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4. (F) Reach’s acceptance complied with the terms of the offer because it was in writing and received by December 20. The offer did not require that the acceptance had to be seen. It only required that it be received by the 20th.
5. (F) Reach’s acceptance did not create any contract, voidable or otherwise, because it was not unconditional. The offer specified a $100,000 fee and the acceptance changed this to $1,000,000. By not complying with Blake’s terms, no contract was created.
6. (T) or (F) The exam gave credit for either answer, an indication that the question was poorly drafted. The (T) answer was counted because changing of the fee would not be a valid acceptance in that it was not unconditional.
Credit was also given for the (F) answer most likely under the theory that an obvious mistake had been made and it was the clear intent of Reach to accept the offer.
7. (T) Reach’s fax changed the terms of the original offer and was therefore a counteroffer.
8. (F) Most contract rights can be assigned as long as the basic obligations are not changed. The assignment of the right to receive money is permissible.
9. (T) Most contract rights can be assigned as long as the basic obligations are not changed. The assignment of the right to receive money is permissible.
10. (T) Since it was the clear intent of Reach to benefit Weaver because of a debt owed Weaver, a third party creditor beneficiary was created.
11. (T) Punitive damages are rarely awarded for contract or sales breaches.
12. (F) Punitive damages are rarely awarded for contract or sales breaches.
13. (F) A writing is required under the Statute of Frauds because this contract is impossible to complete in one year.
The writing need only be signed by one party, but it can only be enforced against the one who signed. There is no writing signed by Reach and thus the contract can not be enforced against him.
14. (T) If an offer does not state how long it is to remain open, it ends after a reasonable time.
15. (T) A writing is required under the Statute of Frauds because this contract is impossible to complete in one year.
The writing need only be signed by one party, but it can only be enforced against the one who signed. It can be enforced against Blake because there is a signed memo from Blake.
ANSWER 3
Suburban is correct concerning the agreement to share utility costs with Bridge. A modification of a contract requires consideration to be binding on the parties. Suburban is not bound by the lease modification because Suburban did not receive any consideration in exchange for its agreement to share the cost of utilities with Bridge.
Suburban is not correct with regard to the Dart offer. An offer can be revoked at any time prior to acceptance. This is true despite the fact that the offer provides that it will not be withdrawn prior to a stated time. If no consideration is given in exchange for this promise not to withdraw the offer, the promise is not binding on the offeror. The offer provided that Suburban's acceptance would not be effective until received. Dart's June 10 revocation terminated Dart's offer. Thus, Suburban's June 9 acceptance was not effective.
Suburban is correct with regard to World's claim. The general rule is that destruction of, or damage to, the subject matter of a contract without the fault of either party terminates the contract. In this case, Suburban is not liable to World because Suburban is discharged from its contractual duties as a result of the fire, which made performance by it under the lease objectively impossible.
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ANSWER 4
Ambel is incorrect. The general rule is that when a party knows, or reasonably should know, that a mistake has been made in the making of an offer, the mistaken party will be granted relief from the offer. In this case, because Ambel was aware of the approximate fair market value of the equipment, it had reason to be aware of the mathematical error made by Victor and will not be allowed to take advantage of it.
Clark is correct. A contract that cannot by its terms be performed within one year from the date it is made must be evidenced by a writing that satisfies the requirements of the Statute of Frauds. The contract between Victor and Clark is not enforceable by Victor against Clark, because the contract was oral and provided for performance by the parties for longer than one year from the date the contract was entered into.
GYX is incorrect. An acceptance of an offer is effective when dispatched (in this case, when mailed), provided that the appropriate mode of communication is used. The general rule is that an offer shall be interpreted as inviting acceptance in any manner and by any medium reasonable in the circumstances. In this case, GYX made its offer by mail. An acceptance by mail, if properly addressed with adequate postage affixed, would be considered a reasonable manner and method of acceptance. Therefore, Victor's acceptance was effective (and a contract was formed) when the acceptance was mailed on November 12 and not when received by GYX on November 17.
Wells is incorrect. As a general rule, most contracts are assignable and delegable unless: prohibited in the contract, the duties are personal in nature, or the assignment or delegation is prohibited by statute or public policy. Victor was entitled to assign the contract to Master, because none of these exceptions apply to the contract.
ANSWER 5
(a) Dodd's claim, that West's offer could not be revoked before September 30, is incorrect. Offers can be revoked at any time before acceptance unless the offeror receives consideration to keep the offer open. West did not receive any consideration from Dodd in exchange for its promise to keep the offer open until September 30. Therefore, West effectively revoked its offer during the September 28 telephone conversation.
Dodd's claim, that the September 27 letter accepting West's offer was effective when mailed to West, is incorrect.
The general rule is that an acceptance is effective when dispatched if the acceptance is made using a reasonable mode of communication. In this case, the offer required that the acceptance be received by West to be effective.
Therefore, Dodd's acceptance could not have been effective until after the offer expired, because it was received after September 30.
(b) West's claim, that any agreement that existed between West and Dodd would not be enforceable against West because of the Statute of Frauds, is correct. The term of the agreement was for three years. The Statute of Frauds requires that contracts that cannot be performed within one year from the date made must be in writing. Because this was an oral contract for a period of three years, it would not be enforceable under the Statute of Frauds. Dodd's attempted acceptance of the offer would not be such a writing because it was not signed by West and could not be enforceable against West.
(c) Abco's first position, that the oral April 14 agreement regarding the painting of the warehouse is not binding, is correct. This agreement was intended to modify the existing lease between the parties. Under common law, agreements modifying existing contracts require consideration to be binding. Abco did not receive any consideration in exchange for its promise to paint the warehouse; therefore, the agreement is not enforceable against Abco.
