SUBSET 2C: QUESTIONS ON ENFORCEABILITY · Kenyon said, I‘m having second thoughts; there‘s even...

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SUBSET 2C: QUESTIONS ON ENFORCEABILITY

QUESTION 46

Ms. Dong owned a house on a large lot in Morena. She was in poor health and, at her doctor‘s urging,

moving to a retirement facility. Before putting her house on the market, she contacted her friend, Mr. Erzoni, a

Morena realtor. She asked Erzoni to estimate the size of her lot and recommend a sales price. On March 1, 2008,

Erzoni went down to the county clerk‘s office to read the file on Dong‘s lot. Because he was in a rush, he

misread the file and thought it said three acres. The lot was actually 4 ½ acres in size. Erzoni advised Dong that

―my best guess is that it‘s three acres and a nice house on a three acre lot is probably worth $650,000.‖

Based on Erzoni‘s advice, Dong advertised the house for sale for that amount. The ad stated that the lot

was huge, approximately three acres in size. Falco, a civil engineer and experienced real estate investor, saw the

ad and visited Dong at her house on March 5. During their negotiations, Falco said, ―Are you sure it‘s only three

acres? At your age your eyesight could be failing. With that lawn, the lot looks bigger to me.‖ Dong explained

that she had had the lot size checked by a professional. Falco responded, ―If you say so.‖ They shook hands.

On March 8, Falco drove to Dong‘s house to sign a writing prepared by Dong‘s attorney. As he pulled

up, Dong‘s garage door was open. He noticed a new riding lawnmower in the garage. It occurred to him that he

would need such a mower to care for the lawn on the property. When he entered Dong‘s house, he asked if she

would be keeping the mower. When she said ―No,‖ he offered to buy it from her.

They then went into Dong‘s living room to sign the writing. According to the writing, Dong would

transfer title to the property to Falco, and Falco would pay her $650,000. The closing was scheduled for March

30th. The writing also contained the following provision: ―This writing sets out the entire agreement between

the parties and supersedes any prior or contemporaneous written or oral understandings between the parties.‖

Before signing, Falco said, ―I meant what I said about the riding mower. I‘ll give you $4,000 for it.

Deal?‖ Dong said ―Yes.‖ With Dong‘s permission, Falco wrote ―plus the mower agreement‖ just above the

signature lines for the parties. Both parties then signed the writing.

That weekend Dong was at a cocktail party. She met an old friend, Ms. Guliani, at the party. Ms.

Guliani was a property surveyor. Dong mentioned that she was selling her house for $650,000. Guliani asked

why the price was so low. Dong replied that ―my lot is only three acres.‖ Guliani said, ―No way. Let me check it

out tomorrow. I don‘t think you understand what‘s going on here. I certainly don‘t want to offend, but maybe

you‘re getting a bit senile.‖

The following day, March 12th, Guliani visited the property and conducted a complete survey. She told

Dong, ―Your property is a more than four and a half acres-almost four and three quarter acres.‖ Dong was

shocked.

Dong immediately phoned Falco to inform him of the mistake. She said that in light of her discovery,

she would need a lot more money before selling. Falco responded, ―Before selling? I‘m sorry, but you‘ve

already sold it to me. Be ready to hand over the deed on the 30th.‖ Dong refused to do so.

Falco sues Dong. In his complaint, he seeks a decree of specific performance that Dong deliver to him

both the deed to the property and title to the mower. Alternatively, he seeks money damages. At trial, Dong calls

a real estate valuation expert who testifies that given the size and condition of Dong‘s property, it is worth at

least $925,000 in the current market.

Will Falco probably succeed in obtaining the decrees? Will the court probably rule that he is entitled to

money damages for breach of contract? Dong files a general denial answer.

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QUESTION 46

1 STATUTE OF FRAUDS

2 the real property

3 within the S/F?

4 yes

5 comply?

6 all the essential terms

7 no mention of price for riding mower

8 procedural effect?

9 majority view: unenforceable

9.1 waive if not plead

9.2 no indication pled here

11 the personal property

12 within?

13 personal property

14 but cutoff $5,000

15 here price only $4,000

16 comply?

17 contents minimal under UCC

18 quantity

19 K has been made

19.1 procedural effect

19.2 waiver?

21 INCLUDE THE PROMISE TO SELL THE RIDING MOWER

22 alternative routes

31 (1) simple interpretation of writing

32 the mower agreement

33 obviously ambiguous

34 admit extrinsic evidence to explain

35 even under objective approach

41 (2) supplement partial integration

42 Q1 obviously an integration

43 Q2 complete integration

44 +merger clause

45 −but agreement's terms obviously omitted

46 if so, supplement

51 (3) incorporate by reference

52 thing incorporated needn't be writing

53 terms of oral conversation

54 manifested intent to be part of K

61 STATUS

62 MENTAL INCOMPETENCE

63 +poor health

64 +retirement facility

65 +doctor's urging

66 physical health

67 not necessarily mental

71 +not understand

72 +senile

73 tone? jokingly?

74 +old friend

75 should know her well

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81 legal test

82 negate cognitive ability?

83 evidence weak

84 negate volitional ability?

85 evidence weak

86 if volitional, also show notice

87 none here

91 waiver?

92 plead as affirmative defense

101 MISTAKE

102 −AS TO ECONOMIC VALUE

103 generally no relief

104 exception fiduciary

105 inapplicable

106 exception hold out as expert

107 experienced RE investor

108 did he tell her that?

111 −AS TO SIZE OF LOT

112 important?

113 650,000 versus 925,000

114 mutual?

115 both apparently assumed 3 acres

116 but assumption of the risk?

117 asked for an estimate

118 told my best guess

121 unilateral

122 if known to other party?

123 +civil engineer

124 −Are you sure?

125 −eyesight

126 +she assured him

131 waiver

132 pleadings

141 EQUITY

142 specific performance decrees

151 inadequate remedy at law?

152 the real estate

153 early common law

154 every parcel unique

155 modern common law

156 more skeptical

157 but one of the largest lots

158 the riding mower

159 difficult to ascertain fair market value?

159.1 no showing

159.2 inability to cover?

159.3 no showing

161 economically inadequate consideration?

162 minority view: standing alone

163 650,000 vs. 925,000

164 majority view: other inequitable conduct

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165 no duress

166 no outright fraud

167 Are you sure?

168 weak

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QUESTION 47

Ms. Ing was an elderly, somewhat eccentric widow who lived alone in the family house she had

occupied with her late husband. She also owned the property next door, a rundown farm that had been owed by

her parents.

Mr. Jarrel owned nearby realty. He was worried that the dilapidated condition of the farm was

depressing his property value. He thought that Ing was fairly gullible; and in a conversation, he told her that he

had heard a rumor that the county was going to condemn the farm. (He had not heard any such rumor, but he

hoped that his statement would prompt Ing to sell the farm.) Mr. Kenyon was a friend of Jarrel. Jarrel told him

that he, Jarrel, had told Ing about a crazy rumor about the county condemning the farm. He added that since he

thought Ing believed what he said, Ing might be ready to sell at a really great price. Kenyon thanked him for the

information.

On May 1, 2008, Kenyon met with Ing. Kenyon said that since there is lots of talk about what‘s going

to happen to realty in this county, he hoped that Ing would be willing to sell him her farm for $300,000. Ing

briefly considered the proposal and then agreed.

On May 20, 2008 Kenyon and Ing met at his attorney‘s office to sign the contract. Before signing,

Kenyon said, I‘m having second thoughts; there‘s even more talk now about declining real estate values. If I pay

$300,000, I don‘t know whether I‘ll have the money to fix up the barns to store all my own equipment. Ing said,

I tell you what I‘ll do. I have a large shed on my property—just across the property line. You can use that shed

rent free for two years to store your stuff. They shook hands and then immediately signed a writing. The writing

provided that: On July 1, 2008, Ing would give Kenyon the deed to the farm, and he would pay her $300,000;

even before July 1, Kenyon could move onto the property to begin making improvements; and this writing

supersedes all prior oral or written agreements between the parties relating to this real estate transaction. The

writing made no mention of the shed.

Kenyon moved onto the property on May 22. He spent $1,500 excavating for a new barn. During the

excavation, he encountered some strange rocks just below the surface. He asked his friend, Ms. Lucero, a

mineralogist, to inspect the rocks. On May 25, she told him, You are so lucky. These ‗rocks‘ are rare minerals

used in the production of computer chips. If this deposit is as big as it seems to be, it‘s worth at least half a

million! Kenyon thanked her, and asked her not to mention the discovery to anybody.

On May 26, Kenyon hired a contractor to rush to put up a barn at the excavation as soon as possible.

Kenyon paid the contractor $15,000 when they entered into the agreement.

The next day, May 27, Ms. Ing was walking across the farm property when she found the excavation

site. She had never seen such strange stones on her property before. She phoned a friend, Professor Merlo, who

taught Geology at the University of Morena. He met her at the site later that day and told her what Lucero had

told Kenyon.

On May 28, Ing calls Kenyon and tells him that the deal is off in light of what I‘ve discovered on the

property. Kenyon responds, Neither of us knew about it, and a deal‘s a deal. I expect you to keep your word. Ing

refuses to convey to Kenyon.

KENYON SUES ING for money damages and, alternatively, for a decree ordering her to (1) convey

the farm to him and (2) allow him the rent-free use of the shed on her adjacent property. In her answer, she

admits that there was an agreement but denies that it is enforceable.

At trial, the undisputed expert testimony is that: (1) On May 20, the fair market value of the farm was

$400,000; and (2) in light of the later discovery, the value is now $900,000.

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QUESTION 47

1 D'S COMPETENCY

2 elderly

3 eccentric

4 somewhat

5 gullible

6 view #1: purely cognitive test

7 not enough

8 view #2: volitional component

9 not enough

11 STATUTE OF FRAUDS

12 Question #1: apply?

13 real estate clause

14 sale of property #1

15 shed on property #2

16 consider it a rental?

two-year provision

21 Question #2: comply?

22 NOTE OR MEMORANDUM

23 complete memo of essential terms

24 omits shed term

25 P unwilling to enter K without that term

26 signed?

27 yes

31 PART PERFORMANCE

32 P moved onto

33 P begins to make improvements

34 initially minimal

35 $1,500

36 later substantial

37 $15,000

38 but later $15,000 in good faith?

39 after discovery

39.1 rush

39.2 as soon as possible

39.3 at the excavation

39.4 make it more difficult for D to discover?

41 ADMISSION

42 answer admitted there was an agreement

43 UCC recognizes this method

44 but UCC inapplicable to realty Ks

51 Question #3: consequence?

52 prevailing view: only voidable

53 must plead as affirmative defense

54 +denies that it is enforceable

55 −no specific reference to S/F

56 −ergo, waiver

61 PAROL EVIDENCE RULE

62 enforce D's oral promise about the shed?

63 Question #1: integration?

64 final embodiment of part

65 real estate sale

66 yes

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71 Question #2: complete?

72 Corbin

73 actual intent

74 perhaps partial

75 Willison

76 similarly situated parties

77 merger clause

78 quote it

79 probably complete

79.1 Wigmore

79.2 same subject-matter

79.3 writing relates to property #1, shed on property #2

79.4 perhaps partial

81 MISTAKE BY D

82 at time of K formation

83 later discovery irrelevant

91 MUTUAL

92 neither knew

93 Neither of us

94 MATERIAL

95 Lucero estimated half a million

96 expert testimony: $500,000

97 much larger than K price

98 ASSUMPTION OF RISK

99 no evidence of conscious disregard by Ing

101 FRAUD BY P

102 in the inducement

103 attributable to P?

104 (1) initially Jarrel told her

105 but Kenyon later learns

106 in later conversation, he refers to county

107 adopts the statement

108 (2) later even more talk

109 true?

111 reliance

112 short time lapse between the two conversations

113 reasonable reliance?

114 she could have checked with county

115 but trend toward pure heart/empty head? Standard

121 ECONOMIC INADEQUACY OF P'S CONSIDERATION

122 distinguish from legal sufficiency

123 in equity

inadequate remedy at law

realty contract

traditional view: each parcel unique

modern view: more demanding

131 WHEN MEASURE?

132 only at time of K formation

133 only $100,000 more at that time

134 one third of the K price

135 later discovery $900,000

136 but during performance stage

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141 ECONOMICALLY INADEQUATE?

142 no objective standard

143 impressionistic

151 STANDING ALONE?

152 some courts: yes

153 most courts: no

154 at least quasi-fraud or quasi-duress

155 P's adoption of Jarrel's statement

156 P's statement about even more talk

157 later P tried to suppress information about discovery

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QUESTION 48

Mr. Formoso owned a company that manufactured lawnmowers. Ms. Gallinas owned a company that

supplied metal components. There were only a handful of metal component suppliers in the state, and her

company was by far the biggest and had a stellar reputation.

On March 1, 2005 Formoso contacted Gallinas. During their telephone conversation, Gallinas promised

that for a period of three years she would deliver 2,000 metal gas tanks each month to Formoso. Formoso

promised to pay her $13.75 for each tank. Before the end of the conversation, Gallinas said that she would

consent to the terms only if Formoso agreed to arbitration of any dispute under the contract. She stated, I hate

going to court. It always takes so much time and money. Formoso responded that he strongly preferred regular

judicial remedies, but I know you‘re easily the best in the business. I guess I have no choice.

On March 3, 2005 Formoso sent a letter to Gallinas. The letter referred to the quantity we agreed to a

few days ago, the three-year term, and the arbitration provision you [Gallinas] demanded. Formoso signed the

letter and mailed it to Gallinas.

On March 12, after receiving Formoso‘s letter, Gallinas emailed Formoso. The email stated that she

was prepared to ship Formoso a couple of thousand tanks each month. Like every other company email, the

bottom of Gallinas‘ email read: Gallinas Metal Components, 4250 West Point Court, Morena, El Dorado 54843.

On March 15, Gallinas shipped the initial delivery. On March 17, after receiving the shipment,

Formoso sent Gallinas a check in payment. Gallinas deposited the check on March 20 and sent the second

shipment on April 1.

The same day Formoso heard a rumor that Gallinas was having severe cash flow problems. On April 3

Formoso phoned Gallinas. At the outset, he said, I‘m just about to cut your second check. But I heard a

disturbing rumor that your cash situation is pretty bad. Gallinas answered, I‘m afraid that‘s right. My bank

unexpectedly called in a loan, and I‘m hurting bad. Your check is sure going to come in handy. Formoso then

said, Before I send it, I want to revisit something we talked about earlier. It still really bothers me that I won‘t

have full judicial remedies if anything goes wrong with your tanks. I‘d feel a lot better about parting with my

money if we didn‘t have that arbitration clause. There was a long pause. Then Gallinas spoke, OK. I can read

between the lines. Have it your way. Forget about the arbitration clause. But please, I beg you, just send the

check ASAP. Formoso said, Given your tough situation, I thought you‘d see it my way. Then we‘re agreed that

it‘s as if arbitration was never part of our deal.

On April 4 Formoso sent the check.

On April 15 several of Formoso‘s customers began complaining about leaks from the gas tanks, and a

number sued Formoso. (All the tanks were from Gallinas‘ initial shipment.)

