MODULE 23 CONTRACTS
incorrect because the fact that Fox failed to return Summers'
letter is irrelevant to the formation of a binding contract.
Fox's reply constitutes a counteroffer as Fox did not intend
to accept Summers' original offer. Answer (c) is incorrect
because Summers' offer was rejected by Fox's counteroffer.
Answer (d) is incorrect because with rare exceptions, silence
does not constitute acceptance.
cs. Consideration
10. (c) Both Zake and Wick had a contract that was
binding for five years. For them to modify this contract,
both of them must give new consideration under common
law rules which apply to employment contracts such as this
one. When Wick agreed to the raise, only Wick gave new
consideration in the form of $20,000 additional each year.
Zake did not give new consideration because he would per-
form in the last three years as originally agreed. Answers (a)
and (b) are incorrect because Zake did not give new consid-
eration whether or not the raise was in writing. Answer (d)
is incorrect because duress needed to make a contract void-
able or void requires more than "some pressure."
11. (a) Consideration is an act, promise, or forbearance
which is offered by one party and accepted by another as
inducement to enter into an agreement. A party must bind
himlherself to do something slhe is not legally obligated to
do. Furthermore, the consideration must be bargained for.
Past consideration is not sufficient to serve as consideration
for a new contract because it is not bargained for. An-
swer (b) is incorrect because relinquishment of a legal right
constitutes consideration. Answer (c) is incorrect because
even though the consideration must be adequate, courts gen-
erally do not look into the amount of exchange, as long as it
is legal consideration and is bargained for. Answer (d) is
incorrect as this performance by a third party is still deemed
consideration.
12. (c) The rebinding of Dunne's books is considered a
service and not a sale of goods, therefore, common law ap-
plies. Under common law, modification of an existing con-
tract needs new consideration by both parties to be legally
binding. Since Dunne has not given any new consideration
for Cook's reduction in price, the contract is unenforceable.
Additionally, the parol evidence rule prohibits the presenta-
tion of evidence of any prior or contemporaneous oral or
written statements for the purpose of modifying or changing
a written agreement intended by the payor to be the final and
complete expression of their contract. However, it does not
bar from evidence any oral or written agreements entered
into by the parties subsequent to the written contract. There-
fore, the agreement between Dunne and Cook is unenforce-
able, but evidence of the modification is admissible into
evidence. Note that if the contract had been for the sale of
goods (DCC), modification of the contract terms would have
been enforceable. Under the UCC, a contract for the sale of
goods may be modified orally or in writing without new
consideration if such modification is done in good faith.
13. (d) A preexisting legal duty is not sufficient as con-
sideration because no new legal detriment is suffered by
performing the prior obligation. For example, when a
creditor agrees to accept as full payment an amount less than
the full amount of the undisputed (liquidated) debt, the
agreement lacks valid consideration to be enforceable.
However, when the amount of an obligation is disputed, the
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creditor's promise to accept a lesser amount as full payment
of the debt is enforceable. Preexisting legal duties are not
valid as consideration.
14. (b) A promise to donate money to a charity which
the charity relied upon in incurring large expenditures is a
situation involving promissory estoppel. Promissory estop-
pel acts as a substitute for consideration and renders the
'promise enforceable. The elements necessary for promis-
sory estoppel are (1) detrimental reliance ona promise,
(2) reliance on the promise is reasonable and foreseeable,
and (3) damage results (injustice) if the promise is not en-
forced. Answer (a) is incorrect because the failure to en-
force an employer's promise to make a cash payment to a
deceased employee's family will not result in damages, and
therefore, promissory estoppel will not apply. Answer (c) is
incorrect because the modification of a contract requires
consideration, unless the contract involves the sale of goods
under the UCc. Answer (d) is incorrect because an irrevo-
cable oral promise by a merchant to keep an offer open for
sixty days is an option contract that must be supported by
consideration. A firm offer under the UCC requires an offer
signed by the merchant.
C.4. Legal Capacity
IS. (c) A minor may disaffirm a contract at any time
during his minority and within a reasonable time after
reaching the age of majority. When Rail disdfflrmed the
contract two days after reaching the age of eighteen, he did
so w\thi\\ a tea'i'>Qna'o\e tUne a\ter reacm.n,& majority age.
Answer (a) is incorrect because Rail could ratify the contract
only after reaching the age of majority. Answer (b) is incor-
rect because although Rail could have transferred good title
to a good-faith purchaser for value, Rail's title was still
voidable and subject to disaffirmance. Answer (d) is incor-
rect because Rail could disaffirm the contract only for a
reasonable time after reaching the age of majority. Failure
to disaffirm within a reasonable time serves to act as ratifi-
cation.
16. (c) When a person has previously been adjudicated
by a court of law to be incompetent, all of the contracts that
s/he makes are void. Answer (a) is incorrect because the
contracts are only voidable at the option of Green if there
was no formal, previous court determination of incompe-
tence for Green. Answer (b) is incorrect because once the
court determines that Green is incompetent, all of the con-
tracts that s/he makes are not valid but are void. Answer (d)
is incorrect because the contracts cannot be enforced by
either Green or the other contracting party.
17. (c) Ratification of a contract prior to reaching ma-
jority age is not effective. A minor may ratify a contract
expressly or by actions indicating ratification after reaching
the age of majority. Failure to disaffirm within a reasonable
time after reaching majority age does act as ratification.
C.S. Legality
18. (d) An agreement is unenforceable if it is illegal or
violates public policy. Therefore, if the personal services of
the contract are illegal, the party will not have to perform
them. Answer (a) is incorrect because the death of the party
who is to receive the benefits does not terminate the duties
under the contract. Hislher heirs can still receive and pay for
the personal services. Answer (b) is incorrect because