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[Note OCR errors due to scanning]

TO: 1994-95 Contracts Students (Section 4)

FROM:        Thomas D. Russell

DATE:        21 June 1995

SUBJECT:     Final Examination and Course Grades

    This memo has two parts.   The first part describes the
grading of the final examination.   The second part includes
model answers for the short answer questions of Section One,
model outlines for Sections Two and Three, and student sample
answers for Section Two and Section Three.

GRADING

    Each of the final examination's three parts was worth 25
percent of the yearly grade.  The midterm also counted for 25
percent of the yearly grade.

    As always,  I graded the examinations by first separating
them into sections, that is, I graded all of the first section
before going on to the second and third.   I thus graded each
section without reference to how individual students did on
other sections.   Once I had determined raw scores for each
section, I then assembled these raw scores into a spreadsheet
and computed adjusted scores and point totals.

    For each section of the examination, I converted the raw
scores into adjusted scores.  These adjusted scores are on the
same scale as the midterm adjusted scores.   Having the three
final examination sections and the midterm on the same scale
made  it  possible  to  add  the  scores  together  in  order  to
determine the point total for the course.

    I computed adjusted scores by first turning the raw score
for each section into what statisticians call a z-score.   A
z-score  is  the  difference  between  the  raw  score  and  the
average for that section divided by the standard deviation for
that  question.    I  then  converted  each  raw  score  into  an
adjusted  score  with  the  same  mean  (100.5~  and  standard
deviation  (14.6)  as  the midterm.   The point  total  for the
course equals the sum of the adjusted scores for each section
plus the adjusted score for the midterm.





     Here are data that describe each section.

       Section One

        Raw Adjusted
Highest  58  128.2
Lowest    9  38.4
Average 42.9  100 5
Std. Dev. 8  14 6


       Section Two

        Raw Adjusted
Highest  30  131.4
Lowest    6  70.2
Average 17.9  100.5
Std. Dev. 5.7 14.6


      Section Three

        Raw Adjusted
Highest  35  146.5
Lowest    3  72.1
Average 15.2  100 5
Std. Dev. 6.3 14 6


For the final examination and course, the adjusted point
totals were:

   Final    Course
Highest     402.5     541.3
Lowest      194.7     276.6
Average     301.4     401.9
Std. Dev.    32.2     41.2



The distribution of grades was as follows:

Total       Grade    Number
->463.6       A+4
444.6-462.5    A        13
431.0-444.5   A-12
414.5-430.9    B+       16
393.1-414.4    B        23
376.1-393.0    B-        18
365.6-376.0    C+       10
331.7-365.4    C        12
300.0-331.7    D        5
<300.0        F




MODEL ANSWERS

Section One

1.   Because the market price has risen, the seller's damages
are zero.

2.   Express warranty:  when the disclaimer and warranty can't
be construed together reasonably,  the warranty prevails,  2-
316(1);  also  the handwritten term should trump the printed
disclaimer.

    Implied  warranty  of  merchantability:     because  the
disclaimer  fails  to  mention  merchantability,  this  implied
warranty still exists.  Light bulbs that burn out after a week
are not merchantable.

3.   2-316(1)  favors the warranty, but because the disclaimer
is handwritten,  the buyer has a weak claim of surprise and
this term has a stronger possibility of trumping the warranty.
Perhaps the buyer bargained away the warranty.

    Also,  the  buyer  still  has  the  implied  warranty  of
merchantability,  because  the  disclaimer  does  not  mention
merchantability.

4.   Alice's claim is weaker than that of the plaintiff  in
Wood v. Boynton.   She had notice that the lapel pin might be
valuable,  and the buyer--her  friend--had none.   She  cannot
rescind because she bore the risk of loss.

5.  If the burning of the hotel was not Ann's fault, then Bill
should  not  be  able  to  enforce  the  contract  against  her.
However,  she was in the best position to insure against this
loss, and if she has taken her insurance money and voluntarily
left the hotel business, then she may be liable to Bill.

6.   The oral term regarding the availability of a flatbed is
admissible as a condition precedent.

7.   The  transaction  would  not  be  within  the  statute  of
frauds.  In most states, an oral lease for a year to begin in
the  future  is  not  within  the  statute,  Hamilton,  Rau,  &
Weintraub, p. 905.

