1999_02_remedies

8/8/2019 1999_02_remedies

1/6

Scott Pearces Master Essay Method - Con tracts / Remedies - February 1999

CONTRACTS / REMEDIES

Copyright February 1999 - State Bar of California

Maker manufactures printing presses. News, a publisher of a local newspaper, had decided to

purchase new presses. Rep, a representative of Maker, met with Boss, the president of News, to

describe the advantages of Makers new press. Rep also drew rough plans of the alterations that

would be required in the News pressroom to accommodate the new presses, including additional

floor space and new electrical installations, and left the plans with Boss.

On December 1, Boss received a letter signed by Seller, a member of Makers sales staff, offering

to sell the required number of presses at a cost of $2.4million. The offer contained provisions

relating to the delivery schedule, warranties, and payment terms, but did not specify a particular

mode of acceptance of the offer. Boss immediately decided to accept the offer, and telephoned

Sellers office. Seller was out of town, and Boss left the following message: Looks good. Im sold.Call me when you get back so we can discuss details.

Boss next telephoned Pressco and rejected an outstanding offer by Pressco to sell presses to News

similar to those offered by Maker. Using the rough plans drawn by Rep, Boss also directed that work

begin on the necessary pressroom renovations. By December 4, a wall had been demolished in the

pressroom and a contract had been signed for the new electrical installations.

On December 5, the President of the United States announced a ban on imports of foreign

computerized heavy equipment. This removed from the American market a foreign manufacturer

which had been the only competitor of Maker and Pressco. That afternoon, Boss received a telegram

from Maker stating, All outstanding offers are withdrawn. In a subsequent conversation, Sellertold Boss that Maker would not deliver the presses for less than $2.9 million. A telephone call by

Boss to Pressco revealed that Presscos entire output had been sold to another buyer.

1. Was Maker obligated to sell the presses to News for $2.4 million? Discuss.

2. Assume Maker was so obligated. What are News rights and remedies against

Maker. Discuss.

8/8/2019 1999_02_remedies

2/6



Outline

Copyright February 1999 - Scott F. Pearce, Esq.

I. Was Maker obligated to sell the presses to News for $2.4 million?

A. The UCC controls this transaction.

B. Contract formation

1. The meeting between Boss and Rep

2. Sellers December 1 letter to Boss: a valid offer

3. Sellers letter did not specify a particular mode of acceptance of the offer.

4. Bosss telephone message to Seller: a valid acceptance

5. Acceptance effective upon dispatch6. Consideration

7. Foreseeable Reliance

C. Makers Defense to Formation: The offer was withdrawn on December 5

D. Makers Breach: The December 5 telegram and Sellers subsequent conversation

with Boss.

E. Makers Defenses to Breach: Impossibility / Impractically / Frustration

F. Conclusion

II News rights and remedies against Maker

A. Damages are inadequate

B. Restitution

C. Specific Performance

1. Definite and Certain Contract

2. Conditions Satisfied by Plaintiff

3. Damages are inadequate - discussed above

4. Feasibility

5. Mutuality

6. Defenses

D. Conclusion

8/8/2019 1999_02_remedies

3/6



Answer

Copyright February 1999 - Scott F. Pearce, Esq.

I. Was Maker obligated to sell the presses to News for $2.4 million?

In order to established Makers obligations, a contracts analysis is required.

A. The UCC controls this transaction.

Printing presses are manufactured goods, so the UCC governs this transaction. Maker is a

manufacturer of printing presses, so it qualifies as a merchant. News is the publisher of a local

newspaper. As a regular commercial consumer of printing press parts and accessories, it is likely that

News also would be characterized a merchant for UCC purposes.

B. Contract Formation

The elements of offer, acceptance and consideration must exist in order for the parties to be liable

to one another in contract.

1. The meeting between Boss and Rep:

The initial meeting between Makers sales representative, Rep, and Boss, President of News, did not

satisfy any element of contract formation. Maker and Boss discussed the new printing press and Rep

sketched out rough plans for alterations to the News pressroom, but neither Boss nor Rep made anyspecific offer.

2. Sellers December 1 letter to Boss: a valid offer:

Seller, a salesman for Maker, wrote Boss a letter offering to sell and deliver the presses for $2.4

million. This letter qualifies as an offer under the UCC and common law. Sellers letter included

the parties, the subject matter, the price, and provisions relating to the delivery schedule, warranties

and payment terms. This letter was more than adequate to place Boss in a position where his valid

acceptance would create a binding contract between News and Maker.

3. Sellers letter did not specify a particular mode of acceptance of the offer.

This fact means that Boss would be able to accept Sellers offer by any reasonable means, since

Sellers offer did not unambiguously limit Bosss acceptance to any particular means.

