A. Consider the following statement of facts from Lancoure v. Dupre, an 1893 decision of the Minnesota Supreme Court:
 

The defendant, in the year 1877, sold to plaintiff the tract of land described in the complaint, and executed and delivered to her his bond for a deed. One half of the agreed purchase price was paid by plaintiff about the time of the purchase. Plaintiff went into possession, and remained until March 1, 1886, when she elected to rescind the contract, abandoned the premises, and brought this action to recover damages because of the failure and inability of defendant to convey a good title in accordance with the conditions of his bond. . . . In 1882, the plaintiff, desiring to make substantial improvements on the land, offered to pay the balance of the purchase price to defendant, providing he would convey a good title to her, but, discovering the defect before mentioned, she refused to accept his deed solely because of such defect. Thereupon the defendant assured her that he could and would [do certain specific acts necessary to] perfect his own title, and would convey the same to plaintiff, and that she could safely make the proposed improvements. At this time the balance of the purchase price was not due, although plaintiff, at her option, could pay it. Relying upon the . . . representations that the defendant was able to convey a good title to the land, the plaintiff was induced to purchase; and, relying upon his further statements and representations that he could and would perfect his defective title, as well as upon the original statements and representations, the plaintiff placed betterments upon the land in 1882 at a cost of $800, as was found by the court. She had also, while in possession, paid the annual interest on account of the deferred purchase-price payment, and had also paid the taxes as they fell due for several years. The defendant was unable and has refused to perfect his title by deed or otherwise, and in March, 1886, as before stated, plaintiff took such steps as were essential to rescind the contract to purchase, and brought this action.
 

Assume that (i) the plaintiff validly rescinded the contract, and (ii) with a good title the tract would have had a market value at the time of the sale (1877) of $3000 more than the contract price. What amounts, if any, may the plaintiff recover from the defendant? Explain.
 
 
 

Model Answer: Since the plaintiff has rescinded the contract, the appropriate remedy is restitution. Restitutionary damages will compensate the plaintiff for the value she has conferred to the defendant.

Plaintiff should therefore recover the one-half of the purchase price already paid, as well as the tax payments made. The former evidently benefitted the defendant; the later indirectly but inescapably benefitted defendant as well, since without those payments the land itself would have be subject to claims by the taxing authority. If plaintiff made the interest payments to defendant, plaintiff may recover those payments as well. Finally, the plaintiff should be able to recover the $800 invested in bettering the property. Although plaintiff had no contractual obligation to make these improvements, she did so only after defendant's assurance that the defendant would provide good title. Plaintiff's cost is an acceptable measure of the value conferred to the defendant by those betterments, absent any more direct evidence.
 

Noteworthy mistakes: ignoring the instructions to assume that the plaintiff had validly rescinded the contract (and thereby making the problem far more difficult); engaging in a lengthy analysis of whether defendant had breached (unnecessary given the stated assumption of a valid recission); asserting that plaintiff should seek expectation damages (inappropriate given the stated assumption of recission); asserting that plaintiff's payments of the purchase price, interest and taxes could be recovered as expectation damages (these expenditures reflect plaintiff's reliance interest and are also subject to recovery via restitution); doing an extensive promissory estoppel analysis with reference to the improvements (asserting promissory estoppel is inconsistent with the stated assumption of recission).
 
 
 

B. Recall Bigelow v. Barnes, the 1913 decision from the Minnesota Supreme Court distributed as the "Take-Home Case." The defendant asserted inter alia (among other things) that (i) the contract included a promise by the Keefe-Davidson Company ("the Company") to continue publishing Current Law "'so long as the Northwestern Reporters were published' by the West Publishing Co," and (ii) since the publisher had breached that promise, the defendant was not liable for anything on the contract, even for volumes already "issued and delivered to him." In the decision's last paragraph the Court rejects this assertion, using the phrase "a failure of consideration." We did not particularly address that phrase during our studies, but we did cover the concept asserted by the defendant in Bigelow. Assume that the contract did indeed contain the promise for continued publication and that the Company did breach that promise. Using concepts from and citations to the Restatement (2d) of Contracts, explain:
 

1. the defendant's theory, and
 

2. why the defendant's theory fails as to the volumes already "issued and delivered to him."
 
