sandals now, but will not have the money until October. correct Professor Fried will have an additional set of sandals in his inventory.

Professor Fried needs the $90 for his sandals now, but will not get the money until October. correct Betty Banker would not be able to earn her $10 commission for accepting the promise now. correct

Can you figure out who is the obligor, who is the obligee, who is the assignor, who is the assignee in this version of the deal?

Professor Fried wants to purchase the boots, and promised to pay you, the Student, $100 in October for your boots. Because you want payment immediately, you sell the contract to Betty Banker. Match the party—Professor Fried (Buyer), Student (Seller), and Betty Banker (Financier) with their respective title: (1) obligor, (2) obligee, (3) assignor, and (4) assignee.

Obligor: correct

Professor Fried

Professor Fried Obligee: correct

Student Seller of the Books

Student Seller of the Books Assignor: incorrect

Betty Banker

Student Seller of the Books correct Assignee: incorrect

Professor Fried

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Betty Banker correct

Can you figure out who is the obligor, who is the obligee, who is the assignor, who is the assignee in this version of the deal?

On January 24, Catherine calls Buckhead Bakeries to bake a cake for her birthday party that weekend. Buckhead Bakeries specializes in personalized cakes. Since these cakes are in such high demand and Buckhead Bakeries has developed a great reputation in the area, the cake will cost Catherine $400. However, Catherine will not have the money to pay for the cake until after her party, where her grandparents have already told her they will be giving her a check for $500. Buckhead Bakeries wants to bake the cake, as they are having an abnormally slow weekend, but they need the money now to buy the materials and pay their bakers. So, they call their supplier and offer to sell them the contract with Catherine, worth $400, in exchange for the supplies necessary to bake the cakes that have been ordered that weekend, worth $350. The supplier agrees and promptly sends the baking supplies shipment to Buckhead Bakeries.

Match the party with their respective title: (1) obligor, (2) obligee, (3) assignor, and (4) assignee.

Obligor: correct Obligee: correct Assignor: incorrect Assignee: correct

1.

Catherine

Buckhead Bakery

Catherine's Grandparents

Supplier

Hint (1 of 5): An assignee is the party to whom the rights are transferred to by the assignor; though the assignee is not a party to a contract, he may enforce the contract because of the assignment.

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2. In which scenario does deadweight loss occur?

3.

A. Jill has a painting in her office that John, an art collector, has spent the past six months searching for. John, ecstatic when he walked into Jill’s office on another matter, offered to buy the painting for $1,000. Though the painting is only worth $750, Jill declined, as it was a gift from her mother.incorrect

4.

B. Charlie needs to purchase textbooks for his upcoming semester at the University of Ames. Without them, Charlie may fail his classes and be kicked out of his academic program. The University of Ames, of course, wants Charlie to pass so they can continue receiving their tuition payments. Currently, however, Charlie does not have the money to pay for his textbooks, so he calls the local bank and gets a student loan—in exchange for the bank fronting the money for his textbooks, he will pay back the cost with interest following graduation.

5.

C. Mia recently moved to Chicago for her job and wants to adopt a dog.

Because of apartment restrictions, Mia is limited to certain breeds of dogs. The local animal shelter has hundreds of dogs and is overcrowded, but does not track or publish the specific breeds of available dogs. Thus, Mia cannot accurately complete the pet application with her apartment because she cannot identify the breed of any of the rescue dogs. correct

Violet, an engineer, is the president of a start-up company in Silicon Valley, California.

She wants to open another office in Austin, Texas, and plans a trip with the company’s development strategist, Jake, to find office space in Texas. Unfortunately, a day before Violet and Jake were supposed to leave for Texas, the company’s senior counsel, Emily, informed Violet that the company’s settlement offer for a patent infringement dispute with a competitor had failed. As a result, the case was going to trial and Violet needed to stay in California for depositions. Violet instructed Jake to continue on with the trip and select a building in downtown Austin that has at least 10,000 square feet and costs less than $15,000 per month. Once Jake arrives in Austin, he contacts Casey, a commercial real estate agent. Casey shows him several properties that meet the square footage and rent caps, and Jake signs a lease on one of the spaces.

