Additional Problems 11th edition appendix.1101 (1) (1) (7)

D1 Chapter 4 - Tort Law 1. Don Juan is so busy trying to get the attention of a young woman that he walks into a light pole and is knocked unconscious. Driver happens to be driving down the road and sees Don Juan’s unfortunate incident. Driver is so amused by the incident that he takes his eyes off the road for a moment and nearly slams into the car ahead of him. Veering off the road to avoid an accident, Driver drives into a restaurant, breaking a large window. Noodle, who was enjoying a bowl of soup at that moment, is burned by the hot soup, which is knocked off the table and into Noodle’s lap. Noodle sues the restaurant, Driver and Don Juan for negligence. As to each claim, what result? Explain. Chapter 11 - Agreement 1. Danforth Corporation entered into a written employment agreement with Eva on September 1, which provided in part that employment would commence on the following January 1 and “will continue for a period of time to be mutually agreed upon”. One month before January 1, Danforth Corporation notified Eva that it had changed its mind and would not employ Eva. In Eva’s action against Danforth for breach of contract, Danforth contends that there is no contract. Judgment for whom? Explain. 2. On April 15, Ramon wrote to Ivana offering to sell a piece of land that Ramon owned for $50,000. The letter, which was signed by Ramon, stated that the offer would expire on July 30. On April 20, Ramon received a better offer from Lou. Ramon called Ivana and told her that he was withdrawing his offer to Ivana. On April 25, Ivana called Ramon and told him that she was accepting Ramon’s offer of April 15. Ramon said that it was too late to accept the offer. In an action by Ivana against Ramon for breach of contract, judgment for whom? Explain. 3. On May 1, Esther, a retail wine seller, sent a letter to Samuel offering to buy 50 cases of Chateau Le Pew wine at $100 a case. The letter, which was signed by Esther, stated that it was a firm offer for 30 days. Samuel received the offer on May 2. By May 10, however, the price of wine was dropping and Esther wrote to Samuel saying, “I am sorry but I hereby withdraw the offer.” Samuel received this letter on May 12. On May 15, Samuel called Esther and told her that he accepted Esther’s offer of May 1. Esther claimed that the offer had been withdrawn and refused to accept delivery of the wine. In an action by Samuel against Esther for breach of contract, judgment for whom? Explain. 4. On July 1, Stan, a steel manufacturer, telephoned Byron and offered to sell Byron six carloads of steel at $600 a ton. Byron said, “That’s a lot of steel! Would you promise to keep your offer open for 10 days so that I can think about whether I can use that much?” Stan replied, “Sure. I promise to keep the offer open for 10 days.” On July 6, Stan sent a letter to Byron that stated, “I hereby revoke my offer of July 1.” Byron received this letter on July 7. On July 7, Byron called Stan and said that he was accepting Stan’s offer of July 1. Stan refused to deliver the steel, claiming that he had validly revoked the offer. In an action by Byron against Stan for breach of contract, judgment for whom. Explain? 5. Mira offered to sell Peter a parking lot for $75,000. The offer was in writing and signed by Mira and provided that any acceptance by Peter must be within 5 days. On the fourth day, Mira accepted a better offer from Dean and transferred the parking lot to Dean on that day. Unaware of this sale, Peter telephoned Mira on the fifth day and accepted Mira’s offer. In an action by Peter against Mira for breach of contract, judgment for whom? 6. Ty, a merchant, wrote to Marcus: “August 1, I offer to sell you one Model A Desktop Computer system, price $1,000. This is a firm offer for 30 days from the above date. ( Signed ) Ty.” (a) On August 10, Marcus received a letter from Ty: “I hereby revoke my offer of August 1.” On August 17, Marcus wrote to Ty: “I hereby accept your offer of August 1.” Is there a contract? Explain. (b) Assume that Ty’s offer stated that it was a firm offer for four months, and that on November 15, Marcus mailed an acceptance. Is there a contract? Explain.

