Legal Analysis: Madonna's Retirement Payments & Jada's Video Game Contract, Exams of Contract Law

Download Legal Analysis: Madonna's Retirement Payments & Jada's Video Game Contract and more Exams Contract Law in PDF only on Docsity! EXAM NO. _____ Page 1 of 6 CONTRACTS Professor John Orcutt Fall Semester 2011 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 383 points (or 85% of your final grade). The examination consists of five essay questions: Q1 = 55 points Q2 = 55 points Q3 = 85 points Q4 = 103 points Q5 = 85 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 = 20 minutes Q2 = 20 minutes Q3 = 30 minutes Q4 = 35 minutes Q5 = 30 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. 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. 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. 5. 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 provide your best answer and explain any assumption you used to answer the question. 6. For those of you who are taking this exam on a laptop computer, the above rules are modified to permit usage of a laptop and are supplemented by the laptop exam rules that are provided to you by the Registrar. Good luck on the examination! DO NOT TURN TO PAGE 2 UNTIL THE PROCTOR TELLS YOU TO BEGIN EXAM NO. _____ Page 2 of 6 QUESTION NO. 1 (55 points possible – 20 minutes suggested): Madonna, aged 53, had been an employee for Borderline Inc. for close to 30 years. Madonna was an at-will employee who had been serving as one of Borderline’s factory managers for the last 10 years. In December 2010, Madonna had a conversation with the company’s president, Justin. Madonna told Justin about how much she enjoyed working at Borderline, but that she was also beginning to think about her post-retirement life. Madonna explained that if she could establish a bit more financial security, she would retire and travel the world. In January 2011, Justin told Madonna that Borderline’s board of directors decided to do something special for her. While Borderline did not generally have a pension plan for employees, it wanted to do something to recognize Madonna’s 30 years of loyal service. Justin then provided Madonna with the following letter: “Dear Madonna, In recognition of your loyal service to this company, Borderline hereby agrees to pay you $5,000 per month for the rest of your life whenever you decide to retire. This retirement plan is being provided to you at the present time in order to provide you security for the future and in the hope that your active services will continue for Borderline for many years to come. Signed, Justin (as authorized signatory for Borderline)” Madonna decided to retire in February 2011. She immediately bought a $50,000 sailboat and began to plan an around-the-world boating trip that would start during fall 2011. Madonna received numerous phone calls from head hunters and other companies asking Madonna if she wanted another job, but Madonna turned down all such inquiries. Madonna received the promised $5,000 payment in each of March, April and May, but not June. When Madonna asked about her June payment, she was told that Borderline would not be making any further retirement payments to Madonna. Borderline experienced some recent financial problems and determined that Madonna’s retirement payments should be discontinued. Madonna believes that she is legally entitled to receive her retirement payments and has hired you to help her. Please analyze for Madonna whether Borderline is contractually obligated to pay Madonna $5,000 per month for the rest of her life. EXAM NO. _____ Page 5 of 6 QUESTION NO. 4 (103 points possible – 35 minutes suggested): Tom purchased a 6-acre lot with the intention of building a custom, residential house. After several weeks of planning, Tom reached an agreement with Suri Construction Co. (“Suri”) to build the house. The parties signed a detailed written agreement (the “Construction Contract”) that included roughly 20-pages of written specifications and drawings (the “Specifications”). One of the specifications provides that “an in-ground, lap swimming pool be installed on the south side of the house in the location marked on drawing C.” Tom watched the house being built and was very pleased and excited until the end. When the house was virtually complete, a Suri representative told Tom that the swimming pool could not be installed per the Specifications because the ground where the pool was to be located is not sufficiently stable. It turns out that Suri relocated the house 30 feet to the south to make excavation for the house’s foundation easier and cheaper. Suri never consulted with Tom about the relocation. Unfortunately, a small underground ravine is located to the south of the house that (due to the relocation of the house) prevents installation of the swimming pool in the desired location. A number of alternatives exist for installing the swimming pool, including installing it in a different location (e.g., on the north-, east- or west-side of the house or about 100 feet south of the house) or installing the pool as an “above-ground” pool. Please assume the following additional facts: • Tom paid $100,000 to acquire the land; • The contract price for Suri to build Tom’s house and swimming pool is $500,000 and installing the swimming pool accounts for $10,000 of that amount (or 2%); • Regardless of where the lap pool is located (or whether it is in-ground or above- ground), the fair market value of Tom’s house and land is $1 million. To be clear, changing the location of the swimming pool (or switching to an above-ground pool) will have no impact on the fair market value of Tom’s house; and • To date Tom has paid Suri $300,000 under the Construction Contract. Tom would like for you to answer two questions: (a) Tom does not want to pay Suri the final $200,000 payment under the Construction Contract. Please analyze whether Tom can refuse to make that payment. (85 of the 103 points, or 30 of the 35 suggested minutes) (b) Assume that Tom’s contractual obligation to pay the $200,000 is discharged. Will Suri have any legal recourse to force Tom to pay Suri anything more than the $300,000 it has already received? (18 of the 103 points, or 5 of the 35 suggested minutes) EXAM NO. _____ Page 6 of 6 QUESTION NO. 5 (85 points possible – 30 minutes suggested): Dakota Corp. (“Dakota”) owns a number of freighter ships that are designed to carry bulk products. One of the products that DT frequently transports is grain. After each shipment, the ship’s grain storage tanks must be cleaned to ensure that grain from a prior shipment does not contaminate grain that will be carried in the next shipment. To perform this cleaning service for one of its ships, Dakota entered into a contract (the “Contract”) with Twilight Cleaning Co. (“Twilight”) on March 1st. The terms of the Contract can be summarized briefly as follows: • Twilight promises to professionally clean 10 grain storage tanks by March 10th; • Dakota promises to pay Twilight $10,000 for this service. After commencing performance, Twilight discovered that cleaning Dakota’s grain storage tanks was more complicated and time-consuming than originally anticipated. As a result, Twilight had to pay substantial overtime to its cleaning crews and even hire additional cleaning personnel. On March 7th, after Twilight had finished cleaning the 7th of 10 grain storage tanks, Dakota informed Twilight that it was terminating the Contract. This termination had nothing to do with Twilight’s performance, which you can assume was professional and in total compliance with the terms of the Contract. Instead, Dakota had received objections from a powerful labor union since Twilight was a non-union operation. Please assume the following additional facts: • If Twilight sues Dakota for breach of contract, Twilight will win; • Dakota has paid Twilight nothing under the Contract; • It cost Twilight $14,000 to clean the first 7 tanks; and • It would have cost Twilight $6,000 to clean the last 3 tanks. Twilight plans on filing a breach of contract lawsuit against Dakota. Please analyze Twilight’s potential monetary recovery from that lawsuit. In conducting your analysis, please examine Twilight’s potential recovery under an expectancy, reliance and restitution theory. * * * * * END OF EXAM * * * * * CONGRATULATIONS ON FINISHING! Have a wonderful break.