FINAL EXAMINATION
COMMERCIAL TRANSACTIONS
FALL, 1993
PROFESSOR KLEINBERGER
General Instructions
This is an open book examination. You may use the statute book, the assigned photocopied
materials, any additional photocopied materials distributed by the professor during the semester
and any notes you have made or developed in studying for the course or the exam. You may use
outlines or other notes developed by a group of students enrolled in this course this semester if
you played a substantial role in the development of the group outline or notes. Except as stated in
the second and third sentences of this paragraph, you may not use treatises, hornbooks,
commercial outlines, other commercial works or any other materials prepared by others.
This examination lasts three hours and has two parts. Part One consists of five separate
questions, each based on a separate fact pattern and each requiring a relatively short answer. Part
Two consists of a single fact pattern, requiring a more intricate answer. Each Part of the
examination is equal in weight to the other Part. That is, the five questions in Part One, taken
together, have the same weight as the one question in Part Two.
Please keep in mind that "spotting issues" is only the first step in doing a legal analysis. You must
also take the issues you identify and organize them into a coherent structure. Then, within that
structure, you must examine those issues (by applying the law you see as relevant to the facts you
see as relevant) and argue for some conclusion. For the questions in Part One, your analysis will
be less complicated than in your answer for Part Two. But for both Parts, your answers must
reflect a coherent analysis.
Please do not write about subjects that are not germane to your analysis. Writing a "treatise" on
some area of law that the question does not put in issue wastes your time and conveys the
unfortunate impression that you do not understand which issues are relevant.
To the extent that your analysis involves statutory provisions, you MUST cite those provisions.
If your analysis involves the construction (as distinguished from mere application) of a particular
word, phrase or provision, it may make sense to quote that word, phrase or provision. Otherwise,
do not waste your time quoting the statute at length. (On the other hand, if you can quote a piece
of the statute faster than you can paraphrase it, feel free to do so.) There is no need to cite case
names. If citing case names helps you, feel free to do so. Do not, however, use case names as a
substitute for stating the law.
The grading rewards coherence. It will probably be worth your while to take some time to think
about the organization of your answer before you begin writing. Ask yourself:
whether you have identified all the necessary parts to your analysis;
whether all the issues you have identified are actually necessary; and
whether you have organized your issues in a way that is likely to make sense to your reader.
Please write legibly. Please write on only one side of each page. If legibility is not your
strong point, please skip every other line as you write.
Budget your time.
BUDGET YOUR TIME.
BUDGET YOUR TIME.
BUDGET YOUR TIME.
Part One
A. Refer to Appendix I (Wizard of Id cartoon). The Wizard did not pay any money for the cow.
Given that fact, does Article 2 apply to the transaction between the Wizard and the kid?
Assuming that Article 2 does apply, will the law enforce the Wizard's comment "ALL SALES
ARE FINAL!"? [Assume that the kid is old enough to have the capacity to contract.]
B. Refer to Appendix II (the bookstore cartoon). The sign in the window refers to the book held
by the customer. The sign says, "It will tug at your heart." Does the customer have a breach of
warranty claim? Does it matter whether the sign was present when the customer purchased the
book? [Do not consider what remedies might be available.]
C. Buyer owned a particular cargo of fuel oil that had a high moisture content. Buyer contacted
Seller, who manufactures "NO-WO," a product that removes water from fuel oil. Buyer had
twice before purchased NO-WO from Seller, and in those transactions Seller had given no
warranty as to how effective NO-WO would be in reducing moisture. This time, when Buyer first
telephoned Seller to discuss purchasing NO-WO, Buyer requested a guarantee on moisture
reduction from Seller. In that phone conversation Seller indicated that, as a matter of company
policy, Seller did not give guarantees.
Seller then inspected Buyer's cargo of fuel oil and made a written offer to sell NO-WO to Buyer
for use with that shipment. The proposal stated that "NO-WO can reduce the water content of
the fuel oil to 0.5%." Buyer accepted the offer, purchased the NO-WO and used it on the
shipment. The water content of the fuel did not drop significantly and came nowhere near 0.5%
Does Buyer have a valid claim for breach of an express warranty? [Do not consider implied
warranties.]