D2 (c) Assume that Ty’s offer stated that it was a firm offer for four months, and that on November 14, Marcus received a letter from Ty, dated November 12: “I hereby revoke my offer of August 1.” On November 15, Marcus mailed an acceptance. Is there a contract? Explain. 7. On March 1, Irina wrote a signed letter to Benito and offered to sell the piano in her home to Benito for $400, and stated that she would keep her offer open for 4 months. On April 1, Irina sold the piano to Tonya, her cousin, for $500, without informing Benito that she did so. On June 10, Benito wrote Irina stating that he accepted Irina’s offer. Irina immediately notified Benito that she could not sell him the piano because she had already sold it to Tonya. Benito sues Irina for breach of contract. Judgment for whom? Explain. 8. On September 15, Preet wrote to Lila as follows: “I offer to sell you my farm, Blackacre, for $300,000, all cash, closing on November 1. Please advise as soon as possible. (Signed) Preet.” On October 1, Lila mailed her acceptance to Preet, unaware that Preet had died on September 30 When Lila learned of Preet’s death on October 5, Lila insisted that the Estate of Preet nevertheless deliver the deed to Blackacre in exchange for Lila’s certified check for $300,000. Xavier, the Executor of Preet’s Estate, refused to do so. (a) In an action by Lila against the Estate of Preet for breach of contract, judgment for whom? Explain. (b) If Preet’s offer was a valid irrevocable offer for 30 days, would your answer to (a) be different? Explain. 9. On October 1, Tsering received the following letter from Shoshanna: “I understand that you are interested in buying a pick-up truck, I will sell you mine for $10,000 all cash, and will have it ready for delivery to you on November 15. (Signed) Shoshanna.” Later that day Tsering telephoned Shoshanna and inquired: “Can I have 20 days to think over your offer?” Shoshanna replied: “O.K., you have an irrevocable option for 20 days. Write to me when you decide.” On October 6, Tsering wrote Shoshanna: “I am still very much interested in your offer. I’m a little short of cash at the moment and would like to know if you would consider taking $5,000 cash and my 30-day note for the other $5,000? (Signed) Tsering.” Shoshanna did not reply. On October 10, without Tsering’s knowledge, Shoshanna sold and delivered the truck to Mario for $11,000 cash. On October 15, Tsering wrote Shoshanna: “I have decided to accept your offer and will pay you $10,000 in cash when I pick up the truck on Nov.15. (Signed) Tsering.” Shoshanna wrote back: “The truck is sold.” Tsering sued Shoshanna for damages for breach of contract. Judgment for whom? Explain. 10. On May 1, Kodzo, a textile manufacturer, mailed to Bonnie, a merchant, a written and signed offer to sell 1,000 bolts of blue denim at $40 per bolt. Each bolt would contain 25 square yards. The offer stated that “it would remain open for 10 days from the above date (May 1) and that it would not be withdrawn prior to that date.” Two days later, Kodzo, noting a sudden increase in the price of blue denim, changed his mind. After making great personal efforts to contact Bonnie, Kodzo sent Bonnie a letter revoking the offer of May 1. The letter was mailed on May 4 and received by Bonnie on May 5 . Bonnie chose to disregard the letter of May 4. Instead, she continued to watch the price of blue denim rise. On May 9, Bonnie mailed a letter accepting the original offer. The letter was sent by mail and was properly addressed and contained the correct postage. However, it was not received by Kodzo until May 12, due to a delay in the mail. Bonnie demanded delivery of the goods according to the terms of the offer of May 1, but Kodzo has refused, claiming there is no contract (a) Is there a contract? Explain. (b) If Kodzo was not a merchant, would there be a contract? Explain. 11. Sara, a wholesale fruit dealer, sent the following letter to Bud, a fruit merchant: “Feb. 1, offer 1,000 boxes of Los Angeles, San Gabriel oranges, at $10.60 per box, F.O.B. Los Angeles: March delivery. Unless I receive your acceptance by 2 P.M. on Feb. 4, I will dispose of them elsewhere. (Signed Sara).” Sara’s letter was received by Bud on Feb. 2, at 3 P.M. At 1 P.M. on Feb. 2, Sara mailed Bud the following letter. “I regret to inform you that I am compelled to withdraw my offer dated Feb. 1.” Sara’s second letter was not received by Bud until Feb. 3. Meanwhile at 5 P.M. on Feb. 2, Bud mailed the following letter to Sara: “I accept your offer dated Feb. 1. (Signed Bud).” Because of a severe snowstorm, which disrupted all means of communication, Bud’s letter was not delivered to Sara until 4 P.M. on Feb. 4. (a) Is there a contract between Sara and Bud? Explain. (b) Assume that the words “Unless I receive your

