Georgetown University Law Center
Examination in Commercial Law: Sales Transactions
(3 Hours)

Professor Avery Wiener Katz

Final Examination
Friday, December 12, 1997
1:30 pm — 4:30 pm


Instructions:

1. The examination consists of 4 pages, including the instruction sheet. Please check now to ensure your copy is complete.

2. This is an open book examination; any written materials may be consulted. You are encouraged to use your casebook and class notes, and strongly encouraged to use your statute book.

3.. The exam consists of three questions of varying length. Each carries grading weight in an amount proportional to the time allocated. I recommend that you spend a significant portion of the time allocated for each question planning and organizing your answer. If you feel that any of your answers depend on facts that are not supplied, you should state clearly any additional assumptions you are making.

4. If possible, please begin your answers to each of Questions 2 and 3 in new examination books, so that I can grade each question independently.

5. Please write legibly; this will ensure that you receive due credit for your entire answer. If possible, please also write on alternate lines of the examination book, as this tends to make your answer much easier to read. I will read material that appears on the scrap paper if you indicate in your examination book that you wish me to, but not otherwise.

6. Unless you are told otherwise, you should assume that all hypothetical parties referred to in the questions below reside and do business in the United States.

7. Good luck on the exam; and for those of you graduating at the end of the term, best wishes.

Please do not turn the page until the exam proctor gives the signal.





Question 1 (90 minutes, 1/2 of exam)


On April 15, Craswell, an Illinois farmer, agreed to sell 80,000 bushels of white corn at a price of $2.10/bushel, f.o.b. Chicago, to Schwartz, the Chicago representative of an international grain dealer based in Santiago, Chile and doing business throughout Asia and the Americas. This was the second time that Craswell had dealt with Schwartz; the previous time was five years earlier, at which time Schwartz was doing business on her own.

Under the agreement, delivery was to occur in two shipments, with Craswell to deliver all he could harvest by October 30 and the balance by December 15. On June 3, however, Craswell orally informed Schwartz that he was not going to plant any corn that year because the season had been too rainy, and advised Schwartz that she should obtain elsewhere any corn that had been slated to be resold to other parties. Schwartz responded that she considered Craswell's duty to deliver corn to be unconditional, and that if Craswell did not want to plant, he should go out and cover his obligations on the market. As of that date, the price for corn on the Chicago futures market was $2.30/bushel for October 30 delivery, and $2.45/bushel for December 15 delivery.

The parties, who had never before experienced any contractual difficulties with each other, continued to negotiate and to exchange correspondence for the next three weeks. Finally, on July 25, Schwartz faxed Craswell a letter offering to cancel the contract in exchange for a payment equal to the differential between the original contract price and the futures price as of that date (which was then $2.55/bushel for October 30 delivery, and $2.65/bushel for December 15 delivery). The letter referred to an alleged trade practice that permitted Schwartz's customers to cancel in exchange for such a payment. Craswell, however, faxed back a response in which he denied ever hearing of such a practice, and in which he repeated his earlier statement that he was not going to be able to supply corn this year and that Schwartz should make other plans. Schwartz then sent one last fax to Craswell, stating that her settlement offer stood, and that Craswell should let her know when he changed his mind. At that point, communications between the parties ceased.

It is now August 14, and the Chicago futures price for corn is 25¢/bushel higher than it was on July 25. Schwartz has consulted you regarding what remedies she may be entitled to pursue under applicable law, and which of these will best protect her interests and those of her company. Advise her; and do not neglect the issue of choice of law to the extent it is relevant to your advice.


Question 2 (60 minutes, 1/3 of exam)

You represent Max, a discount retailer of office products doing business in the State of Virginia. Max operates what is known in the trade as a "bare–bones volume" operation: he sells only to business customers (or, more generally, to customers who represent themselves as business customers) who are willing to buy in bulk sealed packages (e.g., pens and pencils by the gross, paper by 5000–count, etc.) He does sell individual pieces of large equipment such as computers, printers, desks, and file cabinets, and displays demonstration models of such items on his shop floor. Most of his expenditures, however, are associated with his warehouse and shipping department. He employs only one cashier and two sales persons who have direct contact with buyers at the point of sale. His approach to marketing is to offer very low prices, which he can afford to do because of high volume and low costs.

Some of his customers, especially those to whom he grants credit, buy under purchase orders and expect their goods to be shipped; others are cash–and–carry. In either event, Max provides minimal sales assistance, apart from a catalog he prints and distributes, and no after–sale services. His business practice is to accept returns only for large equipment items, and even then only if the items suffer from major defects, such as a computer that does not operate. Customers are expected to absorb the costs of minor nonconformities in bulk shipments of ordinary office supplies, and for more significant nonconformities, customers are awarded store credit to be applied to subsequent purchases.

Most of Max's customers have been happy to do business under such arrangements, but a few unsatisfied buyers have complained. Max wants you to draft an enforceable disclaimer or its equivalent, to be included in his sales contracts, that will help him deal with such problems if they arise again in the future. What would you recommend? Can Max's needs be met through such legal arrangements, or does he need to make more substantive changes in the way he conducts his business?


Question 3 (30 minutes, 1/6 of exam)

Write a letter to Richard Speidel, co–author of your casebook and Chief Reporter to the official Drafting Committee for revising UCC Article 2, in which you explain which Article 2 provision, in your view, is most in need of revision and why. Your only restriction is that you may not choose §2–207. If you insist, you may choose more than one provision, but beware of spreading yourself too thin and detracting from the force of your argument.




END OF EXAM
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