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SUBSET 1: INTRODUCTORY MATERIAL

QUESTION 1

Norine Breen was a graduate student at El Dorado State University In April 1975, she decided to apply for

high school teaching positions in El Dorado. On April 28, she visited the offices of Resumes, Inc., a service

specializing in finding teaching positions. The Resumes' representative, Mr. Hely, gave Norine Resumes' application

form:

―I, _____, hereby offer to teach __________ during the period, __________. I am willing to teach that

course - for an annual salary not less than _______.‖

Hely said that he would send Norine’s resume and the application form to the personnel departments of the

45 county school districts in El Dorado. He also showed her a copy of Resumes' cover letter. The letter stated that

"you will find enclosed the resume and application of a graduate student interested in teaching in your school

district." Norine then filled in her name in the first blank, "French or German foreign language" in the second, "the

1975–76 academic year" in the third, and "$11,500" in the last blank. She gave her resume and completed

application form to Hely. Hely duplicated the materials and mailed the letters on April 29.

On May 2, one of the letters reached the Morena County School District Personnel Department. The

department chief, Mr. Martinez, reviewed the resume and application. He immediately composed a letter to Norine.

The letter stated:

"We have just the position for you. One of our French instructors at South Morena High, Mr. Levy, is

going to retire this year. From your resume, you are ideally qualified to replace him. The salary would be

$12,075, payable in installments. You will receive our normal fringe benefits. The position's yours. Let me

know what text you intend to use. I must submit it to our Educational Materials Committee for approval.

Let me hear from you soon."

Martinez mailed the letter to Norine on May 5.

On May 8, Norine received Martinez' letter. She was overjoyed. Her aunt lived in Morena, and she was

quite fond of her aunt. Norine waited until May 19 to respond to Martinez' letter. On that date, she mailed Martinez

the following letter:

"I'm really pleased with the contract. I graduate within a week. I might move down immediately. The text

I'll most probably use is Marant, The Modern French Language (Harper Bros. 1972)."

On May 25 Norine graduated. The next day she moved to Morena. She incurred $122 in moving expenses.

She moved into her aunt's house; her aunt generously offered her free room.

On May 22 Norine's last letter reached Martinez. On May 23, Mr. Levy changed his mind about retiring

and so informed Martinez. On May 23, Martinez wrote to Norine that "we sincerely regret we have to retract our

offer." The letter arrived at Norine's old mailing address on May 27 the day after she moved. The letter caught up

with Norine on June 2. She had already moved into her aunt's house and paid the moving company. After reading

the letter, she phoned Martinez and insisted that the school district "live up to our agreement." Norine has filed an

action against the school district.

MAY NORINE RECOVER DAMAGES FROM THE SCHOOL DISTRICT FOR BREACH OF

CONTRACT? DO NOT DISCUSS THE MEASURE OF DAMAGES OR OTHER REMEDIES. DISREGARD

ANY PROBLEM OF SOVEREIGN IMMUNITY.

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QUESTION 1

Suggested Organization for Examination Answer

I. Theory #1: Norine's first theory would be that her initial letter was an offer and that Martinez' first

letter was the acceptance

A. ffer – Norine's initial letter

B. Acceptance – Martinez' initial letter

II. Theory #2: Norine's second theory would be that Martinez' initial letter was an offer and 'that her

letter was the acceptance.

A. Offer – Martinez' initial letter

B. Termination of the offer

1. Lapse of time

2. Revocation

C. Acceptance – Norine's second letter

III. Theory #3: Norine's third theory would be that Martinez' first letter was a definite promise and that

promissory estoppel renders that promise enforceable.

A. Scope of the doctrine – Does it apply in a business context?

B. Elements of the doctrine

1. Definite promise

2. Foreseeable reliance

3. Substantial reliance

IV. Conclusion

QUESTION 1

THEORY 1

Norine's first theory would be that her initial letter was an offer and that Martinez' first letter was the

acceptance.

1. Offer – Norine's initial letter.

2. "Offer."- Norine's application form used the term, "offer." Her use of that term is some evidence

that the document was an offer.

3. Some definite terms, salary, etc.. The document specified some definite terms and gave the

recipient the right to specify others, e.g., "French or German foreign language." The terms' definiteness is additional

evidence that Norine intended her proposal to be an offer.

4. "Interested." On the other hand, the cover letter referred to Norine as a person "interested in

teaching in your school district." That language is appropriate for preliminary negotiation. Norine read the letter and

probably realized that the letter used that language.

5. 45 counties. Hely told Norine that he would mail the proposal to 45 county school districts. The

size of the group of addressees cuts against finding an offer.

6. Possible indefiniteness in the contract term. Norine wrote in "the 1975–76 academic year." The

facts do not state whether there is a uniform academic calendar throughout the state.

PROBABLE RULING: The size of the group of addressees is so large that the court would probably rule

that Norine's initial letter was mere preliminary negotiation.

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7. Acceptance – Martinez' initial letter.

8. "The position's yours." Some of the letter's language, especially the noted language, suggests that

Martinez intended to close or finalize a bargain.

9. Added term of installments. The question is whether the acceptance matches the offer. In her

initial letter, Norine referred to a lump sum. Martinez' letter adds a reference to installments. Was it customary that

the school districts pay salaries in installments? How many installments, 9 or 12? If there was a custom, was it so

notorious that Norine should have known the custom?

