CONTRACTS § 3

EXAM NO.

Fall 2001

Professor Lisa Roy

December 14, 2001

FINAL EXAMINATION

3 ½ hours total

This is a closed book examination.

This exam consists of three parts and the total suggested time is three (3) hours. All point values and suggested times are approximate. You will be given three and one half (3 1/2) hours to complete the exam. Do not use the additional time to write longer answers; rather, spend any extra time thinking and organizing.

All answers to Part I should be written on this exam in the space provided. If you need additional space, write on the back of the page.

All answers to Parts II and III should be written in blue books, and you should use a separate blue book for Part II and Part III.

Identify yourself on this exam and on your blue books only by your exam number.

Write legibly.

The law school's honor code binds you to neither give nor receive any improper assistance, and to report any improper assistance of which you are aware.

Section I. Short Answer (75 points total - suggested time: 1 hour, 10 minutes)

1. True or False - Explain briefly in one paragraph or less. (4 points each)

(a) If the terms of a contract are reasonably susceptible to more than one interpretation, then extrinsic evidence may be admitted to explain - but not contradict - the meaning of the terms.

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(b) According to the Restatement (Second), a promise to pay for a benefit that has been conferred is enforceable only if the promise creates a moral obligation.

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(d) An offeree who knows that an offer is meant as a joke cannot create a contract by accepting the offer even if a reasonable person would believe that the offer was seriously made.

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2. Short essay (10 points)

On May 1, Sarah, who lives in Los Angeles, mails a letter to Ben, who lives in New York. The letter reads: "In response to your inquiry about purchasing the beachfront property I advertised in the L.A. Times, I hereby confirm that I will sell the property for $250,000. If you want to buy it, you should let me know right away. There are a couple of other people who came by to look at the property and I'd like to sell it as soon as I can."

On May 2, Sarah accepted an offer from Elena (who also lives in Los Angeles) to purchase the property for $275,000.

On May 3, Sarah mailed a letter to Ben stating that she had sold the property.

On May 4, Ben received Sarah's May 1 letter.

On May 4, Ben sent the following letter to Sarah via Express Mail (next day delivery): "I accept your offer. I will buy the property for $250,000. Enclosed please find a check for $2,500. I'll call you next week to discuss details such as escrow, etc."

On May 5, Sarah received Ben's May 4 letter.

On May 6, Ben received Sarah's May 3 letter.

Discuss Ben's likelihood of success in a breach of contract action against Sarah if Sarah refuses to sell him the property.

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3. Short essay (20 points)

Bill, an experienced tobacco farmer, agrees with Susan, also a tobacco farmer, that he will purchase two tobacco barns from Susan for $5000 each. A few days later, before Bill has taken possession of the barns, he presents Susan with a check made payable to her in the amount of $10,000. The check contains the word "barns" in the memorandum section. Susan refuses the check. The following day Susan sends Bill an e-mail containing the following statement:

"I object to your attempt to pay me as if we had a legally enforceable contract. You know that our agreement was only oral, therefore it cannot be enforced in court."

If Susan refuses to sell the barns, can Bill enforce the agreement against Susan?

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4. Short essay (12 points)

Penelope, a sophomore at the University of Mississippi, auditioned for and obtained a highly coveted role on the new reality show Ole' Miss Survivor - featuring a selection of various University of Mississippi students who have been stranded in the kudzu off Molly Barr Road. One Friday evening, after only two weeks of taping, Penelope was voted off the show by the rest of the cast.

That evening as Penelope was packing her belongings, David Slick, the executive producer of Ole' Miss Survivor, stopped by Penelope's tent. "Penelope," he said, "You are such a sweet kid. I can't believe those ruthless rascals plotted to vote you off the show. You really worked hard on all of the challenges, and I know our ratings during your episodes will soar because you were a part of the cast. In light of all your hard work, I'll make sure you get a shot at any endorsement deals that are presented to the cast, even though you didn't make it to the final four."

After her conversation with Slick, Penelope left Ole' Miss Survivor feeling upbeat and determined to see the show succeed. From time to time Penelope returned to the set during taping to act as a consultant, advising her former cast mates on how to make their scenes appear more realistic to viewers.

Several months later Ole' Miss Survivor aired on network television and became a huge ratings success. While watching an episode of the show, Penelope saw an athletic shoe commercial featuring the final four contestants. Furious that she had heard nothing about the endorsement, Penelope called her lawyer to file a lawsuit against the network.

Can Penelope enforce Slick's promise against the network?

(Assume that Slick is deemed an agent of the network, and that Penelope's jurisdiction has not adopted the rules reflected in the Restatement (Second) of Contracts §§ 86 and 90.)

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5. Short essay (8 points)

Adrianna and Peter desire very much to have a child. but they both feel strongly that carrying a child to term would be detrimental to Adrianna's health, as well as her career. Adrianna and Peter have found a surrogate in Ireland who is willing to carry the couple’s

biological child to term. Adrianna and Peter have visited a lawyer specializing in surrogacy agreements and the lawyer has drafted a contract whicch provides that the surrogate will carry the couple's child to term, and, upon birth, deliver the child to Adrianna and Peter. In exchange, Adrianna and Peter will pay the surrogate's medical expenses, as well as $50,000.

What are the arguments in favor of the enforceability of the proposed contract?

What are the arguments that the proposed contract is unenforceable?

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Section II. Essay Question (65 points - suggested time: 50 minutes)

Chett Roberts, a businessman, was a bit of a braggart. He boasted incessantly to the other members of his country club about the success of his business. One evening in the dining room of the country club, Frank Masters, also a successful businessman, said to Chett, "I'm so tired of all your boasting. If you will go without talking for six months, I will pay you $1 million dollars."

Chett, a proud and stubborn man, immediately accepted the challenge, and the two began working out the details. According to the agreement, if Chett remained silent until 5:00 p.m. on the last day of the sixth month he would be entitled to $1 million. A glass room was erected for Chett in the lobby of the country club, and various members and staff were assigned to "watch" Chett, especially when he received meals and left temporarily to use the restroom. Frank watched anxiously as Chett remained silent, month after month.

At 3:30 p.m. on the last day of the sixth month, many of the club members stood around, waiting to congratulate Chett on his successful completion of the challenge. Unable to contain himself, Frank rushed to Chett and opened the door of the glass room. "It's all over Chett," he said painfully. "I never thought you could do it. Business has been terrible and I don't have that kind of money. I can't possibly pay you."

As Chett emerged from the glass room, he looked both desperate and irate. Chett signaled for someone to give him a pen and paper, and wrote the following on a cocktail napkin:

I haven't worked for six months, and I spent $50,000 getting my vocal cords removed. I'll never speak again.

If Chett sues Frank, what will be the outcome:

(a) under classical contract doctrine?

(b) under the Restatement (Second) of Contracts?

Section III. Essay Question (70 points - suggested time: 1 hour)

One day in October, Derek, an avid hunter, was watching an infomercial for the "Tree Sofa", a foldable chair that can be fastened to a tree trunk so that game hunters can perch themselves high above their prey. The infomercial featured satisfied customers who boasted that, by using the Tree Sofa, they had been able to dramatically increase the number of deer and other game they were able to "harvest" in a given season. Derek, excited by the prospect of this revolutionary technology, quickly began to imagine how he might use the Tree Sofa in his upcoming hunting competition in Northern Africa, where he would be hunting the elusive ecko.

After watching just a few minutes, Derek called the number on the screen eager to order his own Tree Sofa for only $125.00. Derek spoke with Ellen, a representative of HuntCorp, the manufacturer of the Tree Sofa. Ellen took Derek's order and assured him that he would receive the Tree Sofa in 8-10 business days.

Fifteen business days later, on the morning Derek left for his trip to Africa, he still had not received the Tree Sofa. Derek did well at the competition, but felt that he could have done significantly better with the Tree Sofa, which would have increased his ability to spot the many ecko moving quickly in the wooded brush.

Two days after Derek arrived home from the competition, Derek received his Tree Sofa in the mail. Derek began to unwrap the package when he noticed a slip of paper underneath the plastic packaging. The form contained the following statement:

BY OPENING THIS PACKAGE YOU HEREBY UNDERSTAND AND AGREE TO THE FOLLOWING TERMS:

(1) THE SELLER WILL NOTIFY THE PURCHASER OF ANY DELAYS IN DELIVERY. THE SELLER WILL NOT BE RESPONSIBLE FOR ORDINARY DELAYS IN DELIVERY, OR DELAYS THAT ARE BEYOND ITS CONTROL. IF DELIVERY IS NOT MADE WITHIN 90 DAYS OF THE SCHEDULED DATE, THE PURCHASER SHALL HAVE THE RIGHT TO CANCEL THIS CONTRACT.

(2) THE PURCHASER AGREES TO PAY REASONABLE ATTORNEYS' FEES AND COSTS OF COLLECTION, SHOULD THAT BE NECESSARY.

(3) ALL DISPUTES UNDER THIS ORDER SHALL BE SUBMITTED TO BINDING ARBITRATION UNDER THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION.

THIS CONFIRMATION IS EXPRESSLY CONDITIONAL ON ASSENT TO THE TERMS STATED HEREIN.

Derek read the entire form, shrugged, and continued to open the package. Even though the Tree Sofa appeared to be in good working order, Derek was still disappointed that it had not arrived prior to his competition.

Derek has come to your office seeking advice regarding what claims, if any, he has against HuntCorp. To properly advise Derek, you must answer the following questions:

(a) Was HuntCorp's failure to deliver the Tree Sofa prior to Derek's trip a breach of contract?

(b) Will Derek be required to submit his claim to arbitration?