 
 
 

Model Answer: Using concepts from the Restatement (Second) of Contracts ("R.2d"), defendant's theory amounts to a claim of discharge by total breach. Under R.2d § 242, total breach discharges the other party from any further obligation of performance, and defendant is claiming that plaintiff's breach of the promise of continued publication relieves the defendant of any further obligation. Thus, defendant's assertion of "failure of consideration" means, in modern usage, discharge on account of total breach.
 

Defendant's claim fails with respect to the volumes already delivered, because the contract is clearly divisible. The contract calls for a series of separate performances and establishes a price for each separate instance of performance. Under R.2d § 240, each volume published by plaintiff is "pair[ed]" with plaintiff's obligation to pay for that volume.
 

Noteworthy mistakes: ignoring the instructions to rephrase defendant's assertions in terms of the Restatement (Second); ignoring the reference in the instructions to "failure of consideration" and thereby missing a key clue to the question's proper focus; ignoring the stated assumption that the contract did indeed include a promise of future performance and thereby being diverted into the other (for current purposes irrelevant) prong of the court's analysis; missing the divisibility issue; using unjust enrichment rather than divisibility to answer the second part of the question (thereby failing to use the rule that best analyzes the given situation); finding the divisibility issue but missing the total breach issue (thereby ignoring a crucial aspect of divisibility -- i.e., that it functions as an exception to the rule under which total breach by one party discharges the other party from any further obligation of performance).
 
 

C. Consider the following statement of facts, derived and modified from Rochon Corp. v. McGuire Mechanical Services, Inc., a 1998 unreported decision of the Minnesota

Court of Appeals:
 

Hennepin County advertised for bids to build the Hennepin County Sheriff's Water Patrol Headquarters on Lake Minnetonka. Desiring to bid as prime contractor, respondent invited subcontract proposals. Respondent [the prime contractor] intended to calculate its prime contract bid by using the lowest bid in each category of subcontract work.
 

The prime bid deadline was June 4, 1996 at 2:00 p.m. At 1:52 p.m. on that day, appellant [the subcontractor] proposed to do all mechanical work, except for fire sprinklers, for $252,290. This was one of several mechanical subcontract bids.
 

When respondent reviewed the subcontract bids, it noticed that appellant's proposal was $66,000, or 20%, less than the next lowest mechanical bid. Respondent thought that discrepancy noteworthy but did not inform appellant. Instead, respondent used appellant's proposal in calculating the prime contract bid.
 

Respondent learned on June 4, 1996, that it was the lowest prime contract bidder. One hour after receipt of this information, respondent notified appellant that it was the lowest mechanical subcontractor.
 

On June 6, 1996, appellant notified respondent that, because appellant had made a calculation error resulting in a bid $61,000 less than it should have been, appellant was withdrawing its offer. At that point, respondent had not yet accepted appellant's offer.
 

Respondent contacted the county to discuss its options, including the possibility of withdrawing the prime bid. Because the county would not indicate whether it would retain respondent's $87,000 bid bond until after respondent formally withdrew its bid, respondent decided to let the bid stand.
 

Six weeks later, the county awarded the prime contract to respondent, who then found it necessary to hire two mechanical subcontractors to replace appellant. The difference between appellant's bid price and the combined price charged by the replacement subcontractors was $58,710. Respondent sued appellant to recover that difference.
 

What result and why?
 
 
 

Model Answer:⁽¹⁾ The contractor will recover nothing. The subcontractor's bid constituted an offer, and the subcontractor purported to withdraw the offer before the contractor had accepted it. In ordinary circumstances, the offeror is master of the offer and a revocation of the offer terminates the offeree's power to accept. R.2d §36(1)(c).
 

