LAW 7119-02: CONTRACTS II
FINAL EXAMINATION -- SPRING 1999

This exam consists of 3 questions. You have three hours in which to outline and write your answers. The questions count for various percentages of your final grade for this exam, so I advise you to allocate your time accordingly.

I strongly suggest that before you begin writing an answer you 1) read the question carefully; 2) think about exactly which issues you need to address; and 3) outline your answer. Good organization and good analysis almost always go hand-in-hand.

Please write your exam number above and turn in this exam with your answers. Use as many exam booklets as you need. Start your answer to each question in a new booklet and number the booklets so that I can easily follow their intended sequence. Write on one side only of each page, on every other line. For your benefit and my eyesight, please write as legibly as possible. I cannot grade what I cannot read.

This is an open book exam. You may use your casebook, statutory supplement, any material that I handed out in class, and any notes that you or your study group prepared. You may not use other materials, such as nutshells or commercial outlines.

Unless otherwise indicated, all events described below take place in a common law jurisdiction where the legislature has enacted the UCC. If you think it necessary to assume a fact in order to answer a question you may do so, but you should clearly indicate that you are making an assumption and briefly explain why you consider it reasonable to do so. If you have any procedural questions about taking this exam, please contact me in my office.

I've got a successful friend to whom people often say, "Gosh, you're lucky." She replies, "The harder I work, the luckier I get." May you, too, enjoy the success that your hard work merits.

Stu approached a soft-drink vending machine marked, "60¢. Insert coins in slot. Change returned below." The machine presented several large buttons, each with the name of a soft-drink. Stu inserted three quarters and pressed the only button labeled "Jolt." No drink issued from the machine, however. Instead, a sign near the coin slot lit up with the message, "Selection unavailable."

Stu grunted and pressed the lever marked, "Coin return." He wanted Jolt or nothing. He got nothing. He tried the lever several more times, adding a curse and a kick, but the machine held on to his 75¢. He stepped back from the machine and reconsidered. Sighing, he pressed the button labeled, "Fanta." A can of Fanta dropped into reach--but not his 15¢ change. Stu repeated his earlier attack on the coin return lever and got the same result: no change. Muttering, he stomped off with the Fanta.

Setting aside the impracticality of actually bringing suit for so trivial a matter, analyze Stu's experience in terms of contract law.

Clyde owned a new office building. He contracted with Laura, an experienced attorney, for her to draft a lease agreement between him and Tenco, Inc. "I want to keep Tenco very happy," Clyde explained. "I still have a lot of empty space in that building and I need a reputation as a good landlord."

Laura had her paralegal, Paul, find a standard commercial lease and modify it to include the parties' names, addresses, and so forth. It included an integration clause. Laura glanced over the lease, stamped it "DRAFT," and sent it to Clyde.

Clyde scratched through, "Tenco is responsible for all utility charges," substituted, "Clyde will pay monthly utility bills," and faxed the lease to Tenco. "Crank up the A.C.!" his cover note read. Tenco changed, "Exterior signs not allowed unless approved by Clyde," to "Exterior signs allowed unless not approved by Clyde," and faxed the lease back to Clyde. The parties then negotiated a price of $1,500/month for one year--well below the market rate of $2,000/month.

Clyde sent the modified agreement to Laura, who had Paul re-type it. Paul committed an error in so doing, however: He typed "Exterior signs not allowed unless approved by Clyde" (thus failing to move "not" per Tenco's edit). Laura glanced over the 30-page contract and forwarded it to Clyde, who together with Tenco signed the lease. Nobody caught Paul's error. Tenco paid a security deposit of $1,500, together with rent for the first and last months.

Toward the end of the first month, the gas, water, and other utilities sent bills including large sign-up charges. Tenco argued that Clyde had to pay the sign-up charges. Clyde argued that he had to cover only regular utility fees.

In reviewing the lease, Clyde noticed Paul's error and seized the opportunity to demand that Tenco remove its "tacky" exterior sign. Infuriated, Tenco pulled down its sign and moved out of the building. News of the dispute spread quickly, making it nearly impossible for Clyde to find new tenants.

Analyze the rights and remedies of Clyde, Tenco, and Laura under contract law.

Sailor, Inc. ran an ad in "Salty," a marine goods trade publication, reading "Lifejackets: $5.00 apiece. Supplies limited." Buoy, Co. responded by sending its standard order form to Sailor. Buoy filled in the front of the form with, "200 lifejackets at $5.00 each, delivery July 1." The back of the form included a number of provisions in small type, including one reading "Payment due within 30 days of delivery."

Sailor sent its standard acknowledgement-of-order form back to Buoy, the front of which read "200 lifejackets at $5.00 each, delivery July 1." The back of the form included a number of provisions in small type. One read, "Payment due at delivery. Legal tender only." Another read, "Seller not liable to buyer or user for faults in materials or construction." A clerk at Buoy filed Sailor's form.

Two weeks later, Sailor's workers unexpectedly went on strike for higher pay. Sailor's CEO phoned Buoy to say that the strike might make it difficult for Sailor to fulfill the order. Buoy's CEO asked, "Can you get us 100?" Sailor's CEO replied, "Probably. But right now I'm not too sure about getting you any more than that." Buoy entered into a contract with Vestworks Co. for 100 lifejackets at $8.00 each, delivery July 15.

Sailor increased its production by cutting back on quality control, however, and managed to deliver 200 lifejackets to Buoy on July 1. Sailor demanded immediate cash payment for the entire shipment. Buoy refused to take delivery of 100 of the lifejackets, arguing that it was already bound to take delivery of that amount from Vestworks. Buoy furthermore refused to take delivery of the remaining 100 lifejackets on grounds that they plainly exhibited faulty construction.

Analyze the rights and remedies of Sailor and Buoy under contract law.

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