Board of Bar Examiners of the Supreme Court of Delaware
Parent Corporation ("Parent") owns 58% of the outstanding common stock of Subsidiary Corporation ("Sub"). Parent and Sub are both Delaware corporations. The remaining 42% of the common stock of Sub is publicly owned and is traded on the New York Stock Exchange. The board of directors of Parent has decided that it would like Parent to acquire the publicly-owned shares of Sub.
The Board of Parent has asked you, Parent's outside counsel, how Parent should structure a transaction in which it acquires the publicly-owned shares of Sub. Specifically, the Board has asked you to recommend either (a) a tender offer to increase Parent's ownership to at least 90% of the stock of Sub followed by a short form merger pursuant to 8 Del. C. § 253 or (b) a negotiated merger between Parent and Sub with no prior tender offer.
1) What are the advantages and disadvantages of each of options (a) and (b)? Which form of transaction do you recommend and why? Explain your answer.
Parent determines to make a tender offer to acquire the publicly-held shares of Sub.
Parent believes Sub is worth $52 per share.
2) Is Parent obligated to set its tender offer price at $52 per share or greater? Explain your answer.
Parent makes its tender offer for the publicly-owned shares of Sub. The board of directors of Sub decides to create a special committee to consider whether to recommend in favor of the tender offer, recommend against the tender offer, or make a neutral statement with respect to the tender offer. The board of directors of Sub is comprised of (1) Jim Wallace, CEO of Parent; (2) Brian Taylor, CFO of Parent; (3) James Dee, a college professor with no past or present business relationship with Parent or Sub; (4) Susanne May, a C.P.A., whose firm does a substantial amount of work for Parent; (5) Joe Steffens, CEO of a company in a different business than Parent and Sub, who plays golf with Wallace several times a year and whose son is married to Wallace's daughter; (6) Mark Rodgers, President of Sub; and (7) Dan Stipano, a private investor with substantial holdings of Sub stock.
3) Based on the information provided above about each of the members of the Sub board of directors, who should the Sub board of directors appoint to the Special Committee? Who should be excluded from the Special Committee? Explain your answers.
The properly constituted Special Committee convenes to consider its recommendation to the Sub stockholders regarding Parent's tender offer. The Special Committee decides to retain ABC Financial Advisors. ABC has been the regular financial advisor to Sub since Parent's acquisition of its stock holdings in Sub. The Special Committee has one thirty-minute meeting to consider the tender offer. At that meeting, an ABC representative states that while it has not had time to prepare a written analysis, ABC believes the tender offer is from $5 to $7 less than the fair value of Sub on a per share basis. The Special Committee votes unanimously to remain neutral with respect to the tender offer. The Special Committee reasons that, although it believes the tender offer price is inadequate, making a recommendation, one way or the other, could lead to lawsuits against the Special Committee challenging its actions. In its filing with federal regulatory authorities regarding the tender offer, the Special Committee states only: "The Special Committee has determined not to make any recommendation with respect to Parent's tender offer."
4) You are concerned that the Special Committee may have violated its fiduciary duties in evaluating the tender offer as well as the decision to express a neutral recommendation to shareholders regarding the fairness of the tender offer. Which aspects of the Special Committee's process and decision were arguably inconsistent with the fiduciary duties of the Special Committee? Identify the specific fiduciary duty implicated in each instance, and explain your answer.
After purchasing shares pursuant to the tender offer, Parent owns 92% of the outstanding stock. Parent then acquires the remaining 8% through a short-form merger effected pursuant to 8 Del. C. § 253. A stockholder, Pete Petitioner, then files an appraisal action pursuant to 8 Del. C. § 262 to determine the fair value of his shares. Parent argues that the fair value of Petitioner's shares is the merger price. Parent argues that, in determining the value of Petitioner's shares, the Court should consider (1) the forecasted future earnings of Sub; and (2) the fact that Petitioner's shares were minority shares which were difficult to sell. Petitioner argues that the Court should consider (1) prices paid by acquiring companies in similar going-private transactions; and (2) savings Parent will enjoy after the Merger due to reduced administrative and legal expenses.
