Question

In: Operations Management

Juan entered in an oral contract to buy Luke's vacant building for $50,000. He gave Luke...

Juan entered in an oral contract to buy Luke's vacant building for $50,000. He gave Luke a $5,000 deposit. They intended to reduce their agreement to a written contract letter. Pursuant to their oral agreement, Juan took possessions of the building and spent $30,000 making improvements so that it would be capable of being rented to the public. Due to the rise in the value of similar properties. Luke served Juan with a notice to vacate the building. Luke contends the oral contract is unenforceable and that Juan must vacate the building.

a. What is Luke's best argument that the contract is unenforceable?

b. What arguments could Juan make to argue that the contract is enforceable?

c. With whom do you agree? Why?

Solutions

Expert Solution

In most cases when it comes to the process of enforcing an oral contract it might not be simple but with the status of fraud then it enforceability becomes very simple. In the case of Luke and Juan, the contract is very enforceable. First is the deposit which Juan give to Luke. In this case, the 3500 dollars which were given out will act as the legal sign of commitment. The deposit was made after an agreement was reached between the two parties.

Under the provisions of the status of fraud, an agreement is reached in circumstances where a deposit is paid, and it will act as the component showing the agreement. In the case, one partner wants to make the deal unreal it will be regarded as the status of fraud by the party. In this case, even Juan had gone to the extent of making improvements to the building which means that he had spent some money. The improvement would only be made of there was something which guided the operation. In this case, the guiding is the oral contract in the process. It is these two components that make Juan and Luke have a contract that is enforceable.


Related Solutions

Juan entered in an oral contract to buy Luke's vacant building for $50,000. He gave Luke...
Juan entered in an oral contract to buy Luke's vacant building for $50,000. He gave Luke a $5,000 deposit. They intended to reduce their agreement to a written contract letter. Pursuant to their oral agreement, Juan took possessions of the building and spent $30,000 making improvements so that it would be capable of being rented to the public. Due to the rise in the value of similar properties. Luke served Juan with a notice to vacate the building. Luke contends...
Rookie Construction Limited (RCL) entered into a contract to construct a building for $975,000. The contract...
Rookie Construction Limited (RCL) entered into a contract to construct a building for $975,000. The contract provided for progress payments. RCL’s accounting year ends December 31. Work began under the contract on August 1, 2019, and was completed on October 31, 2021. RCL uses the percentage-of-completion method to account for this long-term contract. Construction activities are summarized below: 2019 2020 2021 Construction costs incurred to date 180,000 630,000 825,000 Estimated remaining costs to complete 630,000 190,000 0 Progress Billings during...
Problem 3 An entity entered into a construction contract to build a condo building at a...
Problem 3 An entity entered into a construction contract to build a condo building at a fixed price of $54,000,000. Construction started in 20x0 and ended in 20x3. Data on the contract is as follows (in ‘000’s): 20x0 20x1 20x2 20x3 Costs incurred during the year $ 6500 19500 25000 5800 Estimated costs to complete 38500 26000 6500 - Billings 18000 18000 - 18000 For each of the parts below, prepare the ‘mini’ income statement for the project for each...
You want to buy a new sports car for $50,000. The contract is in the form...
You want to buy a new sports car for $50,000. The contract is in the form of a 60-month annuity due at a 7.2 APR. What will your monthly payment be? Answer =. $988.85 but I keep getting $994.78 how do I get 988.85
A Buyer (Best Buy) and Seller (Dell Computers) of computers entered into a contract whereby the...
A Buyer (Best Buy) and Seller (Dell Computers) of computers entered into a contract whereby the Seller promised to deliver 5,000 laptop computers of a certain model, at $500 each, by February 10, 2016, to the Buyer’s warehouse, in time for a big promotional sale which the Buyer was planning for the President’s Day holiday. The Seller was only able to deliver 3,000 units, due to a labor strike. To “cover” the other 2,000 units, and make sure the Buyer...
Raider Red Construction entered into a contract to build a commercial building for $3,600,000. Raider Red...
Raider Red Construction entered into a contract to build a commercial building for $3,600,000. Raider Red Construction uses the percentage-of-completion method for recognizing revenue on the project. Construction began in September of 2018 and the building was completed in June of 2020. The company provided the following additional information on the project. 2018 2019 2020 Costs incurred to date $                 725,000 $              2,100,000 $              3,400,000 Estimated costs to complete $              2,175,000 $              1,400,000 $                             -   Billings during the year $                ...
A construction company entered into a fixed-price contract to build an office building for $28 million....
A construction company entered into a fixed-price contract to build an office building for $28 million. Construction costs incurred during the first year were $8 million and estimated costs to complete at the end of the year were $12 million. During the first year the company billed its customer $10 million, of which $4 million was collected before year-end. What would appear in the year-end balance sheet related to this contract using the percentage-of-completion method? (Enter your answers in whole...
A construction company entered into a fixed-price contract to build an office building for $38 million....
A construction company entered into a fixed-price contract to build an office building for $38 million. Construction costs incurred during the first year were $12 million and estimated costs to complete at the end of the year were $18 million. During the first year the company billed its customer $14 million, of which $7 million was collected before year-end. What would appear in the year-end balance sheet related to this contract using the percentage-of-completion method? (Enter your answers in whole...
Big Red Engineering Associates entered into a 3 year contract to construct an office building at...
Big Red Engineering Associates entered into a 3 year contract to construct an office building at a contract price of $1,700,000. With the construction data below prepare the necessary journal entries to record cost incurred, billings to customers, cash collections, and the end of year adjusting entry applicable to percentage of completion method:                                                  Year 1                    Year 2                    Year 3 Construction cost incurred       250,000                 900,000                  210,000 Estimated cost to complete   1,000,000                  287,500                       0 Progress Billings                      190,000               1,200,000                  310,000 Collections...
ABC Ltd (“ABC”) entered into a contract on 1st January 20x6 to build a factory building...
ABC Ltd (“ABC”) entered into a contract on 1st January 20x6 to build a factory building for its customer on its customer’s land for $20 million. The completion is expected to be in two years’ time. ABC’s policy is to bill its clients based on 60% in the first year and the balance upon completion of the project. ABC has a 31st December financial year end. It has adopted FRS 115 Revenues from Contracts with Customers and adopts the input...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT