FINAL EXAMINATION

COMMERCIAL TRANSACTIONS

FALL, 1996

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 5 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 5 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.

Special Note as to Applicable Law

To the extent (if any) that UCC § 2-318 applies to a question, assume that the relevant version is Alternative A.

Assume also that each problem is to be resolved under the law of a jurisdiction that has adopted Minn.Stat. § 604.10, against the backdrop of the economic loss cases included in the materials. Whether § 604.10 or that backdrop is relevant to any problem is, of course, for you to determine.

Part One

A. Seller contracted to sell a specified quantity of coal to Buyer for use in one of Buyer's plants. Seller later repudiated the contract, and Buyer supplied the plant using coal already in Buyer's reserves. Buyer later sought cover damages, asserting that the court should treat as the cover price the price Buyer had earlier paid to purchase the reserve coal. Seller contended that Buyer should be limited to the contract--market price differential. Who was right?

B. From the February 3, 1995 edition of The St. Paul Pioneer Press:

O.J. Simpson may have a new court skirmish -- this one over two trophies he was awarded when he played for the Buffalo Bills.

The trophies were seized by police who found them two weeks ago at a Buffalo pawnshop that [had] bought them for $300. Police said they planned to return the trophies to Simpson, but attorneys for the pawnshop said that they will go to court to get them back.

Simpson had left the trophies, one from the Buffalo Evening News and one from the Bills Booster Club, at the home of former teammate Booker Edgerson.

Edgerson said he always intended to return the trophies to Simpson but an acquaintance took them and sold them to Kary's Jewelry & Loan [i.e., the pawnshop] last summer.

1. Assume that the pawnshop did go to court to regain possession of the trophies.Who should have won -- Simpson or the pawnshop?

2. Assume that, before the police could seize the trophies, the pawnshop sold the trophies to a customer who paid cash and had no idea that Simpson had a claim to the trophies. In a lawsuit for possession of the trophies, who should win -- Simpson or the pawnshop customer?

C. Written agreement to sell widgets, price $750 FOB Buyer's loading dock. Seller duly tenders widgets there, and Buyer initially takes possession of the goods. The next day, with the goods still on the Buyer's loading dock, Buyer sends an email to Seller, stating, "Goods are no longer of use to us. We don't want them. Take them away. They're still where you left them." Assuming that the goods and tender were conforming, immediately after Seller's receipt of the email:

1. who has the risk of loss as to the widgets on the loading dock?

2. who owns the widgets on the loading dock?

D. From Harris v. Ford Motor Co., Inc., 845 F.Supp. 1511:

On or about July 27, 1990, the plaintiffs purchased a 1989 Ford F350 truck from the defendant Quality Motors, Inc. [the dealer], in Columbus, Georgia. The truck was represented to the plaintiffs as being "new." At the time of the sale, plaintiffs were provided a written document entitled "New Car Warranty," which had been placed in the glove compartment of the vehicle. Several months after the purchase, the right rear fender on the truck began to discolor. It was subsequently discovered by the plaintiffs that the vehicle's fender had been scratched in transit from the manufacturer, Ford, to the dealership, Quality. Upon the vehicle's arrival, Quality repaired the scratched fender and repainted the vehicle. The total cost of the repair was approximately eighty-six dollars. The defendants never informed the plaintiffs of the damage or the repair. Plaintiffs have brought suit against Quality and Ford for breach of warranty and fraud. The sole basis for the plaintiffs' claims was that the defendants represented to the plaintiffs that the vehicle they purchased was a "new" car when, in fact, it was not.

. . . .

The new car warranty read [in pertinent part] as follows:

"A defect or damage may occur in an appearance item while a vehicle is being assembled at the factory or shipped to the dealer. Usually such a defect or damage is found and repaired during the inspection processes at the factory and the dealership."

In light of the in-transit scratch and the subsequent repair, did the defendant dealer breach an express warranty to provide a "new" truck? Do not consider the fraud claim.

E. Next session the Minnesota legislature will consider a proposed new statute, chapter 319B. The statute deals with firms owned by licensed professionals, such as attorneys, doctors and accountants. As currently drafted, proposed Minn. Stat. § 319B.02, subd. 4 contains the following definition:

"Disqualified" means to have a license to provide pertinent professional services (i) suspended for a definite and stated period of 90 days or more, (ii) suspended indefinitely under an order of suspension that states a minimum suspension period of 90 days or more, or (iii) permanently revoked. The disqualification occurs when the suspension or revocation first takes effect.

Assume that (a) this definition is in effect, (b) on March 1, 1997 the Lawyers Professional Responsibility Board ("LPRB") suspends attorney X indefinitely, (c) in the past 20 years no indefinite suspension by the LPRB has even lasted less than 90 days, and (d) on May 5, 1997, acting on additional evidence of misconduct, the Supreme Court revokes attorney X's license to practice law. When is attorney X first disqualified?

Part Two⁽¹⁾

The recently appointed Judge K_______ was so excited about his new job that the first thing he did was to run to Gavel, Inc. to purchase a new gavel for his first day at work. The sales associate who helped the judge select the Solid Gold model told him, "You'll be making a great investment. The gold may ding and scratch but that adds character. The important thing is that this model will never break because it is solid gold."

The judge was so impressed that he decided to purchase the gavel on the spot. As he wrote out a check for $5,000, he noticed and read a sign at the cash register. The sign stated: "ALL SALES FINAL. DEFECTIVE MERCHANDISE WILL BE REPLACED OR A STORE CREDIT GIVEN IF RETURNED (WITH SALES SLIP) WITHIN 30 DAYS. NO EXCEPTIONS."

For the next month, Judge K_______ was busy with judge training. He did not actually preside in a courtroom until 35 days after his purchase of the gavel. As the Honorable Judge K_______ was bringing his first courtroom to order by gently tapping the gavel, all h____ broke loose. The head of the gavel flew off, pelting Minnesota's most successful attorney in the back of head and causing her to lose all memory of the law (a catastrophe conservatively estimated to have a value of $10 million).

Judge K_______ scrutinized the gavel handle (still in his hand) and saw immediately that the handle was made of wood. In fact, the gavel was not the Solid Gold model but rather the Gold Plated Wood model (list price $250). Judge K_______ ran into his newly decorated chambers where he first called an ambulance for the damaged attorney. He then called Gavel, Inc., told them that they had provided him the wrong model of gavel and described the incident in the court room.

Using concepts covered in this course, explain what amounts, if any, Judge K_______ and the damaged attorney can each recover from Gavel, Inc. Assume that the damaged attorney brought an unsuccessful claim against Judge K_______ and that Judge K_______ spent $20,000 successfully defending the suit. Assume also that Judge K_______ has no interest in getting a new gavel from Gavel, Inc. or receiving a store credit.

1. This problem comes, with a only few changes, from a problem submitted by a student in the fall, 1995 section of this class.