5) Should the Court consider each of those factors in deciding the fair value of Petitioner's shares? Explain your answer.
Arthur, a convicted felon, is romantically obsessed with Claire, a television weather forecaster. He follows her car to and from work and sends her flowers daily. Claire dislikes Arthur intensely and fears that he will harm her. During the past month Arthur has twice secretly entered Claire's home using a steel pry bar, taken several items of her apparel, written sexually suggestive messages on her refrigerator, and allowed her puppy to escape outside into a snowstorm. Her puppy was never found.
With the assistance of his friend Buster, Arthur devises a plan to capture Claire. At a mall parking lot, Arthur and Buster put on masks and commandeer an SUV when Buster points a handgun at the elderly driver and Arthur pulls the man from behind the wheel. The vehicle owner suffers a heart attack and dies at the scene.
Arthur and Buster speed away in the elderly driver's vehicle to find Claire. While driving they discover crack cocaine in the glove compartment. After smoking some of the crack cocaine, Arthur runs a red light and strikes three pedestrians in a crosswalk. One pedestrian is killed instantly, the second is seriously injured, and the third dies at the hospital as a result of a reaction to surgical anesthesia.
Arthur and Buster continue to drive around town looking for Claire. When Arthur sees Claire's car, he takes Buster's gun and shoots out one of her back tires. Claire's vehicle overturns and bursts into flames. Arthur and Buster pull the unconscious Claire from her burning car and transport her to a rental storage bin that the two use as their hideout. Claire is tied to a chair in the hideout and Arthur and Buster send a videotape of Claire pleading to be released to her television station along with a demand for a million dollars. Arthur then telephones the police and reports that Claire has been taken hostage by the competing television station weather forecaster. The next day Arthur has Buster deliver a fake bomb with a second note to the television station demanding payment of a million dollars in exchange for Claire's release. Claire is eventually released unharmed by her captors.
1) Assume that all of these events occur in 2005 in the State of Delaware. What Delaware State crimes has Arthur committed? If a crime has more than one degree, specify the degree and explain why that degree is appropriate. Explain your answers.
1.Larry Lessor owns Lessor Cycle Sales ("LCS"), a bicycle store in Georgetown, Sussex County, Delaware. Bill Borrower owns Borrower Bikes ("BB"), a seasonal bicycle rental business in Rehoboth, Sussex County, Delaware. In March 2002, LCS and BB entered into a 5-year agreement for LCS to supply new bicycles to BB for a four-month period during the summer seasons. The Agreement provides as follows:
This agreement ("Agreement") is made on March 1, 2002 between Borrower Bikes ("BB") and Lessor Cycle Sales ("LCS") for a term of 5 years from the date hereof.
LCS agrees to lease 100 new bicycles to BB each year hereof for a four-month period commencing May 1 and ending August 31.
The lease payment for the bicycles shall be 25% of LCS's purchase price for the bicycles, payable in full by BB on May 1 each year upon delivery of the bicycles. BB agrees to maintain the bicycles in working order during the term of the lease and to return the bicycles in working order to LCS's premises by the close of business August 31.
The parties agree that all actions between the parties involving the subject matter of this agreement shall be brought in the Delaware Court of Chancery, and the parties hereby expressly consent and agree to that Court's personal and subject matter jurisdiction over the parties and all such disputes.
LCS and BB performed under the Agreement without any dispute in 2002, 2003 and 2004. In each of these years, on May 1, LCS delivered 100 new bicycles to BB, BB paid LCS $100 per bicycle (25% of LCS's $400 per bicycle purchase price), and BB properly maintained and timely returned the bicycles to LCS. Following each summer season, LCS sold all of the returned bicycles as used at prices that exceeded Lessor's original $400 per bicycle purchase price.
On May 1, 2005, LCS delivered 100 new bicycles to BB, and BB paid LCS $100 per bicycle constituting 25% of LCS's per bicycle purchase price. On June 1, 2005, BB's shop suffered significant damage in a storm. On June 15, 2005, Bill Borrower informed Larry Lessor that the storm damage had significantly limited BB's storage space and that BB therefore had sold 50 of the bicycles to Spokes, another bicycle shop in Rehoboth, for $200 each. Bill Borrower offered immediately to remit the $200 per bicycle in full to LCS.
