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ANSWERS TO PROBLEMS
1. Rafferty was the principal shareholder in Continental Corporation, and, as a result, he
received the lion’s share of Continental Corporation’s dividends. Continental
Corporation was anxious to close an important deal for iron ore products to use in its
business. A written contract was on the desk of Stage Corporation for the sale of the iron
ore to Continental Corporation. Stage Corporation, however, was cautious about signing
the contract, and it did not sign until Rafferty called Stage Corporation on the telephone
and stated that if Continental Corporation did not pay for the ore, he would pay.
Business reversals struck Continental Corporation, and it failed. Stage Corporation sued
Rafferty. What defense, if any, has Rafferty?
Answer: Suretyship Provision. Main Purpose Doctrine. Rafferty has the defense that his
oral agreement to pay for the iron ore was a contract to guarantee the payment of the debt
2. Green was the owner of a large department store. On Wednesday, January 26, he talked
to Smith and said, “I will hire you to act as sales manager in my store for one year at a
salary of $48,000. You are to begin work next Monday.” Smith accepted and started work
on Monday, January 31. At the end of three months, Green discharged Smith. On May 15,
Smith brought an action against Green to recover the unpaid portion of the $48,000
salary. Is Smith’s employment contract enforceable?
Answer: One Year Provision. No, decision in favor of Green. The oral contract of
employment between Green and Smith was entered into on Wednesday, January 26, but
3. Rowe was admitted to the hospital suffering from a critical illness. He was given
emergency treatment and later underwent surgery. On at least four occasions, Rowe’s
two sons discussed with the hospital the payment for services to be rendered by the
hospital. The first of these four conversations took place the day after Rowe was
admitted. The sons informed the treating physician that their father had no financial
means but that they themselves would pay for such services. During the other
conversations, the sons authorized whatever treatment their father needed, assuring the
hospital that they would pay for the services. After Rowe’s discharge, the hospital
brought this action against the sons to recover the unpaid bill for the services rendered to
their father. Are the sons’ promises to the hospital enforceable? Explain.
Answer: Suretyship Provision: Collateral Promises. Decision for the hospital; the
promises are enforceable. The promise of the sons is not to answer for the debt of
4. Ames, Bell, Cain, and Dole each orally ordered LCD televisions from Marvel Electronics
Company, which accepted the orders. Ames’s television was to be encased in a specially
designed ebony cabinet. Bell, Cain, and Dole ordered standard televisions described as
“Alpha Omega Theatre.” The price of Ames’s television was $1,800, and the televisions
ordered by Bell, Cain, and Dole were $700 each. Bell paid the company $75 to apply on
his purchase; Ames, Cain, and Dole paid nothing. The next day, Marvel sent Ames, Bell,
Cain, and Dole written confirmations captioned “Purchase Memorandum,” numbered
12345, 12346, 12347, and 12348, respectively, containing the essential terms of the oral
agreements. Each memorandum was sent in duplicate with the request that one copy be
signed and returned to the company. None of the four purchasers returned a signed copy.
Ames promptly called the company and repudiated the oral contract, which it received
before beginning manufacture of the set for Ames or making commitments to carry out
the contract. Cain sent the company a letter reading in part, “Referring to your Contract
No. 12347, please be advised I have canceled this contract. Yours truly, (Signed) Cain.”
The four televisions were duly tendered by Marvel to Ames, Bell, Cain, and Dole, all of
whom refused to accept delivery. Marvel brings four separate actions against Ames, Bell,
Cain, and Dole for breach of contract. Decide each claim..
Answer: U.C.C.
(a) Decision for Ames. The U.C.C. has tightened the so-called special order rule. The
Code requires, in order that such an oral contract be enforceable against the buyer, that
the seller, before receiving notice of repudiation and under circumstances which
reasonably indicate that the goods are for the buyer, either make a substantial beginning
5. Moriarity and Holmes enter into an oral contract by which Moriarity promises to sell
and Holmes promises to buy Blackacre for $100,000. Moriarity repudiates the contract
by writing a letter to Holmes in which she states accurately the terms of the bargain, but
adds “our agreement was oral. It, therefore, is not binding upon me, and I shall not carry
it out.” Thereafter, Holmes sues Moriarity for specific performance of the contract.
