Genny and Luke Contract for Luke to Build a Home

question 59

Multiple Choice

Genny and Luke contract for Luke to build a home for Genny. Luke promises to build the house for $100,000 but a neighboring forest fire destroys the framing during construction. Luke must reframe the house. Does the preexisting duty rule prevent Luke from enforcing a contract in which he charges additional money to Genny?

• A) Yes, because he has a preexisting duty to build the house and took the chance of an issue during the building process.
• B) Yes, because there are no exceptions to the preexisting duty rule, especially in contracts for the sale of land and houses.
• C) No, Article 2 of the UCC does not allow for enforcement of this contract.
• D) No, because there are unforeseen circumstances (the forest fire) which require additional work (reframing the house).
• E) No, a court would deem that he was under contract and it would unjustly enrich Luke to charge more money to reframe the house.

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Definitions:

Total Debt Ratio

A financial ratio that compares a company's total liabilities to its total assets, indicating the proportion of a company's assets financed through debt.

Construct Validity

The degree to which a test measures what it claims, or purports, to be measuring.

Criterion Validity

The extent to which a measure is related to an outcome or criterion that it is supposed to predict.

Internal Consistency Validity

A measure of the reliability of a test or scale, indicating how well the items on the test measure the same construct or concept.