D4 refrigerators were delivered to Rafael, he found they were damaged. An estimate for repairing them showed it would cost up to $1,000, and an expert opinion was to the effect that they were defective when shipped. Rafael put in a claim to Aldo, which Aldo rejected. Rafael then wrote to Aldo, “I don’t like to get into a dispute of this nature. I am enclosing my check for $4,000 in full payment of the shipment.” Aldo did not reply, but he cashed the check and then sued Rafael for the $1,000 balance. May he recover? Explain. 6. In the previous problem, assume that there was no damage to the refrigerators and no dispute, but that Rafael did not pay. One month after payment was due, Rafael wrote to Aldo, “I’ll pay you $4,000 if you will accept it in full payment.” Aldo wrote back, “Since I have despaired of getting any more out of you, I’ll take the $4,000 in full payment.” Rafael paid the $4,000 and later, Aldo sued Rafael for the $1,000 balance. May he recover? Explain. 7. Eva and Maria entered into a written contract pursuant to which Eva was to render decorating services for Maria for a total price of $75,000. After the services had been performed, a good faith dispute arose between Eva and Maria over whether all of the services had been properly performed. Eva claimed that the full amount was due, but Maria argued that only $50,000 worth of services had been performed. After several weeks of argument, Maria sent a check for $60,000 to Eva on which Maria had written “payment in full for decorating services.” (a) Eva endorsed the check, without making any further notations on it, deposited it and sued Maria for the remaining $15,000 she claims is due. Judgment for whom? Explain. (b) Instead of the facts in (a) assume that Eva wrote “under protest” on the check when she endorsed it and, after depositing it, sues Maria for $15,000. What result? Explain. (c) Instead of the facts in (a) and (b), assume that Eva and Maria had a telephone conversation in which Eva agreed to take $60,000 in full satisfaction of Maria’s obligation under the contract. Maria then sent the check, with a letter referencing the telephone conversation. Eva wrote “under protest” on the check, endorsed and deposited it, and then sued Maria for $15,000. What result? Explain. 8. Digna owed Cecelia $10,000 under a valid loan agreement. Payment was due on September 1. Digna informed Cecelia that she was unable to pay on September 1. (a) Assume that on September 5, Cecelia orally agreed to accept $8,000 plus the transfer of Digna’s stamp collection (which Cecelia admired) as payment in full, if Digna would do so by September 10. Digna did pay the $8,000 and transferred the stamp collection to Cecelia on September 8. The stamp collection had a market value of $1,000. On September 15, Cecelia sued Digna for the $1,000 balance Cecelia claims is due. How much, if anything, will Cecelia recover from Digna? Explain. (b) Instead of the assumption in (a), assume that on September 5, Cecelia orally agreed to accept $9,000 in full payment of Digna’s debt if Digna paid before September 10. Digna paid Cecelia $9,000 on September 8. On September 15, Cecelia sued Digna for $1,000. How much, if anything, will Cecelia recover from Digna? Explain. (c) Would your answer to (b) be different if Cecelia agreed in a signed writing to accept $9,000 in full payment of Digna’s debt? Explain. 9. Camila, a building contractor, entered into a written agreement with Owen, the owner of 27 Y Street, to build a new wing on Owen’s house for $90,000. After the work was one-half done, Camila complained about the rising cost of materials and stopped work. Owen said to Camila: “If you go ahead and finish the job, I’ll pay you a bonus of $10,000.” Camila agreed and finished the job. Camila then demanded payment of $100,000, but Owen refused to pay more than $90,000. (a) How much may Camila collect from Owen? Explain. (b) Assume that Camila wrote on the bottom of the written contract, “The agreed price for the above work is $100,000” and said to Owen: “I’ll go ahead if you sign that,” which Owen did. How much may Camila collect from Owen? Explain. 10. Armand was hired to work as the chef for the restaurant at Scallop’s seaside resort for 3 months during the summer, under a written contract that provided that Armand would receive compensation of $50,000. During the first month, the guests were wildly enthusiastic about the quality of the food and Scallop’s reservations for the resort and restaurant doubled. Noticing this, Armand felt he was entitled to share in Scallop’s increased profits. During a conversation, Scallop promised to pay Armand a $20,000 bonus at the end of the summer if he continued to work under his contract. At the end of the three months, Scallop paid Armand $50,000 and refused to pay the $20,000 bonus

D5 he had promised. Armand sued Scallop for breach of contract. Judgment for whom? Explain. 11. In May, Mike, a 17-year-old college student, was introduced to Dover, the operator of a summer camp, through Excel Employment Agency. Mike and Dover entered into a written agreement whereby Dover hired Mike as a camp counselor during the summer vacation period at a salary of $2,000 per month. Mike also agreed in writing to pay Excel Employment Agency a certain commission for their services. In June, Mike discovered that he had failed one of his final exams, and decided that, instead of working, he would attend college during the summer session. Mike disaffirmed both contracts. (a) What rights, if any, do Dover and Excel Employment Agency have against Mike? Explain. (b) Would your answer to (a) be the same if, when he entered into the contracts, Mike had fraudulently misrepresented his age as 18? Explain. 