Case Study: Contractual Disputes and Resolutions

Background

Adam, a young entrepreneur, recently launched a tech startup. He signed several contracts with various partners and vendors to ensure smooth operations. These contracts varied in nature$$some were oral agreements, while others were written and implied. Adam encountered several issues, ranging from capacity to contract to breaches and statutory violations.

Scenario $1$: Oral Agreement and Statute of Frauds

Adam orally agreed with Mary, a freelance graphic designer, to design his company's logo for $$600.$ After completing the work, Mary requested payment, but Adam refused, claiming the agreement was not enforceable because it wasn't in writing.

Scenario $2$: Capacity to Contract

Adam signed a contract with a minor, Jane, to supply promotional materials. Jane later decided to disaffirm the contract, arguing that as a minor, she lacked the legal capacity to be bound by it$.$

Scenario $3$: Fraudulent Inducement

Adam entered into a contract with TechCorp, a supplier, based on their representation that they could deliver high$-$quality servers. It turned out that TechCorp intentionally misrepresented the quality of the servers, and Adam's operations were severely affected.

Scenario $4$: Statutory Violation

Adam contracted with a local vendor, EcoSolutions, to dispose of electronic waste. It was later discovered that EcoSolutions$$ methods violated environmental statutes, rendering the contract void.

Scenario $5$: Breach of Contract

Adam contracted with BuildIt, a construction company, to renovate his office space. BuildIt failed to complete the project on time, leading to significant business disruptions. Adam considered this a material breach and sought remedies.

Scenario $6$: Third$-$Party Beneficiary

Adam promised to pay his friend, John, $$5,000$ to settle a debt John owed to another party, Tom. Adam entered into a contract with John for this payment, intending Tom to be the third$-$party beneficiary.

Multiple Choice Questions

$1.$ What is an express contract?

o A$)$ A contract where terms are stated in writing or orally.

o B$)$ A contract formed by actions of the parties.

o C$)$ A contract with no legal remedy.

o D$)$ A contract that cannot be enforced.

$2.$ What constitutes an implied contract?

o A$)$ A contract with terms explicitly stated.

o B$)$ A contract formed based on conduct and facts.

o C$)$ A contract that must be in writing to be enforceable.

o D$)$ A contract that is illegal.

$3.$ Which of the following is true about a valid contract?

o A$)$ It must be in writing.

o B$)$ It provides a remedy if breached.

o C$)$ It has no legal effect.

o D$)$ It can never be voidable.

$4.$ When can a minor disaffirm a contract?

o A$)$ Never.

o B$)$ Only if the contract is for luxury goods.

o C$)$ Anytime due to lack of legal capacity.

o D$)$ Only if the contract is for employment.

$5.$ What happens if a person is judicially determined to be insane before contract formation?

o A$)$ The contract is voidable.

o B$)$ The contract is enforceable.

o C$)$ The contract is void and cannot be ratified.

o D$)$ The contract is valid but unenforceable.

$6.$ What is the effect of committing an illegal act during the performance of a contract?

o A$)$ The contract becomes void.

o B$)$ The contract is enforceable if formed legally.

o C$)$ The contract is voidable.

o D$)$ The contract remains enforceable.

$7.$ What is a contract in restraint of trade?

o A$)$ A contract promoting free competition.

o B$)$ A contract restricting competition.

o C$)$ A contract for the sale of goods.

o D$)$ A contract for employment.

$8.$ What makes a contract voidable due to fraud?

o A$)$ Intentional misrepresentation or omission of a material fact.

o B$)$ A clerical error in the contract.

o C$)$ Lack of capacity to contract.

o D$)$ Breach of contract.

$9.$ Under the Statute of Frauds, which contracts must be in writing to be enforceable?

o A$)$ All contracts.

o B$)$ Contracts for sale of goods over $$500.$

o C$)$ Contracts performable within a year.

o D$)$ Contracts for services.

$10.$ What does the parol evidence rule prevent?

o A$)$ Introduction of external evidence contradicting the written contract.

o B$)$ Oral agreements.

o C$)$ Contracts formed by conduct.

o D$)$ Modification of contracts.

$11.$ What is mutual rescission?

o A$)$ Unilateral cancellation of a contract.

o B$)$ Agreement by both parties to cancel the contract.

o C$)$ Formation of a new contract.

o D$)$ Transfer of contractual rights.

$12.$ What is a substituted contract?

o A$)$ Contract replacing an old one with new terms.

o B$)$ Oral agreement.

o C$)$ Contract with a minor.

o D$)$ Implied contract.

$13.$ What does a novation involve?

o A$)$ Cancellation of a contract without replacement.

o B$)$ Replacement of a party in the original contract.

o C$)$ Unilateral modification of a contract.

o D$)$ Agreement to disaffirm a contract.

$14.$ What is a material breach of contract?

o A$)$ Minor failure to perform.

o B$)$ Performance causing no harm.

o C$)$ Significant failure discharging the nonbreaching party.