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BOARD OF BAR EXAMINERS of the Supreme Court of Delaware


1999 BAR EXAMINATION QUESTIONS

Question 1 | Question 2 | Question 3 | Question 4
Question 5 | Question 6 | Question 7 | Question 8


QUESTION 1

Apple, Inc. ("Apple") is a Delaware corporation that maintains its principal place of business in Wilmington. Apple is a party to a contract with Bolts, Inc. ("Bolts"), a Pennsylvania corporation headquartered in Philadelphia. The terms of the contract require that Bolts design and construct a generator in accordance with Apple's specifications, deliver it to Apple's plant in Dover, Delaware, and install it there.

Bolts completed, delivered and installed the generator. Apple has since concluded that the generator does not meet its specifications and that Bolts failed to install it properly. Apple believes that it will cost $90,000 to redesign the generator to meet the original specifications. Apple also maintains that only Bolts can properly redesign and install the generator given its unique expertise gained in constructing it. Bolts maintains that it has done all that the contract requires it to do.

Apple has retained your law firm to sue Bolts. Apple wishes to secure an award of damages against Bolts in the amount necessary to repair the generator and an order directing Bolts to reinstall the generator following completion of the modifications.

1. Discuss whether Bolts is subject to the exercise of personal jurisdiction by a Delaware court in connection with the claim that Apple wishes to file.

2. In what court or courts sitting in Delaware may Apple file an action to secure the relief it seeks?

3. Apple has expressed a preference for filing in a court in which arbitration is required. Discuss the availability of a compulsory arbitration process in the Delaware courts and the extent to which its result is binding on the parties. Include in your answer a brief discussion of the arbitration process.

Assume that the action is now pending in the Superior Court of the State of Delaware. During the course of the ensuing lawsuit, Bolts' counsel serves on you interrogatories and requests for production. In order to respond fully to one of the interrogatories, Apple will be required to collect, review and draw information from thousands of its files. The production requests seek copies of all written reports that any expert retained by Apple has prepared regarding the matter in dispute, whether or not the expert will testify at trial. The production requests also seek a report prepared by Apple's president at your request, which summarizes the dispute between Apple and Bolts.

4. Advise Apple how it should respond to each of these three discovery requests and explain your answers.

During his deposition in this matter, Apple's Chief Operating Officer gave testimony that was both helpful and harmful to Apple's case. He is not a good witness, however. As trial approaches, Apple sends him out of state on business for an extended period and wants you to use the helpful portions of his deposition transcript at trial instead of his live testimony. You anticipate that Bolts' counsel will object to this. You also expect that, in any event, Bolts will seek to use that aspect of the deposition transcript that is harmful to Apple's position in connection with its case.

5. Will Apple be allowed to use the deposition transcript at trial? Will Bolts? Explain your answers.


QUESTION 2

Worker works for Builder for several years and then relocates in January 1998 to the State of Ames to work on a new building project for Builder. Demand is sluggish, however, and in September 1998, Builder lays off Worker. Worker applies to the State of Ames for unemployment benefits but State Officer at the Ames Unemployment Office tells Worker that he does not qualify because he has not yet resided in Ames for a year.

In October 1998, Worker takes a job with Cannery but quits his job in February 1999 when Cannery refuses to let him take off work for the Religious Festival, which is the holy week of a religious group that Worker joined ten days before the Religious Festival. In February 1999, Worker again applies to the Ames Unemployment Office for unemployment benefits and is found to be qualified. The benefits arrive for several weeks and then unexpectedly stop without notice. When Worker calls State Officer, he is told that his benefits were cut off because State Officer recently had spoken with Cannery concerning the circumstances of Worker's leaving and determined that the Religious Festival is not a recognized religious holiday.

Worker timely exhausts all administrative remedies. Worker then files suit in federal court against State Officer and the State of Ames seeking: (1) unemployment benefits resulting from his work for Building; (2) restoration of his benefits resulting from his work at Cannery; and (3) damages for the emotional harm that he suffered.

Identify and explain all constitutional arguments Worker has against Officer and the State of Ames arising from the handling of Worker's claims for unemployment benefits resulting from his work at both Building and Cannery. Identify and explain all constitutional defenses available to Officer and the State of Ames in Worker's lawsuit. Which parties should prevail on which issues?

