Contracts
Law
Spring
Term 2005
Professor
Howard Kalodner
Question
1
(30
points - Suggested Time: 45 minutes)
Janet was planning a Sweet Sixteen party for her daughter. Although many of her daughter’s friends were having DJs (disk jockeys) supply music at their 16th birthday parties, Janet wanted to provide live music for her daughter’s party. She wanted a band that could play both contemporary pop/rock music, but also the Latin American music that she and her daughter both liked to dance to. She talked with a good friend of hers who recommended a band which he thought would meet Janet’s criteria. This group, The Happy Rockers, was available for the night the party was to be held. Janet called them. They said they would play that evening for $1500. Janet responded that she would pay them $1500 provided that they played a mix of pop/rock and Latin American music. They said they certainly would and Janet sent them, as agreed, a deposit of $500. She was to pay the balance of $1,000 at the end of their performance.
The evening of the party, a band called Perfect Beat came and explained that The Happy Rockers were unable to perform because of a scheduling conflict and had asked Perfect Beat to come in their place. They were a good band and those attending the party appeared to enjoy their music, but they played no Latin American music at all. At the end of the evening, Janet, who had been asking them all evening to play some Latin American music, angrily refused to pay them the $1,000 balance of the performance fee.
Janet has now received a letter from the attorney for Perfect Beat threatening her with a lawsuit unless she pays $1000 to Perfect Beat within the next 48 hours. Please provide Janet with an analysis of her legal rights and liabilities. Be sure to include the arguments that you anticipate will be made by Perfect Beat’s attorney.
Question
2
(40
points - Suggested Time: 1 hour)
This is a two-part question. The three paragraphs below state facts that are applicable to both parts of the question. Facts stated in Section 1 apply only to that section; facts stated in Section 2 apply only to that section.
Our client, Blinking Bracelets (BB), buys bracelets and necklaces that contain blinking LEDs (light emitting diodes) from manufacturers around the world and sells them to stores that specialize in providing their customers with party decorations and gifts that can be given to guests at parties as “party favors.” Blinking bracelets have been especially popular for purchase for large parties for teenagers. BB finds itself in a controversy with a store, Party Playthings (PP), which made its first large purchase from BB last fall. From your conversations with BB and after an examination of their files on the purchase and sale, you have learned the following facts:On September 1, 2004, BB received a telephone call from PP during which PP asked for a quotation on the purchase of 2000 blinking bracelets from BB. The notes of that conversation state that BB quoted a price of $1000 for the bracelets. The notes indicate that BB quoted that price, which was below the market price of $1200, because it wished to attract PP as a permanent customer of BB. PP immediately responded that BB’s price was acceptable and asked whether the bracelets could be delivered by October 1. The notes record that BB said that would be fine and they would expect payment 30 days after delivery. PP asked if they could examine a bracelet. BB replied that they would send along a bracelet, but that they wanted PP to know that out of a batch of 2000, PP should expect that about 5% of them might not work properly.
On September 7, a confirmation of sale form was sent by BB to PP along with one of the bracelets. We have in our file a copy of that confirmation, which is a standard form used by BB to confirm purchase orders it receives. The confirmation contains the price and quantity which conform to the notes of the September 1 conversation plus a clause which excludes consequential damages. The confirmation of sale form also contains a clause stating that the confirmation was the sole and exclusive statement of the terms of the agreement and that there were no other agreements between the parties other than those contained within the writing. The confirmation of sale had, at the bottom of the page, a line calling for the signature of the seller and the buyer. The copy of the form in the file contained BB’s but not PP’s signature. Indeed there was no document from PP at all in the file.
(Section 1) (10 points) Assume all the facts above. On September 30, BB called PP to tell them that they were ready to ship the bracelets and they expected to make the delivery to PP on October 1 in accordance with the terms of the contract. PP denied that there was a contract and told BB not to bother shipping bracelets to them because they would not accept them. BB is quite upset about this event and has asked you to advise them whether they should sue PP and what damages they would be awarded? Please advise BB of their rights and liabilities, including the arguments that will be made on behalf of PP.
