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1. This examination is a closed book examination. You may have with you no materials other than your copy of CONSUMER:TRANSACTIONS: SELECTED STATUTES AND REGULATIONS
2. The examination consists of two questions, weighted 30% and 70%. I would suggest you allocate 2/3 of your time to the 70% question and 1/3 to the 30% question.
3. You will have three hours to complete the entire examination. Do not begin work until you are instructed to do so. 4. Each question imposes a limit on the length of your answer. These limits must be adhered to. That portion of any answer in excess of the limit will be read for the purpose of determining if it contains anything which will result in a reduction of the grade earned but no credit will be given for that portion of the answer in excess of the page limit.
5. Your answers should be written in blue or black ink only.
6. If you need to leave the room during the examination due to illness or incipient incontinence you may do so. Otherwise you should remain in the room and in your seat. If you leave the room you must leave all of your examination materials on the table in front of your seat
7. Use a separate bluebook for each question. Place your exam number on each bluebook you use. Write only on one side of a page. You must not write beyond the left margin line. You must not write in the top margin.
8. I will not be available for questions during the examination. If you believe that there are ambiguities, indicate, in your answer, the nature of the ambiguity and the way in which its resolution either way would affect your analysis of the problem.
9. Begin the examination only when instructed to do so. When time is up, stop immediately even if no one tells you to do so, and even if you are in the middle of a sentence. Failure to stop when time is up may result, in my discretion, in a loss of up to four full letter grades for this course.
10. When you finish the examination place your bluebooks in the box at the front of the room.
11. GRADE POSTING: If you do not wish to have your grade in this course posted (by exam number), please place an X after your exam number at every place it appears on your bluebooks.
12. Enjoy the examination and have a good holiday!
70% 6 Pages
You represent the Church of the Nativity of Our Lord. The following facts describe the situation your client faced after contracting for the installation of a new roof.
Montedison, S.p.A., a large Italian chemical corporation, developed and produced chemical compounds--Flagon SF and Flagon C (PVC pellets and powder)--which were transformed by Flag, S.p.A., under Montedison's direction and supervision, into membranes for use as roofing material. Montedison at all times maintained control of the chemical formulas. From the development of the formula through completion of the finished membrane, Montedison employees maintained quality control.
Montedison U.S.A., a wholly owned subsidiary of Montedison, S.p.A., was involved in a joint venture with Montedison, S.p.A., to produce, develop; market and distribute Flagon roofing materials. Montedison U.S.A. coordinated all phases of marketing and distribution of the materials in the United States, including the use of the Montedison name.
Flag, S.p.A., an Italian corporation formed by former Montedison employees, is an agent of Montedison.
The roofing materials used on Nativity's roofs were shipped through WatPro, Inc., the sole distributor of Flagon roofing materials in the United States and the exclusive agent of Flag. In a letter from Montedison to Flag prepared at WatPro's request, Montedison detailed its role in the production of the Flagon materials and guaranteed the quality of the final product. WatPro relied on this letter in deciding to become the exclusive agent for Flag in the United States. The roofing materials were supplied by MacArthur Company and installed on Nativity's buildings by Ampco, an approved Flagon roofing applicator and local roofing contractor who.
In 1984, Nativity retained the architectural firm of Voight & Fourre to inspect parish-owned buildings and to identity and prioritize repair, rehabilitation, and maintenance needs. The architect recommended the reroofing of certain sections of the roofs of the convent and school as a high priority and later participated with the parish priest and finance council in the selection of materials and contractors for the job. Nativity selected the Flagon materials because of representations made in the product literature that the Flagon materials would provide a watertight roof and because a ten-year guarantee was available.
About 60% of the work was to be completed in 1985, the remaining 40% in 1987. Two consecutive five-year guarantees were issued for the first work completed. In these documents Flag guaranteed that it would "maintain the Flagon roof * * * in a watertight condition at its own expense for a period of five years from this date provided that the owner gives WatPro, Inc., our exclusive agent, written notice of any leaks within 30 days from discovery of such leaks." The first guarantee covered the period September 4, 1985, to September 3, 1990, and was apparently provided at no additional cost. Nativity paid separately for the second guarantee which covered the period September 4, 1990, to September 3, 1995. For the work completed in 1987 Nativity purchased two more five-year guarantees containing identical promises by Flag, the first covering the period July 14, 1987, to July 13, 1992, and the second covering the period July 14, 1992, to July 13, 1997. All of the guarantees contain the names of Flag, WatPro, and Montedison. The guarantees, drafted and approved by both Flag and Montedison, identified WatPro as the exclusive agent of Flag.
