FREE TX Bar Contracts Questions and Answers
The buyer asked a manufacturer to make him 100,000 widgets for $1,000,000. The buyer intended to retail them by mail order sales. The widgets had to have the buyer's logo imprinted on them. The manufacturer ordered the raw material and made a new widget mold that contained buyer's logo.
The buyer wanted quick delivery of at least 10,000 right away. The manufacturer rushed the order and sent 10,000 conforming widgets two days later. The buyer paid for the widgets but rejected delivery on the remaining 90,000 widgets.
The manufacturer filed suit and claimed damages for breach of contract. Defendant buyer filed a motion to dismiss the complaint on the basis that the statute of frauds was violated in that it was a contract for over $500 that was unenforceable under state law.
Will the court likely grant the motion to dismiss?
In contract law, the Statute of Frauds requires certain types of contracts to be in writing to be enforceable, including contracts for the sale of goods priced at $500 or more. However, there are exceptions to this rule. One key exception is for specially manufactured goods. In this scenario, the widgets were specially made for the buyer with their logo imprinted on them. The manufacturer had already started the manufacturing process and created a special mold for the buyer's order. This falls under the exception for specially manufactured goods, making the oral contract enforceable despite the Statute of Frauds. Additionally, the buyer's payment for the 10,000 widgets further supports the existence of a contract. Courts generally protect the interests of parties who have acted in reliance on an agreement, especially when goods are custom-made and not easily sold to others. The "benefit of the bargain" rule, while relevant in some contexts, doesn't directly apply here. The key factor is the exception for specially manufactured goods.
A retailer agreed to purchase an orchard's total cherry production for a 12-month period. The contract included this provision: "Terms: Cash upon delivery — deliveries to be made at least twice per month." The deliveries went as scheduled.
At the beginning of the fifth month, the orchard sent notice to the retailer that a load of cherries was ready for pick up. The truck driver, however, forgot to take the retailer's check with him. The orchard turned over the cherries but advised the retailer to pay within three days.
The retailer sent the check by mail but it arrived late by two days. The orchard refused to deliver any more cherries. The retailer sued the orchard for breach of the installment contract and demanded the difference in price between the cherries on the open market and what he would have paid under the contract.
The orchard claimed that the delayed payment impaired the value of the contract and moved to dismiss. Will the court grant the orchard's motion to dismiss?
Therefore, based on these principles, the orchard’s motion to dismiss is unlikely to be granted because the delay in payment was minor and did not materially impair the value of the contract as a whole. The retailer may still be entitled to enforce the contract and seek damages for the difference in price as stipulated.
A businessperson sent his employee, an administrative assistant, to represent him at a conference where business deals are often negotiated. The principal gave the assistant all of the materials to set up a table with the principal's cards, brochures, promotional materials, price lists and even some order forms with businessperson's logo on them.
In addition, the assistant represented to third parties that she was there officially representing the principal and that she was authorized to execute contracts on his behalf. The assistant negotiated a deal for the businessperson with a third party, which the businessperson refused to honor because he did not like the terms that were negotiated.
Will the third party likely prevail in enforcing the contract against the businessperson?
Apparent authority exists when a third party reasonably believes, based on the principal's actions, that the agent has the authority to act on the principal's behalf. Here, the businessperson provided the assistant with all the materials that made it look like she was officially representing him. This included business cards, brochures, promotional materials, and order forms with the businessperson's logo. These items are known as the *indicia of authority*, meaning they serve as signs or evidence that the assistant had the authority to act. Furthermore, the assistant explicitly told third parties that she was acting on behalf of the businessperson and had the authority to execute contracts. Given these circumstances, a reasonable third party would believe that the assistant was authorized to negotiate deals. Because of this, the principal (the businessperson) is "estopped" (prevented) from denying the assistant's authority to bind him to the contract. Essentially, the businessperson can’t turn around and refuse to honor the deal because he made it look like the assistant had the authority to make such deals. This principle is supported by various case laws such as Jarvis v. K & E RE ONE, LLC and Haviland v. Simmons, which reinforce that the principal is bound by the agent's actions when they have conferred what reasonably appears to be authority to the agent.
A young woman joined a social media service that provided networking with other business persons and entities nationwide. The woman discovered that the service was selling her personal profile information, and the information pertaining to thousands of other members, to third party purchasers for tracking of their Internet activities and buying habits.
In her class action breach of contract action against the service, she alleged two theories of damages. First, she contended that she and the class members suffered "embarrassment and humiliation" from the disclosure, and second, that she and the others must be compensated for the market value of the information seized.
Will the court likely recognize these allegations as sufficient to state a claim for breach of contract?
Thus, while the breach of contract may be valid, the specific claims for "embarrassment and humiliation" and the market value of the personal data may not be sufficient to state a claim for damages in a breach of contract action. The court would likely require more concrete evidence of economic harm or losses directly resulting from the breach.
A furniture dealer sold furniture to a young couple with less than perfect credit. They signed a contract that said that if they purchased new items on the account, they would not own the old purchases until the new ones were paid in full. That provision was in hard-to-read fine print on the reverse side of the agreement.
When husband lost his job, they had by that time paid for everything purchased on the account except for one chair they bought a few weeks earlier. The store sued, trying to repossess all furniture ever sold to the couple.
Will the couple likely prevail on a defense of unconscionability?
Unconscionability is evaluated by looking at the totality of circumstances. This typically involves both procedural and substantive unconscionability. Procedural unconscionability refers to unfairness in the bargaining process (like fine print and lack of clarity), while substantive unconscionability involves unfairly one-sided terms. In this scenario, the fine print on the reverse side of the agreement and the oppressive term that the couple doesn't own any furniture until all purchases are paid off, combined with their lack of bargaining power due to credit issues, strongly suggest unconscionability. Courts often look at these factors together to decide if an agreement is unenforceable due to being excessively unfair.