Moriarity interposes the defense of the statute of frauds, arguing that the contract is
within the statute and hence unenforceable. What result? Discuss.
Answer: Writing or Memorandum. Judgment for Holmes. Moriarity, the party whom
6. On March 1, Lucas called Craig on the telephone and offered to pay him $190,000 for a
house and lot that Craig owned. Craig accepted the offer immediately on the telephone.
Later in the same day, Lucas told Annabelle that if she would marry him, he would
convey to her the property then owned by Craig that was the subject of the earlier
agreement. On March 2 Lucas called Penelope and offered her $25,000 if she would
work for him for the year commencing March 15, and she agreed. Lucas and Annabelle
were married on June 25. By this time, Craig had refused to convey the house to Lucas.
Thereafter, Lucas renounced his promise to convey the property to Annabelle. Penelope,
who had been working for Lucas, was discharged without cause on July 5; Annabelle left
Lucas and instituted divorce proceedings..
What rights, if any, have (a) Lucas against Craig for his failure to convey the property;
(b) Annabelle against Lucas for failure to convey the house to her; and (c) Penelope
against Lucas for discharging her before the end of the agreed term of employment?
Answer: Land Contract Provision.
(a) Lucas has no rights against Craig for his failure to convey the property. To be
7. Clay orally promises Trent to sell him five crops of potatoes to be grown on Blackacre, a
farm in Minnesota, and Trent promises to pay a stated price for them on delivery. Is the
contract enforceable?
Answer: One Year Provision. The contract may not be enforceable. Where an oral
8. Grant leased an apartment to Epstein for the term May 1 to April 30 at $750 a month
“payable in advance on the first day of each and every month of said term.” At the time
the lease was signed, Epstein told Grant that he received his salary on the tenth of the
month and that he would be unable to pay the rent before that date each month. Grant
replied that would be satisfactory. On June 2, due to Epstein’s not having paid the June
rent, Grant sued Epstein for such rent. At the trial, Epstein offered to prove the oral
agreement as to the date of payment each month. Is the oral evidence admissible??
Answer: Parol Evidence Rule. Decision for Grant. The lease expressly provided that the
rent for each month was payable in advance on the first day of the month. The oral
9. Rachel bought a car from the Beautiful Used Car Agency under a written contract. She
purchased the car in reliance on Beautiful’s agent’s oral representations that it had never
been in a wreck and could be driven at least two thousand miles without adding oil.
Thereafter, Rachel discovered that the car had, in fact, been previously wrecked and
rebuilt, that it used excessive quantities of oil, and that Beautiful’s agent was aware of
these facts when the car was sold. Rachel brings an action to rescind the contract and
recover the purchase price. Beautiful objects to the introduction of oral testimony
concerning representations of its agent, contending that the written contract alone
governed the rights of the parties. Explain whether Rachel should succeed?
Answer: Parol Evidence Rule. Decision for Rachel. The used car agency's objection to the
10. In a contract drawn up by Booke Company, it agreed to sell and Yermack
Contracting Company agreed to buy wood shingles at $950 per bunch. After the shingles
were delivered and used, Booke Company billed Yermack Company at $950 per bunch of
nine hundred shingles. Yermack Company refused to pay because it thought the contract
meant $950 per bunch of one thousand shingles. Booke Company brought action to
recover on the basis of $950 per bunch of nine hundred shingles. The evidence showed
that there was no applicable custom or usage in the trade and that each party held its
belief in good faith. Decision?
Answer: Interpretation of Contracts. Decision for Yermack Contracting Company. In the
absence of an applicable custom or trade usage, the contract is ambiguous. As it was
11.Halsey, a widower, was living without family or housekeeper in his house in Howell, New
York. Burns and his wife claim that Halsey invited them to give up their house and
business in Andover, New York, to live in his house and care for him. In return, they
allege, he promised them the house and its furniture upon his death. Acting upon this
proposal, the Burnses left Andover, moved into Halsey’s house, and cared for him until he
died five months later. No deed, will, or memorandum exists to authenticate Halsey’s
promise. McCormick, the administrator of the estate, claims the oral promise is
unenforceable under the statute of frauds. Explain whether McCormick is correct.
