Contract Law

Contract Law

1.    This examination consists of three questions with related fact patterns.
2.    In answering these questions, you may consult the textbook, the PowerPoint
slides provided to you and your notes. You may not consult any web or Internet-based resources, nor may you consult any resources not created by you other than those

specified here.
3.    Cutting and pasting is strongly discouraged.
4.    You may not collaborate on your exam answers.
5.    In answering the questions, assume you are in a jurisdiction where the legislature
has adopted Article 2 of the UCC governing the sale of goods. In all other situations, the supreme court of this jurisdiction has recognized the Restatement Second of

Contracts and the UCC as persuasive but not binding authority.
6. A well-written exam answer will identify each issue presented, state the rule/rules applicable to each issue, apply the relevant facts to the rule, and reach a

conclusion. That said, avoid lengthy and abstract summaries of general legal doctrine.
7. Discuss all plausible lines of analysis. Do not ignore lines of analysis because you think a court will resolve an ambiguous question or “threshold” question (i.e.,

a question that would prelude other analyses) one way or another.
8. Please note the page limit indicated for each question. Any text submitted beyond the page limit will not be read.
9. All answers must be contained in one Microsoft Word document; each answer must indicate the number of the question to which it responds.
10. Your answer document must not indicate your name or any other identifying information.
11. In preparing your answers, please use times new roman, 12-point font. The answer document should be double spaced, with one-inch margins, and page numbers must be

inserted into the answer document at the bottom center of each page, including the first page.

Question One 25 Points Five Page Limit
Will Bates, an entrepreneur and programming genius has developed a computer program that can be used to control a manufacturing company’s shipping procedures. The

innovation is that the program can find the fastest and cheapest shipping options for the manufacturers’ products among the various US and international third party

shipping companies (FedEx, UPS, DHL, local shippers, etc.). The program is targeted for small to mid-size companies that may be seeking to replace and outsource its

shipping and logistics operations due to increasing costs. In order to work properly, the program must be tailored to the end users products, location, location of

principal markets, etc.
Bates has offered this kind of semi-tailored efficiency software product in the past, always targeting the small to medium sized manufacturing sector across all

industries. Because of this past track record, he has a well established marketing list of past customers. Once the beta version of the new logistics software is

ready, he personally called the past clients to tell them about the software, essentially giving the information above as well as pricing ($50,000 for the software

suite plus customizing programming services at $125 per hour on an as needed basis.) He also placed an ad in Business Logistics Monthly, a trade magazine, announcing

the availability of the software, some general descriptions of the logistics problems it seeks to solve, and contact information for Bates if the readers of the mag

want to “Learn More.”
On December 1, 2013, one of Bates’ former clients, Client A, with whom he chatted at length about the new product, called and said he would like the program tailored

to his business but that he would only pay $45,000. Bates said he would get back to Client A about the price, but asked a programmer to begin tailoring the program to

Client A’s business. On January 15, 2014 Client A called Bates and informed him that he did not want the program, that he had found a better product for a lower cost.
Is there a binding agreement between Bates and Client A? In other words is there an agreement that can be enforced? In addition to your analysis on these facts, if

there is more information you would like to know, please advise of that as well.
Question Two 30 Points Seven Page Limit
In addition to the facts in Question One, the following occurs:
On December 2, 2013, Client B, who had seen the ad in Logistics Monthly, received a preview version of the program (on a zip drive) which he ordered on December 1 and

for which he paid a deposit (to be applied against the final purchase, if any) of $5000. Client B ran the software on his computer and clicked through a terms of use

agreement that included a provision that a client who obtained a preview version could not use the program in whole or in part if the client declined to buy the full

version. In such circumstances, the client is required to return the zip drive to Bates within 21 days and Bates would upon receipt of the zip drive refund the

deposit. On December 30, 2013 Client B emailed Bates and informed him that he would be returning the zip drive and requesting a refund of the $5000 dollar deposit.
On January 5, Bates contacted Client B and said that he would not return the deposit, requesting payment of the $45,000 balance of the price of the program. Client B

