June 2001 Question 1 [Contracts]
QUESTION ANALYSIS
Gameco, Inc. ("Gameco") manufactures several varieties of consumer video games. It traditionally sells these games only to wholesalers. (Games are goods and falls under the UCC instead of common law) In 1998, Gameco and Wholesale Games ("Wholesale") executed Gameco's standard form agreement for the sale and purchase of Gameco's video games. (not oral and written, contract formation issue here) The agreement provides that Gameco "agrees to sell and Wholesale agrees to buy Gameco video games for distribution to retail businesses in California. Numerous terms in the agreement relate to the methods of shipment, payment and the manner in which Wholesale conducts its business in the sale of Gameco's games. (Contract terms here. possibly ambiguous contract terms issue)
There is no formula in the agreement for determining the minimum or maximum number of games that Gameco is obligated to sell, or Wholesale is obligated to buy, nor is there a period fixed for the duration of the agreement. One paragraph states, however: "This agreement may be terminated at the will of either party by written notice to the other party given by registered mail. (Possible illusory promise issue) Such termination shall also operate to cancel all orders received but not shipped by Gameco."
Since the execution of the agreement every order of Wholesale has been shipped by Gameco, and Wholesale has promptly paid every invoice submitted by Gameco. In June of 2001, Wholesale learned that Gameco plans to enter into an arrangement with Tryco. Tryco, a major retailer of video games, was Wholesale's primary video game customer in California during 1999 and 2000.
Gameco acknowledged to Wholesale that Gameco is planning to enter into an arrangement with Tryco. Wholesale's representative stated to Gameco's representative, "How can you do this? You told me before I signed your agreement that you would never sell video games to one of our customers during the life of our agreement." (Parol evidence issue) Gameco' s representative responded only that competitive factors require it to begin selling directly to retailers. The next day Wholesale received a registered letter from Gameco canceling their agreement.
1. Does Wholesale have an enforceable contract with Gameco? Discuss.
2. Assuming that an enforceable agreement exists, what rights, if any. does Wholesale have against Gameco and what defenses, if any, may Gameco assert? Discuss.
OUTLINE
I. Enforceable Contract?
1. Applicable Law- UCC
2. Contract Formation
II. W's Rights against G and Defenses
1. Breach
(1) Condition
(2) Parol Evidence Rule
(3) Termination Valid?
2. Defenses
(1) Promissory estoppel
I. Does W have an enforceable contract with G?
1. Applicable Law
We have here a contract for the sale of goods as opposed to services. Since this is the case, the precepts of the UCC (Uniform Commercial Code), as opposed to the common law of contracts, will provide all guidance in helping us to interpret the contract's terms.
2. Formation of Contract
To form a legally enforceable contract, one must have an offer made to a designated offeree and received by same, an acceptance, and consideration to bind the agreement. Gameco ("G"), the manufacturer, and Wholesale ("W"), the video game wholesaler, have entered into an agreement of which we are not provided with all the terms. However, we are told that undisclosed terms govern the manner of payment and how Wholesale conducts its business in the sale of Gameco's games. Therefore, we can logically conclude that there is some form of payment arrangement, most likely based on quantity of games purchased by Wholesale, which would form the consideration to effectively bind this offer. Thus we can logically assume that we have here a legally binding contract.
BREACH:
A party can breach a contractual agreement in many ways. He can terminate the contract prior to the termination date, or he can act in a manner contrary to the terms of the contractual agreement. He can also display a lack of good faith in his contractual relations with the other party. Thus, there are as many ways to breach a contract as there are types of contractual arrangements. What we are concerned with here is:
The facts of the hypo show that the agreement could be terminated by either party at their will by written notice to the other party given by registered mail. Gameco choose to exercise that option two years into the contract when a dispute arose over a change of Gameco's policy regarding only selling their games to wholesalers. Gameco sent a registered letter to Wholesale terminating their agreement.
Technically, Gameco is within their right to cancel since they did so in accordance with a contract provision. However, Wholesale may have some recourse by trying to plead a defense to the cancellation. The UCC would require Gameco to give reasonable notice of such cancellation, even though such reasonable notice is not specifically called for in the written contract. UCC would assume reasonable notice to cancel. Gameco does not appear to have given Wholesale reasonable notice and thus may not be able to cancel this contract so abruptly.
PAROL EVIDENCE:
The Parol Evidence Rule disallows the admission of certain prior or contemporaneous agreements that were not included in the written agreement.
