Answers to Summer 2011
California Bar Exam Questions

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Summer 2011 Bar Question 3

Contracts

Betty is a physician. One of her patients was an elderly man named Al. Betty treated Al for Alzheimer’s disease, but since she believed he was destitute, she never charged him for her services.

One day Al said to Betty, “I want to pay you back for all you have done over the years. If you will care for me for the rest of my life, I will give you my office building. I’m frightened because I have no heirs and you are the only one who cares for me. I need to know now that I can depend on you.” Betty doubted that Al owned any office building, but said nothing in response and just completed her examination of Al and gave him some medication.

Two years passed. Al’s health worsened and Betty continued to treat him. Betty forgot about Al’s statement regarding the office building.

One day Betty learned that Al was indeed the owner of the office building. Betty immediately wrote a note to Al stating, “I accept your offer and promise to provide you with medical services for the rest of your life.” Betty signed the note, put it into a stamped envelope addressed to Al, and placed the envelope outside her front door to be picked up by her mail carrier when he arrived to deliver the next day’s mail.

Al died in his sleep that night. The mail carrier picked up Betty’s letter the following morning and it was delivered to Al’s home a day later. The services rendered by Betty to Al over the last two years were worth several thousand dollars; the office building is worth millions of dollars.

Does Betty have an enforceable contract for the transfer of the office building? Discuss.

All questions © 2011 California State Bar Exam. All rights reserved

Contracts
Question 3, Summer 2011

A valid contract requires an offer, acceptance and consideration.

Offer?
An offer requires present intent, definite terms, and communicated to an identified offeree

Present intent. A said he wanted to pay B back for her past care said if B would provide him with care for the rest of his life, he would give her an office building. These words seem to show A’s intent.

When there is any doubt as to intent, a reasonable person standard is used. That is, would a reasonable person take the offeror’s words to show that he intended an offer? In this case A had a deteriorating mental condition. If his mental state was obvious, a reasonable person may not consider that A had the intent to make a contract. Furthermore, A presented himself as impoverished. It would seem unbelievable that A had an office building to give. It is possible that a reasonable person would not find that A had the intent to contract.

However, if only a doctor would notice A’s mental condition, it is possible a reasonable person would judge the words on their face and find that A had present intent to make an offer.

Therefore, let us assume that a court found that A had the intent to make an offer.

Definite terms. The terms of the offer must be sufficiently certain for a court to enforce the contract. In a common law contract, the terms which must be definite are:
Time for performance is A’s lifetime.
Place for performance is where A is located.
Parties are A and B.
Subject matter is B’s medical care for A in exchange for A’s office building.
Price. Is medical care by B and A’s office building. Assuming that the office building A owns is sufficiently identified, this is met.
Therefore, the terms of the offer are sufficiently definite.

Communicated. A was talking to B face to face. Therefore the offer was communicated.

Conclusion:  A has made an offer.

Acceptance requires present assent, communicated to the offereee and unequivocal.

Present assent. Present assent is usually judged by the words the offeree uses. Here, B did not say anything. At common law the acceptance must be a mirror image of the offer. If the offer was verbal, the acceptance must also be verbal.

It could be argued that B accepted by conduct, which modern courts may permit. However, B did not change her conduct in any way; she continued to treat A as she had done for years. So there was no change in position to point to as an acceptance by conduct.

Therefore, B did not accept.

Face of face offer. An offer expires at the end of a face to face conversation, by operation of law. Here, A offered B the care agreement orally. B did not respond. The offer would expire by operation of law.

An offer made in a face to face conversation can remain open if the parties intend it to. On the one hand, B did not respond for two years. That is an extremely long time for the parties to intend to keep an offer open. Also, B did not intend the offer to remain open. In fact, she did not take the offer seriously and forgot all about it.

On the other hand, A intended to keep the offer open; he did not feel he had any other choice but to rely on B to care for him.

Assuming that the offer did remain open, the question arises whether B eventually did accept it.

B’s letter—acceptance?
Present assent. B finally believed that A’s offer was genuine and wrote a letter, saying, “I accept your offer.” B in fact had the intent to accept and her words show that she intended to accept.

Unequivocal. B did not change the terms of A’s offer. Therefore her acceptance was unequivocal.

Communicated. B wrote a letter to A. A received the letter, but he had already died before he received it. This may satisfy the communication requirement under the mailbox rule.

Mailbox rule.
An acceptance is effective and a contract is formed when the acceptance is placed in a reliable means of communication. Here, B left the stamped letter outside her door to be picked up by the postal worker the next day.

The question is whether this is a reliable means of communication. On the one hand, the letter is not out of B’s control. It is not in a letter box, where she is unable to reach in and retrieve it. It is simply outside her door. It is difficult to argue the policy that the simple act of putting the letter outside her door binds the other party to a contract.

On the other hand, the method of placing the letter outside the door is routinely used to give mail to the postal worker. B had used this method and the letter was in fact picked up and processed. Under this analysis, such placement is a reliable means of communication.

Conclusion: If A’s offer remained open for two years and if B’s receipt of the letter after he died constitutes communicated, then B accepted.

Consideration.
Consideration is a mutually bargained for exchange of value.
“All you’ve done for me in the past.” Consideration must secure the parties’ performance in the future. It cannot be what a party has already done in the past. Therefore, this is not consideration.

“Take care of me for the rest of my life.” B’s future care of A could certainly form the basis for consideration, but only if B delivered the care in order to secure A’s performance of delivering the office building. For two years, B did not believe A and continued to provide care as she had always done. She was not caring for A because she expected to receive an office building from him.

The consideration must induce the promisee’s action. Here, up until a few hours before A died, B did not believe that A had an office building to giver her. She continued to provide care for some other motivation, not as a result of A’s inducement.

But in the last hours of A’s life, B did rely on A’s promised consideration. Even a few hours of performance by B would be sufficient. However, B did not provide any care for A from the time she wrote the acceptance until his death. Can this still be seen as consideration by B?

It appears that what A wanted was to be under B’s care for his whole life. Even though B did not actually provide any hands-on care after she accepted, she did act as A’s doctor for his whole life.

Adequate consideration? Generally a court will not weigh the value of the consideration. A court famously said that even a peppercorn is sufficient consideration. Individuals have their own means for setting value on consideration. In this case, A had no one else to care for him and no one else to leave his property to, so the fact that the value of the office building is worth millions of dollars and B’s remaining medical care is only worth a few thousand is irrelevant to the enforceability of the contract, if one is found.

This is sufficient consideration, and a bilateral contract was formed in the last day of A’s life.

Analysis and Answers © 2012 Vivian Dempsey, The Writing Edge™ All rights reserved.