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Question 1. Question : (TCO A, C) Major Media Station, which broadcasts TV and radio programs around the country, contracts with shock jock Don Marco, who hosts the station’s most successful morning drive radio program in the country: Mark My Words. The program consists of traffic and sports updates, interviews with sports figures and celebrities, and Mark’s Words, which are in the nature of rants and opinions on whatever topic of interest the host decides to focus on, including news articles and happenings around the country and locally. Audience participation is encouraged by way of phone calls to the station during the program.
On more than one occasion, Mark My Words has made national news because of controversial statements made by the host regarding people’s looks, religion, lack of intelligence, actions, race, etc. In fact, the contract between Major Media Station and Don Marco specifies that Mark My Words is to be controversial. The greater the controversy, the higher the audience ratings and the higher Marco’s compensation. However, the term controversial is not defined, although the station manager who broadcasts Mark My Words is responsible for activating a delay button in the event Marco uses a word or makes comments that would cause the FCC to fine the station.
One morning, Mark My Words featured a rant full of derogatory sexual and racial comments about the members of a visiting ball team that succeeded in beating the local favored team at the championship game. As soon as the program aired, Major Media Station was bombarded with complaints. Following letters to sponsors and pressure from respected public figures, three large sponsors cancelled their advertising contracts. This happened in spite of the host’s public apology in which he claimed to have just made another stupid comment. In spite of fan protests, the station terminated Don Marco’s five-year $20 million contract. The contract was in its second year.
Marco is now suing Major Media Station for breach of contract, and the insulted players are also suing the station for defamation and intentional infliction of emotional distress.
i. What arguments do you think Marco will make in his suit against Major Media Station?
ii. In order to support his claim against the station, Marco wishes to introduce parol evidence regarding the term controversial. What would be the purpose of introducing this evidence? What arguments will Major Media Station make in opposition to the introduction of this evidence? Will Marco be successful in this regard, and why?
iii. As for the tort claims by the insulted players, Major Media Station argues it has no liability, as Don Marco is an independent contractor who is solely responsible for his rants, and that his public apology constitutes an admission of liability. Is Major Media Station off the hook?
Question 2. Question : TCO B, D) Kimberly is a general partner with Jared, Joshua, and Diane in a general partnership called KJJD Partners. The partnership operates a fast food joint called We Nail The Burger! Each partner contributed $100,000 to capitalize the business. The partners hire staff to run the restaurant and stop in on occasion for lunch. The business gets its chopped meat from a local supplier to all the local diners.
While enjoying a beer and a burger after taking this Final Exam at We Nail The Burger!, Patricia bites into her burger and cracks a tooth on a fake nail, which is now embedded in her tongue. She gathers her classmates as witnesses, and lisping heavily, says to the manager, “I will THUU you.” The partners, who happen to be there for lunch, laugh at the irony of a nail in the burger, but are not worried about liability because they have insurance and they have nothing to do with the running of the place, especially ordering food and cooking. Unfortunately, Patricia loses half her tongue as a result of the injury, and the judgment against the partnership exceeds the insurance coverage and partnership capital by $1 million.
i. From whom may Patricia collect the extra $1 million in damages? How much can she collect and why? Be sure to address the liability of Kimberly, Jared, Diane, and Joshua, including the extent of liability of general versus limited partners. Does the fact that they employ others to run the restaurant make a difference?
ii. Let’s say Kimberly ends up paying the excess $1 million in damages, can Kimberly collect anything from her partner friends? Explain.
iii. Is there another type of business entity that KJJD could have used in order to minimize personal liability for things like this?
Question 3. Question : (TCO E, H) Simple writes Sharp a $1,000 check and receives in return a defective computer. The transaction from Sharp was fraud. Tonights LLP, a CPA firm, audits the financial documents of Sharp. Sharp then negotiates the check to Trusty, who qualifies as a holder in due course. Then Sharp buys back the check from Trusty. Has Sharp, thereby, acquired the rights of a holder in due course? What are the responsibilities of Tonights LLP in this situation?
Question 4. Question : (TCO F, G) Your home is burglarized. Among the stolen items is a $3,000 custom-made pendant from your grandmother. You are heartbroken. The lead detective on the case, Jack Clouseau, is as bad as the inspector in the movies, so you circulate flyers around the neighborhood and the local stores and pawn shops and offer a $500 reward for information leading to the recovery of the item, no questions asked.
Shortly thereafter, you receive a call from Giovanni, the local pizza parlor owner telling you he saw the local hoodlum’s girlfriend, DeeDee Flat wearing the pendant described in your flyer. You call the police and meet them at the pizza parlor, where DeeDee is confronted and placed under arrest. DeeDee claims she purchased the pendant from the local pawnshop and is a bona fide purchaser for value.
While this drama unfolds, Giovanni receives a certified letter informing him that the pizza ovens he ordered F.O.B. point of shipment from Philadelphia were destroyed in transit. The letter includes a bill for the ovens. Giovanni is outraged. He never even saw the ovens and he is being billed for them.
i. Giovanni is now claiming the reward. Does he collect? Explain.
ii. DeeDee claims because she is a bona fide purchaser for value, that she is entitled to keep the pendant. Is she correct? Why or why not?
iii. Who is responsible for the loss of the pizza ovens in transit the shipper or Giovanni? Explain.
Question 5. Question : (TCO C, D/G) Current legislation limits the amount of economic-related liabilities to be paid by a company on account of an oil spill to $75 million. A move to amend that legislation and raise the liability cap to $10 billion was blocked in the Senate because Big Petroleum, who is responsible for a recent spill has given its word that it would cover the cost of all damages and cleanup costs deriving from a recent oil spill in an ecologically significant marine area that supports a thriving fisheries and recreation industry and is home to many endangered and threatened marine animals and waterfowl. Big Petroleum’s Chairman of the Board made the statement after convening a Special Meeting of the Board and studying videos of the damage taken by film crews.
It is estimated that actual costs of clean up and industry losses could even exceed the $10 billion proposed cap. Meanwhile, other companies involved in the oil spill have now gone to court invoking limits on their liability as provided by law.
While you sympathize with the people, animals, and industries affected, as a stockholder in Big Petroleum you are outraged at the decision of the board of directors to accept full economic responsibility for the damage when the total is unknown. After all, there is a HUGE difference between $75 million and billions of dollars! And, the board even voted to pay $25 million for an ad campaign for one state to let tourists know its beaches are clean. Nuts! This liability could wipe out your investment and ruin your retirement and that of other investors, including several pension plans that are heavily invested in Big Petroleum.
i. What kind of lawsuit would you bring and for what purpose? Explain.
ii. What defense or defenses will Big Petroleum invoke?
Question 6. Question : (TCO C, D, G, H) Petunia is in the business of selling flower bulbs. Petunia’s sales agent is Astilbe. While sales agents generally warrant the quality of the goods they sell, Petunia specifically told Astilbe not to make any warranties on the bulbs she sells. Further, Petunia wrote each of her customers to inform them of this policy. About two months later, Astilbe made a prohibited warranty in order to sell Tulip 1,000 Gladioli bulbs. Tulip was an established customer who knew that Astilbe was acting on Petunia’s behalf and who also had been informed of Petunia’s warranty policy, but who honestly forgot about the policy while dealing with Astilbe and truly thought Astilbe had authority to make the warranty. Is Petunia contractually liable to Tulip here? Is Astilbe liable to Tulip?