The contractor's only hope is to assert some sort of promissory estoppel. In particular R.2d §87(2) provides that:
 

An offer which the offeror should reasonably expect to induce action . . .of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice.
 

If this were an ordinary subcontractor bidding situation, §87(2) would apply. The offeror/subcontractor should have reasonably expected the contractor to formulate its own bid in reliance on the subcontractor's bid. The contractor did in fact rely.
 

However this situation is not ordinary. The contractor found the subcontractor's low bid "noteworthy" and therefore did not reasonably rely on the bid. It would be unjust to transform the subcontractor's otherwise revocable offer into an option contract.
 

Moreover, even if §87(2) did create an option contract, the doctrine of unilateral mistake would allow the subcontractor to avoid that contract. Applying R.2d § 153:⁽²⁾
 

(i) the subcontractor made a mistake as to the calculations;
 

(ii) the absence of such a mistake was certainly "a basic assumption on which [the subcontractor] made [the offer that has been converted into an option] . . . contract," § 153;
 

(iii) the miscalculation amounted to about 1/4 of the bid price and therefore "had a material effect on the agreed exchange of performance," id.; and
 

(iv) the contractor found the lowness of the subcontractor's bid "noteworthy" and therefore "had reason to know of the mistake." § 153(b).
 

Therefore the subcontractor would be able to avoid the option contract, unless R.2d § 154 allocated the risk of mistake to the subcontractor. Nothing in that section applies. The agreement does not allocate the risk to the subcontractor, § 154(a), and, given the contractor's knowledge of the "discrepancy," a court would not find it "reasonable in the circumstances to do so." § 154(c). As for subsection 154(b), the miscalculation did not result from the subcontractor's "limited knowledge."
 

Noteworthy mistakes: identifying and analyzing only one of the three major issues; asserting, contrary to the facts, that the contractor had accepted the bid prior to any revocation; simply missing the issue of revocation of offer; applying promissory estoppel without regard either to the question of reasonable reliance or the issue of unilateral mistake; asserting that the contractor had somehow failed to mitigate damages by declining to withdraw its bid (withdrawing its bid might have cost the contractor the value of its bid bond--which exceeded the amount of damages the contractor suffered).
 
 

D. A blissfully happy couple ("Jack and Jill") enter into a written agreement with Really Fancy Hotel ("Hotel") for Couple's wedding reception. The agreement includes the following provision:
 

Really Fancy Hotel is not responsible for non-performance of this agreement due to any act of God or any labor dispute.
 

One week before the wedding, all the service personnel at the Hotel go out on strike. Fearful that the Hotel will be unable to perform, Jack and Jill telephone the Hotel's catering manager and express their concerns.⁽³⁾ The manager replies, "Don't worry. We're open, and no matter what, we're staying open. Worse case, we'll staff the reception with non-union folks from a 'temp' service."
 

Jack and Jill are appalled. Jill is a union shop steward. She cannot and will not cross a picket line, and neither will her friends. Jack and Jill believe that they can find a substitute location and wish to cancel the contract with the Hotel. Advise them as to getting out of the contract.
 
 

Model Answer: Jack and Jill's best chance is to avoid the contract on grounds of frustration of purpose.⁽⁴⁾ They cannot claim breach or anticipatory repudiation. They have already sought assurances of performance from the hotel, and the manager's promise seems to meet the requirements of R.2d § 251(2) (requiring that, upon proper demand, the obligor "provide such assurance of due performance as is adequate in the circumstances of the particular case"). The facts do not suggest that the agreement contains any promise by the hotel to use union labor, so the hotel's assurance does not constitute an impermissible attempt to modify the contract.
 

