Essay Question - Chicago-Kent College of Law



Final Examination

Contracts, Fall 2011

Prof. Warner

December 12, 2011

The exam is 4 hours long.

The exam is open book; you may use material on your computers, as well as commercial or personal printed materials.

Essay Question

Steve “The Preacher” Sowle is the President and CEO of the New Age movement, The Sowle Train, Your Soul Track to Your Full Potential Now and in the Whatever-After. Sowle travels the United States in a special train to deliver sermons in which he offers his message of fulfillment now and in the Whatever-After through New Age enlightenment (achieved by reading his books and buying his products).

Christopher “The Sage” Buccafusco owns and operates The Way of Ways, a website devoted to New Age philosophy. On Monday, Buccafusco contacts Sowle to discuss Sowle’s advertising The Sowle Train schedule of sermons on The Way of Ways. Buccafusco concludes their conversation with, “I am sending you our standard advertising agreement. I have signed it. The agreement guarantees that I will put banner advertising for The Sowle Train on my site. It guarantees 100 presentations of your advertisements a day—no more, no less. You pay just $.0.10 a click-through. All other relevant details are in the agreement. Sign and we have a deal!”

Is Buccafusco’s letter with the agreement an offer?

a) Yes

b) No

Sowle responds that he will need some time to think about it. Buccafusco responds, “I understand. To sweeten the package for you, let me offer this. You come back under contract to the advertising agency, Super Banner Ads, for the creation of your ads, and I will cut the rate to $0.05 a click-though. I intend to keep the whole offer—the terms in the agreement and the Super Banner Ads price reduction—open until Friday.”

Is Buccafusco’s communication an offer?

a) Yes

b) No

Does Buccafusco’s communication create an option contract?

a) Yes

b) No

Sowle responds, “Great. I will be back to you by Friday. This advertising will increase attendance at my sermons. There is ample evidence of that, and you know I charge an attendance fee. So bucks for me!”

On the next day, Tuesday, Buccafusco calls Sowle. He says, “Hi, Preacher. The Sage here. I had an idea. Why don’t you sell your books and other products, like your portable Sowle Meter, over The Way of Ways?” Sowle responds, “Truly enlightened! I love it. I will send along a written offer in which you purchase my books for resale on The Way of Ways. I will give you a great rate. Now I have an idea. Why don’t you join me for a month on the Sowle Train? You come along and promote The Way of Ways and the availability of my books on it, and in exchange I will provide accommodation, transport, and food in The Soul Train plus a speaking opportunity during every sermon I give while you are on board.”

Did Sowle make an offer?

a) Yes

b) No

Buccafusco responds, “Done. That’s a deal. Preacher, you are one persuasive Sowle.”

Did Buccafusco accept?

a) Yes

b) No

The next day Sowle sends signed written agreement detailing the sale of books to The Way of Ways. Call this the Train-Ways Agreement.

Did Sowle make an offer?

a) Yes

b) No

Buccafusco signs the agreement and adds a note, “Sowle warrants that all products are fit for the purpose for which such products are ordinarily used.” The written agreement Sowle sent conspicuously disclaims any warranty of merchantability. It also contains this clause: “This agreement represents the complete and exclusive statement of the parties’ obligations to each other. Neither party is relying on any representations, oral or written, not contained in this agreement.”

Did Buccafusco accept?

a) Yes

b) No

Does the Train-Ways Agreement (sale of books) contain a warranty of merchantability?

Did Buccafusco accept?

a) Yes

b) No

Sowle enters into a contract with Super Banner Ads for the creation of banner advertisements on Wednesday and contacts Buccafusco on Thursday to accept Buccafusco’s offer to provide banner advertising over The Way of Ways at $0.05 a click-through. Before Sowle can accept, however, Buccafusco informs him that he is revoking the offer.

Is Buccafusco’s offer offer to provide banner advertising over The Way of Ways at $0.05 a click-through revocable?

a) Yes

b) No

Buccafusco makes a new offer is identical to the old one except that the click-through rate is back to $0.10. Sowle protests but finally accepts the new offer.

The Train-Ways agreement specifies that The Sowle Train will deliver on January 16, 2011 1000 copies of Get On Board! Your Ticket to Enlightenment, and 1000 copies of Visions of the Whatever-After: My Personal Story. At the time he entered the agreement with Buccafusco, Sowle had 1000 copies of each book in a warehouse. However, in December, the fire alarm in the warehouse malfunctioned and reported a non-existent fire. Unfortunately, at the same time, children who had broken into the warehouse set off a smoke bomb. The fire fighters mistook the smoke for a sign of fire, and their attempt to put out the “fire” destroyed 500 copies of Get on Board!.

