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Messages - ellewood$

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Studying and Exam Taking / Contracts...kill me now
« on: April 22, 2012, 10:32:30 PM »
Working on this practice exam.  Granted I still have 10 days before the final, but I am completely lost.  Any help at all would be greatly appreciated.

Melanie Safka once was a highly popular singer-songwriter. It has, however, been several decades
since she has had a new hit song. Nonetheless, she has never entirely resigned herself to the “oldies”
concert circuit, and continues to write and record new material, hoping that the lightning will
strike again. In the fall of 2009, she was approached by Muzak Town about doing a recording for
them to distribute. They represented that they had developed a new distribution technique that
would guarantee her wide exposure with a possibility of large sales if her songs were well received
by the audience. Muzak Town’s representative explained to Melanie that their experience with other
performers allowed them to predict that she should sell at least 100,000 compact disks per year,
and could probably sell many more.

Melanie wanted to know more about what Muzak Town was planning to do with her music before
she signed. She learned that Muzak Town had a contract to provide music for a popular chain of
coffee shops named Galactica. Muzak Town not only provided music feeds to all Galactica shops,
but also displayed disks of the music being played in the coffee shops. Customers could purchase
the disks if they chose to do so. Some recordings thereby sold (nationally) 1,000,000 or more copies,
while other recordings sold few or none, with a wide range in between.

When Muzak Town first approached Galactica, their proposal was a novel idea, not having been
tried before. The decline of sales of recorded music had left many recording artists and recording
companies in dire economic straights, although some artists found that they could make substantial
sums by charging outrageous prices for live tours. For most artists and recording companies, however, the outlook was very bleak. Muzak Town calculate that it could manufacture the necessary
disks and sell them well below the traditional selling price for compact disks and still make a handsome profit, particularly relying on the “captive audience” nature of its new distribution channel to generate demand for the disks. It had quickly recruited several dozen artists before talking with
Melanie and had begun its operations in the Galactica shops about fourteen months before the first
discussions with Melanie. Sales of disks by other artists in fact were slower than Muzak Town had
expected, so Muzak Town, which had first set its prices at $9.95 per disk, and late cut them to
$8.95 per disk, and later still to $7.95 per disk, but only a few disks sold well. None of this was disclosed to Melanie; neither did Muzak Town disclose its plan to begin selling disks at different prices keyed to the popularity of the artists.

Melanie decided to sign with Muzik Town. Melanie agreed and signed Muzak Town’s standard
form contract and began to write and record songs for Muzak Town to distribute. Melanie invested
about $100,000 of her own money in creating masters that she delivered at frequent intervals to
Muzak Town. The key terms of the contract between Melanie and Muzak Town were:

1. The party of the first part to this contract is Muzak Town, Inc.

2. The party of the second part is Melanie Safka

3. The party of the second part will not distribute or sell songs through any other means for
a period of four (4) years. The party of the first part will have exclusive distribution and
sales rights to all songs recorded by the party of the second part for one (1) year after the
song is made available to party of the first part. After the aforesaid period of one (1) year, the party of the second part will be free to distribute a song covered by this agreement
through any means the party of the second part shall choose.

4. The party of the first part will pay to the party of the second part a fee of $2,000 per
month for the duration of this contract, payable on the first of every month. The party of
the first part additionally will pay the party of the second part a royalty of 10% of the
sales price for each compact disk of one her songs sold by party of the first part through
any outlet. Royalties shall be paid to the party of the second part on the 15th day after the
end of each quarter of the calendar year.

5. The party of the second part warrants to the party of the first part that all songs made
available by the party of the second part shall be original compositions free of any copyright
claim or other claim by any other person. Should any other person make a copyright
or other claim against the use of any songs provided by the party of the second part,
the party of the second part shall hold the party of the first part free of any damages that
might result from such claim.

6. This contract comprises the entire agreement of the parties, and other representation or
agreement between the parties is hereby declared null and void.