Jack and Jill might seek further assurance that any temporary labor will be generally competent and particularly knowledgeable about the hotel's facilities. However, assuming the hotel provides such assurances, Jack and Jill will be no further along in addressing their real concern -- i.e. the use of non-union labor.⁽⁵⁾
 

To succeed with a frustration theory, Jack and Jill would have to show: (i) the occurrence of an event whose non-occurrence was a basic assumption of the contract, and (ii) that occurrence has or will undermine the benefits they expected to obtain from the bargain. R.2d. § 265.
 

Jack and Jill cannot plausibly argue that the strike constitutes the necessary occurrence. The written agreement expressly contemplated the possibility of a strike, so a strike's non-occurrence could not have been a basic assumption of the contract.
 

Jack and Jill might instead argue that the use of non-union labor during a strike constitutes the occurrence. Again, the written agreement would cause them problems. The provision quoted in the question entitles the hotel to an excuse in the event of a labor dispute and thereby bespeaks flexibility in favor of the hotel. To succeed, Jack and Jill would have to establish that the parties tacitly assumed an unwritten restriction on that flexibility -- i.e., that the hotel would never use its flexibility to employ non-union replacements.⁽⁶⁾
 

Assuming, however, that Jack and Jill could establish the use of non-union labor as the necessary "occurrence," they would still have to characterize the occurrence as undermining the benefits they had expected to obtain. There is no question that the use of non-union labor would have ruined the reception. Whether this fact would suffice would depend on how broadly or narrowly a court would view the contract's purpose.
 

Viewed narrowly, the contract's purpose was to provide Jack and Jill a competently-catered reception. The use of non-union labor would not undermine that purpose. Viewed more broadly and practically, the contract's purpose is to provide Jack and Jill a reception appropriate to the happy and blissful occasion. Under that view, the use of non-union labor would suffice to undermine that purpose.
 

Noteworthy mistakes: Asserting frustration but failing to take into account the agreement's language regarding labor disputes; asserting impracticability and disregarding the fact that Jack and Jill's sole duty of performance was to pay money; asserting baldly that the contract prohibited the use of non-union labor or promised the use of only union labor;⁽⁷⁾ asserting the frustration theory but failing to grapple with the difficulties Jack and Jill would face in establishing the purpose of the contract
 
 
 
 
 

Part Two
 

Max was toiling as a second-year associate in a large, downtown law firm. He was well-paid ($75,000 per year salary), but he worked very long hours. Moreover, he had very little client contact, and he found most of his work uninteresting and alienating. On several occasions he mentioned his plight to his aunt, who always sympathized with him.
 

Eventually his aunt decided to do more than sympathize. She owned her own business, and the business had substantial needs for legal services. One evening she summoned Max to her office and advised him, "Listen, you're a bright fellow, too bright to be toiling as someone else's lackey. You should go out on your own, hang up your own shingle."
 

In that conversation, his aunt did more than advise Max. She also said, "Look, if you'll quit that sweat shop and start your own practice, I'll give you all of my company's legal work. I know that will amount to at least $30,000 per year in fees."
 

When Max expressed reluctance at leaving the security of the large firm, his aunt said, "Look, try it for three years. You'll have the security of my fees and you'll be able in that time to know whether you're destined to build from that base and establish a thriving practice of your own."
 

After several more conversations with the same theme, Max decided to take his aunt's advice. (He also talked with an accountant friend, who powered up her computer, did a few "down and dirty" calculations on her spread sheet program and projected "best case scenario -- five years from now you should be clearing $120,000; moderate case -- $80,000.")
 

Max resigned from the law firm, rented an office (in an office sharing arrangement that included secretarial services) and bought office equipment. His rent was set at $1200 per month, with the lease to run for two years. The equipment cost him $6000.
 

Max's first year on his own went well enough. Fees from his aunt's business totaled $40,000, and he managed to collect $15,000 from other clients. The next year, however, matters changed substantially. Max's aunt sold her business, without telling Max in advance. (She had another lawyer handle the transaction, because, as she later explained to Max, "I thought this deal was a bit too complicated." Fees for that lawyer's work totalled $18,000.)
 

