BIZ LAW EXAM 2

Your friend says "I'll give you $100 next week" and expects nothing in return. He never pays. Can you enforce it?

No. It's a gratuitous promise (no consideration). Exceptions: promissory estoppel or a gift already delivered and accepted.

A store sells a refrigerator and installs it. Which law governs?

UCC (Uniform Commercial Code). It's a mixed contract, involving both items and services, but since the physical item is the main focus, standard commercial sales laws apply.

A company hires a developer to write custom software. Which law governs?

Common law. Custom software is a service. Off-the-shelf software is treated as goods under the UCC (Uniform Commercial Code).

A contract to sell land or provide consulting services: UCC (Uniform Commercial Code) or common law?

Common law. The UCC (Uniform Commercial Code) covers only movable, tangible goods, not real estate, services, or intangibles like stock or patents.

Fed up with gas prices, Sam texts "I'd sell this car for $1K, the cost of a tank of gas!" A friend replies "Deal." Contract?

No. Under the objective standard, a reasonable person would know Sam wasn't serious, so there was no intent to be bound.

John asks Emily if she'd sell her building for $1M. Emily says she wants "closer to $2M." John sends a $2M check. Contract?

No. John's question was an inquiry, and Emily's reply was an invitation to bargain, not a definite offer. John tried to accept a non-offer.

A store ad lists TVs (televisions) at $300. You show up, and they refuse to sell to you. Breach?

No. Ads are generally invitations to bargain. You made the offer by trying to buy, and the store could reject it.

An ad says "First customer Oct. 10 with this ad can buy the display Rolex for $500." You're first. Must they sell?

Yes. An ad that is specific and limits who can accept (first customer, one item) is an offer.

A contractor gives you an estimate of $8,000 for a deck. Is that an offer?

No. Estimates, price quotes, and preliminary negotiations such as LOIs (letters of intent), MOUs (memorandums of understanding), and term sheets are generally not offers.

"I'll sell you my car for a fair price." You say "I accept." Contract under common law?

No. Price is an essential term, and "fair price" is too indefinite. The contract fails for indefiniteness.

Two businesses agree to the sale of 500 widgets but never set a price. Contract?

Yes, under the UCC (Uniform Commercial Code). Gap fillers supply a reasonable price. The UCC needs intent and quantity.

A buyer agrees to purchase "all the corn your farm produces this year." No quantity is stated. Valid?

Yes. It's an output contract, an exception to the UCC (Uniform Commercial Code) quantity requirement. Requirements contracts (all the buyer needs) work the same way.

You find a lost dog and return it, then learn there was a $100 reward. Can you collect?

No (under the class rule). You can't accept an offer you didn't know about. An offer must be communicated to the offeree.

Sara offers her house to Allen with 15 days to accept. Allen pays her $10 to hold it open. On day 5 Sara revokes. Effective?

No. Allen bought an option contract with consideration, so Sara can't revoke during the 15 days.

Con Ed (Consolidated Edison) asks for bids. GE (General Electric) submits a signed written bid promising to hold it open 90 days. Con Ed accepts on day 60, but GE backs out. Contract?

Yes. It's a UCC (Uniform Commercial Code) firm offer: merchant, signed writing, assurance to hold open. It's irrevocable without consideration, for up to 3 months.

Offer: "$5,000 for my boat." Reply: "I'll pay $4,500." The seller refuses. Then the buyer says "Fine, $5,000." Contract?

No. The counteroffer rejected and ended the original offer. The buyer's new $5,000 is a new offer the seller can accept or reject.

Sara offers her building with closing by Nov. 1. John writes "I accept, closing Dec. 1." Contract?

No. Under the common law mirror image rule, any change makes the reply a counteroffer.

"I'll paint your house for $5,000, paid on completion." Reply: "I accept, if I can pay within 30 days after." Contract?

No. Adding a condition makes it a counteroffer (common law, services).

"If I don't hear from you by Friday, I'll assume you accept." You say nothing. Contract?

No. Silence is not acceptance (except under the UCC (Uniform Commercial Code) when prior dealings make it so).

