Substantial Performance. Melissa Gallegos bought a used $1996$ Saturn automobile for $\$ 2,155$ from Raul Quintero, doing business as JR's Motors. Their written contract focused primarily on the transfer of physical possession of the vehicle and did not mention who would pay the taxes on the sale. Gallegos paid Quintero $\$2,200$, believing that this amount included the taxes. When she asked him for the title to the vehicle, he told her that only the state could provide the title and only after the taxes were paid. Quintero added that they had orally agreed Gallegos would pay the taxes. Without the title, Gallegos could not obtain license plates and legally operate the vehicle. More than six years later, she filed a suit in a Texas state court against Quintero, alleging breach of contract. Did Quintero substantially perform his obligation under the contract? Explain

Discharge by Operation of Law. Dr. Jake Lambert signed an employment agreement with Baptist Health Services, Inc., to provide cardiothoracic surgery services to Baptist Memorial Hospital-North Mississippi, Inc., in Oxford, Mississippi. Complaints about Lambert's behavior arose almost immediately. He was evaluated by a team of doctors and psychologists, who diagnosed him as suffering from obsessive-compulsive personality disorder and concluded that he was unfit to practice medicine. Based on this conclusion, the hospital suspended his staff privileges. Citing the suspension, Baptist Health Services claimed that Lambert had breached his employment contract. What is Lambert's best defense to this claim? Explain

Material Breach. The Northeast Independent School District in Bexar County, Texas, hired STR Constructors, Ltd., to renovate a middle school. STR subcontracted the tile work in the school's kitchen to Newman Tile, Inc. (NTI). The project had already fallen behind schedule. As a result, STR allowed other workers to walk over and damage the newly installed tile before it had cured, forcing NTI to constantly redo its work. Despite NTI's requests for payment, STR remitted only half the amount due under their contract. When the school district refused to accept the kitchen, including the tile work, STR told NTI to quickly make repairs. A week later, STR terminated their contract. Did STR breach the contract with NTI? Explain.

Juan is an elderly man who lives with his nephew, Samuel. Juan is totally dependent on Samuel’s support. Samuel tells Juan that unless he transfers a tract of land he owns to Samuel for a price 35 percent below its market value, Samuel will no longer support and take care of him. Juan enters into the contract. Discuss fully whether Juan can set aside this contract. (See Undue Influence.)

Junior owes creditor Iba $1,000, which is due and payable on June 1. Junior has been in a car accident, has missed a great deal of work, and consequently will not have the funds on June 1. Junior’s father, Fred, offers to pay Iba$1,100 in four equal installments if Iba will discharge Junior from any further liability on the debt. Iba accepts. Is this transaction a novation or an accord and satisfaction? Explain.

Online Acceptances. Airbnb, Inc., maintains a website that lists, advertises, and takes fees or commissions for property rentals posted on the site. To offer or book accommodations on the site, a party must register and create an account. The sign-up screen states, "By clicking 'Sign Up' ... you confirm that you accept the Terms of Service" (TOS). The TOS, which are hyperlinked, include a mandatory arbitration provision. Francesco Plazza registered with Airbnb and created an account but did not read the TOS. Later, Plazza filed a suit in a federal district court against Airbnb, alleging that the defendant was acting as an unlicensed real estate broker and committing deceptive trade practices in violation of New York state law. Airbnb filed a motion to compel arbitration, pursuant to the TOS. Can Plazza avoid arbitration? Explain. [Plazza v. Airbnb, Inc., $289$ F.Supp.$3$d $537$ (S.D.N.Y. $2018$)] (See Agreement in E-Contracts.)

Sue Ann Apolinar hired a guide through Arkansas Valley Adventures, LLC, for a rafting excursion on the Arkansas River. At the outfitter’s office, Apolinar signed a release that detailed potential hazards and risks, including “overturning,” “unpredictable currents,” “obstacles” in the water, and “drowning.” The release clearly stated that her signature discharged Arkansas Valley from liability for all claims arising in connection with the trip. On the river, while attempting to maneuver around a rapid, the raft capsized. The current swept Apolinar into a logjam where, despite eorts to save her, she drowned. Her son, Jesus Espinoza, Jr., Filed a suit in a federal district court against the rafting company, alleging negligence. What are the arguments for and against enforcing the release that Apolinar signed? Discuss. [Espinoza v. Arkansas Valley Adventures, LLC, 809 F.3d 1150 (10th Cir. 2016)] (See Legality.)