Just what would be excluded under the Parol Evidence Rule would depend upon whether or not the parties had an agreement that was fully integrated, partially integrated or not integrated at all. In other words, have the parties completely committed their full understanding to written form? Also Parol Evidence would be admissible to clarify a term in the integrated agreement, or to show that a separate agreement not covering any of the terms in the main agreement existed.
The facts of this case show that there was a writing that seemed complete. It contained numerous. terms that covered everything from shipping to payment, and everything in between. Nothing in that agreement, however, stated that Gameco was under an obligation to forego selling to retailers in spite of their past practice, and corporate policy of only selling to retailers. Gameco is claiming that there was an oral agreement that Gameco would only sell to wholesalers. Gameco violated that agreement by entering into a contract to supply Tryco, one of Wholesale's major customers.
Since the facts of this case show good faith dealings in all matters in the past term of this contract, and that this was the first dispute to arise, I believe that Parol Evidence would be admissible to show that a separate contemporaneous oral agreement existed regarding Gameco' s agreeing not to sell to retailers. Also, since past practice will show that Gameco never did sell to retailers, I believe this evidence will merely be considered clarifying the relationship between the parties.
Wholesale will be permitted to introduce this parol evidence to show a contemporaneous oral agreement regarding Gameco agreeing to only sell to wholesalers.
IS THERE AN ENFORCING CONTRACT?
A contract an be written in any way the parties choose to write it, so long as the parties are on equal footing, and there are no illegal or unconscionable clauses written into it-. .. . . . ..
Both Gameco and Wholesale are merchants according to the UCC, and thus they seemed to enjoy equal footmg. There do not appear to be any unconscionable clauses 1n the agreement. Gameco d1d have a right to terminate this contract, and took the appropriate actions to do so. While the court may apply the requirement that Gameco give Wholesale some notice of the cancellation . . . perhaps 30 days, etc. . . . I believe Gameco cancelled according to the contract provisions.
The fact that Gameco instituted a new corporate policy regarding selling their products to retailers is not in violation of this contract on its face and only if Wholesale can prove a contemporaneous agreement to the contrary, I believe Gameco will prevail in this action.
Clearly there are other video suppliers in the marketplace and Wholesale can just obtain his product from another one. There is nothing in the facts provided here to indicate that Gameco cannot make changes in a corporate policy, no matter how longstanding, in order to increase their competitive position in a free marketplace.
The UCC favors the formation of contracts and good faith dealings between the parties once those contracts are formed. I believe good faith has been the rule here, and Gameco, in good faith, is simply choosing to exercise a clear-cut business decision designed to improve their profit position in the market.
Wholesale once had an enforceable agreement with Gameco, but now that Gameco has cancelled it in accordance with contract provisions regarding cancellation, they no longer do.
II. Assuming that an enforceable agreement exists, what rights, if any. does Wholesale have against Gameco and what defenses, if any, may Gameco assert?
If an enforceable agreement existed, Wholesale would have the right to seek damages against Gameco. Wholesale could sue for breach of contract and plead their expectation damages under this contractual agreement.
EXPECTATION DAMAGES:
Expectation damages are awarded to give the non-breaching party the benefit of their bargain. However, such damages must be reasonably certain and able to be calculable with reasonable accuracy.
Wholesale could rely on past sales records and show that because Gameco has begun selling to one of their largest customers, they lost the business from that customer. They could probably show reasonable sales figures and use them to plead the amount of lost profits they actually incurred.
DEFENSES FOR GAMECO:
I believe Gameco will assert the defense that they· merely executed a contractual clause giving them the right of cancellation, and that the Parol Evidence Rule should serve to prevent Wholesale from admitting evidence of an oral agreement not contained in the integrated writing.
I believe Gameco will also assert that business policies change, and this change did not violate the contractual provisions since they were welt spelled out in a fully integrated writing. This change of selling to retailers did not violate the contract as it was not something agreed to by the parties at the time of contract formation.
Reliance
Wholesale may assert they relied upon the statement never prior to signing (supra) however this will fail since it would alter terms and since there was good faith involved. Gameco may assert it will lose sales due to the competition, and will be a detriment. However, competition is a foreseeable type of conduct in the business world.
