Memorandum

Date: May 16, 1997 
To: Sales Transactions students
From: Avery Katz
Re: Feedback on Spring 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 brief outline of how I thought the questions should have been approached. On Question 1, a good answer would first have discussed whether the UCC applied to the transaction at all, since a significant part of the deal involved intellectual property and services. Under the predominance test, however, it would likely apply, and most issues had to do with breach of the goods portion of the contract anyway.

Under the UCC, the buyer Brittan has to worry about liability under both the GML contract and the oxidizer contract. The GML contract is a requirements contract of no fixed duration, so it is valid for a reasonable time and terminable at will [2-309(2)]. Thus Brittan can likely terminate without liability; alternatively, it can legitimately claim to have no requirements in good faith under 2-306 (although there is still an argument whether this would be disproportionate to past estimates.) The oxidizer contract poses more of a problem. There is no claim that the oxidizer does not work, so unless Brittan can show that it is excused from buying it, it will be liable for the price under 2-709. Brittan could argue frustration of purpose (if it is no longer using Marvel, it has no need for the oxidizer) either by analogy to 2-615 or on a common-law theory (via 1-103). This will require a showing that the risk of frustration was not allocated by the parties' agreement, which may be problematic.

A stronger argument for Brittan is that the purchase of the oxidizer was necessitated by Shazam's breach of the implied warranty of merchantability in providing resins that emitted noxious fumes; on this theory Brittan could recover the cost of the oxidizer (and associated installation costs) as consequential damages. Noxious fumes, especially if they violate air pollution laws, would probably prevent Marvel from being fit for ordinary purposes under 2-314. Brittan also has counterclaims for breach of express warranty (the various statements made by Shazam officers and employees, and the Shazam brochures and cast models) under 2-313, and because of the longstanding connection between the companies and Shazam's promise to provide technical services, for breach of implied warranty of fitness under 2-315. All of these claims are worth discussing on the facts. Damages for breach of warranty could also include a refund of the price under 2-714, the fines paid to the county under 2-715, and arguably lost business.

In order to prevail on these claims, however, Brittan will have to overcome the disclaimers found in the order forms. Technically, the disclaimers probably comply with 2-316: they are in writing, mention merchantability and fitness, and are in bold print; additionally a clause immediately above the signature line directs the buyer's attention to them. Furthermore, if the merger clause at the end of clause 8 is valid, the express warranties will be negated as well (since the parol evidence rule will prevent Brittan from introducing them). Brittan's best argument here is that because these terms appeared in subsequent standardized order forms, they never got into the agreement between the parties (and for parol evidence purposes, were never accepted as a final expression of the agreement). Instead, they were attempted modifications of the original GML agreement, which contained no such disclaimers. As such, they do not comply with the good faith requirement of 2-209 [since contradicting express warranties is both misleading and dishonest], or with the requirement for additional terms in confirming memoranda of 2-207(2) [since negating a warranty is a material alteration of the original agreement.]

This is a close case. In the actual dispute on which this problem was based, the trial court found the disclaimers and merger clause to be valid and held for the seller.

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. As with the first question, discussion of specific facts and business problems made the difference between good answers and merely adequate ones. With regard to part (1), most students recognized that the proposed language was ambiguous (since under the law of Oregon the CISG applies to all US/Canadian commercial sales transactions) and that the client should explicitly exclude the CISG in its forms. Many of you stopped there, however, forgetting that the client's form might not by itself determine the applicable law (notwithstanding Article 6). For instance, there might be a battle of the forms. Under the CISG, moreover, it is possible to attack a form with parol evidence after the fact; and it is also possible to establish a binding contract without any writing at all. Thus, the client needs more thorough advice than simply redrafting a form; at the least, it needs a full explanation of how contracts are formed under the CISG.

On part (2), most of you recognized the statute of frauds problem with using EDI, and some of you recognized the problems arising under other provisions of the UCC that mandate writings and signatures [e.g., 2-205, 2-207, 2-209, and 2-316]. A full answer would have gone on to discuss the definition of "writing" and "signature" under 1-201 and whether and how EDI could fit within this definition, augmented by the liberal construction principle of 1-102. A really thorough answer would have talked about the CISG as well.

On part (3), most of you suggested using 2-719 to limit the available remedies. Credit depended on how well you explained your solution to the problem, and the best answers discussed why their solution was better than other possible solutions (for instance, in regard to incentives for efficient cover and resale).

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 for each exam containing my own notes. If 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.

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