10. Added term of normal benefits. Again, the issue is whether the acceptance was unconditional.

Norine's letter is silent on fringe benefits." Martinez' letter alludes to "our normal fringe benefits." Were the fringe

benefits uniform throughout the state? Were the type and amount of the fringe benefits so notorious that Norine

should have known them?

11. Added term of approval of the text. Like #9 and #10, #11 presents the question whether the

acceptance is a mirror image of the offer. Martinez' letter directs Norine to submit the name of her text for approval.

If Martinez is insisting upon an acceptable text to close the bargain, the acceptance is qualified.

12. Added term of reply to Martinez' letter. At the close of his letter, Martinez writes, "Let me hear

from you soon." If we should interpret that language as requiring further correspondence to close the bargain, his

letter is not an acceptance.

PROBABLE RULING: Even if Norine's initial letter constitute an offer, the court would probably rule that

Martinez' initial letter is not a "mirror image" acceptance.

THEORY #2

Norine's second theory would be that Martinez' first letter was an offer and that her second letter was the

acceptance.

13. Offer – Martinez' initial letter.

14. Definite terms. Read in light of Norine's first letter, Martinez' letter would have sufficiently

definite terms to constitute an offer.

15. Martinez' subsequent description of his letter as an offer. In his May 23 letter, Martinez described

his prior letter as "our offer."

PROBABLE RULING: Martinez' initial letter was an offer.

Termination of the offer.

16. Lapse of time. Martinez would argue that his offer terminated before Norine accepted.

17. "Soon." Martinez would point out that his letter asked Norine to respond "soon."

18. Reply on May 19th. The question of fact is whether Norine's response on May 19th was a

sufficiently prompt response.

19. Revival by unexpressed intent. On May 23, Martinez acted as if the offer was still in effect. Norine

could argue that even if the offer had terminated by lapse of time, Martinez revived the offer.

20. Revocation. In addition to invoking lapse of time, Martinez would argue that he revoked the offer

before an effective acceptance.

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21. Effective date of revocation. Whether the revocation's effective date was May 27 (the day the

revocation reached Norine's old address) or June 2 (the day the letter actually reached Norine), the revocation would

be ineffective. The acceptance would antedate the revocation. Norine dispatched the acceptance on May 19, and

Martinez received the acceptance on May 22.

PROBABLE RULING: The offer was still in existence when Norine purported to accept on May 19th.

22. Acceptance – Norine's second letter. Norine's second letter manifested an intent to finalize a

bargain. Her letter even uses the term, "contract."

23. "Probably." The question is whether the acceptance is unconditional. The offer asked Norine to

name the text she intended to use. She responds that she will "probably" use Marant, The Modern French Language.

The court might say that as a layperson, Norine was simply using the expression inartfully. Alternatively, the court

might rule that the text is a relatively minor term of the bargain.

PROBABLE RULING: Unless the court applies the "mirror image" rule very strictly, the court would

probably find an effective acceptance.

THEORY #3

Norine's third theory would be that Martinez' first letter was a definite promise and that promissory

estoppel renders that promise enforceable.

24. Promissory estoppel.

25. Applicable in a business context? This fact situation revisits the Hand-Traynor debate. Hand

would contend that a court should not apply the promissory estoppel doctrine in a bargain context.

26. Definite promise? On its face, Martinez' letter is a bit ambiguous; but read in the light of Norine's

first letter, Martinez' promise is sufficiently definite.

27. Foreseeable reliance. In general, it was foreseeable that Norine would rely on the promise.

28. Statement in Norine's letter. In her second letter, Norine wrote, "I might move down immediately."

That statement makes her detrimental reliance even more foreseeable.

29. Actual reliance.

30. Substantial reliance. This element of the doctrine is the key to Norine's third theory.

31. $122 moving expenses. The salary was to be $12,075. The moving expenses are only 1% of the

salary the school district would have to pay Norine if the court enforces the promise. Query: Is that substantial

enough to trigger the promissory estoppel doctrine?

32. Free rent. It will be difficult for Norine to show other expenditures in reliance on the promise. The

facts specifically state that Norine's aunt was giving Norine free board.

PROBABLE RULING: If the court rigorously enforces the requirement that the reliance be substantial, the

court would probably reject a promissory estoppels theory.

MISCELLANEOUS ISSUES SOME STUDENTS DISCUSSED:

— If there were differences between Norine's offer and Martinez' acceptance, were the differences

material?

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— Did Martinez' letter's reference to Levy's retirement make the contract subject to a condition that

Levy actually retire?

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QUESTION 2

Glenn Hara was 21 years old and a senior at El Dorado State University. He had achieved All-American

honors in basketball and volleyball. He was supposed to graduate in June 1975. The World Basketball Association

was the only professional basketball league in the United States. It held its college draft in April 1975. A W.B.A.

team, the El Dorado Bruins, drafted Glenn.

In early May 1975, the Bruins' owner, Ms. Napper, flew to Morena to meet Glenn. She and the club

attorney, Mr. Powell, negotiated with Glenn. Mr. Powell explained to Glenn that the Bruins were making him "a

fantastic offer." In Ms. Napper's words, the offer included:

1. "$650,000, spread over a five-year period;" and

2. title to Ms. Napper's "500 acre farm" in Granite, a county just south of Morena. (Ms. Napper

wanted to-dispose of the farm for tax reasons.)

Glenn commented that he had always wanted a farm to raise quarter horses; he said he wanted a farm large

enough to raise at least 20 horses. Ms. Napper assured Glenn that her farm was large enough. (At the time she made

these statements, Ms. Napper believed them to be true.)

