Law at the Margins Unit Test

8/8 points (graded)

Select one answer for each question. Answer all questions before checking.

1. Alma calls Bill and tells him to donate $100 to a charity for her birthday. When Alma’s birthday
comes around, Bill doesn’t make the donation and instead gives Alma a $100 painting. Can a court
require Bill to make the donation?

Yes, under the theory of charitable subscription

Yes, under the theory of Ricketts v. Scothorne

No, because Bill made no promise to rely on

No, because Bill still gave Alma a gift of equal value

correct

Explanation

Here, although Alma has requested that Bill make a $100 donation to charity for her birthday, Bill
has not done anything to signify his agreement to Alma’s request. Thus, if Alma took this to court,
the court could not require bill to make the donation.

2. Alma calls Bill on behalf of a charity and asks him to make a $100 donation. Bill agrees and
promises to do so. Can a court require Bill to make the donation?

Yes, under the theory of charitable subscription

Yes, under the theory of Ricketts v. Scothorne

No, because Bill made no promise to rely on

No, because Bill might give Alma, instead of the charity, a gift of equal value

correct

Explanation

Here, Alma is acting as a representative of a charity. Because Bill has made a promise to make a
donation to the charity, this is a typical situation in which a court would apply the theory of
charitable subscription and uphold the promise without worrying about finding a bargain.

3. Adam and Bob make a joke that if Adam can run a marathon without stopping in the next month,
Bob will pay Adam $1,000,000. Adam then decides to try to run a marathon. He trains for hours
every day for the next four weeks and finally runs a whole marathon without stopping, exactly one
month after his and Bob’s conversation. Bob is at the finish line, cheering for Adam. Under the
theory of detrimental reliance, must he pay Adam?

Yes, Adam relied on Bob’s promise

Yes, Adam’s reliance on Bob’s promise was foreseeable

No, Adam did not rely on Bob’s promise

No, Adam’s reliance on Bob’s promise was not reasonable

correct

Explanation

Because Adam and Bob’s “deal” was a joke, Adam later deciding to rely on the exchange does not
make it enforceable.

4. Bob promises Adam that he’ll give Adam $1,000,000 if Adam runs a marathon the next day. Adam
was going to run the marathon anyway, and goes ahead and does so. Under the theory of
detrimental relaince, must Bob pay Adam?

Yes, Adam relied on Bob’s promise

Yes, Adam’s reliance on Bob’s promise was foreseeable

No, Adam did not rely on Bob’s promise

No, Adam’s reliance on Bob’s promise was not reasonable

correct

Explanation

Here, because Adam was planning on running the marathon anyway, he did not rely on Bob’s
promise to do so and thus cannot hold Bob to his promise based on detrimental reliance.

5. AllCo wants to buy B. Co. The parties have not signed a finalized contract yet. Using the reasoning
of the cases we’ve discussed, in which of the following scenarios would there likely be an agreement
in principle?

Both companies had hired lawyers to negotiate an agreement

Agreement in Principle

No Agreement in Principle
correct

Explanation

Although both companies hired lawyers, because the majority of the details of the agreement still
needed to be figured out, a court would not likely find an agreement in principle.

AllCo and B. Co. had gone through numerous negotiations and agreed on a price; all that the
remained for the parties to do was sign the agreement

Agreement in Principle

No Agreement in Principle

correct

Explanation

If AllCo and B. Co. had gone through this time and expense to make the agreement and both
intended to sign, they were the closest to having an agreement that they could be without signing it.
This is the mostly likely scenario in which a court would find an agreement in principle.

AllCo and B. Co. had gone through numerous negotiations, and B. Co. had told AllCo that so long as
AllCo invested $1,000,000 in B. Co.’s former partner company, they would agree to a deal. AllCo had
done so, then B. Co. had said they actually needed to invest $5,000,000. AllCo invested the
additional money.

Agreement in Principle

No Agreement in Principle

correct

Explanation

Here, again, AllCo and B.Co. have gone through much time and expense to come to an agreement;
AllCo has done all that it can to fulfill its side of the exchange. Because B. Co. has made a conditional
promise that they will enter the deal as long as AllCo invests, B. Co. has implied that it is willing to
agree to the deal. Thus, both parties here have signaled their assent to terms; all that seems to be
left is for them to sign the deal.

AllCo and B. Co. had gone through numerous negotiations and agreed to some details, but still
largely disagreed on a price.

Agreement in Principle

No Agreement in Principle
correct

Explanation

A court would not likely be willing to find an agreement in principle if the parties had not yet agreed
on a price, because price is such a large detail to leave undecided and could easily make or break a
deal.

1. Hint (1 of 1): Think back to all of the principles and topics covered in this Unit. Consider all of
the different means that courts use to hold someone to a bargain. Is there a two-sided
bargain? What about reasonable reliance? Did the parties agree to enough of the deal such
that a court will hold them to it, or are too many details still unresolved?