On July 15, 2005, Larry Lessor requested you to file an action in the Delaware Court of Chancery on behalf of LCS against BB seeking compensatory and punitive damages based on claims for breach of contract and conversion of the 50 bicycles which BB sold to Spokes. Larry Lessor also requested you seek an injunction against BB to enjoin future breaches of contract and future conversions of the bicycles by BB, and to seek a jury trial in Sussex County on the claims.
1) Assume for purposes of answering this question that LCS has viable claims against BB for breach of contract and conversion based on BB's sale of 50 of LCS's bicycles to Spokes. Is the action Larry Lessor requested you to file on behalf of LCS properly within the subject matter jurisdiction of the Court of Chancery? Are all of the remedies sought within the Chancery Court's jurisdiction? Explain your answers.
2.Tom Trustee ("Trustee") is the sole trustee of a trust for the benefit of John Smith, the sole beneficiary. The property of the trust includes over $1,000,000 in cash and 5,000 shares of common stock of ABC Corp. ABC stock is widely traded on the New York Stock Exchange. Under the terms of the Trust, Trustee is required to distribute the trust property, in full, to Smith, on December 31, 2005. On January 1, 2005, Trustee advised Smith by letter that Trustee intended to transfer the 5,000 shares of ABC stock to Trustee's brokerage company, Tom Trustee Brokerage Company, on July 31, 2005 to be sold at the then-current market price and that the sale proceeds, net of the brokerage commission paid to Trustee's brokerage company, would be included in the trust property distributed to Smith on December 31, 2005. Trustee also stated in the letter that the sole purpose of the stock sale is to provide a lucrative trading commission on the sale to Trustee's brokerage business.
Smith received, but did not respond to Trustee's January 1, 2005 letter and has had no communication with Trustee since the January 1, 2005 letter. On July 15, 2005, Smith requested that you immediately file an action in the Delaware Court of Chancery on his behalf against Trustee for breach of fiduciary duty based on the stock sale and to seek an emergency trial before July 31, 2005 to obtain a final injunction to enjoin the stock sale. On January 1, 2005, ABC stock closed at $100 per share. The trading price of ABC stock has steadily increased since January 2005 and closed on July 15, 2005 at $125 per share.
2) Assume for purposes of answering this question that the proposed stock sale constitutes a breach of Trustee's fiduciary duty to Smith. Discuss:
(a) whether the action Smith requested you to file is properly within the subject matter jurisdiction of the Court of Chancery; and
(b) whether Trustee has any potentially valid bases to oppose Smith's request for an expedited trial and a final injunction prior to July 31?
Explain your answers.
3.Sam Slick is an employee of USA Bank. USA Bank invited all USA Bank employees to a charity event to be held at a local race track on the Thursday prior to a June 2005 auto race. The invitation stated that the event was open only to USA Bank employees and that veteran champion race driver Rusty Jones would attend the event to give personalized autographed photographs of himself to USA Bank employees in exchange for a $100 donation to the charity. Sam Slick's brother, Joe Slick, and Joe's wife, Sally Slick, were Rusty Jones fanatics but were not employees of USA Bank. Joe and Sally wished to meet Rusty Jones. Sam had no desire to meet Rusty but wanted to obtain an autographed photo for his son, Sam, Jr. Sam gave Joe his employee ticket. To obtain a second employee ticket for Sally, Sam stole a ticket from the desk of Bill Jones, another USA Bank employee. Joe and Sam therefore agreed that Joe and Sally could use the two tickets to gain access to the event and Joe, in return, would obtain for Sam a Rusty Jones photo autographed "To Sam Slick."
Joe and Sally used Sam's badge to enter the event, met Rusty Jones and obtained the "To Sam Slick" autographed photo. Tragically, Rusty Jones died suddenly of a heart attack the following day. The autographed photos immediately became priceless collector's items. Recognizing his windfall, Joe returned Sam's employee badge to Sam but refused to give Sam the autographed photo.
