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1997 Bar Exam Question

Please help me answer the following question in IRAC form...

On April 1st, Bob the owner of a chain of retail stores, entered negotiations with Amy, an architect, to draft up plans for a new shoe store that Bob was constructing on land which he owned in Suffolk County. Bob clearly stated at the time of negotiations that the land was adjacent to protected wetland and would require an environmental impact statement. A contract was written up stating that Amy was to obtain, at her expense, all necessary construction permits. The contract also stated that Amy would be paid a fee of 100,000 upon delivery of the plans and permits to Bob.

Bob then entered into a contract with Sam (shoe manufacturer) to purchase 10,000 pairs of shoes which were to be delivered to the new store on the expected opening day of October 1st. The written purchase order called for payment in full upon delivery, the sale was expressly contingent upon Bob notifying Sam that the new store would be opening.

Amy drafted plans and submitted them to the appropriate agency for issuance of the necessary construction permit. She was notified that an environmental impact statement was needed with an expected cost of $100, 000. Amy advised Bob that the cost to obtain the permit rendered it impossible for her to perform the contract. She advised Bob that she wished to rescind the contract but to be compensated for the services she had already rendered. Bob refuses to pay anything and demanded that she fulfill the terms of the contract. Amy promptly commenced an action in Supreme Court, Suffolk County, seeking to rescind the contract upon the ground of impossibility of performance and to recover the value of the services she had rendered to date. Bob's answer admitted the factual allegations of the complaint, but denied that Amy had any right to rescind the contracts or to recover for her services. Amy duly moved for summary judgment. Upon the foregoing pertinent facts, the court denied Amy's motion and but granted summary judgment to Bob dismissing Amy's complaint.
Bob then wrote to Sam canceling the shoe order due to not knowing when the store would be opening. Sam received Bob's letter, but failed to notify his shipping department of the cancellation. On October 1st, 10,000 pairs of shoes were delivered to Bob's warehouse. Bob had the shoes placed in a locked construction shed inside his fenced in property and notified Sam to remove them. Sam told Bob in three days the shoes would be picked up. The next day the shoes were stolen.

(1) Was the court's ruling correct?

(2) What remedies, if any, does Bob have against Amy?

(3) Is Bob liable to Sam for the loss of the shoes?

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(1) Was the court's ruling correct?
The court's ruling was correct. Amy cannot claim impossibility of performance. She is not excused from performance simply because of the unforeseen expenses (Transatlantic Financing Corp. v. U.S. 363 F.2d 312 (1966.). Also Amy is not excused from ...

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