Exam Instructions and Multiple Choice Questions

Instructions for the Exam

The exam consists of two sections: one multiple choice section and one (short) essay question. The exam is worth a total number of 85 points. On the multiple choice questions, you must clearly choose *one* answer only; if more than one answer is chosen, or if it is not clear which answer you have selected, you will not be awarded any points for that question. On your answer document, please note the number of the question and the letter of your corresponding answer choice directly next to the number of the question. On the essay question, please read the question carefully and provide your analysis of the issue raised by the facts in no more than two or three paragraphs. Your answer to the essay question must not exceed three paragraphs and must not exceed one page of text. I will not read any text beyond one page. In addition to these instructions, I am also sending to all students a short document that provides further advice and details on how to approach and answer the essay question on this exam.

If you are handwriting the exam, please write legibly. I cannot award points for language that I cannot read (and handwriting that is scanned into a PDF document can often be difficult to read).  Good luck, and it was my sincere pleasure having you all in this course. 

1. (5 points) Joe woke up one day and found that his garage had been broken into by a burglar. He quickly discovered that his brand new motorcycle had been stolen. Upset by the theft, Joe decided to post flyers around his neighborhood with a picture of his motorcycle and which read: “Stolen motorcycle from 2450 N. Springfield Avenue. $1000 REWARD for anyone who returns my motorcycle to me, no questions asked and no report to police will be made. $500 REWARD for anyone, excluding police officers, who provides the name and address of the thief or of the person who is currently and factually in possession of my motorcycle. Contact me at 312.555.5555.” Joe’s flyer is:
a. An invitation to deal;
b. An offer for a bilateral contract;
c. Has no legal effect;
d. An offer for a unilateral contract; or
e. Binding on Joe if he receives a call from someone who makes a promise to find the thief and the motorcycle.

2. (5 points) Frank sends Jonny the following message on Monday, November 22, 2021: “Hi Jonny, I know you have been interested in buying that table saw in my basement, and even though I don’t really want to sell it, I am rather desperate for some additional cash right now. So, I offer to sell you the table saw for $300 cash if you respond in writing by email by 1:00 PM Thursday, November 25, 2021.” Jonny, who really wants to buy the table saw at the stated price, only checks his email about once every other day. Jonny sees the email from Frank on Wednesday, November 24th but is not able to respond until Friday, November 26th. Jonny replies by email on Friday to Frank and says, “so sorry, Frank, I read your email late, but I accept your offer!  You know how long I have wanted to buy that saw from you! Thanks, and I will come by your place later today with the $300 to pick up the saw.” Jonny’s reply:
a. Forms a contract for sale and purchase of the saw;
b. Does not form a contract for sale and purchase of the saw;
c. Invites Frank to make an offer;
d. Is a counteroffer to Frank’s offer of $300 for the saw; or
e. Provides a legally valid reason for Jonny’s delay in responding.

Multiple Choice Questions

3. (5 points) An “express” contract or term of a contract is one which:
a. Is formed by the parties’ conduct;
b. Creates obligations that must be performed as soon as possible;
c. Is formed by language;
d. Creates rights and/or obligations not necessarily from the language of the agreement, but from the law itself; or
e. Is a contract of carriage.

4. (10 points) Jerry calls Steve and says, “Hi Steve, I think I recall you mentioning that you were thinking about selling your Mercedes SL 500. If you are still thinking about it, I am interested in possibly buying it from you.” Steve says,“Yeah, I was thinking about it. Now that I know you are interested, let me think a bit more about it and let you know in a few days whether I really want to sell it.” A few days passes, and Steve leaves the following note in Jerry’s mailbox in front of his house: “Jerry, I thought about selling my Mercedes to you and, even though I have really loved that car, I decided it’s time for a new one, so I offer to sell it to you.” Steve’s note to Jerry:
a. Creates the power of acceptance in Jerry;
b. Creates a legal right for Jerry to buy the car before any other potential buyer;
c. Doesn’t create the power of acceptance in Jerry;
d. Is not a legally effective offer because the time between Jerry’s phone call to Steve and Steve’s delivery of the note to Jerry’s mailbox is unreasonably long; or
e. None of the above.

