Contracts & Sales Missed MBE Questions and Answers 2022

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 lacked a full, handwritten signature, 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. $7,5000, 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. Answer choice B is correct. Under the UCC's firm offer rule, an offer to buy or sell goods is irrevocable if the offeror is a merchant, there is an assurance that the offer is to remain open, and the assurance is contained in a signed writing from the offeror. No consideration by the offeree is needed to keep the offer open. Here, all three conditions are satisfied (note that letterhead and an agent's initials suffices as a "signature"), and the wholesaler's offer was irrevocable until the offer period expired. The retailer's order was within the 7-day window, and thus the order for 1,000 units is priced at $7.50 each, or $7,500 total. Answer choice A is incorrect because the wholesaler was bound by the UCC firm offer rule, and his offer was irrevocable regardless of the method of his attempted revocation. Answer choice C is incorrect because the initials of the head of sales on the letterhead are sufficient to constitute a signed writing under the UCC. Answer choice D is incorrect because, under the UCC's firm offer rule, no consideration was required to hold the offer open. 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? Answers: 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. Answer choice A is correct. A seller's shipment of nonconforming goods with a notice of accommodation does not constitute an acceptance and breach, but rather a counteroffer, which the buyer is free to either accept or reject. However, an offer calling for prompt shipment can be accepted either by a prompt promise to ship or by the prompt shipment of goods. Under the mailbox rule, an acceptance is effective when mailed. Consequently, on May 15 when the supplier mailed his acceptance to the coach, a contract for 20 red jerseys was formed, even though the coach did not receive this acceptance until May 19. With regard to the May 16 shipment of blue jerseys by the supplier that the coach received on May 18, the coach may accept or reject these jerseys as nonconforming goods and, in either event, recover damages, if any. Answer choice B is incorrect. Although a seller's shipment of nonconforming goods with a notice of accommodation does not constitute an acceptance and breach, but rather a counteroffer, which the buyer is free to either accept or reject, this is only true if the seller has not already accepted the buyer's offer. Here, the supplier had earlier mailed its acceptance of the coach's offer to supply red jerseys, so the supplier's shipment of the blue jersey constitutes a breach of contract. Consequently, the coach may reject the blue jerseys without waiving any remedy for breach of contract. Answer choice C is incorrect because the supplier's shipment of the blue jerseys did not constitute an acceptance of the coach's offer, but a breach of the contract that had already been formed for the shipment of red jerseys. Answer choice D is incorrect because, although typically an accommodation shipment constitutes a counteroffer rather than an acceptance and breach of the contract, here the shipment, despite being designated as an accommodation, cannot be a counteroffer because the supplier had already accepted the coach's offer. 00:44 01:21 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? Answers: 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. Answer choice B is correct. At common law, a promise to perform a preexisting legal duty does not qualify as consideration because the promisee is already bound to perform. In this case, the landscaper had a preexisting legal duty to trim the tree, and thus there was no consideration to support the homeowner's promise to pay an additional $500. Answer choice A is incorrect because an enforceable contract may be renegotiated. Even when there is a preexisting legal duty, there will be consideration if the promisee gives something in addition to what is already owed or varies the preexisting duty. Answer choice C is incorrect because modification of a services contract must be supported by consideration. Or some circumstances that were not anticipated when the contract was made must have arisen, and modification is fair and equitable in light of those circumstances. Answer choice D is incorrect because the fact that the landscaper had to forego other work would not serve as consideration in this case because the landscaper was under a preexisting legal duty. 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? Answers: 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. Answer choice C is correct. This is considered an "accord and satisfaction," which discharges both the original contract and the accord contract. Under an accord agreement, a party to a contract agrees to accept a performance from the other party that differs from the performance that was promised in the existing contract, in satisfaction of the other party's existing duty. Generally, consideration is required for an accord to be valid. By compromising, each party surrenders its respective claim as to how much is owed. If a claim is subject to dispute, it can be discharged if the person against whom the claim is asserted in good faith tenders a negotiable instrument (e.g., a check) that (i) is accompanied by a conspicuous statement indicating that the instrument was tendered as full satisfaction of the claim (e.g., "payment in full"), and (ii) the claimant obtains payment of the instrument. Here, the rug maker compromised by accepting the 90% wool yarn, and the supplier compromised by accepting $15,000 rather than $20,000. Thus, there was an accord and satisfaction and the rug maker is not liable for the remaining $5,000. Answer choice A is incorrect, because the good-faith dispute did not suspend the duty of the rug maker to pay for the yarn supplied. In the context of an accord and satisfaction, it is only the existence of an accord agreement that suspends the original duty of a party. Answer choice B is incorrect, as this is not a novation. A novation is the substitution of a new contract for an old one when the original obligor is released from his promises under the original agreement and a new obligor becomes liable. Here, there are only two original parties-the rug maker and the supplier. Answer choice D is incorrect because estoppel requires not only an assertion by a party but also justifiable reliance on the assertion by the party to whom the assertion is made, to that party's detriment. Here, even assuming that the supplier's deposit of the check constituted an assertion, there is no evidence that the rug maker has relied on this assertion to his detriment. 