On April 20 Formoso files suit against Gallinas for damages for breach of the implied warranty of

merchantability. Gallinas files an answer. The answer stated that Gallinas admits that the parties reached a

general understanding on March 1, 2005. The answer also alleged that the parties had agreed to arbitrate any

dispute under their agreement. On the basis of that allegation, she moved to dismiss the complaint and for an

order compelling arbitration.

Otherwise, the answer consisted of a general denial.

WILL THE JUDGE PROBABLY ORDER ARBITRATION? Assume arguendo that the judge denies

the motion for arbitration. WILL FORMOSO PROBABLY RECOVER IN THE LAWSUIT? DO NOT

DISCUSS THE MEASURE OF DAMAGES.

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QUESTION 48

1 STATUTE OF FRAUDS

2 QUESTION #1: WITHIN PURVIEW?

3 one year clause

4 +three years

5 −termination clause

6 clause not simply restate discharge doctrines

7 performable=terminable?

8 split of authority

9 personal property clause

9.1 subject matter personalty

9.2 $5,000

11 QUESTION #2: SATISFY

12 one year clause

13 what if one year clause and PP clause?

14 must satisfy both sets of requirements?

15 traditional S/F requirements stricter

16 more complete memo

17 full performance on one side

18 only one shipment

19 only two payments

19.1 no admission exception under traditional S/F

21 UCC 2-201

22 2-201(1) D's email

23 signed by D

24 Gallinas Metal Corporation

25 indicate a K has been made

26 no futuristic language

27 quantity term

28 a couple of thousand

29 ambiguous

29.1 admit extrinsic evidence to clarify

31 2-201(2) P's letter

32 signed by P

33 Yes

34 confirmation


36 but better view: past tense

37 here agreed

41 quantity term

42 the quantity

43 -ambiguous

44 admit extrinsic evidence to clarify?

45 -so vague as if no quantity term

46 sent to D

47 mailed

48 actually received

49 no objection

51 acceptance and receipt

52 acceptance - title

53 receipt - possession

54 first shipment − both

55 traditional S/F − render entire K enforceable

56 UCC − only this shipment

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57 but complaints relate to first shipment

61 payment

62 payment

63 for first and second deliveries

64 traditional S/F - entire K enforceable

65 UCC − only those shipments

66 but complaints relate to first shipment

71 admission

72 +a general understanding

73 not say contract

74 +agreed to arbitrate

75 implicitly admit valid K?

81 ARBITRATION

82 provision unconscionable at outset?

83 procedural

84 knowing

85 involuntary?

86 other suppliers

87 but stellar reputation

88 easily the best

89 by far the biggest

89.1 no choice

89.2 only a handful

91 substantive

92 courts at first opposed to ADR

93 now a favorable attitude

101 Part of the K?

102 +in original agreement

103 -apparently deleted by later modification

104 but no consideration for modification

105 but UCC 2-209

111 voidable on the ground of duress?

112 physical

113 no

114 economic

115 illegal threat

116 withhold second payment

117 Before I send it

118 feel a lot better parting

119 read between the lines

119.1 threat to breach K

121 dire situation

122 I beg you

123 loan called in

124 Formoso not cause

125 but breach would aggravate

131 interpretation

132 claims relate to first shipment

133 Is the deletion retroactive or applicable only to future shipments?

134 could delete prospectively

135 but as if arbitration was never part of our deal

12

141 modification enforceable under S/F?

142 as modified, K still under S/F

143 all acts−payment, etc.−precede modification

144 also applicable to the modification?

145 admission exception?

146 no reference to the modification

151 PLEADINGS

152 other than arbitration, general denial

153 waive unenforceability issues?


155 if render void, sufficient

156 if merely unenforceable, need affirmative defense allegation

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QUESTION 49

Mr. Estivez is a plumbing contractor in Morena. Ms. Fong owned an old apartment complex in

Morena. In early 2004 she decided to replumb the complex. On April 1, she informally hired Estivez to do the

plumbing.

Ms. Grant owned a large Morena plumbing supply company. Estivez sometimes bought his supplies

from Grant. On April 2, Estivez and Grant had an oral conversation. He told Grant that he wanted to place a

large order, including complete sets of fixtures for 100 Standard Brand wash basins and 50 toilets, for the Fong

replumbing project. They agreed upon $15,000 as the price. Estivez said that he would expect the fixtures no

later than April 30. Grant indicated that she would expect payment within three days after Estivez received the

bill for each delivery.

Since the quantity of the purchase was much larger than any order he had placed in the past, Grant

inquired about how much cash Estivez had in his business checking account. Estivez knew that at that time, the

account was overdrawn. However, he said, I‘ve got plenty in the account−maybe twenty thousand. Grant

replied, That sounds great to me. Let‘s shake.

On April 3, Grant sent Estivez a letter. In part, the letter read: It will be nice doing business with you

again. I‘m especially pleased that the quantity of your order is so large. Although she did not initial or sign the

letter, the top of the page included the letterhead for her company.

On April 6, Estivez received Grant‘s letter. Later that day, he sent her a letter. In part, the letter stated:

The order for the fixtures (100 basins, 50 toilets) is a hefty one. However, it just reflects how much faith I have

in you as a supplier. In every order in the past in which you‘ve agreed to be my supplier, you‘ve delivered high

quality parts. Again, I‘ll accept delivery any time before the 30th. Estivez signed his letter.

On April 10, Grant began delivering and Estivez accepted the deliveries. On April 13, Grant sent

Estivez a bill in the amount of $8,000 for the fixtures already delivered.

On April 14, Estivez was speaking with Huston, an acquaintance of both Estivez and Grant. Huston

told Estivez that on April 12, Grant had to pay a large gambling debt and mat as a consequence, Grant was

finding it difficult to make mortgage payments on the store where her business was headquartered. Estivez

thanked Huston for this useful, valuable information.

On April 15, Estivez received Grant‘s bill. On April 19, Grant phoned Estivez to inquire when he was

going to pay the initial bill. Estivez said he was sorry, but he had had some unexpected major medical expenses.

I can‘t afford to pay you $15,000. But how about this? If you reduce the overall price to $12,000, I‘ll send you

eight immediately. Grant reluctantly agreed. Estivez then sent Grant a check for $8,000. Grant cashed the check.

Subpart A

On April 20 Fong cancels the project. Estivez refuses to order any more fixtures from Grant. CAN

GRANT SUCCESSFULLY SUE ESTIVEZ FOR BREACH OF CONTRACT? If so, will she recover on the

basis of the original $15,000 purchase price or $12,000?

Subpart B

Assume alternatively that the Fong project proceeds. Huston tells Grant what he told Estivez about her.

Incensed, Grant refuses to deliver any further fixtures. CAN ESTIVEZ SUCCESSFULLY SUE GRANT FOR

BREACH OF CONTRACT? Grant filed an answer stating that she had reached an oral understanding with

Estivez.

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QUESTION 49

1 GRANT SUES ESTIVEZ

2 STATUTE OF FRAUDS

3 within the Statute?

4 $5,000

5 $15,000

11 satisfy the Statute?

12 memorandum

13 letter prepared by D under (1)

14 April 6

15 K has been made

16 present tense


18 quantity

19 100 basins, 50 toilets

19.1 signed by D

19.2 Estivez signed

21 letter prepared by P under (2)

22 April 3

23 confirmation

24 some equate with (1)

25 others demand past tense

26 will futuristic

27 but certain will do business

28 if it must be past tense, this letter insufficient

31 sufficient against sender?

32 quantity term

33 vague

34 signed

35 −no signature

36 −no initial

37 +but letterhead

41 Estivez received

42 didn't object

51 consequences of non-compliance

52 in most jurisdictions, unenforceable

53 must plead a*n affirmative defense

54 not done here

55 ergo, waive defense

61 P'S CONDITIONS

62 deliver the supplies

63 fulfillment

64 delivered some

65 technical failure

66 didn't deliver the rest

67 excuse

68 Estivez refuses to order more

69 prospective non-performance

71 D'S DUTY OF IMMEDIATE PERFORMANCE

72 performance?

73 for the Fong replumbing project

74 Fong cancels

75 this K subject to agreement with Fong?

76 did she know it was informal

77 no condition language

15

81 discharge

82 no basis evident

83 ergo, breach

91 $15,000 VERSUS $12,000

92 pre-existing duty rule

93 common law

94 but 2-209 abolish

95 one-sided modification effective

101 fraud

102 statement about medical expenses

103 false

104 not specifically stated false

105 if false, must have known

106 induced agreement to modification

111 duress

112 physical?

113 tortious

114 fraud, supra

115 reasonableness immaterial

121 economic

122 Estivez didn't create Grant's situation

123 gambling debt

124 but he knew of it

125 Huston

126 he exploited it

127 no reasonable alternative

128 loan?

129 need more facts

131 ESTIVEZ SUES GRANT


133 within Statute?

134 supra

141 satisfy Statute?

142 Grant's letter under (1)

143 April 3

144 indicate that K has been made

145 present tense


147 will

148 here means certain will do business

151 signed

152 -no initials

153 -no signature

154 quantity

155 vague

161 Estivez' own letter under (2)

162 April 6

163 confirmation

164 order

165 order … in which you've agreed

166 past tense

167 signature

16

168 he signed

169 quantity

169.1 100, 50

171 did she receive?

172 no facts

173 no evidence of objection

181 mitigating doctrines

182 admission in answer?

183 oral understanding

184 not state valid K

185 not restate terms

191 FRAUD IN THE INDUCEMENT

192 she asked about his finances

193 statement plenty-maybe $20,000

194 false − overdrawn

195 Estivez knew

196 induced her to enter agreement

197 unwilling to do so unless he had the money

198 but no indication she plead affirmative defense

199 waiver?

201 P'S CONDITIONS

202 payments

203 fulfilled

204 made some

205 technical failure

206 not make others

207 but she said not deliver any more

208 prospective non-performance

209 but because of his fraud

209.1 supra

209.2 right to say it

211 D'S DUTIES

212 deliver

213 performed

214 some delivered?

215 discharge?

216 none evident

217 ergo, breach

17

QUESTION 50

Joshua Grant was 23. When he was young, he had been diagnosed as having subnormal intelligence.

(The undisputed expert testimony is that while he was chronologically an adult, his mental age was

approximately 16.)

Grant lived at home with his elderly mother. She suffered from severe arthritis and was largely

confined to bed. Her doctor had advised her to purchase special home fitness equipment as part of her treatment.

Consequently, in early April 2004 his mother instructed Grant to go to a fitness equipment company to purchase

the exercise equipment her doctor had prescribed.

Hamilton owned a nearby fitness equipment company. The residence and the store were in an

economically depressed area in Morena. The bad debt percentage for Hamilton‘s account receivables was 10%

compared to a 5% average in Morena. His insurance premiums were roughly 50% above the Morena average for

businesses of comparable size.

When Grant initially entered Hamilton‘s store, Hamilton greeted Grant. Grant explained the type of

equipment his mother needed. As they spoke, Hamilton sensed that Grant was having a difficult time

understanding what Hamilton was saying about the equipment and financing the purchase. Grant said that he

could probably afford only the cheapest exercise machine that met the doctor‘s prescription. Hamilton realized

that his cheapest model would probably meet Mrs. Grant‘s medical needs, but he pressured Grant to look at

more expensive models. He told Grant, If you want your mom to get real relief from her arthritis, you‘d better

consider this model, our Mark XV, not the cheapest model, the Mark V. (Hamilton generally sold the Mark V

for $600 and the Mark XV for $1,000.)

Eventually Hamilton wore down Grant‘s resistance, and Grant agreed to buy the Mark XV. Grant

asked, What‘s your price for the Mark XV? Hamilton said, I like you, kid. I‘ll make you a special deal at

$1,700. Grant was reluctant, but he said, If my mother really needs this to get rid of the pain, I guess I have no

choice. Hamilton said, Let‘s shake on it. You‘ve made a great deal for your mom. I guarantee you that the Mark

XV will do the trick for your mom, or you get your money back in 30 days. That‘s also guaranteed.

Hamilton took Grant into his office to wrap up the deal. Hamilton then prepared a writing, including

the following term: Merger. This writing embodies the parties‘ entire agreement and supersedes any prior oral or

written understandings. The writing made no mention of the money back guarantee. Grant placed his initials on

the writing and made a down payment of $500.

Hamilton delivered the equipment on May 1. Grant‘s mother used the equipment, but it was too

advanced for her and gave her no pain relief. On May 20, Grant informed Hamilton that he, Grant, wanted to

return the equipment and get his money back. Hamilton refused, saying, All sales are final.

HAMILTON SUES GRANT FOR THE BALANCE DUE ON THE CONTRACT. WILL HAMILTON

PROBABLY RECOVER? IN ADDITION TO DENYING LIABILITY, GRANT COUNTERCLAIMS FOR

THE RETURN OF HIS $500. WILL GRANT PROBABLY RECOVER? Grant‘s pleadings are sufficient to

raise any applicable enforceability problems. Do not discuss the measure of damages.

18

QUESTION 50

1 MUTUAL ASSENT

2 oral agreement

3 writing

11 CONSIDERATION

12 P promised to deliver equipment

13 bargain

14 D bargained for it

15 P gave it in exchange

16 legal value

17 detriment to P

18 no prior duty to transfer title

19 benefit to D

19.1 no prior right to equipment

21 MINORITY

22 not formally

23 23

24 exceeds either 18 or 21

25 but developmentally

26 16

27 but reason for rule: in most cases, appearance put the adult on notice

28 not evident to P here

31 any exceptions?

32 necessity

33 not for him

34 for his mother

41 MENTAL DISORDER

42 developmentally delayed

43 type of disorder?

44 not a psychosis

51 effect?

52 cognitive test

53 difficult time understanding

54 but not that extreme

55 test in the alternative

56 vulnerable to pressure tactics

57 wore down

58 but not that extreme

61 UNCONSCIONABILITY

62 common law

63 UCC as well

71 procedural

72 unknowing

73 P lied to D

74 involuntary

75 pressure

76 no choice

77 substantive

78 normally $1,000

79 $1,700

79.1 Murray's concept

19

79.2 bad debt twice as high

79.3 insurance premiums twice as high

79.4 but not justify singling this customer out


82 apply?

83 personal property

84 but under $5,000

85 satisfy by memorandum

86 essential terms

87 quantity term

88 has been made

89 wording of the document?

89.1 signature

89.2 initials OK

91 alternative methods of satisfying


93 acceptance title

94 here yes

95 receipt possession

96 yes

97 part payment

98 $500

101 FRAUD

102 normal price

103 $1,000 vs $1,700

104 intentional

105 material

106 D short on money

111 INTERPRETATION

112 add the guarantee?

113 parol evidence rule

114 integration?

115 finality

116 yes

121 complete integration?

122 +detailed writing

123 +merger clause

124 but only prior

125 contemporaneous

126 UCC governs

127 certainly

128 partial integration

129 supplement with consistent additional term

129.1 guarantee consistent


132 fraud, supra

141 pleadings

142 sufficient to raise enforceability problems

143 supra

151 enforceability problems

152 on the claim, use as defense

153 on the counterclaim, use as a basis for restitution of the $500

21

QUESTION 51

Jessica Jason was a high school student in Morena. Her father was a dealer in classic cars. When one of

her classmates passed away, Jessica became depressed. At her physician‘ suggestion, Jessica consulted a

psychiatrist who placed her on anti-depression medication. (Jessica remained on the medication throughout all

the events described in this question.)

