Question 1

Pena was injured in an auto accident involving Fox. Pena's attorney sent an offer to Fox's insurance company offering to drop all claims with respect to Pena, but not any other parties, in exchange for a certain payment. Fox's insurer replied that it would pay the amount, but the payment would settle all possible claims related to the matter. Pena contended the reply was a rejection of the offer and sued. The trial court held that the parties had agreed to settle the matter so there could be no suit. Was that correct?
A) ​Yes because Pena and Fox were the only parties involved in the accident.
B) ​Yes because the payment would exhaust the funds the policy could provide.
C) ​No because other possible parties did not agree to the settlement.
D) ​No because under state law settlements may only be done party by party.
E) ​None of the other choices are correct.

Accepted Answer

Pena's initial offer explicitly stated that it would only drop claims with respect to Pena, not any other parties. Therefore, the insurance company's response that the payment would settle all possible claims related to the matter was a rejection of the offer as it did not meet the terms of the original proposal. Other possible parties did not agree to the settlement, and the trial court was incorrect to hold that the matter was settled between Pena and Fox.

Question 2

Pena was injured in an auto accident involving Fox. Pena's attorney sent an offer to Fox's insurance company offering to drop all claims with respect to Pena, but not any other parties, in exchange for a certain payment. Fox's insurer replied that it would pay the amount, but the payment would settle all possible claims related to the matter. Pena contended the reply was a rejection of the offer and sued. The trial court held that the parties had agreed to settle the matter so there could be no suit. Was that correct?
A) ​Yes because Pena and Fox were the only parties involved in the accident.
B) ​Yes because the payment would exhaust the funds the policy could provide.
C) ​No because the insurance company could not settle the claim on behalf of Pena.
D) ​No because under state law settlements may only be done party by party.
E) ​None of the other choices are correct.

Accepted Answer

The trial court's decision was incorrect because the insurer's reply constituted a counteroffer, not an acceptance of Pena's original offer. Therefore, there was no mutual agreement to settle the matter.

Question 3

Fact Pattern 10-1
Lulene makes the best lemon meringue pies in Mississippi. So Ellen, who owns Ellen's Old Fashion Cafe, contracts with Lulene to buy 50 pies per week at the price of $5.00 per pie.
Although Lulene took a class in business law, she forgot to get her agreement with Ellen in writing. Lulene and Ellen agreed during a chat. Lulene said: "I will supply you with lemon meringue pies for however long you want them at $5.00 per pie." Ellen said: "That's great, I'll take them." Both women were pleased.
Soon Lulene had a problem. Between a hurricane in Florida and brush fires in California, the price of lemons increased by 200%. Now, instead of the $5.00 per pie price she intended to charge Ellen, she feels she must charge $7.00 per pie to make a little profit.
Lulene calls Ellen with the bad news and Ellen has a fit. She tells Lulene that's too bad, but the deal is off. Lulene says, "That's what you think!" and goes to see Amanda, her attorney.
-Refer to Fact Pattern 10-1. Assume that Ellen doesn't call the deal off when she is told the price is now $7.00, but wants to hold Lulene to the deal to supply pies at $5.00. If Lulene fails to supply the pies, and if Ellen then sues her for a breach of contract, what is Lulene most likely to argue to avoid liability?
A) sufficiency of writing
B) substantial performance
C) failure of a condition subsequent
D) impossibility
E) failure of a condition concurrent

Accepted Answer

Lulene's argument to avoid liability is likely to be based on impossibility. The increase in the price of lemons was a supervening event that made performance of the contract commercially impracticable. Since the price increase was beyond Lulene's control, she may be excused from her obligation to supply the pies at the original price of $5.00 per pie.

Question 4

Fact Pattern 10-1
Lulene makes the best lemon meringue pies in Mississippi. So Ellen, who owns Ellen's Old Fashion Cafe, contracts with Lulene to buy 50 pies per week at the price of $5.00 per pie.
Although Lulene took a class in business law, she forgot to get her agreement with Ellen in writing. Lulene and Ellen agreed during a chat. Lulene said: "I will supply you with lemon meringue pies for however long you want them at $5.00 per pie." Ellen said: "That's great, I'll take them." Both women were pleased.
Soon Lulene had a problem. Between a hurricane in Florida and brush fires in California, the price of lemons increased by 200%. Now, instead of the $5.00 per pie price she intended to charge Ellen, she feels she must charge $7.00 per pie to make a little profit.
Lulene calls Ellen with the bad news and Ellen has a fit. She tells Lulene that's too bad, but the deal is off. Lulene says, "That's what you think!" and goes to see Amanda, her attorney.
-Refer to Fact Pattern 10-1. Assume that Ellen says to Lulene that she would like blueberry pies rather than lemon pies. Assume that Lulene agrees to this and states that she will supply Ellen with all the blueberry pies she needs. This is known as:
A) a rescission
B) a restitution
C) a material breach
D) substantial performance
E) accord and satisfaction

Accepted Answer

This scenario describes an "accord and satisfaction," where the original contract obligation (supplying lemon meringue pies) is replaced by a new agreement (supplying blueberry pies) to which both parties agree. This resolves the dispute and modifies the original contract terms.

Quiz 10: Contracts