8.   a)   Yes,  there was a definite and seasonable expression
of acceptance.

    b)   If  the  term  regarding  the  seller's  providing  a
loading crew materially alters the contract,  then it's out.
If the loading term in Form 2 is construed as a different term
than the loading term in Form 1 (rather than as an additional
term)  and  the  jurisdiction  follows  the  knock-out  rule  for
different terms,  then both terms will be knocked out and the
UCC defaults will prevail.   The best construction is probably
that the seller will provide a crew for two days, but Irene
will pay for that crew.

9.   Buyer should be able to get restitution of the $10K.  He
may claim reliance damages of $30K, but the advertising costs
might not be recoverable depending upon their foreseeability
and,  if they were pre-contract expenditures,  depending upon
whether the jurisdiction allows the award of these expenses,
Dempsey or Anglia.  Buyer won't get the 50K because of the new
business    these  profits  are  too  speculative  and
uncertain.

10.  Specific Performance.

11.   $5,000 should have been $3,000.  As it was written, the
best answer was that neither price should be used, because the
drop in price means that Edgar has suffered no damage.

    Disregarding the error, the best answer was:]
   
    Both the futures and spot market prices are market prices
at the time that Edgar learned of the breach.  The best price
to use would be $4,000, because this futures price replicates
what Edgar would have received under the contract--delivery of
widgets on 1 May.

12.    [Most  students  saw  that  this  question  also  had  some
typos.   I  took each student's understanding of the problem
into account as I graded.]

    There is no contract and no damages.  The brochure was an
invitation to deal.  Buyer offered to buy certain goods with a
delivery date of 1 April.  Seller rejected that offer when it
indicated that it could not deliver before 15 May.


SECTION TWO

Model Outline

This outline organizes the answer according to the Professor's
contract claims.


Goods--Article 2 applies.
SoF satisfied.

1.  MacroCode won't run.
     Creation of express warranty
     Disclaimer
     Parol Evidence Rule
Defective merger clause
    Length of Warranty
    Damages
   
    2.  RSI.
Creation of warranty
Damage/causation
PER-no problem, post-K.
NOM - no problem.  Initialing of clause.
Modification/Waiver.
Disclaimer.  Unconscionable per se.
Damages:
        Foreseeability-OK.
       
    3.  Lost Grants.
Consequentials.
        Not foreseeable and too uncertain.
        Disclaimer.
       
       
Section Two

Model Outline

This outline first looks at the formation of the contract to
see what Sally Subber promised, interprets that promise,  and
concludes that she did not breach.  The answer then says that
even if she has breached, there are little or no damages.


Common law applies.
Not within SoF, and it's written.

Settlement offer of $50K, not liquidated damages.



   1.  Formation.
        RFP not an offer.
        Her bid was offer.
        -    He accepted--mirror image.
       
   2.  Meaning of "Treated Lumber"
        Trade usage
        RFP via Parol Evidence Rule
        Misunderstanding/Mistake
        Burden
        She should have read RFP but he should have read
        offer.
       
  3.  Substantial Performance
      Jacobs & Youngs
  Similarities
  Differences


 Student Sample Answers

   The following answers are very strong but not perfect.
       
       
 Section Two

    Under Bonebrake,  this  is  a  sale of goods,  so Beier's
        claim is governed by the UCC.  There is no question that there
        is an enforceable K--only whether it includes warranties, and
        what type of warranty remedies.
       
       
 1.  The Macrocode problem

    The  salesperson  expressly  warranted  the  XPS  to  run
        Macrocode.   She made an affirmation of fact  (2-313(1))  that
        this  computer was  compatible with Beier's  software.   Since
        this warranty was individually dickered, it is presumed to be
        part of the basis of the bargain--B got the promise before he
        signed the K--so it is an express warranty.
       
    The  parol  evidence  rule  will  not  exclude  the  oral
        warranty, at least not on the grounds of complete integration.
        The  "merger  clause"  is mislabeled  (it's  really  a  "no  oral
        modifications" clause,  forbidding changes after the writing),
        so there's nothing in the writing to say that this writing is
        the exclusive statement of the terms of the K.   (Since we're
        not in NY, we're willing to look beyond the 4 corners of the
i       writing, & don't presume a complete-looking writing is a
 complete integration.)