12. The father of a 17-year-old daughter, Alicia, sent his daughter away to college, and paid Alicia’s expenses for board, clothing and tuition. (a) Assume that Alicia decided to occupy her spare time, and accordingly contracted to take a two-year correspondence course in computer repair with Careers Correspondence School. After Alicia became 18, she continued to receive the course materials for 6 months, did the correspondence lessons, used the books sent to her, and made six monthly payments. Then she notified Careers Correspondence School that she disaffirmed any further obligation under the contract. In an action by Careers Correspondence School against Alicia to recover the balance due under the contract, judgment for whom? Explain. (b) Assume that while Alicia was 17, her father suffered financial reverses and Alicia and her father agreed that thereafter Alicia was on her own. In order to return to college, Alicia borrowed $25,000 from the college’s Student Aid Fund to cover her expenses for the next year. The loan was payable at the end of 3 years. When Alicia became 18, she immediately notified the college that she disaffirmed the loan agreement. May the college enforce the loan agreement against Alicia? Explain. 13. On his 17th birthday, Alex received a deed to Blackacre, a tract of farmland, as a gift from his uncle. Alex cut down a number of trees suitable for making railroad ties. Alex sold Blackacre to Bertha for $100,000 and the felled timber to Carmen for $3,000. He spent the money and, immediately after his 18 th birthday, notified Bertha and Carmen that he disaffirmed the respective contracts. In the meantime, however, Bertha had sold Blackacre to Marvin and Carmen had sold the timber to Ned. Is Alex entitled to recover: (a) Blackacre from Marvin? Explain. (b) the timber from Ned? Explain. 14. Bob, who was 17 years old, bought a used sports car for $12,000 from Ace Motors on the installment plan. He had already paid $3,000 on the car when he disaffirmed the contract on his 18 th birthday. He offered to return the car and demanded the return of the $3,000 he had paid. The car is now worth only $8,000. What are the rights of the parties? Explain. 15. Ad and Bookem, an accounting firm operating nationally over a long period of years, with branch offices in all major cities and coverage of all major industrial areas in the United States, acquired the entire practice and goodwill of Sub and Div. another accounting firm operating nationally, with branch offices in all major cities. The price was to be paid in ten annual installments. The agreement contained a provision that provided that the five major partners of Sub and Div, both individually and as members of the accounting firm, were not to engage in practice anywhere in the United States for three years. (a) Is the provision enforceable? Explain. (b) Assuming the provision is enforceable, what remedies does Ad and Bookem have against any of the partners who breach the contract provision? Explain. 16. On February 1, Brad purchased the assets of Smalls, a small management-consulting firm based in Manhattan. Under their written agreement, Brad agreed to pay $80,000 a year for five years. The agreement required Smalls to transfer all of his assets and goodwill to Brad. Further, the agreement required Smalls not to compete with Brad for a period of five years within Manhattan, where the majority of Small’s clients were located. Other clients of Smalls were located throughout New York State. Three months later, on May 1, Brad learned that Smalls had opened a management consulting firm three blocks from where Smalls’ office had been located on February 1. What rights, if any, does Brad have against Smalls? 17. Dr. Livingston was the only oral dental surgeon

D7 discovered these facts, Brown had expended $75,000 for the installation of new machinery. (a) Did Smith commit fraud? Explain. (b) What remedy or remedies, if any, are available to Brown? Explain. 2. On April 1, Santos, a dealer in mining stocks, sold to Burns, 10,000 shares of Alaska Uranium, Inc., at $5 per share, knowingly misrepresenting that Alaska Uranium, Inc. had proven uranium deposits in its Alaska properties. Burns paid Santos for the stock on April 1. On April 15, on the advice of friends, Burns had the corporation investigated and found that it had never had any prospects of uranium, but that it had just discovered a copper vein on its property and was putting it into production. During the following February, Burns received and deposited a $100 check from Alaska Uranium, Inc. for its one cent per share dividend. One month later, Burns regretted his purchase. (a) In an action by Burns against Santos to disaffirm the contract on the grounds of fraud, judgment for whom? Explain. (b) In an action by Burns against Santos to recover damages based on fraud, judgment for whom? Explain. (c) In an action by Burns against Alaska Uranium, Inc. to recover damages based on fraud, judgment for whom? Explain. 3. On February 13, Mario purchased an engagement ring from John, a jeweler, for $5,000, relying upon John’s representation that the ring was set with a genuine diamond. The next morning, Mario had the ring appraised by a gemologist and learned to his amazement that the center stone was not a genuine diamond, but rather a zircon, a cheap imitation that looked like a diamond but was worth only $50, and that the entire value of the ring was $200. Nevertheless, the next day, Mario gave the engagement ring to Gina, his fiancée, on Valentine’s Day, as he had promised. One month later, Gina terminated her engagement to Mario and returned the ring to him. The following day, Mario decided to rescind his contract with John and to sue John for damages. (a) Does Mario have the right to rescind his contract with John? Explain. (b) Does Mario have the right to recover damages, from John and if so, how would the damages be computed? Explain. 