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CONTRACTS FINAL EXAMINATION Spring 2006 Santa Barbara/Ventura Colleges of Law Instructor: Craig Smith QUESTION 1 After four years of college and three and one-half years of law school, Moe had racked up quite a bit of debt in loans, $100,000 to be precise. Soon after graduating, Moe began to receive dunning letters from Scrooge Finance to whom the money was owed. Moe did not dispute the fact that he owed the full $100,000 but nevertheless, decided to negotiate with Scrooge to see if they would accept a lesser amount as full payment for the loans. Much to Moe’s surprise, he was successful. Scrooge agreed that if Moe paid them $50,000 within 30 days, they would forgive the balance of the remaining $50,000 that was owed. The very next day Moe sent off a cashier’s check to Scrooge for the $50,000 together with a letter that set forth the understanding that Scrooge was accepting the $50,000 as full payment and would not pursue him for the balance that was owed. He asked that Stooge sign the letter and return it to him. Scrooge upon receiving the check promptly cashed it, signed Moe’s letter and sent it back as requested. Three months later in exchange for $15,000, Scrooge Finance transferred to Acme Collections the right to the balance of the $50,000 that Moe had originally owed. They did not mention to Acme the fact that they had entered into the prior agreement with Moe about forgiving the balance owed. Acme notified Moe that they had taken over efforts to collect the $50,000 that had not been paid and that Moe should promptly pay the money to them or they would pursue all available legal remedies against Moe. Moe doesn’t pay and predictably Acme sues him. Who should the court rule in favor of and why? Discuss fully.
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QUESTION 2 Bert was a builder of custom made bicycles and was very particular about the materials that he used. In order to insure a reliable supply of the aluminum tubing he used to fabricate the bicycle frames he builds he entered into and signed a formal written contract with Sesame Street Steel and Tubing that provided: 1. Bert would fulfill all of his needs in tubing from Sesame Street and Sesame Street alone. 2. All of the tubing Sesame Street would supply to Bert would be of the “Easton” brand. 3. The price of the tubing would be the wholesale price to Sesame Street on the day it received Bert’s order plus a 15% markup. 4. The written contract could only be changed or modified by another written agreement signed by both parties. Bert placed three orders without a problem. When he placed his fourth order he got a call from the sales manager at Sesame Street, who told him that due to a strike at the Easton plant they were unable to obtain Easton brand tubing, but they could, at the same price, sell him Reynolds brand tubing. Although Reynolds tubing was of the same quality as Easton tubing, Bert had an emotional attachment to Easton. But because he had many bicycle orders to fulfill he reluctantly agreed over the phone to
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This note was uploaded on 11/05/2009 for the course MATH 110 taught by Professor Washingtonm during the Fall '08 term at Foothill College.

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