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Contracts On Monday, Resi-Clean (RC) advertised its house cleaning services by hanging paper handbills on doorknobs in residential areas. The handbills listed the services available, gave RC’s address and phone number, and contained a coupon that stated, “This coupon is worth $20 off the price if you call within 24 hours and order a top-to-bottom house-cleaning for $500.” Maria, a homeowner, responding to the handbill, phoned RC on the same day, spoke to a manager, and said she wanted a top-to-bottom house cleaning as described in the handbill. Maria said, “I assume that means $480 because of your $20-off coupon, right?” The RC manager said, “That’s right. We can be at your house on Friday.” Maria said, “Great! Just give me a call before your crew comes so I can be sure to have someone let you in.” Within minutes after the phone conversation ended, the RC manager deposited in the mail a “Confirmation of Order” form to Maria. The form stated, “We hereby confirm your top-to-bottom house cleaning for $500. Our crew will arrive at your house before noon on Friday. You agree to give at least 48 hours advance notice of any cancellation. If you fail to give 48 hours notice, you agree to pay the full contract price of $500.” About an hour later, Maria sent RC an e-mail, which RC received, stating, “I just want to explain that it’s important that your cleaning crew do a good job because my house is up for sale and I want it to look exceptionally good.” On Thursday evening before RC’s cleaning crew was to show up, Maria accepted an offer for the sale of her house. The next morning, Friday, at 10:00 a.m., Maria sent RC another e-mail stating, “No need to send your crew. I sold my house last night, and I no longer need your services.” By that time, however, RC’s crew was en route to Maria’s house. At 10:30 a.m. on Friday, Maria received RC’s Confirmation of Order form in the mail. At 11:00 a.m., RC’s crew arrived, prepared to clean Maria’s house. Maria explained that she no longer needed to have the house cleaned and sent the crew away. RC’s loss of profit was $100, but RC billed Maria for $500. Maria refused to pay. Has Maria breached a contract with RC, and, if so, how much, if anything, does Maria owe RC? Discuss.
Answer 3 This answer provided by Emerson’s Tutorial Bar Review, www.emersonstutorialbarreview.com. The call of the question essentially asks: Was there a contract between Maria (M) and RC? What were the terms? Did M breach the contract? To what damages is RC entitled? Formation of Contract Formation of a contract requires mutual assent on the essential terms, consideration, and no effective defenses. Mutual assent can be established by offer and acceptance. An offer is a manifestation of intent to contract which contains definite essential terms, and is communicated to the offeree. Here, the handbills might be an offer. Ordinarily, handbills, advertisements and the like are not offers because they are not sufficiently specific. Moreover, a reasonable offeree would not believe that he or she could form a contract by responding to an advertisement with “I accept.” However, these handbills were quite specific about the services available, gave RC’s address and phone number, and contained a coupon. They were hung on door knobs in residential areas. A resident could claim he or she thought the handbill was directed specifically to him or her. Such a claim would probably fail because reasonable expectations come from the culture, and people in this culture do not usually believe a handbill or other advertisement creates the power to form a contract by simply saying “I accept.” Assuming the handbills were not an offer, M did make an offer when she responded to the handbill. She called and negotiated on the telephone, which shows intent to contract. After the negotiations, the essential terms of the contract were definite. The parties were M and RC. The price was $480, including the use of the coupon. The subject matter was top-to-bottom house cleaning as described in the handbill. The time for performance was Friday. An acceptance is manifestation of assent to the terms of the offer. Here, the manager replied “We can be at your house on Friday.” A reasonable person in M’s position would take this to be an acceptance. M did request that the manager “Just give me a call before your crew comes so I can be sure to have someone let you in.” This may or may not be a condition precedent to her duty to let the crew in to work. But it is not important because according to the facts, M was present at the house when the crew arrived. In conclusion, a contract was formed at that time and terms are as enumerated above. Modification The “Confirmation of Order” form, sent to M within minutes after the phone conversation probably has no legal consequences. The order confirmed the above terms of the contract, but added that “at least 48 hours advance notice of any cancellation” was required, else M would be charged the full contract price of $500. The original contract did not contain a right to cancel. The “Confirmation of Order” contains a right to cancel, in exchange for the coupon not being recognized. This is a proposal to modify the contract to include this new term. Modification of a contract requires agreement on the new terms, good faith, and no effective defenses. Here, the parties did not agree on the new term. The modification is not effective. M sent an e-mail to RC stating, “I just want to explain that it’s important that your cleaning crew do a good job because my house is up for sale and I want it to look exceptionally good.” The crew as already obligated to do a “good job.” Industry standards would be used to determine whether or not they did a good job. However, she request that the house look “exceptionally good” and this may be her request to modify the contract to include this term. Again, this modification is unenforceable because the parties did not agree on it. No Frustration of Purpose Defense M might also claim that she has identified the purpose of the contract, and that when she sold the house the contract was terminated by frustration of purpose. However, this doctrine requires that both parties know the purpose of the contract at the time for formation. Announcing the purpose after the contract is formed will not invoke the doctrine. Breach by Anticipatory Repudiation On Friday at 10:00 a.m., M sent an e-mail to RC stating “No need to send your crew. I sold my house last night and I no longer need your services.” This is a breach by anticipatory repudiation, because it informs RC that M will not perform, while the contract is still fully executory. Breach by Refusal to Pay At 10:30 a.m. on Friday, M received RC’s Confirmation of Order. At this time, the contract had already been breached, assuming the e-mail arrived at RC’s office. Even if the contract had not been breached by anticipatory repudiation by the e-mail, it was breached when M sent the crew away without permitting them to clean, and refused to pay. A breach of contract occurs when all conditions precedent to the promissors duty to perform have occurred or been excused, time for performance has arrived, and the duty has not been discharged or excused. Here, M has a duty to pay RC. Her duty is subject to the condition precedent that RC perform the cleaning. However, this condition was excused by prevention since M would not allow RC to clean. When a condition is excused, it is treated as though the condition occurred. Thus, for our purposes, the work has been done. The time for her payment has arrived because payment is due when the work is done. M’s duty do pay has not been discharged or excused. M’s duty to pay is absolute, and non-payment is a breach of contract. Damages RC is entitled to its loss of profit of $100. RC is not entitled to $500 because the modification discussed above is not a part of the contract. RC is also entitled to its reliance damages, if any. These are the damages resulting from the crew relying on her promise to allow the cleaning. The crew lost time driving to her house, and may or may not have other work it can do during the time allotted for cleaning M’s house.

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