7. In the event that the party of the second part shall violate any term of this agreement, the
party of the second part shall pay, as liquidate damages and not as a penalty, the sum of
$100,000 per day for each violation for so long as it shall continue.

8. This contract shall enter into effect on January 1, 2010. 

The parties began to perform their responsibilities under the contract, with Muzak Town paying the promised fee of $2,000 per month on a timely basis, and remitting the royalties due on April 15.

Unfortunately, sales of Melanie’s songs were few, only about 400 disks having been sold in the
first quarter. Sales by other performers were also few. Muzak Town, while negotiating its contract
with Galactica, had presented projections of sales that demonstrated an income stream in excess of
$1,000,000 per month nationally to Galactica. Galactica therefore made space in its coffee shops
for displays of the disks on sale, eliminating from one to three tables in each shop, depending on its
size. This meant an estimated loss of $500,000 per month in its national income from beverage
sales. The actual income generated nationally by the disk sales for Galactica was around $60,000
per month. Disappointed with the outcome of its contract with Muzak Town, Galactica, cancelled
its contract with Muzak Town on April 20, 2010. Muzak Town then notified Melanie and other performers that it was cancelling its contract with them, and would remit to them any remaining royalties still due for sales.

The contract between Muzak Town, Inc. and Galactica, Inc. reads, in relevant part:

1. Muzak Town, Inc. shall have the exclusive right to provide recorded music for playing in
Galactica shops. Muzak Town, Inc. shall also make available to Galactica shops compact
disks of such recorded music for sale in Galactica shops. Muzak Town shall have the exclusive
right to select the music to be played and displayed and shall also have the exclusive
right to determine the price at which the music disks shall be sold.

2. Galactica, Inc. shall provide suitable sound systems in their shops for the playing of the
recorded music provided by Muzak Town, Inc., and also shall provide suitable spaces in
the shops for the display and sale of compact disks of the music provided by Muzak
Town, Inc. Galactica, Inc. also will not allow any other person to display or sell music
disks in any of its shops.

3. Galactica, Inc. shall pay to Muzak Town, Inc., the sum of $75,000 per shop per month,
payable on the 10th day of each month for the recorded music played in each shop. Galactica,
Inc. shall also account to Muzak Town, Inc. for the proceeds of any and all sales of
compact disks provided by Muzak Town, Inc., less a fee of 20% of the sales price of any
disk sold by Muzak Town in a Galactica shop. The fee shall be retained by Galactica, Inc.
as compensation for its services in displaying and selling the music disks.

4. This contract shall enter into force on September 1, 2008, and shall continue for the period
of five years from that date.

5. Muzak Town, Inc. warrants to Galactica, Inc. that all record music and disks provided to
Galactica, Inc. shall be free of any copyright claim or other claim by any other person.
Should any other person make a copyright or other claim against the use of any music under
this contract, Muzak Town, Inc. shall hold Galactica, Inc. free of any damages that
might result from such claim.

6. This contract comprises the entire agreement of the parties, and other representation or
agreement between the parties is hereby declared null and void.

I
What rights, if any, does Melanie Safka have against any party? If she has rights, what remedy
would she be entitled to, if any? Remember to consider any possible defenses any party might have
as well as the legal bases for any claims on behalf of Melanie.

II
What rights, if any, does Muzak Town have against any party? If it has rights, what remedy would
it be entitled to, if any? Remember to consider any possible defenses any party might have as well
as the legal bases for any claims on behalf of Muzak Town.

III
What rights, if any, does Galactica have against any party? If it has rights, what remedy would it be
entitled to, if any? Remember to consider any possble defenses any party might have as well as the
legal bases for any claims on behalf of Galactica.

xo - Overwhelmed 1L trying to study for Crim Pro exam Friday, Contracts shortly thereafter.   This hypo makes me want to die, and my outline can't teach me to issue spot. FML.  Thanks.

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