5. (15 points) Rich owns a custom kitchen design and construction company called American Custom Kitchens (“ACK”). He is currently doing a job for a hot new restaurant that is expected to open next week on November 29, 2021 in Downtown Chicago, called “Gentry.” The contract that Rich entered into with Gentry’s owner to design and build the kitchen, contains the following provision: “The time for completion of full performance by ACK of the scope of work as detailed herein is of the essence of this agreement [another provision of the agreement sets forth that November 29, 2021 is the date on which full performance is to be complete]. The parties therefore agree that any delay of completion of full performance by ACK of the scope of work shall constitute a material breach of this agreement, and ACK shall be responsible for all direct and indirect damages resulting from a failure to fully perform all aspects of the scope of work.” On November 22, 2021, Rich was installing a gas line on one of the new stove tops and discovered that the gas fitting on the stove was not the correct part, and the full, correct, and safe operation of the stove is certainly a necessity for the opening of the restaurant expected on Monday, November 29, 2021. He immediately contacted his supplier, who said that they can provide him with the correct fitting which would be delivered to him by express courier on Friday, December 3, 2021. Rich says “that’s too late” to his supplier. “Can you get it to me sometime before Friday, November 26?” asked Rich. The supplier said that “if you [Rich] can arrange for someone to pick up the fitting here in California, we can provide it immediately, but that means we are not shipping it, and you [Rich] would be responsible for getting the fitting to your location.” Rich said, “Thanks, and I will let you know who will be picking it up from your warehouse.” Rich then contacts several express carriers and finds one, “Interstate Express” which says it can pick up the fitting today from Rich’s supplier in California and have it delivered to Rich’s Chicago location by Thursday evening, November 25, 2021. The delivery term offered by Interstate Express is their fastest and most expensive express service. Rich does not mention anything to Interstate Express about his obligations under his contract with Gentry, and he felt assured that he would be able to meet his performance deadline with Gentry since Interstate guaranteed delivery of the part by Thursday, November 25. Unfortunately, Interstate’s delivery of the fitting was delayed by several days due to some negligence by employees of Interstate. Rich did not receive the gas fitting in time to meet his obligation of full performance under his contract with Gentry and the November 29th opening of the restaurant has been delayed by one week. Gentry has now asserted a claim against ACK for damages it suffered from the delay of its opening due to ACK’s failure to fully perform. Gentry’s claim includes loss of food supplies, employee pay, lost revenue for the days it has remained closed, costs of advertising the opening date, and other items it claims it lost because of the delay in ACK’s full performance. Assuming that Gentry’s claim is successful against ACK, if ACK sues Interstate Express to recover damages for the breach of its contract of express carriage and among the items of damages requested are the damages ACK is now responsible to pay Gentry, a court will likely determine:
a. That Interstate Express is required to compensate ACK for all damages it suffered including the total amount of the successful claim Gentry made against ACK;
b. That Interstate Express is required to pay damages to ACK for only the direct consequences of the breach of its contract of express carriage, i.e., the cost of the express delivery service, etc., but not for the damages that ACK has to pay Gentry;
c. That Interstate Express is not required to pay any damages to ACK since delays in shipping are common and to be expected; or
d. None of the above.

Question 1: Stolen Motorcycle

6. (10 points) Ryan makes the following offer to Jason: “hey, if you loan me $1,000 by tomorrow before 12:00 PM, I will give you $5,000 two weeks from tomorrow.” Jason likes the idea of turning $1,000 into $5,000 in just two weeks, so he says to Ryan: “Sure! That sounds like a very lucrative deal! I accept and I will have the money for you tomorrow. I will come by your house tomorrow at 11:00 AM.” Assuming Jason shows up at Ryan’s house at the appointed time and with the $1,000 and gives it to Ryan:
a. No contract is formed because the consideration is clearly nominal since no one would accept $1,000 in exchange for the obligation to pay $5,000 in just two weeks;
b. A valid contract is formed as each of the three essential elements are present under the facts;
c. No Contract is formed because Jason’s acceptance was not legally effective;
d. A contract is formed, but any court which may later need to resolve a dispute under the contract would adjust the amounts of the exchanged consideration because it is not fair to Ryan to have to pay so much; or
e. None of the above.