4. Max Corporation, a well-known television manufacturer, had several odd lots of discontinued models, which it desired to clear out. Max, the president, invited Dharun, the owner of Dharun Discount Chain, to come in and examine the different models and make Max an offer for the entire lot. The sets were segregated from the regular inventory. Fifteen televisions that were not discontinued models were accidentally included in this segregated group by one of Max’s employees. Dharun was unaware that Max did not intend to include the fifteen televisions in the group. Dharun made Max an offer of $10,000 for the entire lot. Unaware of his employee’s error, Max accepted the offer. Max would not have accepted Dharun’s offer if Max had known the fifteen current models had been included. Upon learning of the error, Max Corporation refused to perform and alleged mistake as a defense. Dharun Discount Chain sued Max Corporation for breach of contract. Judgment for whom? Explain. 5. Cynthia was bequeathed an oil painting by her childless aunt. Cynthia was not favorably disposed toward the painting because it reminded her that her aunt had left her entire estate (except the painting) to the Society for the Prevention of Cruelty to Animals. When Cynthia’s best friend, Beatrice, admired the painting, Cynthia offered to sell it to her for $10. Beatrice accepted, paid the $10 and took the painting. The painting was clearly an original and bore the signature, “Ad Schreyer,” but neither Cynthia nor Beatrice had ever heard of the painter. Several weeks later, Beatrice informed Cynthia that she had inquired about the artist and had learned that the painting was worth $15,000. On hearing this, Cynthia tendered $10 to Beatrice and demanded the return of the painting. Beatrice refused and Cynthia brought suit against Beatrice to recover the painting. (a) Judgment for whom? Explain. (b) Would your answer to (a) be the same if Beatrice had known, at the time she bought the painting, that Ad Schreyer was a famous artist and that the painting was far more valuable than Cynthia realized? Explain. (c) Would your answer to (a) be the same if Beatrice had told Cynthia that Ad Schreyer was an amateur painter when Beatrice knew that Shreyer was a famous painter? Explain 6. Jorge is the owner of a 20-story office building undergoing renovation. A flooring contractor, Mikhail,

D8 came to the building to measure the job in preparation for making an offer. Mikhail mistakenly failed to include one of the floors, and his offer was thus 5% lower than it otherwise would have been. Jorge, who did not know of Mikhail's error, accepted Mikhail's offer. When Mikhail's workers came to start the job, they noticed the error. Mikhail now wants to avoid the contract. Will he be successful? Explain. 7. Aldo, an adult college student, went to Brentwood Department store to buy clothes. He selected two new suits and a coat for $950 and asked to open up a charge account. The credit manager was willing to open account but was concerned about payment. Aldo told the credit manager to call Franco, his father. On the telephone, Franco told the credit manager. “Go ahead, open the account for him. It will teach him to stand on his own feet if he has to pay his own bills. But don’t worry, if Aldo doesn’t pay you, I will.” The clothes were given to Aldo and billed to Aldo. Aldo failed to pay. The store sues Franco who pleads the Statute of Frauds as a defense. Judgment for whom? Explain. 8. Assume in the previous question that the credit manager refused to open the account for Aldo, that he called Franco on the telephone, and Franco said. “I have an account with your store, give Aldo the clothes and charge them to my account. “The clothes were given to Aldo. Is Franco liable for payment if he pleads the Statute of Frauds as a defense? Explain. 9. Bo was the owner of Lot No. 1 on which he had built his home. Sadia owned the adjoining Lots No. 2 and 3, which were undeveloped, along with Lot No. 4 on which Sadia’s home was located. Bo wished to acquire Lot No. 2 in order to protect his home site from crowding if Lot No. 2 should be sold to a stranger. Meeting Sadia on the street on January 2, Bo explained his wish to acquire Lot No. 2 and offered to buy it from Sadia for $75,000 cash. Sadia agreed and promised to deliver a deed to Lot No. 2 in 4 weeks. Bo paid Sadia $1,000 as a deposit or down payment towards the purchase price of $75.000. On February 1, Sadia told Bo that she had changed her mind. Bo demands that Sadia perform the contract. Sadia contends that if there is any contract, it is unenforceable. (a) Was there an offer and acceptance sufficient to constitute a contract between Sadia and Bo? Explain. (b) In an action by Bo against Sadia for breach of contract, judgment for whom? Explain. (c) Assume that on January 10, Bo sent to Sadia his check for $1,000 bearing the notation “On account of purchase price of Lot No. 2” and that Sadia cashed the check, but later refused to convey Lot No. 2. Would Bo’s payment constitute sufficient part performance to enable Bo to enforce the contract against Sadia? Explain. (d) If the contract is not enforceable, may Bo recover his $1,000? Explain. (e) Assume that in addition to the payment, Bo, with Sadia’s knowledge and consent, entered on Lot No. 2 and had it cleared of brush on January 20 at a cost of $150, but Sadia still refused to convey. Would Bo be entitled to obtain a decree of specific performance to compel Sadia to deliver a deed to Lot No. 2 to Bo upon paying to Sadia the balance of $74,000? Explain. (f) Would Bo be entitled to recover his $1,000 payment plus the $150 cost of clearing the land? Explain. (g) Assume that on March 1. Bo instituted a suit for specific performance and that Sadia denied she had agreed to sell. At the trial, the court decided that Bo was telling the truth and ordered Sadia to execute and deliver to Bo a deed to Lot. No. 2 upon Bo paying the balance of $74,000. Is Sadia entitled to have the decision reversed on appeal, if on the appeal Sadia raises for the first time the defense that her agreement was not in a writing signed by the party to be charged? Explain. 