The written agreement between the aunt and the buyer ("the Buyer") included the following term:
 

Seller [i.e. the aunt] assigns to Buyer all of the contracts pertaining to the Business⁽⁸⁾ ("the Assigned Contracts"). Buyer agrees to assume responsibility for performance of Seller's obligations under the Assigned Contracts, which include without limitation [here the agreement listed the Business' contracts with its major customers, plus the Business' lease on its office; the list did not mention any contracts with persons who provided service to the Business].
 

Max learned of the sale only when his aunt introduced him to the new owner (i.e. the Buyer). In that introduction, the aunt said, "This is Max. He handles all our regular legal work."
 

The Buyer responded by saying, "Glad to meet you. I look forward to working with you."
 

Unfortunately for Max, that work dried up very quickly. Within a month the Buyer had shifted all the business' legal work to another firm. When news got out that Max had lost his major client, two other clients decided to seek other legal counsel. Together these two clients had accounted for $12,000 in fees during the first year of Max's solo practice.
 

Max had no choice but to fold up his practice, just two months into the second year of his solo adventure. He had collected nothing in those first two months.
 

First enraged and then depressed by what he considered his aunt's betrayal, he was psychologically unable to seek another job. Over the next two years he spent $25,000 in fees for psychotherapy. A year into the therapy he turned down the offer of an associate position paying $55,000.
 

Max had 10 months remaining on his lease, and the landlord refused to let him out of it. He did sell the office equipment for $2000.
 

Max brought suit against his aunt and the Buyer.
 

1. Did Max's aunt breach any enforceable obligation to Max? Explain.
 

2. Assuming Max's aunt did breach some enforceable obligation, how much would Max be entitled to recover? Why?
 

3. Did the Buyer breach some enforceable obligation to Max? Explain. For this question, do not concern yourself with the measure of recovery; i.e., do not do a damage analysis.
 

4. Hard pressed by his landlord for the lease payments, Max agrees in writing to "assign to [the landlord] any and all payments I recover from my litigation against the Buyer for the Buyer's failure to provide the legal services as promised me." The landlord promptly mailed a copy of the assignment to the Buyer. Meanwhile Max approached the Buyer and pushed for a settlement. The Buyer initially resisted, but gave in when Max said, "Listen, you don't want a lot of your confidential business information to leak out, do you?" The Buyer and Max then agreed to settle Max's claim for $9000. Later, when the landlord demanded that the Buyer pay the $9000 to the landlord, the Buyer had second thoughts about the settlement. Is the Buyer obligated to pay the landlord the $9000? Explain.
 
 

Model Answer to Question 1: Max's aunt did breach an enforceable obligation to Max. She offered a unilateral contract, and he accepted that offer. However, the resulting contract is subject to the statute frauds and no writing exists. Max will therefore have to rely on promissory estoppel.
 

The conversations between Max and his aunt suffice to establish an offer for a unilateral contract. His aunt promises to provide him three years of legal work if he will quit his job as an associate and set up his own law office. She seeks action rather than a reciprocal promise, so the offer is for unilateral contract. Her offer is adequately specific; she offers to retain Max for "all" of her company's legal work. She is in essence offering a requirements contract, and modern law upholds such contracts.
 

Max has certainly performed the requested acts and therefore the contract has been formed. Unfortunately for Max, however, by its terms the contract cannot be performed within one year. The performance promised by Max's aunt explicitly extends for three years. Max's aunt can therefore assert the statute of fraud to avoid the contract.
 

Max will therefore have to invoke promissory estoppel. R.2d § 139. Given Max's very substantial, detrimental and expected reliance, justice will require the enforcement of his aunt's promise despite the statute of frauds.

