Question 1
(30 pts; Suggested Time: 45 Minutes)
Professor Paula Prof has asked you to advise her about her rights arising out of the following set of events.
On Tuesday, April 14, 1998, Sarah Student, one of Professor ProfÕs students, placed the following note under Professor ProfÕs office door. The note read as follows:
Dear Professor Prof:
I would like to be your research assistant this summer. I will be available to work 40 hours per week from June 1 though August 15 and would like to be paid $10 per hour. Please reply by April 17 if you are interested.
Sincerely,
Sarah Student
On Thursday, April 16, Prof Prof wrote back:
Dear Ms. Student:
I would like to have you work for me, but $10 seems a little high. I usually pay my research assistants $8 per hour. Please let me know how you feel about this as soon as possible.
Sincerely,
Paula Prof
Paula Prof placed her note in an envelope addressed to Sarah Student and placed the envelope in the mail bin in her secretary's office. Before the envelope was picked up by an employee of the mail room, Sarah stopped in to see whether Paula Prof had left any answer for her. Paul Prof's secretary immediately gave Sarah Professor Prof's envelope addressed to her.
The next afternoon (Friday, April 17, 1998), Professor Prof was having lunch in the faculty lounge when Professor Blum (who Professor Prof had never liked) came over to her to announce ÒYour cheapness lost you a terrific research assistant. When Sarah Student told me this morning that you would only pay her $8 per hour, I outbid you and told her she should come to work for me on June 1 for $9 per hour.Ó
Paula Prof rushed back to her office and wrote another note to Sarah stating:
Dear Ms. Student:
After further thought, I have decided that $10 per hour is a fair rate, so I agree to pay what you asked. I look forward to having you work for me. I will be away until June 1. Please come to my office on June 2 to get instructions on your first assignment.
Sincerely yours,
Paula Prof
Professor Prof put this note in the mailroom bin in her secretaryÕs office and it was delivered by United States mail to Sarah Student on Monday, April 21.
Please advise Professor Prof whether or not she has a contract with Sarah Student. While Sarah would probably like to work for Professor Prof, Professor Blum will probably insist that she is contractually obligated to work for him. Therefore you must consider both Professor ProfÕs arguments and those that will be advanced by Professor Blum.
Question 2
(50 points; Suggested Time: 75 Minutes)
Our client Peter Purchaser is President of Spiffy Suits, a manufacturer of womenÕs clothing. His company is particularly known for the quality and appearance of the buttons it uses on womenÕs suits. Peter is always on the search for new and innovative materials and designs for buttons. While his company is a major purchaser of buttons, his company had never attempted to manufacture buttons, but relied instead on button manufacturers. Peter annually travels abroad to find new sources of buttons.
Although he had for some time been interested in Africa as a source of buttons, he had, until January 1998, never been presented with a possible line of buttons from Africa. During January, he met Selby Seller who had been hired by a South African manufacturer of buttons to market buttons in the United States. Selby showed Peter samples of the buttons, and Peter was quite excited about the possibility and undertook negotiations to buy buttons from the company represented by Selby.
At first, Peter offered to buy all the buttons SelbyÕs company was willing to sell in the United States. Selby refused that suggestion, but instead suggested that Peter agree to purchase 100,000 buttons per month for two years, at 10 cents per button, for a price of $10,000 per month. Peter did not want his competition to be able to buy any of these buttons, so he made a different suggestion, that his company would buy the entire output of SelbyÕs company for two years for $250,000. That suggestion was rejected by Selby, who explained that while he had no objection to limiting his button sales in the United States to PeterÕs company, he did not have the authority to negotiate about sales of buttons by his company in other countries. At this point, the two decided to do some independent thinking about an arrangement that would be acceptable to both of them. However, Peter informed Selby that he was so certain of the purchase of SelbyÕs buttons that he was going to terminate all other button purchases. Peter and Selby wrote out the following note, which each of them signed for themselves and for their companies:
We, Peter Purchaser and Selby Seller, agree that we will work out an arrangement satisfactory to both of us though further negotiations that will take place in March 1998. This arrangement will provide that Peter Purchaser will be able to purchase a quantity of buttons which will be about 100,000 buttons at a price which will be about 10 cents per button.
Peter terminated all of his other button supply contracts as they expired. At the beginning of March, Peter contacted Selby to set up a meeting time to conclude their arrangement. Peter had decided that the deal that Selby had offered would be acceptable if the quantity was to be set at not less than 100,000 buttons and not more than 125,000 buttons per month and a price that would be .09 cents per button but could rise to .10 per button if the Producers Price Index rose more than 3% during the term of the contract and that no buttons were to be sold in the United States by SelbyÕs company to other
manufacturers of womenÕs suits. But Peter never had a chance to make that proposal because Selby would not meet with him. Peter now finds himself at the beginning of the season to manufacture winter suits, and he has no adequate button supply to meet his needs. Peter asked you to intervene on his behalf.
You contacted Selby who stated, among other things, that he anticipated difficulty with importing buttons because many were manufactured from the teeth and bones of animals regarded by the United States as endangered species; he feared that importation of such buttons might be forbidden by the United States. Selby also denies that any contract was formed with Peter. When you suggested that you might seek an injunction prohibiting Selby from selling buttons to any other manufacturer of womenÕs suits in the United States, Selby, in addition to denying any contract with Peter, also denied that Peter would have been entitled to be an exclusive United States purchaser of the buttons.
Please provide an analysis for Peter of his rights against Selby. Even if you conclude that their memorandum was not binding, please address the issue of what the content of the contract would be should the court decide that a contract was formed by the memorandum.
Question 3
(40 points; Suggested Time: 60 Minutes)
Abby fell in love with a house the first time she saw it. But she realized that it might be more expensive than she could afford. Nevertheless, Abby negotiated with Bob, the owner, and after many exchanges both in person and on the telephone, Abby agreed to purchase BobÕs house for $100,000. They discussed the possibility that Bob would accept a mortgage back from Abby provided that Abby could pay $20,000 cash and could provide Bob with a credit report approved by Bob if Abby could not borrow the money from a bank or mortgage financing company. The agreement prepared by attorneys for Abby and Bob, and signed by both of them, contained the following clause:
This contract is subject to the buyerÕs ability to borrow from a mortgage lender $80,000 at an interest rate of not more than 7.75%.
Abby was told by the real estate broker that there was only one bank that was likely to finance the house on the terms described in the contract. She immediately applied to that bank but, after three weeks, was notified that the bank would not provide financing for $80,000 at 7.75%. When she asked at the bank why they declined, they indicated that they were no longer willing to finance the purchase of houses in that particular neighborhood. She asked whether they would be willing to lend her the money at a higher interest rate. They indicated they would be prepared to lend her the $80,000 provided that the interest rate was set at 8.25%. Abby informed Bob of her problems at the bank, and she then provided a credit report to Bob which revealed that while she had few assets, she was free of debt and her income was substantial.
Abby has been told by the broker that rumor in the neighborhood is that Bob has found a buyer willing to pay $125,000 for the house. Abby would still like to buy the house; if she feels she is unable to afford the house, she would like to be able to assign the contract to buy the house to this other interested buyer. Please analyze for Abby her legal position if she demands that Bob go ahead with the contract they have made.
END OF EXAMINATION