Sam has informed you of the above facts and that he wishes you to file a breach of contract action immediately against Joe to obtain the remedy of specific performance in the Delaware Court of Chancery. Sam asserts that he performed his end of the agreement completely by giving Joe his two tickets so that Joe and Sally could gain access to the event and therefore, per the agreement, Joe owes him the priceless autographed photo. Sam also asserts that the autographed photo cannot be valued for purposes of a money damages award.
3) Sam has asked you to advise him whether, assuming the facts as set forth above, Joe could raise any viable defenses or challenges to Sam's right to the remedy of specific performance. Explain your advice to Sam.
Victoria Jones was riding to work one day when the vehicle she was driving was struck by a truck driven by Ignatius Mason. Mason was employed by Ace Trucking, Inc. The collision occurred at the intersection of Route 1 and Route 88. Route 1 is the main roadway, and travel across Route 1 from Route 88 is controlled by a stop sign. Mason initially stopped at the stop sign before crossing Route 1, but then proceeded across Route 1 into Jones's path. Mason now claims that Jones was driving at a high rate of speed, and had Jones been driving no higher than the 55 mile per hour speed limit, Mason would have cleared the intersection before Jones arrived, and no collision would have occurred.
Jones sustained serious and permanent injuries in the collision and now has sued Mason and Ace Trucking claiming negligence. The defendants have raised, among other defenses, the defense of comparative negligence. You are the law clerk to a Judge of the Delaware Superior Court who has been assigned the case. The following evidentiary issues arise at trial and the Judge asks you to prepare a memo explaining how the Judge should rule on each issue and why.
At the scene of the collision Mason spoke to Willard Witness who said to Mason, "I saw the car driven by Jones and she was going like the speed of light." Mason responded, "I don't know what you saw but Jones looked like she was poking along at twenty miles per hour and I thought I had plenty of time." The investigating State Trooper overheard the conversation.
1) Mason wants to testify about what Witness said to him and Jones objects. On what grounds can Jones object? How should the Judge rule and why?
2) Jones calls the Trooper to testify about what he heard Mason say to Witness, and the defense objects. On what grounds can the defense object? How should the Judge rule and why?
3)The State Trooper is a road officer specially trained in accident reconstruction at the state police academy with three years' experience. Mason calls him to testify about Jones's speed and the cause of the collision. On what grounds can Jones object? How should the Judge rule and why?
Mason meets Barbara Preston in a bar before trial. Preston tells Mason that she knows Jones and rides with her to work regularly on Route 1. She knows Jones always drives between 10 to 20 miles per hour above the speed limit on Route 1.
4)Mason calls Preston to testify about Jones's driving habits. On what grounds can Jones object? How should the Judge rule and why?
Through discovery Jones learns that Mason was convicted in State Court two years earlier for the felony of filing false information in a mortgage application. Jones seeks to introduce evidence of the conviction to impeach Mason's credibility.
5)On what grounds can the defense object? How should the Judge rule and why?
Ace Trucking's managing officer, Sam Straight, arrived at the scene of the collision within twenty minutes. Jones had not yet been taken to the hospital, so Sam spoke with her while waiting for the ambulance. Sam told her how sorry he was she was hurt in the collision, and offered on behalf of the company to pay all her medical bills.
6)Jones seeks to introduce evidence of her conversation with Straight. On what grounds can the defense object? How should the Judge rule and why?
7) Mason tells his lawyer at a luncheon that Jones was going well below the speed limit. The conversation is overheard by Barbara Preston who is sitting nearby. Jones tries to introduce evidence of Mason's statement. On what grounds can the defense object? How should the Judge rule and why?
Barry Busybody reads about the Jones v. Mason and Ace Trucking case in the local newspaper, and remembers seeing Mason at a corner market five minutes before the collision happened. Busybody remembers that Mason appeared drunk to him. He thought Mason staggered, used slurred speech and had red eyes. Busybody made these observations through his rear-view mirror in a dark parking area as he watched Mason for the three seconds it took Busybody to light a cigarette. Busybody calls Jones and tells her what he saw.
