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SANTA CLARA UNIVERSITY
Contracts
Fall semester
Instructions 1. This is a limited open book examination. During the examination you may consult your casebook, Selections for Contracts, the Burnham drafting book, 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 Commercial Code, if and when applicable. You may but need not assume that the Restatement 2nd, Contracts, is the governing common law. 3. My best estimate is that Question 1 will be somewhat more time consuming than Question 2. Thus, you may wish to consider allocating approximately 2 hours to Question 1 and approximately 1-1/2 hours to Question 2. However, this estimate may not be accurate for all students. 4. I do not grade by awarding points and establishing a curve. Rather, I consider the net impression made by your answers. 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, and organization and conciseness of response. Exceedingly good or exceedingly poor English expression may also influence the grade.
Caution: The facts from this question are suggested by our class exercise involving a dispute between an architect and a therapist. Consider only the facts stated here, not any other or contrary facts arising in the class exercise. Eduardo Hernandez ("Hernandez"), an architect, and Sheila Jones ("Jones"), a licensed marriage, family, child counselor, occupy adjacent commercial premises in the City of Hamlet, California. Hernandez retained a contractor to renovate his commercial premises. Noise from the renovation disturbed the therapy practice of Jones, and several of her patients have told Jones that they might not continue treatment unless the noise abated. Jones hired an expert who measured maximum noise from the renovation at 85 decibels. Jones located the Hamlet noise ordinance at the local law library. The ordinance, like many
housing codes, provides a civil rather than a criminal penalty for violation, enforceable in a civil action brought by the City Attorney of Hamlet. In a telephone conversation with her son, a New York tax lawyer, Jones learned that she might possibly have a tort claim for nuisance, even in the absence of a violation of a noise ordinance. Her son cautioned that he wasn't an expert in tort law, and he wondered aloud whether a court would consider temporary construction noise to be a nuisance. Jones confronted Hernandez with her conclusion that the noise violated the Hamlet noise ordinance. When Hernandez appeared unwilling to work toward a solution, Jones threatened to file a complaint with the City Attorney for violation of the noise ordinance. In the heat of the moment, she also told Hernandez that she had been assured by the City Attorney that Hernandez would be fined if there were a violation of the noise ordinance. In fact, she had never talked to the City Attorney. She also threatened to sue Hernandez for nuisance and said that she would seek damages for lost patients and an immediate injunction against the construction. As an architect, Hernandez was, in general, familiar with noise ordinances and he thought there might be an exception for construction. However, he was worried about being sued for nuisance because financial constraints made it imperative for him to complete the construction promptly, without the threat of injunction. He also learned from his contractor that it would be relatively easy to shift work schedules to alleviate the noise problem. Accordingly, without checking the Hamlet noise ordinance, he signed a written agreement, prepared for Jones by her son the tax lawyer. Jones also signed the agreement. The agreement included the following terms: 2.1 Hernandez shall cause his contractor each weekday between the hours of 9:30 a.m. and 2:30 p.m. to limit on site construction activity involving sawing or hammering to no more than 10 minutes each hour. 2.2 Except in the event of breach by Hernandez of his promise under paragraph 2.1, Jones surrenders her claim against Hernandez for violation of the City's noise ordinance and for nuisance. 3.0 In the event of breach by Hernandez of his promise under paragraph 2.1, Hernandez shall pay Jones at the rate of $100.00/hour for therapy treatment hours lost by Jones as a result of clients terminating therapy because of construction noise from the Hernandez renovation. 