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MBE WORKSHOP: CONTRACTS

PROFESSOR LISA TUCKER

DREXEL UNIVERSITY SCHOOL OF LAW

CHAPTER 1: INTRODUCTION

• Your first step in any Contracts question is to figure out which law applies: the

_________________________________________________ or the ______________________

• Do lots of practice questions and be sure to carefully read the

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• Most testable areas:

o _____________________________________________________ of contracts

 _____________________________, ___________________________________,

_________________________________________

 Modification

 Unilateral contracts

 Assignment and delegation

o Statute of Frauds and Parol Evidence

o When Contracts Fail:

 Remedies

 Damages

Question 1 | 4287 | MBE CONTRACTS & SALES | FORMATION OF CONTRACTS | Consideration

A homeowner entered into a contract with a landscaper. The contract specified that the homeowner

would pay the landscaper $10,000 upon completion of a list of projects. The landscaper performed the

work while the homeowner was away on vacation. When the landscaper sought payment, the

homeowner refused, noting that a tree had not been trimmed as required by the contract. The

landscaper responded that, since he would now have to forego other work in order to trim the tree, he

would do it but only if the homeowner agreed to pay him a total of $10,500 for his services. The

homeowner, desperate to have the work completed, agreed. Once the work was completed, however,

the homeowner gave the landscaper a check for $10,000, and refused to pay more. The landscaper sued

for breach of contract.

Is the landscaper likely to succeed in his claim?

(A) No, because an enforceable contract cannot be renegotiated.

(B) No, because there was no consideration for the promise to pay $10,500 and no unanticipated

circumstances arose.

(C) Yes, because there was a valid modification of the contract.

(D) Yes, because the landscaper suffered a detriment by foregoing other work.

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Question 2 | 4220 | MBE CONTRACTS & SALES | FORMATION OF CONTRACTS | Mutual Assent

A wholesaler of bicycle chains sent a retailer the following fax on December 1: "Because of your

continued loyalty as a customer, I am prepared to sell you up to 1,000 units of Bicycle Chain Model D at

$7.50 per unit, a 25% discount off our original $10.00 price. This offer will remain open for 7 days." The

fax was not signed, but was on the wholesaler's letterhead and had been initialed by the wholesaler's

head of sales. On December 4, the wholesaler's head of sales called the retailer and informed the retailer

that he had decided to revoke his December 1 offer. On December 5, the retailer placed an order for

1,000 bicycle chains, stating that he would pay the discounted price of $7.50 per unit.

What is the correct value of the order placed by the retailer?

(A) $7,500, because the wholesaler's revocation was not in writing.

(B) $7,500, because the wholesaler was bound to keep the offer open for 7 days.

(C) $10,000, because the offer was not signed by the wholesaler.

(D) $10,000, because the retailer did not provide consideration to hold the offer open.

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Question 3 | 3186 | MBE CONTRACTS & SALES | FORMATION OF CONTRACTS | Mutual Assent

A retailer received a written firm offer signed by a supplier. The offer committed the supplier to

providing the retailer with up to 10,000 tubes of toothpaste over the next 45 days at $1 a tube. Thirty

days later, the supplier informed the retailer that the price per tube of toothpaste would be $1.10. The

next day the retailer ordered 6,000 tubes of toothpaste from the supplier, which the supplier promptly

shipped. Sixty days after the receipt of the offer, the retailer ordered another 4,000 tubes of toothpaste,

which the supplier also promptly shipped.

What price is the retailer permitted to charge the supplier for the toothpaste?

(A) $10,000 (10,000 * $1), because the supplier's firm offer was effective for three months regardless

of its terms.

(B) $10,400 ((6,000 * $1) + (4,000 * $1.10)), because the supplier's firm offer was effective for only 45

days.

(C) $11,000 (10,000 * $1.10), because the firm offer rule does not apply where the buyer is a

merchant.

(D) $11,000 (10,000 * $1.10), because the supplier informed the retailer that the price was increased to

$1.10 before the retailer's placement of either order.

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Question 4 | 6011 | MBE CONTRACTS & SALES | FORMATION OF CONTRACTS | Mutual Assent

On May 10, the coach of a youth league baseball team sent a letter to a supplier asking the supplier to

promptly ship 20 red jerseys to him. On May 15, the supplier received this letter and sent the coach a

reply letter accepting the offer. On May 16, the supplier realized that he had no red jerseys with which

to fill the order, and sends the coach 20 blue jerseys with a note that the blue jerseys were tendered as

an accommodation. The coach received the jerseys and accommodation note on May 18, and received

the supplier's acceptance letter on May 19.