    Even though the writing is only a partial integration,
the P.E. rule  (2-202)  says we can only introduce evidence of
consistent  additional  terms,  not  contradictory  terms.   The
seller's statement about Macrocode conflicts with the warranty
disclaimers  (which cover only "defects," & we are told the
failure to run Macrocode is not a defect).

    2-316 says that when express warranty & the disclaimer
collide,  the warranty prevails, but subject to 2-202.   Since
2-316  is  supposed  to  prevent  unexpected  &  unbargained
language,  we would probably be  stretching it  to  allow the
conflicting evidence  in here,  since the disclaimer was not
unexpected (visible type on one-page contract buyer is well-
educated).    However,  if  there  is  evidence  of  fraud  (if
salesperson   knew   Macrocode   wouldn't   run   without   the
specialized equipment,  but hid this so B would buy anyway),
the evidence will be allowed.

    The  salesperson  also  created  an  implied  warranty  of
fitness for a particular purpose  (use of Macrocode)  when she
told B it would work during their "long discussion" where B
was relying on her expertise to choose a suitable computer.
The parol  evidence  considerations  for  the  implied warranty
will be similar to those discussed above.

    However,  even  if  parol  evidence  is  allowed  &  these
warranties about Macrocode were created, B can get no remedy
because he did not revoke acceptance in a reasonable time.
Back in April '94 he could have revoked (assuming a warranty)
because  the  no-Macrocode  substantially  impaired  the  XPS's
value to him & he accepted it unaware of its nonconformity to
the  warranty  because  of  the  seller's  oral  assurances  (2-
608(1)).  However, B didn't revoke within a reasonable time of
discovering the problem.   That  (non-revocation)  would still
leave  him with  his  2-714  warranty  remedies,  but  since  he
didn't timely notify seller of the breach after discovering
it,  he  loses  all  remedies  for the Macrocode problem.    (2-
607(3)).    [TDR  note:    The  student  might  have  said  that
although  the  warranty  period  has  ended,  the  statute  of
limitations on bringing a claim may not have.   We would want
to research this.]


2.  The Repetitive Stress Injury

    Beier's injury would be due to a breach of the implied
warranty  of  merchantability,  if  any.   Under  2-316(2)  this
warranty was  successfully disclaimed by  specific  &  visible
language.   However,  the Magnuson-Moss consumer protection act
(if  still  in  force)  says  that when  a  written warranty is
given,  such  as  the  1-yr  warranty  here,  the  Seller  cannot
disclaim  implied  warranties,  but  only  limit  them  to  the
reasonable time period of the written warranty.   (see HRW p.
-    729). [TDR note: This-was very flashy.] Thus there was a
 warranty  of  merchantability,  at  least  through  April  '95.
 Although B was not diagnosed until May '95,  since this is a
 repetitive injury the failure of warranty was already having
 its effects within the  1-year limit,  it should be covered.
 (using an equitable excuse like the  'discovery rule'  for why
 he didn't notify within the warranty period.)

    The seller also orally told B not to worry about RSI, but
        this will not function as an express warranty because  (1)  it
        was said after the K was signed, so it's excluded by the 'no
        oral modifications'  clause  (although it  could operate  as  a
        waiver--but B's reliance was not reasonable since the Seller
        is  not  a  medical  expert),  and  more  importantly,   (?) the
        statement was too vague to be a warranty--a few words are not
        a health insurance policy.   [TDR note:   The student gets this
        wrong.  Seller is a computer expert and her words may operate
        as an express RSI warranty.  The uninitiated NOM clause is no
        obstacle.]  In particular, they don't create liability for the
        $500K grants  (1)  Hadley-unforseeable;  (2)  too uncertain;  (3)
        mitigation; maybe B should hire someone to type for him rather
        than forego the grants).
       
    Given that we have an implied w  (but not an express w
        against RSI), it is unconscionable to exclude damages to B's
        person.   Although  with  any  type  of  warranty,  it's  ok  to
        exclude  consequentials  other  than  personal  injury,  so  no
        recovery for the $500K grants.  2-719.  This is the rule under
        2-179(3), and under the traditional idea that if no reasonable
        person  would  agree  to  give  up  all  remedies  for  personal
        injury, the term is unconscionable.
       