In return, Glenn was to play for the Bruins for five seasons, beginning in October 1975. Before closing the

conversation, Mr. Powell noted that the contract would "of course include the normal league covenant that you won't

jump to any other pro team." Ms. Napper added, "Glenn, you have my word that I won't invoke the covenant unless

a competitive basketball league is formed and you try to jump to that league." On that assurance, Glenn accepted the

offer.

Powell sent Glenn a written contract in late May. Glenn signed the document without reading it. The

writing referred to "Ms. Napper's farm in Granite"; the writing did not state that the farm included 500 acres. The

contract contained a merger clause that "this writing contains the parties' entire agreement. There are no collateral

oral agreements or stipulations." Tonally, the contract included the covenant, barring Glenn from playing for "any

other professional sports team in the United States during the contract's term."

PART A: The ranch included only 378 acres. Because of a local zoning ordinance, Glenn could graze only

10 horses on the farm; under the ordinance, he would have needed at least 650 acres to graze 20 horses.

Glenn discovered these facts on June 2, a week before graduation. At that time, he had heavy, extraordinary

expenses: a student loan came due, and a local court entered a large Judgment against him. In light of these

expenses, Glenn decided to accept the initial $25,000 installment Ms. Napper tendered Glenn on June 4.

The next week Glenn consulted an attorney. Glenn then filed suit for declaratory relief, a declaration that

his contract with the Bruins is void, voidable, or unenforceable.

IS GLENN ENTITLED TO THE DECLARATION?

PART B: Glenn played for the Bruins for two years. He grew weary of basketball. He decided to join the El

Dorado Stars, a professional volleyball team. Like the Bruins, the Stars play their home games in Morena. The Stars'

season is five months long while the Bruins' season is four months long. There is a three month overlap. The Bruins

play their games on Friday nights. The Stars play most of their games on Saturday afternoons.

When Ms. Napper learns that Glenn is joining the Stars, she files an equity suit against Glenn for a

prohibitory injunction barring him from playing for the Stars.

IS MS. NAPPER ENTITLED TO THE PROHIBITORY INJUNCTION?

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QUESTION 2

Suggested Organization for Examination Answer

PART A

I. Applicable Enforceability Doctrines

A. Mistake

B. Innocent misrepresentation

C. Unconscionability or illegality

II. Ratification

III. Conclusion

PART B

I. Preliminary Equitable Considerations

A. Special equitable remedy

B. Special equitable requirement, inadequate remedy

II. Glenn's Defenses

A. Glenn will attempt to introduce parol evidence of Ms. Napper's oral promise not to invoke the

covenant unless he jumped to a competitive basketball league.

B. Secondly, Glenn would argue that the covenant's occupational breadth is excessive and illegal

C. Thirdly, Glenn would argue that the covenant is unconscionable.

III. Conclusion

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QUESTION 2

PART A: IS GLENN ENTITLED TO THE DECLARATION

1. Mistake, Glenn would first argue that the contract is voidable on the ground of mistake.

2. Mistake as to the size. The parties were mutually mistaken that the farm was 500 acres in size. In

fact, the farm was only 378 acres in size.

3. Mistake as to possible uses of the farm. Likewise, the parties were mutually mistaken that the farm

was large enough to permit Glenn to raise 20 quarter horses,

4. Characterize the mistake as a mistake concerning the subject-matter. The mistake was a mistake

about the extent of the subject-matter of the contract. Some courts grant relief for mutual mistakes of this character

if the mistake is material. This mistake was material; it prevented Glenn from making his contemplated use of the

property,

5. Parol evidence. Glenn must use parol evidence to prove the mistake. The contract documents

reflect neither Ms. Napper's statements about the farm's size nor Glenn's statements about his contemplated use.

6. Parol evidence rule no bar. The parol evidence rule, does not prevent a person from using parol

evidence to invoke an enforceability doctrine such as mistake.

PROBABLE RULING? The contract is voidable on the ground of mistake.

7. Innocent misrepresentation. Alternatively, Glenn can rely upon the innocent misrepresentation

doctrine.

8. Materiality, Glenn will have to convince the court that the false statements related to material

matters, matters that a reasonable person would weigh heavily in deciding whether to enter the contract. On the facts

of the case, this issue is a close question, Glenn might have accepted the contract solely for the $650,000. On the

other hand, Glenn indicated that he attached some importance to the farm.

9. Parol evidence. As in #5, Glenn must use parol evidence to establish the innocent

misrepresentation.

10. Parol evidence rule no bar. See #6, supra.

PROBABLE RULING: The contract is voidable on the ground of innocent misrepresentation.

11. Unconscionability of the covenant, Glenn might argue that the covenant is unconscionable and

taints the whole contract.

12. Procedural, unconscionability – involuntary assent. The W.B.A. had an effective monopoly; it was

the only professional basketball league in the United States.

13. Substantive unconscionability. The over-all effect of the bargain certainly was not indecent; Glenn

received $650,000 and a large farm for his services, Glenn can argue that the provision's effect on his right to work

is indecent, but it seems doubtful that the court would accept the argument.

14. Severability. Even if the court found the provision unconscionable, Glenn would have to convince

the court that the provision taints the whole contract. The court could invalidate the provision but deny Glenn the

declaration.

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PROBABLE RULING: The court would not invalidate the provision as unconscionable. The court might

invalidate the provision as an illegal restraint on trade, infra. Even if the court went that far, the court would not

invalidate the entire contract.