8)Jones seeks to introduce Busybody's testimony. On what grounds can the defense object? How should the Judge rule and why?
Jones calls to the stand Alice Aire, a New Age Mind Reader. Aire has been trained to place her hands on people and feel their vibrations to determine if the person suffers from physical or emotional injuries. Aire has felt Jones's vibrations and determined that Jones suffers from severe emotional and physical injuries as a result of the collision.
9)Jones calls Aire to the stand to testify about the extent of Jones's injuries and damages. On what ground can the defense object? How should the Judge rule and why?
Paul Plaintiff is a real estate developer who in 1999 moved from California to the County of Blackacre within the State of Ames. In 2005 Paul started having disputes with certain legislators serving in the Ames General Assembly, the lawmaking body for the State of Ames, and with land use officials working for the County of Blackacre.
1.On January 10, 2005, Paul filed an application with Blackacre County seeking approval to construct a 500,000 square foot shopping mall on property in the northern portion of Blackacre County. On March 1, 2005, Ophelia Official, a County planning official, informed Paul that the County would not process his application to develop the shopping mall because his plans failed to set the buildings back at least 50 feet from the road. In talking to other developers, Paul learned that the Ophelia Official and the County had never previously required more than a 30-foot setback from other developers. Then, on April 1, 2005, the Ames General Assembly, at the suggestion of Rick Roughshod, an Ames senator representing Blackacre County, passed a law providing that "no person who has lived in Ames less than ten years, nor any company whose majority owner has lived in Ames less than ten years, may construct a new commercial complex of over 400,000 square feet."
Paul is convinced that Ophelia Official, the County, Rick Roughshod, and the other members of the General Assembly have acted solely out of personal hostility toward him and not for any legitimate purpose. He wants to sue the County, the State, and all of the individuals responsible for the denial of his application and for passing the new law.
1) As his attorney, Paul has asked you to:
(a) identify any federal Constitutional claims that Paul might file against each of Blackacre County, the State of Ames, and each of the individuals;
(b) identify the appropriate standard of review that would be applied to such claims; and
(c) discuss the likelihood that each claim would be successful. Also, address whether the Eleventh Amendment affords any immunity or defense to each of the County, the General Assembly, Ophelia, and Rick.
Explain your answers.
2.Paul is developing a private residential community called Paradise Gardens ("Gardens") in Blackacre County through a limited liability corporation called Gardens LLC. Gardens consists of homes, sidewalks, streets, private police and fire protection services and a shopping district. As the sole member of Gardens LLC, Paul chooses residents to serve on the Board of Officers (the "Board") of Gardens LLC, which functions like a town council.
As residents move into Gardens, Paul begins to receive complaints about missionaries from the Temple of Caesar Rodney ("Temple"), a religious organization whose members are handing out religious literature on street corners in Gardens. Paul suggests to the Board that they pass a regulation banning the distribution of handbills, pamphlets or other literature on the streets and sidewalks of Gardens.
2) Paul asks you, his attorney, two questions:
(a) whether the Board of Gardens LLC may adopt such a regulation for Gardens without running afoul of the United States Constitution; and
(b) whether Paul can adopt the same regulation at a new shopping mall outside Gardens in the State of Ames, without running afoul of the United States Constitution.
With respect to both questions, explain what federal constitutional issues are implicated by the proposed "no pamphleteering" regulation, and discuss the likely ruling if either Gardens LLC or the shopping mall adopt this policy and it is challenged in court.
Explain your answers.
3. The Temple leadership decides that Gardens is an ideal setting for their organization and begins to encourage members to buy houses in the community. After a short time members of the Temple own most of the housing units in Gardens. Soon Paul joins the Temple himself and appoints Temple members to the Board of Gardens LLC. The Board now votes to approve a number of new regulations consistent with the Temple's beliefs. They are:
a.It is forbidden for unmarried persons to engage in intimate sexual conduct within the boundaries of Gardens.
b.No person or business shall sell, purchase, or receive obscene reading or viewing materials within Gardens, nor shall any person transport obscene materials through Gardens. The possession of obscene material is also banned.
c.All youth who participate in recreational activities at Garden's athletic facilities are subject to random urinalysis, to be carried out at locker room facilities on the premises of Gardens' community park.