On May 20, which of the following is a correct statement of the parties' legal rights and duties?

(A) The coach can either accept or reject the blue jerseys and, in either event, recover damages, if any,

for breach of contract.

(B) The coach can either accept or reject the blue jerseys, but if he rejects them, he will thereby waive

any remedy for breach of contract.

(C) The supplier's shipment of nonconforming goods constituted an acceptance of the coach's offer,

thereby creating a contract for the sale of the blue jerseys.

(D) The supplier's shipment of the blue jerseys constituted a counteroffer.

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CHAPTER 2: CONTRACTS, CONTINUED

Question 5 | 7073 | MBE CONTRACTS & SALES | FORMATION OF CONTRACTS | Consideration

A maker of hand-woven rugs contracted with a supplier to provide yarn made from sheep's wool. The

written contract specified that, for four years, the supplier would provide the rug maker with 2,000 spools

of yarn made from 100% sheep's wool per month, at $10 per spool, for a total of $20,000. Two years

into the contract, the supplier sent 2,000 spools of yarn to the rug maker made from 90% sheep's wool

and 10% synthetic fiber. The rug maker sent a check to the supplier for $15,000 for the shipment, and

added a clear note on the check stating that the payment was in full for the shipment, but was $5,000

less due to the synthetic fiber in the yarn. The supplier promptly deposited the check, and then four

months later filed suit against the rug maker for the remaining $5,000. The supplier has submitted

evidence of the written contract, and the rug maker has submitted evidence of the deposited check.

What is the rug maker's best defense in this situation?

(A) The rug maker's and supplier's good faith dispute over the yarn composition suspended the rug

maker's obligation to pay the remaining $5,000.

(B) The act of knowingly depositing the check for $15,000 by the supplier was a novation that relieved

the rug maker from any further liability.

(C) The supplier deposited the check for $5,000 less than the contract price, thereby discharging the

rug maker of any further duty to pay the remaining amount for that month's shipment.

(D) By depositing the check, the supplier was estopped from claiming that the rug maker owed him an

additional $5,000.

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Question 6 | 4356 | MBE CONTRACTS & SALES | FORMATION OF CONTRACTS | Mutual Assent

The owner of a restaurant who highlighted local ingredients when creating his menu bought cheese and

other dairy products from a local dairy farmer. The owner and the farmer had entered into written

requirements contracts each spring for the past ten years. In the winter of the tenth year, the farmer

purchased a substantial amount of new dairy cows and expanded his farming capabilities. He notified all

customers that he would have a much higher amount of available products the following spring, and

would adjust his deliveries accordingly. The owner responded with a date he wished for the products to

be delivered, as per custom, but said nothing else. On the agreed upon date, the farmer delivered

substantially more products than he would customarily provide. The owner attempted to accept half of

the shipment, as that was roughly his customary quantity, but the farmer stated that the products were

already packaged and that the owner should have spoken up after receiving the notice from the farmer.

The owner then rejected the shipment in its entirety.

Did the owner breach the contract with the farmer as to this shipment?

(A) No, because no contract existed, as the parties did not agree to a quantity.

(B) No, because the farmer made a nonconforming tender of goods.

(C) Yes, because the owner should have given the farmer time to cure the nonconformity.

(D) Yes, because the owner rejected the shipment in its entirety.

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Question 7 | 6379 | MBE CONTRACTS & SALES | DISCHARGE | Impracticability

A homeowner entered into a written contract with a contractor to construct an elaborate tree house

among the large trees located in the homeowner's backyard. After commencing construction of the tree

house, the contractor discovered that one of the trees intended to be used as support for the tree house

had a relatively common fungal infection in its core that would cause the strength of the tree's branches

to falter if left untreated. Neither the homeowner nor the contractor had knowledge of the fungal

infection when they entered into the contract, but the contractor knew that such infections were common

in the area and did not request an inspection of the trees before entering the contract. The contractor

also knew that treatment was available at a high cost, but even after treatment, he would need to create

additional heavy-load bearing supports for the tree at a substantial cost. When the contractor informed

the homeowner that he would not perform under the contract unless the homeowner provided at least

75% of the additional costs needed to make the structure safe, the homeowner refused to pay the

additional amount. The homeowner then sued the contractor for breach of contract.

