SOUTH TEXAS COLLEGE OF LAW

JEAN POWERS, PROFESSOR
1990, FALL SEMESTER
THURSDAY, DECEMBER 6, 1990

CONTRACTS I

PART I (30 Points ­ Approximately 55 minutes)

E is an employee of R in his small ad agency. She had been trying for some time to get a raise and more job security from R. One day when. she was dealing with a client, the client asked her out. She became enraged and told the client to leave. She then told R that she was going to sue him for sexual harassment. R, who had been sued by an employee on a different charge recently, did not want to have to deal with the legal expenses and hassles. He therefore offered to "settle" with her by offering her a substantial raise and a promotion.

E had been taking notes on company stationary while they talked. The notes included the new position and salary. She showed them to R and asked him if she could really count on this, and if he wouldn't back out of the deal. R said that he would not, and that she could have the job as long as she wanted. When pressed further, he said he would guarantee that she would have the job for at least 3 years, although she could leave anytime sooner if she wished.

A few weeks later, R was talking to his lawyer L and told him about the sexual harassment claim made by E. L started laughing and said, "She must have been crazy to think you would fall for such a weak stunt. She must think you're a complete idiot. I hope you sent her packing." R, too embarrassed to tell L what he had really done, mumbled something about having taken care of E, and hastily left L's office. For the next few days, every time he saw E, who really was working out quite well in the new position, he felt his stomach tighten as he recalled his "humiliation."

By the end of the week, he couldn't take it anymore and he fired E.

E sued R for breach of contract. Discuss the arguments, issues, and likely outcome.

PART II (30 Points ­ Approximately 55 minutes)

B is preparing to open a retail bicycle shop. He needs to buy three display racks for 10­speed bikes. He contacts S and tells him what he wants. They agree on a price and S gives him the model numbers for the racks he needs. B then sends a memo to S as follows:

To: S

From: B

PE: Purchase of 3 Model 18­J bicycle racks

This is to confirm our order for 3 bicycle racks as agreed @ $X.00 per rack, for delivery within 2 weeks. Price includes installation in our store.

On the same day, S sends a memo to B as follows:

To: B

From: S

RE: Sale of Model 18­J bicycle racks

This is to confirm our agreement to sell you Model 18­J bicycle racks @ $X.00 apiece. No warranties apply to the racks sold.

The two memos cross in the mails. Twelve days later, S calls to say that the racks are ready to be shipped, but says that there will be an extra charge for installation. B objects, saying the price is supposed to include installation. S delivers the racks the next day, but does not install them. When B sets them up, he discovers that, although they are Model 18­J as agreed, they will not accommodate 10­speed bikes. Further, the third rack is completely unstable when assembled. B refuses to accept the racks and sends them back to S.

B sues S for the value of the installation and for damages for the problems with all three racks. S denies any liability for installation, denies that there is any liability for any problems with the racks, and further claims that he only agreed to sell two racks.

Discuss all issues raised.

PART III (15 Points ­ Approximately 25 minutes)

D is a drug dealer. He approaches B, a 17­year­old high school senior and offers him drugs. B accepts and buys the drugs. Over the next few months B becomes more dependent on drugs. Two days before B turns 18, D offers to supply B a specified amount of drugs to B each week in exchange for $200 a week for the next 12 weeks. B will give the money to R, who will then give it to D and then bring the drugs to B within the next few days. B says he would prefer not to get "locked in" to such an agreement. D says he will not supply him anything at all on any other basis, so B agrees.

After the third payment, R does not bring the drugs as agreed. When he comes for the next week's payment, B refuses to pay him. R tells him there has just been a slight delay, but that D has the money and he will get the drugs within the next couple of days. He says B should go ahead and give him the next $200 to keep D happy, and he does. By the end of the week the drugs have still not been delivered. R tells B that he has had to "lay low" and has not seen D lately. He says he still has the second $200, but refuses to return it to B. When B still hasn't received the drugs the next week, he decides to go to court to require R and D to give him the drugs as agreed or to return the $400.

Discuss the legal issues raised.

PART IV (15 points ­ Approximately 25 minutes)

P is a Houston resident who has heart problems. His doctor has recommended open heart surgery, but P has thus far refused. When P and his wife, W, are driving through Texas to New Mexico, P has a heart attack in Muleshoe, Texas. He is rushed to the hospital in Lubbock. D, the doctor in ER, tells his wife that he will need open heart surgery immediately to have any chance for survival. D says that for the particular operation needed, they will need to bring in a surgeon from Dallas. D sets up a phone call to S, a specialist in Dallas. W is shocked when S tells her how much the operation will cost, since it is more than twice the price they had discussed with their doctor in Houston. When she complains, S says he will not do it for less. W agrees to the price. By the time S arrives, W is frantic with worry. She asks S if P is going to be all right and he tells her not to worry, he will be fine.

After surgery, D, who has assisted, tells W that S did a superb job, which is, in fact, true. Nonetheless P does not survive the night. P refuses to pay the full price for the surgery. S sues for his fee. P sues for damages.

What arguments will be made and what is the likely result?

PART V (6 Points ­ Approximately 12 minutes)

In March, 0 decided to have a sun porch built on to the back of his house. He called C to find out about how much he would charge to do it and whether he would be available to do it in April. C said he would be glad to do it, that he could probably do it for about $5000, and would come by the next week to look over the plans. When he came by, O was not there, but had left a description of what he wanted done with his housekeeper. C wrote up all the specifications and prices on an "estimate sheet" and left it with O's housekeeper. The price indicated on the sheet was $5500. When O came home and looked it over, he grumbled about the price, then marked it out and wrote in $5000. A few days later, C called to ask if O was ready for him to start the next day, April 1. O said he was, and C began work on schedule. When C submitted his bill for $5500, O said he only owed $5000. C insisted the price was $5500. What is the contract price? Discuss.

PART VI (4 Points ­ Approximately 8 minutes)

X has a small greeting card business. She has 6 employees. To get ready for the Christmas rush, she says that any employee who works an extra hour every day for the next month will get a , $300 Christmas bonus. Three of the employees decide to do this. After three weeks, X tells them that she will not be able to pay the bonus after all. The employees insist that they are entitled to complete the month of extra work and get the bonus. What are the rights of the parties and why?