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CONTRACTS FALL SEMESTER EXAMINATION
Professors Anderson and Shkolnick Tuesday, December 14, 1993
Part I
Page 1 of 7
INSTRUCTIONS: THIS IS PART I OF A THREE-HOUR CLOSED BOOK EXAMINATION,
BOOKS, STUDY NOTES, OUTLINES AND ANY OTHER MATERIALS ARE NOT PERMITTED IN
THE EXAMINATION ROOM. PLACE YOUR EXAM NUMBER, SECTION, PROFESSOR'S NAME
AND COURSE TITLE ON EACH BLUE BOOK. IF YOU WRITE MORE THAN ONE BOOK,
NUMBER THE BOOKS, e.g., 1 OF 2, 2 OF 2.
QUESTION NO. 1: (30 MINUTES)
Jones, Inc. (Jones) is a manufacturer of industrial tubing used by various metal fabricators in the production of various items. One line of tubing, Perfex, is in great demand and Jones has not been able to keep up with the demand for it. Jones has recently developed a new line of tubing, Exleaf, which is made in a secret process from recycled grass clippings. Exleaf is suitable for some but not all of the jobs where Perfex could be used, would be a very profitable item and its use would be demanded by environmental groups if Jones could just get some of its customers to buy and use Exleaf. Byer, Inc. (Byer) is one of the larger users of Perfex and, as far as Jones is concerned, a perfect buyer and user of Exleaf. Jones has been unsuccessful in convincing Byer to order Exleaf and after some legally irrelevant conversations Jones writes Byer:
November 2, 1993 Dear Byer:
I know you will come to use and appreciate Exleaf if only you will give it a try. In order to make this easy for you, if you agree to buy and use 40,000 feet of Exleaf during the next eight months, we will also give you an option to buy up to 80,000 feet of Perfex at our current price of $5.00 a foot. This option can be exercised as you desire Perfex during the year following the date of this letter.
(Signed) Jones
Byer responded:
November 8, 1993 Dear Jones:
We are not willing to commit to buying a specific quantity of Exleaf. We are very happy with Perfex and would be interested in some kind of an arrangement to secure a future supply at your current price of $5.00 a foot; why do you insist that we get involved with your silly grass clippings? If Exleaf proves out, then maybe we can talk.
(Signed) Byer
CONTRACTS FALL SEMESTER EXAMINATION
Professors Anderson and Shkolnick Tuesday, December 14, 1993
Part I
Page 2 of 7
QUESTION NO. 1: (Continued)
On November 23, 1993, Jones wrote Byer:
November 23, 1993 Dear Byer:
You are a tough customer. We will give you an option to purchase up to a total of 80,000 feet of Perfex at $5.00 a foot delivered to your factory if you order a total of 40,000 feet of Exleaf during the next six months. This option may be exercised from the date on which you complete orders totaling 40,000 feet of Exleaf to a year after that date.
(Signed) Jones
On December 2, 1993, Jones received a communication from Byer which stated: " Your letter of the 23rd got our attention; send us 8,000 feet of Exleaf." On December 3, Byer received a telegram from Jones which stated:
Offer of letter of November 23 withdrawn. Price of Perfex going up. Our attorney has advised us that any promises we made are void for lack of mutuality and mutual assent. Will be in contact later. Jones.
Byer consults you. She says that the "option" contained in the letter of November 23 would be a valuable "option" and she would like to have it. PLEASE ADVISE AND BE SPECIFIC AS TO ANY THEORY AND COURSE OF ACTION YOU CAN SUGGEST. DO NOT CONCERN YOURSELF WITH ANY QUESTION OF POSSIBLE DAMAGES.
QUESTION NO. 2: (35 MINUTES)
The senior partner of your law firm calls you in and gives you the following assignment:
As you know, our firm represents Byer, Inc. (Byer) of Omaha Nebraska. We are currently in a dispute with Jones, Inc. (Jones) concerning a load of Perfex which Jones sold and delivered to us in October of 1991. I have determined the events leading up to the dispute to be as follows:
After some preliminary discussions concerning the possible purchase and sale of a quantity of Perfex which did not result in an offer or a contract, Jones sent the following document to Byer; the underlined words are typed on a pre-printed form.