What is the likely result?

(A) The contractor wins, because his performance was discharged due to impracticability.

(B) The contractor wins, because neither party was aware of the fungal infection.

(C) The homeowner wins, because the contractor assumed the risk of the fungal infection.

(D) The homeowner wins, because the fungal infection did not render performance impossible.

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Question 8 | 6020 | MBE CONTRACTS & SALES | THIRD-PARTY BENEFICIARY CONTRACTS | Vesting of

Beneficiary's Rights

A sister convinced her brother that they should open a small coffee shop. Their friend, a guitarist,

suggested bringing his band to play live music and attract customers. He did not request any payment,

saying the publicity would be good for the band. The siblings agreed, and the band started playing at

the shop weekly. The coffee shop became a success, in no small part due to the band's performances.

When a businessperson offered to buy the coffee shop from the siblings, they orally agreed to each pay

$10,000 out of their share of the sale proceeds to the guitarist for his help in making the shop popular.

The sister told the guitarist about their agreement. He was so delighted with it that he put a down

payment on a new car. By the time the sale of the business was finalized, the brother had encountered

financial difficulties. After the sale, the siblings signed a written contract stating that the sister would pay

the guitarist $10,000 and her brother would pay him $5,000.

If, after the sale, the brother pays the guitarist only $5,000, will he have a valid basis for action against

the brother for another $5,000?

(A) No, because the guitarist was bound by the written modification of the contract made by the

siblings.

(B) No, because the guitarist was only a donee beneficiary of the oral contract between the siblings.

(C) Yes, because the guitarist's reliance on the promised payment prevented the siblings from changing

the obligations of their oral contract.

(D) Yes, because the oral promise to pay $10,000 to the guitarist was made binding by the guitarist's

valuable and uncompensated contributions to the business.

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Question 9 | 7081 | MBE CONTRACTS & SALES | THIRD-PARTY BENEFICIARY CONTRACTS | Creditor

and Donee Beneficiaries

While attending a rodeo on August 20, a hat maker entered into a valid, written agreement with the

rodeo manager to make 500 leather cowboy hats for an upcoming rodeo event at a price of $75 per hat.

Per the agreement, the rodeo manager agreed to pay one-fourth of the total purchase price to a tannery

owner to whom the hat maker owed a debt for a previous leather order. On August 25, the hat maker

changed his mind about paying one-fourth of the purchase price to the tannery owner. The hat maker

and rodeo manager subsequently executed a valid modification of the original agreement. The rodeo

manager's brother was also present on August 20 when the original agreement was executed, but he did

not know about the August 25 modification of the agreement to no longer pay the tannery owner. On

August 30, the brother, who was friends with the tannery owner, called and told him that his debt from

the hat maker would finally be paid off. However, the rodeo manager refused to pay one-fourth of the

purchase price to the tannery owner.

If the tannery owner sues the rodeo manager for one-fourth of the purchase price, will he recover?

(A) No, because the tannery owner did not rely on the August 20 agreement between the hat maker

and the rodeo manager.

(B) No, because there was no consideration for the promise to pay the tannery owner by the hat maker

and the rodeo manager.

(C) Yes, because the tannery owner had the right to sue the rodeo manager to enforce the contract

between the rodeo manager and the hat maker.

(D) Yes, because the rodeo manager agreed to pay one-fourth of the purchase price to the tannery

owner on August 20.

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Question 10 | 6392 | MBE CONTRACTS & SALES | ASSIGNMENT OF RIGHTS AND DELEGATION OF

DUTIES | Delegation of Duties

A boutique hotel contracted with a seamstress to hand make 500 pillows. The signed contract specified

that the pillows should be filled with down, and that the pillow covers be made with white, 1000 thread

count cotton fabric. Before the seamstress began making the pillows for the boutique hotel, she secured

another commission for work that would prevent her from making the hotel's pillows. As a result, the

seamstress informed the boutique hotel that she was passing on the hotel's contract to her former

business partner, who was comparable in talent and skill at making high-quality pillows. The boutique

hotel agreed to the substitution. The former partner diligently worked on making the pillows, using

white, 1000 thread count fabric to make the pillow covers. However, instead of using down to fill the

pillows, she used a comparably priced synthetic microfiber. The boutique hotel subsequently filed a

breach of contract action against the seamstress.

Will it succeed?