8/8/2019 1999_02_remedies

4/6


4. Bosss telephone message to Seller: a valid acceptance

Upon receipt of Sellers letter, Boss immediately decided to accept the offer, and telephoned Sellers

office. Because Seller was out of town, Boss left an unambiguous message: Looks good. Im sold.

Call me when you get back so we can discuss details. Both the modern common law and the UCC

judge acceptance by an objective standard. Since a reasonable person would interpret Bosssmessage as an acceptance, a valid contract will be found between Maker and News, unless some

other valid defense to formation is present.

The mere fact that Bosss message referred to a future discussion of details does not invalidate the

acceptance, because that is how a reasonable person would interpret the language. This would be

true under the UCC and modern common law.

If News is considered a non-merchant, the terms of the offer govern. If both parties are merchants,

Bosss acceptance could include new and different terms that would become part of the contract so

long as they did not materially alter the deal. Heres Bosss letter does not change the offer, it merely

refers to the parties need to discuss further the logistics of the transaction.

5. Acceptance effective upon dispatch.

The phone message from Boss was effective acceptance at the moment Boss left it. No facts suggest

this message was not received by Seller, and even if Seller did not personally read or hear the

message until after the December 5 effort to withdraw the offer, Maker would be liable under the

terms of the agreement under both the UCC and modern common law.

6. Consideration

This element of the contract analysis is satisfied easily: News will pay $2.4 million for the requirednumber of printing presses.

7. Foreseeable Reliance

News relied on the existence of the contract in three ways. First, Boss rejected an outstanding offer

by Pressco to sell printing presses. Secondly, Boss used the rough plans from Rep to begin

renovations to the pressroom. Finally, a contract was signed for new electrical installations. All

three acts of reliance happened between December 1 and December 4, before Makers attempted

withdrawal of its offer on December 5. The foreseeable reliance by News will estop Maker from

denying the existence of a contract.

C. Makers Defense to Formation: The offer was withdrawn on December 5

Maker telegraphed a withdrawal of its offer to Boss on December 5. As discussed above, this

withdrawal was ineffective because the December 1 offer had been accepted when Boss called Seller

the same day. The foreseeable reliance by News further underlines why Makers December 5

8/8/2019 1999_02_remedies

5/6


telegram was ineffective. Maker would be estopped from denying the existence of the contract.

D. Makers Breach: The December 5 telegram and Sellers subsequent conversation

with Boss.

Maker sought to withdraw its offer on December 5. Seller then told Boss the new price was $2.9million. Since the December 1 offer had been accepted, this constitutes a breach of the December

1 contract.

E. Makers Defenses to Breach: Impossibility / Impracticability / Frustration

None of these defenses to contract liability are present. Maker could live up to its obligations if it

wished. They are seeking to abrogate their deal with News in order to make an extra half million

dollars profit, by taking advantage of the Presidential order banning foreign imports of similar

equipment.

F. Conclusion

A valid contract was formed on December 1. Maker is obligated to sell the presses to News for $2.4

million.

II News rights and remedies against Maker.

A. Damages are inadequate.

The typical remedy for UCC contracts that are breached by the seller is the cover remedy. The

aggrieved buyer gets goods at a higher price from another seller and then seeks to recover thedifference. Here, the competing seller, Pressco, already has sold its entire output to another buyer.

The Presidential Order has removed foreign manufacturers from the market. Thus damages are

inadequate because News cannot cover itself and seek money damages to make up the difference.

B. Restitution

News has not conferred a benefit on Maker, so it cannot obtain any relief via this theory.

C. Specific Performance

This is News preferred remedy, and this analysis will show that this is the appropriate remedy.

1. Definite and Certain Contract

As discussed above, the December 1 communications establish a valid contract with definite and

certain terms.

8/8/2019 1999_02_remedies

6/6


2. Conditions Satisfied by Plaintiff

News is ready to perform. It has not breached any terms or conditions of the December 1 contract.

3. Damages are inadequate - discussed above.

4. Feasibility

A court would have no problems crafting and enforcing an equitable remedy requiring Maker to sell

the printing presses for $2.4 million.

5. Mutuality

Mutuality of performance is present under these facts. The older Mutuality of Remedy requirement

is no longer a problem in situations where, as here, the seller might be limited to money damages

for lost profits.

6. Defenses.

Maker has breached a valid contract in a cynical effort to make an extra half million dollars profit.

It has no valid defenses.

D. Conclusion

News will win specific performance. Maker will have to sell and deliver the presses for $2.4

million.

1999_02_remedies

Documents