To help cheer Jessica up, her father gave her one of his classic cars, a 1972 Jaguar. He had the car re-

registered in Jessica‘s name. Jessica began driving the car to school. One of the teachers, Mr. Kassano, was an

amateur car enthusiast He admiringly noticed the Jaguar in the parking lot. He was Jessica‘s English teacher, the

coach of the tennis team she played on, and her home room counselor

On September 1, 2003, as Jessica was getting into the Jaguar to drive home, Kassano approached her.

He said, Jessica, those are pretty hot classic wheels. Any possibility that you‘d be interested in selling me that

Jaguar? Jessica said that she would have to discuss that possibility with her father.

That night Jessica talked with her father. Her father told her that the decision was hers. He said, I gave

you an adult‘s car, and you can make an adult decision whether you want to keep it or sell it. Jessie, it‘s up to

you.

On September 2, just before school started, Jessica told Kassano that he could come over to inspect the

car and discuss a possible purchase. Later that afternoon Kassano visited Jessica at her house. Initially, Kassano

looked under the hood. He said, It doesn‘t look as if this is the original engine. I‘d guess that it‘s been rebuilt.

Kassano was being honest when he made the statement, but in fact the engine was the original. Jessica believed

Kassano‘s statement

Continuing his inspection of the car, Kassano examined the interior. He realized that the Jaguar had its

original wood paneling. However, by now, he had concluded that Jessica knew little about cars. He commented,

Just as the engine was rebuilt, it looks as if this isn‘t the original paneling. That reduces the value a bit. Again,

Jessica believed Kassano‘s statement. She trusted him in part because he was her counselor.

After inspecting the car, Kassano said, OK. Let‘s talk money. I‘d be willing to pay you $11,000 for this

baby. It‘s worth that much to me. Jessica responded, My dad told me that it‘s up to me, and that sounds like a lot

of dough to me. I guess we‘ve got a deal. Kassano immediately took out two pieces of paper stapled together

and on the top sheet wrote, Jaguar license number CSU247, seller Jessie Jason, buyer Vern Kassano, price

$11,000. (In fact, the license number was CSU246.) He put his signature on the top sheet and handed the sheets

to her. He added, Jessie, if you sign on the dotted line, I‘ll have the check for you tomorrow. She put her initials

on the bottom sheet of paper.

That evening Jessica described the transaction to her father. She mentioned what Kassano had said

about the paneling. Her father said, Wait a minute. This guy claims to be a car enthusiast. Any real enthusiast

would instantly recognize that that was the original paneling. This guy is trying to cheat you. You‘re not turning

the car over to him, honey. On her lather‘s advice, Ms. Jason refuses to deliver the car to Kassano.

KASSANO FILES SUIT AGAINST HER FOR BREACH OF CONTRACT. He seeks a specific

performance decree or, in the alternative, damages. As her answer in the case, she filed a general denial. At a

pretrial deposition, Jessica testified: I‘ll admit we discussed the sale of the car. We had sort of an understanding.

At trial, there is undisputed expert testimony that: (1) a 1972 Jaguar with the original engine is worth $7,000

more than one with a rebuilt engine; and (2) a 1972 Jaguar with the original wood paneling is worth $1,000

more than one with replacement paneling. Can Kassano probably recover? Do not discuss the measure of

damages.

22

QUESTION 51

1 MUTUAL ASSENT

2 writing

3 signed

4 indefinite?

5 no time of delivery stated

6 no place of delivery stated

7 but personal property

8 ergo Article II of UCC

9 gap fillers

11 CONSIDERATION

12 promise to pay $11,000

13 legally sufficient

21 ENFORCEABILITY

22−MINORITY

23 legal test

24 early common law 21

25 now 18

26 her age

27 −in high school

28 −year in high school?

29 +adult

29.1 +drives

29.2 +registered in her name

29.3 she has burden of proof on affirmative defense

29.4 even if otherwise good defense, waived?

29.5 general denial in answer

29.6 not plead an affirmative defense

31 −INSANITY

32 legal test

33 majority: cognitive or volitional

34 minority: purely cognitive

35 her mental state

36 -depression

37 -psychiatrist

38 -medication

39 not enough

39.1 waiver?

39.2 supra

41−INTOXICATION

42 alcohol or drugs

43 medication

44 no showing of effect on her competency

45 even if, waiver?

51−DURESS

52 physical

53 criminal or tortious

54 any here?

55 fraud

56 economic

5? -teacher

58 -coach

59 -counselor

59.1 but illegal threat?

59.2 even if, waiver?

23

61−MISREPRESENTATION-UNINTENTIONAL

62 not original engine

63 material

64 $7,000

65 state of mind

66 he thought it was true

67 her reliance

68 +subjectively honest

69 reasonable?

69.1 required for unintentional

69.2 could have asked her father


71 MISREPRESENTATION−INTENTIONAL

72. paneling

73 his state of mind

74 intentional deceit

75 material

76 relaxed or eliminated if intentional

77 only $1,000

78 compared to $11,000

79 her reliance

79.1 subjective

79.2 reasonable

79.3 relaxed or eliminated if intentional

79.4 could have asked her father


81−MISTAKE

82 engine

83 mutual

84 both wrong

85 material

86 $7,000

87 unless she assumed risk

88 she arguably negligent

89 could have asked father

89.1 but negligence is not gambling frame of mind


91 −MISTAKE

92 paneling

93 unilateral

94 presumptively no relief

95 but he knew

96 but he caused

97 material

98 only $1,000

99 assumption of risk

99.1 majority: irrelevant here

99.2 R2d {{ 153-54


101−STATUTE OF FRAUDS

102 apply?

103 personalty

104 UCC

105 $5,000 threshold

106 $11,000 here

24

111 memorandum

112 original Statute

113 correct

114 wrong license plate number

115 complete

116 scanty

117 but UCC controls

118 signed by D

119 quantity term

119.1 one

119.2 indication that K has been made

119.3 vague writing

121 multiple documents

122 two pages

123 signed does not refer to other

124 but stapled together

125 but same subject matter?

126 what else other than the signature is on the page?

131 alternative: admission

132 controversial

133 but the law in El Dorado

134 deposition

135 we discussed

136 not enough

137 sort of an understanding

138 vague

141 effect of non-compliance

142 general denial

143 satisfactory if void in El Dorado

144 unsatisfactory if merely unenforceable in El Dorado

151 −ECONOMIC INADEQUACY OF CONSIDERATION

152 in equity

153 specific performance decree

154 P has an inadequate remedy at law

155 classic Jaguar

156 how easy to purchase a similar Jaguar?

157 special defense

158 vague standards

159 but $8,000 compared to $11,000

159.1 minority: standing alone a defense

159.2 majority: must be accompanied by inequitable conduct

159.3 supra

25

QUESTION 52

Mrs. Sylvia Harden and her 18-year-old son, Steven, were planning to open a new exercise and fitness

club in a wealthy area in Morena. They hoped for a highly publicized Christmas holiday opening.

Mr. Imwalle was the sole proprietor of one of several El Dorado companies which marketed exercise

equipment manufactured by various companies. In August 2002, he learned that the Hardens were going to open

their new club. He visited them on September 10. Mrs. Harden said that she and her son were planning a holiday

opening with a large-scale promotional campaign. Mrs. Harden explained to him that they wanted the longest

lasting equipment because she intended to turn the business over to Steven; she wanted a business with

equipment that he could maintain well into his adult life. Imwalle knew that although less expensive, Karst

weights were much more durable than Johnson equipment. However, he suspected that the type of clientele the

Hardens‘ club would attract would not put the equipment to intensive use, and he doubted that the Hardens

would discover the difference. By the end of their conversation, they had agreed that the Hardens would

purchase ten Johnson aerobic machines, nine John stationary bicycles, and 20 sets of different types of Johnson

weights for $51,000.00.

On October 1, Imwalle again visited the Hardens. On this occasion, he brought a four-page Contract

Document with him. Paragraph 13 of the document listed the items being purchased, ten aerobic machines, nine

bicycles, and 30 sets of weights. Paragraph 14 specified delivery no later than December 1, 2002. Paragraph 17

provided that the Hardens would pay $5,000 on delivery and the balance on January 31, 2003.

By mid-November, the Hardens still had not received any equipment from Imwalle‘s warehouse. Mrs.

Harden phoned Imwalle and asked, When can we expect delivery? We‘re readying the site, but we can‘t open

unless we have your equipment in the workout rooms. Imwalle explained that it looks as if there‘ll be a bit of a

delay at Johnson‘s end in getting you the equipment you ordered. Upset, Mrs. Harden asked, Isn‘t there any way

you can hurry them up to get it here on time? Imwalle said, Well, I know the guy at the Johnson plant who sets

the shipping priorities. If we gave him a little under the table, he might make you an immediate priority. It‘ll

probably take $2,000. Mrs. Harden said that she was uncomfortable doing something shady but agreed. Imwalle

then said, You‘re being great about this. I‘m so confident that the $2,000 will do the trick that I‘ll move delivery

up to November 25th. The Contract Document was never amended to reflect a November 25 delivery date.

However, Mrs. Harden gave Imwalle the $2,000, he passed half on to the Johnson employee, and Imwalle was

able to deliver on November 25. Mrs. Harden paid Imwalle $5,000 on that date.

The club opened on December 15th. One of the first persons to join the club was Ms. Lucero, a veteran

triathlete. In early January, she struck up a conversation with Mrs. Harden. Mrs. Harden told Lucero that she,

Mrs. Harden, hoped that her son would continue the business. Lucero then asked, If you want to keep this club

going for awhile, why did you buy Johnson equipment? Everybody knows that it doesn‘t last as long as, for

example, stuff from Karst. The Johnson stuff is expensive and looks nice, but Karst equipment is really built to

last. After hearing that, Mrs. Harden called Imwalle and demanded to know whether he also carried Karst

equipment. When he admitted that he did, she said, I now realize that you conned me on this sale. You better get

yourself a lawyer if you want to see another penny from us.

IMWALLE SUES THE HARDENS FOR BREACH OF CONTRACT. In their pleading, the Hardens

demand the return of the $2,000 payment.

26

QUESTION 52

1 MINORITY

2 Steven

3 definition

4 18

5 21

11 consequences

12 voidable

13 disaffirm until adulthood

14 but mut return

15 personal to the minor

16 unavailable to Mrs. Harden

21 THE STATUTE OF FRAUDS


23 $500 or $5,000

24 $51,000

25 comply ˗˗ memorandum

26 first contract

27 indicates

28 quantity

29 wrong: 20 ˗˗ 30

29.1 but acceptable

29.2 signed

29.3 facts silent

31 revised agreement

32 $2,000

33 November 25

34 incomplete

35 inaccurate

36 still satisfactory if signed


42 UCC with respect to

43 no longer all or nothing

44 but evidently took all the goods

51 part payment

52 $5,000 toward the $51,000

53 $2,000

54 with respect to

55 apportion

61 defense if unsigned

62 but pleadings

63 waive?

71 FRAUD

72 statement about durability

73 false

74 material?

75 last for son

76 knowing?

77 yes

81 MISTAKE

82 subject matter

27

83 durability

84 very important to her

85 material

86 unilateral

87 norm: no relief

88 but induced

89 but known to P

91 ILLEGALITY

92 illegal act

93 bribery

94 serious

95 contemplated at the time of contracting?

96 committed during performance

97 forfeit rights under the contract

101 CONSIDERATION

102 pre-existing duty to deliver

103 but accelerated date

104 even if no consideration, not powerful enough

105 already paid the $2,000

106 need a doctrine that will allow recovery of the $2,000

111 FRAUD

112 said pass the $2,000 to employee

113 pocketed half

114 intention at the time of the statement?

115 short time lapse

116 infer the same intent earlier

121 ECONOMIC DURESS

122 illegal threat?

123 not late yet

124 suggest would be late

125 dire situation

126 holiday opening

127 promotional campaign

128 large-scale

129 no alternative

129.1 several companies

129.2 too late then?

131 ILLEGALITY

132 illegal act

133 bribery

134 uncomfortable

135 but realized shady

136 but agreed

141 ordinarily not disturb status quo

142 if so, no refund

143 not in pari delicto exception?

144 he more experienced in the field

145 he guilty of fraud

146 he guilty of quasi-duress

147 but moral turpitude

28

QUESTION 53

Felton was a wealthy socialite in El Dorado. He lived rather extravagantly. Among his other holdings,

he owned a rather unique, valuable parcel of realty on the outskirts of Morena. He was 63 years of age. In the

early 1990s he had been institutionalized for a mental disorder. He took medication for that disorder, and he still

battled chronic alcoholism.

Guist was a financial advisor. Although she was not a lawyer, she knew a good deal about the law

related to realty transactions. She had long been a close friend of the Felton family. Her late father had been the

attorney for Felton and Felton‘s father. Guist was familiar with Felton‘s struggle with alcoholism, but Guist did

not know about Felton‘s mental illness.

On January 5, 2001, Guist happened to meet Felton at a party. Guist could tell that Felton had been

drinking. Felton was loudly complaining that he was running out of money because of bad stock deals. Guist

began to pay particular attention when she heard Felton state that he, Felton, might have to get rid of his realty,

parcel. After hearing Felton‘s statement, Guist decided to walk over to speak with Felton. She struck up a

conversation with Felton.

During the conversation, Felton said that he had a lot of money in El Dorado Power stock and that he

had heard that E.D.P. was on the verge of bankruptcy. On the one hand, Guist knew that that rumor was

circulating. On the other hand, that very morning she had read a business consultant‘s report, demonstrating that

the rumor was unfounded. Guist simply ignored Felton‘s statement about E.D.P.. She quickly turned the

conversation to Felton‘s realty. Felton said that as he understood El Dorado tax law, if he sold the parcel he

would get favorable treatment, since I‘m over 60. Guist knew that that statement was false; to qualify for that

treatment, the taxpayer had to be at least 65 years of age. Knowing that, Guist said, Yeah, Clark, you are over

60. You well might get that break. Guist then added that given the longstanding friendship of their families, she

was willing to buy the realty to help Felton out of the bind you think you're in with E.D.P. stock. They agreed to

meet within a week or so at Guist‘s attorney‘s office.

They met there on January 16th. Guist‘s attorney had already prepared a writing for Guist and Felton to

sign. In the writing, Guist promised to pay Felton $300,000 for the parcel. The writing stated that the parties

would close on February 23, 2001.

Before signing, Felton told Guist that he was concerned about his ill cousin, Ms. Harvest. He asked

whether Guist would be willing to increase the purchase price by $15,000 and pay that amount directly to

Harvest Guist said, That'll be fine. On the last page of the writing, just before the signature lines, Felton added a

notation: Subject to agreement re Caroline Harvest. They both initialed that notation and signed the writing.

Within a week Guist hired an architect to draw plans for a commercial building she hoped to erect on

the parcel. He also applied for a building permit

A week later Felton happened to be talking to the business consultant who had written the report about

E.D.P.. Felton discovered both that the rumors about E.D.P. were false and that at the time of their conversation,

Guist knew that the rumors were false. He phoned Guist to call off Guist‘s purchase of Felton‘s realty. He told

her, I‘m not your bargain basement.

GUIST SUES FELTON IN EQUITY FOE BREACH OF CONTRACT. As his pleading, Felton files a

general denial. The case comes to trial today. At trial, there is undisputed expert testimony that when Felton

signed me writing, he was suffering from a psychosis that grossly interfered with his ability to control his

conduct Does Guist have a cause of action? Do not discuss the measure of damages.