(A) No, because the former partner's use of a synthetic microfiber instead of down did not reduce the

value of the pillows.

(B) No, because the boutique hotel agreed to the delegation of the seamstress's duties to her former

partner.

(C) Yes, because the boutique hotel had not released the seamstress from liability under the contract.

(D) Yes, because the seamstress did not give consideration for delegating the contract to the former

partner.

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CHAPTER 3: CONTRACTS, CONTINUED

Question 11 | 7616 | MBE CONTRACTS & SALES | STATUTE OF FRAUDS | Types of Contracts Within

the Statute of Frauds

A shoe manufacturer contends that the owner of a shoe store called and ordered 50 pairs of a type of

shoe. The manufacturer promptly sent the owner a written acknowledgment of the alleged order that

reflected the manufacturer as seller and the shoe store owner as buyer, as well as the number and type

of shoes, but that did not indicate the price of the shoes. The owner admits to receiving the

acknowledgement the following day. Two weeks later, the owner received a shipment of 25 pairs of the

shoes along with an invoice that reflected the price of $100 per pair. The owner immediately called the

manufacturer and asserted that he had never ordered the shoes.

Can the manufacturer enforce this contract against the owner?

(A) Yes, but only to the extent of $2,500, which is the price of the shoes shipped.

(B) Yes, because the owner did not respond to the written acknowledgement in a timely manner.

(C) No, because the acknowledgement did not indicate the price of the shoes.

(D) No, because of the Statute of Frauds.

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Question 12 | 4377 | MBE CONTRACTS & SALES | CONDITIONS AND PERFORMANCE | Satisfaction of

Conditions

A baker and a bride-to-be entered into a contract in which the baker agreed to bake the wedding cake

for the bride's wedding at a cost of $2,500. The contract contained a clause that read: "An express

condition of Bride's performance under the Contract is Baker's satisfaction of Bride's aesthetic

expectations in the design of her wedding cake." In keeping with the wedding's butterfly theme, the

baker constructed an elegant cake accented with colorful butterflies, flowers, and caterpillars. At the

wedding reception, the guests were enthralled by the cake. The bride, however, upset over the inclusion

of the caterpillars, to which she had a genuine aversion, refused to pay the baker. The baker sued the

bride for $2,500.

Should the court require the bride to pay the baker?

(A) Yes, because the cake was aesthetically pleasing to the wedding guests.

(B) Yes, because the baker substantially performed.

(C) No, because the bride was personally and honestly dissatisfied with the cake.

(D) No, because no contract was formed between the parties.

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Question 13 | 6005 | MBE CONTRACTS & SALES | CONDITIONS AND PERFORMANCE | Performance

A nature magazine advertised a photography contest in its January issue, offering "$1,000 to any

subscriber who sends us a photograph of the rare Florida Grasshopper Sparrow that we use for the cover

of our May issue. Only submissions meeting our technical specifications and received by April 1 will be

considered." The only subscriber to respond to the advertized contest sent the magazine a photograph

of the sparrow that met the magazine's technical specifications. The photograph arrived on March 15.

However, due to an ecological disaster that occurred in early April, the magazine used a different picture

on the cover of its May issue. The magazine used the picture on the cover of its June issue, and has

refused to pay $1,000 to the subscriber on the grounds that it was not used on the May cover.

Is the subscriber likely to prevail in a breach of contract action against the nature magazine?

(A) No, because the subscriber's photo was not used on the cover of the May issue.

(B) No, because the subscriber failed to adequately notify the magazine of his acceptance.

(C) Yes, because all of the express conditions of the offer have been satisfied.

(D) Yes, because the nature magazine prevented the publication of the photograph.

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Question 14 | 4382 | MBE CONTRACTS & SALES | BREACH OF CONTRACT AND REMEDIES |

Anticipatory Repudiation

A homeowner called a septic cleaning company and made arrangements for the company to remove the

waste from the septic tank on the homeowner's property. After completing the job, the company mailed

the homeowner a bill for $500, the fair market value of the services rendered by the company. The bill

indicated that payment was due in 60 days. Upon receiving the bill, the homeowner called the company

and informed it that, since he had lost his job due to an accident, he would not be paying the company's

bill. The following day the company filed suit for breach of contract. Ten days later, the homeowner

moved to dismiss the suit. The court granted the motion, dismissing the suit without prejudice.

Is the court's dismissal proper?