Identify the agent, principal, and third party in this scenario.

Agent: correct Principle: correct Third Party:

J ake

Violet

Casey

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correct Rafael and Alex own and operate an accounting business together. Rafael instructs a new associate, Isabel, to review the previous quarter’s financial records for a client and then prepare a report. Rafael usually reads these reports in great depth before filing a tax return. However, Rafael has many clients to get through, so he quickly skims Isabel’s report. He misses critical information that affects the amount of taxes the client must pay to the government because Isabel, being new to the company, put the information in a different section of the report then associates usually do. The client must now pay penalties for its underpayment of taxes.

First, classify Rafael and Alex’s scenario as a principal-agent relationship or partnership.

Then, determine who is liable for the loss suffered by the client.

Principal-agent; Rafael and Isabel are liable for the loss.

Principal-agent; Only Rafael is liable for the loss.

Partnership; Rafael and Alex are liable for the loss. correct Partnership; Only Rafael is liable for the loss.

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OPEN RESPONSE ASSESSMENT Come up with a more detailed answer.

Scenario 1 Vincent owns a farmhouse in Provence that is in dire need of repainting. He hires a local house-painter, Pablo, to paint it next month for $2,000, subject to Vincent’s satisfaction with the final product. Unfortunately, Pablo owes his friend Jackson $1,500, and despite his previous promises to pay Jackson from his work proceeds, Pablo always spends his earnings immediately after he is paid. Frustrated with this pattern, Jackson threatens to sue Pablo for the outstanding balance if he does not pay within 24 hours. If Jackson pursues litigation, Pablo’s time and resources will be fully consumed and he will not be able to paint Vincent’s house. Pablo does not have $1,500 on hand, but he will have the $2,000 payment from Vincent next month. Jackson agrees to

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extend the deadline a month if Pablo pays $2,000 instead of $1,500, so Pablo tells Vincent to pay the $2,000 directly to Jackson.

Question 1 0/1 point (graded)

What deadweight losses are avoided by this arrangement?

Select all answers that apply.

Vincent’s farmhouse does not get painted correct Non-payment of the debt owed to Jackson correct Pablo’s payment of $500 more than his outstanding debt Pablo is unable to accept and complete the job correct incorrect Explanation A deadweight loss occurs when both parties would have been better off if the deal occurred, but because of some circumstance, the parties are precluded from contracting. Here, the circumstance that would preclude the parties from contracting is the potential litigation over the debt owed by Pablo to Jackson. Because of the arrangement between Vincent, Pablo, and Jackson, however, three deadweight losses are avoided: (1) Vincent’s farmhouse gets painted, (2) Jackson receives the debt owed to him by Pablo (with a premium for waiting an additional month), and (3) Pablo can accept the job and paint the house, which will allow him to clear his debts with Jackson.

Though Pablo must pay a premium to Jackson, he likely would have been in an even worse position if he was sued: he would still be on the hook for $1,500, but would not have the money to pay that (or any related court fees) since he could not have taken the job on Vincent’s farmhouse.

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Question 2 3/4 points (graded)

Identify the obligor, obligee, assignor, and assignee in the above agreement to pay $2,000.

Obligor: correct

Vincent

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Vincent Obligee: correct

Pablo

Pablo Assignor: incorrect

J ackson

Pablo correct Assignee: correct

J ackson

Jackson Explanation An obligor is the party obligated to perform. In this hypo, Vincent is obligated to pay $2,000 to Pablo for his farmhouse being painted.

An obligee is the party to whom the duty is owed. Vincent is supposed to pay Pablo, who assigned his right to be paid to Jackson.

An assignor is the party who transfers his rights under the contract to another party.

Here, Pablo transferred the rights to be paid from himself to Jackson when he asked Vincent to pay the fee directly to Jackson.

An assignee is the party to whom the rights are transferred to by the assignor; though the assignee is not a party to a contract, he may enforce the contract because of the assignment. Pablo transferred the right to be paid to Jackson, so Jackson is the assignee.

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Question 3 1/1 point (graded)

Now, determine whether the assignee is subject to any of the obligor’s defenses.

