Consideration

Question 1

Mr. An owes $5000 to Ms. Binh. The debt is due on 1 December, 2008.

Mr. An is having difficulty getting the money to pay on time. He would have to borrow the
money from the bank, but the bank has told him that he must pay a very high rate of interest,
10% per month. He would prefer not to do this. He can borrow the money privately from his
family but will have to wait until the 1st January 2009.

On 15 November, 2008, Mr. An asks Ms. Binh if she will allow him to pay the debt on 1 January
2009. Ms. Binh says that this is okay. Relying on Ms. Binh’s promise of an extension, Mr. An
does not ask the bank for a loan. Instead he decides to wait and borrow the money privately
and repay the loan on the 1st January.

On 25 November, Ms. Binh realizes that she really needs the money on 1 December, 2008, and
tells Mr. An that he must pay on that date. That day, Mr. An goes to the bank to see if he can
borrow $5000, and is told that he can borrow money, but will now have to pay interest of 15%
per month.

(a) Is there an enforceable contract between Mr. An and Ms. Binh that Mr. An be
permitted to repay the loan on the 1st January? (10 points)

Question 2

On October 1st, Mr. X signed a contract to purchase a property from Mr. Y for $100,000 and paid
Mr. Y a $10,000 deposit. The contract stated that the remaining $90,000 was due on October
31st, and that the seller had the right to terminate the contract and retain the deposit if the
remaining $90,000 was not paid on time.

On October 2nd, Mr. X applied for a loan from his bank for $90,000. Mr. X’s bank told him his
loan application would not be processed until November 3rd. Mr. X called Mr. Y on October 5th
and asked if Mr. Y would extend the due date for the $90,000 until November 3rd. Mr. Y agreed
that he would extend the due date to November 3rd.

On October 21st, Mr. Y received an offer from a different buyer to buy the property for $200,000
but did not tell Mr. X about it. Mr. Y waited until November 1st, then told Mr. X he was
terminating the contract because Mr. X had not paid the $90,000 by October 31 st, as per their
original contract. Mr. Y also told Mr. X he would not return the $10,000 deposit to Mr. X.

Mr. X’s loan was approved by his bank on November 3rd, and he now wishes to complete his
purchase of Mr. Y’s property.

Advise Mr. X whether there was a new agreement on October 5th for the extension of the due
date.

(10 points)

Question 3

On March 1st, Bob gets into a contract with Mike where Bob will repair Mike’s I-phone for $100.
Bob takes the phone home to repair it but as he opens the phone and began to really look at it,
he discovers that the job is very difficult and will take him much longer than he expected.

On March 5th, Bob calls Mike and says, “Hey Mike, this job is going to take me much longer than I
thought. I will now have to charge you $150.” Mike responds, “But we have a contract for $100.
I really don’t think I should have to pay more than that.” Bob then responds by saying he won’t
fix the phone then.” Mike finally agrees to pay the $150 new price that Bob quoted.

March 9th, Bob finishes fixing the phone and returns it to Mike. Mike pays Bob only $100.

REQUIRED:

Discuss the relevant legal issues and advise Bob if he can sue for the additional $50. (10
marks)

Question 4 (10 Marks)

On 1 August 2010, Sand Co. and Dirt Co. entered into a contract under which Dirt Co. agreed to
buy sand exclusively from Sand Co. for a period of one year at the price of $2.00 USD per
kilogram. The contract did not require Dirt Co. to buy a minimum amount of sand. It required
only that whatever sand Dirt Co. decided to buy during the contract term, it would buy from
Sand Co. at the price of $2.00 USD per kilogram.

Dirt Co. planned to resell the sand it bought from Sand Co. to construction companies at a price
of $2.50 USD per kilogram, thus earning $0.50 USD for every kilogram it sold.

On 29 April 2011, Mr. Loam, the President of Dirt Co., called Mr. Silica, the President of Sand Co.,
and said: “As you know, the retail market price of sand has gone down considerably. We are
only able to sell sand to construction companies for $1.75 USD per kilogram, meaning that we
will actually lose $0.25 USD on every kilogram of sand we buy from you.”

Mr. Silica replied: “Yes, we know the price is low. It’s hurting our business too. We are willing
to reduce your price to $1.50 USD per kilogram for the rest of the contract term. That way at
least you will make a profit of $0.25 USD per kilogram.”

Mr. Loam then said: “Well, that would be great, but please make sure you are really willing sell
it to us for $1.50 for the rest of the contract. If you are not sure, we will simply stop selling sand
for the rest of the contract term and won’t order any more sand from you or from anyone else.”

Mr. Silica replied: “Don’t worry. We’re sure. We promise that we will only charge you $1.50 per
kilogram.”

Mr. Loam thanked Mr. Silica and they hung up the telephone.