15. Ratification

16. Acceptance of the $25,000 payment. Ms. Napper will argue that Glenn ratified the contract by

accepting the $25,000 payment. He accepted the payment after discovering the facts which made the contract

voidable.

17. Surrounding circumstances. Glenn would counter that in the surrounding circumstances, his

acceptance was involuntary; he had to meet the extraordinary expenses.

18. Fact-law distinction. When Glenn accepted the $25,000. he knew the relevant facts. Perhaps he did

not know that those facts rendered the contract voidable. In most jurisdictions, the ratification is effective as long as

the party knew the relevant facts.

PROBABLE RULING: Glenn's ratification precludes him from avoiding the contract on the ground of

mistake or Innocent misrepresentation. Ms. Napper was not responsible for the surrounding circumstances which

compelled Glenn to accept the $25,000.

PART B: IS MS. NAPPER ENTITLED TO THE PROHIBITORY INJUNCTION?

19. Special equitable remedy. Ms. Napper prays for a special equitable remedy, a prohibitory

injunction. She must satisfy the special equitable requirements for relief.

20. Inadequate remedy at law. The foremost special equitable requirement is that Ms. Napper

demonstrate that she has an inadequate remedy at law.

21. Difficulty of computing damages. Glenn performs unique personal services for the Bruins. It

would be difficult to assign an economic value to those services. It would, hence, be difficult to compute Ms.

Napper’s damages if Glenn breaches.

PROBABLE RULING: Ms. Napper has an inadequate remedy at law.

Glenn's first defense

22. Parol evidence rule, Glenn will argue that the rule does not prevent him from proving Ms,

Napper's oral promise not to invoke the covenant unless Glenn jumped to a competitive basketball league.

23. Was the document an integration? Yes. The parties certainly intended to finalize at least part of their

agreement.

24. Was the document a complete integration? The document clearly would be a complete integration

under the Wigmore test. It is equally evident that it would be a partial integration under the Corbin test. Applying

the Williston test, the court would probably find a complete integration. Glenn has a weak argument that similarly

situated businesspersons would not include the term in the document, since they would not want the other W.B.A.

teams to know of the agreement.

25. Contradict. As a matter of interpretation, the parol evidence seems to contradict the document's

terms; the document refers to "any other professional sports team in the United States .... " Even if the integration is

partial, Glenn cannot use parol evidence to contradict the document's terms.

Glenn's second defense

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26. The covenant's illegality. Glenn would next argue that the covenant was unduly broad and illegal.

27. Temporal overbreadth. This attack on the covenant seems weak. This is net even a post-

employment covenant; the covenant runs during the time Glenn is to play for the Bruins.

28. Geographical overbreadth.

29. — The whole United States. The geographical overbreadth attack is stronger than the temporal

overbreadth argument. However, if the W.B.A. is a national league, the covenant's geographic breadth seems

justified.

30. Occupational overbreadth.

31. — Any professional team. The occupational overbreadth attack is the strongest. However, perhaps

professional teams in different sports are financially competitive; the sports fan has a finite number of dollars to

spent for sports, and in a financial sense the covenant's occupational overbreadth might be defensible. Yet the

precedents in this area are rather strong and this covenant's occupational breadth is so sweeping that Glenn would

probably prevail.

32. Blue pencil. A minority of courts blue pencil overly broad covenants. The Bruins and Stars play in

the same geographic area, and their seasons overlap for three months. A court might blue pencil the covenant and

issue the injunction.

PROBABLE RULING: The covenant is overly broad, and the court would not blue pencil.

Glenn's third defense

33. Unconscionability. Glenn would argue that the covenant is unconscionable. See #11–14, supra.

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QUESTION 3

Rob Kennett was a fiction writer. In November 1974, he decided to earn some extra money by operating a

Christmas tree lot in his backyard. He had never operated a lot before. He contacted local commercial tree farms and

learned that their price was 55¢ per foot. He decided to inquire whether his uncle, Mr. Parks, would supply the trees.

Mr. Parks owned a ranch in the nearby mountains. (The ranch was Mr. Parks' sole property; Parks' wife did not have

any interest in the ranch.)

On Saturday, November 16, Rob drove to his uncle's ranch. As they were discussing the tree lot, Mr. Parks

remarked, "Rob, I'll always remember the way ya helped me put the cabin up couple years ago. If I'd hadda hire

some guy to help, it would a cost me plenty. Sure, I'll let ya have the-trees. I figure I owe ya that much. But to keep

your aunt happy, we'll have to make it look legal and proper. Ya get it wrote up, and I'll put my John Hancock on it."

That Monday, Rob contacted his attorney, Ms. Inbau. She drafted a written contract, referring to Rob as the

party of the first part and Mr. Parks as the party of the second part. The contract stated:

"The party of the first part promises that:

1. He shall buy whatever Christmas trees he thinks he needs for the operation of his Christmas tree

lot from the party of the second part at 40¢ per saleable foot of tree, payable on January 1, 1975; and

2. He shall not begin removing trees from the property of the party of the second part until obtaining

a tree harvesting permit from the El Dorado State Forestry Department."

The contract provided that Mr. Parks would sell Rob whatever trees Rob needed during the contract's term.

The document stated that the contract's term would run from the date of signature to December 25, 1974. Finally, the

contract provided that Rob could terminate the contract on three days' advance notice; the contract specifically

permitted oral notice. Rob and Mr. Parks signed the document on November 19.

