Contracts July 2011 Sample Answer

Applicable Law

The UCC applies to contracts for the sale of goods. The common law applies to contracts for the
sale of services. In this case, the facts concern caring for a patient (a service) so the common law
applies.

Offer

An offer is the manifestation of willingness to enter a bargain. It must contain the intent to be
bound, certain and definite terms, and it must be communicated to the offeree.

In this case, Al (A) said he would give Betty (B) his office building if she would care for him for
the rest of his life. It is possible that he only wanted to pay her back, as he stated, which would
be expressing gratitude and not intent to offer the building to make a contract for the future. A
did specifically state that he wished to give B the building in exchange for care, however—
although the terms “care for” and “rest of my life” are not precisely clear because the care
needed could change over time, and it is not clear how long A would live. On balance, however,
A did communicate by telling B directly that he would exchange the building for care, so it likely
qualifies as an offer.

Type of Contract

A unilateral contract occurs when an offeror’s promise is in exchange for the offeree’s actual
performance. A bilateral contract occurs when both parties make promises to perform.

Here, the fact that A needed to “know now” indicates that he probably wanted a promise from B;
however, A also specifically said that he wanted B to “care for” him, which indicates
performance. Although this is a close issue, due to the fact that A promised to give the building
to B in exchange for her performance of providing him care, this most likely concerns a promise
in exchange for performance and would qualify a unilateral contract.

Termination of Offer

The offeror can set a time limit for acceptance, or if none is stated it remains open only for a
“reasonable” time. Once the time has passed, the offer lapses and may not be accepted.

Here, over two years passed between A’s comment and B writing her note. If this were indeed a
unilateral contract, B had already been treating A, and arguably did not continue treating him
afterwards in response to his offer; in fact she had forgotten about A’s offer until she wrote her
note. Even if this were a bilateral contract, two years most likely would not be a reasonable time
period within which to accept A’s offer. A’s offer likely terminated due to lapse of time.

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Acceptance

Mailbox Rule

The mailbox rule provides that an acceptance is effective upon proper dispatch. Proper dispatch
requires that the offeree no longer has control or possession of the acceptance, such as with a
properly mailed letter.

Here, although B put a note with her signed acceptance in a stamped envelope addressed to A
outside her front door, she still had control and access to the response up until the mail carrier
picked it up, as it was just outside her door as opposed to at the post office or in a mailbox to
which she had no access once the letter was deposited. Since A died before the mail carrier
picked up B’s letter, the offer was not accepted prior to A’s death. This would terminate the
offer, so there likely was no acceptance by the mailbox rule.

Acceptance by Performance

An offeree may accept an offer through performance. This is judged by an objective standard.

In this case, B already was performing by providing care to A prior to A making his offer. B did
not believe that A owned the building, so even though B was not providing care in exchange for
payment, this would indicate that she was performing just out of kindness, and not in response to
A’s building offer. Therefore acceptance by performance is unlikely.

Consideration

Consideration is a bargained-for exchange of legal detriment. Past consideration, or a promise to

pay for a benefit received in the past, is not effective. A promise to do something one is already
legally obligated to do also will not provide consideration for a new bargain.

Here, A offered to exchange a valuable office building for medical care. B was already caring
for A at the time, however, so she had an obligation to continue caring for him as an existing
patient. B doubted that A even owned the building as she continued to care for him, further
supporting the idea that she was not performing in response to his promise. Moreover, A also
said that he wanted to pay B back for all she had done over the past years. Because a promise to
repay someone for services already rendered, or to fulfill a legal obligation, cannot form
sufficient consideration, there likely is not sufficient consideration here.

Promissory Estoppel

A promise that foreseeably (to the promisor) induces reliance, and is actually relied upon, may
be enforceable to prevent injustice, even without consideration.

In this case, as stated above, B was already performing when A made his offer, and she did not
even believe that A owned the building. Therefore her continued care of A was not in reliance of
her expectation of receiving the building, and there is no promissory estoppel.

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Defenses

Statute of Frauds

Contracts involving the sale of an interest in land must be in writing and signed by the party to
be charged in order to be enforceable.

In this case, the offer concerned an office building, so it involves an interest in land and the
Statute of Frauds applies. A’s offer was oral, however, and the only writing that exists was B’s
note. Because A did not sign B’s note and he is the party to be charged, the Statute of Frauds
would be a valid defense to formation.

Capacity

Parties to a contract must be of sound mind in order for the contract to be enforceable.

Here, A had Alzheimer’s disease, which affects the sufferer’s memory and mental state.
However, A clearly recalled that he owned the office building, and that he did not have any heirs.
Based on the facts given, A was of sound mind and had contractual capacity when he made his
offer to B.

Undue Influence/Duress

Extreme pressure or coercion to enter into a contract will lead to its invalidation.

In this case, A was afraid that he had no heirs, and may have felt obligated to give B something
substantial to influence her to continue caring for him, since she was doing so without payment.
B also was in a position of power in the relationship since she was providing the medical care,
but A came to her completely of his own accord—B did not even believe that A had an office
building to offer—and came up with the idea completely by himself. There was no undue
influence or duress involved.

Unconscionability

Unfairness at the time of contracting also will lead to the contract’s invalidation.

Here, A was elderly with no heirs and needed care for his Alzheimer’s disease, but B did nothing
to force or even suggest A’s offer, even though the care she provided was worth several thousand
dollars. She did not even believe A really owned the building in the first place. The
unconscionability defense does not apply.

In sum, B probably does not have an enforceable contract for the transfer of the office building.