Joe (non-merchant) offers his bike for $150. Susan says "I'll take it, tire pump included." Contract?

Yes, for the bike at $150. Between non-merchants under the UCC (Uniform Commercial Code), an additional term is only a proposal Joe can accept or reject.

Same bike, but Susan says "I'll take it for $149." Contract?

No. A different term between non-merchants works like the mirror image rule, so it's a counteroffer.

ABC orders 1,000 widgets from XYZ (both merchants). XYZ accepts and adds a standard late-payment interest term. Is it in the contract?

Yes. Between merchants, additional terms are included unless the offer limited acceptance, the term materially alters the deal, or the offeror objects in a reasonable time.

Same merchants, but XYZ adds an arbitration clause. Is it in the contract?

The contract exists, but probably without that clause. It materially alters the deal, so it isn't included.

Two merchants' forms conflict on the delivery date. What happens?

Majority rule: the conflicting terms cancel out, and a UCC (Uniform Commercial Code) gap filler (reasonable time) applies.

"I'll pay $50 to whoever mows my lawn Saturday." Tim mows it. How did he accept?

By performing. It's a unilateral contract (promise for an act). A promise for a promise is bilateral.

Both buyer and seller believe a painting is a famous original. It's a copy. Can the buyer get out?

Yes. It's a mutual mistake about a material fact, so the contract is voidable.

A contractor bids $110K but meant $150K. The owner had no reason to know. Can the contractor back out?

No. A unilateral mistake is enforceable unless the other party knew or should have known, it was a clerical error, or it's unconscionable.

Zach sells a Rolex for $500, not knowing it's worth $5,000. Can he undo it?

No. Misjudging value is an error in judgment or a unilateral mistake, not grounds to void it.

A salesperson repeats the manufacturer's false spec, believing it's true. Buyer's remedy?

Innocent misrepresentation: rescission only, no damages.

A real estate agent says a home is in a top school district without checking. It isn't. Result?

Negligent misrepresentation: rescission plus possible damages.

A seller falsifies a business's financial statements to close a sale. Result?

Fraudulent misrepresentation: rescission, likely damages, and it's also a tort.

A seller says "This car is worth $50K." It's worth $30K. Misrepresentation?

Usually no. It's opinion, not a statement of fact (unless the seller is an expert or fiduciary).

A son caring for his elderly mother pushes her to sell him her house below market value. Result?

Undue influence. The contract is voidable by the mother.

"Sign this new deal or I'll cancel our other contract." Result?

Economic duress (when one party uses improper or illegitimate financial pressure to force another party into signing or modifying an agreement). The contract is voidable.

Kate promises to lend John a book. A month later John promises to help Kate move. Consideration?

No. Kate's promise didn't induce John's, so there's no bargained-for exchange.

You sell your car to a friend for $1. Enforceable?

Yes. Courts don't judge whether consideration is adequate, absent fraud or another defense.

An uncle promises his nephew $5,000 if he doesn't drink until 21. The nephew complies. Consideration?

Yes. Giving up a legal right is a legal detriment.

"I'll do the work if I have time." Is that consideration?

No. It's an illusory promise, because the promisor isn't bound to anything.

Building Co. may order "as many girders as we elect" from US Steel (United States Steel) at $8K each. Can US Steel refuse?

Yes. Building Co.'s promise is illusory, so there's no consideration or binding obligation. If it agreed to buy all it needs, it would be a valid requirements contract.

Sara promises her assistant a car "in consideration of" 10 years of past service. Enforceable?

No. Past consideration isn't consideration because it wasn't bargained for.

Halfway through a $300K house, the contractor demands $50K more to finish. The owner agrees. Must the owner pay the extra?

No (common law). The preexisting duty rule applies: the contractor was already obligated. Extra work or faster completion would change that.

A coal contract is at $20/ton. The market spikes and both parties agree in good faith to $25. Need new consideration?

No. Under the UCC (Uniform Commercial Code), good-faith modifications need no new consideration. Common law would require it.

Halfway through building a road, unexpected soil erosion requires major reinforcement. The owner agrees to pay more. Enforceable?

