California Contracts Attack Sheet by yke10739


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									                          Exam Number
          Return Exam and Answer to Student   X


       (Course # 11041)


          * * * * *


    TUESDAY, MAY 18, 2004


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 (Instructions on Next Page)

      Page 1 of 7 Pages
Final Examination                             Exam Number
Contracts                       Return Exam and Answer to Student   X
Professor Dodge


1.   This is a limited open notes examination. You may bring with
you and consult one 8½ by 11 sheet of notes (both sides) in print
that can be read without magnification. You may not use or consult
any other materials. If you use a sheet of notes, you must turn that
sheet in, separately from the examination, before you leave the
examination room. Please do not put your name or examination number
on the sheet of notes.

2.   The allotted time for the examination is three hours. There are
three questions. Question one is worth 60 points, question two is
worth 75 points, and question three is worth 45 points. I recommend
that you spend one hour on question one, one hour and fifteen minutes
on question two, and forty-five minutes on question three.

3.   Read each question carefully, including the instructions at the
end of the question. Within the limits of those instructions,
discuss each issue reasonably raised by the facts, including issues
that might be rendered moot by your resolution of another issue.

4.   Think about and organize your answers before starting to write.

5.   To the extent possible, write on every other line of the
bluebooks and on only one side of the page. This will give you room
to revise your answers if necessary.

6.   Please write as neatly as you can.

                    Good luck and enjoy your summer!

                    (Examination Begins on Next Page)

                            Page 2 of 7 Pages
Final Examination                           Exam Number
Contracts                     Return Exam and Answer to Student   X
Professor Dodge

                            QUESTION ONE
                             (60 points)

     Hal Hitchcock is a successful, and devoutly religious, Hollywood
director. Inspired by the success of Mel Gibson’s film “The Passion
of the Christ,” Hitchcock decided to make a trilogy (trilogies also
being rather popular these days) about Jesus’s life, from birth to

     Hitchcock realized that the actor cast to play Jesus would be
critical to the success of his films. After an extensive search,
Hitchcock chose a relatively unknown actor by the name of Geoffrey
Gottesman to play the role of Jesus. Hitchcock offered Gottesman a
contract with a “pay-or-play” clause, under which Gottesman would be
paid $2 million per movie even if Hitchcock decided not to make one
or more of the films. Naturally, Gottesman was interested, but he
was also concerned about the projected three-year filming schedule
and about the following provision in the proposed contract:

     Covenant not to compete. Performer [i.e. Gottesman] agrees that
     he/she shall not perform in any film, television program, or
     other production from the date of this agreement until a date
     one year after the United States theatrical release of the last
     film in the trilogy.

Hitchcock explained that this provision was important because it was
vital that the audience associate Gottesman only with the role of
Jesus during the release of the three films in theaters and
thereafter on DVDs. Gottesman said that he understood, but that he
had his heart set on a role in the stage revival of a musical theater
classic, a show that would be over by the time the first movie was
scheduled to begin filming. Hitchcock responded that his lawyers
would not let him change a word that they had drafted, but that he
didn’t think the non-compete provision would cover stage productions
and that, in any event, he certainly wouldn’t enforce the non-compete
provision to prevent Gottesman from doing a little musical. With
this assurance, Gottesman signed the contract.

     What Gottesman did not tell Hitchcock is that the musical
theater classic was “Damn Yankees,” a musical retelling of the Faust
story in which a baseball player sells his soul to the devil to help
his team win the pennant, and that Gottesman’s role was that of Mr.

                (Question One Continues on Next Page)

                          Page 3 of 7 Pages
Final Examination                             Exam Number
Contracts                       Return Exam and Answer to Student   X
Professor Dodge


Applegate (i.e. the devil). Hitchcock discovered this only after the
opening night of “Damn Yankees” by reading a front-page article in
“Variety” (an entertainment industry newspaper) entitled “Devil to
Play Jesus in Hitchcock Trilogy.”

     You are a lawyer in Los Angeles, and Hitchcock has come to see
you in a rage. He shows you a copy of Gottesman’s contract, which
includes the provisions mentioned above as well as a standard merger
clause. He wants to know if he can (1) rescind the contract and
avoid paying Gottesman the $6 million; (2) sue Gottesman for
breaching the contract and collect damages for the effects of this
negative publicity on his films; and/or (3) enjoin Gottesman from
continuing to perform in “Damn Yankees.” Please advise Hitchcock.