29

QUESTION 53

1 ENFORCEABILITY

2 Insanity

3 not mere alcoholism

4 not mere past institutionalization

5 not mere use of medication

6 but psychosis

7 expert

8 undisputed

11 required effect?

12 grossly distort

13 consequence

14 some jurisdictions ˗ only a cognitive definition

15 control conduct

16 other jurisdictions ˗ volitional as well

17 but notice requirement

18 knew of alcoholism

19 not know of mental problem

21 Intoxication

22 notice

23 knew of at party

24 effect

25 worn off by the time of meeting

31 Economic duress

32 running out of money

33 but P not cause D's condition

34 Physical duress

35 not criminal

36 tortious

37 fraud

38 infra

41 Mistake

42 type

43 as to relevant tax law

44 material

45 yes

46 not mutual

47 unilateral

48 but known to P

49 in a sense, caused by P

49.1 rather than correcting, seems to confirm

51 Misrepresentation

52 as to EDP

53 D said

54 P knew false

55 but P ignored

56 fiduciary duty

57 she not an attorney

58 she had not represented D

61 as to tax law treatment

62 fact versus law

63 but she knew

64 reasonable to rely?

30

65 financial advisor

66 Did D know that?

67 family relationship

68 trust

71 Statute of Frauds

72 within Statute?

73 realty clause

74 note or memorandum?

75 generally complete

76 provision re cousin

77 a reference

78 parol admissible to explain

79 signature?

79.1 initials suffice

81 if not comply?

82 majority: unenforceable, not void


84 here only a general denial

85 therefore waived


87 promissory estoppel to lift the bar

88 infra

91 Did D disaffirm in time?

92 did P's acts cut off D's right?

93 P hires architect

94 how much money will P lose?

95 P's conduct reasonable?

101 Promissory estoppel theory for P

102 reliance?

103 architect

104 substantial?

105 fee unspecified

106 permit fee?

107 must be very substantial to lift the bar of the Statute

108 reasonable?

109 P should have had doubts about the contract

111 Economically inadequate consideration

112 in equity?

113 facts specifically state

114 P inadequate remedy at law?

115 old view: any realty contract

116 modern view more skeptical

117 but unique here

121 inadequate of consideration as defense

122 no expert testimony

123 inequitable conduct

124 majority view: also need inequitable conduct to bar

125 bargain basement

Other issues: unconscionability

31

QUESTION 54

Ms. Jankowski was in the business of growing bushes for Christmas wreaths. If the bush is already

established, it takes only four months for enough new growth for the type of large wreaths which Jankowski

sold. She owned a parcel of land on the outskirts of Morena with established bushes.

On June 1, 1999 a forest fire spread to her property. The fire destroyed not only some of her bushes but

even a long stretch of the road connecting the parcel to Morena. The damage to the road was so extensive that

the City Council expressed doubt that it had enough extra money in the budget to repair the road before the end

of 1999. She therefore decided to find another site for growing the bushes for her wreath business.

Herbst owned the only other parcel in the Morena area with established bushes. For the past six months

he had been advertising the parcel for sale for $400,000. His property was rather expensive, since it was much

closer to town. Jankowski met with Herbst on June 6 to discuss the possible purchase of his parcel. At the

beginning of the meeting, Jankowski acknowledged that she was basically over a barrel. Herbst told her frankly

that he intended to drive a hard bargain. He insisted on $600,000 as the price for his parcel. She reluctantly

agreed. However, she added that before finally committing, she wanted to ensure that she could afford the

irrigation to accelerate the growth of the bushes already on the property. Jankowski asked Herbst how much he

currently paid monthly for irrigation. He told her that the monthly bill was at max $1,500. In fact, during the

past two years the minimum bill had been $2,000, the largest bill had been $4,100. When he made the statement,

Herbst thought that the statement was true. However, his wife (who worked as his bookkeeper) paid the bills;

and he had not looked at the irrigation bill for several years.

On June 10, Herbst phoned Jankowski to tell her that the papers are ready to sign. However, he added

that he was having second thoughts and would not sign unless she orally agreed to one further provision. He

owned an adjacent piece of farm land, and as part of our deal he insisted on an easement allowing him to drive

farm equipment across the parcel. Jankowski replied, OK. Again, you‘ve got me over a barrel. They shook

hands, but they did not reduce the easement agreement to writing. They signed the writing Herbst had prepared,

providing that Herbst would convey title to Jankowski in early 2000. That afternoon Herbst stopped running his

ad in the local newspapers.

Jankowski immediately took possession and started growing in late June 1999. In late July she received

her first monthly irrigation bill for $3,500. When she contacted the irrigation district, she was given the correct

information about the parcel‘s recent bills. That very week the City Council met and decided that as a result of

an unanticipated budget surplus, they could afford to immediately repair the road connecting Jankowski‘s old

parcel to Morena. The work would begin immediately and be completed within two weeks. As soon as

Jankowski learned of the decision, she decided to try to get out of her agreement with Herbst.

She brings a declaratory judgment action seeking a declaration that she and Herbst do not have a valid,

enforceable contract for the purchase of his property. In her complaint, Jankowski described in detail the terms

of the agreement, including the easement. However, she specifically alleges that the agreement is unenforceable

under Morena‘s Statute of Frauds. At trial, there is undisputed expert testimony that both at the time of their

agreement and the time of trial, the fair market value of Herbst‘s property is $350,000. IS JANKOWSKI

ENTITLED TO THE DECLARATION?

32

QUESTION 54

1 PROCEDURAL SETTING

2 declaratory judgment

11 mutual assent

12 oral agreement

13 shook hands

14 writing

15 signed

21 consideration

22 given by D to P

23 ˗did P bargain for it

24 yes

25 ˗did D give it in exchange

26 yes

27 ˗did D incur legal detriment

28 yes

29 immediate right to possession

29.1 eventually right to title

31 consideration substitute

32 promissory estoppel

33 surrender possession

34 but could reenter

35 stop advertising

36 could resume

37 hadn't been able to sell

38 no evidence of change in state of market


42 contract within purview?

43 the land

44 real property

45 executory

46 not to executed transactions

47 surrendered possession

48 but has not yet conveyed

51 if so, satisfy?

52 preparation of memo

53 correct

54 complete?

55 easement

56 agreed

57 not included in writing

61 acts of part performance

62 by seller

63 has not conveyed

64 by buyer

65 paid some money

66 took possession

67 but no evidence of improvements

71 if not, effect

72 unenforceable

73 affirmative defense

74 evidently did plead here

33

81 MISREPRESENTATION

82 -negligent

83 he thought that representation was true

84 actually false

85 dramatically underestimated

86 material consideration


91 -intentional

92 he may have thought

93 but wife knew

94 not just family relationship

95 bookkeeper

96 impute to husband

97 no need to show material consideration

98 no need to show reasonable reliance

101 DURESS

102 -physical

103 inapplicable

104 -economic

105 she in difficult situation

106 over the barrel

107 hard bargain

108 but he not put her in that position

109 fire



113 majority view

114 minority view

115 unknowing?

116 no facts

117 involuntary?

118 Over the barrel

119 twice

119.1 Hard bargain

121 substantive unconscionability

122 $350,000

123 $600,000

131 MISTAKE

132 type of mistake

133 not merely economic value

134 so important that treat as subject-matter

135 if he did not know, mutual

136 material

137 ergo, general rule avoid

138 did she assume risk

139 she specifically inquired

141 Did she delay too long in asserting right to avoid?

142 she did not expressly affirm

143 delay

144 relatively short

145 no evidence of prejudice

146 no evidence of market shift

34

QUESTION 55

Falcone made a fortune in the stock market in the early 1990s. In mid-1998, he and his family decided

to move out of the city. He began looking for a business in a rural area.

Ms. Gage owned a llama ranch just outside Morena. Gage was a tax lawyer, but she had raised llamas

for roughly ten years. She was eager to sell because she knew that the federal government was about to impose

new restrictions on the importation of llama breeding stock; she feared that the new restrictions might spell

disaster for the llama breeding industry in the United States.

Falcone approached Gage to discuss the purchase of the ranch. Falcone told Gage that he, Falcone, had

heard that the llama business has a bright future and is just about to take off in America. Gage responded, Yup.

That‘s my opinion.

Early in their conversation, Gage told Falcone that she was a tax lawyer. Later in their conversation,

Falcone explained how he had profited from the stock market and added that it was his understanding that if he

immediately used those profits to purchase a business such as the llama ranch, for tax purposes Falcone would

have to recognize only part of the profit he had made from selling his stock. Falcone had never bothered to

consult an attorney to confirm his understanding. As a tax lawyer, Gage realized that Falcone‘s understanding

was erroneous; but she said nothing.

A few weeks later Falcone and Gage signed a written agreement for the purchase and sale of the ranch.

Just before they signed the writing, it occurred to Gage that the writing said nothing about mineral rights on the

property. Gage had heard that some ranchers had recently discovered valuable mineral deposits, and she wanted

to reserve certain mineral rights. Falcone was eager to close the deal; and when Gage mentioned mineral rights,

Falcone said, We don‘t need to delay. We can just write something up right here. Falcone took a blank sheet of

paper and wrote some general language reserving mineral rights to Gage. Falcone and Gage agreed that Gage

would retain the right to certain mineral deposits as deep as 110 feet beneath the surface; but when Falcone

prepared the sheet, he inadvertently wrote 100 feet. The sheet stated that if gold were discovered, the sales price

Falcone paid would be retroactively reduced by a fair amount later to be agreed upon by the two parties. Neither

party signed the sheet, but they used a paper clip to attach it to the writing which they both signed. The writing

contained no reference to the separate sheet.

After signing the writing but before moving onto the ranch, Falcone attended a local llama ranchers‘

meeting to introduce himself to his new colleagues. It just so happened that one of the presentations at the

meeting dealt with the impact of the new federal import restrictions. Falcone was shocked by the presentation.

Falcone went straight to an attorney. The attorney gave Falcone her opinion that Falcone could walk

away from the agreement with Gage. After meeting with the attorney, Falcone wrote to Gage. In the letter, he

accurately described the details of their agreement and stated that on advice of counsel, he was disaffirming the

agreement. He signed and mailed the letter to Gage.

The next week Gage filed suit against Falcone. Her complaint alleged breach of contract. Falcone filed

an answer, generally denying the allegations in the complaint.

DOES GAGE HAVE A CAUSE OF ACTION AGAINST FALCONE FOR BREACH OF

CONTRACT? Do not discuss the measure of recovery.

At a pretrial deposition, Gage‘s attorney forced Falcone to admit that Falcone‘s agreement with Gage

included all the terms alleged in Gage‘s complaint. At trial, Falcone calls a valuation expert who testifies that

the new import restrictions will reduce the value of the llama ranch by 40%. Gage does not present any rebuttal

expert testimony.

35

QUESTION 55

1 MUTUAL ASSENT

2 amount to be agreed upon by the two parties

3 reserved for future mutual determination

4 material term

5 remote possibility

6 but could be important in an $ sense

7 part of contract?

8 in separate sheet

9 but intended to be part of K

11 ENFORCEABILITY

12 Fraud

13 misrepresentation as to future of llama industry

14 false

15 bright future

16 spell disaster

17 knew

18 she knew that … .

19 opinion?

19.1 right to rely?

19.2 reasonable reliance?

19.3 trend to dispense with requirement

19.4 assumption of risk?

19.5 not as against fraud

21 misrepresentation as to tax law consequences

22 D made the statement

23 P knew erroneous

24 P tax lawyer

25 P identified herself as tax lawyer

26 -but P simply remained silent

27 -no fiduciary relationship with D

28 D not P's client

29 assumption of risk?

29.1 not as against fraud

31 Mistake

32 mistake as to the future of industry

33 mistake as to the tax consequences

34 -not a mistake as to bargaining process

35 -not as a mistake as to the nature of the subject-matter

41 merely a mistake as to economic value

42 +40%

43 expert

44 unrebutted

45 but general norm for economic value no relief

46 fiduciary relation exception

47 inapplicable here

48 expert exception

49 not hold out as expert on valuation

49.1 but the reason is the tax taw

49.2 identified self as tax lawyer

51 if apply general norm

52 unilateral mistake

53 ordinarily no relief

36

54 but exception where known to other party

55 D told P about bright future

56 D told P about assumptions re tax law

57 but in some jurisdictions no relief if assume risk

58 minority view

59 perhaps applicable here

59.1 didn't bother to check understanding with lawyer

61 THE STATUTE OF FRAUDS

62 within the statute?

63 realty clause

64 satisfy the statute?

65 note or memorandum-original writing

66 complete?

67 need separate sheet

68 can piece together memo

69 -no reference

69.1 -no staple

69.2 +paper clip

69.3 correct?

69.4 100

69.5 110

71 later letter

72 not intend to affirm

73 but only required intent one to authenticate

74 accurately

75 the details

81 admission

82 pretrial deposition

83 admit

84 all the terms

85 UCC

86 but realty contract

87 admission provision inapplicable

91 procedural consequences

92 void?

93 general denial satisfactory

94 unenforceable?


96 majority view

37

QUESTION 56

Ms. Gerson owned a large farm just outside Morena. The farm has been in her family for well over a

century. She was a high school graduate who had spent her entire life on the farm. She was becoming rather

elderly and was taking several medications.

Mr. Hassel was a distant relative of Gerson. He had met Gerson on occasion, and he was very

interested in the farm property. He thought that if he got the property, he could turn the land into a residential

development. He knew that if possible, Gerson wanted to keep the property in the family. He also knew that

after two years of bad crops, Gerson was in need of cash. In mid 1997, he had hired an appraiser to assess the

fair market value of the farm. The appraiser‘s report stated that the farm was worth at least $450,000.

On September 1, 1997, Hassel approached Gerson. He told her that he had always wanted to live in the

country and that he had thought about buying the family farm from her. She said that she was glad that he was

interested, since no other family member had expressed any interest in continuing our family tradition and living

on the farm. She stated that she had no idea what the value of the property was. At that point, Hassel

volunteered that he had checked around and thought that $250,000 might be a ballpark figure. Gerson said that

she knew she could take a fellow family member‘s word and that $250,000 sounded like an awful lot of money

to her.

On September 10, 1997, Gerson met Hassel at his attorney‘s offices. The attorney had prepared a

writing for the parties to sign. The writing was entitled Draft of Agreement. In the attorney‘s presence, Hassel

signed on the signature line on the last page. Before she signed, Gerson began to feel weak. She apologized but

said that I can‘t finish this today. She hurriedly read the writing; and before she left, she initialed the bottom of

first page of the writing to acknowledge that she had at least looked at the writing. However, she left the

signature line blank. (Hassel erroneously thought that she had signed.)

That afternoon Gerson felt so ill that she called an ambulance and had herself taken to the local

hospital. She phoned Hassel to let him know she was there.

On September 12, Hassel visited her in the hospital. He brought the writing with him. At the outset of

the meeting, he told her that he was very concerned about her condition, He added that he had another concern.

He falsely told her that earlier that morning, he had heard a TV report that Congress was thinking of cutting

back farm subsidies. He said that he was worried that if Congress did so, the value of the farm would decrease.

