MS6020 A2

Assignment 2: Application of Contract Law

Reread the Contracts Mid-Term Exam. Click

here

 to access the exam. Write a 3- to 5-page paper explaining the contract  issues and how a court would inquire into the situation. Use the  articles you found and used for the previous assignment and the Contract  Law Tutorial to support your answers. 

Note that the law school tutorial is available through the Readings and Assignments page under Course Home.

Submission Details:

Save your paper as a Microsoft Word document and name it as M2_A2_lastname_firstinitial . By the due date assigned, submit it to the Submissions Area.

  Assignment 2 Grading Criteria  Maximum Points    Wrote a 3- to 5-page paper explaining the contract issues and how a court would inquire into the situation.  40    Presented a thoughtful reflection of the contract issues and how a court would inquire into the situation.  40    Wrote  in a clear, concise, and organized manner; demonstrated ethical  scholarship in accurate representation and attribution of sources;  displayed accurate spelling, grammar, and punctuation.  20    Total:  100

CONTRACTS MID-TERM EXAM
Fall 2009

Santa Barbara/Ventura Colleges of Law
Craig Smith

On July 16, Philadelphia Phillies first baseman Ryan Howard hit
his 200th career home run, which landed in the hands of 12-
year-old Jennifer Jones. Afterward, Phillies officials escorted
Jennifer alone to the clubhouse and persuaded her to accept an
autographed ball from Howard in exchange for the home-run ball,
which Jennifer accepted.

When Jennifer returned to her seat and told her father what had
happened, he was furious. Her father was a collector of
baseball memorabilia and knew that 200th career home run
baseballs hit by players of the stature of Howard never sold
for less than $1,000 on E-Bay.

Jennifer’s father went and found the Phillies official who had
persuaded Jennifer to exchange the baseballs. He told him he
thought it was despicable that the Phillies would enter into
such a deal with a 12-year old girl and that if they didn’t
give the baseball that Jennifer had actually caught back to
Jennifer, he would go to the local newspapers and tell them how
the Phillies had cheated his 12-year old daughter out of a
valuable piece of memorabilia.

The Phillies official, out of fear of bad publicity, then
suggested that instead of returning the baseball they give
Jennifer’s dad two season tickets for next year to Phillies
games. Dad knew that two season tickets were worth several
thousands of dollars. He then said, “Forget the baseball, I’ll
take the tickets.” The Phillies official then whipped out a
voucher for two season tickets, handed them to Dad and said,
“Here you go.”

Jennifer cried the whole way home from the ballpark. She was
inconsolable. She wanted to get the ball she actually caught
back. Dad realized that the season tickets weren’t worth as
much as the experience of catching your first baseball at a
major league game; priceless.

Does Jennifer have a contractual right to get the original
baseball back from the Phillies?

Can the Phillies enforce the contract with Dad to exchange the
original baseball for two season tickets?

Discuss fully.

QUESTION 2

On July 4, 1990, Moe mailed to Larry a written offer to sell ten
shares of an unlisted stock at $60.00 per share. Larry was given four
days from the date of the letter to accept. The offer was received on
July 6 at 2 p.m. At 3 p.m. on July 6, Larry mailed a letter to Moe
which stated in part: “will purchase ten shares at $55.00 per
share. . . . ” At 11 a.m. on July 6, however, Moe had sold the ten
shares to Curly for $65.00 and at 1 p.m. of the same day had mailed a
letter to Larry revoking the offer. Larry who was blissfully unaware
of Moe’s activity, learned at 4 p.m. on July 6 that the market price
of the shares might increase and, at 5 p.m. on the same day,
telegraphed Moe to “disregard letter . . . will take offered stock
for $60.00 per share.” Larry’s telegram of July 6 was received by Moe
at 9 a.m. on July 7. Larry’s letter of July 6 was received by Moe at
2 p.m. on July 8. Moe’s letter of July 6 was received by Larry at 2
p.m. on July 8.

Larry claims that he has a contract with Moe for the purchase of the
stock. Is this contention correct? discuss fully and in your answer
deal with the following:

(a) The legal right of Moe to revoke his offer before it is
accepted.

(b) The legal effect, if any, of Larry’s letter of July 6.

(c) The legal effect, if any, of Moe’s sale of the stock to Curly.

(d) The legal effect, if any, of Moe’s letter of July 6.

(e) The legal effect, if any of Larry’s telegram of July 6.

ISSUE SHEET QUESTION 1

Jennifer vs. Phillies

Contract Formation. Contracts are formed through a process of
offer and acceptance and must be supported by consideration.

Adequacy of Consideration. Courts don’t inquire into the
adequacy of consideration. That is, they don’t determine
whether what was exchanged was of equivalent value.