3) A group of Gardens residents who are not Temple members is preparing to challenge the regulations in court. Paul again seeks your advice and asks you to assume that Gardens is subject to federal constitutional law. For each of the regulations, identify the federal constitutional claims that the opponents of the Temple may raise in court and discuss the likelihood that each claim would be successful. Explain your answers.
Martha Merry ("Merry") owned a farm near a small town in Sussex County, Delaware. When her children moved out of the house, Merry wanted to hire Hannah Housekeeper ("Housekeeper"), who worked for one of Merry's friends. Housekeeper, however, was loyal to her current employer, and declined to accept Merry's offer. Merry knew that Housekeeper's employer was terminally ill but, to satisfy her immediate need for household help, Merry offered the job to Lucy Luckless ("Luckless"), a maid at a nearby motel.
At first, Luckless was reluctant to leave her job, which paid medical benefits, but Merry sent Luckless a letter promising to pay Luckless $250 per week, plus room and board, with the possibility of annual salary increases based on her work performance. Luckless wrote back to Merry and accepted the offer. Luckless then vacated her leased apartment, moved into Merry's home, and started her household duties. A few weeks later, Merry assured Luckless that she had the position for as long as she wanted it.
After Luckless had worked for Merry for eight months, Housekeeper called Merry, said she had reconsidered, and asked to be employed by Merry. Merry immediately hired Housekeeper, and fired Luckless on the spot.
1) Luckless is furious about her discharge and has threatened to sue Merry for damages for violating their agreement. Merry has come to your office and asked what possible causes of action Luckless might assert against Merry, and what defenses Merry might assert against Luckless' claims. Prepare a memorandum discussing these issues, and explain your answers.
Merry decided to open a gift shop in an old garage on her property. The garage housed a farm truck, which she offered to her neighbor George Greenacres ("Greenacres") in exchange for Greenacres' oral promise to play Scrabble with Merry once a week for the rest of her life. Greenacres took the truck, but after six months of playing Scrabble with Merry, he died in a tractor accident on his farm.
2) Merry wonders whether she is entitled to any damages from Greenacres' estate as a result of his alleged breach of contract. Discuss any possible causes of action Merry has against the estate, and any defenses the estate might raise to Merry's claims. Explain your answers.
To prepare the garage for use as a gift shop, Merry hired Steve Sands ("Sands"), President of Beach Builders, Inc. ("Builders"), to repair the roof, and install new siding. Sands knew at the time he submitted Builder's written proposal for the work that the old siding contained asbestos, but Merry assured Sands that she was hiring another company with special asbestos expertise to remove the old siding. As a result, the written contract between Merry and Builders did not contain any time specified for performance or completion of the project.
Builders started work and completed the repairs to the roof. The old siding, however, had not been removed by the time Builders was ready to install the new siding and, despite her assurances, Merry had not yet hired an asbestos removal specialist. Builders submitted a bill for the work completed to date, less the payment received upon delivery of the materials. Merry refused to pay the amount requested because it was contrary to the written terms of the contract that called for payment to be made one-third on delivery of materials and the balance upon completion. Builders then moved its crew and equipment to another job site, intending to return to work on Merry's garage once the asbestos siding had been removed. Merry sent Builders a letter stating that she considered Builders' removal from her job site to be a breach of contract, and that she would hire another contractor to complete the work. Another contractor eventually put new siding on the garage after Merry found a specialist to remove the asbestos siding.
3) Merry has asked you to research what causes of action Builders might have against Merry, and what defenses Merry might raise to Builders' claims. Explain your answers.
After several years of running a successful gift shop, Merry decided to retire and sell the business to her shop assistant, Doris Dealer ("Dealer"). The shop's inventory included valuable collectibles such as old Amish quilts, historic books, photographs and postcards about Delaware that Merry had purchased at auctions and yard sales. The purchase price of the business and its inventory was relatively low because the written contract included a provision that Dealer would pay Merry a monthly fee for five years to locate Delaware collectibles for the shop as long as Merry was alive and physically able to do so. One year later, Dealer realized that the business was losing money so she decided to close the gift shop.