Yes, the assignee is subject to the obligor’s defenses. correct No, the assignee is not subject to the obligor’s defenses.

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Scenario 2 Finley and Eleanor form a partnership and open a dog-walking service together that matches local dog-walkers with pet owners who need their services. The primary method of connecting walkers and pet owners is through a mobile application that is currently being released in major markets around the country. Finley, who is in charge of staffing, hires Millie to review applicants for the dog-walker positions. The company’s policy requires that each applicant pass a background check and have three confirmed references before their profile is listed on the app. The company’s app recently launched in Chicago and received a lot of attention from local media, leading hundreds of locals to apply to be walkers. In other markets, the average number of applicants was just 75. Overwhelmed, Millie decides to randomly check the applicants rather than performing a thorough review on each. As a result, the company allows Luca, who was previously convicted of animal abuse, to solicit dog-walking jobs. Luca was hired by an unknowing user, and later kicked the user’s dog for disobeying his commands during the walk.

Question 1 2/2 points (graded)

Identify each party as a principal or agent.

Finley: correct Millie: correct

Principal

Agent

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Question 2 0/1 point (graded)

Who is liable for Luca’s acts?

Finley and Eleanor correct Finley only

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Eleanor onlyincorrect Millie only

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FINAL EXAM

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Question 1 0/1 point (graded)

Be sure to complete all answers before submitting your exam. When asked to "Select 1" please choose the best available option.

1. Anna is having a dinner party and wants everything to be perfect. She asks her good friend, Beth, to come over early to help prepare all of the food so that she doesn’t have to pay a caterer. Anna tells Beth that if she helps out, Anna will write Beth’s term paper for her. The two agree and sign a deal. Is this contract enforceable? (Select 1) Yes, because there was an intent to create legal relations.incorrect Yes, because both sides were serious.

No, because this was not legal and not moral. correct No, because this was a gift, not a bargain.

Explanation Answer: C. Because it is unethical for Anna to write Beth’s term paper, and it is also likely prohibited by the institution that Beth attends, the law will not stand behind this bargain.

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Question 2 1/3 points (graded)

2. Amy asks Brian if he’ll drive her to the airport and pick her up from her return flight if she pays him $20. Brian says he’ll do it if she pays him $40 now. Amy gives him the $40.

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Who is the Offeror? (Select 1) Amyincorrect Brian correct Who is the Offeree? (Select 1) Amy correct Brianincorrect What sort of exchange is this? (Select 1) Promise for Promise Promise for Performance correct Performance for Performance None of the above

Explanation Brian makes a counteroffer, so he is the offeror. This is Promise for Performance. Amy has already fully performed her end of the bargain by paying Brian the $40, and Brian has so far given only a promise to perform his end at some point in the future.

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Question 3 0/1 point (graded)

3. A woman sends the following email to a local repairman: “I will pay you $600 to come and repair four storm gutters on my garage this Saturday morning, the 23rd. It should take you about 3 to 4 hours to finish the job.”

The repairman replies: “Sounds good, but my going rate for this kind of work is $750.”

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When the repairman arrives at her house on Saturday, the woman is nowhere to be seen. He has turned down other work to be there. He doesn’t do the job because the woman is not there to pay him.

Can the repairman enforce this contract? (Select 1) No; he was not entitled to request more money from the woman because she, the offeror, was the master of the bargain.

No, because the woman never accepted the repairman’s increased price. correct Yes, because the terms of the woman’s email were specific enough.incorrect Yes, because he gave up other work in order to be at the woman’s house at the time she requested.

Explanation Answer: B. When the repairman replied to the woman’s offer with an increased price, he did not accept her offer, but instead made a counteroffer. This is so despite the fact that he began his email with the words “sounds good”; what is important is that he changed the substantive terms of the deal. The woman never accepted those new terms, so there was no contract.

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Question 4 1/1 point (graded)

4. A consultant has been working for the manager of an investment fund for ten years.

At the beginning of their working relationship, the consultant sent the investment manager a contract for the first year of work, detailing how much compensation he expected and other terms, which the manager never signed or returned. However, shortly after receiving the contract, the manager sent the consultant some work, and the consultant completed it. The consultant continued to complete a few projects a year for the manager, though he never sent him another contract. The consultant kept track of his time and sent the manager a bill once a year at the end of the year, which the manager always promptly paid. This year, however, the manager is refusing to pay the bill on the grounds that he did not have a contract to pay the consultant for his services.

