Note: this problem originally appeared on Prof. Mel Eisenberg's Fall 2002 Contracts exam; the entire exam is available as part of the CLS exam bank. You should write up your answer in 500 words or less and e-mail it to me at ak472@columbia.edu by Monday, October 15. In exchange [!] the TA's and I will give you individualized feedback. The problem is intended to take you no more than four hours, not counting any generalized review you may do in preparation for it.
With regard to exam writing technique, keep in mind that you are writing an essay and so standard methods of organization are appropriate. Make sure to relate the law to the facts: an answer that focuses only on doctrine or only on the facts will not be effective. Explaining and defending your answer is critical; getting the right answer by itself counts for nothing.
For more possibly useful advice, here are some exam tips originally published on Letters of Marque, a law student blog at the University of Michigan, entitled Why IRAC sucks, Approaching the question, and What you should get out of practice exams [via the Internet Archive Wayback Machine].
Sound Company is a major record company. Sound is a wholly owned subsidiary of Sytz, Inc., a multimedia company. (A subsidiary is a corporation that is owned or controlled by another corporation.) Ohyess is a rock-music group that was formed in early 2000. The members of Ohyess are in their very early 20's, and Ohyess appeals in large part to pre-teen and teenage fans.Sound and Ohyess signed a written Agreement under which Ohyess agreed to record exclusively for Sound, and to compose music exclusively for Sound, for seven years, and to record at least five albums for Sound during that period. Sound, on its part, agreed to pay Ohyess specified royalties on the sale of Ohyess albums made and sold during the term of the contract and on the sale of sheet music of songs composed by Ohyess during the term of the contract.
As is industry usage, the Agreement provided that Ohyess would bear all of its own expenses, including the expenses of recording its songs and preparing master recordings from which albums could be manufactured. Section 6 of the Agreement provided that "Sound reserves the right, in its sole discretion, to determine whether to utilize master recordings made by Ohyess, whether to manufacture and sell Ohyess albums, and whether to publish and sell Ohyess sheet music."
Pursuant to Section 5 of the Agreement, at the time the Agreement was signed Sound gave Ohyess a check for $5,000 with the notation, "refundable advance against 6 royalties." (An "advance" is essentially a loan made by a person, A, who expects to pay salary, commissions, or royalties, to another person, B, and also expects to recover the loan by deducting its amount from the salary, commissions, or royalties.)
In the two years after the Agreement was signed, Ohyess recorded two albums, both of which sold over two million copies - sales that were way above average for new groups. However, Ohyess's recording and other expenses exceeded the royalties on the sale of its albums and sheet music. Indeed, Ohyess consistently requested that Sound alter the terms of the Agreement so that Ohyess could make money on the deal. Sound refused, although it did advance another $80,000 to Ohyess.
On September 1, 2002, Ohyess repudiated the Agreement with Sound, and signed an exclusive contract with a competitor of Sound.
In August, Sytz had been negotiating a sale of Sound to Disney for $58 million. On August 28, the parties initialed a memorandum of understanding for a sale of Sound at that price, subject to reaching a satisfactory final contract. Disney wanted to buy Sound as a core around which to build a record business. It was especially interested in Sound because of Sound's contract with Ohyess, which fit into Disney's marketing efforts directed to pre-teens and teenagers. When Disney learned that Ohyess had repudiated its contract with Sound, Disney withdrew from further negotiations with Sytz.
Discuss.