Yes. It's the unforeseen circumstances exception. It wouldn't apply to a foreseeable risk like snow during roofing season.

You pledge $10K to a charity, which then starts building based on pledges. Can you back out?

Likely not. Promissory estoppel applies: a definite promise, foreseeable and reasonable reliance to their detriment, and injustice if not enforced.

A 16-year-old buys a gaming laptop, then wants to return it and cancel. Allowed?

Yes. A contract with a minor is voidable at the minor's election, except for necessities or statutory ones (student loans).

An unlicensed contractor finishes a job in a state requiring a license. The owner refuses to pay. Result?

The owner may not have to pay. Contracts with unlicensed parties can be unenforceable.

An employee's non-compete bars working anywhere in the U.S. for 20 years. Enforceable?

No. It's unreasonable in scope and violates public policy.

A gym waiver says "not liable for injuries, even from our gross negligence." Enforceable?

Not for gross negligence. Exculpatory clauses can't excuse intentional or gross negligence.

A lease lets the landlord evict any time, without notice, and charges 400% late interest. Result?

Unconscionable. It's so one-sided it shocks the conscience, so it's unenforceable.

A concert venue burns down before the show. Is the performer liable for not performing?

No. Impossibility (destruction of subject matter) excuses performance, unless a force majeure clause says otherwise.

You rent a room to watch a parade, and the parade is canceled. Must you pay?

Likely not. Frustration of purpose: the main purpose, known to both sides, was destroyed.

John orally promises Sarah $50K if she marries him. She does. He won't pay. Enforceable?

No. A promise in consideration of marriage must be in writing (Statute of Frauds).

An oral 2-year employment contract. Enforceable?

No. It cannot possibly be performed within one year, so it needs a writing.

Maria orally agrees to landscape for 2 years. She finishes both years, but Emma won't pay the last $5K. Can Emma use the SOF (Statute of Frauds)?

No. Full performance by one party defeats the Statute of Frauds defense.

An oral contract to buy a house. The buyer paid part, moved in, and renovated. Enforceable?

Likely yes. The part performance exception for land applies (payment plus possession and/or improvements).

An oral contract to BUILD a house on your land. Must it be in writing?

No. Construction isn't an interest in land. (Sales, mortgages, options, and leases over 1 year are.)

A parent company orally guarantees its subsidiary's loan to keep its own business running. Enforceable?

Yes. The main purpose exception applies because the guarantor's own economic interest was the main reason.

Brenna orally orders 500 plain hats at $8. 60 are delivered and kept. Can Kara collect for the other 440?

No. It's a $4,000 oral sale of goods, standard rather than custom. It's enforceable only for the 60 received and accepted.

Same hats, but they're custom-made and Kara has substantially started production. Result?

Enforceable. The specially manufactured goods exception applies.

An oral order for 500 widgets ($5,000). In court the buyer admits ordering 250. Result?

Enforceable for 250 only, under the admission exception (to the extent admitted).

A retailer drafts and signs a lease. The owner never signs, then leases to someone else. Can the retailer sue?

No. A lease (interest in land) must be signed by the party being sued, the owner.

A 2-year written employment contract says nothing about a bonus. The employee says the boss orally promised one before signing. Admissible?

No. The parol evidence rule bars prior terms that add to a fully integrated written contract.

A signed, fully integrated contract was induced by fraud. Can the victim introduce outside evidence?

Yes. Parol evidence can show fraud, mistake, duress, incapacity, clerical errors, later modifications, or clarify ambiguity.

A home purchase is "subject to passing inspection." It fails. Must the buyer buy?

No. The inspection was a condition precedent that never occurred, so the duty never arose.

You're hired on the condition you pass the CPA (Certified Public Accountant) exam within a year. You don't. Result?

The employer is released. It's a condition subsequent, which ends an existing duty.

A contract says payment for a car is due on delivery. Who goes first?

Neither. It's a concurrent condition, so both perform at the same time (the common law default).

A portrait is payable "upon the buyer's personal satisfaction." The buyer honestly hates it. Must she pay?

