Sample Contracts Exam

[DirkDiggler]

My contracts professor released this sample exam. Please post regarding approaches you'd take or issues you'd discuss.

2-Hour Practice Test

As the world's largest manufacturer of military aircraft, Locheads (L), a perennially fabulously profitable corporation, has on its payroll many test pilots who fly L's planes in various experimental stages. To compensate them for their scarce skills and the extremely hazardous nature of their work - a considerable proportion of pilots are maimed or killed every year - the company pays the pilots annual salaries generally in the neighborhood of a million dollars.

Romeo Sierra (S), one of L's top pilots, test-flew its experimental X-ZZZ, which was on course to becoming the biggest seller in military aviation history. On a test flight, the cockpit burst into flames. Although S could have saved himself by activating the ejection seat, the plane might have crashed into a heavily populated area. With unimpaired presence of mind, he recalled that L's policy, as incorporated into his contract of employment, required him to use his best efforts to avoid collateral damage that might result in L's having to satisfy costly tort claims. He therefore stayed the course, battling the flames while landing the plane back at L's airbase. Because the fire destroyed the landing wheels, however, he crashed. Blind and paralyzed for life, he will never be able to do physical work again.

While undergoing treatment at a regional burn center, S received a visit from L's president, who assured him that L would provide for S and his family financially. A few days later the president wrote S a letter stating:

"You've been our star pilot for more than 20 years. Because you've shown loyalty far above and beyond the call of duty, we'll never forget what you've done for us. Enclosed is a check for $30,000. You'll be getting a check like this every month so long as we remain profitable."

L kept sending the checks like clockwork for ten years. During this time, S was occasionally wheeled into L headquarters, where, with the president's encouragement, he passed on his lore and grit to other pilots. Sniffing the cash value of his growing lionization in the press, he began writing his autobiography with a ghost writer. Although he intended the book as a piece of enthusiastic advocacy for the military-industrial complex, his agent convinced him that he had in fact been a dupe. In 2008, he published The Right Stiff. Unbeknownst to him, the publisher, in order to hype the book, announced on the back cover that it was founding a peace institute named after S.

When L's president heard about the book, she immediately told S that he was a traitor, whose allegations might very well cause L serious financial injury. Moreover, detectives, whom L had promptly hired to investigate S, reported that several people had reported that S had used marijuana.

If L terminates the payments and S sues for breach of contract, who will prevail? Explain your answer.

[mtbrider59]

Try Webb v. McGowin Alabama 1935 for some guidance, the beginning of this fact pattern is similar to Webb.

[lyre]

I think L would prevail because there was no consideration for L's promise to S, it was based solely on past performance.

[Eugene Young]

S probably has a promissory estoppel claim if you find there's no K. L would raise a SOF claim as a defense if there's found to be a K b/c K can't be performed in a year. S could come back with an SOF exception b/c L undertook partial performance when they made timely payments for 10 years with the correct amount. S would also point to the letter as irrevocably referrable evidence of their agreement. Obviously, you need to analyze whether there was a K first before you start addressing the above. You also need to raise the enforceable agreement issue before you address the P/E  and SOF claims. I would approach it like this:

Is there a K b/w S&L?
A. Offer (IRAC)
B. Acceptance (IRAC)
C. Consideration (IRAC)

If you conclude there's no K, move to P/E, then damages if P/E found.
If you conclude there is a K, move to damages.
I would address both possibilities.

Then I would raise L's defenses.
SOF (IRAC)
Then I would hit a C/A for S with what I mentioned above.
Go through an enforceble agreement analysis also.

There may be other stuff, but that's off the top of my head. Also, I'm a 1L who's yet to take an exam, so take everything I just said with a grain of salt.

[Jets]

S probably has a promissory estoppel claim if you find there's no K. L would raise a SOF claim as a defense if there's found to be a K b/c K can't be performed in a year. S could come back with an SOF exception b/c L undertook partial performance when they made timely payments for 10 years with the correct amount. S would also point to the letter as irrevocably referrable evidence of their agreement. Obviously, you need to analyze whether there was a K first before you start addressing the above. You also need to raise the enforceable agreement issue before you address the P/E  and SOF claims. I would approach it like this:

Is there a K b/w S&L?
A. Offer (IRAC)
B. Acceptance (IRAC)
C. Consideration (IRAC)

If you conclude there's no K, move to P/E, then damages if P/E found.
If you conclude there is a K, move to damages.
I would address both possibilities.

Then I would raise L's defenses.
SOF (IRAC)
Then I would hit a C/A for S with what I mentioned above.
Go through an enforceble agreement analysis also.

There may be other stuff, but that's off the top of my head. Also, I'm a 1L who's yet to take an exam, so take everything I just said with a grain of salt.

This is actually a rather good approach. Just to add my two cents in (and probably just repeat what EY already said:

Use headings as follows:

I. Contract Formation--no matter what, proceed to #2
II. Bases for Enforcement--no matter what, proceed to #3
III. Defenses
IV. Remedies

Prepare to say a lot of "assuming the Court holds," etc. The important point is you want to say EVERYTHING you can. Literally everything. No one will really tell you this, but a lot of law school success boils down to typing speed.

