Question One
(Suggested Time: 45 minutes; 40 points)
Swim Team Coach Bob Blue needed to strengthen his team's group of twelve and thirteen year-old swimmers. One day, watching a swim meet between two of his team's competitors, he saw an excellent young female swimmer who he knew would add to the quality of his swim team. He looked for her parents and found them in the stands watching the meet. He approached them with the following proposition. Bob Blue said, "I watched your daughter Sara Sampson swim this afternoon. You must be very proud. She is a fine swimmer. I am the coach of the Dolphins, and we would certainly love to have Sara join our team." Mr. and Mrs. Sampson knew of Bob Blue's reputation as an excellent coach and they were flattered with his assessment of their daughter. On the other hand, Sara was happy on her team, which included a number of her closest friends. They responded to Coach Blue by saying, "We are flattered, of course, by your suggestion, but Sarah will probably be happiest staying on her present team."
Coach Blue then said, "She has been well trained, of course, on her present team. But I notice that the only stroke that she swims is freestyle (also called "crawl" or "Australian crawl"). She has not been assigned any backstroke, breaststroke or butterfly. For her development as a swimmer, she should be given opportunities to swim all of these strokes in competition. Sara's parents acknowledged that Sara always seemed to be assigned the same stroke at meets and that Sara had sometimes commented that she would like to compete in other strokes as well. They remained, however, reluctant about changing teams. They told Coach Blue that they would discuss the matter with their daughter.
One week later, Mr. Sampson called Coach Blue and said, "If we and Sara decided she would swim with your team, the Dolphins, what would we have to do?" Coach Blue said that the families of all of the Dolphin swimmers had to be members of the organization which sponsored the Dolphins and provided the pool for the Dolphins. Aside from that, Sara would only need a team swimsuit and would need to come to a minimum of three practices a week. He said she could start by coming to a practice the next day.
The next day, Mr. Sampson purchased a membership in the sponsoring organization. Family membership cost $750. He also purchased a uniform for Sara for $50. She went to practice that day and three days later was ready to participate in her first meet as a member of the Dolphins. Much to her father's surprise and distress, Sara was assigned to swim the same events she had been swimming with her former team. That meant that once again she was swimming only freestyle. Sara did quite well in her races, but she and her father were disappointed that she was not asked to swim other strokes. Mr. Sampson said to Coach Blue, "You said that for the best development of a swimmer, she should swim a variety of strokes in competition." Coach Blue acknowledged the truth of that statement, but he said, "My job as Coach is to try to produce victories. I use my swimmers as best I can to accomplish that result."
Mr. Sampson has come to you for your advice. He acknowledges that he doesn't want to sue Coach Blue, but he would like to know whether he is correct in his view that Coach Blue has a legal obligation to provide Sara with opportunities in swim meets to swim other strokes. In response to Mr. Sampson's request, please provide the arguments you would make to support Mr. Sampson's view of Coach Blue's obligations. In doing so, please also provide the arguments that you would expect Coach Blue's attorney to make in support of Coach Blue's position on this question.
Question Two
(Suggested Time: One Hour 15 minutes; 60 points)
Your client HRM is a company which writes software intended for use by businesses to assist them in managing human resource issues (everything from salary and fringe benefits to discipline and promotion). The software offered by HRM is a group of programs that are installed by HRM on servers and computers owned by its corporate clients. HRM charges $75,000 for the software, including the installation of the software, training in its use, and maintenance and technical support for one year. When desired by the corporate client, HRM will contract to provide software updates and technical support for up to five years at $5,000 per year.
In October 2003, HRM and XYZ corporation entered into a contract under which HRM agreed to install its HRM software into XYZ's computers for $75,000 and to provide updates and technical support for five years beyond the first year for $5,000 per year. Thus the total contract price was $100,000. Installation was to take place from November 3, 2003 to November 21, 2003. XYZ agreed to pay HRM $50,000 on the first day of installation. The contract stated that should XYZ fail to comply with any of its contract obligations, that HRM could retain the $50,000 "not as a penalty but as liquidated damages." The contract also stated that if HRM breached its contract, XYZ could ask for replacement of defective software. In addition, it stated that HRM was not responsible for consequential damages to XYZ caused by any breach on the part of HRM.
It became clear during the week of November 3 (the first week of installation) that there was significant tension between the employees of HRM and the employees of XYZ. At the end of that week, the executives of both HRM and XYZ discussed resolution of these tensions. XYZ suggested that bonus payments to XYZ's employees engaged in the installation might ease those tensions, but that it wished HRM to agree to split the cost of those bonuses by reducing the contract price by $5,000. HRM agreed.
Although the bonus payments were made the following Monday, November 10, by November 14 HRM concluded that the unhappiness of the XYZ employees working on the project was so great that the introduction of the software was not going to be effective in improving XYZ's operations. It was clear to HRM that the cost of providing technical support to the XYZ operation would deprive the contract of any possibility of profit for HRM. It withdrew its equipment and software on that day.
The President of HRM has asked you for your advice about its position in this controversy. Immediately after November 14, HRM had informed XYZ that, pursuant to the contract, it was retaining the $50,000 payment made to it by XYZ. In response, HRM had received a demand from XYZ that HRM repay to XYZ the $50,000 payment. XYZ's letter also included a demand for damages, not specified in amount, suffered by XYZ "because of HRM's breach of contract."
1. Assuming that a court determines that XYZ was in breach of the contract (by failing to comply with its duty of cooperation in the installation of the software), what damages is HRM entitled to against XYZ?
2. Assuming that a court determines that HRM was in breach of the contract (by failing to install the software and carry out its other contract obligations), what damages is XYZ entitled to against HRM?
In this jurisdiction, it is unclear whether this transaction would be considered a sale of goods contract. Please respond to this question, therefore, first assuming that the common law would be applicable and then assuming that Article 2 of the Uniform Commercial Code would be applicable.