During the last week in November, Rob prepared to open the lot. He spent $325.00 to set up the lot. Rob

then decided to stock the lot with trees. On Monday, December 2, he rented a truck, drove to the ranch, cut a load of

trees, and drove back to the lot. To Rob's surprise, the trees died by Wednesday morning. A tree surgeon told Rob

that the trees were diseased. Rob and the surgeon drove to the ranch. The surgeon inspected the trees. He told Rob

and Mr. Parks that the only healthy trees on the property were the trees far above the snow line. The surgeon then

told Rob about the expensive, special equipment he would need to harvest the trees above the snow line. Rob said,

"Wow, that's going to wipe out my profit. Could you reduce the price per foot, Unc?" Mr. Parks said, "Suppose so."

Mrs. Parks objected, "You're already giving the trees away. Don't be a fool." Mr. Parks retorted, "Oh, hush. Rob,

they're yours for 25¢ a foot." Rob said, "Thanks a million. By the way, if we have any stuff we can't sell, I'll drop it

off at the cabin for fire wood," Mr. Parks said, "Fine. The stack is gettin' low." The two men shook hands.

On December 5, Rob rented the special equipment and removed a week's supply of trees. That Saturday,

Mr. Parks suffered cardiac arrest and died. His will named his wife as his sole beneficiary and executrix of the will.

Rob drove to the ranch on the next Thursday, December 12, to get another load of trees. Mrs. Parks refused to let

Hob remove trees unless he agreed to pay 40¢ per foot. Rob refused and filed an action against his uncle's estate.

MAY ROB RECOVER DAMAGES FOR BREACH OF CONTRACT? DO NOT DISCUSS THE

MEASURE OF DAMAGES OR OTHER REMEDIES.

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QUESTION 3

Suggested Organization for examination Answer

I. The Original Contract

A. Consideration

1. Moral obligation as a substitute for conventional Consideration

2. Formal or nominal consideration

3. Conventional consideration

a. Sias the first promise illusory?

b. Does the pre-existing duty rule render the second promise insufficient consideration?

c. Does the termination clause render both promises illusory?

B. Defenses to enforcement - economic inadequacy

II. The Modification of the Original Contract

A. Consideration

1. U.C.C. 2-209(1) applies, and new consideration was unnecessary.

2. New consideration was unnecessary because an unforeseen development had occurred.

3. New consideration was unnecessary because promissory estoppel applied.

4. There was bargained-for, new consideration

B. Defenses to enforcement

1. Economic inadequacy

2. Unconscionability

III. Conclusion

QUESTION 3

THEORY #1

Ms. Parks would first attack the existence of the original contract. She would contend that there was no

contract to begin with.

Rob's first response

1. Moral obligation. Rob would first invoke moral obligation, a species of past consideration.

2. Material benefit rule. Rob would contend that his past conferral of benefit upon his uncle served

as a substitute for conventional consideration.

3. Uncle's statement recognizing moral obligation. Rob would point to his uncle's statements,

including, "I figure I owe ya that much."

4. Expectation of compensation. There is no evidence that Rob expected payment for his services. In

the family context, Rob probably did not expect compensation.

PROBABLE RULING: The court would rule that the uncle's sense of moral obligation was not a sufficient

substitute for conventional consideration.

Rob's second response

5. Formal or nominal consideration. Rob would next argue that even if there was no bargain, the parties

purported to bargain. In some jurisdictions, formal or nominal consideration suffices.

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6. No bargain.

7. Uncle's statement. The uncle's statement supports Rob's theory. The uncle asked Rob to prepare a

contract document "to make it look legal and proper."

PROBABLE RULING: In a jurisdiction accepting nominal consideration, the court would accept Rob's

second response. Of course, the nominal or formal consideration theory satisfies only the bargain component. We

still must address the legal value component, infra.

Rob's third response

8. Bargain theories. Rob finally would argue that there was a genuine bargain and that the things bargained

for constituted legal value.

9. Promise #1 illusory. Ms. Parks would rejoin that promise #1 is illusory.

10. "Thinks." She would point out that promise #1 merely requires Rob to buy the trees "he thinks he needs

...."

11. New business. Rob had never operated a tree lot before; he did not have any prior experience as to the

lot's requirements. The fact that his business was new strengthens Ms. Parks' argument.

12. Interpretation Question. The real issue is how the court should interpret "thinks." Should the court read

in an implied requirement of good faith?

13. Modern view concerning requirements contracts. The court could rule that Rob Impliedly surrendered

his right to purchase trees from third party suppliers. If Rob surrendered that legal right, he incurred legal detriment.

PROBABLE RULING: Promise #1 was not illusory. Rob impliedly surrendered the right to purchase trees

from suppliers other than his uncle.

14. Promise #2 illusory, Ms. Parks would argue that the pre-existing duty rule renders promise #2

insufficient consideration. Perhaps El Dorado law required Rob to obtain the tree harvesting permit before removing

the trees.

15. Need more facts. We do not know the content of the statute or regulation imposing the requirement for

a tree harvesting permit. If the duty Rob owed Mr. Parks was co-extensive with the duty Rob owed the State

Forestry Department, the pre-existing duty rule would apply.

16. The termination clause renders both promises illusory.

Finally, Ms. Parks would contend that the termination clause renders both promises insufficient

consideration. She would argue that the clause gave Rob a "free way out "of both promises.

17. Oral notice. The fact situation is unique in that the contract expressly authorizes oral notice.

18. Detriment. In principle, even the act of giving oral notice is legally detrimental. The court should find

legal detriment.

PROBABLE RULING: The termination clause would not render the other promises illusory. Promise #1 is

sufficient. The original contract was supported by legally sufficient consideration.