No, if her dissatisfaction is in good faith (subjective standard for matters of taste).

A landlord never charges the late fee for months. Can he suddenly enforce it on past payments?

Probably not. He waived it by implied waiver (voluntary relinquishment of a right).

A seller shows up on the closing date with the car and title. The buyer refuses. Result?

Tender of performance: the seller is discharged and can sue the buyer for breach.

A business owes the bank $400K. The bank agrees to take land instead. Result?

Accord and satisfaction discharges the debt.

A painter and owner agree to drop the 5-office, $25K deal and replace it with 4 offices for $20K. What is this?

A substitute contract, which discharges the original.

All parties agree a new company takes over a supplier's contract and the original supplier is released. What is this?

A novation.

A Virginia party sues on an oral contract 4 years after breach. Result?

Barred. Virginia's statute of limitations is 3 years for oral contracts, 4 for UCC (Uniform Commercial Code) sales, and 5 for written contracts. That's discharge by operation of law.

A contractor uses cheaper water fixtures than the homeowner specified. Otherwise the house is perfect. Can she refuse to pay?

No. It's substantial performance: she pays the contract price minus the cost to replace the fixtures.

Evans builds Dyer a house with cracked load-bearing beams, a flooding patio, and freezing pipes. Must Dyer pay?

No. It's a material breach (no substantial performance), so Dyer is discharged. Evans gets at most the value of the work.

A real estate contract says "time is of the essence." The buyer closes one day late. Breach?

Yes. Strict performance is required, and substantial performance doesn't apply.

Nagel must deliver goods by Sept. 10. On Sept. 3 he says he won't. Can Fields sue now?

Yes. Anticipatory repudiation (when one party to a contract clearly and unequivocally communicates that they are unwilling or unable to fulfill their contractual obligations) is a material breach, so Fields can sue immediately.

A buyer has reasonable grounds to doubt a seller will deliver goods. What can the buyer do under the UCC (Uniform Commercial Code)?

Demand adequate assurance. The seller has a reasonable time, up to 30 days, to respond.

A contractor builds 200 parking spaces ($5M) but never installs the charging stations ($1M). Result?

It's a divisible contract: complete performance on the spaces, material breach on the stations.

A singer backs out of a $100K concert. The replacement costs $150K. Damages?

$50K in compensatory (direct) damages: the replacement cost minus the contract price.

Late software causes the buyer to lose a $1M deal, which the developer knew about. What damages?

Consequential damages: indirect but foreseeable at contracting (lost profits).

After a vendor breaches, you fly out to find a new vendor and pay to store the rejected goods. What damages?

Incidental damages: the costs of responding to the breach.

A tenant breaks a lease. The landlord leaves the unit empty for a year and sues for all the rent. Result?

Reduced. The landlord had a duty to mitigate by trying to re-rent and can't recover avoidable losses.

A $360K/yr employee is wrongly fired with 2 years left and finds a comparable job in 6 months. Damages?

$180K, not $720K. Mitigation limits damages to the 6 months of lost pay.

A contract says the builder pays $2,000 per day of delay. Enforceable?

Yes, as liquidated damages, if it's a reasonable estimate and not a penalty.

A vendor breaches, but the replacement is cheaper. What damages?

Nominal damages (about $1), since there was no actual loss.

Can a plaintiff get punitive damages (additional monetary punishments) for an ordinary breach of contract?

No, unless the conduct is also a tort (a civil wrong doing ) (e.g., Liberty Mutual's bad faith toward Parkinson).

A seller refuses to deliver a rare painting or a house after agreeing to sell. Best remedy?

Specific performance: the court orders the sale because the item is unique (always for land).

A deed lists the wrong property measurements because of a mutual error. Remedy?

Reformation: the court rewrites the contract to fix the mistake.

A developer completes 60% of a software project before the contract falls apart. How to recover?

Restitution, measured by the benefit conferred on the other party.

A roofer fixes the wrong roof while the homeowner watches and says nothing. No contract exists. Can the roofer recover?

Likely yes, through quasi-contract: benefit conferred, payment reasonably expected, unjust enrichment.