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If the consultant sues the investment manager for the amount of the unpaid bill, will he be successful? (Select 1) No, because the manager never signed and returned the contract.

No, because after the year of work provided for in the first contract expired, there was no bargaining as to the terms of the continuing relationship.

Yes, because this was an implied contract governed by the pattern of performance and payment that had been going on for several years.correct Yes, because the manager has a moral obligation to pay the consultant for services that he has already rendered, and the law will stand behind this obligation.

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Question 5 0/1 point (graded)

5. In which of the situations below does contract law provide a remedy? (Select 2 Answers) Trading stocks based on insider information False statements made during contract negotiations correct One company loses sales of its product due to competition from another company’s product, which is misleadingly advertised A store sells a customer a cell phone, which both the store and the customer honestly believe is brand new; in fact, the phone has been used previously for four months by an employee of the phone manufacturer correct One party’s failure to turn over all relevant information in its possession to the other side during a contract negotiation incorrect

Explanation

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Only the case of fraud and mutual mistake are covered by contract law. Professor Fried discusses statutory action taken in the case of insider trading and also in improper competition, but neither falls under contract law. Finally, contract law would not provide a remedy in the last case because a party is allowed to not turn over all information provided that they do not say or do anything to impose on the other.

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Question 6 0/1 point (graded)

6. Judy owns an apartment building, and Juan expresses interest in renting from her.

Over the phone on Tuesday, the two agree in principle to a lease and all of its material terms. Juan tells Judy that he will stop by her office on Thursday morning to sign the lease, so that he can move in to the apartment that afternoon. Given the short timeline, Judy scrambles on Wednesday to prepare the apartment for Juan’s coming arrival. She hires a cleaning crew on short notice, and also has a painter clean and repaint the walls.

On Thursday morning, though, Juan does not come to Judy’s office and instead calls to say that he is no longer interested in the apartment. Judy—out several hundred dollars from cleaning the place—is upset and wants to collect those costs from Juan. Can she?

Yes. This is a case for reliance damages; Judy had the apartment cleaned in reasonable reliance on Juan’s promise to lease it. correct Yes, because the terms of the lease govern, and it almost certainly covered the apartment cleaning.incorrect No, because there was no contract between Juan and Judy.

No, because Judy’s cleaning of the apartment was not a reasonable expenditure.

Explanation Answer: A. Although Juan and Judy had not signed the lease agreement, they had agreed in principle to the lease and all of its material terms. Thus, Judy paying to clean the apartment, believing that Juan would follow through on their agreement, was reasonable reliance that an objective third party would have engaged in as well.

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Accordingly, Judy would be able to recover damages for the money she expended cleaning the apartment.

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Question 7 0/1 point (graded)

7. Synergy Inc. makes televisions, which it sells to consumers through a network of independent distributors. Matthew owns one such distributorship in Storyville, Ames.

The relationship between Synergy and Matthew is governed by an elaborate contractual agreement, which among other terms provides price schedules for Matthew’s wholesale purchases, sales incentives for dealing lots of Synergy televisions, and a term that allows either party to cancel the agreement without cause by giving ten days’ notice to the other party.

For thirty years, Matthew sells Synergy’s televisions with great success, generating large profits for Synergy and providing a nice lifestyle for Matthew and his family in Storyville. One day, though, the son of Synergy’s CEO decides that he wants to sell Synergy televisions through his new distributorship in Clarksville, Ames (a mere 5 miles from Storyville). Attempting to drive Matthew out of business, Synergy notifies him that it is cancelling the thirty-year old agreement, effective twenty days later. Matthew is heartbroken, seeing his entire livelihood crumble before him.

Eventually, he calms his emotions and speaks to Vince, Matthew’s high school friend and longtime lawyer. Vince, knowing that Matthew’s life has been built on the basis of selling Synergy televisions, tells Matthew that he can use contract law to prevent Synergy from pulling the deal out from under him. Is Vince correct? (Select 1) Yes, because there is a long-established course of dealing (over 30 years) between the parties.