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? Answers: 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. Answer choice A is correct. If performance of a promise would satisfy an actual, supposed, or asserted duty of the promisee to a third party, and the promisee did not intend to make a gift to the third party, then the third party is an intended beneficiary who is a creditor beneficiary. A creditor beneficiary has the right to sue either the promisor or the promisee to enforce the contract. Here, the tannery owner was a creditor beneficiary as of August 20. However, the hat maker and the rodeo manager agreed on August 25 to not pay the tannery owner. The tannery owner did not know about the August 20 agreement until August 30, after the two parties had agreed to not pay the tannery owner. Thus, he did not rely upon the original agreement that was later modified by both parties. For this reason, answer choices C and D are incorrect. Answer choice B is incorrect because an agreement to benefit a third party does not need to be supported by separate consideration. In addition, the tannery owner cannot recover because the two parties to the original agreement eliminated the third-party beneficiary agreement on August 25. Because the original agreement involved the sale of goods, no consideration is required to amend it, as long as the amendment is done in good faith. A shoe manufacturer contends that the owner of a shoe store called and ordered 50 pairs of Oxford-style dress shoes at $100 per pair to be shipped within three weeks and that the manufacturer's representative immediately accepted this order. The manufacturer promptly sent the owner a signed, 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 style of shoes, but that did not indicate the price of the shoes. The owner admits to receiving the acknowledgment the following day and taking no action regarding it. Two weeks later, the owner received a shipment of 50 pairs of Oxford-style dress shoes. The owner immediately called the manufacturer and asserted that he had never ordered the shoes. Will the Statute of Frauds prevent the manufacturer from enforcing this contract against the owner? Answers: A. No, because an oral contract made between merchants is enforceable. B. No, because the owner received and did not respond to the written acknowledgment in a timely manner. C. Yes, because the acknowledgment did not indicate the price of the shoes. D. Yes, because the price of the shoes exceeds the $500 threshold of the Statute of Frauds. Answer choice B is correct. Generally, a contract that falls within the Statute of Frauds is unenforceable unless evidenced by a writing. The writing must (i) be signed by the party to be charged and (ii) contain the essential elements of the deal. A contract for the sale of goods for a price of at least $500 falls with the Statute of Frauds. Consequently, the purported order of 50 pairs of shoes at $100 per pair is subject to the Statute of Frauds. Although the acknowledgment sent by the manufacturer to the owner is otherwise sufficient to satisfy the Statute of Frauds, it was not signed by the owner. However, if both parties are merchants and a memorandum sufficient against one party is sent to the other party, who has reason to know its contents, and the receiving party does not object in writing within 10 days, then the contract is enforceable against the receiving party even though he has not signed it. Here, this merchant's exception applies to the owner who received the acknowledgment of his order and did not reply for more than 10 days after receiving it. Answer choice A is incorrect. Although a memorandum of an oral agreement sent by one merchant may permit the enforcement of the agreement against another merchant, there is no blanket exception to the Statute of Frauds that permits enforcement of an oral agreement between two merchants. Answer choice C is incorrect. Under the Statute of Frauds for the sale of goods, the price of the goods need not be included in the contract. If the price is omitted, the parties can present evidence of the agreed-upon price or (if that fails) the market price. Therefore, the failure of the acknowledgment to reflect the price of the shoes does not prevent the acknowledgment from satisfying the merchant's exception to the Statute of Frauds. Answer choice D is incorrect. Although the Statute of Frauds for a sale of goods does apply to this purported transaction and was not satisfied because the owner did not sign the acknowledgment, the acknowledgment sent by the manufacturer satisfies an exception to the Statute of Frauds when both parties to the oral agreement are merchants. 