Noteworthy mistakes for question 1: omitting the contract formation analysis; including the contract formation analysis but characterizing the contract as bilateral; omitting the statute of frauds issue (which typically led to the mistake of omitting the promissory estoppel analysis); analyzing the consideration issue as involving some promise by Max to provide legal services and the Aunt's promise to pay for them (thereby missing the link to the promise at issue - namely, the Aunt's promise to provide legal work for three years)
 
 
 

Model Answer to Question 2: The nature and extent of Max's recovery will depend on whether the court allows him expectation or reliance damages.⁽⁹⁾ In either case Max's recovery will depend on how the court handles the mitigation issue.⁽¹⁰⁾
 

As for expectation damages, his aunt's breach caused Max $60,000 in direct damages -- i.e. "loss in value." His aunt had promised Max a minimum of $30,000 per year in legal fees for three years and reneged on the last two years. (Retaining another lawyer to handle the sale of the business was just part of his Aunt's overall failure of performance.)⁽¹¹⁾
 

As for other loss -- i.e. consequential damages -- Max's best chance is to claim $15,000 per year in fees lost from other clients. To win on this claim he must show that such losses were foreseeable in the sense of Hadley v. Baxendale and he must prove the amount of the loss with reasonable certainty.
 

On the Hadley v. Baxendale issue Max will argue that (i) his Aunt encouraged him to establish a solo practice with her business as the linchpin client, and (ii) it was therefore foreseeable that he would lose other clients if that linchpin deserted him.
 

As for proving the amount of damages, Max will point to his first year's results and argue that he would have done at least as well for the next two years. Given the reluctance of courts to grant consequential damages to new businesses, Max will have a difficult task. (In any event, it would be hopeless for him to claim lost profits based on his accountant friend's "down and dirty" calculations. Those scenarios amount to no more than guesstimates and would fail to establish the necessary specificity.)
 

In any event, Max cannot recover for the costs of his psychiatrist bills. These bills pertain to emotional distress, and contract law rarely allows recovery for emotional distress. Only when the contract is of the sort whose breach is likely to produce extreme emotional disturbance (i.e., the mishandling of a corpse) are such damages available.
 

To avoid overcompensation Max will have to deduct any amounts he saved on account of his Aunt's breach. Under the rubric of "other loss avoided" he would subtract the $2000 he obtained by selling his office equipment.
 

Max's aunt will contend that Max's recovery should also be reduced by $55,000, the amount he could have made as an associate. The offer came one year after the breach -- i.e. with one year remaining on the aunt's three year promise. Max's aunt has the burden of proving that a suitable opportunity to mitigate existed, but the facts state that Max actually had an offer for another associate position. Absent some other information suggesting unsuitability, the mere fact that the rejected position paid less than Max's old position should not matter. The rejected position would have paid more than Max was making when his Aunt breached.
 

Max's best hope on this issue is to claim that he was not reasonably able to mitigate, due to the emotional turmoil produced by his Aunt's callus breach of promise. Max might argue that his taking that position at that moment in his life was as unreasonable as him moving a thousand miles away. The Aunt would counter that, to allow the psychological excuse, would be tantamount to allowing Max $55,000 in recovery to emotional distress.⁽¹²⁾
 

The expectation damage analysis can be summarized in table form as follows.
 
 
 

Loss in Value $60,000 (two years left on guaranteed $30,000 per year minimum)

Other loss $30,000 ($15,000 per year of other legal work)

Costs avoided $ 0 (the landlord refused to compromise on the rent)

Other loss avoided $2000 or (the first figure represents the price obtained for reselling the

$57,000 equipment; the second represents that price plus the salary

available from the rejected associates position)
 

Because many courts will allow only reliance damages for promissory estoppel claim, Max may have to content himself with vindicating his reliance interest. Ironically, however, in these circumstances those damages might exceed an expectation recovery. Max would be entitled not only to expenses incurred in reliance on his Aunt's promise but also to the value of opportunities forgone.
 