ETA: Another important thing to note re: exam taking is that there's really not all that much difference between a good exam and a great exam. That means little things--using case citations, headings and generally good writing--make a big difference. The importance of organization, in particular, cannot be understated. You need to break everything down into headings and subheadings and treat this like you're explaining it to a (smart) three year old.

[drrjohnson]

Essentially you can argue either side:

To argue that K exists and is enforceable: then look to Section 87 of the Restatement. There might be an option contract because of the written and signed letter. If it merely purports consideration in exchange for whatever, then the consideration does not even have to exist (although it is not helpful that this it states past consideration - but you could argue that this is also a "future action" has he is able to bring about publicity for L).

To argue against the existence of K, which is probably the stronger argument, there was no detrimental reliance whatsoever to the offer = therefore no bargain and no K. In other words, the guy did not rely on the pension as a means to retire since he would have had to retire due to his injuries anyway. He is giving up nothing! So, I would have to disagree with the above arguments because promissory estoppel (detrimental reliance) will be defeated.

Your welcome.

[jgsmith]

This is easy! There is no contract here, there is no consideration. This is a gratuitous promise. The only answer to this question is maybe there is an estoppel claim, if the guy detrimentally relied on his promise.

[jgsmith]

Essentially you can argue either side:

To argue that K exists and is enforceable: then look to Section 87 of the Restatement. There might be an option contract because of the written and signed letter. If it merely purports consideration in exchange for whatever, then the consideration does not even have to exist (although it is not helpful that this it states past consideration - but you could argue that this is also a "future action" has he is able to bring about publicity for L).

To argue against the existence of K, which is probably the stronger argument, there was no detrimental reliance whatsoever to the offer = therefore no bargain and no K. In other words, the guy did not rely on the pension as a means to retire since he would have had to retire due to his injuries anyway. He is giving up nothing! So, I would have to disagree with the above arguments because promissory estoppel (detrimental reliance) will be defeated.

Your welcome.

I disagree on the detrimental reliance. There is a good argument that the guy did not seek employment over the next 10 years because of the Co.'s promise to send him checks. This is detremental reliance all day long! I am relying upon your promise to send me checks, so I am not going to seek another job or means of income.

[armyjag]

I'm studying for Civ Pro final, so my head's somewhere else, but isn't the prior performance exception to the SOF only for goods(ucc 2-201)? 

Funny, this sort of fact pattern was our practice midterm.

[Slumdog Lovebutton]

1. UCC or Common law?
Common law - UCC only deals with goods, this is discussing a service relationship.  Although the damaged plane was a good, it was not the basis of the transaction.  Predominant purpose test if you want, but don't spend a whole lot of time on this.

2. Consideration
Performance (saving the plane) was not bargained for, since it took place before the offer.  L will argue that their offer was a gratuity without consideration, and thus cannot be enforced.  S could try to argue that it came with an implied duty to keep quit or say good things about the company, but this is probably not sufficiently clear to qualify as a performance that is bargained for.  The hypo says that S was "wheeled in" to headquarters to talk up the job - who did this?  If it was L, there might be an argument that the money was given in exchange for his continued loyalty.

3. Promissory Estoppel
I wouldn't spend a lot of time on this...just get it out there to show it's no good.  PE requires a promise to induce an action or forebearance.  What did the promise to pay 30k/year induce here?  S certainly wasn't going to get another job in his disabled condition.

4. Material benefit rule
This is probably S's best chance at enforcement of the agreement.  § 86(1) of the restatement defines MB as: a promise made in recognition of a benefit previously received is binding to the extent necessary to prevent injustice.  To get MB, you have to show that the $$ was not a gift, which might be difficult, but I'd focus on the fact that it was awarded in recognition of past service and the degree of sacrifice.  Distinguish Mills v. Wyman, which was about a good samaritan who did not expect compensation and suffered no real detriment.  Webb v. McGowin is your golden ticket here.  MB was enforced on a similar arrangement - employment context, person was permanently disabled while acting like a responsible employee for the company's interest, and there was considerable performance of the contract.  Big differences are that the guy in Webb did not repudiate the payments, whereas they did do that here.

5. Statute of Frauds
I agree that there may be an issue here.  We don't know what kind of writings exist.  I would venture that one of the signed $30k checks might even be sufficient if there was a note in the "memo" line at any point identifying the subject matter of the contract (131(a)).

6. Who breached?
If there was a contract based on S's continued loyalty, then S certainly may have breached the agreement by publishing an incendiary book.  Sec. 241(a) asks the extent to which the injured party is denied of a benefit he reasonably expected.  Did L reasonably expect S's lifelong loyalty?  The initial offer in the hospital didn't say anything about that, and since there are seemingly no writings with terms on them, S would be able to introduce that conversation under the parol evidence rule to show the that writing a negative book was not a breach of contract.  S could have a claim that L violated their duty to perform their contract in good faith by spreading around the info about the marijuana use.

I don't know if i'd spend time discussing remedy here since it only asks who would prevail.  Given the number of uncertainties at several key analytical points, I'm going with L.

What's the relevance of the peace institute?  There's gotta be a reason that's there...