DAMAGES;
If Wholesale prevails, they will receive their expectation damages; i.e., the damages they can show .as lost profits in their contract with Tryco. They may also possibly get injunctive relief, though such is highly doubtful, by having the court prohibit Gameco from revising this policy of selling to retailers and cease selling product to Tryco. I doubt Wholesale will receive injunctive relief as such would be against general policy regarding free enterprise and the maintenance of an open market. I strongly doubt the courts would permit this, and at most would give Wholesale their lost profits up to the date the court feels Gameco's cancellation of the contract would be legally valid.
June 2001 Question 2 [Criminal Law]
QUESTION ANALYSIS
I. Is Harvey guilty of murder of Beth?
1. Murder
Common law murder is the unlawful killing of a human being with malice aforethought. Malice can be found in one of four ways: intent to kill, intent to inflict serious bodily injury, willful and wanton conduct (depraved heart), or felony murder.
Here, Harvey intended to kill Dawn, not Beth. The prosecution will apply the doctrine of transferred intent and charge premeditated murder. His act of putting poison in the soup also exhibited willful and wanton conduct with a reckless disregard for the consequences. Harvey will be found guilty of murder.
(1) First Degree
Murder committed with the intent to kill plus premeditation, by poison, bomb, torture, or ambush, or during the commission of an inherently dangerous felony or a felony committed in a dangerous manner.
Harvey intended to kill Dawn. He put poison in the soup to accomplish the deed. His thinking and planning ahead exhibits premeditation with the intent to kill. He will argue that he intended to kill Dawn not Beth. The prosecution will argue that the doctrine of transferred intent will transfer the intent from the original victim to the actual victim. In addition, Harvey was to accomplish the murder by poison which also qualifies for first degree murder charge. Harvey will be prosecuted for first degree murder.
(2) Second Degree
All murders that are not of the first degree are second degree murder.
If the prosecution is not successful with a first degree murder charge, they will charge second degree murder based on depraved heart act. The putting of the poison in the soup exhibits a reckless disregard for human life. It could be foreseeable that someone else would eat the soup and become poisoned. Harvey could be convicted of second degree murder.
2. Manslaughter
(1) Voluntary Manslaughter
The intentional killing of another with malice provoked. Harvey will not be able to mitigate his charge of murder to voluntary manslaughter because he was not provoked by Beth.
(2) involuntary Manslaughter
The unintended killing of a human being by criminal negligence, intent to inflict non-serous bodily injury, or misdemeanor manslaughter.
Harvey will try to mitigate his murder charge to involuntary manslaughter by arguing that it was negligent for him to have the poisoned soup in his car where someone else might get to it, that he did not intend to kill Beth. The prosecution will argue that his actions should not be reduced to criminal negligence since he prepared the soup with the intent to injure. The prosecution will probably win and Harvey will not get his charge reduced.
3. Atttempted Murder
Attempt is a substantial step toward the perpetration of the intended crime. In this instance, Harvey intended to kill Dawn. He prepared the soup with poison in it to "injure" her. The prosecution will argue that the preparation of the soup is a substantial step. The defense will argue that it was not a substantial step but mere preparation for the offense. They will further argue that Dawn was not within the zone of danger. The soup was locked up in the trunk and Harvey had made no effort to have Dawn partake of the substance. The defense will probably win on this point and Harvey will not be successfully prosecuted for the attempted murder of Dawn.
II. Is Ann guilty of theft of Harvey's car?
Larceny by trick
The taking of property from another by misrepresentation of past or present fact which induces the party to give up possession of his property with the intent to permanently deprive.
Here, Ann dressed herself up in the uniform of a Club Ritz valet parking attendant so that customers would believe she was a valet and that they could entrust their car to her. Harvey was deceived by her dress and gave her possession of his vehicle. Ann intended to deprive Harvey of the vehicle when she took possession and did drive off in the car. Her intent was to take a cross-country trip, indicating that she had no intention of returning the car to Harvey, but to permanently deprive him of its possession. She will be convicted of larceny by trick.
False Pretenses
False pretenses is gaining voluntary possession and title of the personal property of another with the intent to deprive through a misrepresentation of past and present fact. Here, Ann did not gain title to the car so Ann is not guilty of false pretenses.
III. Is Tom guilty of any offenses?
Larceny
The trespassory taking and carrying away of the personal property of another with the intent to permanently deprive.
Here, Tom took a license tag off of an abandoned car and affixed it to the car Ann had stolen. Tom will argue that the car was abandoned and that it was therefore not a trespassory . taking. However, the license was attached to the car and will not be considered Tom's. He had the intent to permanently deprive the owner as he was putting it on the stolen vehicle for a cross-country trip. He will be found guilty of larceny.