10. Assume that in the preceding problem Sadia had sent to Bo a receipt for the $1,000 reading as follows: “January 11. Received from Bo $1,000 on account of $75,000 purchase price of Lot No. 2 at 27 Y Street. Albans, NY Closing in 4 weeks. (Signed) Sadia.” (a) Would Bo be entitled to a decree of specific performance against Sadia? Explain. (b) Assume that Sadia is willing to perform, but that Bo refuses. Would Sadia be entitled to damages against Bo? Explain. 11. On September 15, Lubov agreed orally with Tim to lease a store to Tim in Manhattan at $5,000 per month for one year starting the following January 1. (a ) Is the oral agreement enforceable? Explain. Assume that the oral lease was for three years, that Tim moved in on January 1, and paid the monthly rent for six months, and that Lubov then notified Tim to vacate. (b) Is the oral agreement enforceable by Tim for the balance of the three-year term? Explain. (c) Is the oral agreement enforceable by Tim for an

D10 to accept or pay for it, stating that he had changed his mind and did not need Study’s computer. Study sues Burrow for breach of contract. Burrow pleads the Statute of Frauds as a defense. (a) Judgment for whom? Explain. (b) If Study and Burrow were merchants who sold computers, judgment for whom? Explain. Chapter 14 - Third Party Rights and Discharge 1. Salvador, who owned a retail shoe store, decided to sell the business. The assets of the business consisted of a one story building worth $100,000, merchandise worth $50,000, accounts receivable of $10,000, fixtures worth $30,000 and goodwill estimated at $50,000. He owed various wholesalers a total of $20,000 for shoes bought by him on credit. Salvador offered to sell all of these assets to Byron for $220,000 cash, provided that Byron would also agree to assume payment of the $20,000 owed for merchandise. Byron agreed, and a written contract was executed by both parties. Upon payment of $220,000 by Byron, Salvador signed a deed and bill of sale for all the assets listed. Charles, who is one of the wholesalers to whom Salvador owed $5,000, demanded that Salvador pay the $5,000 owed. Salvador informed him that Byron was to pay. Charles sued Salvador and Byron for payment. (a) Byron defended on the ground that he had made no contract with Charles. Is the defense valid? Explain. (b) Salvador defended on the ground that Byron had agreed to pay. Is the defense valid? Explain. Assume that the court entered judgment against Salvador and Byron for $5,000 as a joint liability. (c) If Salvador paid $2,500 and Byron paid $2,500, has either any claim against the other? Explain. (d) Would your answer to (a) be the same if Byron had paid $240,000 for the assets but had not agreed to pay the $20,000 owed to Salvador’s creditors. Explain. 2. In the previous question, assume that Salvador wished to make a present to his wife, Wilma, of one half of the sales value of the business, and that Byron agreed to pay for the business in two installments. Accordingly, the contract between Salvador and Byron provided that Byron would “pay $110,000 to Salvador upon taking over the store, and $110,000 to Wilma two years later.” Wilma was not one of the parties to the contract. Two years have elapsed and Byron has not paid Wilma. (a) Does Wilma have a cause of action against Byron for the $110,000 promised to her? Explain. (b) Would the one year Statute of Frauds be a defense to Byron if the agreement between Salvador and Byron were oral? Explain. 3. In question 1, assume that Salvador, on closing the contract with Byron, signed a document reading as follows: “May 1. For value received, I hereby transfer to Byron all of my right, title and interest in and to the following accounts receivable owed to me: (1) From Darren, $5,000 due June 1; (2) From Ellen, $2,000 presently due, and (3) From Fatima, $3,000 due July 1.” (a) If Darren paid Salvador $5,000 on June 3, without knowledge of the assignment, what are Byron’s rights against Darren and Salvador? (b) If Byron immediately notified Ellen of the assignment, and then Ellen paid Salvador the $2,000, what are Byron’s rights against Ellen and Salvador? Explain. (c) If Byron notified Ellen of the assignment, but Ellen did not pay because she was insolvent, what are Byron’s rights against Salvador? (d) Assume that Byron notified Fatima of the assignment on June 15 and Fatima failed to pay on the due date. Byron then sued Fatima for $3,000, and Fatima interposed as a defense the fact that the goods sold to her by Salvador (the transaction from which her debt to Salvador arose) were defective, and worth only $1,000. What are Byron’s rights against Fatima and Salvador? (e) Assume that in (d), Fatima instead interposed as a defense the fact that she had paid the $3,000 on June 10 to Xavier, to whom Salvador had assigned the same debt on June 1. What are Byron’s rights against Fatima, Xavier and Salvador? Explain (f) In (c) and (d) above, what steps could Byron have taken to ensure the collectability of the debts. Explain.