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 costume was NOT an acceptance, what is highest value remedy available to the collector? Answers: 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. Answer choice D is correct. The store's rejection of the collection was proper under the perfect tender rule, but the store's selling the collection to the theater company constituted conversion. The remedy for conversion is the fair market value of the goods at the time of the conversion of the collection. The $15,000 received by the store from the sale of the collection reflects the collection's fair market value at the time of the conversion. Answer choice A is incorrect because the collector is not a volume seller; consequently, lost profit damages are not available to him. Answer choice B is incorrect because the difference between market and contract prices is an improper measure of damages in cases of conversion. Answer choice C is incorrect because the collector is not limited to the contract price in ascertaining the value of the collection; instead, he is entitled to fair market price of the costumes. Seeing his elderly neighbor struggle to shovel large amounts of snow from a sidewalk, a man decided to shovel the neighbor's sidewalk himself. The man wanted to help the neighbor so she would not injure herself. He figured that if anyone else used the sidewalk, he could charge them later for the work performed. The man continued to shovel the sidewalk for the remainder of the winter. The neighbor knew the man was doing the shoveling and never objected. She even wrote him a note on the first day of spring indicating that she would love to pay him for the service. A second neighbor regularly used the particular sidewalk as well. When the man ran into the second neighbor at the grocery store one day, the second neighbor said he would pay the man for taking such good care of the neighborhood. At the end of the winter, the man placed a bill on the doorstep of both the elderly neighbor and the second neighbor. The service charges were comparable to the reasonable market rate for such services. The jurisdiction applies the material benefit rule. From whom can the man can likely obtain payment? Answers: A. Neither the elderly neighbor nor the second neighbor B. The elderly neighbor only C. Correct Answer: The second neighbor only D. The elderly neighbor and the second neighbor Answer choice C is correct. Under the material benefit rule, when a party performs an unrequested service for another party that constitutes a material benefit, the performing party (here, the man) can enforce a promise of payment made by a party who benefits from the service rendered. In this case, both neighbors benefited from the shoveling and both offered payment. However, the material benefit rule is not enforced when the performing party rendered the services without the expectation of compensation. Here, the facts indicate that the man wished to shovel the snow for his elderly neighbor in a gift capacity—i.e., so she would not injure herself. He had no such motivation for the second neighbor and can enforce that payment. Answer choice A is incorrect because the man can enforce payment against the second neighbor, as he did not intend for that neighbor to benefit from the gift. Answer choice B is incorrect. The man cannot enforce payment against the elderly neighbor even though she benefited from his services because he intended the service to be a gift. Answer choice D is incorrect because the man cannot enforce payment against the elderly neighbor. A tire dealer phoned in an order to a wholesaler for various tires of specific sizes and types at a total cost of $25,000. The wholesaler sent the dealer an acceptance of the order that listed the quantities of the various sizes and types of tires that the dealer had ordered. The acceptance identified the wholesaler in its heading, and in its body it identified the dealer as the person who had ordered the tires. Twelve days after the dealer received the acceptance but prior to the wholesaler's shipment of the tires, the dealer objected to the order. Unable to resell the tires for $25,000, the wholesaler sued the dealer for damages. The dealer asserted the Statute of Frauds as a defense. Will the dealer be successful in its defense against the wholesaler's action? Answers: A. No, because the dealer failed to timely object to the written acceptance. B. No, because there is no need for a writing when both parties to a contract for the sale of goods are merchants. C. Yes, because the dealer never signed a writing that identified it as the buyer of the tires. D. Yes, because the dealer objected to the written acceptance before the wholesaler had shipped the tires. Answer choice A is correct. If both parties are merchants and a memorandum sufficient against one party is sent to the other party, who has reason to know its contents, and the receiving party does not object in writing within 10 days, then the contract is enforceable against the receiving party even though he has not signed it. Here, the dealer did not object to the written acceptance sent by the wholesaler within 10 days. Therefore, the contract as expressed in the written acceptance is enforceable against the dealer despite the absence of the dealer's signature. Answer choice B is incorrect because the UCC does not completely eliminate the need for a writing when both parties are merchants. Answer choice C is incorrect. Generally, the Statute of Frauds requires that there be a writing signed by the party against whom the contract is to be enforced. However, there is an exception when both parties are merchants if a memorandum sufficient against one party is sent to the other party, who has reason to know of its contents, and the receiving party does not object in writing within 10 days. Answer choice D is incorrect. Under the special memorandum provision of the UCC Statute of Frauds that is applicable when both parties are merchants, a party who receives a memorandum of the contract from the other party has 10 days to object in writing to the memorandum, or the party receiving the memorandum waives the Statute of Frauds defense to the contract. A supplier contends that a dentist called and ordered 100 boxes of disposable paper masks, which the supplier's representative immediately accepted. The supplier also promptly sent the dentist a signed, written acknowledgment of the alleged order, which reflected the supplier as seller and the dentist as buyer, as well as the number and type of masks ordered. However, the writing did not indicate the price of the masks. The dentist admits to receiving the acknowledgment the following day, but asserts that she took no action regarding it. Two weeks later, the dentist received a shipment of 100 boxes of masks from the supplier along with an invoice that reflected the price of $9.99 per box. The dentist immediately called the supplier and