4) Merry is still alive and physically able to locate Delaware collectibles, and wants her monthly payments. Discuss what causes of action Merry may have against Dealer, and what defenses Dealer might raise to Merry's claims. Explain your answers.
Mr. Driver ("Driver") recently purchased a new car from Automobile Corporation. The car contained a factory-installed, computerized navigation system which provided directions for the driver of the car. Once a particular destination is selected, the computer system worked in conjunction with a global positioning system to provide directions by means of a computerized voice. When approaching intersecting roadways, the computerized voice gave advance notice whether to proceed through the intersection or to turn left or right.
In his first week of using the car, Driver followed the directions in the owner's manual, and properly entered his desired destination into the computer. He proceeded toward that destination, and the computerized voice gave appropriate directions as various intersections approached. At one point, however, the navigation system directed Driver to "turn right in 100 yards." A computer chip in the computer system had malfunctioned and incorrectly gave a command for a turn that did not exist on the roadway.
In response to the navigation system's command, after traveling 100 yards, Driver turned right into an exit-only lane of a mall parking lot, which Driver mistook to be a public road. At the same time, Ms. Exit's ("Exit") vehicle was approaching the clearly marked lane for cars leaving the mall. Exit was forced to swerve and avoid a collision with Driver's oncoming vehicle. Exit swerved into a large sign for the mall, which collapsed upon both her vehicle and Driver's vehicle. Both vehicles were totally destroyed and both Driver and Exit suffered bodily injuries. All of the foregoing events occurred in Delaware.
1)Ignoring any claims that might exist based upon the Uniform Commercial Code, what tort claims, if any, can Driver assert against Automobile Corporation? What elements must he prove to recover? What defenses might Automobile Corporation assert? Explain your answers.
2)Ignoring any claims that might exist based upon the Uniform Commercial Code, what tort claims, if any, can Exit assert against Automobile Corporation? What elements must she prove to recover? What defenses might Automobile Corporation assert? Explain your answers.
3)Assume for purposes of this question only that as Exit approached the mall parking lot exit, she was speaking on her cellular telephone. Also assume that, in an action brought by Exit against Driver and Automobile Corporation, a jury returns a verdict in the amount of $100,000 and determines that Exit was twenty percent responsible for the accident, with the remainder of the responsibility attributable to Driver. What amount of the damages determined by the jury will Exit be legally entitled to recover? Explain your answer.
4)Assume for purposes of this question only that as Exit approached the exit, she was speaking on her cellular telephone. Also assume that in an action brought by Driver, a jury determines that Exit was twenty percent responsible for the accident, and that Automobile Corporation was twenty percent responsible for the accident, with the remainder of the responsibility attributable to Driver. What amount of his total damages will Driver be able to recover from all defendants? Explain your answer.
5)Assume for purposes of this question only that after the accident, Helper, a customer of the mall, observed the accident, and, with no thought of any possible monetary compensation, ran to assist Driver, who was bleeding profusely. Helper, who had no medical training of any kind, was negligent in addressing Driver's wounds, and Driver's injuries were greatly increased by the actions of Helper. Can Driver assert a claim against Helper? Explain your answer.
Sisters Sally and Jessica decided to go into the organic milk business after inheriting a small soybean farm from their uncle. Neither of them had any experience with farms or the dairy business, but Sally was a good "hands on" person and Jessica was skilled at office management. Accordingly, they agreed that Sally would supervise the conversion of the farm into a dairy farm and, after that, oversee its operation, while Jessica would handle contract negotiations and the financial side of the business.
Jessica successfully negotiated the purchase of the general building supplies needed to convert the farm and Sally proceeded with the actual construction work. However, as the time approached to arrange for the purchase of the cows, automatic milking equipment, and appropriate feed - areas requiring specialized knowledge- Sally grew nervous. Jessica calmed her fears by telling her that she knew someone who could probably take care of those matters for them.
