Exam 7: The Nature and Creation of Contracts

On June 1, Sasha agreed to sell a car to Elaine for $10 000.Under the terms of that agreement, she was required to pay the price to him on June 10 and he was required to transfer ownership in the car to her on the same day.Once Sasha and Elaine do so, their contractual relationship will be terminated for all purposes.

In order to decide whether the parties intended to create a legally enforceable agreement, the courts apply a subjective "reasonable person" test.

Quality Kitchens Inc operates a store that sells kitchen utensils and gadgets.In an attempt to increase sales, the store ran an advertisement in a newspaper that featured Juicy Brand Blenders for $49.99.Martha rushed to the store with the intention of buying a blender.When she arrived, however, she was told that while there were no such blenders in stock, the store did have several Swirl Brand Blenders to sell for $99.99 each.After a bit of investigation, Martha discovered that the store knew that it never had any Juicy Brand Blenders, and that it was simply hoping that shoppers would buy the Swirl Brand Blenders once they got inside the store.Which of the following statements is most likely to be TRUE?

A municipal government announced that it wanted to have a bridge built and issued a call for tenders.Estey Management Inc (EMI) submitted a tender.Five other companies did the same.If the usual tendering rules are applied, which of the following statements is most likely to be TRUE?

Simon owns 10 000 shares in ABC Inc.He wanted to sell half of them in order to raise $20 000 in cash.He therefore wrote separate letters to Bronwyn and Gwyneth on June 1.In each case he said, "I will sell 5000 shares in ABC Inc to you for $20 000.Please respond by any reasonable means within one week." Bronwyn replied on June 3 with a letter that said: "I accept your offer." Simon received that letter on June 5.On June 6, he received a fax from Gwyneth that said, "I accept your offer." Simon then informed Gwyneth by telephone that he had already sold the shares to Bronwyn.In that situation, there is no contract between Simon and Gwyneth.

A firm offer is binding upon the offeror if it was given in writing.

Wessam offers to sell Ivan a bicycle for $100.Ivan asks to think about it for a couple days.The next day, Wessam tells him that she has increased the price to $150.Wessam has

The parties are involved in a battle of the forms.The court needs to decide which set of terms, if either, will govern the contract.In making that decision, the court is most likely to be influenced by

Which of the following statements is TRUE?

Rosie placed an advertisement in a newspaper that said: "Five purebred Siamese kittens for sale.$200 each.First come/first served.Respond in person or by email to Rosie@netmail.com." Gig saw the advertisement and immediately sent an email message that said, "I will pay $1000 for the five kittens." However, when Gig arrived at Rosie's door with the cash in hand, she refused to hand over the kittens.She explained that while Gig's message was the only reply that she had received in response to her advertisement, she had changed her mind and had decided to keep the kittens for herself.Provide an argument on behalf of Gig that would support the creation of a contract with Rosie.

As a matter of risk management, how can a business avoid becoming involved in a battle of the forms?

Mysty offered to sell her car to Tim for $15 000.Tim faxed a letter to her that said, "Consider it sold.I'll bring the money to you next Monday when I pick up the vehicle.Of course, for that price, I'll want you to install a new stereo in it." Tim did not hear anything more from Mysty, but he arrived at her door the following Monday with $15 000 in cash.He was delighted to find that a new stereo had been installed in the car, but disappointed when Mysty refused to accept his money or hand over the vehicle.Mysty is required to do so because there was a valid offer and acceptance.

Layton Fine Fashions had a shipment of orange ties that it wished to sell.On Monday, it placed the following advertisement in the town newspaper: "Fine silk orange ties.The season's hottest fashion trend.This week only-Come to Layton Fine Fashions and we guarantee that you'll pay no more than $35." The advertisement was such a success that almost all of the ties were sold within two days.Which of the following statements is most likely to be TRUE?

Rabby Inc is an oil exploration company that wants a sophisticated piece of equipment to be designed for its operations in northern Alberta.It therefore wants to receive bids from various engineering companies.In the context of a normal tendering process, which of the following statements is TRUE?

As a general rule, the courts will not enforce an agreement that is not in writing.

Which of the following statements is TRUE?

Explain what it means to say that the offeror is the "master of the offer." Provide examples to support your answer.

Marissa had 500 shares in XYZ Corp that she was willing to sell at a price of $10 each. She wrote a letter to Mark that said, "I will sell 500 shares in XYZ Corp to you at a price of $10 each.You can accept any time within the next month.This is a firm offer." Marissa signed and sealed that document.When he received that letter two days later, Mark decided to accept Marissa's offer.He wrote a letter to that effect, but then forgot to mail it.Two weeks later, the value of the shares increased to $20 each.Marissa therefore no longer wanted to sell them at the original price.She telephoned Mark and told him that her offer was revoked.She was entitled to do so.

Joan wants to buy a prime piece of real estate from Guiaumme, but she is waiting to find out whether the bank will give her a loan.In order to make sure that Guiaumme does not sell the land to anyone else, Joan gives him $5000 in exchange for his promise that, for a certain period of time, she alone has the right to accept his offer to sell.This type of agreement is called

It is presumed that people who create agreements in commercial contexts do intend to create legal relations, while people who create agreement in social or family contexts do not intend to create legal relations.Provide an explanation for each of those presumptions.