EXAM NO. _____
CONTRACTS—JD Afternoon Section
Professor John Orcutt
Fall Semester 2012
FINAL EXAMINATION—IN CLASS
INSTRUCTIONS:
1. This is a closed-book examination. You may not bring any materials to the examination with the exception of ESL students who are allowed to bring and use a Home Language/English dictionary.
2. This examination is worth 425 points (or 85% of your final grade). The examination consists of five essay questions:
Q1 = 96 points / Q2 = 63 points / Q3 = 96 pointsQ4 = 107 points / Q5 = 63 points
I have written this examination as a 135-minute examination (2 hours and 15 minutes). It is your responsibility to apportion your time appropriately amongst the questions. If you base your time on the possible points per question, the time apportionment should be roughly:
Q1 = 30 minutes / Q2 = 20 minutes / Q3 = 30 minutesQ4 = 35 minutes / Q5 = 20 minutes
To provide some cushion in your taking of the exam and to allow you time to be more thoughtful—but not necessarily more long-winded—I am giving you an extra 15 minutes, so you will in fact have 150 minutes (2 hours and 30 minutes) for the exam.
3. The grading of examinations is anonymous. So, you must write your examination number on the examination and your blue book. YOU MAY NOT WRITE YOUR NAME ON ANYTHING – YOU MAY ONLY USE YOUR EXAM NUMBER.
4. For those of you who are handwriting your exams, please write your answers in a blue book. The only answers that will be graded are the answers written into a blue book. While you are free to use scratch paper, answers written on scratch paper, or anything else other than a blue book, will not be read and will not be counted for any credit. Please write only on the front side of the pages in the blue book.
5. For those of you who are taking this exam on a laptop computer, you will be subject to the laptop exam rules that are provided to you by the Registrar.
6. Please remember that organization, persuasiveness, neatness, and legibility all count in determining your grade on the essay answers. To improve the organization of an answer, you may wish to quickly outline the answer on a separate sheet of paper prior to writing your full answer in the blue book or on your laptop.
7. I have tried my best to write and proofread the exam so that there are no distracting typos or other errors – but, I may not have been totally successful. If you believe there is a typo or other error that makes it difficult to answer a particular question, please point out the error in your answer and explain any assumption you used to answer the question.
Good luck on the examination!
DO NOT TURN TO PAGE 2 UNTIL THE PROCTOR TELLS YOU TO BEGIN
QUESTION NO. 1 (96 points possible – 30 minutes suggested):
Acme Corp. ("Acme") develops and distributes enterprise software for companies. Miley has been working at Acme for close to ten years and has attained the position of regional sales manager. Miley is one of Acme's most successful salespeople and has developed a reputation as being the "go to person" for landing the biggest and most unattainable accounts. In March 2012, for example, Miley helped Acme to win the $1 million Cisco account.
On December 1, 2012, Miley had her end-of-year review. The company was very pleased with her work. To demonstrate that appreciation, Acme made two promises to Miley:
· Promise 1: In consideration for Miley winning the Cisco account, Acme promised to pay Miley a $10,000 bonus (the "$10K Bonus") in March 2013.
· Promise 2: Acme has been trying for more than one year to land Google as a client. Acme promised to pay Miley a $25,000 bonus (the "$25K Bonus") in March 2013 if she wins the Google account and convinces Google to license at least $500,000 of Acme software products by February 28, 2013.
Both promises were reduced to writing, signed by an authorized Acme representative, and provided to Miley.
Following the review, Miley followed her normal sales routine. She conducted a large amount of research on Google to determine why Acme's software products would benefit Google. Miley also identified Google's internal technology buyers (i.e., the employees at Google who decide whether to license Acme's software) and scheduled a meeting with them in early-January.
On December 14, Acme informed Miley it would not be paying her the $10K Bonus or the $25K Bonus. Walt was very sorry, but Acme decided to end its bonus programs for salespeople effective immediately.
Miley is considering whether to sue Acme to collect the two bonus payments.
Your Assignment:
(a) Please analyze whether Acme's promise to pay the $10K Bonus was bound by consideration? Please do not spend any time discussing consideration replacements in your answer. (20 points possible)
(b) Please analyze whether Acme was entitled to revoke its promise to pay the $25K Bonus? (76 points possible)
QUESTION NO. 2 (63 points possible – 20 minutes suggested):
On November 1, Paul entered into a written contract (the "Contract") with Diane to have Diane be the headline singer at a December 15 concert promoted by Paul (the "Concert"). Pursuant to the terms of the Contract, Diane promised to sing ten songs at the Concert in exchange for Paul's promise to pay Diane $25,000.
Unfortunately, Diane died on December 1st from a drug overdose. Paul had to cancel the concert, which resulted in Paul losing roughly $200,000. Paul would like to sue Diane's estate to recover the losses caused by Diane not performing as she promised under the Contract.
Your Assignment:
Please analyze whether a court should find Diane liable for breach of contract. To help you with your analysis, here is § 261 of the Restatement (Second) of Contracts:
§ 261. Discharge by Supervening Impracticability
Where after a contract is made, a party's performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary.
When answering this question, please explain the role that “constructive conditions” play in the analysis.
QUESTION NO. 3 (96 points possible – 30 minutes suggested):
Always Sunny Productions ("ASP") produces plays. ASP's latest effort is titled Philadelphia (the "Play") and it focuses on five degenerate underachievers who own a bar. Finding space to hold the Play was challenging. After weeks of searching, ASP was finally able to secure space in Paddy's Theater (the "Theater"), which is owned by Frank. ASP entered into a lease (the "Lease") with Frank on November 1 that provided as follows:
· Frank promised to lease the Theater to ASP for the purpose of hosting the Play. The term of the Lease was to commence on February 1, 2013 and end on February 14, 2013.