returned the zip drive and did not pay the $45,000.00.
1) Assume that the agreement between Bates and Client B can be enforced as a binding agreement, and that Bates has brought a breach of contract claim against Client B

for the balance of $45,000. Will the contract be enforced by the court? In addition to your analysis on these facts, if there is more information you would like to

know, please advise of that as well.
2) Assume that the evidence shows that Client B believed that Bates’ program would not perform as represented, could not be used for shipping to 30 percent of its

customers’ locations, and that it would not save Client B any money in shipping to customers which could be reached by the logistics functions of the programs.

Further, Bates knew that Client B’s former logistics software supplier had gone out of business and there was no other option for Client B but to use Bates’ program.

Should the contract be enforced against Client B? In addition to your analysis on these facts, if there is more information you would like to know, please advise of

that as well.
Question Three 25 Points Five Page Limit
Assume that a court finds that there is a binding and enforceable contract between Bates and Client A. The evidence also shows the following:
The programmer Bates hired was an independent contractor and cost Bates $15,000 to begin the customizing of the program before Client A notified Bates of its decision

not to buy the program. Bates did not believe Client A when he called and asked the independent contractor to keep working for another two weeks at a cost of another

$5000. Bates had rented an office for the independent contractor at a cost of $2000, which he does not now have to pay. On the expectation of the contract with Client

A, Bates also upgraded his internal computer equipment at a cost of $30,000. This new equipment would be used for Client A’s work and for any other sales of the

program to other clients.
The cost of the independent contractor’s work is well over the market value for such services but Bates claims the expertise possessed by this programmer is unique and

specific to this project.
What remedies/damages are available to Bates? What defenses to those damages are available to Client A? In addition to your analysis on these facts, if there is more

information you would like to know, please advise of that as well.

Parol (Extrinsic)Evidence Rule Takeaways

General Rule:
Such evidence is inadmissible to contradict or vary an integrated agreement.
It may be admissible to supplement or clarify.

Concept of “Integration”:
Integrated = entire contract/agreement is reflected in the writing and meant to be the final expression of terms.

Partially Integrated = when the contract contains more than one term, the written contract is complete as to one term and incomplete as to another.

Not Integrated = where all terms (or only term) in the contract are incompletely expressed in the writing.*

*Note: Do not confuse integrated and completely integrated. Only these three categories matter; the “completely integrated” seems to apply as a comparison to a

partially integrated agreement.

Traditional Approach:
–    Admissible where the writing:
o    Is incomplete on its face
o    Doesn’t purport to contain the whole agreement – no merger clause.
–    Where contract is integrated, courts limited to evidence contained in “Four corners of the document” – extrinsic evidence not even admissible to make threshold

determination of whether the contract is integrated.
Modern Approach:

-Extrinsic evidence admissible in stage 1 (pre-trial, to Court) to determine     whether the writing is integrated, or a final expression of the terms.
-If the writing is integrated, extrinsic evidence is not admissible in stage 2     (at trial to trier of fact), to inform the meaning of the contract

Relevant Restatement and UCC sections:

Restatement 213: Effect of Integrated Agreement on Prior Agreements:
A binding integrated agreement discharges prior agreements to the extent that it is inconsistent with them or that they are within its scope.
An integrated agreement that is not binding or that is voidable and avoided does not discharge a prior agreement.
Restatement 216: Consistent Additional Terms:
Evidence of consistent additional term is admissible to supplement an integrated agreement, unless court finds agreement was completely integrated.
Agreement is not completely integrated if the writing omits a consistent additional term which is:
1.      Agreed to for separate consideration.
2.      Might naturally be omitted.

UCC 2-202: Final Written Expression; Parol or Extrinsic Evidence:
Integrated terms may not be contradicted, by may be explained or supplemented by parol evidence by:
1.      Course of performance, course of dealing, usage of trade.
2.      Consistent (non-contradictory) addt’l terms.

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