asserted that she had never ordered the masks. Will the Statute of Frauds prevent the supplier from enforcing this contract against the dentist? Answers: A. No, because an oral contract made between merchants is enforceable without a writing. B. No, because the dentist did not respond to the written acknowledgment in a timely manner. C. Yes, because the acknowledgment did not indicate the price of the masks. D. Yes, because the price of the masks exceeds the threshold for the application of the Statute of Frauds to a sale of goods. Answer choice B is correct. Generally, a contract that falls within the Statute of Frauds is unenforceable unless evidenced by a writing. The writing must (i) be signed by the party to be charged and (ii) contain the essential elements of the deal. A contract for the sale of goods for a price of at least $500 falls with the Statute of Frauds. Consequently, the order of 100 boxes of masks at $9.99 per box is subject to the Statute of Frauds. Although the acknowledgment sent by the supplier to the dentist was otherwise sufficient to satisfy the requirements of the Statute of Frauds, it was not signed by the dentist. However, if both parties are merchants and a memorandum sufficient against one party is sent to the other party, who has reason to know its contents, and the receiving party does not object in writing within 10 days, then the contract is enforceable against the receiving party even though she has not signed it. Here, this merchant's exception applies to the dentist who received the acknowledgment of her order and did not reply for more than 10 days after receiving it. Answer choice A is incorrect. Although a memorandum of an oral agreement between merchants may permit the enforcement of the agreement against another merchant, there is no blanket exception to the Statute of Frauds that permits enforcement of an oral agreement between two merchants. Therefore, this answer choice is a misstatement of the law. Answer choice C is incorrect. Under the Statute of Frauds for the sale of goods, the price of the goods need not be included in the contract. If the price is omitted, the parties can present evidence of the agreed-upon price or (if that fails) the market price. Therefore, the failure of the acknowledgment to reflect the price of the masks does not prevent the acknowledgment from satisfying the merchant's exception to the Statute of Frauds. Answer choice D is incorrect. The Statute of Frauds for a sale of goods does apply to this transaction since the contract involves the sale of goods at a total price of $999 (100 x $9.99) and the threshold for application of the UCC Statute of Frauds is the sale of goods at a price of at least $500. Since the dentist did not sign the acknowledgment, it is true that generally the acknowledgment cannot serve as evidence of the existence of a contract. However, the acknowledgment sent by the supplier does satisfy the memorandum exception to the Statute of Frauds that is applicable when both parties are merchants. A life coach entered into a contract with an introverted woman to provide a week-long course that served as an introduction to the life coach's year-long program. Under the terms of the contract, the life coach would work with the woman full-time for a week to start teaching her to interact with people with more confidence. The woman would then participate in a speed-dating event as her "graduation" from the course. The contract also provided that unless the woman received an offer for a second date at the speed-dating event, she had no obligation to pay for the introductory course. If she received an offer for a second date at the event, she would be required to pay the life coach $1,000 within three days of the speed-dating event. After working with the life coach pursuant to the terms of the contract, the woman attended the speed-dating event. Four days after the event, when the woman still had not paid the life coach, the life coach brought a breach of contract action against the woman to recover $1,000 under the contract. Which of the following best states the burden of proof that will apply in this case? Answers: A. Because the contract involved a condition precedent, the life coach must prove that the woman received an offer of a second date at the speed-dating event to recover. B. Because the contract involved a condition precedent, the woman must prove that she did not receive an offer of a second date at the speed-dating event to avoid liability. C. Because the contract involved a condition subsequent, the life coach must prove that the woman received an offer of a second date at the speed-dating event to recover. D. Because the contract involved a condition subsequent, the woman must prove that she did not receive an offer of a second date at the speed-dating event to avoid liability. Answer choice A is correct. Performance by one or both of the parties may be made expressly conditional in the contract, and the conditions may precede the obligation to perform (condition precedent), or may discharge the duty to perform after a particular event occurs (condition subsequent). Here, the condition that the woman must receive an offer for a second date at the speed-dating event preceded her obligation to pay the life coach. If she received no offer, no duty to pay attaches. Therefore, it is a condition precedent. If a defendant's duty is subject to a condition precedent, then the plaintiff (here, the life coach) has the burden of proving that the condition occurred in order to recover. Therefore, answer choice A correctly states the burden of proof in this case. Answer choice B is incorrect because it states the burden of proof for cases when the defendant's duty is subject to a condition subsequent. Answer choices C and D are incorrect because they incorrectly state that the contract included a condition subsequent. Here, unless the woman received an offer for a second date at the speed-dating event, she had no obligation to pay for the introductory course. Therefore, because no obligation to perform attaches unless and until the woman received an offer for a second date at the speed-dating ev