Capacity to Contract. Jennifer being the age of 12 years old,
was a minor and the general rule is that the contract of a
minor other than for the necessities of life is voidable at the
minor’s option. So, Jennifer would have an absolute right to
void the contract and get the ball back.

A minor who chooses to avoid the contract must return any
consideration that she has received. So Jennifer would have to
return the autographed ball she received in exchange for the
home run ball. If for any reason she no longer had the
autographed ball, she wouldn’t have to return it. This is so
even if the minor has squandered or destroyed the
consideration.

Dad vs. Phillies

Duress/Coercion. Dad’s threats raise the issue of whether the
Phillies agreeent was the product of duress or coercion. Duress
is the making of an unlawful threat. Coercion is the use of
undue influence to achieve the other parties assent to an
agreement.

Statute of Frauds. This oral agreement raises the issue of
whether or not there was compliance with the writing
requirement of the statute of frauds. The general rule is that
oral agreements are valid and enforceable. However, some types
of contracts must be evidenced by a note or memorandum signed
by the party to be charged in order to be enforceable.

One of those categories are contracts for the sale of goods for
a price of $500 or more.

Are tickets “goods” or merely a “license” to occupy a seat?

Would a voucher satisfy the SOF writing requirement?

QUESTION 2

Larry’s contention that he has a contract to purchase the stock is
correct.

The legal right of Moe to revoke his offer before it is
accepted.

An offer may be revoked anytime prior to acceptance. The only
exceptions to this rule are situations of option contracts or
detrimental reliance. An option contract is an offer that is
irrevocable for a stated period of time. However, an option contract
must be supported by separate consideration. Otherwise, the promise
to keep the offer open, in this case for four days from the date of
the letter, is merely gratuitous. This offer is subject to the usual
rule that it may be withdrawn any time prior to acceptance.

An offeror may lose the power to revoke the offer prior to acceptance
where it is foreseeable that the making of the offer will result in
substantial action or forbearance on the part of the offeree, such
action or forbearance actually results, and injustice can only be
avoided by enforcing the promise. None of these conditions exist.
This was not an offer which invited acceptance by performance (a
unilateral contract) but rather invited acceptance by the making of a
promise. No substantial action or forbearance was foreseeable on the
part of the promisee as a result of the promisor merely making the
offer.

The legal effect, if any, of Larry’s letter of July
6.

Larry’s letter of July 6 was a counteroffer. At common law an
acceptance had to be the mirror image of the offer. If it varied from
the terms of the original offer in any manner, no matter how trivial
or insignificant, it operated as a counteroffer or rejection. I.e., a
counteroffer has the same effect as an outright rejection. It
terminates the power of acceptance. The offeree cannot revive the
negotiations by later attempting to accept the original offer. Since
a counteroffer is a rejection it is governed by the rule that a
rejection is effective upon receipt. Hence, it was effective at 2
p.m. July 8.

The legal effect, if any, of Moe’s sale of the stock to
Curly.

The power of acceptance is terminated when the offeror takes any
action inconsistent with keeping the offer open and the offeree
receives reliable information to that effect. This is sometimes
called “indirect revocation.”

Here, Moe certainly took action inconsistent with keeping the offer
open (he sold the stock to someone else). The problem is there are no
facts to indicate that Larry learned of this fact from any reliable
source (or from any source at all for that matter.)

The legal effect, if any, of Moe’s letter of July 6.

The power of acceptance is terminated by express notice of
revocation. Moe’s July 6 letter was certainly such express notice.

However, a revocation is not effective until it is received. If this
were the only circumstance then the revocation did not take effect
until 2 p.m. July 8 when it was received. Coincidentally, this is the
same time that Larry’s counteroffer and rejection was received.

The legal effect, if any of Larry’s telegram of July
6.

An acceptance is an unequivocal assent to the terms of the offer made
in the manner or mode invited or required by the offeror. Acceptance
results in a contract with the consequence that neither party can
withdraw from the bargain without incurring liability to the other.

The acceptance in this case is unequivocal. (Will take offered stock
for $60.00 per share.” No manner or mode of acceptance was suggested
or required therefore any reasonable manner or mode under the
circumstances is effective. Considering that the offer was made by
mail, telegram is at least as expedient if not a more efficient mode
of communication and hence is reasonable. Under the “mailbox rule” of
Adams v. Lindsell acceptance is effective upon dispatch. I.e., when
it is put out of the control of the offeree. Hence acceptance was
effective at 5 p.m. July 6th. This was prior to the rejection by
counteroffer becoming effective (2 p.m. July 8) and prior to the
express revocation becoming effective (2 p.m. July 8). And as stated
before Larry never received reliable information that Moe had already
sold the stock so there was never an effective indirect revocation.

There is an enforceable contract for the sale of the stock between
Moe and Larry.