(A) No, because the parties' dealings created an implied-in-fact contract.

(B) No, because the homeowner has repudiated the contract.

(C) Yes, because the vendor failed to demand assurances.

(D) Yes, because the vendor's complaint is premature.

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Question 15 | 2790 | MBE CONTRACTS & SALES | BREACH OF CONTRACT AND REMEDIES | Remedies:

Damages for Breach of Contract

A mining company contracted with a railroad to transport 10,000 tons of coal from the company's mines

to a power company at a cost of $100,000. The railroad told the mining company that the coal would

arrive at the power company on June 1st, but the contract contained a clause that the railroad would not

be liable for any losses suffered by the mining company as a result of a late shipment. The railroad was

aware that the mining company had contracted with the power company to deliver the coal on June 1st,

and pursuant to standard industry custom, the price to be paid by the power company decreased by $1

per ton for each day that the coal was late. The shipment of coal did not reach the power company until

June 10, and the railroad had no justification for the 10-day delay. Because of the delay, the mining

company lost $100,000 in revenue from the sale. The mining company filed suit against the railroad for

breach of contract, claiming $100,000 in damages.

Is the mining company likely to succeed in its claim?

(A) Yes, because the damages that the mining company would suffer from the railroad's delay were

known to the railroad prior to shipment of the coal.

(B) Yes, because consequential damages cannot be excluded by a merchant.

(C) No, because the claimed damages are disproportionate to the original contract price between the

railroad and the mining company.

(D) No, because the contract between the mining company and the railroad protected the railroad from

losses suffered by the mining company due to a late shipment.

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Question 16 | 3188 | MBE CONTRACTS & SALES | BREACH OF CONTRACT AND REMEDIES | Remedies

Under the UCC

A new florist placed a written order with a wholesaler for $15,000 worth of fresh flowers. Delivery was to

be made to the florist via a national delivery service. Because the florist was a new customer, the

wholesaler accepted the order on the condition that he pay $5,000 in advance, and the remaining

$10,000 within 20 days of delivery. There was no discussion as to who bore the risk of loss. The

wholesaler arranged with a national delivery service to pick up and deliver the flowers to the florist. The

delivery service picked up the flowers, but, due to malfunction of the temperature controls on the

transporting plane, the flowers were worthless upon arrival. The florist rejected the flowers and notified

the wholesaler, who refused to ship other flowers. The wholesaler filed a claim against the florist for the

remaining $10,000. The florist counterclaimed for the return of its $5,000 payment to the wholesaler.

How should the court rule on these claims?

(A) Grant the wholesaler's claim for $10,000 and deny the florist's claim for $5,000 because the risk of

loss passed to the florist.

(B) Grant the florist's claim for $5,000 and deny the wholesaler's claim for $10,000 because the risk of

loss remained with the wholesaler.

(C) Offset the two claims against each other and require the florist to pay the wholesaler $2,500

because, since neither party was at fault for the loss, each should bear the loss equally.

(D) Deny both claims because the florist accepted the risk of loss up to the amount he had paid for the

goods.

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Question 17 | 6018 | MBE CONTRACTS & SALES | BREACH OF CONTRACT AND REMEDIES | Remedies

Under the UCC

A collector agreed to sell his collection of authentic extras' costumes from a cult classic 80's show to a

costume store for $10,000, payable one month after the collection was delivered to the store via a third-

party carrier. Due to the time and expense that went into accumulating and repairing the costumes, the

collector expected a $2,000 profit. The costumes suffered minor water damage in transit, and the store

immediately notified the collector that it was rejecting the collection and would hold the collection until

the collector picked them up. The collector told the store that he would look for a new buyer and would

pick up the collection in a few weeks. The collector quickly found another buyer willing to pay the

original contract price. However, before the collector retrieved the costume collection, the store sold and

delivered the costumes to a theater company who knowingly accepted the costumes despite the water

damage. The theater company paid the store $15,000 for the collection, which the store retained.

If the store's sale of the costumes was NOT an acceptance, what is highest value remedy available to the

collector?

(A) $2,000, the collector's lost profit.

(B) $5,000, the difference between market price and contract price.

(C) $10,000, the collector-store contract price.

(D) $15,000, damages for conversion.

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• Final tips:

o Make sure you know the common law and UCC version of every rule

o Fact patterns can be long, but apply the rules methodically and the answer will be apparent

o Lots of points to pick up in Contracts!

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