Accomplice Liability
Under the common law, the parties to a crime were defined as principle in the first degree, the one who actually committed the crime; principle in the second degree, one who was actually or constructively present but did not participate; accessory before the fact, one who aided and abetted the preparation for the crime; and accessory after the fact, one who did not participate but assisted after the crime was completed. Modem law combines the principle in the first degree, second degree, and accessory. before the fact into accomplices. The accessory after the fact is left separately and is usually charged with obstructing justice.
Here, Tom would be classified as an accessory after the fact. Neither he nor Beth knew about Ann's plan to steal a vehicle but were informed after the crime had been committed. He assisted Ann in concealing the identity of the car by replacing the license tag. He actively assisted her in hiding her crime. He will be convicted as an accessory after the fact.
June 2001 Question 3 [Torts]
I. H v. B
Henry ('H') may seek recovery for his damages by advancing 3 theories under the law of product liability.
1. Negligence Theory
To be successful under a theory of negligence, H must prove that 1.) B owed H a duty; 2.) B breached that duty; 3.) which actually and legally caused 4.) H's damages; 5.) and B has no successful defenses.
1.) B's duty to H
. Under these facts it is likely that B owed H a duty to act with reasonable care in preparing and serving the doughnuts for its customers, since H was a foreseeable plaintiff under J. Cardozo's view that a duty is owed to all unforeseeable plaintiffs in the 'zone of danger.' Bowed H a duty to act as a reasonable baker.
2.) Did B breach that duty?
The bigger question is not whether Bowed a duty, but did B breach that duty when it served H a doughnut using the inedible wax paper without warning H not eat the paper? In such a case, the court likely will perform a risk/utility balancing test to determine if a breach occurred. In using the 'learned hand calculus' the gravity and probability of harm will be balanced against the utility of the conduct. Here, the utility in preventing "sticky hands" may not hold much weight, but the "germ prevention" should carry considerable weight in this balancing test. If it is determined that the probability of harm from eating the paper is low, and that even if the paper is eaten that the harm which may occur is low, then no breach will be found.
3.) Did serving the doughnut on the paper cause H's car crash?
If H is able to overcome the breach hurdle, he will still need to prove that B's conduct was the actual and legal cause of his injuries. While 'but-for' the paper on the doughnut, H would not have crashed, the intervention of the car crash and the unforeseeable consequences of a doughnut wrapper causing car damage may break the causal link between B's conduct and H's injuries. If so, proximate cause will be lacking.
4.) Damages - Personal injuries and car damages
H's personal injuries and damages to his car would also be compensable should H be successful in his claims against B.
5.) Did H's fault create a complete or partial defense forB?
When fault is an issue, the court will determine whether the plaintiff acted reasonably under the circumstances. If the jurisdiction recognizes contributory negligence, H's own fault will completely bar his recovery. However, if the jurisdiction is among the majority view who recognize the doctrine of comparative fault, H 's recovery will be reduced in proportion to his percent of fault and may even bar recovery if the jurisdiction bars recovery where a plaintiff's fault may not be greater than defendant's.
H 's apparent negligent driving likely will show that H is at least partially at fault for his injuries.
2. Strict Liability in Tort
H may also advance his claims against B on a theory of strict liability in tort by alleging that the doughnut wrapper was defective via an inadequate warning.
Since H was a foreseeable consumer he is a proper plaintiff, and since B was in the stream of commerce for doughnut wrappers it is a proper defendant.
1) Was the warning adequate on the doughnut wrapper?
To establish his claim, H must prove the wrapper was defective, which in this case was due to not having an adequate warning, as opposed to a manufacturing defect, or design defect. While the wrapper had a proper warning "not edible" the adequacy of that warning comes into play since the paper was translucent and the printing was white. If the warning was very difficult to read, the court may decide that it would not have placed much of a burden to use black ink, or different paper. Or that B should have told its customers nDon't eat the wrapper." Again this burden will be balanced against the utility and as long as the wrapper would remain viable with this new more prominent warning, the warning may be deemed inadequate and thus the wrapper is defective.
2.) Causal link broken?
As previously discussed though, the causal link between the wrapper and the injuries may have been broken which would prevent the required finding of proximate cause.
3.) Damages
Previously discussed under negligence
4.) Defenses
Under a theory of strict liability in tort, comparative fault and contributory negligence are not available since fault is not what is being analyzed. Instead, B must show that eating the wrapper was unforeseeable, which it can't prove due to its admission on the wrapper itself indicates the thought of eating a wrapper occurred. B may assert that H ·assumed the risk when he ate the doughnut while driving.