    However, B's personal injuries may not be covered because
        he proximately caused them by using the machine on the mere
        assurance of a salesperson when he knew he might be sensitive
        to RSI--but probably the cts would not put the burden on the
        consumer.
       
       
 Section Three

    If  S agrees to D's terms and lets the $50K go,  it will
        enforceable because each will be giving up a potential lawsuit
        of certain outcome against the other,  creating consideration
        for modifying the K price  (still required in non-UCC deals).


This  is  a non-UCC deal  since  its predominant purpose  (and
cost) involves labor, not goods.

    Under the UCC, this might be a battle of forms situation
between  the  RFP    Sally's  fax.    [TDR  note:    What  fax?]
However, with the common law mirror image rule, there is only
on e K text here:  Sally's.   We can't treat her  fax as an
acceptance since the RFP wasn't an offer (see its name: just a
request for "feeler"; subs couldn't bind G by accepting it).
Rather, S's fax was the (it counts as signed b/c it's on her
letterhead) offer & G accepted it making a K.

    However,  the question remains of what "treated lumber"
means  in the K.   The RFP counts  as  'Parol Evidence'  even
though it's in writing, because it came before the--written K.
But it can get past the P.E. rule here to show the meaning of
the writing.   (Even Williston might admit that the fax didn't
look like a complete integration because there were so  few
details.     He  might  feel  'treated  lumber'  was  facially
unambiguous,,  but  we  no  longer  feel  restricted  to  the  4
corners of the writing;  214(c)  allows evidence of meaning,
so we will look at the totality of the circumstances.)

    Sally and David say she made a "mistake," but that's not
the right term.   Sally did not install wrong lumber thinking
it was Wolmanized  (like buying a pregnant cow thinking it's
sterile); there was no factual misapprehension here.  Instead,
it's  a  situation  of misunderstanding,  where  the  2  parties
(S&G)  attached  different  meanings  to  the  words  "treated
lumber" in the K.

    It is undisputed that neither S nor G knew subjectively
of  the  meaning  the  other  attached  to  'treated  lumber.'
However,  Sally  had  reason  to  know  of  the  meaning  George
intended,   since  she  had  constructive  knowledge  of  the
'definitions' section of the RFP.  It is arguable, though less
certain,  that  G had  reason  to  know  S  wasn't  thinking  of
Wolmanized lumber,  since she used the general term "treated"
in her fax when he had made a big deal of Wolmanization in his
specs.  On the other hand, her fax was so brief that maybe its
omission of "Wolmanized"  should not have given rise to any
suspicion on G's part.

    If we determine G had no reason _3 know of S's meaning,
the K would be binding on his terms are S would be in breach.
But following Cardozo in Jacob & Youngs, we are going to put
the burden on the party with the  idiosyncrasy here.   Even
though G emphasized the need for Wolmanized lumber in his RFP
(and tried to foreclose the Cardozo approach of saying "brand
name  =  standard"),  we  won't  vindicate  his  strange  wishes
unless he makes (manifests them) them clear to S at every step
of the way--including when she sent back a fax that was vague
about the type of lumber.  In other words, for policy reasons
of enforcing normative dominance, a court would probably say G
had reason to know of S's non-Wolmanized meaning when he saw
her fax.  [TDR note:  Student should have used the magic words
"substantial performance."]

    Thus, each party had reason to know the other attached a
different meaning to "treated."   Under  20,  however,  this
does not void the K under the parties' subjective meanings are
"materially different," (e.g. the 2 Peerlesses, or 2 types of
chicken), which a court would probably say they are not.  At
any  rate,  materially  different  or  not,  a  court  will  be
reluctant to undo a K that has already been performed.

    A further note on subjectivity:  G's personal preference
for Wolmanized lumber might have been enforceable by him with
strong enough language in the RFP,  b/c we allow people to K
for what they care about even if it's stupid.   But when D
tries to enforce the clause, he's acting in bad faith,  since
he doesn't even care about the lumber & he knows the decks are
good.

    Sally already has $50K of profit, and she wants to avoid
litigation costs,  so she should negotiate w/D as far as she
can.