Final Examination - Contracts Law Section 3, 2010-2011
Question 1
(40 points; Suggested Time: One Hour)
Howard Homeowner (HH) has a substantial yard behind his house. For years he has contracted with a landscape company to maintain the yard during the spring, summer, and fall. In August 2010, the owner of the company died and his widow closed the business. In September 2010, after researching the landscaping companies in his area, he invited Anthony Arbor (AA) to provide him with an estimated price. AA looked at the property and discussed with HH the work that HH wanted AA to do.
That work was mowing the lawn, fertilizing the lawn both fall and spring, bush trimming in spring and fall and leaf clean-up in the fall. HH pointed out that there were many older trees in the yard and one of the tasks was to clean up after storms that from time to time cause branches, including large tree limbs, to fall into the yard. HH and AA agreed that AA would do the yard work for an hourly charge of $20 per hour for the fall of 2010 and the spring, summer, and fall of 2011.
The next day AA delivered an estimate to HH’s home. Printed at the top was the name Anthony Arbor with his address and telephone number. In large bold face letters centered on the page and just under the AA name and address were the words “LAWN CARE CONTRACT. At the bottom of the document these words were printed: “Payment due 10 days after the bill for work is submitted.“ In between these two were the following handwritten words: “$20 per hour.” At the very bottom of the form there was a line for the homeowner’s signature. HH signed this document and mailed it back to AA. In the summer and fall of 2010, AA came regularly to mow the lawn and, during the fall, remove the fallen leaves. After each visit, AA gave a bill to HH which HH promptly paid.
Last week there was a serious wind storm that brought down a large number of limbs from trees on HH’s property. HH notified AA of the need to clean up the fallen limbs. Two days later AA arrived. AA said that HH would have to pay $40 an hour to do this work and that he would return during the second week of May to take care of the yard cleanup. HH told AA that he was planning a big party at his house on Thursday May 5 and needed the property to look good for the party. He also felt that all of this work was supposed to be done for $20 per hour. “However,” HH said to AA, “I will agree to pay you the $40 per hour, but the yard must be cleaned up by May 5.” AA agreed.
This afternoon AA called HH telling him that he would not be finished cleaning the yard until May 6 and that it would take about 20 hours to finish the job for a total cost of about $800. Immediately after that conversation, HH called you. He regrets having agreed to pay AA $40 per hour for clearing the fallen tree branches from his yard and does not want to pay that higher hourly price for AA’s work. What legal arguments will you make supporting HH’s position that he does not owe AA anything more than $20 per hour for his work? What legal arguments will AA make supporting his claim that HH owes $40 per hour for cleaning up the fallen tree limbs?
Question 2
(40 points: Suggested Time: One Hour)
Your client Tablet World (TW) is a newly formed corporation. It was created to design, manufacture and sell electronic tablets designed for use in education. Tom Wilson is the inventor of the tablet and is the President and Chief Executive Officer of TW. TW intends to market its tablet in both the kindergarten through high school market and in the college market. TW has designed its own operating system which permits most functions to be carried on by touching the screen. TW calls the device the EDTAB (for education tablet). On April 1 TW made its first successful sales deal. That day, TW received a telephone call from Dean Albert Gibe (AG), dean of the William Noobie Evans College (WNEC) expressing an interest in experimenting with the tablets as part of a new curriculum which would replace both textbooks and some classroom teaching hours with written materials in electronic format and educational computer games. Dean Gibe told TW that the college wished to purchase 500 tablets at $500 per tablet (the educational purchase price set by TW) for a total purchase price of $250,000. The tablets were to be delivered to WNEC on August 15, 2011, to be available during the 2011-2012 academic year. TW agreed to the deal.
On April 8 TW delivered to Dean Gibe’s office an EDTAB tablet. The tablet was accompanied by an invoice signed by Tom Wilson stating that 499 additional tablets would be delivered on August 15. Dean Gibe looked at the tablet but, having little personal interest in electronic devices, he placed it and the invoice in his desk drawer without even turning the EDTAB on.
Last Friday, on April 29, Dean Gibe had a meeting with the college’s Vice President for Financial Affairs (VPFA). The VPFA told Dean Gibe that the very poor admissions situation for 2011-2012 placed the college in an extremely difficult economic position and that it would be necessary to reduce the previously approved budget for the 2011-2012 academic year by one million dollars. Dean Gibe immediately realized that if he cancelled the contract with TW, that would represent one-quarter of the reduction he had to make in the college’s budget.
