HAMLINE UNIVERSITY SCHOOL OF LAW
Date of Examination: December 19, 2000 Instructor: Gordon Gendler
Fall Semester 2000
FINAL-COMMERCIAL TRANSACTIONS
CODE OF CONDUCT
Violations of the Code of Conduct include: (1) unauthorized conversation among students concerning the examination; (2) giving, receiving, or soliciting unauthorized aid; (3) using materials which are not specifically permitted by the written examination instruction; (4) exceeding the examination time limit; or (5) any other dishonest conduct in connection with the examination.
INSTRUCTIONS
1. This examination consists of four (4) pages in addition to this cover page. Please ensure that you are not missing any pages.
2. The time allowed for this examination is three (3) hours.
3. Outside permitted material: Open Book.
4. SPECIAL INSTRUCTIONS: Please show analysis. Please use blue or black pen. GOOD LUCK.
QUESTION 1
(25 POINTS)
You are in a State that has adopted Alternative B to 2-318.
Cliff Johnson recently purchased a used Drof Sports Utility Vehicle (“SUV”) from his local Drof dealership. The SUV was two years old and had 25,000 miles on it when Cliff bought it. It was still under the manufacture’s warranty when he bought it. That warranty provides:
Seller warrants that the vehicle will be free of defects in materials for a period of four years from delivery or 48,000 miles whichever occurs first. In the event of defects in material or workership, seller will, at its option, repair or replace defective parts. This duty to repair or replace is the sole and exclusive remedy.
It had snowed the day before Cliff got the SUV. Cliff could not wait to drive his new SUV. On his way home from the dealership, Cliff drove home and picked up his long time friend and former college roommate, Steve Fontanna. Cliff convinced Steve to go for a ride with him. Steve thought Cliff was driving a little fast for the conditions. Cliff responded, “don’t be such a back seat driver, what do you think 4-wheel drive is for? And besides, I’m at the speed limit.” Shortly thereafter, Cliff saw a display of Christmas Trees and tried to make a turn so he could enter the lot to buy one. Because he had not seen the display until late, he tried to make a very sharp turn. Due to the ice, the sharp turn and his speed at the time, the SUV skidded and then rolled over. Cliff was not seriously hurt, but Steve suffered personal injuries, including a broken hand. Cliff is a ballet dancer and his minor injuries caused him to miss his audition the following day for the lead role in the ballet. He has not been able to find replacement work. Steve has been unable to return to his job as a surgeon. Later, Cliff learned that this particular model SUV rolls over easily, particularly when the driver attempts a sharp turn. Drof maintains this is necessary for the SUV to work well off road.
You have been retained by Steve and Cliff who have asked you about their rights against Drof. Please advise them.
QUESTION 2
(25 POINTS, 45 MINUTES)
Byron Oil Company had contracted to buy 500,000 gallons of oil from Superoil, Inc. for $500,000. The contract provided in part that, “ the oil shall be grade 1 quality.” Grade 1 quality is defined by the applicable regulating organization as oil where, “the sulfur content of the oil does not exceed .5%”. The oil was delivered on October 1, 2000, the date of delivery required by the contract.
Byron immediately inspected the oil. The sulfur content tested at .52%. Byron notified Superoil by facsimile of this fact on October 2, 2000 and told Superoil to “come and get its oil”. On October 3, 2000, Superoil faxed back that it would come for its oil later that day and would be bringing 500,000 gallons of new oil at the same time with a lower sulfur level. Byron refused delivery of the new oil, even though it was the same amount of oil as the original delivery and the sulfur content was less than .5%. Byron and Superoil had done business together before for a number of years. Byron had refused oil only three times in the past and each time the sulfur content exceeded .6%. Superoil had not had any oil refused in the past from its other buyers unless sulfur content exceeded .55%.
The price of oil dropped sharply on October 5, 2000 due to a sudden glut of oil on the market. On October 1, 2000 the wholesale value for oil was $1 per gallon. On October 5th, it dropped to $.60 per gallon. This drop was unforseen by everyone. Due to the glut, it was difficult for Superoil to find another buyer. Finally on November 1, 2000, it sold the first 500,000 gallons of oil it had delivered to Byron for $275,000 and the second 500,000 gallons of oil it had tendered to Superoil for $280,000.
Superoil had entered into certain contracts with unrelated parties that required it to purchase 2,000,000 gallons of oil at $.90 a gallon. The contracts provided an escape provision whereby Superoil could get out of its obligations by paying $150,000 on or before October 8, 2000. Since it did not have the cash from the sale to Byron, it was not able to escape from the contracts. It also had to pay $4000 to store the refused oil for a month.
You represent Superoil. It has asked your advice on its rights and whether it should file suit. What advice do you give?
QUESTION 3
(25 POINTS, 45 MINUTES)
Sam’s steaks is a wholesaler of fresh meats. Sam’s received an order from its longtime customer, Betty’s Bar and Grill. Betty’s was expecting a busy weekend and ordered a thousand steaks from Sam’s. Sam’s is located 100 miles from Betty’s and upon receiving Betty’s order, Sam’s contacted Carrie’s carriers to deliver the steaks. Sam’s agreed to deliver the steaks by 11:00 a.m. on Friday.
Friday at 6:00 a.m., Sam’s loaded the steaks onto one of Carrie’s trucks. The truck left at 6:30 a.m. making a direct trip to Betty’s. On the way to Betty’s, a deer ran onto the road and, in an effort to avoid hitting it, the driver swerved off the road and the truck rolled over. The steaks were destroyed in the accident. Later, it was discovered that 200 of the steaks had not been properly refrigerated and were not fit for human consumption. The other 800 steaks were fine, until the truck had the accident.
Sam’s sent Betty’s a bill for the steaks which Betty’s refused to pay. Sam’s brought suit seeking to recover the invoice price of the steaks. Betty’s in turn counterclaimed. Betty’s denied liability for the steaks and sought damages for the failure to receive the steaks. Betty’s can prove that because it did not timely get the steaks and could not get replacement steaks on Friday for that weekend, it lost sales of $10,000 and future business worth $15,000. As such, Betty’s seeks $25,000 in damages. Sam’s seeks the purchase price of the steaks. You are the judge decide the case.