D. THIS QUESTION REQUIRES YOU TO CONSIDER A STATUTE THAT WE HAVE
NOT DISCUSSED IN CLASS. DO NOT PANIC. APPLY THE PRINCIPLES OF
STATUTORY INTERPRETATION THAT WE HAVE DISCUSSED THIS SEMESTER.
Refer to Appendix III (cohabitation statute). Alice and Zena, a lesbian couple, lived for several
years in St. Paul in a committed relationship that contemplated and included sexual relations.
They lived in a house owned by Alice. The couple later split up, and Zena sued Alice claiming an
interest in Alice's house. The women had no written agreement on the subject. Zena based her
claim on the former committed relationship. Are Minn.Stat. §§ 513.075 and 513.076 relevant to
Zena's lawsuit? [This question does not ask what outcome would follow if the statutes do
apply.]
E. Agreement for the sale of goods. Terms: sight draft against bill of lading. Goods to be shipped to railroad station in Buyersville. Seller ships goods and receives a negotiable bill of lading to Seller's order. While the goods are in transit and before the Seller has done anything with the bill of lading, the Buyer repudiates. Seller locates a substitute purchaser willing to take the goods at the same destination and wishes to instruct the carrier to turn the goods over to the substitute purchaser. Is Seller better off invoking UCC § 7-303(1) or § 7-403(1)? Based on your answer to that question, what, if anything, must Seller do to enable the substitute purchaser to obtain the goods from the carrier?
Part Two
In answering this Part Two, apply Minnesota law. Assume that the Minnesota version of
UCC § 2-318 states:
A seller's warranty whether express or implied extends to any person who may reasonably
be expected to use, consume or be affected by the goods and who is injured by breach of
the warranty. A seller may not exclude or limit the operation of this section.
Assume also that Minnesota has adopted the rest of the UCC without any changes, except
that Minn.Stat. § 604.10 is in effect.
Geri operates Geri's Garage, an automotive repair and service station. On occasion she installs
replacement equipment in a customer's car. She buys spark plugs, alternators, starters, batteries
and other electrical parts from Wholesale Automotive Electric, Inc. ("Wholesale"). She has also
bought from Wholesale a sophisticated machine that tests a car's electrical system ("the tester").
Wholesale in turn buys electrical products (including testers) from Spark Manufacturing Company
("Spark"). There is no written agreement between Geri and Wholesale, and none between
Wholesale and Spark.
Wholesale and Spark have done business with each other for approximately ten years. During
that time Spark has occasionally sold Wholesale defective products. On each occasion Wholesale
has returned the defective product to Spark and has received a credit against the amount that
Wholesale then owed Spark. Spark has never given Wholesale a cash refund. Spark has never
paid Wholesale anything for any expense, inconvenience or customer dissatisfaction that
Wholesale may have suffered as a result of the defective products.
Spark packages its products in plain corrugated cardboard containers, with no printing other than
Spark's name and address, plus the model name and model number of the product. Wholesale
never opens the containers. Inside each container is a product specification sheet that includes the
following statement, printed in boldface and large type:
SPARK WARRANTS THAT THIS PRODUCT IS FREE FROM DEFECTS IN MATERIALS
AND WORKMANSHIP AT THE TIME OF SHIPMENT. IN THE EVENT OF ANY
DEFECT, SPARK WILL, AT ITS OPTION, EITHER REPAIR OR REPLACE THE
PRODUCT. THIS REPAIR/REPLACE IS BUYER'S SOLE REMEDY. THIS WARRANTY
AND LIMITATION OF REMEDY COVERS ANYONE WHO PURCHASES, INSTALLS OR
USES THIS PRODUCT.
Last month Geri used the Spark tester while working on a car belonging to Morris. The tester
was hooked up to Morris' car, and the car was left inside Geri's garage overnight. During the
night, a defect in the tester suddenly materialized and caused the battery in Morris' car to explode.
A small fire started which damaged Morris' car and ruined the tester. The fire triggered an
automatic sprinkler system, and that system prevented further fire damage. However, the water
from the sprinkler damaged other equipment owned by Geri and also the garage itself.
Can Geri make a successful claim against Spark for:
i. the $400 Geri paid Wholesale for the tester?
ii. the $2000 of damage done to Morris' car by the explosion and fire?
iii. the $3500 of water damage done to other equipment in the garage and to the garage itself when the sprinkler system went off?