SOUTH TEXAS COLLEGE OF LAW

JEAN POWERS, PROFESSOR
FALL SEMESTER, 1987
FRIDAY, DECEMBER 18, 1987

CONTRACTS I

PART 1 (25 points ­ 45 minutes)

A opened a store to sell video tapes. He talked to a supplier S about getting tapes to sell in his store. S gave him a price list for all the tapes he carried. A asked him to leave it and he would let him know what he wanted to do later. S agreed to this, and left an order blank with A, but said he probably should let him know within the next week because he anticipated a price increase soon. He said that until then he would accept any orders from A from the current price list up to a total of 1,000.

Four days later, S came back to see A and brought a new price list, reflecting price increases for all tapes. A informed him that he had sent in an order form the day before, and expected to get the tapes at the price listed. He took out a copy of the order he had sent and showed it to S. S noticed that in the sentence indicating that all accounts must be paid within 10 days of delivery, the 10 had been crossed out and 15 had been written in. There were no other changes or additions to the form, other than the placement of orders and the signature. S pointed out that all payments were due within 10 days, and he was unwilling to change this.

A said that he had been reviewing his needs, and had found several more tapes he wanted to purchase. He gave S an order form for the additional tapes. S took it, and advised A that the new prices would apply to all tapes. A said that since his grand opening was coming soon and he didn't want to have to try to locate the tapes elsewhere, he would take them regardless of price. He still insisted, nonetheless, that he was entitled to the old prices for both orders, and the 15 day payment term for at least the first order.

Which prices and terms are in effect for each order and why? Discuss all issues raised.

PART II (35 points ­ 1 hour)

W works for M, a manufacturer of widgets. He decides he wants to go into business for himself, and makes arrangements to open a hardware store. Since he needs to keep a steady income to support his family until the business gets off the ground, he and his wife decide that she will work in the store and he will continue with his job for the first year.

To secure his income, he asks for a written contract with M. M agrees, and they sign an employment contract for one year at a stated salary to begin the first of the following month. At the same time, they enter into an oral contract for W to buy and M to supply all the widgets W needs for his store, for the next two years, or until he closes the store if that is sooner, at a price provided in the contract.

Six months later, problems develop between W and M. W feels that M is not upholding his part of the contract, and confronts M with his contentions. He also says that since the widget market has been declining and he can get widgets elsewhere for less money, he will no longer buy widgets from M. After some discussion, M and W mutually agree to orally rescind the employment contract (W's store is now doing so well that he no longer needs the job and needs to spend more time at the store) and also agree to reduce the price W is paying for widgets. Relations between M and W continue to decline over the next year. M sues W for the difference between the first contract price for the widgets and the price actually paid­under the agreement. W sues M for the contract price due under his employment contract, denying that the rescission was valid, and claiming breach by M.

What legal issues are raised, what arguments will be made, and what is the probable result?

PART III (40 points ­ 75 minutes)

T is a 16 year old high school junior who has been suffering from severe depression and alcoholism since his girlfriend broke up with him. He stays home from school one day and starts the day by drinking a quart of vodka. He then goes to M's electronics store and purchases a stereo, making a $50 down payment. Under the written agreement, he will pick up the stereo when he pays the balance. After leaving, he realizes he has spent all his money and has no more liquor. He then goes to his friendly neighborhood liquor store and asks the owner O if he can buy booze on credit. O refuses, but says that if he will agree to make deliveries for him for 2 hours after school every day for the next 6 months, he will pay him by giving him a quart of vodka at the end of each day. T agrees, and says he will be back that afternoon to begin.

Since T needs a car for his new job, he goes to S's used car lot to buy one. S shows him a car that he says was owned by a little old lady who only drove it to church and bridge club, is in "mint condition," and is a "steal" at $1500. In fact, the car was owned by S's son who used it to race his friends, is in need of major repairs, and is worth no more than $600. T agrees to buy the car. The first time he tries to sign the sales contract, he misses the signature line by about 2 inches. When S points this out, he signs again in the appropriate place. He then takes the car, but it breaks down after he has driven it just a couple of miles. He gets out and notices it has stopped in front of an alcohol treatment facility, H. Taking this to be a sign, he goes in and checks in for treatment, signing a contract to pay for the treatment. While he is there, the car, which he has abandoned, disappears.

One month later, he leaves the facility, fully cured. He refuses to work for O, who sues him for breach of the employment contract. He also refuses to pay H and S, who sue for breach of contract. He tenders to M the balance due for the stereo. M refuses to accept the tender and deliver the stereo, saying that the contract is void. T sues for breach of the contract to sell the stereo.

What legal issues are raised, what arguments will be made, and what is the probable result of each suit?