Worker purchases a 100-acre farm in the State of Ames. Unfortunately, business still is not going well for Worker. The farm is not profitable partly because the State requires Worker to use local packers to pack his produce. Worker's costs would be less if he could use packers located in the neighboring state. Worker tries to sell his land to a developer. He learns, however, that shortly after he purchased his farm, the Town Council passed a zoning ordinance which prohibits the conversion of farmland. The stated purpose of the ordinance was to preserve the amount of open space in the town and stem the tide of overdevelopment. Worker, who is outraged by this ordinance, announces that he will organize a rally in front of the Town Square to hang the Town Council members in effigy. The town Licensing Official refuses to grant Worker a permit for a rally under an ordinance that gives her the power to grant or deny permits based on community welfare and morals. Worker decides to go forward with the rally anyway and is arrested for violating the permit ordinance and violating the disorderly conduct statute, which prohibits "loud and offensive behavior."

Worker hires you to (1) challenge the local packers law; (2) challenge the zoning ordinance; (3) challenge the denial of the rally permit; and (4) defend him on the violation of the permit requirement and on the disorderly conduct charge. Worker asks for your written opinion describing all the constitutional arguments he could make on each of these issues and his likelihood of success on each of them.


QUESTION 3

The body of Sam Smith was discovered in his apartment in Dover, Delaware. The police arrived on the scene and determined that a window had been broken and used as the point of entry. They further concluded that Smith had been murdered with a blunt instrument. They shortly turned up a witness who reported that the night before she had observed Smith near the apartment complex arguing with another man who appeared to be threatening Smith. She stated that she believed that the man with whom Smith was arguing was Tom Tyler and that Tyler was wearing a red bandana. The police knew that Tyler was from out of town, but that he frequently stayed overnight with his girlfriend, who lived in Dover.

The police went to the residence of Tyler's girlfriend. She was home, but she reported that Tyler was not there and that she did not know where he was. She stated that he had stayed with her on the evening of Smith's murder, however. The police asked that she consent to a search of the bedroom of her residence. She freely agreed and signed a written consent to the search. In the hall closet, the police located a packet of cocaine wrapped in a red bandana. They seized these items. A subsequent fingerprint examination of the packet of cocaine revealed that it bore the prints of both Smith and Tyler. Tyler's fingerprints were also found on glass fragments from the broken window.

Several hours following the search, Tyler was found in Dover. The police asked him to accompany them to the police station, which he agreed to do. Upon arrival at the police station, the police read Tyler his Miranda rights and began questioning him regarding Smith's murder. After indicating that he was unable to account for his whereabouts the previous evening, Tyler asked his interrogators whether he needed a lawyer. The police told him that they didn't think so and that things would go easier for him if he cooperated. Tyler said he wanted to talk to a lawyer, but after a few more minutes of interrogation, he blurted, "I just stole the drugs. I didn't kill him." He then refused to give any further statements.

Tyler was placed under arrest for possession of cocaine. The police continued to consider indicting him on the charge of murder in the first degree. Tyler then retained a lawyer, Amy Advocate, who contacted the prosecutor's office and advised them that she would be representing Tyler on the cocaine charge.

Tyler was sent to jail. At the request of the police, Tyler was placed in a cell with a well-known jailhouse informant. During his incarceration, Tyler made several incriminating statements to the informant regarding his involvement in Smith's murder. The informant promptly reported these statements to the police. Tyler was thereafter indicted on charges of possession of cocaine and murder in the first degree. The State indicated its intent to seek the death penalty. At his arraignment, Tyler pleaded not guilty and bail was denied.

You are an associate in Amy Advocate's law office. She has asked that you report to her on the appropriate motions to be filed on Tyler's behalf in connection with his arrest on these charges. Please list the appropriate motions and, with respect to each, discuss the likelihood of success based upon the relevant facts and law.