The following Monday, May 2, Dean Gibe called TW and explained the financial difficulties facing WNEC and the necessity of canceling the purchase of the tablets. Dean Gibe said that WNEC continued to be committed to the development of a curriculum based on tablets, but said that development would have to await improvement in the financial circumstances of WNEC. Tom Wilson listened to Dean Gibe, but, according to Tom, responded only “I am sorry to hear of your financial problems.” Immediately after the phone call, TW called you for legal advice.
You asked Tom Wilson how far along in the manufacture of the tablets TW is. His answer was that TW had contracted for the manufacture of the tablet designed by TW with a Taiwanese manufacturer. The contract called for the manufacture of 1000 tablets, 500 of which were for WNEC. Tom Wilson is not sure, but he believes the manufacture is now completed and that the tablets are being prepared for shipment by boat to the United States. You also asked him the cost of the tablets and he has told you that the contract price with the Taiwanese manufacturer for 1000 tablets was $450,000 ($450 per tablet) delivered to TW’s offices in the United States. TW’s economic projections had called for selling the tablet for $500 leaving a net profit of $50 per tablet. The WNEC order was consistent with this business plan and the 500 tablets sold to WNEC would have yielded a gross of $250,000 with a net profit of $25,000. There have been no orders yet from other buyers. TW had planned to pay more than one half of the price charged by the manufacturer of the tablets out of the proceeds of the sale to WNEC. Tom told you that he did not make the contract with the Taiwanese manufacturer until after he had received the order from WNEC.
What legal arguments should you make on behalf of TW in a suit against WNEC for breach of contract? What legal arguments can you expect WNEC to make in response? What remedy or remedies should you seek against WNEC and what responses do you expect from WNEC to your remedy claims?
Question 3
(40 points: Suggested Time: One Hour)
Philip Kale is a collector of ceramic objects. One object in his collection is a large clay cat carrying a dead mouse (should have read “fish”). He, and other experts, believe this to be the work of the well know ceramic artist Marge Brown. Such a ceramic would carry a market value between $50,000 and $60,000. Philip Kale recently decided to limit his collection to ceramics that were abstract in design. He therefore decided to offer for sale all other objects in his collection, including the ceramic cat.
Ben Buyer was a beginning ceramic collector. He knew the value of Marge Brown’s work and, after inspecting it carefully at Philip’s house, offered Philip $50,000 for the clay cat. The agreement was reached on April 4 of this year and Ben was to pick up the cat from Philip’s home on May 13. They signed an agreement which included the subject of the sale, the price and a delivery date of May 13. The May 13 date was chosen for the delivery because Philip Kale had scheduled a last showing of his entire collection at his home on April 29. He wanted the ceramic cat to be on display for that show.
At the show on April 29, Sam Second, a ceramic collector, expressed admiration for the cat and told Philip that while he didn’t value Marge Brown’s work as much as he liked the work of other ceramic artists, he really liked the ceramic cat and offered Philip $10,000 for it. Philip explained that the cat was already sold.
Another one of the people attending the show was Karen Knowsall, the world’s leading authority on the work of Marge Brown. When she saw the cat, she stated that without any doubt this was NOT the work of Marge Brown. It was a fine piece, she stated, but not the work of Marge Brown who never made any ceramics of domestic animals.
Word of this opinion spread rapidly though the collector community and soon reached Ben Buyer. Ben called Philip on May 2 and said that under the circumstances he would not purchase the ceramic cat from Philip.
After receiving that call from Ben, Philip called Sam Second and told him he would sell him the cat ceramic for $10,000. Sam said he was no longer interested.
The next day, Tuesday, May 3, Karen Knowsall stated on her blog margebrownceramics.com, that she had just been given a previously unknown diary kept by Marge Brown. In that diary, Marge Brown had written: “ I have just completed a ceramic cat with a fish in its mouth in honor of my cat Tuck who died last week.” In her blog, Karen Knowsall quoted this sentence from Marge Brown’s diary and then wrote: “Just recently I saw the cat in a show and declared it was not Marge Brown’s work. I now know I was completely wrong. Not only is it an authentic Marge Brown ceramic, but, as the only ceramic of a cat ever made by Marge Brown, it is of even greater value than any of us had previously thought.” Philip Kale, Ben Buyer and Sam Second all read this blog immediately after it was published. Ben called Philip and said he would be coming to Philip’s home on May 13 with the $50,000. Sam called Philip to “confirm” his purchase of the cat for $10,000. Philip called you and retained you as his lawyer, saying, “Now I don’t want to sell the ceramic cat to anyone.”
Please provide Philip with an analysis of the claims made by Ben and by Sam, each of whom assert that they are contractually entitled to the ceramic cat. You need to include in your analysis the arguments that will be advanced by attorneys for Ben and by attorneys for Sam. How would you respond to these arguments on Philip’s behalf?