19. Economic inadequacy of consideration. Ms. Parks might argue that the consideration in the original

contract was economically inadequate. Commercial tree farms were charging 55¢ per foot while Mr. Parks agreed to

40¢ per foot.

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20. Immaterial. Even if the consideration were economically inadequate, the inadequacy would be

immaterial. Economic inadequacy is an equitable defense. Rob is suing at law for damages rather than in equity for

specific performance.

THEORY #2

If the court finds that the original contract was supported by legally sufficient consideration, Ms. Parks

would next argue that the modification, reducing the price to 25¢ per foot, was not supported by consideration.

Rob's first response

21. Consideration unnecessary for a modification. Rob would argue that consideration is unnecessary for a

contract modification. Rob would urge the court to invoke U.C.C. 2-209(1).

22. Personalty contract? The question would arise whether the contract for the sale of Christmas trees was a

contract for the sale of goods or personalty.

22.1 The buyer to sever. The facts indicate that Rob was to sever the trees. He had to obtain a tree

harvesting permit, and he evidently cut the first two loads of trees. Under the Code, if the buyer is to sever goods

affixed to the land, the goods are generally deemed realty. However, there is an important exception to that general

rule.

23. Material damage to the land. If the buyer can sever without material damage to the land, the goods are

deemed personalty. Rob could probably sever the trees without material damage to the land.

24. If so, consideration unnecessary. If Rob could sever the trees without material damage to the realty,

U.C.C. 2-209(1) would apply; and the parties could modify the contract without new consideration.

PROBABLE RULING: 2-209(1) is applicable, and new consideration was unnecessary.

Rob 's second response

25. Consideration unnecessary - unforeseen development.

Some courts hold that if the parties modify the contract in light of an unforeseen development, new

consideration is unnecessary for the modification.

26. Discovery of the tree disease. The court might treat the discovery of the tree disease as an unforeseen

development.

PROBABLE RULING: In the Jurisdictions permitting modifications in light of unforeseen developments,

the modification would be enforceable even in the absence of new consideration.

Rob's third response

27. Consideration unnecessary - promissory estoppel.

28. Business context? Again, we revisit the Hand-Traynor debate over the scope of the promissory estoppel

doctrine.

29. $325. Rob could not rely on the $325 expenditure. He expended that money before his uncle agreed to

the modification.

15

30. Rent special equipment. Rob did rely upon the promised modification by renting the special equipment.

The facts indicate that the equipment was expensive. The amount of the rental might be substantial enough to trigger

the promissory estoppel doctrine.

31. Other suppliers? When Ms. Parks repudiated the agreement, could Rob have found other suppliers? His

inability to do so would evidence detrimental reliance.

PROBABLE RULING: Especially if Rob would have had difficulty finding substitute suppliers, the court

would invoke promissory estoppel.

Rob's fourth response

32. Bargain. Rob would finally argue that there was new, bargained-for consideration for the modification.

33. Uncle's statements. The uncle's statements indicate that he might have been bargaining for the delivery

of the firewood.

34. The handshake. The fact that the men shook hands after the uncle's statements about the firewood is

additional evidence that there was a bargain.

PROBABLE RULING: If the court was hostile to the pre-existing duty rule, the court would treat the

agreement about the firewood as consideration for the modification.

35. Economic inadequacy. Now the economic inadequacy is even more pronounced: 25¢ versus 55¢.

However, again, economic inadequacy is strictly an equitable defense.

36. Unconscionability. Lastly, Ms. Parks might turn to unconscionability.

37. Harsh effect alone. There is no evidence of procedural unconscionability: the uncle's consent was both

voluntary and knowing. Ms. Parks would have to argue that the court could invalidate the contract on the basis of

substantive unconscionability alone.

38. Price alone. Ms. Parks would have to argue that a showing of an inadequate price was an adequate

showing of substantive unconscionability.

PROBABLE RULING: The court would probably adhere to the traditional view that both substantive and

procedural unconscionability are necessary.

MISCELLANEOUS ISSUES SOME STUDENTS DISCUSSED:

— The Statute of Frauds

— Did Rob actually obtain the -tree harvesting permit?

If he did not, what effect would that have on his right to recover from the estate?

16

EXAMINATION-TAKING PROCEDURES

Before the Examination

Prepare two outlines. One outline should be relatively detailed and help you review all the material covered

in class during the semester. The second - and more important - outline should be very short, two or three pages at

most. It should be a checklist of questions to ask yourself during the examination; it should be a tool for factual

analysis. Writing this outline will force you to see the forest as well as the trees.

During the Examination

1. When you read the facts the first time, simply try to get the facts straight - who, what, when, where, how,

etc. - and focus on the call of the question.

2. As you read the facts the second time, search for the major legal issues, e.g. offer, acceptance, Statute of

Frauds, etc.. As you spot the issues, jot them down on a separate sheet of paper.

3. Convert your notes into the short ROUGH OUTLINE. The organization will usually track the

organization of your course outline.

4. Review the outline and identify the principal focus of the fact situation. In a Contracts examination, the

focus might be mutual assent. In a Torts examination, the focus might be proximate causation. Pause to review the

parts of your course outline devoted to that topic. Refresh your recollection of all the key legal norms relating to that

topic. In your mind, turn the pages of your short outline.

5. Read the facts a third time. As you read the facts, stop at the end of EVERY SENTENCE and ask

yourself: Why is the factual data in that sentence there? What is it legally relevant to? Does it help me analyze the

offer issue? Or is it pertinent to the acceptance problem? Or is it relevant to the disposition of the Statute of Frauds

problem?