QUESTION 4

Larry Jones decided that he wanted to buy and develop a vacant lot along Route 202 together with his two adult daughters, Megan and Nancy. Larry proposed to his daughters that he would put up all of the money to purchase and develop the lot, a cost of approximately $1,000,000, but that the three of them would jointly own the land and they would share equally in the gross returns it generated. Neither daughter had any particular interest in real estate development or in going into business with their father, but they agreed that the financial opportunity was too good to pass up. With Nancy's approval, Megan called Larry and said that they each wanted to be in on the deal, but that neither of them wanted to devote any time to it. Larry said that was fine. He told Megan that he would go ahead and enter a purchase agreement to buy the property and he asked her if she would accompany him when he did so. Megan agreed.

1. Based on these facts, are Larry, Megan and Nancy partners? Explain why or why not.

Regardless of your answer to Question 1, assume that Larry, Megan and Nancy did not agree to become partners.

Later that week, Larry and Megan met with Scott Seller, the owner of the lot and a longtime business associate of Larry's. Larry signed a purchase agreement, as the "managing partner" of "The Jones Family Partnership," in which he agreed to pay Scott Seller $100,000 in cash at closing and to execute a note in the principal amount of $400,000. Scott was concerned whether Larry had the means to pay off the note, but Larry told Scott that he need not worry about getting repaid because "Megan and my other daughter are in this with me and they each have plenty of money. They won't let this venture fail." Megan smiled, but said nothing. The next day, Larry mailed copies of the purchase agreement to Megan and Nancy.

After closing on the purchase of the property, Larry entered into a $500,000 construction loan with Bill Banker, which he executed as the managing partner of the "Jones Family Partnership." After getting the loans, Larry faced a series of unexpected delays in building the strip mall and getting necessary governmental approvals. As a consequence, both the $400,000 note to Scott Seller and the $500,000 construction loan to Bill Banker went into default and Larry could not come up with the cash to pay them.

2(a) To what extent, if any, does Scott Seller have recourse against Megan and/or Nancy? Explain.

2(b) To what extent, if any, does Bill Banker have recourse against Megan and/or Nancy? Explain.

2(c) Does Larry Jones have recourse against Megan and/or Nancy for payment of the loans? Explain.

Before long, the strip mall was on firm financial footing, and good relations among Larry and his daughters were restored. Larry Jones had eventually succeeded in paying off the note and construction loan himself, the strip mall had become fully occupied, and the rents were rolling in. One evening, over dinner, Larry, Megan and Nancy agreed that they would be partners in the strip mall venture, but that Larry would have the sole power of management and the conduct of partnership business. Nancy was willing to be partners with Larry and Megan, but she expressed a concern for limiting her personal liability. Nancy proposed that they form a registered limited liability partnership.

3(a) Larry says that in order to form a limited liability partnership, they must set aside $1,000,000 of funds for the satisfaction of judgments against the partnership. Is that true? Explain.

3(b) Practically speaking, which partner(s) will have the least exposure to liability by forming a limited liability partnership? Explain.

3(c) If Larry, Megan and Nancy form a limited liability partnership, must each of their names be publicly disclosed?

Larry, Megan and Nancy form "Jones and Daughters LLP." The strip mall continued to be profitable. Rather than pay out income to his daughters, however, Larry accumulated income in the partnership. Larry then used the accrued earnings of the partnership to purchase an adjoining strip mall. Larry purchased the property in his own name, but he used partnership funds to pay liens on the property and to make improvements to it. Megan and Nancy had no idea that Larry made this purchase. They were not involved in the management of the partnership and they had not seen any partnership records over the course of the year. At the beginning of the next year, when Megan received her tax statement from the partnership, she wondered why the income from the partnership was so low. She asked Larry for the monthly financial statements for the partnership. Larry refused to provide them. He said that because he had solepower to manage the partnership's business, and Megan did not participate in the management of the partnership, she had no right to see partnership records.

4. Is Larry correct? Explain.

After much persuasion, Larry agreed to give Megan access to the monthly financial statements. Based on her examination of the documents, she realized that Larry had been spending partnership money on the adjoining strip mall without obtaining any benefit for the partnership from that expenditure. Larry said that he owned the adjoining strip mall, and that he would pay back the partnership for the money he "borrowed" from the partnership. Megan said that the adjoining property and any profits derived from it belonged to the partnership.