7. (10 points) Dave owns the trademark “Eternal Youth” which he has used to market a product line of health supplements, e.g., vitamins, super-food powders, etc. To expand his market share, Dave contracts with Ken, who has worked in the health supplement industry for 30 years and has substantial contacts at the world’s largest manufacturers and suppliers of these products, to make licensing deals for Dave’s trademark with other businesses in the industry. The term of the contract is for two years, and it provides for any royalties that are generated from licensing contracts which Ken makes on Dave’s behalf to be split on a 50-50 basis. Ken also has the obligation to provide Dave with quarterly royalty reports which show the licensing agreements he has made for the Eternal Youth trademark, the products on which the licensee is to use the trademark, and the quarterly sales figures of the licensed products and the amount of royalties owed by the licensees. Dave and Ken’s agreement does not provide specific targets of the number of licensing agreements that Ken must make on Dave’s behalf in any given period, but instead, states that Ken shall use his “best efforts” at leveraging his industry contacts to make such trademark licensing contracts for the benefit of both parties. If, within the second year of the term of the agreement, Dave becomes dissatisfied with the number of licensing contracts Ken has been able to make on his behalf, and seeks to get out of the contract on the basis of a claim that the agreement is unenforceable because it lacks consideration, a court would likely determine:
a. Dave has the right to get out of the agreement only if Ken has not provided the required quarterly royalty reports;
b. Dave has the right to get out of the agreement because it in fact lacks any consideration provided by Ken since Ken has no obligation to make any licensing contracts, and it is therefore not a binding agreement as an illusory promise under the Rule of Mutuality of Obligation;
c. Dave is not actually bound by the agreement since the contract is really just an offer for a unilateral contract and would become binding on Dave only once Ken has fully performed all of his obligations;
d. Dave cannot get out of the contract with Ken because the contract and surrounding circumstances show that Ken’s promised obligations are not illusory as he is required to put forth his best efforts to make licensing contracts and has other obligations under the agreement; or
e. None of the above.

Question 2: Sale of Table Saw

Cameron owns a building with four apartments in it, one of which he lives in, and three others which he leases to others (the apartments are all residential and not commercial spaces). Cameron requires each of his tenants to enter into a written, one-year (12- month) lease agreement before he provides keys and permits the tenant to occupy the apartment. Cameron charges $1,000 per month for rent for each of the three apartments. One of Cameron’s tenants, Levi Harris, who signed the lease and moved into the building 5 months ago into the apartment directly next to Cameron’s apartment, recently approached him and told him the following: “Yes, Cameron, everything here in the building and in my apartment has been really great for the time I have been here. You and all of the tenants are such great neighbors and, honestly, I could not be happier. But, I am glad I ran into you because I’ve been meaning to tell you that I received notice from my employer a few days ago that they need me to relocate to another state as soon as possible, and the relocation includes a promotion for me, so I need to do it for my career. My employer expects that I will be able to take on the new position by no later than three weeks from now. I am very sad to say that I have to break my lease and move. I am so sorry about this, Cam, and let me know if I can help in any way.” Upon hearing this, Cameron said, “well, that is disappointing Levi. I have also really enjoyed having you as a tenant and I think the other tenants feel the same. However, this leaves me in a difficult situation. I am counting on the monthly rent from you in order to be able to make my monthly mortgage payment for the building to the bank and to cover all of the (many) expenses for required maintenance and repairs. So, even though you have been great as a tenant, I am going to have to hold you to the terms of the lease and insist that you continue to pay each month’s rental payment through the remainder of the lease. You are fully paid through the fifth month of the one-year lease, so that means I will be expecting your monthly payment of $1,000 for 7 more months until the lease expires. I hope you can work this out with your employer so that they can help you financially. I am sorry to have to insist on this, but it will likely be difficult for me to find another tenant right now as I don’t have the time and there doesn’t seem to be a lot of people looking for apartments at this time of year.” While he was telling Levi these things, Cameron was thinking to himself that this is a fantastic situation…he has wanted to have some extra space for his hobby as a musician where he can play music with his friends and not disturb his wife and their small daughter, so he plans to use Levi’s apartment for his hobby after Levi moves out and yet, he won’t lose the rent money he gets from the apartment and which he needs to make his mortgage payment. Assuming that Levi breaches the lease and also assuming that a claim by Cameron against Levi for breach would be successful in establishing that Levi is fully liable for the breach, can Cameron simply use the apartment for his own personal activities without taking any other steps since Levi would be responsible for paying the remaining rent due under the lease? Why or why not?

[Note: your analysis of the issue raised by the above facts shall not exceed two or three paragraphs of text and in no case, can it exceed one page. I will not read any language exceeding these limits.]