In September 1985, a leak was discovered in the roof of the convent. This leak was satisfactorily repaired under the guarantee though the source of the problem was not discovered. In 1987, new leaks were discovered. It was later determined that the Flagon material was the cause of the leaks. It appears that the Flagon roofing materials were defective and that the defect was caused by plasticizer migration. Plasticizer is the chemical that makes the PVC flexible. The plasticizer migration, which occurs when an improper chemical formula is used, makes the Flagon brittle and susceptible to tears and shrinkage.
In 1989, WatPro was given written notice of the problem. WatPro promised repairs and extended the guarantees, but the Flagon materials continued to deteriorate. In November 1991, WatPro informed Nativity that Flag was refusing to honor its guarantees. In the summer of 1992, after consulting with experts, Nativity removed and replaced the roofs at its own expense. Nativity sustained substantial interior damage to the walls and ceilings of the convent and school.
Assume that the jurisdiction in which you practice and in which all relevant events took place is a State in the United States and has in force, in addition to the UCC, the following Consumer Fraud Act.
CHAPTER 325F CONSUMER PROTECTION; PRODUCTS AND SALES PREVENTION OF CONSUMER FRAUD ACT Stat. 325F.68 - 70 (1992)
Subdivision 1. The following words and terms where used in sections 325F.68 to 325F.70 shall have the meanings ascribed to them in this section.
Subd. 2. "Merchandise" means any objects, wares, goods, commodities, intangibles, real estate, or services.
Subd. 3. "Person" means any natural person or a legal representative, partnership, corporation (domestic and foreign), company, trust, business entity, or association, and any agent, employee, salesperson, partner, officer, director, member, stockholder, associate, trustee, or cestui que trust thereof.
Subd. 4. "Sale" means any sale, offer for sale, or attempt to sell any merchandise for any consideration.
Subd. 5. "Going out of business sale" means any sale advertised or held out to the public as a sale in anticipation of the imminent termination of a business, including any sale advertised or held out to the public as a "going out of business sale," a "close out sale," a "loss of lease sale," a "must vacate sale," a "bankruptcy sale," or in any similar terms.
325F.69 Unlawful practices
Subdivision 1. Fraud, misrepresentation, deceptive practices. The act, use, or employment by any person of any fraud, false pretense, false promise, misrepresentation, misleading statement or deceptive practice, with the intent that others rely thereon in connection with the sale of any merchandise, whether or not any person has in fact been misled, deceived, or damaged thereby, is enjoinable as provided herein.
Subd. 2. Referral and chain referral selling prohibited. (1) With respect to any sale or lease the seller or lessor may not give or offer a rebate or discount or otherwise pay or offer to pay value to the buyer or lessee as an inducement for a sale or lease in consideration of the buyer's or lessee's giving to the seller or lessor the names of prospective purchasers or lessees, or otherwise aiding the seller or lessor in making a sale or lease to another person, if the earning of the rebate, discount or other value is contingent upon the occurrence of an event subsequent to the time the buyer or lessee agrees to buy or lease.
(2) (a) With respect to any sale or lease, it shall be illegal for any seller or lessor to operate or attempt to operate any plans or operations for the disposal or distribution of property or franchise or both whereby a participant gives or agrees to give a valuable consideration for the chance to receive something of value for inducing one or more additional persons to give a valuable consideration in order to participate in the plan or operation, or for the chance to receive something of value when a person induced by the participant induces a new participant to give such valuable consideration including such plans known as chain referrals, pyramid sales, or multilevel sales distributorships.
(b) The phrase "something of value" as used in paragraph (a) above, does not mean or include payment based upon sales made to persons who are not purchasing in order to participate in the prohibited plan or operation.
(3) If a buyer or lessee is induced by a violation of this subdivision to enter into a sale or lease, the agreement is unenforceable and the buyer or lessee has the option to rescind the agreement with the seller or lessor and, upon tendering the property received, or what remains of it, obtain full or in the case of remains, a proportional restitution of all sums paid, or retain the goods delivered and the benefit of any services performed without any further obligation to pay for them.
(4) With respect to a sale or lease in violation of this section an assignee of the rights of the seller or lessor is subject to all claims and defenses of the buyer or lessee against the seller or lessor arising out of the sale or lease notwithstanding an agreement to the contrary, but the assignee's liability under this section may not exceed the amount owing to the assignee at the time the claim or defense is asserted against the assignee. Rights of the buyer or lessee under this section can only be asserted as a matter of defense to or setoff against a claim by the assignee.
(5) In a sale or lease in violation of this section, the seller or lessor may not take a negotiable instrument other than a check as evidence of the obligation of the buyer or lessee. A holder is not in good faith if the holder takes a negotiable instrument with notice that it is issued in violation of this section.