Max's expenses are quite straight forward. He obligated himself to monthly rent of $1200, for 24 months, which amounts to $28,800. He expended $6000 on office equipment, from which he recouped $2000 selling the equipment. By far his largest claim, however, would be the value of the job he quit -- $75,000 per year for three years ($225,000). (Max's psychiatrist bills are not recoverable. They are the consequence of breach, not reliance. Moreover, this contract is not the type whose breach occasions recovery for emotional distress damages.)
 

From the amounts claimed by Max, Max's aunt would insist upon deducting $55,000, the money he made in his first year. On this point she would be correct, since the purpose of reliance damages is to put the non-breaching party in the position he would have occupied had there been no contract.
 

Max's Aunt would also challenge the $225,000 as speculative, asserting that Max was a mere at-will employee at the law firm and had no certainty of continued employment. The question does not give enough facts to further analyze that assertion, other than to note that the mere fact of at-will employment will not defeat Max's claim if he can show that he was likely to have maintained his position.
 

Max's aunt will also assert that any recovery is subject to a deduction for failure to mitigate (The analysis here is identical to the analysis presented for expectation damages.)
 

Noteworthy mistakes -- expectation damages: asserting that lost profits were too speculative (and thereby ignoring the specific $30,000 per year promise); characterizing the other lost legal fees as direct damages (i.e., part of "loss in value");adding to the damages the obligations incurred for office equipment and rent (and thereby forgetting the rule of "invest a buck to make two bucks"); not addressing the emotional distress issue; failing to consider the accountant friend's estimates; failing to consider the mitigation issue
 

Noteworthy mistakes -- reliance damages: failing to consider the foregone opportunity at the old law firm; trying to plug reliance damages into the expectation damage formula; failing to consider the mitigation issue; failing to explain why a court might use reliance damages rather than expectation damages
 
 
 
 
 

Model Answer to Question 3: The Buyer probably did breach an obligation to Max. Although the Buyer had no contract with Max, the Buyer had promised Max's aunt to perform the Aunt's "obligations under the Assigned Contracts." The sales agreement between the Buyer and Max's aunt ("the sales agreement") did not specifically list Max's contract as a "contract[] pertaining to the Business," but the sales agreement made clear that the list was not exclusive ("without limitation").
 

The question remains, however, whether the Buyer owed any obligation to Max. Becoming the delegate of one party's obligations under a contract does not by itself make the delegate directly liable to the other party. The Buyer's casual remark -- "I look forward to working with you." -- falls far short of the manifestation necessary to constitute an offer of novation. Moreover, even assuming that statement constituted an offer, the facts do not indicate that Max accepted the offer.

Therefore, if the Buyer is directly liable to Max that liability must relate to Max's status as a third party beneficiary of the sales agreement. At first glance, Max's claim in this respect seems forlorn. There is no evidence that in making the sales agreement Max's aunt specifically intended to have the sales agreement inure to Max's benefit. R.2d § 302. Max's contract was not even mentioned.
 

However, the sales agreement did include language assigning all of the Seller's contracts. Under R.2d § 328(2), "the acceptance by an assignee [i.e., the Buyer] of such an assignment operates as a promise to the assignor [i.e., Max's aunt] to perform the assignor's unperformed duties , and the obligor of the assigned rights [i.e., Max, who under the unilateral contract with his Aunt was obligated to provide legal services] is an intended beneficiary of the promise." Therefore, the Buyer did breach an obligation to Max.
 

Noteworthy mistakes for question 3: asserting that the sales agreement did not encompass Max's contract with his Aunt (and thereby ignoring the specific language quoted from the sales agreement); failing to construe the sales agreement's assignment language as encompassing delegation as well as assignment; analyzing the question as one of assignment rather than delegation; seeing the Buyer as having been delegated the obligations of Max's aunt and asserting, without support, that that delegation made the Buyer directly liable to Max
 
 
 

Model Answer to Question 4: The Buyer does not have to honor the assignment. Although in formal terms the assignment itself is valid, the Buyer has a valid defense against Max relating to the underlying obligation. The Buyer can assert that defense against the assignee.
 