He asked Gerson what she thought they should do. Gerson said that if farm subsidies decreased, it would only

be fair to reduce the contract price. Hassel thanked her for being so kind. He then lined out 250,000 wherever it

appeared in the writing, interlineated 200,000, and had her initial each change.

Unbeknownst to him, legislation to reduce farm subsidies was pending when Hassel spoke with

Gerson. A week later the bill passed both houses, and the President signed.

While Gerson was in the hospital, her treating physician became concerned about her mental condition.

She asked a psychiatrist to consult. The psychiatrist, Dr. Isolte, is prepared to testify that: Ms. Gerson suffers

from a serious mental illness; the illness does not impair her cognitive functioning; but the illness drastically

reduces her ability to exercise control over her conduct, particularly when it comes to dealings with fellow

family members.

HASSEL SUES GERSON FOR BREACH OF CONTRACT. HIS COMPLAINT

SEEKS BOTH MONEY DAMAGES AND A SPECIFIC PERFORMANCE DECREE. IS HASSEL

ENTITLED TO BOTH OR EITHER TYPE OF RELIEF? DO NOT DISCUSS THE MEASURE OF

DAMAGES (other than the issue of whether damages would be computed on the basis of a contract price of

$200,000 or $250,000.)

At trial, there is a stipulation between the parties that in September 1997, the fair market value of the

farm was $475,000.

38

QUESTION 56

1 VALIDITY

2 mutual assent

3 Finality

4 Draft

5 can't finish

6 at least looked at

7 contract price

8 Gerson

9 what point in time?

11 ENFORCEABILITY

12 INSANITY

13 high school graduate

14 Elderly

15 medications

16 hospitalized

21 treating physician

22 psychiatrist

23 serious mental illness

24 psychosis?

25 cognitive functioning

26 volitional

27 control

28 drastically

29 especially family members

29.1 but notice?

29.2 knew in hospital

29.3 physical, not mental, problem


32 -as to intent to stay on property

33 already decided to sell

34 the family farm

35 always wanted to live in the country

36 can be a misrepresentation as to state of mind

41 -as to value

42 not just his estimate

43 checked around

44 had done so

45 250,000

46 450,000

47 at least

48 475,000

49 stipulation

51 -as to pending legislation

52 did not think true

53 but was true in substance

61 MISTAKE

62 -as to economic value

63 unilateral mistake

64 generally no relief

65 not hold himself out as expert

66 fiduciary?

67 family relationship

39

68 not technical fiduciary

71 UNCONSCIONABI1JTY

72 procedural

73 unknowing

74 knew contents

75 not hide price

76 no legalese

77 but misrepresentations, supra

78 involuntary

79 weak

79.1 but no monopoly, etc.

81 substantive

82 standing alone?

83 minority view

84 price alone?

85 some authority for that view

91 ECONOMIC INADEQUACY OF CONSIDERATION

92 in equity


94 P inadequate remedy at law

95 land

96 not tract land or subdivision

101 when assess?

102 at time of contracting

103 how measure?

104 here stipulation

105 standing alone?

106 some

107 others require quasi-fraud or quasi-duress

108 misrepresentations

109 three

109.1 physically weak

109.2 elderly


112 apply?

113 realty

114 comply?

115 originally did not sign

116 initial

117 but not at end

118 some statutes require subscribe

119 only to acknowledge looked at

119.1 later

119.2 initialed change

119.3 for different purpose?

119.4 terms otherwise complete?

119.5 Seemingly

121 $200,000 VS $250,000

122 one-sided modification

123 lined out

124 interlineated

125 no consideration

126 but if no contract until meeting in hospitality?

40

127 no finality until then

128 no pre-existing duty then

41

QUESTION 57

Mr. Ing owned two valuable, adjacent, undeveloped lots in Morena. He was 84, and he took numerous

medications for chronic illnesses. The medication sometimes left him a bit confused. Realizing that he might

soon die, he wanted to erect a large house on one of the lots to bequeath his children.

Ms. Jerold was a contractor in El Dorado. Ing approached her on June 1, 1994. He offered to give her

the smaller lot in exchange for her construction of a house on the second lot. She had been looking for a lot to

build her own residence on; but when Ing contacted her, she stopped her search.

Jerold gave Ing a book of plans she had used in the past. She knew the plans inside and out because she

had personally prepared each one.

Ing took the book home that evening. He took some medication as soon as he arrived home and

excitedly rushed through the book. He found a plan he loved--#24--but he mistook the number to be 25. Plan

#24 was identical to plan #25 with one exception; while #24 had a large screened-in porch, #25 lacked that

feature. On June 4, 1994, Ing phoned Jerold and told her that he wanted to have her build plan #25 on his lot.

Jerold had a contract drawn up by her lawyer, Lawton. On June 6, 1994, Ing met Jerold at Lawton‘s

office to sign the contract. A copy of plan #25 was stapled to the document. Ing took some medicine before

driving down to the office, and Jerold noticed that he was acting a bit disoriented. Jerold signed first. Just before

Ing signed, he said that his children will love that porch during the summers. Jerold said that she certainly

agreed and was confident that the children will love the house when it‘s finished. She urged Ing to hurry up and

sign. She stated that she was running late for an appointment (that statement was false). Ing then signed.

On July 1, 1994, Jerold moved a trailer onto the lot Ing was to convey to her; her workers used a

bulldozer to clear a site for the trailer. Jerold planned to live in the trailer while the construction project was in

progress on the adjacent lot and begin building her own residence when she finished that project. On July 2,

1994, her work crew began excavating for the house she was building for Ing. On July 15, 1994, Ing asked

about the porch. When Jerold told him that the plans attached to the contract did not call for a porch, Ing angrily

ordered Jerold off his property.

Jerold sues Ing for breach of contract. Because of concerns about Ing‘s mental competency, on June 1,

1995 the court appoints a guardian ad litem to represent Ing at trial. (After examining Ing, a court-appointed

psychiatrist informed the judge that Ing is undergoing a long-term mental degenerative process and that he has

already been reduced to a confused state of mind.) The guardian files an answer, generally denying Jerold‘s

allegations.

At trial, there is undisputed expert testimony that: The fair market value of the lot Ing had promised to

convey to Jerold was $200,000; it would have cost Jerold $90,000 to construct plan #25 on Ing‘s other lot; the

fair market value of that house would be $120,000; it would have cost Jerold an additional $20,000 to build plan

#24 on that lot; and the fair market value of that house would be $150,000.

JEROLD SUES ING FOR BREACH OF CONTRACT. CAN SHE OBTAIN A DECREE OF

SPECIFIC PERFORMANCE? CAN SHE RECOVER DAMAGES FOR BREACH OF CONTRACT? DO NOT


42

QUESTION 57

1 VALIDITY

2 mutual assent

3 writing

4 both signed

5 consideration

6 promise to do work

7 bargained for

8 entails legal detriment

11 ENFORCEABILITY

12 competency

13 mental disorder

14 degenerative process

15 but not a psychosis

16 its effect

17 a bit confused

18 confused state

19 not negate ability to understand

19,1 not negate ability to control conduct

19.2 notice

19.3 saw that was a bit disoriented

21 intoxication

22 medication

23 effect

24 supra

25 notice

26 supra


32 clause?

33 one side construction

34 no

35 but other side realty

36 yes

37 comply?

38 note

39 complete?

39.1 porch

39.2 not included

41 part performance

42 move onto

43 clear site

44 trailer

45 but incident to construction

46 alternative explanation other than purchase

51 promissory estoppel to lift the bar

52 stopped looking at other lots

53 but lots still available

54 only loss the loss of the benefit of the bargain

55 what other change of position?

56 if not require more, impliedly abolish the Statute

61 effect of non-compliance

62 majority: unenforceable

63 must raise as an affirmative defense

43

64 mere general denial

65 waive the defense

71 mistake

72 type

73 contents of document

74 material

75 $20,000

76 mutual or unilateral?

77 Ing yes

78 Jerold

79 porch

79.1 knew inside and out

79.2 hurry up

79.3 running late

79.4 lie

81 fraud

82 misrepresentation

83 withhold

84 certainly

85 after reference to porch

86 intent to defraud

87 porch

88 knew inside and out

89 hurry up

89.1 running late

89.2 lie

91 economic inadequate of consideration

92 equity

93 specific performance

94 P has inadequate remedy at law

95 realty

96 early common law-as a matter of course

97 different attitude modernly

98 special defense available to D

101 some not recognize at all

102 others yes

103 $200,000

104 $90,0000

105 $20,000

106 two to one

107 still others if accompanied by inequitable conduct

108 quasi-fraud

109 supra

44

QUESTION 58

Ms. Martínez had long owned a farm equipment sales and leasing company in Morena. Mr. Naliboff

owned a farm just outside Morena.

On June 1, 1994 Mr. Naliboff visited the showroom of Mr. Martínez‘s store. Naliboff was shopping for

a new tractor. He needed a new tractor, but he did not have cash to pay in full for the tractor. Naliboff had had

bad crops for the past three years. He was two monthly payments behind on the mortgage which Karlton Bank

held on his farm, and he realized that he would have to buy the new tractor on credit After inspecting all the

tractors in the showroom, he selected a Harvester model 34 that cost $60,000 and carried a six year warranty. He

informed Martínez of his selection and filled out a credit application. Martínez told him that it would take

roughly a week to complete the credit check and asked him to return then.

On June 2, 1994, Martínez faxed Naliboff's application to the Iverness Investigations, the agency which

did her credit checks. Iverness contacted the Karlton Bank and requested information about the status of the

mortgage from Mr. Lorenzo, a bank employee. Lorenzo was in a rush that day. In his rush, he did not note the

delinquent payments. Lorenzo faxed Iverness a note that it looks OK. Iverness sent the report to Martínez.

On June 8, 1994, Naliboff returned to Martínez‘s showroom. Martínez told Naliboff that she had

received the credit report; to his surprise, she said that she rarely sees a report so good with absolutely no major

blemishes. I‘m ready to go forward. She said that she was willing to sell the tractor to Naliboff on credit but that

she would need a $1,000 down payment At that point, Naliboff interjected, I‘m delighted my credit checked out

My policy has always been to keep my word and pay my debts. While Martínez and Naliboff agreed to talk later

about whether Martínez‘s mechanics would apply an anti-rust coating to the tractor‘s painted surface, they

shook hands. Naliboff decided to pay by check. He wrote a notation on the check: down payment on $60,000

contract for Harvester 34 with warranty. He then handed the check to Martínez.

Martínez placed the check in her office safe. On June 9, by accident Lorenzo happened to glance at

Naliboff‘s account and noted the two delinquent payments. Lorenzo immediately contacted Iverness, and the

same day they phoned Martínez.

On June 10, Martínez wrote to Naliboff: I know that I agreed to sell you the model 34, but we

discovered that your credit report was in error. Quite frankly, I am surprised that you were not candid enough to

tell me about the problems with your mortgage. In any event, given your credit history, I cannot proceed with

this as a credit sale. You will find your check enclosed. Her letter was unsigned, but the sheet of paper bore her

business‘ letterhead. The check was stapled to the letter. Naliboff sues Martínez.

Prior to trial, Ms. Martínez was discovered to have some psychiatric problems. She was eventually

institutionalized on the basis of a finding by a panel of psychiatrists that she had a severe mental disorder

impacting her ability to appreciate the character of complex transactions. A guardian ad litem has been

appointed to represent her in this lawsuit. On her behalf, the guardian filed an answer, denying the plaintiff‘s

allegations.

CAN NALIBOFF RECOVER DAMAGES FOR BREACH OF CONTRACT? DO NOT DISCUSS

THE MEASURE OF DAMAGES.

45

QUESTION 58

1 VALIDITY

2 MUTUAL ASSENT

3 anti-rust coating

4 material term for future mutual determination

5 if so, finality lacking

6 but if no additional cost, final

7 but if minimal cost, perhaps final

8 governed by UCC

9 goods contract

9.1 change result

11 CONSIDERATION

12 promise to pay the money

13 clearly bargain

14 clearly legal value

21 ENFORCEABILITY


23 apply?


25 goods

26 over $500

27 moreover, one year clause

28 six year warranty

31 comply?

32 under the personal property clause

33 memorandum

34 can be prepared by P

35 the check notation

36 P's signature

37 quantity-one tractor

38 indicates a contract has been made

39 but over 10 days

41 part payment

42 check

43 need not be earnest money

44 P gave

45 D accepted

46 but D did not yet cash

47 if so, enforceable to that extent

48 one tractor

51 under the one year clause

52 memorandum

53 traditional Statute of Frauds

54 must be D's memo

55 D's letter

56 need not be signed with intent to make

contract enforceable

57 mere intent to authenticate the information

58 not signed

59 but letterhead

59.1 terms missing

59.2 but refers to check

59.3 but check stapled

59.4 not specify length of warranty

46

59.5 incomplete

61 effect

62 unenforceable

63 majority view

64 must plead as an affirmative defense

65 mere general denial in answer?

66 if so, waiver


72 statement

73 record OK

74 impute to him because he did not correct

75 he acknowledges

76 false

77 no major

78 two mortgage delinquencies

79 probably major

81 knowingly

82 to his surprise

83 reliance

84 credit transaction

85 reasonable

86 bank's negligence

87 not her negligence

88 not her agent's negligence

91 MISTAKE

92 mistake

93 credit record

94 unilateral?

95 she believed true

96 to his surprise

97 if so, known to him

98 presumptively entitled to disaffirm

99 but Restatement-assumption of the risk

99.1 on these facts?

101 INSANITY

102 insane?

103 a mental disorder

104 psychosis?

105 impacting

106 vague

107 must have severe effect

108 appreciate

109 cognitive

109.1 all jurisdictions

109.2 did disorder exist at time of purported contract?

109.3 discovered later

109.4 length of period of time

109.5 did P have notice?

109.6 notice a requirement?

111 void if entered into after appointment of guardian

112 but here guardian appointed later

113 guardian ad litem

114 not general guardian of person

47

QUESTION 59

Mr. Karlton and Ms. Lucido owned adjacent parcels of property at the foot of a cliff on a bay in

Morena. (See the attached map.) Eariton, a contractor, decided to buy a large sailing boat but delayed doing so

until he had built a bigger dock on his property. Karlton knew that to build the dock, he would need at least

medium-sized tractors. (Karlton assumed that the soil immediately below the sandy beach surface was soft and

that medium-sized equipment would suffice.) Given the cliff, his choices were to: (1) lift the tractors down the

cliff by helicopter; or (2) gain access over the Lucido‘s beach. (Using helicopters would have cost at least

$25,000.)

On June 1, 1992, Karlton approached Lucido to obtain her permission to drive the tractors over her

property and use part of her property as a work site. Lucido explained that as state Sierra Club president, she

was reluctant to agree. She relented, however, when he stated, Consider two things. First; you‘re short on cash.

You lost a ton on the stock market last month. I‘ll pay you $10,000 to access across your property. Second, the

stock you lost on was in a company up to its eyeballs in toxic waste. Wouldn‘t your Sierra Club buddies be

delighted to learn that? (Both statements were true.) Karlton gave her the following oral assurances:

1. I‘ll have the project wrapped up by September 1, 1993. (Karlton planned to submit his plans

to the El Dorado Coastal Commission in early June 1992. The Commission statute provides that: After

submission, there is a six-month period for public comment on the plans; at the conclusion of mat

period, the Commission may grant tentative approval; and unless another public agency such as an

affected city objects, the approval automatically becomes final upon the lapse of another six months.)

