Memorandum

Date: January 15, 1998 
To: Sales Transactions students
From: Avery Katz
Re: Feedback on Fall 1997 exam
 

I have put on reserve the top two student answers to each of the questions to the final exam, along with a copy of the exam itself. What made these answers the best was their coverage of arguments, detail and sophistication in use of facts, and clarity in organization and explanation. If you drew different inferences from the given facts than I did or than the top answers did, you wouldn't have lost points, unless your inferences were unsupportable.

Here is a (very) brief outline of how I thought the questions should have been approached. On Question 1, it was first necessary to discuss which law applied, since Schwartz's Chilean principal raises the possibility that this is an international transaction. The test under the CISG is whether the parties' primary places of business are in different states (and if parties have multiple places of business the one that is closest to the transaction controls). Since Schwartz is physically in Chicago, the goods are being shipped there, and Craswell may not even know of Schwartz's Chilean connection, probably Schwartz's place of business is Chicago and the CISG does not apply. But it does not hurt to discuss the consequences under the CISG just to be safe.

The next issue was whether Craswell had a valid excuse for refusing to plant under 2–615 or its CISG analogue. Probably he does not, given that agricultural contracts are always made in conditions of uncertainty over the weather. But there is a colorable (though weak) argument to the contrary, if one interprets the agreement to require that the corn comes from C's farm.

If Craswell has no excuse, he has most likely repudiated, though it is a little unclear exactly when that may have happened. Given the parties' further negotiations and Schwartz's apparently–still–open offer, there may even be room for Craswell to retract. The date of repudiation, however, will be critical to any assessment of damages.

Damages pose the most complex aspect of this problem. The alleged trade usage, if it can be proven, may control (since the agreement includes trade usage under 1–201(3)). Otherwise it is necessary to consider whether Schwartz can still cover (under 2–712, a reasonable time may or may not have passed) and what damages can be calculated under 2–713. On this latter issue, it is necessary to consider the date on which market price is to be measured (is it June 3, July 25, or August 14) and whether the October or December forward price is to be used (recalling that Craswell had discretion to divide his delivery between those two dates.) The place where price is to be measured is easy — f.o.b. Chicago. Incidental and consequential damages may also be available, but not specific performance — unless the case can be brought under the CISG, where specific performance is the usual remedy. Even so, a US court is not bound to award specific performance under the CISG if it would not do under its own law.

On question 2, it was necessary to consider what consequences would follow under the client's current practices, and how a disclaimer would affect those consequences. Most people saw that there were potential problems with express warranties (arising out of description in the catalog, the floor models, and any statements made by sales personnel) and with merchantability. Fitness warranties are also possible, although the "minimal" sales assistance would make this a relatively low risk. Max's course of dealing could in theory suffice to disclaim some or all of these warranties, or to limit the remedies available for their breach, but this will not help with new customers or with those who cannot fairly be charged with knowledge of his practices. Thus, some changes in his contracting and marketing practices are in order. These could include written and oral disclaimers, changes in catalog language and signs on the floor, instructions to sales personnel and cashiers, and explicit negotiations with customers.

There were two common pitfalls in answering this question. The first was to overdraft and overdisclaim. Many students wrote clauses that disclaimed everything under the sun, even though that was not was the client wanted or needed. Max's current practice is to give a limited warranty for serious defects, and to pay compensation, when it is owed, in the form of store credit. He does not want to sell goods "as is," and does not want to drive away business by trying to do so. The second pitfall was to assume that the problem could be handled entirely by drafting a disclaimer and avoiding making any express warranties. There are many reasons why drafting alone does not work, including the limits of good faith, unconscionability, and the requirement of minimally adequate remedies under 2–719. More important than that is the fact that Max's purchase order customers have forms of their own, so disclaimers will likely run into a battle of the forms. For both of these reasons, the best student answers discussed additional policies and practices, beyond oral and written contract clauses, that might address Max's problem.

On question 3, which asked for advice to the Article 2 revision committee, you could have chosen any section you wanted; I awarded points based on your command of both legal material and policy considerations. Detail and coherence were pluses; so were structural arguments that took into account the relationships among different UCC provisions, as well as between individual provisions and the structure of the statute as a whole. You may be interested to know that the most popular choice was §2–201, the statute of frauds; most who chose to discuss that section it favored abolishing it..

Your individual exams will be available for inspection at the registrar's office, though I have not made many marks on them; instead, I kept a score sheet for each exam containing my own notes. Attached to this memo is a key to the various markings I did use. If, after reading this memo and the top answers, you want to discuss your exam, please feel free to contact me.

It was a pleasure teaching the class and I wish you all well. Please keep in touch.

Key to symbols used to mark exams:

v good point or argument
! excellent point or argument
~ fair point, or incompletely or unclearly expressed
– weak point
… point needs elaboration
" point already made, repetitive
? unclear
?? very unclear, confused, mixing together separate points
x mistake of law, misstatement of fact, misuse of term
x? point appears mistaken
# irrelevant or tangential point
#? point's relevance unclear
ns non sequitur: conclusion does not follow
ff fighting facts: contradicting stated facts or making assumptions inconsistent with them
ll laundry list: throwing in relevant and irrelevant arguments alike, without distinction