Max and the landlord did take the necessary formal steps to effect a valid assignment. Max's written assignment manifested his "intention to transfer . . . [his] right to performance by the obligor" (i.e., the Buyer) to the assignee (i.e., the landlord)." R.2d § 317(1). The landlord gave notice of the assignment to the obligor (i.e., the Buyer) before the obligor could discharge the obligation directly to the obligee (i.e., Max).
 

However, under R.2d § 336(1), an obligor may assert against an assignee any defense that would enable the obligor to avoid the underlying contract with the assignor. In this case, the assigned right arises from a settlement, and the Buyer can avoid the settlement on account of duress. Max induced the Buyer to settle their dispute by wrongfully threatening to reveal client confidences. Arguably, at least, the disclosure of confidential business information is a tort, R.2d § 176(1)(a), and left the Buyer with "no reasonable alternative." R.2d §175(1). Therefore, the Buyer need not pay the landlord the $9,000.⁽¹³⁾
 

Noteworthy mistakes: properly analyzing the initial assignment, but ignoring the duress issue; analyzing the duress issue, but failing to explain how duress relates to the right of the assignee; asserting baldly that the duress allows the Buyer to avoid the assignment, without stating the applicable legal rule; analyzing the matter as one involving delegation rather than assignment

1. It was impossible in the allotted time to consider all the issues to the depth shown in this Model Answer. The best answers noted the three major issues (purported revocation of the offer, promissory estoppel arguably leading to an option contract, unilateral mistake) and then provided detailed analysis of one or two. This Answer analyzes all three in detail so as to provide guidance on whatever issue(s) a student selected for in-depth analysis.

2. This Model Answer happens to use provisions from the Restatement (Second). It was equally appropriate to use the doctrine as provided in the casebook.

3. Assume that the manager's words and actions are attributable to the Hotel. (That is, analyze the problem as if the Hotel did directly whatever the manager did.) [This footnote appeared in the exam, although with a different number.]

4. Neither impossibility nor impracticability is appropriate. Jack and Jill's sole obligation under the contract is to pay money. The advent of a strike and the potential use of non-union labor in no way interferes with or undermines their ability to perform that obligation.

5. This paragraph makes a very sophisticated point. It was possible to get full credit on this question without considering this point.

6. This paragraph makes a very sophisticated point. It was possible to get full credit on this question without considering this point.

7. Several students argued that Jack and Jill had a substantial interest that rendered improper the hotel's proposed delegation to temporary workers. This analysis rests on the Sally Beauty case, CB 1238, and I gave substantial credit to answers that made a cogent argument of this sort. I did, however, deduct points from any answer that failed to explore the frustration theory.

8. The contract elsewhere defined the word "Business." [This footnote appeared in the exam, although with a different number.]

9. I did not expect an answer to include both types of damages. This Model Answer does so only to encompass both possibilities.

10. In grading this answer I gave little attention to the exact numbers adduced. I focused on the analysis rather than the arithmetic.

11. It was certainly possible to argue that the $18,000 constitutes a separate item of damages, and I gave appropriate credit to answers that did so plausibly. For example: "Max would also argue for $18,000 in additional direct loss -- the amount of fees paid to the lawyer for handling the sale of the business. Max's Aunt would contend, in contrast, that Max could not prove that this amount should be added to the $30,000 minimum."

12. The issue as to how, if at all, Max's emotional turmoil affects the mitigation issue is quite subtle and only a couple of answers found it. I gave those answers extra credit but did not deduct from answers that handled his rejecting the associate position as a routine and obvious example of failure to mitigate.

13. Some answers used undue influence rather than duress. Although I consider that analysis a "stretch," I gave full credit to answers that plausibly argued the theory.