Question One. The contracts between Chef Jacque and his students included the following provision:

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1 Ventura & Santa Barbara Prof. Virginia Goodrich Question One Chef Jacque is a celebrity chef who owned a cooking school for laypersons and housewives. Chef Jacque wanted to leave the country for one year to research the exotic cuisines of the Amazon. Chef Jacque had a colleague. His name was Chef Bob. Chef Bob who recently graduated from culinary college and opened his own cooking school, executed a written agreement whereby Chef Bob agreed to assume Chef Jacques' existing contracts for the next 12 months. The contracts between Chef Jacque and his students included the following provision: "Neither Party shall assign any of its rights hereunder without the prior written consent of the other." Susie, a regular student of Chef Jacque's cooking school received a letter that Chef Bob would be teaching the remaining six classes under her contract. Susie, a devoted fan of Chef Jacque, called Chef Bob to tell him that she objected to the substitution and demanded that Chef Jacque teach the remaining classes. Chef Jacque had owed some money to Bank that had financed his culinary study when he attended college. He owed Bank $50, He had contracted with five of his students to send their payments directly to the Bank in satisfaction of this debt. When Chef Jacque failed to show up for the remaining classes, five students refused to pay Bank. Chef Jacque failed to notify the Bank and Chef Bob that Bank was to receive the payments from 5 of his contracts on a personal, separate debt he had with Bank. Bank did not receive the money received on the 5 student contracts. Discuss the following lawsuits: 1. Susie v. Chef Bob 2. Bank v. Chef Bob 3. Chef Bob v. Chef Jacque

2 Ventura & Santa Barbara Prof. Preston Marx III Question Two Joe wants to build a new home. He enters into a valid written contract with Tom, a contractor, to build the home. The contract outlines 5 stages of construction, and specifies that Joe will make a certain payment at the satisfactory completion of each stage. The contract would be completely paid at the completion of stage five. The contract contains the following clause: This is the full and final agreement of the parties, no other agreements, be they oral, written or otherwise shall be made part of this agreement. The contract also states that Only Slab Co. drywall can be used in the construction. Joe is owner of Slab Co. Joe selected Tom because he is the only local contractor licensed to construct specialized stone structures - a major part of Joe s house design. Tom completes stages one through three of construction. Joe is satisfied with each, and makes timely payment. Stage four was the dry-walling. When stage four was complete, Joe discovered that Slab Co. drywall was not used, and instead, another company s product of equal quality was used. Joe gives notice to Tom that he is not satisfied with the construction and Joe withholds payment. In the contract negotiations between Joe and Tom, Joe stated that he didn t care what type of drywall would be used. Since Joe has withheld payment, Tom fails to complete the home. Joe sues Tom. Discuss all rights and remedies. Tom sues Joe. Discuss all rights and remedies.

3 Santa Barbara Prof. Preston Marx III Question Three Spa King is a company that sells spas and related products. Spa King orders its inventory from Pools, Inc., a company that distributes pool and spa supplies nationwide on a wholesale basis. Spa King orders six spas and six spa covers from Pools, Inc with a written purchase order. The value of the order is $10,000. Upon receiving the order, but prior to filling it, a check from Spa King on a previous order bounces to Pools, Inc. Thereafter, Pools, Inc. sends a letter to Spa King requesting a letter of credit from Spa King. Spa King supplies the requested letter of credit to Pools, Inc. King. Unaware of the credit issue, Pools Inc., shipped the six spas and spa covers to Spa The spas are delivered to Spa King. Spa King s manager plugs one spa in and fills it with water. He punches all the buttons to see that they function, but he does not have time to heat the water up to maximum temperature. He does not examine the other five spas because of the time and difficulty in setting each one up. While the six spas are on display at Spa King's store, their technician discovers the heating problem. He reports it to the manager. The manager does not instruct his staff to remove those spas from the sales floor. Spa King s Pools, Inc. stating that the six spas are "no good" and will be returned to Pools, Inc. The next time it makes a delivery. Pools, Inc. immediately sends Spa King a letter instructing Spa Kings that the spa in question are now owned by Spa King and payment is demanded. Spa King refuses to pay. Pools, Inc. sues Spa King, discuss all rights and remedies. Spa King sues Pools, Inc., discuss all rights and remedies.

4 Ventura & Santa Barbara Prof. Virginia Goodrich ISSUE SHEET Question One Common Law governs transaction as this is a Services Contract. SUSIE v. CHEF BOB Delegation Susie Chef Jacque Obligee K Delegator/Obligor Delegate Chef Bob Define Delegation Is the Duty Delegable? The duty to teach a cooking class is delegable contractual duty unless an exception applies. Susie will make the following arguments in support of her claim that the duty to teach the cooking class was not delegable: 1) the duty involved personal skill (i.e. celebrity chef versus a new chef who just graduated from culinary school); 2) the performance from Chef Bob would materially change her expectancy under the contract and 3) there was a contractual restriction on delegation a clause prohibiting the assignment of the contract will be construed as barring only the delegation of the assignor s duties. Has there been an assumption of the duties? What is the effect of the delegation? If Susie s arguments are unsuccessful, Susie, as the obligee must accept performance from the delegate, Chef Bob.