D11 4. Tom sold goods to Gerard on 30 days credit for $10,000. The next day, Tom assigned this account receivable to Lou, who promptly notified Gerard in writing of the assignment. One week after receiving notice of the assignment from Lou, Gerard discovered that $2,000 of Tom’s goods were defective and were worth only $500. Gerard promptly reported this information to Tom and Lou. Tom acknowledged that the defective goods were his fault but said that he could do nothing about it because he had already assigned the account receivable to Lou. Lou informed Gerard that he should pursue his claim with Tom, but should pay Lou the $10,000 due. (a) What rights, if any, does Lou have against Gerard to recover the $10,000? Explain. (b) Assume Lou agrees to accept $8,500 from Gerard, after deducting $1,500 for defective goods. What rights, if any, does Lou have against Tom? Explain. 5. Ed owned a company that cleaned swimming pools. He charged his customers $100 per month and billed them every two months. At the beginning of September, Ed had not yet collected for the months of July and August from his customer, Suzy, whose pool he had cleaned during that period. On September 5, Ed spoke with Larry who was selling a used mountain bike. Larry said that he would sell the bike to Ed for $250. Ed accepted this offer, gave Larry $50 and a signed writing assigning to Larry the debt owed by Suzy. The next day, Larry attempted to collect the $200 from Suzy. She refused to pay, telling Larry that she was not prepared to pay anything because Ed had been adding the wrong chemicals to the water, causing her to suffer a severe skin rash. She only discovered the cause, she said, after seeing a doctor in mid-August. Larry sues both Suzy and Ed for $200. (a) How much if anything, may Larry recover from Suzy? (b) How much, if anything, may Larry recover from Ed? 6. Abbott enters into a written signed contract with Costello to sell Costello 3,000 reels of comedy films for $60,000. Without the knowledge or consent of Costello, Abbott assigns his right to receive Costello's payment to Edgar, a creditor of Abbott. Edgar gives notice of the assignment to Costello and demands payment of $60,000. Costello, however, contends that he has no obligation to pay Edgar because: (1) Costello never consented to the assignment and (2) in any event, 2,000 of the film reels are totally defective and, therefore, Costello only owes $20,000. Assume that Costello's claim of defective reels is proven and that Edgar did not know of the defects at the time the assignment was made. What rights, if any, does Edgar have: (a) against Costello? Explain. (b) against Abbott? Explain. 7. On January 10, Simpson sold her business to Bart for $250,000 under an executed contract that provided that Bart would pay Simpson's indebtedness to Homer, which was due on February 10. On February 10, Simpson refused Homer's demand for payment, explaining that Bart has agreed to pay Homer and that Homer should look to Bart for payment. The next day, Homer demanded payment from Bart, who refused to pay upon the grounds that: (1) Bart had no contract with Homer requiring Bart to pay Homer and (2) Homer cannot enforce the contract between Simpson and Bart because Homer gave no consideration. (a) In an action by Homer against Bart, judgment for whom? Explain. (b) In an action by Homer against Simpson, judgment for whom? Explain. 8. By contract dated May 1, Rob agreed to sell to Nancy, and Nancy agreed to buy from Rob, a certain house located at 10 Melbourne Road. At the time she signed the contact, Nancy transferred to Rob a deposit equal to 10% of the purchase price. The contract stated that closing and transfer of the property would occur on or before July 15. Nancy’s finances were such that she needed to obtain a loan to pay the full purchase price for the house. Pursuant to the terms of the contract, Nancy was to obtain financing for the house in an amount of $180,000. The contract stated that Nancy was to apply for such financing in good faith within 7 days of the signing of the contract. It further stated that if Nancy could not obtain $180,000 in financing from a bank, savings bank, or savings and loan association, then Nancy could cancel the contract and recover her deposit. (a) On May 5, Nancy applied for the $180,000 loan in good faith, but on July 1, the bank notified her that she would only be allowed a loan of $50,000. Rob demands that Nancy close on the purchase and sale of the house on July 15 and Nancy sues Rob for return of her deposit. Judgment for whom? Explain.