CONTRACTS FALL SEMESTER EXAMINATION
Professors Anderson and Shkolnick Tuesday, December 14, 1993
Part I
Page 4 of 7
Upon receipt of the communication from Jones, Byer responded with the following:
Order #0991-6 September 7, 1991 Your #P-
To: Jones, Inc.
Please ship 12,000 ft. Perfex @ $4.00 per ft. Freight Paid U.P.Rail October delivery
All orders are to be entered subject to the terms and conditions set forth on the reverse side of this order. Vendor must notify within 5 days if this is not acceptable.
CONTRACTS FALL SEMESTER EXAMINATION
Professors Anderson and Shkolnick Tuesday, December 14, 1993
Part I
Page 5 of 7
QUESTION NO. 2: (Continued)
The reverse side of Byer's form contained the following printed material:
There were no further communications between the parties. The Perfex was shipped and delivered to Byer in October of 1991, and Byer paid for and used the goods. We are convinced that some of the recent production problems Byer has been having stem from defects in that shipment of Perfex. What I need from you is an analysis and preliminary conclusions as to:
A. Whether clause (1) of the Jones form (the limitations clause) is part of the Jones -Byer transaction; and
B. Whether clause (3) of Byer's form (the choice of law clause) is part of the Jones -Byer transaction.
YOU ARE NOT TO CONCERN YOURSELF WITH THE EFFECTIVENESS OF THESE
CLAUSES; ANOTHER ASSOCIATE IS LOOKING INTO THAT. WHAT I WANT FROM
YOU IS A DISCUSSION OF THE REASONABLE POSITIONS THAT MAY BE ARGUED AS
TO THE ABOVE QUESTIONS. SECTION 2-207 OF THE UCC WHICH MAY BE HELPFUL
IS ATTACHED TO THIS EXAMINATION.
- Vendors are to notify us at once if goods are not available. No back orders without our consent.
- Purchaser shall have four years from the time the cause of action accrues to bring an action for breach of contract including an action for delivery of defective goods.
- Vendor agrees that the law of Nebraska shall determine the rights and duties of the parties to this transaction.
CONTRACTS FALL SEMESTER EXAMINATION
Professors Anderson and Shkolnick Tuesday, December 14, 1993
Part I
Page 7 of 7
APPENDIX A
2-207. Additional Terms in Acceptance or Confirmation.
(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms. (2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless: (a) the offer expressly limits acceptance to the terms of the offer; (b) they materially alter it; or (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received. (3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.
CONTRACTS FALL SEMESTER EXAMINATION
Professors Anderson and Shkolnick Tuesday, December 14, 1993
Part II
Page 1 of 3
INSTRUCTIONS: THIS IS PART II OF A THREE-HOUR CLOSED BOOK EXAMINATION,
BOOKS, STUDY NOTES, OUTLINES AND ANY OTHER MATERIALS ARE NOT PERMITTED IN
THE EXAMINATION ROOM. PLACE YOUR EXAM NUMBER, SECTION, PROFESSOR'S NAME
AND COURSE TITLE ON EACH BLUE BOOK. IF YOU WRITE MORE THAN ONE BOOK,
NUMBER THE BOOKS, e.g., 1 OF 2, 2 OF 2.
QUESTION NO. 1: (65 MINUTES - Part A 20 Minutes, Part B 15 Minutes, Part C 30 Minutes)
While vacationing in Austin, Texas in December, 1991, Jim Bob Larson (JB) became interested in country- western music in general and "line dancing" in particular. After several nights at the Line-Em-Up Club JB became convinced that there was indeed money to be made in operating such a business. Admission to the dance floor and bar receipts alone seemed to guarantee a profitable business. The possibility of an attached dining room and a line of western clothing did not seem out of the question. JB was convinced that such an operation would really go in his native Nebraska.