(6) Any person who violates any provision of this subdivision shall be guilty of a gross misdemeanor.
Subd. 3. Advertising media excluded. Sections 325F.68 to 325F.70 shall apply to actions of the owner, publisher, agent or employee of newspapers, magazines, other printed matter or radio or television stations or other advertising media used for the publication or dissemination of an advertisement, only if the owner, publisher, agent, or employee has either knowledge of the false, misleading or deceptive character of the advertisement or a financial interest in the sale or distribution of the advertised merchandise.
Subd. 4. Solicitation of money for merchandise not ordered or services not performed. The act, use, or employment by any person of any solicitation for payment of money by another by any statement or invoice, or any writing that could reasonably be interpreted as a statement or invoice, for merchandise not yet ordered or for services not yet performed and not yet ordered, whether or not any person has in fact been misled, deceived, or damaged thereby, is enjoinable as provided herein.
Subd. 5. Prohibited going out of business sales. It is illegal for any person to represent falsely that a sale is a "going out of business sale." Any representation that a sale is a "going out of business sale" is presumed to be false and illegal under this subdivision, if at that location or within a relevant market area:
(1) the sale has been represented to be a "going out of business sale" for a period of more than 120 days;
(2) the business has increased its inventory for the sale by ordering or purchasing an unusual amount of merchandise during the sale or during the 90 days before the sale began;
(3) the business, or any of its officers or directors, has advertised any other sale as a "going out of business sale" during the 120 days before this sale began; or
(4) the sale has continued after a date on which the business has represented, expressly or by reasonable implication, that the business would terminate.
Any presumption arising under clauses (1) to (4) may be rebutted if the business shows, by clear and convincing evidence, that the sale was in fact conducted in anticipation of the imminent termination of the business. This subdivision does not apply to a sale in any statutory or home rule charter city that by ordinance requires the licensing of persons conducting a "going out of business sale," nor to public officers acting in the course of their official duties.
Subdivision 1. Injunction. The attorney general or any county attorney may institute a civil action in the name of the state in the district court for an injunction prohibiting any violation of sections 325F.68 to 325F.70. The court, upon proper proof that defendant has engaged in a practice made enjoinable by section 325F.69, may enjoin the future commission of such practice. It shall be no defense to such an action that the state may have adequate remedies at law.
Subd. 2. Service of process. Service of process shall be as in any other civil suit, except that where a defendant in such action is a natural person or firm residing outside the state, or is a foreign corporation, service of process may also be made by personal service outside the state, or in the manner provided by section 303.13, subdivision 1(3), or in such manner as the court may direct. Process is valid if it satisfies the requirements of due process of law, whether or not defendant is doing business in Minnesota regularly or habitually.
What rights does your client have against Watpro, Flag, MacArthur and Montedison U.S.A.? What problems do you expect to encounter in establishing these rights? Be certain to state the reasons supporting the positions you take.
II 30% 4 Pages
Marjorie purchased consumer goods on credit from Wise on four separate occasions between February 9, 1989 and October 22, 1989. On February 9, 1989 she purchased a carpet and two lamps with a cash price of $250.00 and a finance charge of $28.61. Sometime after February 9, 1989, she also purchased a vacuum cleaner that was added to the February 9, 1989 contract. A separate agreement with cash price and financing charge does not appear to exist; the addition of the vacuum cleaner is only apparent because of reference to the vacuum cleaner as part of the "old contract" in the April 2nd contract.
On April 2, 1989, Marjorie purchased four chairs with a cash price of $300.00 and an added finance charge of $113.90.
On October 22, 1989, she purchased a sofa and two tables. The cash price was $729.95 and a finance charge of $277.78 was added.
Each contract refinanced the previous contract. For example, the April 2 contract totaled $634.00 plus the finance charge. The $634.00 was composed of the $300.00 cash price for the chairs, plus $11.05 tax, plus a $322.95 balance on the April 2 contract. The credit agreement recites "the old contract" and is unclear whether the $322.95 balance of "the old contract" includes the old finance charge, nor is it clear whether the new finance charge is computed on a total figure which includes the old finance charge. Furthermore, the newly computed finance charge is added in twice in arriving at the deferred payment price of the new contract. The October 22, 1989 agreement also appears to refinance the balance due and owing, including the finance charge, on the April 2 contract.
The April 2 and October 22 agreements seem to attempt to retain a security interest in all of the goods purchased by respondent.
On March 4, 1991 Marjorie defaulted on the last contract with an outstanding balance of $811.23 due. Marjorie made payments totaling $947.55 prior to default.
You represent Marjorie. Please draft a memorandum to your files outlining her rights. Include a discussion of those points you expect to be raise against Marjorie and why.
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