Jessica then contacted Mr. King Dairy ("Dairy"), a highly-regarded supplier of dairy cows, milking equipment and feed. During her initial call to Dairy, Jessica explained that they were new to the dairy business and she insisted that Dairy's people would have to supply everything that they needed and also to install the automatic milking machines for them. Dairy told Jessica that his price structure did not include installation, especially given the small size of the project - Sally and Jessica were only purchasing sixty milking cows, thirty milking machines and six tons of feed. Eventually, however, Dairy agreed to perform the installation, but insisted that an additional charge for the installation of each milking machine would have to be added to the cost of the machines. Jessica agreed to that concept and they both agreed that they would negotiate the actual installation charge later.
Meanwhile, Sally was ahead of schedule on the farm construction work, and she told Jessica that it was time to schedule and coordinate the delivery of the cows, machines and feed. The next day, Jessica called Dairy and demanded that he deliver the cows, milking machines and feed that week. Dairy told her that he could not possibly meet her demand but he offered to deliver twenty cows, ten milking machines and two tons of feed the following Monday and to make similar deliveries on each of the two successive Mondays thereafter. He also agreed to install each group of milking machines during the week that they were delivered but he reminded Jessica that there would be an extra installation charge.
On the following Monday, Dairy's trucks arrived at the farm with twenty (20) cows, ten (10) milking machines and two (2) tons of feed. That same day, Dairy's workers began installing the first ten (10) milking machines. Jessica approached Dairy's foreman and asked him what the additional charge was going to be for the installation of the milking machines. The foreman responded that he did not know; he told her that she would have to talk to Dairy about that. Jessica told the foreman to tell Dairy that they would not pay more than 30% of the total milking machine costs for the installation. Later, as Jessica was leaving the farm, she spoke to Sally privately and told her to call Dairy and to get the installation price resolved.
On Tuesday, Sally called Dairy and spoke to him for the first time. She made it clear that she was not the "business end of their team," but she wanted to know the installation costs. Dairy told Sally that the installation charge would be 65% of the purchase price of each milking machine. Sally, who was very nervous, said "thank you" and hung up.
The next Monday, the second shipment of cows, milking machines and feed arrived at the farm. Prior to beginning the installation, Dairy's foreman sought out Sally and confirmed with Sally, at Dairy's instruction, that the same 65% installation charge per machine applied to this second shipment of milking machines. Sally agreed and Dairy's workers began installing the machines.
One week later, the third shipment of cows, milking machines and feed were delivered to the farm. Dairy also went to the farm that morning to confirm that everything had been delivered. Jessica saw Dairy in the barn, and asked Dairy if Sally and Dairy had talked about the installation charge. Dairy happily replied that they had discussed the matter and had agreed on an installation cost of 65% of the purchase price.
When Jessica recovered from her shock, she confronted Dairy and demanded to know why the installation charge exceeded the 30% figure she had discussed with Dairy's foreman. Dairy ignored her question and simply replied that he and Sally had made a deal and there was nothing more to discuss. Jessica told him that no dealer in the world charges rates anywhere near that high and that no buyer would pay such rates. Dairy, however, refused to discuss the matter and, as a result, Jessica told him that she was canceling the contract immediately.
Dairy then pulled his crew off the farm, leaving behind all of the cows, machines, and feed, although the last ten milking machines had not been installed. When Dairy returned to his office, he called his attorney, Leslie Lawyer ("Lawyer") and told him what happened. At Lawyer's advice, Dairy sent a letter to Sally and Jessica setting forth all of the terms of the agreement under which he had delivered the cows, machines, and feed, and included as one of the terms, the industry average price for cows, machines and feed, along with his usual profit markup for each, and the additional 65% per machine installation charge. Sally and Jessica did not respond.
1) Assume that you are Lawyer's associate. Prepare a memorandum discussing the following issues:
(a) whether Article 2 of the Uniform Commercial Code ("UCC") as adopted in Delaware applies to this transaction?
(b) assuming Article 2 of the UCC applies, whether Dairy has an enforceable contract with Sally and Jessica? and
(c) any defenses which you anticipate that Sally and Jessica might raise.
Explain your answers.
Board of Bar Examiners of the Supreme Court of Delaware
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