Given the fire, is Sowle excused under impracticability doctrine from delivering 1000 copies of Get on Board!?

a) Yes

b) No

On January 14, Sowle delivers and 1000 copies of Visions of the Whatever-After: My Personal Story, 500 copies of Get on Board!, and 500 copies Sowle Train, Soul Train: Tracking Enlightenment. Buccafusco accepts the copies of Get on Board! and Visions of the Whatever-After but rejects the copies of Sowle Train, Soul Train.

Did Sowle breach the Train-Ways Agreement?

Given the fire, is Sowle excused under impracticability doctrine?

a) Yes

b) No

Sowle immediately says, “I will get you the additional 500 copies of the first edition of Get on Board! by the 16th.”

Does Sowle have a right to cure his breach?

Given the fire, is Sowle excused under impracticability doctrine?

a) Yes

b) No

Sowle manages to locate, purchase, and deliver the copies by the 16th. By the 16th, however, Buccafusco has also purchased 500 copies on his own, and he refuses to accept the delivery of Sowle’s 500 copies of Get on Board!.

Did Buccafusco breach?

Given the fire, is Sowle excused under impracticability doctrine?

a) Yes

b) No

Sowle sells the 500 copies of Get on Board! to The Third I, a bookstore in Santa Monica, California at the same price he was going to charge Buccafusco. There are no more copies of Get on Board! available anywhere. It sold out and Sowle is writing a second edition.

Sowle is a lost volume seller?

a) Yes

b) No

For the first two months of the banner advertising contract, Buccafusco fails to deliver 100 presentations of Sowle’s banner advertisements a day. He delivers only 50 a day. After that, he delivers 100 a day.

Please answer the following questions.

1. Assume Buccafusco made an offer to Sowle regarding placing banner advertisements on The Way of Ways? Was offer revocable by Buccafusco on Thursday?

2. Assume that when he revoked the offer concerning banner advertising, Buccafusco breached a promise to keep the offer open until Friday. Make the best argument you can that the court should grant specific performance by ordering Buccafusco to reduce the click-through rate to $0.05.

3. Does the Train-Ways agreement contain a warranty of merchantability? Start your analysis with Sowles’s sending the Sowle signed written Train-Ways agreement. Assume Sowle and Buccafusco are merchants. Assume that any expression of acceptance was definite and seasonable.

4. Assume that, prior to executing the Train-Ways agreement, Sowle and Buccafusco enter an oral agreement for Buccafusco to join Sowle on The Sowle Train. Assume the Train-Ways agreement an enforceable contract and is a complete integration. Does the parol evidence rule make that oral agreement unenforceable?

5. Assume the Train-Ways agreement is an enforceable contract. Did Buccafusco breach the contract when he refused delivery of the second 500 copies of Get on Board!? If so, what are Sowle’s damages? Assume that Buccafusco paid the amount due for 1000 copies of Visions of the Whatever-After: My Personal Story and 500 copies of Get on Board!. Assume there are no incidental or consequential damages.

6. Assume the agreement to display 100 banner advertisements a day at a charge of $0.05 a click-through is an enforceable contract, and that Buccafusco breached that contract when he delivered only 50 advertisements a day for two months. What are Sowle’s expectation damages? Sowle has undisputable evidence that, in those two months, he averaged an increase of $50 in attendance fees for each 50 advertisements displayed, and he also has undisputable evidence that additional banner advertising would have increased attendance at approximately the same rate.

In the sale of good, use the common law when no relevant UCC section is supplied below.

§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 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 do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.

§ 2-508. Cure by Seller of Improper Tender or Delivery; Replacement.

(1) Where any tender or delivery by the seller is rejected because non-conforming and the time for performance has not yet expired, the seller may seasonably notify the buyer of his intention to cure and may then within the contract time make a conforming delivery.

(2) Where the buyer rejects a non-conforming tender which the seller had reasonable grounds to believe would be acceptable with or without money allowance the seller may if he seasonably notifies the buyer have a further reasonable time to substitute a conforming tender.

§ 2-314. Implied Warranty: Merchantability; Usage of Trade.

(1) Unless excluded or modified (Section 2-316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.

(2) Goods to be merchantable must be at least such as

(a) pass without objection in the trade under the contract description; and

(b) in the case of fungible goods, are of fair average quality within the description; and

(c) are fit for the ordinary purposes for which such goods are used; and

(d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and

(e) are adequately contained, packaged, and labeled as the agreement may require; and

(f) conform to the promise or affirmations of fact made on the container or label if any.

2-316. Exclusion or Modification of Warranties.

(1) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this Article on parol or extrinsic evidence (Section 2-202) negation or limitation is inoperative to the extent that such construction is unreasonable.

(2) Subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that "There are no warranties which extend beyond the description on the face hereof."

(3) Notwithstanding subsection (2)

(a) unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like "as is", "with all faults" or other language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty; and

(b) when the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him; and

(c) an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.

(4) Remedies for breach of warranty can be limited in accordance with the provisions of this Article on liquidation or limitation of damages and on contractual modification of remedy (Sections 2-718 and 2-719).

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