JB returned to Nebraska in January of 1992 and entered into a three year lease of a suitable vacant plot of land at a rental of $4,000 a year. JB then contacted Barns, Inc. (Barns) a builder of barns and pre- fabricated storage buildings. JB entered into a contract with Barns for the erection of large barn type building at a cost of $375,000 and a 30,000 square foot graveled lot at a cost of $150,000. As JB wanted to keep his plans as secret as possible, he was non-committal as to his intended use of the structure, and when asked why he wanted large bathrooms in a "barn" said with a grin, " I might want my cows contented."
PLEASE CONSIDER THE FOLLOWING QUESTIONS:
(A) Assume that Barns is to have the building and graveled lot completed by September 1, 1992. After finishing the graveled lot and doing a portion of the building, Barns becomes insolvent and is unable to continue. JB has the work completed by another contractor by September 1, for the reasonable price of $90,000. Barns has been paid nothing at this time. Barns (actually the party succeeding to the rights of Barns) brings suit against JB seeking recovery for the work Barns did. Please advise being as precise as possible indicating what the results would be under all reasonable scenarios.
(B) Assume that Barns is to have the building and graveled lot completed by September 1, 1992. Barns falls behind schedule and does not complete the work until October 15th, thus delaying the opening of JB's operation a month and a half. JB wishes to bring an action against Barns for loss of profits for that period. Please advise as to any problems with his recovery and any possible alternate measure of damages.
CONTRACTS FALL SEMESTER EXAMINATION
Professors Anderson and Shkolnick Tuesday, December 14, 1993
Part II
Page 3 of 3
QUESTION NO. 1: (Continued)
in Paragraph 7 to him (Clean) rather than to Chemco. JB agreed, and did so in October. In early November JB learned that Clean breached the promise contained in paragraph 8 by working as a consultant for a competing janitorial service for a period of two weeks; JB has refused to make the payment called for in paragraph 1 (c), and Clean is threatening suit to recover this payment. Supply, Inc. has contacted JB concerning payment for the scrubber-polisher. JB tells you the machine as delivered to Clean was defective and reasonably worth only $20,000 and JB refuses to pay more; Supply, Inc. has sued JB for $24,000. Chemco has somehow learned of the provisions of paragraph 7 and is demanding that JB pay them the promised $5,000.
Please advise JB as to his rights and obligations, if any, with respect to the claims of
a. Clean;
b. Supply, Inc.
c. Chemco.
BE COMPLETE AND PRECISE. IF SIMILAR CONSIDERATIONS APPLY TO MORE THAN
ONE CLAIMANT, YOU DO NOT NEED TO REPEAT THE DISCUSSION, BUT MAY
INCORPORATE IT BY REFERENCE.
QUESTION NO. 2: (20 MINUTES)
Pharmco, Inc. hired Smith to a two year contract as a sales representative. As Pharmco's products were sophisticated chemical compounds, all sales representatives were required to go through an expensive three month training program sponsored and paid for by Pharmco. In addition to providing the training, Pharmco paid Smith a salary of $2,500 a month during the training period. Following the completion of the training, Smith began work as a full time sales representative, selling Pharmco products on commission.
After working six months as a sales representative, Smith wrongfully quit his job. Pharmco has sued Smith for breach of the employment contract and is seeking to enforce the following provision contained in the employment contract signed by Smith.
"In the event employee shall wrongfully leave employment within eight months from the date employee begins full time work as a sales representative, employee agrees to pay employer, as liquidated damages, all salary paid to employee by employer during the initial training period, not to exceed $7,500."
Smith comes to you and wants to know whether he must pay Pharmco the $7,500 received during training. He states that during the time that he worked as a sales representative he was very successful and made Pharmco a profit well in excess of his commission and the $7,500 paid him during training. Please advise.