5 Assignment Susie Chef Jacque Obligor K - Assignor Assignee Chef Bob Define Assignment Valid Present Assignment? Is the Right Assignable? Express Contractual Provision Against Assignment - A clause prohibiting the assignment of the contractual duties generally does not bar assignment, but merely gives the obligor the right to sue for breach. The contract provision may not be written well enough to suppress Chef Jacque s right to assign as it does not include the words VOID and INVALID. Effect of Valid Assignment Chef Bob, the assignee, stands in the shoes of the assignor, Chef Jacque, and must provide the cooking classes to Susie, and Chef Bob receives the corresponding right of receiving payment from Susie. BANK v. CHEF BOB Third Party Beneficiary Chef Jacque Bob- Promisee K Chef Bob Jacque - Promisor Bank 3BP Define Third Party Beneficiary Contract Promisee enters into contract with an intent to benefit beneficiary and promisor s performance will benefit the beneficiary. Privity of contract is not required pursuant to Lawrence v. Fox. Intent of Promisee to Benefit Beneficiary Since Chef Jacque failed to notify (or inform Chef Bob) of the requirement to send the payments from the 5 student contracts, Chef Bob as the promisee, did not form the requisite intent to benefit the Bank, the creditor beneficiary. Classify the Beneficiary Creditor Beneficiary Intended Beneficiary

6 Vesting When Bank brought suit against Chef Bob, its rights vested under the third party beneficiary contract. However, because Chef Bob did not agree to pay Bank (he was not aware of the payments to Bank), Chef Bob will argue that there was no third party contract to benefit, Bank. Successive Assignment Chef Jacque had made a partial assignment to Bank and assigned those same rights to Chef Bob. Assuming there was a valid assignment and the first assignment was irrevocable, the Bank will have priority over the assignment and Chef Bob will be required to pay Bank. If Chef Bob is required to pay Bank, Chef Bob will seek reimbursement from Chef Jacque, otherwise, Chef Jacque would be unjustly enriched by the Chef Bob s payment to Bank. CHEF BOB v. CHEF JACQUE Chef Bob will successfully argue that Chef Jacque breached the following implied warranties that is associated with every assignment: 1) The assignor implied warrants that the rights assigned actually exist and are subject to no defenses or limitations other than state or apparent at the time of the assignment; and 2) The assignor impliedly warrants that the assignor has not made no other prior assignments and that he will do nothing to interfere with the right.

7 FINAL Spring 2009 Ventura & Santa Barbara Prof. Preston Marx III ISSUE SHEET Question Two This contract is governed by the common law. 1. Contract formation - the question says a valid contract is formed. Other than a basic definition of offer, acceptance and consideration, formation need not be discussed. So long as Joe s satisfaction is based upon a reasonable standard, his promise is not illusory. 2. Integrated contract/parol evidence rule - This is an integrated contract. Under the parol evidence rule, oral evidence cannot be used to contradict and integrated writing. Tom will want to use Joe s statement that any drywall would be ok. That statement will not be admissible. 3. In Joe s suit and Tom, he will not be awarded a remedy based on total breach based on Tom s failure to use the correct drywall. The caselaw holds that Joe is only entitled to quantum meruit, that is, the value of house as promised minus the value of the house as delivered. The student should evaluate whether the use of Slab Co drywall constituted a major or minor (material or immaterial) breach? Tom had an absolute duty to use Slab Co drywall. Since the drywall was of equal quality, it is arguable that Tom substantially performed on his duty. 4. In order to determine if Joe can collect a remedy from Tom for total breach for failing to complete the house, the student should apply the rules found in the restatement section 241: How much of the anticipated benefit did the non-breaching party receive; will the breaching party suffer forfeiture if the breach is deemed material; how well can the non-breaching party be compensated by damages; what is the likelihood that the breaching party will cure his breach; and did the breaching party act in bad faith? 5. Specific Performance - Tom s talents could be considered unique since he is the only licensed stone contractor in the area. The students should apply all factors of specific performance: inadequacy of legal remedy, definite and identifiable contract, feasible decree, mutuality, and no defenses. 6. Tom will sue Joe for failing to pay on the contract. Again, he will recover under quantum meruit, and under restitution for the reasonable value of his services rendered.

8 Santa Barbara Prof. Preston Marx III ISSUE SHEET Question Three 1. This is a contract for the sale of goods governed by the Uniform Commercial Code. 2. Define Merchant per and Goods per An enforceable contract is formed. Other than briefly reciting the existence of Offer, Acceptance, and Consideration, formation need not be discussed Statute of Frauds is satisfied Request for Assurances by Pools. Assurances sent when Spa King sent the requested letter of credit, but they are late. Could Pools still consider it a repudiation? 6. The six spas on display at Spa King's store in an act of ownership wrongful to the seller. The sent to Pools that the spas are "no good," is essentially a failed rejection by the buyer under the 2-600's. Did Spa King's actions amount to an acceptance? Pools, Inc. appears to ratify this action in its letter and under Can the buyer revoke the acceptance under 2-608? Was inspection of the problem too difficult under 2-608(1)(b)? The students are to fully discuss these aspects. 7. Seller's Remedies: 2-703, 2-706, 2-708, 2-709, Buyer's Remedies: 2-711, 2-712, 2-713, 2-714, Course of dealing a trade usage may be of some assistance in this problem;