To be successful with this defense, B must establish that H understood the risks and voluntarily exposed himself to them. Going back to the discussion of "adequacy of the wrapper's warning label," B may not be able to show that H understood the risks and therefore could not voluntarily expose himself to them .
ICJ. Breach of Implied Wacranty
Finally, H may advance his claims under a theory that the doughnut, with wrapper attached, breached the implied warranties of quality for merchantability and fitness for intended purposes. While the wrapper was not fit for consumption, that was not its intent. Moreover, under these facts there is nothing to suggest that the doughnut itself was inedible and it will be difficult for H to sustain his claim under this theory.
June 2001 Question 4 [Contracts]
The contract between Alice and Ben, since it deals primarily with a service (the building of the pool and spa). will be governed by the common law of contracts.
Alice v Ben
Alice will sue Ben for the sum of $200,000, which she will claim was the agreed amount for the job as modified. To have a valid contract, in addition to an offer and acceptance, valid consideration is required, which must (bel the bargained· for legal detriment each party gives to the other. Under the traditional view, a party could not come back for more money when circumstances turned out not as the party had thought, since the party was already under an obligation to perform and there was no new consideration offered in exchange for the change in price. Modern courts now permit changes to contracts when unforeseen circumstances make such a change appropriate.
Here, finding bedrock in an area where it had never been found previously represents such a circumstance. Alice will argue that she requested the additional $100,000 in good faith, and that Ben agreed to it. The fact that he reluctantly agreed is of no import. She will claim that she fully performed and that she should therefore be entitled to full payment.
The problem with this argument is that Alice expressly assumed the risk of geologic problems in her agreement to build the pool. Unless she can introduce evidence that the written agreement does not reflect the true agreement of the parties, she will be required to .perform the contract for the original price.
Parol Evidence Rule
The parol evidence rule bars the admission of prior oral and written agreements and contemporaneous oral agreements when a writing represents the parties' complete agreement, known as an integration. Alice and. Ben's contract explicitly states that it is "the complete and final agreement between the parties." This merger clause will usually be given effect by the courts, since it is strong evidence that the parties intended to be bound only by the terms expressed in the subject agreement. Ben will argue that finding bedrock is irrelevant. That was Alice's risk.
However, the parol evidence rule does not bar admission of parol evidence to explain the contract. It is clear that when Alice took on the risk of geological problems, both parties were thinking only of swampy conditions. It IS likely, therefore, that this evidence will be admitted to show that finding bedrock was an unforeseen condition, the. risk of which Alice had not taken on. Alice will, therefore, prevail in a suit against Ben.
Quasi-Contract
Even if Alice failed to be able to admit evidence showing that she did not assume the risk, she will nonetheless be entitled to recover the fair market value of her services under a quasi-contract theory, since for Ben to be able to pay nothing would result in his unjust enrichment, which the court would want to avoid.
Ben v. Alice
Ben will claim that he does not owe Alice for the pool since, by using a lower grade of concrete, she did not construct it according to the specification, as required by the contract. He will also insist that she had agreed to build a spa and had not done so.
Express Conditions v. Promises/Constructive Conditions
Express conditions must be perfectly performed before a duty arises. Here, however, a court is extremely likely to interpret the specifications as promises that Alice took on. A promise need only be substantially performed to avoid a total breach. Here, Alice will argue, is such a case. The concrete had no impact on the pool's use or. durability.
Ben will counter, however, that the pool was less attractive than it would have been had Alice· used the concrete shown in the specifications. A court will likely allow Ben to reduce his payment to Alice by the amount of diminution in value caused by her minor breach.
Failure to Build Spa
Ben may also claim that Alice failed to perform their oral agreement to build a spa for $20,000. If this agreement were to be considered part of the agreement to build the pool, evidence of the oral agreement will be barred by the parol evidence rule, especially in light of the merger clause.
However, there is nothing in the pool agreement that suggests anything about a spa, and the agreement to build the spa had its own consideration. As a result, Ben will argue that this was a separate oral agreement, not subject to the parol evidence rule.
He may well succeed with this argument, but, in the end, the same issues of unforeseen circumstances, the risk of which was not undertaken by one of the parties, may enable Alice to avoid having to build the pool at a price that will not permit her a reasonable profit.