D13 agreed to a clause in the contract stating, “Time is of the essence in this contract.” At the closing Nissan Corp was unable to tender clear title to Belle because the day before the State Tax Department had notified Nissan that an unpaid franchise tax constituted a lien on the warehouse. Nissan Corp. requested a delay of 3 days to pay the tax and satisfy the lien. Belle, who had reconsidered her bargain, refused any extension, tendered her certified check for the balance, and demanded that Nissan deliver clear title. When Nissan Corp. was unable to comply, Belle said she was cancelling the contract. (d) Is Belle entitled to the return of her down payment? Explain. (e) Is Nissan Corp. liable in damages to Belle for Belle’s cost of conducting a title search? Explain. 13. Camille, a builder, contracted to build a house for Alan, in accordance with the specifications prepared by Alan’s architect, for a total price of $350,000, payable in stages as the work progressed. The final payment of $20,000 was to be made when Camille obtained a completion certificate from Alan’s architect certifying that the work had been done according to the detailed specifications. Camille, as was customary in the industry, subcontracted out various parts of the work to sub-contractors who were specialists in excavation, brickwork, electricity, flooring and other trades. When the house was finished, Alan’s architect refused to issue a certificate of completion because the flooring was done in maple, instead of oak, as was required by the specifications. The difference in value because of the variation was $3,000. It turned out that Dan, the flooring subcontractor, had deliberately used the maple flooring to reduce the cost of his contract with Camille and, therefore, to make a larger profit. Camille did not know of or consent to the substitution. Alan refused to make the final payment of $20,000. Camille, who had already paid Dan, refused to replace the floors with oak wood. Camille now sues Alan for $20,000. (a) Has Camille committed a material breach of the contract? Explain. (b) Are Alan’s damages measured by the cost of removing the maple floors and replacing them with oak floors? Explain. (c) Is Camille entitled to be paid $20,000 less the damages incurred by Alan? Explain. (d) Does Camille have a claim for damages against Dan? If so, for how much? Explain. Chapter 15 - Breach and Remedies 1. On April 1, Conrad and Owen executed a contract under which Conrad agreed to build a specified house on Owen’s land for $700,000. The contract provided that Owen was to make periodic payments to Conrad as different phases of construction were completed, with the last payment of $70,000 due 5 days after completion of the house. The contract further provided that the house was to be completed by August 1 and included the following provision: “If Conrad is late in completing the construction of the house, the purchase price is to be reduced by $3,000 for each and every day after August 1.” Conrad constructed the house according to the contract, except that it was completed 5 days after August 1. Owen made all scheduled payments except for the final payment of $70,000. Although Owen could not prove any monetary damages caused by Conrad’s delay, Owen offered to make a final payment of $55,000 to Conrad, after deducting $15,000 for the 5 day delay. Conrad rejected Owen’s offer and sued Owen for $70,000. How much, if anything, will Conrad recover from Owen? Explain. 2. Millie, a famous singer, entered into a contract to perform at Tanya’s night club during the month of December. Tanya advertised that Millie would be performing at Tanya’s nightclub and obtained many advance reservations from customers for the performance. In November, Raisa, the owner of another nightclub, convinced Millie to breach her contract with Tanya and to perform at Raisa’s nightclub instead during the month of December. On November 15, Millie told Tanya that she would not be available to perform at Tanya’s nightclub as planned. When Tanya found out that Millie would be performing at Raisa’s nightclub instead, Tanya became furious and immediately called her lawyer. (a) Tanya sues Millie, demanding specific performance of the contract. Discuss. (b) Tanya seeks an injunction against Millie, to stop her

D14 from performing at Raisa’s nightclub during December. Discuss. (c) Tanya sues Millie for breach of contract and demands damages. What damages, if any, may Tanya recover? (d) Does Tanya have any action for damages against Raisa? Discuss. Chapter 25 - Employment Discrimination 1. Tom, Dick and Jane are employed by Atlantic Motors, a large chain of used car lots with several hundred employees. None of them was hired for a definite period of time and each has an excellent record of sales. On April 15, all of them were fired. (a) Tom, who is 50, was told by his manager that he was being fired so that the company could “make room for some young faces on the sales force.” (b) Dick, who is 49, was fired because, on April 15, he had become frustrated with a prospective customer who was arguing about prices and had punched the customer in the nose. (c) Jane was fired because she repeatedly refused invitations from Al, the sole owner of Atlantic, to spend weekends with him at his beach house. Al had warned Jane that she would be fired if she continued to reject his advances. Discuss, separately, whether Tom, Dick or Jane has any claim against Atlantic Motors.