· ASP promised to pay $20,000 in rent. ASP was to pay Frank $5,000 upon signing the Lease and the remaining $15,000 on February 14, 2013. ASP paid Frank the initial $5,000.
ASP spent the month of November rehearsing, and otherwise preparing, for the Play. In early December, Frank contacted ASP and repudiated the Lease. Frank decided the Play was not sufficiently family friendly and he did not want it shown in the Theater.
After some fact-finding, you know the following about the situation:
· ASP had not yet begun selling tickets for the Play when Frank repudiated the Lease.
· ASP has paid $3,000 to the actors, director, stage-hands, and other workers involved with the Play.
· ASP has paid $2,000 for costumes and the design of the set.
· ASP has paid $1,000 to pre-advertise the Play.
· ASP diligently tried to find an alternative theater to host the Play, but none was available.
· If ASP had performed the Play as scheduled, it would have needed to incur substantial additional expenses.
ASP believes the Play would have been a smash hit that would have generated considerable profits. Frank believes the Play would have been a colossal failure.
ASP would like to sue Frank for breach of contract. When answering this question, please assume that a court will find Frank to have materially breached the Lease. ASP would like to understand what it can recover in monetary relief for a breach of contract lawsuit.
Your Assignment:
(a) Please discuss the difficulties that ASP would have in suing for expectancy damages. (21 points possible)
(b) Please analyze ASP's potential recovery under a reliance damages approach. (60 points possible)
(c) Please analyze ASP's potential recovery if it were to sue for restitution. (15 points possible)
QUESTION NO. 4 (107 points possible – 35 minutes suggested):
Twilight Inc. ("Twilight") leased five floors in an office building in downtown Utopia from Lincoln Properties Inc. ("Lincoln"). Due to a recent downsizing, Twilight only occupied three of the floors and sought to sublease the other two floors to another company (the "Available Floors").
In November, Twilight entered into a Sublease Agreement (the "Agreement") with Skyfall Co. ("Skyfall") regarding the Available Floors. The Letter Agreement set forth Skyfall's contractual commitment to sublease the Available Floors from Twilight, as well as Twilight's contractual commitment to sublease the Available Floors to Skyfall. Section 1 of the Agreement stated:
· Section 1: Subject to the conditions herein set forth, Twilight agrees to sublease the Available Floors to Skyfall, and Skyfall agrees to sublease the Available Floors from Twilight. The sublease will begin on January 1, 2013 and will terminate on December 31, 2018.
The Agreement contained a number of promises and conditions, including the following two provisions:
· Section 4: Skyfall's obligation to sublease the Available Floors is conditioned on Twilight (a) obtaining written confirmation from Lincoln that Skyfall is an acceptable subtenant and (b) delivering that written confirmation to Skyfall by 5:00 pm on December 16.
· Section 8: Twilight agrees that prior to January 1, 2013, it shall remove all personal property and other things from the Available Floors and otherwise leave the Available Floors in broom clean condition. “Broom clean” shall be defined as follows: Free of all personal property, debris and garbage in all parts of the premises. The premises shall be swept with a broom and left in a clean and generally hygienic condition.
Your Assignment:
(a) For purposes of Question 4(a) only, please assume the following additional facts. Twilight did not deliver the Section 4 written confirmation prior to 5:00 pm on December 16. Rather, Twilight's attorney telephoned Skyfall's attorney at 4:30 pm on December 16 and informed her that Lincoln's written confirmation had been secured. Twilight did deliver the written confirmation on December 17 around 9:00 am. On December 17, Skyfall decided it no longer wanted to sublease the Available Floors. Please analyze whether Skyfall will be obligated to sublease the Available Floors. (35 points possible)
(b) For purposes of Question 4(b) only, please assume the following additional facts. Twilight failed to leave the Available Floors in broom clean condition when it vacated the premises. When Skyfall inspected the premises on January 1, 2013 (prior to moving in), the Available Floors were filled with trash and debris and were generally filthy and un-hygienic. Upon seeing the state of the premises, Skyfall estimated it would take roughly 12 hours of cleaning (at a cost of roughly $1,000) to make the Available Floors broom clean and ready for move in. Skyfall decided it no longer wanted to sublease the Available Floors. Please analyze whether Skyfall will be obligated to sublease the Available Floors. (72 points possible)
QUESTION NO. 5 (63 points possible – 20 minutes suggested):
Perry Co. ("Perry") entered into a maintenance agreement (the "Maintenance Agreement") with Swift Inc. ("Swift"). Under the Maintenance Agreement, Perry agreed to repair Swift's steam turbine in exchange for Swift's promise to pay Perry $50,000. The maintenance agreement also included the following indemnification clause:
· Clause 7: Perry agrees to indemnify Swift against all loss, damage, expense and liability resulting from injury to property, arising out of or in any way connected with the performance of this Maintenance Agreement.
During the work, the turbine's cover fell and damaged the exposed rotor of Swift’s turbine. Swift sued to recover the $25,000 it cost to repair the turbine's rotor based on Perry's indemnification promise in Clause 7.
Swift filed for summary judgment on the grounds that Clause 7 clearly states that Perry is required to indemnify Swift for the damaged rotor. Perry, however, filed a motion to introduce extrinsic evidence to show that Clause 7 was only meant to cover injury to the property of third parties (i.e., Perry wants to demonstrate it only promised to indemnify Swift for damage caused to third-party property, not Swift's property).
Your Assignment:
Please analyze whether Perry can use extrinsic evidence to prove its interpretation of Clause 7.
* * * * * END OF EXAM * * * * *
CONGRATULATIONS ON FINISHING! Have a wonderful break.
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