Abco's second position, that evidence of the April 14 oral agreement could not be admitted into evidence, is incorrect. The parol evidence rule allows the admission of proof of a later oral agreement that modifies an existing written contract.
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ANSWER 6
Stake's first allegation, that Packer committed fraud in the formation of the contract, is correct and Stake may rescind the contract. Packer had assured Stake that the vacant parcel would be used for a shopping center when, in fact, Packer intended to use the land to construct apartment units that would be in direct competition with those owned by Stake. Stake would not have sold the land to Packer had Packer's real intentions been known. Therefore, the elements of fraud are present:
x A false representation;
x Of a fact;
x That is material;
x Made with knowledge of its falsity and intention to deceive;
x That is justifiably relied on.
Stake's second allegation, that the mistake as to the fair market value of the land entitles Stake to rescind the contract, is incorrect. Generally, mistakes as to adequacy of consideration or fairness of a bargain are insufficient grounds to entitle the aggrieved party to rescind a contract.
Stake's third allegation, that the contract was not enforceable against Stake because Stake did not sign the counteroffer, is correct. The contract between Stake and Packer involves real estate and, therefore, the Statute of Frauds requirements must be satisfied. The Statute of Frauds requires that a writing be signed by the party against whom enforcement is sought. The counteroffer is unenforceable against Stake because Stake did not sign it. As a result, Stake is not obligated to sell the land to Packer under the terms of the counteroffer.
ANSWER 7
Snow's assertion that Jacobs' acceptance was not received on a timely basis is incorrect. Jacobs' January 31 acceptance was effective when dispatched (mailed) under the complete-when-posted doctrine because:
x The letter was an authorized means of communication (because Snow's offer was by mail); and x The letter was properly stamped and addressed.
Therefore, Jacobs' acceptance was effective on January 31, the last possible day under Snow's January 21 offer.
Snow's assertion that the January 21 offer was effectively revoked is incorrect because a revocation is not effective until received. In this case, the revocation was effective on February 3, and Jacobs' acceptance was effective on January 31.
Snow's assertion that Jacobs' failure to sign the January 31 acceptance prevents the formation of a contract is incorrect. The Statute of Frauds, which applies to contracts involving interests in real estate, requires only the signature of the party to be charged with enforcement of the contract. Therefore, because Snow had signed the January 21 offer, which was accepted by Jacobs, the contract is enforceable against Snow.
Snow's assertion that Jacobs had no right to assign the contact is incorrect. Contract rights, including the right to purchase real estate, are generally assignable unless the assignment:
x Would materially increase the risk or burden of the obligor;
x Purports to transfer highly personal contract rights;
x Is validly prohibited by the contract; or x Is prohibited by law.
None of these limitations applies to the assignment by Jacobs to Eljay.
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ANSWER 8
a. Korn would argue two points of law to show there was no valid contract. Korn would argue that the July 5 offer was not accepted by Wilson before it was withdrawn on September 30. An offer can be withdrawn at any time before it is accepted even if it states that it will remain open for a definite period of time.
Korn would also argue that Wilson’s response of September 28 was not a valid acceptance because Wilson included additional terms and Wilson’s attempt to change the term of the contract was a rejection and a counteroffer.
b. Wilson would argue two points of law to show there was a valid contract. Wilson would argue that the mailing of the acceptance on September 28 was an effective acceptance under the mailbox rule. There is a valid contract because there was a valid acceptance before the offer was withdrawn.
Wilson would also argue that the attempt to extend the contract was not a condition of acceptance but a requested immaterial modification that did not negate the acceptance.
c. If a valid contract existed, Korn’s September 30 telephone call resulted in Korn’s anticipatory breach of the contract because Wilson could no longer rely on Korn performing.
Under common law, Wilson could either cancel the contract or sue to collect compensatory damages for the additional amount it would cost to obtain the services.
ANSWER 9
a. 1. There was an enforceable contract between Thorn and Birch. The requirements necessary to form an enforceable contract for the sale of real property are as follows:
An offer
An acceptance
Legally sufficient consideration
Parties who have the legal capacity to enter into a contract A legal purpose
A written contract document
2. Thorn did not breach the contract by assigning the mortgage payments to a third party. The right to receive a sum of money may be assigned even when a contract contains an anti-assignment clause.
3. If a court determined that Thorn breached the contract, Birch would be entitled to sue for either compensatory damages or specific performance. Compensatory damages would reimburse Birch for all expenses as well as any additional amounts spent in obtaining substitute property as a result of Thorn’s actions. Specific performance would require Thorn to complete the sale of the property to Birch because each parcel of real property is unique.
b. 1. Acme’s first contention that Birch had no insurable interest in the property when the policy was issued is incorrect. Birch had an insurable interest in the property when the contract was signed, since a contract right is an insurable interest.
Acme’s second contention that Birch is a coinsurer is correct. Birch’s policy for $1.5 million is less than 80% of the value of the buildings.
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2. Birch would recover $150,000 of the loss. This figure is computed by dividing the face value of the policy by 80% of the fair market value of the buildings and multiplying by the amount of the loss.
Face value of policy X amount of loss = recovery 80% of fair market value
$1,500,000 X $160,000 = $150,000 .80 x $2,000,000
3. The mortgage recorded in February would have first priority. In a notice-race jurisdiction, the first recorded mortgage has priority unless the holder of a later mortgage has knowledge of the earlier mortgage. Based on the facts presented, no one had notice of the earlier unrecorded mortgage and, consequently, it has no priority despite its being first in time. Accordingly, the February mortgage would be paid in full ($475,000) and the balance of the foreclosure proceeds ($525,000) would be paid to Thorn.