6. While you are reading the facts in this fashion, ANNOTATE the facts to the DETAILED OUTLINE.

7. Armed with the DETAILED OUTLINE, now you are ready to begin writing in the bluebook.

a. Use IRAC organization in paragraphing.

I- The first sentence should specify the issue. As in class, it should incorporate both the key legal concepts,

e.g. "legally valuable consideration," and the salient facts, e.g. "although by the terms of the promise, the plaintiff

could demand the money whenever he wanted it."

R- State the governing rule of law in one or two sentences Do not waste your time citing case names

or the numbers of Restatement or U.C.C. sections. The examination is not designed to test memorization. Notice the

underlined sentences in the sample answer.

A- Go into great detail analyzing the facts. Transfer the facts from the DETAILED OUTLINE onto

the bluebook. Do not simply list the facts. Explain their legal relevance -- why are they helpful in resolving the

Statute of Frauds issue? WEIGH the facts in terms of the policies. In the common law, facts are legally relevant only

insofar as they have policy significance.

C- Explicitly draw a conclusion couched as a probabilistic prediction of judicial behavior.

b. Add a formal conclusion at the end of the essay and answer the call of the question.

17

UNIVERSITY OF CALIFORNIA DAVIS SCHOOL OF LAW STUDENT # ___________

CONTRACTS 1 & 2 SEM. I TIME: 3 HOURS

PROFESSOR IMWINKELRIED

INSTRUCTIONS:

1. This is a completely closed book examination to be taken subject to the provisions of the Honor Code,

Law School regulations, and my instructions.

2. The examination consists of three essay questions. The first two questions are worth 35 points each. The

third question is worth 30 points.

3. Place all your answers in the bluebooks.

QUESTION 4

National Digital manufacturers computers. Its manufacturing plant is in Boulder, Colorado. Its business

office is in New York City. Ms. Manning is the president of National Digital. She lives in Boulder. National Digital

has developed a new, compact inventory control computer, the MARK VI.

On Monday, January 7th, Manning learned that the plant will produce only three MARK VI's during the

year. Manning began thinking of customers. Mr. Kelley is a Denver warehouseman. Manning decided to mail

Kelley a MARK VI advertising brochure. She enclosed a letter. The letter stated that National Digital "offers" a

MARK VI to Kelley. The letter quoted a price of $86,000. The letter stated that the price included "the computer,

mechanical maintenance for a year, and a reasonable number of computer tapes for the year." The letter concluded,

"Acceptance is to be sent to our New York business office." Manning signed the letter.

On Wednesday morning, Kelley received the letter. He had long hoped to expand his warehouse. In fact, he

already had a complete set of blueprints. He wanted to expand plant without increasing the number of inventory

employees; Kelley delayed in the hope that someone would develop a compact, inventory control system. When

Kelley read the brochure, he knew that his hopes had been realized.

On Wednesday afternoon, Kelley phoned Manning. He said, "I've waited a long time for a system that

compact." Manning responded, "Fine. I thought you'd like it." Kelley added, "I'll get my letter in the mail to you

tomorrow. Now that I've got the computer, I've got a lot of things to do." Manning closed, "I'll be looking forward to

hearing from you."

On Thursday morning Kelley contacted a construction firm. That afternoon, Kelley and the firm signed a

$100,000 contract for his warehouse's expansion. After signing the contract, Kelley mailed a letter of acceptance to

Ms. Manning in Boulder.

On Friday morning, Mr. Garth of Worldwide Warehouses contacted Manning. He had heard of the MARK

VI. Garth offered Manning $400,000 if National Digital would deliver three MARK VI's by December. Manning

accepted.

On Friday afternoon, Manning phoned Kelley. She told him that the deal was off. Kelley informed her that

he had already mailed the letter of acceptance. The construction firm will not release Kelley from the construction

contract.

18

MAY KELLEY RECOVER DAMAGES FROM NATIONAL DIGITAL FOR BREACH OF

CONTRACT? DO NOT DISCUSS THE MEASURE OF DAMAGES.

19

ROUGH OUTLINE

Offer

Present contractual intent definiteness

Acceptance - theories for finding an acceptance

written letter to Boulder authorized by offer

oral contract over the telephone

written let ter to Boulder authorized over telephone

Statute of Frauds

wi thin the Statute?

use offer as the note or memorandum

Promissory Estoppel

adequate factual showing?

more than mere substi tute for consideration

indefiniteness problem, supra

DETAILED OUTLINE

Offer

Present contractual intent

advert i sing brochure

le t ter used the term "offered"

letter spec i fied quantity, one computer

definiteness

"a reasonable number of computer tapes" material part of the bargain?

Acceptance - theories for finding an acceptance

written letter to Boulder authorized by offer

letter authorized letter to New York

prescribed method of acceptance

letter used words "is to be"

oral contract over the telephone

parties' language ambiguous

resolve ambiguity in favor of offeror

written let ter to Boulder authorized over telephone

Manning waives prescribed method

"I'll be l o o k i n g forward to hearing from you"

Kelley said he would mai l letter to Manning

Statute of Frauds

wi thin the Statute?

personalty for more than $500 performance exceeding one year

20

use offer as the note or memorandum

or igina l written proposal

Manning s igned cover letter

Promissory Estoppel

adequate factual showing?