                          (End of Question One)

                    (Question Two Begins on Next Page)

                            Page 4 of 7 Pages
Final Examination                           Exam Number
Contracts                     Return Exam and Answer to Student    X
Professor Dodge

                            QUESTION TWO
                             (75 points)

     As his plans for a trilogy based on the life of Jesus collapsed,
Hal Hitchcock began to feel pains in his chest. Hitchcock’s doctor
diagnosed him as having a heart condition that, if exacerbated by
stress, could result in a major heart attack. Heeding his doctor’s
advice, Hitchcock decided to retire and build his “dream house” on a
lot that he already owned in Malibu overlooking the Pacific Ocean.

     Hitchcock’s plan was for the house to be in the style of a 15th
Century Italian monastery, with a stone exterior and decorated on the
interior with frescos reproducing Renaissance paintings. The focal
point of the dining room was to be a full-scale, fifteen by twenty-
nine foot reproduction of Leonardo da Vinci’s masterpiece “The Last

     After reviewing a number of bids, Hitchcock entered a contract
with Angelo Architectural Associates (AAA) to build the house for a
total price of $8 million, to be paid in four equal installments.
The contract specified that the exterior was to be made of sandstone
from the Redding Quarry located in Redding, Iowa. With respect to
the frescos the contract further provided:

     Condition of Final Payment. The final installment of $2
     million shall not be due and payable unless and until Owner
     [i.e. Hitchcock] has certified in writing that he is
     satisfied with the interior frescos. Should any dispute
     arise as to the quality or fitness of their workmanship,
     the decision as to acceptability shall rest strictly with
     the Owner, based on the requirement that all work done
     shall be first class in every respect.

     Because of the steepness of the hill on which the house was to
be built, AAA entered a separate contract with Slyde Soil Services
(SSS), a well respected soil engineering company, to conduct a soil
survey and to perform whatever work was necessary to stabilize the
hillside prior to building. Although the contract with SSS did not
mention Hitchcock by name, AAA did provide SSS with a copy of the
building plans, which were labeled “H. Hitchcock Residence.” The
soil survey showed that only minimal work was necessary to stabilize
the hillside, which SSS performed at a total cost to AAA of $200,000.

                (Question Two Continues on Next Page)

                          Page 5 of 7 Pages
Final Examination                            Exam Number
Contracts                      Return Exam and Answer to Student   X
Professor Dodge


     Work soon began on the construction of Hitchcock’s home, and
Hitchcock paid the first three installments of $2 million each as
they came due. Within a year, the house was completed according to
plans, with one exception: having found a cheaper source of supply
for identical sandstone, AAA purchased the stone (without telling
Hitchcock) from the Koho Quarry in Koho, Arizona.

     Hitchcock had been looking forward to the final inspection of
his house with great anticipation. He was very pleased with the
frescos and, upon seeing “The Last Supper” in the dining room, he
exclaimed: “It’s perfect!” Towards the end of the inspection,
however, Hitchcock noticed that cracks had developed in the north
wing of the house. Further investigation showed that the hillside on
which the north wing was built had not been properly stabilized and
that it would cost an additional $1 million to stabilize the hill and
repair the north wing. Then, Hitchcock, who was already frustrated
with the delay, learned that the house had been built not out of
Redding sandstone but out of Koho sandstone. He immediately called
Mike Angelo, AAA’s owner, and told him to forget about repairing the
north wing because he was “going to have to tear the whole house down
and build it all again.” After hanging up the phone, Hitchcock
suffered a mild heart attack and had to be hospitalized for a week at
a cost of $80,000.

     Hitchcock is now out of the hospital and has, once again, come
to see you, his lawyer. He wants to know if he can: (1) withhold the
final $2 million payment either because the house was built with the
wrong stone or because he is not satisfied with the frescos; (2) sue
AAA for the cost of tearing the whole house down and rebuilding it;
(3) sue SSS for the cost of stabilizing the hillside and repairing
the north wing; and/or (4) sue either AAA or SSS for his hospital
expenses. Please advise Hitchcock.

                          (End of Question Two)

                    (Question Three on Next Page)

                            Page 6 of 7 Pages
Final Examination                           Exam Number
Contracts                     Return Exam and Answer to Student      X
Professor Dodge

                           QUESTION THREE
                             (45 points)

     Under the rule of Hadley v. Baxendale, which is adopted in
Restatement (Second) of Contracts § 351, damages are not recoverable
for loss that the party in breach did not have reason to foresee as a
probable result of the breach when the contract was made.

     What are the advantages and disadvantages of this rule? Would
you recommend that it be changed, and if so how?

                       (End of Question Three)

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                        (END OF EXAMINATION)

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                          Page 7 of 7 Pages

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