2. I‘ll use the smallest sized equipment possible to get the job done, so I won‘t unnecessarily

disturb your property. (He drove her to one of his work sites and showed her the small tractors he was

using there; they were two-thirds the weight of the medium-sized tractors he contemplated using on

this project.)

3. If the Commission rejected his plans, he would remove all his equipment from her property

within 48 hours.

On June 11 while on vacation, Lucido sent Karlton a signed letter stating that she was happy with our

arrangement for the construction deal.

On June 20 Karlton began work with the medium-sized tractors but soon discovered that the beach

subsoil was hard. He told his workers to begin using heavier equipment

On July 1 Lucido returned from vacation. She was incensed when she saw the size of equipment

Karlton was using. She ordered Karlton‘s workers to leave. That afternoon she wrote Karlton a letter stating that

despite all your promises about ending the job by September 1993 and using the smallest equipment; I know

now that you can‘t be trusted. Keep your $10,000; I don‘t intend to honor the promise to give you access to the

work site over my property.

KARLTON SUES LUCIDO TO OBTAIN: (1) MONEY DAMAGES FOR BREACH OF

CONTRACT; OR (2) A DECREE ORDERING HER TO SPECIFICALLY PERFORM HER ALLEGED

CONTRACT. DO NOT DISCUSS THE MEASURE OF DAMAGES.

Lucido filed a general denial in her answer to Karlton‘s complaint At trial, Lucido presents undisputed

expert testimony that the fair market value of a license for access across her property is $20,000.

48

Map for Question 59

49

QUESTION 59

1 MONEY DAMAGES

2 VALIDITY

3 ENFORCEABILITY AT LAW


12 apply?

13 real property

14 license

15 interest in realty

21 one year clause

22 June 1, 1991-September 1, 1993

23 one year for approval

24 possible rejection

25 within one year

26 assurance

27 within 48 hours

31 if so, comply?

32 initially oral

33 June 11 letter

34 signed

35 reference to arrangements

36 contents insufficient

37 July 1 letter

38 signed?

39 contents

39.1 end job by September 3

39.2 smallest equipment

39.3 $10,000

39.4 access

41 piece together memo

42 contents - July 1

43 signature - June 11


45 not attached

46 no reference to unsigned document

47 but seems to refer to the same subject-matter

48 the most liberal standard

49 apply to the facts here

51 effects of non-compliance

52 unenforceable

53 plead as an affirmative defense

54 only a general denial in this answer

55 waiver of the defense


62 under the real property clause

63 part performance

64 move onto

65 but did not make improvements

66 under the one year clause

67 promissory estoppel?

68 but only loss of benefit the bargain

50

71 FRAUD

72 representation

73 size of tractors

74 false

75 smallest possible

76 face of document

77 technically true

78 oral representation

79 showed smallest

81 intent

82 paragraph 1 knew

83 #3 contemplated

84 material

85 required if intentional misrepresentation?

86 2/3 size

87 Sierra Club president

91 DURESS

92 physical

93 criminal?

94 very broad statute

95 tortious

96 true

101 economic

102 illegal?

103 the facts

104 wrongful

105 merely immoral

106 cause

107 reluctant

108 immediately relent

111 MISTAKE

112 size of the equipment needed

113 subsoil

114 the nature of the subject-matter

115 mutual

116 he assumed

117 she?

118 material?

119 affect her use of her property

119.1 Sierra Club

119.2 Sierra Club president

119.3 assumption of risk by D?

119.4 D layperson

119.5 P contractor

119.6 if he assume


122 substantive

123 setting

124 normal allocation

125 $20,000

126 expert

127 undisputed

128 effect

129 $10,000

129.1 legitimate reason to shift?

51

129.2 facts warrant the shift?

131 procedural as well required


141 procedural

142 involuntary assent

143 threat

144 reluctant

145 economic losses

151 EQUITY

152 equitable remedy?


161 P - inadequate remedy at law?

162 normally judgment for money damages

163 helicopters

164 $25,000

165 realty

171 D - special defense of economic inadequacy of P's consideration?

172 in equity

173 $20,000

174 $10,000

181 accompanying inequitable conduct by P required as well?


183 fraud

184 quasi-fraud

185 tractors

186 duress

187 quasi-duress

188 threat

52

QUESTION 60

Mr. Hernandez owned a single, large parcel of land in the Horena foothills. He had retired from law

practice 20 years before and become a farmer. He was 87 years of age, rather reclusive, and somewhat feeble.

Ms. Irwin, an attorney and entrepreneur, was trying to purchase property to build a new mall. (She did

not want the public to know of her plan; she feared that publicity would drive up the price of the realty she

needed to buy.) She selected a site including Hernandez‘ parcel. Irwin learned that the Horena Bank held the

mortgage on Hernandez‘ property and that Hernandez was delinquent on the mortgage. Irwin had represented

the bank president, Mr. Jerud, in a legal matter; and during the representation, he confidentially told her that he

had cheated on his 1989 income tax.

On December 1, 1991, Irwin visited Jerud. She told him that it certainly would be unfortunate if the

IRS received an anonymous phone call about your 1989 taxes. Irwin told Jerud that there would be no phone

call if you lean on Hernandez and demand immediate payment of his delinquency. Jerud agreed to notify

Hernandez the next day. He did so.

On December 3, 1991, Irwin visited Hernandez to tell him that she wanted to buy his land. She said

that she wanted to build a custom personal residence on the parcel. She added that I remembered from the old

days when we worked together that you bought this beautiful piece of land up here near the mountains. She

offered him $300,000. Hernandez said that whatever you want to use the land for, if it‘s worth a penny, the

property‘s worth $500,000. Irwin then said that she had heard on the grapevine that Hernandez needed cash

pronto. Hernandez reluctantly admitted that she was right and said, All right. I guess I‘ve got no choice but to

say Yes. Irwin handed Hernandez her handwritten document mentioning Mr. Hernandez‘ realty. The writing

specified that Hernandez would deliver the deed on January 10, 1992. The writing bore her letterhead. She

assured Hernandez that I‘ll prepare the formal documents to close the deal.

Irwin rushed to prepare the documents. Without telling Hernandez, Irwin worded the document to

provide that if Hernandez delayed delivering the deed, he would owe her $2,000 for each day of delay. The

document mentioned the December 3d writing. The new document referred only to his property. On December

5, she drove to Hernandez‘ house; and he initialed the document.

Late December 6, a Friday, Irwin told her architect, Mr. Jankowski, to go full speed ahead on the mall

project. That day Jankowski directed his staff to drop everything and start putting together the plans for Irwin‘s

new mall.

Jerud felt guilty about calling in Hernandez‘ loan. Early on December 9, he phoned Hernandez to tell

him that Irwin had pressured him into calling in the loan. Hernandez immediately phoned Irwin to tell her that

he refused to deliver the deed to her.

Irwin filed a complaint against Hernandez for breach of contract. Hernandez‘ answer generally denied

Irwin‘s allegations. At trial, two experts on real estate valuation testified; Hernandez‘ expert testified that the

parcel was worth $700,000 while a court-appointed expert opined that the parcel was worth at least $500,000.

DOES IRWIN HAVE A CAUSE OF ACTION FOR BREACH OF CONTRACT? SPECIFICALLY,

CAN SHE ENFORCE THE $2,000 DELAY CLAUSE? IS SHE ENTITLED TO A DECREE OF SPECIFIC

PERFORMANCE?

53

QUESTION 60

1 MUTUAL ASSENT

2 detailed terms

3 price

4 subject-matter

5 delivery date

6 finality

7 close deal

8 execution of formal documents a condition precedent to

formation?

9 documents initialed here

11 CONSIDERATION

12 by P

13 promise to pay $300,000

21 ENFORCEABILITY

22 insanity

23 age

24 feeble

25 somewhat

26 reclusive

27 not enough

28 no showing of psychosis

29 no showing of effect on capacity

29.1 understand nature and consequences of transaction

29.2 control conduct

31 fraud


33 for mall

34 not want people to know

35 fear prices go up

36 custom residence

37 therefore misrepresentation

38 reliance?

39 whatever you want to use it for

41 higher standard?

42 fiduciary relation

43 P attorney

44 D former attorney

45 worked together

46 when D purchased property

47 timing coincidental?

48 P represent D in connection with realty purchase?

49 make her a fiduciary for this deal?

51 economic duress

52 illegal act

53 criminal?

54 perhaps criminal extortion

55 tortious?

56 breach attorney-client confidence

57 but not directly as against D

58 against Jerud

59 apply vicariously?

59.1 policy analysis

54

61 yield

62 subjective component of test

63 reluctantly

64 no choice

65 objective component of test

66 pronto

67 did not contact any other potential buyers

68 did not attempt to obtain loan from another bank

69 insufficient facts

69.1 D has burden of proof

69.2 but policy bias in favor of innocent victim

69.3 ergo, make close call in victim's favor


72 within Statute?

73 realty clause

74 comply with Statute?

75 first writing

76 document include all required terms?

77 delivery date for deed

78 Mr. Hernandez' realty

79 ambiguous

79.1 but parol admissible to explain ambiguity

79.2 parol show only this parcel

79.3 purchase price?

79.4 signed?

79.5 her letterhead

79.6 but his signature needed

79.7 use a document prepared before final contract?

79.8 close deal

79.9 no contract then

79.10 split of authority

81 second writing

82 document all the required terms?

83 purchase price?

84 delivery date?

85 his property

86 even more ambiguous

87 but parol admissible

88 signed

89 he initialed

91 if you need the first writing as well

92 piece together?


94 not attached

95 no reference to the other writing

96 but same subject-matter?

97 Yes

98 but not as much corroborating evidence

99 and P the source of the corroboration

101 consequences if not comply

102 unenforceable

103 if so, capable of waiver

104 must plead as an affirmative defense

105 waived here


55


113 not mere loss of benefit of the bargain

114 but architect's expenses

115 how substantial?

116 Friday

117 late

118 intervening weekend

119 Monday

119.1 early

119.2 she has the burden on this issue

119.3 full speed ahead

119.4 entire staff

119.5 but expenses attributable to this site

119.6 perhaps useful at another mall site

121 DELAY CLAUSE

122 mistake

123 unilateral

124 she knew

125 he didn't

126 as to the contents of document

127 known to her

128 perhaps contract enforceable without that clause

131 fraud

132 no affirmative misrepresentation

133 not interfere with his ability to read document

141 SPECIFIC PERFORMANCE

142 equity

143 special remedy

144 decree

145 special requirements


147 realty contract

148 difficult to compute since part of larger project

151 special defenses

152 P gave D economically inadequate consideration

153 $300,000

154 $500,000

155 court-appointed

156 $700,000

157 accompanied by inequitable conduct

158 quasi-fraud

56

QUESTION 61

Mr. and Mrs. Gerald lived in an apartment in Morena. Mr. Gerald was something of a handyman; he

had been a professional carpenter in the construction trade before becoming a landscape architect. Ms. Hickman

was a contractor in Horena. She owned a lot in the new Islandia Subdivision, and she was offering to build a

custom house on the lot.

In early August 1990 the Geralds approached Hickman. They told her that they were interested in

having her build a house for them on her lot. Mr. Gerald handed Hickman a set of specifications which he had

drafted. Mr. Gerald told Hickman that he wanted to use Dryvit in his new house. (Dryvit is a new type of stucco.

It is far superior to traditional stucco; It is better insulating, does not crack, and does not need repainting. Mr.

Gerald had read an article in Popular Mechanics about Dryvit.) He told Hickman to submit an itemized bid

including Dryvit.

At roughly the same time, the Geralds contacted two other contractors who owned lots in Islandla: Mr.

Jantzen and Mr. Kellen. The Geralds asked them to submit itemized bids on the same specifications - - again

including Dryvit.

On August 16, Hickman prepared her bid. In the process of computing the bid, she made a mistake;

over the phone the supplier told her that Dryvit would cost $32,000, but she was a bit distracted during the

telephone conversation and thought she heard $12,000. After adding her profit margin, she entered $14,000 for

Dryvit on her bid. She read the bid to Mr. Gerald over the phone. Hickman‘s total bid was $200,000. The next

day Hickman sent the Geralds draft contract documents. One of Hickman‘s documents promised that 1f the

Geralds awarded her the contract, she would begin work just as soon as I see fit in my best professional

judgment. The document stated that the parties can later agree on the paints to be used for the interior of the

house.

By late August Jantzen and Kellen submitted their itemized bids. Jantzen‘s bid was $220,000 and

Kellen‘s $221,000; both bids listed $34,000 for the Dryvit. Gerald noticed that Hickman had the lowest Dryvit

bid, and he told his wife that they had better grab this bid quick. It‘s almost too good to believe.

On September 1st the Geralds orally accepted Hickman‘s bid. Hickman asked how her bid compared

with the others. Before accepting, Mr. Gerald said, They were all in the same ballpark. You all must have

contacted a lot of the same suppliers. Hickman said, What about that Dryvit bid? I was surprised how cheap that

stuff was. Mr. Gerald responded, I guess. That number was ballpark too. Mr. Gerald handed Hickman a $4,000

check as a down payment.

On September 2, Hickman sent the Geralds a memo on a sheet of notepaper with her firm logo. The

note read: We‘re all set. My plans are finished. She stapled Geralds‘ specifications to the sheet of notepaper; she

had made some handwritten changes on the specifications.

On September 3, with Hickman‘s permission, Mr. Gerald began digging the trenches for the sprinkler

system on the rear portion of the lot. He also arranged for a lumber company to deliver the lumber he needed to

build a gazebo on the lot. The company delivered the lumber to the lot on September 5.

On September 10, Hickman discovered her error. She phoned the Geralds, but they refused to release

her from the contract. Later that day Hickman sent the Geralds a letter. Her letter stated: I know that we reached

a deal; but in light of the huge mistake I made, It‘s unfair to hold me to 1t. Hickman added her initials at the end

of the letter. (On September 3, Jantzen and Kellen were still willing to perform the work for the Geralds at the

prices they originally bid.)

The El Dorado Statute of Frauds requires a subscribed note or memorandum. The statute provides that

if a contract is within any of its clauses and the parties do not comply with the statute, the purported contract is

void. The Geralds sue Hickman for breach of contract. As her responsive pleading, she files an answer stating a

general denial.

DO THE GERALDS HAVE A CAUSE OF ACTION AGAINST MS. HICKMAN? DO NOT


57

QUESTION 61

1 MUTUAL ASSENT

2 definiteness

3 see fit

4 subjective standard

5 in best professional judgment

6 objective

11 finality

12 future mutual determination

13 paints

14 material term?

15 need more facts

16 cost of paint compared to cost of project

21 CONSIDERATION

22 see fit

23 illusory

24 but that affects defendant's promises

25 not affect plaintiff's promises

26 only meaningful question whether P gave consideration

27 mutuality of obligation expression

28 wrong-minded


32 apply?

33 construction contract

34 no

35 but also realty

36 bring within the purview of the Statute

41 comply?

42 note or memorandum

43 original documents

44 complete?

45 signed?

46 subscribed?

51 notepaper

52 complete?

53 piece together the memo?

54 stapled

55 reference to same subject

56 reference to document?

57 plans

58 ambiguous

61 subscribed?