Kelley said, "I've got a lot of things to do" actual rel iance - $100,000 construction contract contractor

won't release Kelley Did Kelley rely too quickly?

more than mere substi tute for consideration

indefiniteness problem, supra

some courts treat as bas is for separate cause of ac t ion

21

QUESTION 4

I. OFFER

A. Present Contractual Intent. The first question is whether Manning's written proposal to Kelley

constituted an offer. National Digital will argue that the proposal did not manifest present contractual Intent.

Specifically, National Digital will point out that Manning mailed an advertising brochure. Digital will rely on the

general working guide that advertisements are not offers. However, Manning also enclosed a letter in which she

"offered" a MARK VI to Kelley. By offering "a" MARK VI, she specified the quantity, namely one computer. The

use of the word "offer", the detailed terms, and the specified quantity all lead me to believe that the court will reject

Digital's argument.

B. Definiteness. Digital might argue that the proposal was too indefinite to constitute an offer. Digital will

stress that the proposal included "a reasonable number of computer tapes." While the courts will fill in price and

time terms, the courts are reluctant to fill in quantity terms. We do not know whether there were any prior dealings

between the parties which would help the court determine a reasonable number of tapes. If it develops that tapes are

relatively expensive, the court well might find that this proposal was materially indefinite. The courts imposed the

definiteness requirement as a matter of policy to ensure that the proposal contains enough details to enable a .judge

to frame a remedy, and on these facts it might be difficult for the judge todo so.

II. ACCEPTANCE

Let us assume that the court holds that the proposal was an offer. Now we must determine whether Kelley

effectively accepted. There are several theories for finding an acceptance.

A. The original proposal invited acceptance bv letter to Boulder. If the offeror requires the offeree to use a

particular means of acceptance, the offeree must do so; no other means of acceptance. However commercially

reasonable, will be effective. Kelley could argue that the proposal expressly authorized acceptance by letter to New

York but the proposal did not prescribe that method of acceptance. Digital will point out that the letter said that

acceptance "is to be" sent to New York. Courts are reluctant to treat methods of acceptance as prescribed, but I think

Digital sufficiently manifested its desire that the acceptance be sent to New York. "Is to be" is not only stronger than

"should" or "ought;" the language seems to have a mandatory connotation. The court will probably treat that method

as prescribed. The court will likely reject Kelley's first theory.

B. Manning and Kelley concluded an oral contract during the telephone

conversation. Even if an offeror initially requires a specific method of acceptance, the offeror can

subsequently modify the offer to permit other methods of acceptance. Kelley next would argue that during the

conversation, Manning not only waived and prescribed method of acceptance but Kelley then made his acceptance

during the conversation. The court could find a waiver, infra. However, the parties' language is ambiguous.

Courts usually resolve ambiguities in favor of the the offeror; that bias serves the policy of protecting the

offeror's freedom of contract. A court would probably conclude that the parties did not finalize their bargain during

the telephone conversation.

C. Manning authorized Kelley to mail acceptance to Boulder.

Kelley will argue that during the conversation, Manning waived the prescribed method of acceptance and

authorized him to mail acceptance to Boulder. Manning said, "I'll be looking forward to hearing from you." Kelley

had already said that he was going to mail the letter "to you (Manning)." Manning modified the original offer and

authorized acceptance by letter to Boulder. The court will accept Kelley's argument.

III. STATUTE OF FRAUDS

22

If a contract is within the ambit of the Statute of Frauds, the contract is enforceable against the defendant

only if the defendant has signed a sufficiently detailed memorandum. The contract seems to fall within two clauses.

First, it is a contract for the sale of personal property for more than $500. Second, since the contract promised

maintenance for a year (presumably after installation), the contract's term would exceed on year. However, Kelley

could probably use the original written proposal as a sufficient memorandum. The proposal set forth the terms, and

Manning signed the cover letter. The courts have held that the original offer can qualify as the memorandum for

purposes of the Statute of Frauds.

IV. PROMISSORY ESTOPPEL

Kelley could invoke promissory estoppel for two purposes.

A. Substitute for Consideration. There appears to be conventional consideration on both sides. Kelley

surrenders his money, and Digital surrenders its computer. If, for some reason, the court concluded that there was no

consideration, Kelley could invoke promissory estoppel. In most jurisdictions, a Contract plaintiff may use

promissory estoppel as a substitute for consideration. Digital made a promise; Kelley's statement, "I've got a lot of

things to do," made reliance foreseeable; Kelley actually relied by entering into the construction contract; on these

facts, the reliance interest is substantial, since the amount of the construction contract was $100,000; and since the

contractor will not release Kelley, the only way to avoid injustice is to enforce the contract. Digital's only argument

is that Kelley's reliance was so swift that it was not foreseeable.

In fact, Kelley's reliance was extraordinarily swift because he already had the blueprints; but Kelley's

statements during the conversation should have put Digital on notice that Kelley intended to do something

immediately.

B. Separate Cause of Action. In a number of jurisdictions, the courts treat promissory estoppel as more than

a substitute for consideration; promissory estoppel has become an independent, hybrid cause of action. Assume that

the court holds that the proposal was too indefinite to constitute an offer. Kelley could then invoke promissory

estoppel as a basis for a separate cause of action. Some courts have applied the doctrine even where the plaintiff

relied upon a promise that was too indefinite to qualify as an offer. These courts would grant Kelley a separate cause

of action.

V. CONCLUSION

Kelley may recover damages. The proposal might be too indefinite to constitute an offer, but Kelley can

invoke promissory estoppel as a basis for a separate cause of action.