Cohen contracts to sell his house and lot to Windsor for $100,000. The terms of the contract call for Windsor to pay 10 percent of the purchase price as a down payment. The terms further stipulate that if the buyer breaches the contract, Cohen will retain the deposit as liquidated damages. Windsor pays the deposit, but because her expected financing of the$90,000 balance falls through, she breaches the contract. Two weeks later, Cohen sells the house and lot to Ballard for $105,000. Windsor demands her$10,000 back, but Cohen refuses, claiming that Windsor’s breach and the contract terms entitle him to keep the deposit. Discuss who is correct.

In the direct labor variance matrix, there are three factors: (1) Actual hours x Actual rate, (2) Actual hours x Standard rate, and (3) Standard hours X Standard rate. Using the numbers, indicate the formulas for each of the direct labor variances.

Business Case Problem with Sample AnswerConditions. H& $\&$ Ditching & Excavating, Inc., was hired by JRSF, LLC, to perform excavating and grading work on Terra Firma, a residential construction project in West Knox County, Tennessee. Cornerstone Community Bank financed the project with a loan to JRSF. As the work progressed, H&J received payments totaling 90 percent of the price on its contract. JRSF then defaulted on the loan from Cornerstone, and Cornerstone foreclosed and took possession of the property. H& J filed a suit in a Tennessee state court against the bank to recover the final payment on its contract. The bank responded that $\mathrm{H} \& \mathrm{~J}$ had not received its payment because it had failed to obtain an engineer's certificate of final completion, a condition under its contract with JRSF. H& J responded that it had completed all the work it had contracted to do. What type of contract condition does obtaining the engineer's certificate represent? Is H& J entitled to the final payment? Discuss.

John Warren wanted to buy a condominium in California. Hildegard Merrill was the agent for the seller. Because Warren's credit rating was poor, Merrill told him he needed a co-borrower to obtain a mortgage at a reasonable rate. Merrill said that her daughter Charmaine would "go on title" until the loan and sale were complete if Warren would pay her $10,000. Merrill also offered to defer her commission on the sale as a loan to Warren so that he could make a$20$ percent down payment on the property. He agreed to both plans. Merrill secured the mortgage in Charmaine's name alone by misrepresenting her daughter's address, business, and income. To close the sale, Merrill had Warren remove his name from the title to the property. In October, Warren moved into the condominium, repaid Merrill the amount of her deferred commission, and began paying the mortgage. Within a few months, Merrill had Warren evicted. Warren subsequently filed a suit against Merrill and Charmaine. (See Duties of Agents and Principals.)

(a) The first group will determine who among these parties was in an agency relationship.

(b) The second group will discuss the basic duty that an agent owes a principal and decide whether that duty was breached here.

(c) The third group will explain whether Warren is entitled to any remedies in this situation.

Russ Wyant owned Humble Ranch in Perkins County, South Dakota. Edward Humble, whose parents had previously owned the ranch, was Wyant's uncle. Humble held a two-year option to buy the ranch. The option included specific conditions. Once it was exercised, the parties had thirty days to enter into a purchase agreement, and the seller could become the buyer's lender by matching the terms of the proposed financing. After the option was exercised, the parties engaged in lengthy negotiations. Humble did not respond to Wyant's proposed purchase agreement nor advise him of available financing terms before the option expired, however. Six months later, Humble filed a suit against Wyant to enforce the option. Is Humble entitled to specific performance? Explain.

26-4. *Business Case Problem with Sample AnswerNegotiation. Sandra Ford signed a note and a mortgage on her home in Westwood, New Jersey, to borrow $\$ 403,750$ from Argent Mortgage Co. Argent transferred the note and mortgage to Wells Fargo Bank, N.A., without indorsement. The following spring, Ford stopped making payments on the note. Wells Fargo filed a suit in a New Jersey state court against Ford to foreclose on the mortgage. Ford asserted that Argent had committed fraud in connection with the note by providing misleading information and charging excessive fees. Ford contended that Wells Fargo was subject to these defenses because the bank was not a holder in due course of the note. Was the transfer of the note from Argent to Wells Fargo a negotiation or an assignment? What difference does that make? If Argent indorsed the note to Wells Fargo now, would the bank's status change? Discuss

Melissa Faraj owns a lot and wants to build a house according to a particular set of plans and specifications. She solicits bids from building contractors and receives three bids: one from Carlton for $160,000, one from Feldberg for$158,000, and one from Siegel for $153,000. She accepts Siegel’s bid. One month after beginning construction of the house, Siegel contacts Faraj and tells her that because of ination and a recent price hike for materials, his costs have gone up. He says he will not nish the house unless Faraj agrees to pay an extra$13,000. Faraj reluctantly agrees to pay the additional sum.

(a) One group will discuss whether a contractor can ever raise the price of completing construction because of inflation and the rising cost of materials.