62 logo

63 deemed a signature

64 position of logo on page

65 subscribed?

71 letter

72 intent

73 to satisfy Statute?

74 no

75 but unnecessary

76 to authenticate the information?

77 yes

58

78 complete?

79 piece together?

79.1 subscribed

79.2 initials

79.3 at the end

81 part performance

82 $4,000 down payment

83 but if that the only change of position, give money back

84 dig the trenches

85 lumber delivered

86 substantial enough?

91 waived the defense?

92 if merely unenforceable


94 void

95 general denial sufficient

101 mitigating doctrine


103 not merely loss of the benefit of the bargain

104 Jantzen

105 Kellen

106 still possible to accept next best offer (benefit of bargain)

111 FRAUD

112 ballpark

113 false

114 34,000

115 14,000

116 intentional

117 noticed

118 handyman, not layman

119 better grab quick

119.1 too good to believe

119.2 almost

121 MISTAKE

122 at the time of contract formation

123 unilateral?

124 but known to other party

125 supra

126 but induced by other party

127 not originally caused

128 maintained by

131 collateral assumption of fact?

132 assume not know

133 minority view

134 innocent

135 distracted

136 careless

137 but not egregious

138 material

139 14,000 versus 34,000

139.1 size of the project

141 timely notice

142 a few days later

143 (provide)still return other party to the status quo ante?

144 Jantzen

145 Kellen

59

151 BREACH OF DUTY

152 see fit

153 objective standard

154 repudiating duty to ever do the work

60

QUESTION 62

Mr. Kelso was a general contractor and developer in Morena. (He was particularly expert in electrical

engineering.) In early 1989, after a cursory inspection, he bought an old, vacant shopping mall in the southern

part of the city with a view to remodeling the mall.

Ms. Lorraine was a local businessperson. In early 1939 she decided to open a florist shop in Morena,

She began searching for a location for the shop.

On July 1, 1989, Kelso and Lorriane met at a seminar. Kelso told Lorraine that he was interested in

remodeling and reopening his mall. Lorriane stated that she was looking for mall space. After the seminar, they

went out for a drink, Kelso told Lorriane that he was confident that he could have the mall ready for occupancy

before Thanksgiving. Lorriane said that she would need a refrigeration area to keep her flowers fresh. Kelso

assured her that it‘ll be simple to install a refrigeration unit; he said that he would assume responsibility for

installing the unit. They shook hands on an agreement that Lorraine would occupy the space until at least June

30, 1990. Lorraine agreed to pay $5,000 monthly rent. Kelso knew that if Lorraine had checked, she would have

discovered that she could rent comparable space at another Morena mall for only $3,000. They agreed that

Lorraine would have an option to buy a 5% interest in the mall.

After the meeting, Kelso began work on the remodel. He had his attorney, Ms. Marston, draft a lease

for Lorriane. Marston completed the draft on July 3 and mailed it to Lorriane. Lorraine received the draft on

July 6. She phoned Kelso and assured him that she would sign as soon as the city issued occupancy permits for

the premises. Kelso told her that he appreciated her assurance; he said, I wouldn‘t have the guts to start this

project so soon unless I had commitments from dependable people like you, Molly.

On August is Kelso hired a subcontractor, Mr. Nerney, to ready the space for the florist shop. Nerney

immediately applied for a construction permit.

A city inspector did not examine the site until September 1, 1989. He discovered that the wiring was

inadequate for the refrigeration unit; he informed Nerney that Nerney would have to tear down two walls,

remove the existing wiring, install new wiring, and seal up the walls before the refrigeration unit could be

installed. Nerney called Kelso to inform him. Nerney knew that correcting the problem would delay opening the

space.

By early October Ms. Lorraine was anxious about moving in in time for Thanksgiving. She phoned

Kelso. Kelso said everything going smoothly. You‘ll open on time.

In early November, the space was still unavailable for occupancy. Lorriane contacted the city. She

spoke with Mr. Oberlein, the chief inspector. He told her that their inspector had found inadequate wiring and

that the space would not open until the city approved the new wiring. He assured her that approval was only a

formality and that you‘ll be able to move in sometime around Thanksgiving, perhaps a day or two after the

holiday. I can almost guarantee you that you‘ll be in your space well before Christmas. Oberlein told Lorraine

that his office had formally notified Kelso.

Lorraine became angry. She immediately wrote a letter to Kelso. The letter stated: I know we agreed to

abide by the terms of that written lease, but you lied through your teeth. You will find enclosed the unsigned

contract. She stapled the unsigned contract to her letter.

By the time Kelso received the letter, he had spent $10,000.00 remodeling the space for Lorraine. He

spent $8,000 of the $10,000 after Nerney notified Kelso of the inadequate wiring.

Kelso sues Ms. Lorriane. Kelso asks the court to order Ms. Lorriane to occupy the remodeled premises.

In the alternative, he seeks money damages for breach of contract.

DO NOT DISCUSS THE MEASURE OF DAMAGES.

61

QUESTION 62

1 HONEY DAMAGES

11 ENFORCEABILITY


13 within the statute?

14 one year

15 no

16 real property clause

17 + option

18 −no contract yet

19 special lease clause?

21 if within, comply?

22 note or memo?

23 signed by D

24 K prepared by P

25 but D signed cover letter

26 agreed

27 attached

28 −intent to render enforceable

29 + intent to authenticate

31 if not comply, mitigating doctrine


33 substantial

34 $10,000

35 no irrevocable loss-rent to third party

36 reasonable

37 $2,000 before

38 $8,000 after

39 reasonable after notice?

39.1 more than loss of benefit of the bargain

41 mistake

42 AS TO SUBJECT MATTER

43 mutual?

44 both subjectively assume

45 material?

46 florist business need refrigeration unit

47 installation delay opening

48 miss holiday

49 more facts about $ and ¢ loss

51 uni1ateral

52 even if, he arguably induced

53 it'll be simple

54 impliedly represent wiring suitable

55 electrical engineer

56 assumption of risk

61 mistake AS TO ECONOMIC VALUE

62 material?

63 $5,000

64 $3,000

63 even if, relief?

66 generally-no relief

67 fiduciary exception

68 no

69 expert exception

69.1 + expert as to electrical matters

62

69.2 - not expert as to valuation of mall spaces

71 fraud


73 negligent misrepresentation

74 negligence?

75 cursory inspection


77 objectively reasonable to rely?


79 she know of his background?

79.1 material?

79.2 supra

81 1ater fraud

82 failure to disclose when he learned

83 affirmative duty?

84 failure to disclose when she inquired

85 going smoothly

86 open

87 Herney knew of probable delay

88 did Kelso know?

89 not a formation problem

89.1 breach problem?


92 commercial setting


94 hybrid cause of action


101 factual showing

102 promise

103 yes

104 foresee

105 wouldn't have the guts

106 dependable people like you

107 in fact

108 yes

111 substantial

112 $10,000

113 irrevocab1e?--rent to third party

114 reasonable

115 $2,000 before notice

116 $8,000 after

117 reasonable after

121 SPECIFIC PERFORMANCE

131 equitable remedy

132 order


141 inadequate remedy at law?

142 money damages

143 comparable rents calculable

144 real property K

145 cloud on title

146 even if, only an option at this point

63

151 inadequate consideration by B

152 economic inadequacy

153 $5,000

154 $3,000

155 accompanying inequitable conduct

156 some do not require

157 even if require, see fraud supra

158 quasi-fraud accepted in some jurisdictions

64

QUESTION 63

Mr. Justin owned a printing company in Morena, E1 Dorado. El Dorado has adopted the Uniform

Commercial Code. Kellogg Corporation operated the largest, high-end department store in Morena. (Kellogg

was the equivalent of Neiman-Marcus.) For years Justin had unsuccessfully bid for the contract to print

Kellogg‘s special, modernistic Christmas cards; he had never bid low enough to win the contract.

In early September 1987, Justin learned that Kellogg had hired a new buyer for its stationery

department, Ms. Lucero. Justin knew that as buyer, she would decide whom to award the Christmas card

contract to. By coincidence, Justin was an old friend of Ms. Lucero.

On September 3, Justin phoned Lucero to catch up on old times. Lucero said that she was delighted to

hear from Justin. She commented that her new job was a Godsend--I just went through a rough divorce. My

finances hit rock bottom, and now I at least have a chance to dig out of the hole I‘m in. At the end of

conversation, they agreed to have lunch the next day.

On September 4, they met for lunch. During lunch, Justin said, Linda, I‘m glad you told me about your

financial problems. If you can get me that Christmas card contract, there‘ll be something extra in your

Christmas stocking. Lucero said that she did not understand. Justin responded, O.K. I‘ll be blunt. There‘s $5,000

in it for you if you make sure I get the contract. Lucero replied, I‘ve never done anything like that before. But I

could sure use the money. Gee, let me think it over.

They met again for dinner on September S. Lucero told Justin that she could not accept the $5,000; I

can‘t cheat my boss. I‘ve got to get the best contract I can for the department. Justin then said, Linda, you don‘t

have much choice. I didn‘t tell you, but I had a recorder on me during our lunch. You said some things that

make it sound as if you‘d be willing to sell out your new boss. You sure wouldn‘t want your boss to hear that

tape. Would you? (Justin lied about the recorder; there was no tape.) It‘s no big deal. I know that my rates right

now are the lowest in Morena. I‘d get the contract anyway; I just want to make sure. (when he made this

statement, Justin did not know what other printers were charging.) Lucero then reluctantly agreed to arrange for

Justin to be awarded the contract.

On September 6, Lucero told her immediate superior, Mr. Markle, that she was awarding the contract

to Justin. She assured him that she had surveyed the market and found that Justin‘s prices were the lowest.

Markle said, That‘s good enough for me. Write it up. Later that day Lucero prepared an informal memorandum

stating Christmas cards--quantity 950,000--style modernistic--price $105,000. Markle initialed the memo. The

memo was written on a sheet of paper with a Kellogg letterhead. Later that day Justin signed the memo. He

immediately ordered the ink and paper for the printing.

On September 7, Markle lunched with Mr. Natali. Natali had just retired from the printing business in

Morena. Markle told Natali that Kellogg had awarded its contract to Justin. Natali told Markle that Justin

unquestionably charged the highest prices in Morena. When Markle returned to the office, he phoned five

printers and discovered that they all would have charged less than Justin for the printing job. Markle confronted

Lucero. She assured him that Justin had said that he had the lowest rates. Markle immediately phoned Justin and

terminated the contract. He told Justin, We don‘t do business with damn liars.

Justin sues Kellogg. DOES JUSTIN HAVE A CAUSE OF ACTION FOR BREACH OF

CONTRACT?

Do not discuss the measure of damages.

65

QUESTION 63

1 ENFORCEABILITY

11 ILLEGALITY

12 commercial bribery

13 recognized by the case law

14 but no bribe

15 but factual causation?

21 DURESS

22 economic duress

23 P not place D in the dire financial situation

24 but clearly illegal means

25 physical duress

26 criminal means

27 extortion


32 about the tape

33 false

34 knowingly false

35 to Lucero as agent?

41 about the prices in the market

42 by P

43 false

44 Markle's survey

45 to Lucero as agent


47 survey later

48 many jurisdictions not require reasonable for intentional fraud

51 about the prices in the market

52 by Lucero

53 acting as P's agent

54 impute later misrepresentation to P?

61 MISTAKE

62 nature of the mistake: economic value

63 generally no relief for that type of mistake

64 exception 1: the person held himself or herself out as an expert

65 D also has expertise

66 exception 2: fiduciary relationship between P and D

67 not here


72 apply?

73 $105,000

74 personalty?

75 but element of services

76 analogous to construction contract?

81 if so, comply?

82 note or memorandum

83 common law: correct and complete

84 UCC laxer

85 quantity

86 writing indicated contract has been formed

87 signed

88 initials

66

89 letterhead

91 alternative methods

92 special manufacture

93 customized goods

94 modernistic

95 saleable to third parties?

96 substantial commitments or beginning

97 order

98 ink

99 paper

99.1 but what was the cost?

67

QUESTION 64

Messrs. Murtharika and Nerney were lawyers in Morena, El Dorado. They had lived in the same

neighborhood for 10 years. In addition to owning his house in Mutharika‘s neighborhood, Nerney owned a

parcel of undeveloped land near Lake Marshall, one of the premier vacation areas in El Dorado.

Nerney and Murtharika both were interested in playing the stock market. For that reason, in 1983, they

entered into a valid, enforceable contract for a joint venture in stock investment. Murtharika was a very

experienced investor, and they agreed that he would be responsible for making all the investments of their

pooled resources.

Between 1983 and 1986, the joint investment venture was very profitable. However, in early 1987

through no fault of Murtharika‘s, most of the investments turned sour. Nerney lost so much money that he told

Murtharika that he, Nerney, would probably have to sell off his Lake Marshall land to make the payments on his

Morena residence. Nerney made that statement to Murtharika on June 20, 1987. At that time, Murtharika

remarked that he might be interested in buying the property. (Murtharika had a large inheritance from his father;

and although he had lost as much money on the stock market as Nerney, Murtharika was still well off

financially)

On June 21, Murtharika stopped by the brokerage office where he made most of the joint venture‘s

investments. While he was there, he spoke with Ms. Olsen, one of the account executives. She told him that

things are gonna pick up for you and Nerney in the future. Murtharika asked her to explain. She stated that she

had heard that two of the oil companies the venture held stock in had just struck oil in Indonesia and that when

that news became widely known, the odds are that your stock is going to take off. You may make up all of your

losses real soon. Murtharika thanked her for the information. (The information was not insider information

under the securities laws, and it was lawful for Ms. Olsen to relate the information to Murtharika.)

On June 22, after work, Murtharika went to Nerney‘s house. He told Nerney that in light of your poor

financial position, he would help out by buying the Lake Marshall land. Murtharika offered Nerney $20,000 per

acre. Nerney initially remarked, Joe, that‘s not nearly what it‘s worth. It should go for at - least $30,000 per

acre. Murtharika reminded Nerney of his need for cash and stated, Dave, if you put it on the market, you may

get that but it may take months to sell. In the meantime, who knows whether you‘re going to lose this house.

Nerney reconsidered and said, O.K. $20,000 it is. I think that there are 5 1/2 acres -- I guess we‘re talking

$110,000. (In fact, there were only five acres.) Murtharika said, It‘s a deal, and they shook hands.

That weekend Murtharika drove up to Lake Marshall. He purchased a $10,000 trailer on the way up to

Lake Marshall and set the trailer up on the property. The same weekend he hired a general contractor to build a

foundation for a permanent structure on the tract; he gave the contractor $1,000 down with an agreement to pay

another $4,000 later. As a favor, that weekend the contractor left some of his grading equipment at the tract.

Murtharika used the equipment to clear the area where the foundation was to be laid. The contractor told

Murtharika that if you can do that much yourself, it‘ll save you at least $1,500, Murtharika spent Saturday

afternoon and all Sunday doing the clearing.

On the morning of June 29, Murtharika went to work and drew up a written contract to document his

agreement with Nerney. Be signed the document and drove to Nerney‘s office. That morning Nerney had seen a

newspaper article about the Indonesian oil discoveries. When Murtharika presented the document to Nerney,

Nerney pointed to the article and said, Joe, this obviously changes everything, I don‘t need the money now.