On 1 August 2011, the day after the contract expired, Sand Co. sent the following invoice to Dirt
Co.:

From 29 April 2011 to 31 July 2011, Dirt Co. bought 6,000

kilograms of sand from Sand Co.  At a cost of $2.00 USD per
kilogram, the total cost to Dirt Co. is $12,000.  Please pay $12,000
USD to Sand Co. within 30 days.

Required:  You have been hired as the lawyer for Dirt Co.  Dirt Co. has asked you the
following question. Please fully advise them.

(a) “On 29 April 2011, when Sand Co. verbally promised to sell us sand for $1.50 USD
per kilogram, was a new valid contract formed?  Discuss. (10 Marks)
Legal capacity
Question 1

On 15 August 2011, M. Corleone emerged from a coma (deep sleep) and woke up in the hospital.
He looked around the room and said “What happened? Where am I? How did I get here?”
Fortunately, even though M.’s arm and hand were badly injured, M. was not feeling any pain
because he was very heavily medicated.

M.’s friend, Miss M. Ringwald, was sitting in a chair next to M.’s bed, and when M. woke up she
said: “Hi M. You’ve been asleep for a long time. How do you feel?” M. replied: “Not good. I feel
very dizzy and I’m not even sure where I am.” Miss Ringwald then said: “I need you to sign this
contract stating that you agree to pay the hospital bill,” and handed M. a contract, which he
signed immediately.

Miss Ringwald then laughed loudly and said “Ha, ha! You just signed a contract agreeing to sell
me your house for $100 USD! You are a one-armed idiot!”

(d) M. Corleone has hired you as his lawyer and wants to know if there is any way he can
avoid selling his house to Miss M. Ringwald for $100 USD. Please fully advise him. (8
Marks)

Question 2 (10 Marks)

On 7 April 2011, Miss Jobs, who is 16 years old, went to the Peach International
Programming School (PIPS) to enrol in computer programming classes. Miss Jobs told
PIPS “These classes will help me get a job later on in the computer industry.”

PIPS told Miss Jobs that the tuition for one semester of computer classes was $20,000.
Miss Jobs said: “I don’t have $20,000,” and PIPS asked her: “Do you have any family
members or friends who would guarantee that, if you can’t pay us $20,000 by the end of
the semester, they will pay it for you?” Miss Jobs said “Maybe my grandfather, Mr.
Gates, will guarantee it for me. I will ask him tonight.”

That night, Miss Jobs said to her grandfather, Mr. Gates: “Hey grandfather, would you be
willing to guarantee my tuition at PIPS?” Mr. Gates replied: “How much would I be
guaranteeing?” and Miss Jobs replied: “$20,000.” Mr. Gates said “I may guarantee it, but
let me call my lawyer and financial adviser and ask their advice before I agree.”

Mr. Gates has never learned to read and he is 80% deaf in both ears. It is extremely
difficult for him to hear without his hearing aid.

Later that night, Mr. Gates told Miss Jobs: “My lawyer and my financial adviser both say
that it’s no problem for me to guarantee the tuition for you, so I will do it. You are lucky
that I am still working as a janitor and have not retired yet!” Miss Jobs said: “Thanks
grandfather!”
The next day, 8 April 2011, Miss Jobs and Mr. Gates went to PIPS together, but Mr. Gates
did not have on his hearing aid. Mr. Gates repeatedly asked PIPS how much he was
guaranteeing and although PIPS repeatedly stated $20,000, Mr. Gates repeatedly heard
$2,000 usd. Mr. Gates thought to himself that he was lucky that he was only
guaranteeing $2,000. PIPS became annoyed as he realized the Mr. Gates could not hear
at all.

Miss Jobs signed a contract agreeing to pay $20,000 to PIPS in exchange for a semester
of computer classes, and Mr. Gates signed a separate contract agreeing that, in exchange
for PIPS agreeing to provide computer classes to Miss Jobs without receiving the tuition
in advance, if Miss Jobs did not pay the $20,000 to PIPS, Mr. Gates would pay the
$20,000 himself. However, the contract had a typing error and it was written $25,000.

At the end of the semester, Miss Jobs had not paid the $20,000 to PIPS as well as she
owed them $5,000 for books, and when PIPS tried to collect the $25,000 from Mr. Gates,
he refused to pay. PIPS then sued Miss Jobs and Mr. Gates for breaches of their
contracts with PIPS.

Required: You are the lawyer for both Miss Jobs and Mr. Gates.

(a) Miss Jobs wants to know if she can successfully argue that no
contract was ever formed between her and PIPS. Please fully advise her. (6
Marks)

(b) Mr. Gates wants to know if he can successfully argue that no contract
was ever formed between him and PIPS. Please fully advise him. (9 Marks)