3.1 Ronald Goldblum shall arbitrate any dispute about whether or not a breach of the promise under paragraph 2.1 results in the loss of clients by Jones and any dispute about the number of remaining hours each client would likely have been treated by Jones. The agreement contained no other promises by either party. Ronald Goldblum, like Jones, is a licensed marriage, family and child counselor. He practices in an adjoining county. Goldblum and Jones were classmates in the masters program leading to their counseling degrees. Jones frequently refers clients to Goldblum. Hernandez breached the promise in paragraph 2.1 several times. Jones now claims to have lost several clients, each of whom require long term therapy, as a result of the breach and claims that she has therefore lost between $10,000 and $15,000 in future fees. Jones has demanded that Hernandez meet with her, or submit to an arbitration by Ronald Goldblum, to determine the amount that Hernandez should pay for breaching the agreement. Hernandez has asked that you advise him. What is your analysis of the enforceability of the agreement, the enforceability of the arbitration clause, and, in the event that Hernandez has
breached an enforceable agreement, his liability for damages? Do not discuss his potential liability for violation of the noise ordinance or for the tort of nuisance. Question 2 Minh Ngo, a high school teacher, signed a written agreement with Valley Motors to purchase a new Chevrolet Impala automobile for his personal use. Mr. Ngo paid a $1,000 down payment
toward the $20,000 purchase price. He was to pay the balance in installments over four years beginning one month after delivery of the automobile. The automobile was to be ordered from Detroit because of
the particular combination of colors and options which Mr. Ngo desired. The agreement contained the following clause: "In the event and under the circumstance that either of the aforementioned parties to this agreement desire and agree to alter, change or modify this agreement in any respect whatsoever, then any such alteration, change or modification shall only be valid and enforceable if same is reduced to writing and signed by both parties, or their authorized agents or representatives, and any oral alteration, change or modification of this agreement shall be of no force or effect whatsoever." One month after signing the agreement Mr. Ngo suffered a serious back injury during a soccer game, disabling him from work for several months. Because of a reduction in income, from salary to disability benefits, Mr. Ngo informed Valley Motors by telephone that he didn't think he could afford to buy the Impala. A week later, at the invitation of Valley Motors, Mr. Ngo visited with the sales manager. The sales manager told Mr. Ngo that failure to take the Impala when it arrived would be a breach of contract. He also told Mr. Ngo that there was another prospective buyer for the Impala and that, in view of Mr. Ngo's situation, Valley Motors would be willing to allow Mr. Ngo to substitute a less expensive car, a particular red Chevrolet Camaro, from inventory. Mr. Ngo said that he would think it over. The sales manager gave Mr. Ngo the sales manager's business card (bearing the printed names of both Valley Motors and the sales manager). On the back of the business card the sales manager wrote: "3 days - red Cam. I.D. B2X479356 - $15k". (Assume for purposes of your answer that these words on the business card constituted an offer.) Two days after meeting with the sales manager, Mr. Ngo called the sales manager and said: "O.K. We've got a deal on that red Chevy Camaro." (Assume for purposes of your answer that these words constituted an acceptance.) The sales manager said that he would have to check if the car were still available. A few hours later he called Mr. Ngo and told Mr. Ngo that the red Chevy Camaro had been sold to someone else and that Mr. Ngo would have to fulfill his obligation under the original agreement. "Alternatively," the sales manager said, "we'll put the whole matter to bed if you pay us another $500.00 on top of the deposit." Mr. Ngo said he would think this over. Valley Motors has sought your advice. It now has the Impala but it hasn't heard from Mr. Ngo. It has also determined that its total loss of profits on the deal with Mr. Ngo will be $2,500. 1.Valley Motors wants to know whether it can hold Mr. Ngo liable for breach of contract if he continues to refuse to take and pay for the Impala and, if so, how much money it can recover from Mr. Ngo. It also wants to know whether Valley Motors could be liable to Mr. Ngo for failing to deliver the red Chevy Camaro. Please answer Valley Motors' questions and provide supporting analysis. U.C.C. 2-209(3), a section we did not study in class, may be among those relevant to answering the question. 2.In looking over the original purchase agreement, you suggest to Valley Motors a redraft of the clause of the agreement which is quoted in the question. Please provide such a redraft. Your redraft should reflect the principles of drafting articulated in the Burnham drafting book.
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