(Section 2) (30 points) Assume all the facts other than those in Section 1 of this question. After further examination of the Seller’s files, you have found that the buyer had signed and returned to the seller the Seller’s confirmation of purchase. The bracelets were then shipped by BB at the end of September and arrived at the Buyer’s place of business on October 1. PP uncrated the shipment and examined 40 of the bracelets and found that 2 of them (5%) were defective. PP rejected the shipment on the ground that the shipment was nonconforming. PP further stated that they had just checked the market price of bracelets and learned that the market price of these 2000 bracelets, if not defective, was $1500. They are now demanding $300 in direct damages and an additional $5,000 in consequential damages - the profit they would have made if they had had for sale the bracelets they had ordered from BB. Please advise BB of their rights and liabilities, including the arguments that will be made on behalf of PP.
Question
3
(50
points - Suggested Time: 1 hour and 15 minutes)
Bob and Sue Homeowners purchased their home ten years ago. They both have loved the house, aside from the kitchen, as have their four children. Both Bob and Sue love to cook, and they have hated their kitchen for every one of the ten years they have lived in this house. After much planning and discussion, they drew a floor plan for a new kitchen and made a list of which model stove, oven, sink, refrigerator and dishwasher they wanted in the kitchen. They also selected the cabinets they wanted. They then called five contractors, each of whom had been recommended by one of their friends. Each contractor visited the house and to each they gave a copy of their plans and the list of cabinets and appliances that they wanted. Each contractor was asked to quote a price within one week.
Only two of the contractors, ABC and XYZ responded. Bob and Sue were amazed to see that the prices quoted by the two contractors were very far apart. XYZ quoted $40,000 to carry out the reconstruction of the kitchen in accordance with the plans and specifications given them by Bob and Sue. ABC quoted $30,000 as their price for the same job. They first called XYZ who had quoted $40,000 and explained that they were going to accept a lower bid. XYZ said, “I hope they know what they are doing - I wanted to do this job and I have quoted a price barely above my anticipated costs. I don’t see how they can even cover their costs if they bid significantly below my quote.” Bob and Sue called ABC, who had quoted $30,000 for the job, and accepted ABC’s offer.
ABC arrived at Bob and Sue’s house on the agreed date and carried out the demolition of the existing kitchen and began the work to rebuild the room. The contract called for them to be paid $15,000 at the point that the demolition had been completed, and the new pipes and wires put in place and the new flooring installed. The other $15,000 was to be paid at the completion of the job (after the cabinets and appliances were installed).
After three weeks, ABC came to Bob and Sue and asked for the first $15,000 payment. Bob and Sue inspected the work (they were at this point staying with Sue’s mother because they couldn’t stand living in their house during the demolition and construction of the kitchen). It looked nice and they were pleased. But ABC said, “I should warn you that you can’t fit the appliances you have chosen into the room; there just isn’t enough space for either the stove you chose or the refrigerator you chose.” Bob and Sue were extremely upset and they asked why this was the case. The contractor said that some adjustments they had to make for the plumbing and wiring had taken up space so that there just wasn’t enough space for the appliances Bob and Sue had chosen. ABC explained that in making the bid they didn’t realize that the house was built on a concrete slab and there was no cellar. That required the creation of pipe and wire chases that took up additional space in the walls of the kitchen. Bob and Sue called the owner of XYZ, whose bid they had rejected, and asked her to inspect the kitchen. After inspecting the kitchen, she said, “I see what they have done. In order to reduce their costs they created those chases and that’s how they lost the space needed for the stove and refrigerator you chose. They could have run the pipes and wires by chopping the concrete and laying conduit in the floor. I guess they were trying to keep their costs down. You remember what I said about their price quote. I could undo the work that took away the space you need for your appliances and run the pipes and wires in a different way, a way that I had planned to do when I composed my bid.”
ABC has told Bob and Sue that if they don’t make the $15,000 payment, ABC will not complete the job. XYZ has said that she is still willing to take on the job, but that undoing the work that needs to be undone and completing the kitchen would cost $35,000.
Bob and Sue have come to you for advice. They really want the kitchen as they had planned it and are both angry and saddened by their experience. They are not sure what to do. They would like you to provide them with an analysis of their rights and liabilities in connection with the various courses of action they could take at this point. Please also consider the arguments that you anticipate will be made on behalf of ABC.
END OF EXAMINATION
statutory and restatement supplement follows