TO:  Commercial Law Students
FROM: Avery Katz
DATE: May 22, 1994
RE:  Feedback on Spring 1994 exam
 

I have put on reserve the top three 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.  One of the model exams violated the length limit in spirit by its
systematic use of sentence fragments, in my judgment, so I deducted 5% from its score; even after the deduction,
though, it was still one of the top answers.  (There were also several other exams that lost points by writing more than
1500 words, in amounts ranging from 5% to 30%, but this exam was the only one that required a judgment call.)

The exam was a challenging one in my judgment and I thought the class did well on it.  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
completely unsupportable.

Here is a very brief outline of how I thought the questions should have been approached.  On Question 1, a good
answer would first have discussed whether the odor in the car breached any warranty or constituted a non-conformity in
delivery.  If not, then Carp has no recourse to any remedy under the Code, including rejection or revocation.   (A
number of students lost points by failing to remember this.)  The only possible theories of breach are express warranty
and warranty of merchantability, since there is no indication that the seller had any knowledge of Carp's particular
needs.  Whether the car is unmerchantable turns on whether the odor is worse than usual (possible though uncertain on
the given facts), and whether any express warranty was breached turns on whether the odor comes from the catalytic
converter failing to meet published specifications (uncertain on the given facts.)  It is of course possible that other
express warranties, not given in the facts, were made.  You then needed to discuss whether merchantability had been
disclaimed (this turns on the conspicuousness of the disclaimer), and whether any express warranty was disclaimed by
Carp's initial inspection of the car (in general, only defects reasonably observable at the time would be disclaimed; it is
arguable whether the air conditioner problem was reasonably observable.)

If there is a nonconformity, then the question becomes one of remedy.  One can argue that because Carp could not
reasonably have discovered the defect, he never accepted the car.  This is colorable, but a long-shot, since it has been
three months, he has put 1100 miles on the car, and he has been making payments.  Better to argue that he can now
revoke his acceptance.  To do so, he must show the odor is a substantial nonconformity (arguable on the facts, though
the fact that it is a subjective test under 2-608 helps him).  The difficulty in discovering the problem and Lax's repeated
assurances and denials probably give him a good excuse for the delay, though Denton can still argue that the car's
substantial depreciation and the change in the model year have caused enough change in the value of the car to make it
too late to revoke.

There are possible monetary remedies as well, if Carp can get past the remedy limit and repair-and-replace clause.
Denton's failure to repair and the unlikelihood that repair will be effective will help here.  There is room to argue what
the damages would be under 2-714 given the depreciation and the change in the model year; you could also discuss
whether Denton is entitled to cure at this point and what would constitute a cure.

A complete answer would also have addressed the effect of the assignment to CMAC and the possibility of bankruptcy.
While the assignment is valid, and while as the assignee CMAC has no obligations to perform or to remedy any breach
of warranty, the warranty claim ordinarily would give Carp a good defense under 9-318 against CMAC's demands for
payment and against any attempt on their part to repossess the car -- unless clause 5c is read as a waiver of defenses
(probably not, though it is arguable).   The main effect of Denton's potential bankruptcy is on Carp's tactics, since if
Denton goes out of business any claim for repair or return is problematic.  Money damages are less problematic, since
Carp can always set them off against the unpaid balance on the car.  Additionally, there is a possibility that any
remedies from or settlement with Denton will be voidable as a preference if Denton goes under within 90 days
(although certain transfers, such as a new catalytic converter to replace the old one, will probably be safe under the
ordinary-course-of-business exception of §547(c).)

On Question 2, there was a lot of room for individual creativity and judgment, and you might have addressed a variety
of issues in your essays, so it is harder to provide an official answer.  On each of the proposed Code revisions, though, a
good answer would have explained just what difference there would be from current law (on the second and third
proposal there is a fair argument that it would not make much difference in practice), and how the proposals affect the
underlying policies of the Code.   For instance, on the first proposal I hoped you would address the merits of first-in-
time priority and of the purchase-money exception.  Most students discussed these issues generally, but the better
answers discussed in specific how the underlying policies of first-in-time and purchase money priority applied in the
unusual and particular case of dual purchase-money interests.  Similarly, on the second proposal, you needed to address
the functional advantages and disadvantages of security interests in after-acquired property, but the better answers tied
their discussions to the specific problems raised by dual debtors.   And on the third proposal, you needed to address the
merits and demerits of deferring to commercial standards, the evidentiary problems with a subjective honesty test, and
the effects the proposed policy change would have on consumers and other persons less familiar with the norms of the
commercial community.  As with the first question, organization, clarity, and discussion of specific facts and business
problems made the difference between good answers and adequate ones.

Your individual exams will be available for inspection at the registrar's office, though I have not made many marks on
them other than check marks; instead, I kept a score sheet containing my own notes on each exam.   If you want to
discuss your individual exam, please feel free to contact me.

It was a pleasure teaching the class and I wish you all well.
 
 
                                       AK