|
 |
||
|
SANTA CLARA UNIVERSITY SCHOOL OF LAW FINAL EXAMINATION
Commercial Transactions I May 5, 1995 The revised examination rules issued June 1993 apply to this examination, except that this is a limited open book examination. Instructions 1. This is a limited open book examination. During the examination you may consult your casebook, Uniform Commercial Code, class handouts, and any notes, outlines, charts, or other form of your own written work product. No other sources may be consulted. 2. Apply the uniform version of the Commercial Code. 3. Provide analysis which supports the conclusions you reach. 4. In determining an appropriate grade for your examination, I look for ability to identify issues, demonstrated understanding of legal principles and relationships, skill in using the statutory law we have studied, accuracy, clarity and creativity of analysis, organization and conciseness of response, and good English expression. 5.Recommended time allocations: Question 1: 1 hour, 15 minutes (1:30-2:45 p.m.) Question 2: 30 minutes (2:45-3:15 p.m.) Question 3: 1 hour, 45 minutes (3:15-5:00 p.m.)
Basic facts: Mark bought a grand piano for $25,000, on credit, from the San Jose Civic Light Opera ("Opera'), which was disposing of the piano in an effort to raise capital for future operations. Mark paid $10,000 cash down, signed a promissory note promising to pay the balance, including interest, in equal monthly installments of $375/month over five years, and signed a written security agreement granting a security interest in the piano to secure payment of the promissory note. The security agreement provided that failure to pay under the promissory note constituted a default. The promissory note included a clause making the entire balance due and payable immediately in the event of failure to pay any installment when due. Opera did not file a financing statement at this time. Mark was an accomplished pianist. He played the piano approximately 20 hours each week for both practice and enjoyment. He also performed occasional recitals in his home for friends. He did not perform for pay. He also gave piano lessons to 20 students, using the grand piano purchased from Opera. Each student visited Mark's home once each week for a one hour lesson and paid Mark $40.00 per lesson.
Mark stopped paying for the piano one year after purchase when he left for a one year trip around the world. Prior to leaving, Mark loaned the grand piano to Gary, one of his favorite students, with the understanding that Gary would return the piano to Mark upon Mark's return. Instead of keeping the piano, Gary delivered the piano to John, the varsity soccer coach at the high school attended by Gary's daughter, on the understanding that John could keep the piano if John selected Gary's daughter for the varsity soccer team. Before the soccer team was selected, upon discovery of Mark's absence from the country, Opera filed a properly completed financing statement in the correct location. Eventually, Opera discovered the location of the piano. Opera demanded its return from John and John has approached you for advice. a. May John keep the piano free of Mark's claim? b. Assuming for purposes of argument that John could keep the piano free of Mark's claim, could John keep the piano free of Opera's claim? c. Under what circumstances would John have a claim against Gary? On what theory? If liable, what is the measure of damages?
Question 2 (Recommended: 30 minutes) Remember the facts stated under the heading Basic facts, but disregard the additional facts stated in Question 1. Instead, consider the following additional facts. The grand piano required repair after three months. After Opera declined to repair the piano, Mark paid a piano repair specialist $750.00 to perform the repairs. After Opera declined to reimburse Mark for the repair costs, Mark, without explanation to Opera, withheld two monthly payments on the promissory note. When Opera called to inquire about the missed payments, Mark said: "Our contract said that you would repair the piano if problems occurred during the first year, or that you would reimburse me for repair costs, and you refused to do either. I'm not going to send you those two payments." The security agreement included an express warranty against defects for a period of one year and also included the following provision: "In the event of defects in the piano during the warranty period, Opera filed a lawsuit seeking possession of the piano and judgment for the entire balance due under the promissory note. You are the judge in a hearing on Opera's motion for a pre-judgment writ of possession. a. Will you grant the motion? b. Had there been no express warranty and no provision regarding repair or reimbursement, would you grant the motion?
Remember the facts stated under the heading Basic facts, but disregard the additional facts stated in Questions 1 and 2. Instead, consider the following additional facts. The security agreement contained an express warranty against defects for a period of one year but did not contain any provision regarding remedy for breach of warranty. Two weeks after Mark received possession of the piano, two of the keys of the piano began to "stick" when played, i.e. the keys failed to promptly return to their normal position. As a consequence, in some musical pieces, a few notes of the piece could not be played. In addition, one of the legs of the piano began to crack. Inspection of the leg by an expert revealed that within six months the leg might collapse leading to substantial possible damage to the piano in the event the piano crashed to the floor. The leg could be replaced but with no assurance that the exterior finish of the leg would perfectly match the exterior finish of the rest of the piano. Because of these two problems, Mark decided to return the piano to Opera. He promptly notified Opera of the problems and of his decision. He told Opera that it could come get the piano as soon as they refunded his down payment. A few days later, piano movers hired by Opera came to Mark's house with the assignment of repossessing the piano. Only Mark's house guest, an exchange student from Japan, was home at the time. The piano movers convinced the house guest that they had come to pick up the piano for repair. They removed the piano from Mark's home, placed it on a platform at the rear end of their truck which had been lowered to street level, and then raised the platform such that the piano could be rolled into the truck. As they were about to roll the piano into the truck off the raised platform, the piano movers took a short break to drink some water offered them by Mark's house guest. At this point Mark returned home. He discovered what had happened and demanded that the piano movers return the piano to his house unless they were going to give him a check for his down payment. One of the piano movers accompanied Mark into the house to phone Opera about the problem; as soon as Mark entered the house, the other piano mover rolled the piano into the truck and drove away. A few weeks later, in full compliance with the requirements of UCC 9-504, Opera sold the piano to John. Opera has filed suit against Mark for a deficiency judgment. Mark has approached you for advice. In evaluating Mark's situation, your analysis should include consideration of UCC 9-113. a. What are Mark's chances of prevailing against Opera on Opera's complaint? b. What are Mark's chances of prevailing on a counterclaim against Opera? c. What rights, if any, does Mark have to retrieve the piano from John?
|
||