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SANTA CLARA UNIVERSITY CONTRACTS DECEMBER 3, 1997
The examination rules stated in the current Student Handbook govern this examination, except that you may keep these examination questions. Instructions 1. The examination is closed book. 2. Provide analysis supporting your conclusions. 3. 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. 4. Suggested time allocations: Question 1: 1-1/2 hours Question 2: 1-1/2 hours
Question 1 (Suggested time: 1-1/2 hours) Important Note: Base your answer to this question only on the facts stated in the question. Do not assume any facts discussed in our classroom exercise involving the same characters. Rachel Electronics (``Company") is a manufacturer of electronic learning devices for young children. Robert Fullerman (``Fullerman") is a well known television personality, known on television as Mr. Wizard. His popular, long running weekly television program, which appears on NBC, teaches science to young children. Because of the popularity of Fullerman's television program, Company approached Fullerman to discuss the possibility that he endorse Company=s products. Early in the negotiations, Company requested and Fullerman provided a copy of Fullerman's resume, television ratings of his television show for the preceding two years, financial statements stating advertising revenues for his television show for the preceding two years, and a list of his personal appearances as Mr. Wizard for the preceding two years. The list of appearances listed the dates, locations, and audiences of 45 personal appearances. Following negotiation, Company and Fullerman executed a 10 page written agreement in which Fullerman agreed to permit Company to use his name and likeness on the packaging of Company products for a period of five years following execution of the agreement, and Company agreed to pay him $1,000.00 upon execution of the agreement plus one percent of gross sales of Company products for five years following execution of the agreement. The agreement included the following three clauses: 15.0 Discontinuance 15.1 Company may discontinue the use of Fullerman's name and likeness on Company packaging at any time, without notice and without cause. 15.2 Fullerman may withdraw permission to use his name and 19.0 Morals Company may terminate its obligations under this agreement 20.0 Other Product Endorsements Fullerman shall not permit his name or likeness to be used by others to promote the sale of any product which competes with products manufactured by Company. Two years after execution of the agreement, NBC television news reported that Fullerman had been sued by Jane Doe for battery. In the lawsuit she claimed that she had been dating Fullerman and that he had hit her in the face several times during an argument. Contacted for comment, Fullerman admitted dating Ms. Doe but denied hitting her. NBC television news also reported that it had decided to discontinue Fullerman's television show immediately. A week after the news broke, Company notified Fullerman that it was discontinuing use of his name and likeness on its packaging and that it would no longer be paying him royalties. Fullerman has threatened to sue Company for breach of contract. Company approached you for legal advice. At your suggestion Company conducted an investigation in which it learned for the first time that: (1) The list of appearances furnished to Company by Fullerman during negotiations listed five dates on which Fullerman did not appear because of illness; (2) The resume furnished to Company by Fullerman during negotiations incorrectly described his Ph.D. in physics as having been awarded by M.I.T. whereas he actually obtained his Ph.D. from the University of Oregon; (3) During negotiations, Fullerman did not inform Company that Mattel Toys, a long time advertiser on Fullerman's television program, had notified Fullerman that it was considering discontinuation of its purchase of advertising time on the show ``because Mr. Wizard was getting stale." Company also tells you that ABC television has decided to air Fullerman's television program and that Fullerman has landed a five year endorsement deal with a manufacturer of laptop computers under which he is likely to earn substantial royalties. You have advised Company that it might be entitled to terminate the contract, without liability, pursuant to the terms of clause 19.0 of the contract. Other than on the basis of that clause , may Company escape liability for breach of contract? If it cannot escape liability for breach of contract, what would be the nature and extent of Fullerman's remedy?
Question 2 (Suggested time: 1-1/2 hours) In preparation for the 1999 Women's Soccer World Championship, to be held in the United States, the United States tournament organizing committee (``committee") contacted Nike about purchasing 50,000 soccer balls, to be marked with a special commemorative logo and distributed free to the first 50,000 fans attending the final game of the tournament. Nike offered to provide the balls with the commemorative logo at $8.00/ball. The committee asked Nike for time to consider the offer. Nike responded with the following e-mail: ``Our $8.00 offer subject to terms stated at our web site: www.nike.com. Yours sincerely, Mina Ham, Sales Representative." The web site included the following information: ``All prices quoted for custom orders are guaranteed for 6 months from the date of quotation." Two months after Nike's offer, the committee contacted Nike to order 50,000 balls with the commemorative logo @ $8.00/ball. Nike told the committee that it would have to charge $9.00/ball because of increased labor costs (responding to public criticism of low wages for workers in foreign countries). The committee objected to the increased price, but ended up sending a written, signed order for 50,000 balls. The order did not specify a price. The order did specify the logo: ``Women's World Championship 99." Nike timely delivered the balls together with an invoice for $450,000. The committee sent Nike a check for $400,000 together with a note explaining that it was holding Nike to the originally quoted price of $8.00/ball. Negotiations ensued and the parties agreed to settle their dispute by payment of $25,000 from the committee to Nike at the end of the tournament (9 months later). Subsequent to the settlement agreement, the committee discovered that the commemorative logo on the balls contained an error: the logo read ``Woman's World Cup 99" instead of ``Women's World Championship 99." (I have added the bold and the underline to highlight the error for purposes of this question; there was no bold or underline on the soccer balls.) It was too late, however, to order new balls from Nike or anyone else. Thus, the committee decided to use the balls anyway, but wrote a letter to Nike saying that it was ``withholding payment of the $25,000 until advised of our rights or liabilities by legal counsel." The committee seeks your advice. What are the committee's rights against or liabilities to Nike? End of examination |
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