Answer: Land Contract Provision. Yes, McCormick is correct. In general, a contract to
12. Amos orally agrees to hire Elizabeth for an eight-month trial period. Elizabeth
performs the job magnificently, and after several weeks Amos orally offers Elizabeth a
six-month extension at a salary increase of 20 percent. Elizabeth accepts the offer. At the
end of the eight-month trial period, Amos discharges Elizabeth, who brings suit against
Amos for breach of contract. Is Amos liable? Why?
13. Ethel Greenberg acquired the ownership of the Carlyle Hotel on Miami Beach.
Having had little experience in the hotel business, she asked Miller to participate in and
counsel her operation of the hotel, which he did. He claims that because his efforts
produced a substantial profit, Ethel made an oral agreement for the continuation of his
services. Miller alleges that in return for his services, Ethel promised to marry him and
to share the net income resulting from the operation of the hotel. Miller maintains that he
rendered his services to Ethel in reliance upon her promises. The couple planned to wed
in the fall, but Ethel, due to physical illness, decided not to marry. Miller sued for
damages for Ethel’s breach of their agreement. Is the oral contract enforceable? Discuss.
Answer: Marriage Provision. Judgment for Ethel Greenberg. Any oral promise or
agreement made in consideration of marriage, other than a mutual promise to marry, is
14. Dean was hired on February 12 as a sales manager of the Co-op Dairy for a
minimum period of one year with the dairy agreeing to pay his moving expenses. By
February 26, Dean had signed a lease, moved his family from Oklahoma to Arizona, and
reported for work. After he worked for a few days, he was fired. Dean then brought this
action against the dairy for his salary for the year, less what he was paid. The dairy
argues that the statute of frauds bars enforcement of the oral contract because the
contract was not to be performed within one year. Is the dairy correct in its assertion?
Answer: One Year Provision. Judgment for Dean. A contract of employment to start in the
future and to continue for one year is within the statute of frauds because the one-year
15. Alice solicited an offer from Robett Manufacturing Company to manufacture certain
clothing that Alice intended to supply to the government. Alice contends that in a
telephone conversation Robett made an oral offer that she immediately accepted. She
then received the following letter from Robett, which, she claims, confirmed their
agreement:
Confirming our telephone conversation, we are pleased to offer the 3,500 shirts at
$14.00 each and the trousers at $13.80 each with delivery approximately ninety days
after receipt of order. We will try to cut this to sixty days if at all possible.
This, of course, as quoted f.o.b. Atlanta and the order will not be subject to
cancellation, domestic pack only.
Thanking you for the opportunity to offer these garments, we are
Very truly yours,
ROBETT MANUFACTURING
CO., INC.
Is the agreement enforceable against Robett?
Answer: Writing or Memorandum. No, judgment for Robett Manufacturing Company.
16. David and Nancy Songer planned to travel outside the United States and wanted to
acquire medical insurance prior to departure. They spoke with an agent of Continental
who requested that Nancy Songer undergo a medical examination based on a statement
that she had a heart murmur. She promptly complied, and the Songers later met with the
agent to complete the application. David Songer signed the application and tendered a
check for the first six months' premium. The Songers also claim that the agent stated that
a “binder” was in effect such that policy coverage was available immediately. The agent
subsequently denied making this statement, relying, instead, on a clause in the contract
that required home office acceptance. The Songers left the United States and sixty days
later inquired as to the status of their application. At approximately the same time,
Continental denied the application and sent a refund to the Songers. Nancy Songer was
then severely injured in an automobile accident. When Continental refused to honor the
policy, the Songers claimed that the oral representation constituted part of the contract
due to the vagueness of the policy “acceptance” language. Is the evidence regarding the
oral representations admissible?
Answer: Parol Evidence Rule. Judgment for Songer reversed and case remanded for retrial.
The statements of the Continental agent could only have been considered to form a
17. Yokel, a grower of soybeans, had sold soybeans to Campbell Grain and Seed
Company and other grain companies in the past. Campbell entered into an oral contract
with Yokel to purchase soybeans from him. Promptly after entering into the oral contract,
Campbell signed and mailed to Yokel a written confirmation of the oral agreement. Yokel
received the written confirmation but neither signed it nor objected to its content.
Campbell now brings this action against Yokel for breach of contract upon Yokel’s failure
to deliver the soybeans. Should Yokel be considered a merchant and thus bound by
Campbell’s written confirmation?
Answer: U.C.C.: Written Confirmation. Judgment for Campbell—the agreement is
