Practice Questions (Contracts)
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Apr 3, 2024
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Practice Questions (Contracts)
1. The U.S. Navy awarded a contract to a small business, CMD, to supply the Navy with
1,400 calculators at a price of $75/calculator. CMD contacted Audio Visual, Inc. (P), a
company that agreed to buy the calculators cheaply and sell them to CMD at a price of
$65/calculator. P contacted a manufacturer of calculators, Sharp Products (D), and asked
for a price quote. D mailed to P a sheet of price quotations for its various calculators. The
Model E-9C, which met Navy specifications, was listed at $50. P then mailed a letter to
D, stating: “We hereby order 1,400 Model E-9C calculators at a price of $50 per
calculator to be delivered to us at your earliest convenience.” Soon thereafter, D mailed
back a letter, stating: “We are all out of this model and, therefore, cannot fill your order.”
P has sued, claiming that there is an agreement to buy from D at a price of $50/calculator.
P will probably lose its lawsuit. (a) True
(b) False
2. Pennie (P), a high school senior, researched colleges on the internet. Her primary
concerns were cost and the nature and types of financial aid. The website for Drysdale
College (D) had information about a Jenna Watkins Scholarship, which provided $5,000
per year and a waiver of all fees. Based on this information, P requested an application
package from D. When she received it in September 2021, it contained the 2022-2023
catalog, which further described the scholarship, including that it was offered to students
who scored 26-27 on the ACT test and had a GPA of 90% or higher. P met both criteria.
To keep the scholarship while in college, a student must maintain a 3.0 GPA. Based on
this information, P applied and was admitted on November 14, 2021. P sent a check to D
dated March 8, 2022, for a dorm room deposit. D cashed the check. Before orientation, P
called D to ensure that P met the scholarship requirements and was told that she did. At
orientation, P was informed that the criteria for the scholarship had changed, that P no
longer qualified, and that the amount of money had been reduced from $5,000 to $1,000
per year. P sued for breach of contract. D claims that there was no offer and acceptance.
D is probably wrong. (a) True (b) False 3. Devin (D) owns land on Lake Travis and enters into a contract with Pennington
Homes, Inc. (P) for the construction of a two-story house for $500,000. P begins
construction. No unforeseen difficulties arise that would cause the construction to be
more expensive or time-consuming than what was envisioned at the time the contract was
formed. After three months, P demands an additional $75,000 to complete the house. P
tells D that if the extra $75,000 is not paid, P will stop working. Having no one else to
complete construction, D promises to pay the extra $75,000. D’s promise is probably
enforceable because P has provided consideration for it. (a) True
(b) False
Answers
Correct answer to # 1
: (a)
There is no agreement between P and D. D’s sheet of price quotations is treated like an advertisement; it is merely an invitation to make an offer. P mailed an offer to D, but D rejected it. Correct answer to # 2
: (a) An agreement was formed based on the application process. D published eligibility
criteria for the scholarship (D’s catalog is an invitation). P met those criteria and applied
(P’s offer to attend). D accepted P and her check.
Correct answer to #3
: (b) P has not provided consideration for D’s promise to pay an extra $75,000. P has a
pre-existing duty to complete the house for $500,000. Promising to do something that
you already have a legal obligation to do (promising to fulfill a pre-existing duty) does
not qualify as value and, therefore, no consideration from P here.
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