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Contracts

Exam 5
30 minutes

Fact Pattern

Theater Owner owns and manages the Village Theater. Recently, Theater Owner spoke with Costumer, a local costume designer, about a holiday vocal concert she was planning to host in early December of next year, 14 months away. As the concert was to feature an appearance by Santa Claus, Theater Owner needed a generic Santa costume. 

Because Theater Owner planned to hold the holiday concert every year, Costumer suggested that it might make more sense for her to buy the Santa suit, rather than renting one every December. Costumer’s advice made sense to Theater Owner. The two thus orally agreed that Costumer would design and construct a custom-built Santa suit, to be delivered one week prior to the holiday concert, and not before. In exchange, Theater Owner would pay Costumer $500. 

However, eight months later, and six months before the concert, the local fire marshal inspected the Village Theater to assess the building’s compliance with recently amended fire regulations. The amendments imposed new and severe requirements regarding access to exits in public venues. 

After the inspection, the fire marshal informed Theater Owner that under the amended regulations, the Village Theater’s balcony seats did not have sufficient access to exits. To comply with the regulations, the Village Theater would need additional staircases with exit doors. Without those improvements, Theater Owner could not legally sell tickets to the balcony seats. This reduced the total seating capacity of Village Theater from 500 to 400 seats.

Theater Owner was disappointed to hear the fire marshal’s report, as her profits on the holiday performance would be significantly lower if she could sell a maximum of 400 tickets, as opposed to the 500 she wanted to sell. Thinking it best to make the needed improvements as soon as possible, Theater Owner notified all her vendors, including Costumer, that all upcoming events were canceled until she could finish adding the staircases and exit doors. Soon after, Costumer received another email from Theater Owner, notifying him that she no longer planned to honor their agreement, because she could not complete the needed improvements by the scheduled concert date. Furious, Costumer called Theater Owner to complain, after which he sued Theater Owner for breach of contract.

As to damages: Costumer indicated that he had expected to spend $600 on the raw materials to construct the Santa suit, but had spent only $150 thus far, all on materials that could not be returned or reused.

Assume that the common law of contracts, and not the Uniform Commercial Code, applies here.


Questions

  1. What defense(s) to enforceability, if any, will Theater Owner raise as to the form of her contract with Costumer? Will the defense(s) likely succeed? Explain.
  2. What defense(s) to enforceability, if any, will Theater Owner raise as to the fire marshal’s report? Will the defense(s) likely succeed? Explain.
  3. How would Theater Owner’s argument change if, unbeknownst to Theater Owner, the amendments to the fire code had been passed before Theater Owner and Costumer formed a contract? Explain.
  4. Assume that the contract between Theater Owner and Costumer is enforceable. What will Costumer likely receive in damages? Explain.

Question 1

What defense(s) to enforceability, if any, will Theater Owner raise as to the form of her contract with Costumer? Will the defense(s) likely succeed? Explain.

Question 2

What defense(s) to enforceability, if any, will Theater Owner raise as to the fire marshal’s report? Will the defense(s) likely succeed? Explain.

Question 3

How would Theater Owner’s argument change if, unbeknownst to Theater Owner, the amendments to the fire code had been passed before Theater Owner and Costumer formed a contract? Explain.

Question 4

Assume that the contract between Theater Owner and Costumer is enforceable. What will Costumer likely receive in damages? Explain.

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