Let‘s call the deal off. Murtharika responded, A deal‘s a deal. Sign on the dotted line. Nerney refused.

Murtharika sues Nerney for specific performance of the contract. At trial, all the appraisal experts,

including a court-appointed expert, agree that the fair market value of the Lake Marshall parcel is in excess of

$200,000.

IS MUTHARIKA ENTITLED TO A DECREE OF SPECIFIC PERFORMANCE? DO NOT

DISCUSS ANY DAMAGES THAT MUTHARIKA COULD RECOVER.

68

QUESTION 64

1 MUTUAL ASSENT

2 preliminary negotiations

3 deal

4 shook hands

11 CONSIDERATION

12 bargain component

13 supra

14 legal value

15 detriment to P

16 pay money otherwise no duty to give

17 benefit to D

18 receive money otherwise no right to

21 ENFORCEABILITY


23 apply?

24 realty clause

25 agreement to buy

26 comply?

27 oral

31 part performance

32 realty clause

33 payment of money

34 not yet

35 take possession

36 with consent?

37 short period of time

41 improvements

42 trailer

43 could move off property

44 another use for?

45 contract

46 $1,000

47 $4,000

48 grading

49 $1,500

49.1 one a half days

49.2 substantial enough?

51 mitigating doctrine


53 foresee reliance?

54 permission to take possession?

55 substantial enough

56 supra

61 Fraud

62 outright

63 none

64 half-truth

65 reminded him of need for cash

66 misleading?

67 non-disclosure, withholding

68 fiduciary

69 lawyer

69

69.1 not alone

69.2 partners in venture

69.3 active partner

69.4 more knowledgeable partner

71 Mistake

72 economic value

73 mutual

74 $20,000

75 $30,000

76 evidently $50,000

77 material

78 only half the value

79 normally no relief for this type of mistake

79.1 but fiduciary

79.2 supra

81 Mistake

82 subject-matter

83 size of parcel

84 five

85 five and a half

86 mutual

87 material

88 but mistake favored D

91 Economic Duress

92 D in difficult financial position

93 P not create

94 but P continued by withholding information

95 fraud facts - supra

96 illegal threat

97 no

98 under broader wrongful standard

101 Unconscionability

102 Article II inapplicable

103 but recognized at common law

104 substantive unconscionability

105 undervalue

106 proper to inquire into price?

107 procedural unconscionability

108 involuntary assent

109 D's weak financial position

109.1 unknowing assent

109.2 fraud facts – supra

111 Specific Performance

112 special equitable remedy


114 subject-matter realty

115 traditional view: inadequate

116 today many courts not mechanically apply that view

117 but more justification to apply it to this type of land

121 D has special equitable defense

122 economic inadequacy of consideration

123 alone?

124 some courts yes

125 gross

70

126 one half

127 others require accompanying inequitable conduct

128 fraud facts supra

131 right time?

132 appraisers

133 at trial

134 is

135 time of contracting

136 how much time elapsed?

137 a few months

138 burden of proof on D

71

QUESTION 65

Mr. Weston is the president and general manager of Sportland, Inc., a new sporting goods score in

Morena, El Dorado. He is also the corporation's only stockholder. He incorporated the firm in September 1985.

Weston was convinced chat with proper promotion, the firm could do a large volume of business during the

1985 Christmas season. He decided that a large-scale Christmas card mailing would be an excellent

advertisement.

On October 1, 1985, Weston contacted Mr. Gerard, a local printer. Weston explained to Gerard that he

wanted to mail 1,800 commercial Christmas cards with the Sportland tradename. After Gerard showed Weston

several designs, Weston selected a card depicting a skier. The card was to read; HAVE A JOYOUS HOLIDAY

SEASON. Sportland, Supplier of Fine Sporting Goods, 175 Witkin Lane, Morena. Weston and Gerard

concluded an oral agreement for the printing. Gerard agreed to bill Sportland rather than Weston personally. The

agreed price was $800.00.

During the discussion leading to the agreement, Weston told Gerard that he had had a similar printing

done for another one of his corporations in 1983 for somewhere between S750 and $800. Weston then asked

whether that was still the prevailing rate. Gerard responded, That sounds good to me. (In fact, several new

printers had moved to Morena during the past year, and the competition had driven prices down. At the time of

the discussion, Gerard knew that most other Morena printers would have quoted Weston only $550.)

On October 10, Gerard learned for the first time that Sportland was a new corporation. He contacted

Dunn and Bradstreet and discovered that Sportland had a low credit rating because it was thinly capitalized.

Gerard phoned Weston and told him about the credit rating. Gerard stated that he was not certain he wanted to

do the printing and take the risk that Sportland would not pay. Weston told Gerard not to worry, If Sportland

doesn't have the cash to pay you, I will. You've got my word. Gerard knew that Weston had a good financial

standing and said, O.K. On chat assurance, I'll go ahead with the printing.

On October 15, Gerard began the printing for Sportland. That morning he visited his printing ink

supplier, Aquarius Inks. He spoke with the sales representative, Ms. Silverstein. Gerard asked about a Christmas

discount. Ms. Silverstein stated that she was sorry but that she could not offer ink at a Christmas discount until

next week. Gerard said, That's ridiculous. If I could buy it next week at 20% off, why can't you give it to me

now? She said, Company policy -- but maybe the policy would bend a bit if there was something in it for me.

Gerard asked, How much? Silverstein replied, Throw in $150 for me. Gerard paid her $150 cash. She then

prepared an order blank with an incorrect date and allowed Gerard to take delivery of a large supply of ink at the

discount price. Gerard used part of the ink to print Sportland's cards. (Commercial bribery is not a criminal

offense in El Dorado, but El Dorado tort law gives the injured employer a tort cause of action against the person

bribing the employee.)

On October 20, Weston was at a reception hosted by the Morena Chamber of Commerce. Two printers

attended the same reception. During a conversation with them, Weston mentioned that Sportland was paying

Gerard $800 for the Christmas cards. Both printers told Weston that Gerard is robbing you blind. Any honest

printer in Morena would do that job for between $550 and $600. Both printers assured Weston that if he gave

them the printing job, there would still be enough time to print the cards and mail them before Christmas

shopping began. That same day Weston confronted Gerard and demanded that he release Sportland and Weston

from the agreements. Gerard refused; he had already completed 900 cards at a cost of $230.00. Weston refused

to accept any cards from Gerard. Gerard sues Sportland and Weston for damages for breach of contract.

MAY GERARD RECOVER DAMAGES FROM SPORTLAND AND/OR WESTON? DO NOT


72

QUESTION 65

1 GERARD VS. SPORTLAND

2 Statute of Frauds

3 apply?


5 cards

6 but labor and materials?

7 amount

8 $500

9 now $5,000

9.1 $800

11 special manufacture contract

12 split of authority under original Statute

13 UCC - substantial commitment

14 ink

15 or beginning


17 to lift the bar of the Statute

18 under UCC?

19 substantial enough

19.1 same standard to limit power to revoke?

21 Fraud

22 fact?

23 most

24 non-responsive to question

25 but knew false

26 negligence on Weston's part

27 enough to preclude fraud defense?

31 Mistake

32 fact?

33 or economic value

34 no relief on latter ground

35 unilateral

36 but known to other party

37 but induced by other party

41 Illegality

42 against public policy

43 no statute

44 but tort cause of action

45 but only tort cause of action by injured employer

46 not mere general public policy

51 during the performance phase

52 not contemplated at contract formation

53 close in time

54 how gross

55 the requested bribe

56 only technical violation

57 available next week

58 large quantity

59 some used on these cards

59.1 what fraction?

61 Unconscionability

62 substantive

63 price disparity

64 not particularly wide disparity

73

65 price unconscionable at all?

66 need procedural unconscionability as well?


68 if required, unknowing assent

69 deception

71 GERARD VERSUS WESTON


73 apply?

74 surety clause

75 secondary liability

76 If Sportland doesn't

77 main purpose or leading object exception

78 sole shareholder


79.1 mere indirect benefit

81 effect of fraud

82 effect of mistake

83 effect of illegality

84 effect of unconscionability

91 consideration

92 pre-existing duty

93 three-party situation


95 better view: duties personal

96 fraud by Weston?

97 withheld thin capitalization

98 surrender right to disaffirm on that ground

74

QUESTION 66

PART A

The Cavaliers are a professional baseball team. Their franchise is located in the Stare of El Dorado. In

March 1974, with two months left in the regular season, the Cavaliers were leading their league. In large

measure, the Cavaliers‘ success was due to their star catcher, Rod Murcheson. Murcheson was the league‘s

leading batter and one of the league‘s best defensive players.

In January 1974, Murcheson and the Cavaliers entered into a new agreement. The agreement was oral.

The new contract‘s term expires in June 1977. The parties agreed that the Cavaliers could terminate the

agreement on oral notice. Murcheson expressly promised the Cavaliers that during the contract‘s term, he would

not play for any professional athletic team in competition with the Cavaliers.

The Tokyo Spartans are a professional baseball team in Japan. The Spartans have recruited several

American players for their team. The Spartans would like to hire Murcheson. The Spartans have already made

an overture to Murcheson.

William Spregg is a professional gambler. He has made an $30,000.00 wager that the Cavaliers will

win their league title. Spregg placed his bet in the State of El Dorado. The El Dorado Criminal Code prohibits

such betting. Spregg learned that the Spartans were attempting to lure Murcheson to Japan. Spregg feared that if

Murcheson left the Cavaliers, the Cavaliers would lose the race for the league title.

On March 14th, Spregg contacted Murcheson. Spregg told Murcheson, If you‘ll stay with the Cavs

through the season, I'll pay you $7,000.00 on January 2nd. Murcheson said, I‘ll see you on January 2nd.

Murcheson assured Spregg that he would keep Spregg‘s promise confidential.

On March 16th, the Spartans offered Murcheson $300,000.00 to jump to their team. Murcheson

accepted the offer. The Cavaliers immediately brought suit in the El Dorado Circuit Court.

MAY THE CAVALIERS RECOVER DAMAGES FROM MURCHESON FOR BREACH OF

CONTRACT? MAY THE CAVALIERS OBTAIN AN INJUNCTION BARRING MURCHESON FROM

PLAYING FOR THE SPARTANS? Do not discuss the measure of damages.

PART B

Suppose that Murcheson had played out the season with the Cavaliers. Despite Murcheson‘s best

efforts, the Cavaliers finished second in their league. On January 2nd, Spregg refused to pay Murcheson the

$7,000.00. Murcheson immediately brought suit in the El Dorado Circuit Court.

MAY MURCHESON RECOVER DAMAGES FROM SPREGG FOR BREACH OF CONTRACT?

Do not discuss the measure of damages.

75

QUESTION 66 SAMPLE ANSWER

PART A -THE CAVALIERS VS. MURCHESON

MAY THE CAVALIERS RECOVER DAMAGES FROM MURCHESON FOR BREACH OF

CONTRACT?

I. Consideration. The first question presented is whether the Cavaliers gave legally sufficient

consideration to support Murcheson‘s promise to play for them. According to the question, the Cavaliers could

terminate the agreement on oral notice. Murcheson will argue that the termination clause rendered the Cavaliers‘

promises illusory. The courts have split or this question. Some courts hold that a termination clause renders a

promise illusory unless, the clause requires written notice or a certain period of notice. Those courts would hold

that the Cavaliers‘ promises were illusory. However, other courts would reject Murcheson‘s argument. In

principle, the Cavaliers incur a legal detriment when they obligate themselves to give even immediately

effective, oral notice. The El Dorado court will probably reject Murcheson‘s argument.

II. The Statute of Frauds. Murcheson will next argue that the contract is unenforceable under the

Statute of Frauds.

Is the contract within the purview of the Statute of Frauds? One of the statute‘s clauses applies to

contracts which cannot be performed within a year from their making. The parties entered into this contract in

January 1974. The contract expires in June 1977. Hence, the contract falls within the clause‘s purview.

Does the termination clause take the contract outside the Statute? Again, the courts divide. The

majority hold that such a clause does not remove a contract from the one year clause. The majority view is well-

reasoned; termination is simply not performance. The El Dorado court will probably hold that the contract is

unenforceable.

III. Conclusion. Although the Cavaliers gave sufficient consideration, the contract is unenforceable

under the Statute of Frauds. I conclude that the Cavaliers may not recover damages for breach of contract.

MAY THE CAVALIERS OBTAIN AN INJUNCTION BARRING MURCHESON FROM PLAYING

FOR THE SPARTANS?

I. Inadequacy of the remedy at law. I shall assume, arguendo, that the Cavaliers could recover money

damages at law. Even if the Cavaliers could, the remedy at law would be inadequate. Murcheson‘s services are

unique; he was the league‘s leading batter and one of the league‘s best defensive players. It would be very

difficult for a court to compute the exact amount of damages the Cavaliers have suffered. Hence, money

damages at law would be an inadequate remedy. An equity court could grant the extraordinary remedy of a

prohibitory injunction.

II. Interpretation of the restraint on trade. Murcheson promised that he would not play for any

professional athletic team in competition with the Cavaliers. What does the word, competition, mean? In a broad

sense, the Spartans compete with the Cavaliers; at least we know that they compete economically for personnel.

In a narrow

sense, the Spartans do not compete because they are not in the same league with the Cavaliers.

Realistically, the court would probably resolve any ambiguity against the Cavaliers. The court will probably

interpret the language as not barring Murcheson from playing for the Spartans.

III. The legality of the restraint. If the court interpreted the language broadly, the court would have to

reach the question whether the restraint‘s scope is reasonable and lawful. Courts analyze restraints scope in three

respects: geographic area, lines of business, and time. This restraint seems to have unlimited geographic scope; a

court could invalidate the restraint on that ground. The restraint does not even seen: to be limited to baseball

teams; a court could invalidate the restraint on that ground. The restraint‘s scope is so broad that the El Dorado

court will probably invalidate it.

IV. Conclusion. The Cavaliers have an inadequate remedy at law. However, the court might not

interpret the restraint as applying to the Spartans; and alternatively, the court might invalidate the restraint as

unreasonably broad. I conclude that the Cavaliers may not obtain a prohibitory injunction.

76

PART B - MURCHESON VS. SPREGG

I. Pre-existing duty rule. Spregg will argue that Murcheson did not give sufficient consideration

because Murcheson did something he was already legally obliged to do.

First, Murcheson‘s contract with the Cavaliers was unenforceable, supra. Murcheson did not have a

legal duty to play for the Cavaliers.

Second, this problem Is a three-party situation. Many courts do not apply the pre-existing duty rule to

three party situations. That view is well-reasoned because duties are correlative and personal.

The El Dorado court will probably reject Spregg‘s argument?

II. Illegal contract. Spregg will argue that the contract is illegal and void.

In its terms, the contract is legal. Is the contract tainted because of its connection with the prior Illegal

bet? Under the mechanical tests, e.g., pleading and independent consideration, the contract is lawful. Would the

enforcement of this type of contract encourage illegal gambling activity It well might; gamblers would know

that they could use this type of contract to increase their chances of winning their wagers. The El Dorado court

will probably hold the contract illegal.

Murcheson will argue that he Is not in pari delicto. However, Murcheson must have suspected

something. After all, Spregg asked him to keep the promise confidential.

III. Conclusion. Murcheson gave sufficient consideration, but the contract was illegal. Murcheson may

not recover damages from Spregg.

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