Yes, because the contract term allowing cancellation of the agreement is unconscionable.

No, because any argument that Vince might make about acting in good faith or the course of dealing between the parties is defeated by the contract term on cancellation. correct No, because changed circumstances frustrated the contract’s objective.incorrect

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Explanation Answer: C. Although there is a long history of a course of dealing between the two parties, an explicit contract term specifying that either party may cancel the agreement without cause by giving ten days’ notice shows that the parties had contemplated the possibility of a party wanting to abruptly end the contract. Accordingly, the express provision overrides any argument that Vince might make about acting in good faith or the course of dealing between the two parties.

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Question 8 0/1 point (graded)

8. Ralph and Henry have a valid contract for Ralph to build Henry’s new house. When negotiating the deal, Ralph estimated that his costs for the project would be $150,000, which would easily be covered by the contract price of $200,000. When Ralph was only partially finished with the job, Henry became angry with him and fired Ralph, making him leave the job site. To that point, Ralph had expended $75,000 in construction and labor costs.

Ralph is upset about being fired and needs the money the job would have brought him.

Based on the doctrines you have learned in this course, what is his best option? (Select 1) He should seek specific performance of the contract, getting a court to force Henry to allow Ralph to complete the job.incorrect He should sue Henry for damages, which would total up to $125,000. correct Contract law provides no solutions for Ralph—he should seek other construction jobs instead to cover his lost costs.

He should sue Henry for damages, which would total up to $75,000.

Explanation Of course he can sue for the costs he has already expended in performance of the contract ($75,000). However, he can also sue for his expectation of the contract, which is a $50,000 profit (the $200,000 contract price less the $150,000 projected costs). Thus the total he can sue for is $125,000.

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Question 9 1/1 point (graded)

9. Kitty goes to her lawyer, Ross, to have him prepare her will, in which she wants to leave all of her property to her older daughter, Meghan, and none to her younger daughter, Olivia. At their first meeting in Ross’s office, Ross and Kitty sign a representation agreement (a contract), under which Ross must work on Kitty’s business in accord with the normal standards of attorney practice.

Kitty dies fifteen years later. As it turns out, though, Ross did a terrible, terrible job drafting the will (far worse than a lawyer normally would, easily breaching his earlier agreement with Kitty), and the will is thrown out by a court. Because of that, Kitty’s property is distributed according to the state’s default rules, which give half to Meghan and half to Olivia.

Meghan, having received only half of the property she would have if the will were valid, is furious. She wants to sue Ross for the difference. Can she? (Select 1) No, because too much time has passed and she is barred from suing.

Yes, because lawyers must account for their poor conduct, and Meghan is the best situated person to bring that suit.

Yes, because Meghan was an intended third-party beneficiary of the Kitty-Ross agreement. correct No, because Kitty was the only person who could sue Ross, and she is dead.

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Question 10 0/1 point (graded)

10. Ken is one of the largest beef wholesalers in all of East Dakota; Jesse operates one of the most famous and fantastic steakhouses in the state. One day, Ken finds himself with an inventory of especially bad beef; he tried selling it to dog food manufacturers, but even they wouldn’t take it! Needing some cash to make payroll that week and really needing the bad meat gone from his warehouse, Ken mixes some of the poor quality meat in with Jesse’s order of select-grade filet mignons. Not noticing the bad meat in the container (likely because Ken has done his best to hide it), Jesse accepts the delivery and pays Ken for it. He does not notice the bad meat until two days later.

Obviously, he is furious and wants his money back from Ken. If Ken refuses, does Jesse have any remedy under contract law?

Yes, because this is a case of mutual mistake, and the contract can be set aside.incorrect No, because when Jesse took delivery, he assumed any risk of poor quality meat at that point.

Yes. Jesse can get this contract invalidated, either because Ken failed to perform or because Ken acted fraudulently. correct No, because in waiting two days to notify Ken of the problem, Jesse has waived his right to object by allowing too much time to pass.

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