5. Is Megan correct? Explain.

Rather than go to court, Megan and Nancy decide it would be better if they could settle their differences with their father privately. They confronted Larry about his mismanagement of partnership funds and obtained his agreement that from that point forward they would take over the power to manage the partnership. The next day, however, Larry went to Fred, a longtime friend and business associate, explained to him that Megan and Nancy had assumed control over the partnership, and said he needed to sell the two strip malls immediately, because Megan and Nancy had no idea how to manage them. That same day, Larry and Fred drew up the papers, and Larry conveyed the strip malls to Fred for market value. Nancy soon learned about the sale.

She caused the partnership to sue Fred in the Court of Chancery to require that he convey the strip malls to the partnership.

6. Is the partnership entitled to that relief? Explain why or why not.

Megan is fed up with the partnership and has no desire to continue it.

7. Can Megan dissolve the partnership over the objection of Nancy and Larry?


Question 1 | Question 2 | Question 3 | Question 4
Question 5 | Question 6 | Question 7 | Question 8
Question 9 | Question 10 | Question 11 | Question 12


QUESTION 5

Manufacturer bought land for construction of a manufacturing facility. To finance both the purchase of the land and the subsequent construction, Manufacturer borrowed money from Bank and gave Bank a note secured by a mortgage on the land and improvements. Bank properly recorded the mortgage document, which stated that the mortgage was to secure repayment of funds loaned for purchase and improvement of the land.

Manufacturer ordered manufacturing equipment and spare parts from Supplier by sending a Purchase Order specifying the equipment, the spare parts and certain nonstandard modifications in the equipment. The Purchase Order stated the price that had been quoted by Supplier for standard (unmodified) equipment. The Purchase Order specified 6 months to pay and stated that Supplier would retain a security interest in the equipment and spare parts. The Purchase Order was signed by an authorized representative of Manufacturer. Supplier acknowledged the order with his standard Order Acknowledgment, which stated that payment was due in six months and that interest would accrue on the price after 30 days. The Order Acknowledgment also stated that the sale was conditional on Manufacturer agreeing to pay an additional 30% of the equipment price for the equipment modifications desired by Manufacturer.

Manufacturer received and installed the equipment in its facility and stocked the spare parts in a storeroom. It then ran into financial difficulty, stopped paying Bank, and did not pay Supplier for the equipment or the spare parts.

1. Is Manufacturer obligated to pay the higher price stated on Supplier's Order/Acknowledgment? Explain. Is Manufacturer obligated to pay the accrued interest as specified on Supplier's Order Acknowledgment? Explain.

2. Can Supplier repossess the equipment installed in the facility by Manufacturer? Can he repossess the spare parts? Explain.

An employee of Manufacturer, in an attempt to keep the manufacturing facility in operation, drafted a note stating that Manufacturer would pay Supplier a stated sum at a fixed date in the future, forged the signature of the Treasurer of Manufacturer on the note and sent it to Supplier in satisfaction of Manufacturer's debt to Supplier. In a subsequent conversation, Supplier mentioned to Manufacturer's President ("President") that he was pleased to have received Manufacturer's note promising payment of the outstanding debt. President had no idea what supplier was talking about, and did nothing but nod his head. Supplier then transferred the note to Creditor in payment of Supplier's outstanding debt to Creditor. The date stated in the note came and went without any payment on the note.

3. Can Creditor recover on the note from Manufacturer? Explain.


QUESTION 6

Bob Bookkeeper was employed by Small Construction Company ("SCC") for many years. Bookkeeper and George were the two co-signers required on all checks issued on behalf of SCC. For the last two years, Bookkeeper stole money from SCC due to his addiction to gambling.

Bookkeeper issued checks to fictitious companies and signed George's name thereon without George's permission. Bookkeeper then endorsed and deposited the checks (ranging from $1,000 to $5,000) in an account he bad opened at a local bank for that purpose. During the last three years, Bookkeeper was able to obtain over $50,000 for himself in this manner. Ultimately, Bookkeeper's scheme was detected. SCC fired Bookkeeper and told him the police would be called the next day.

Depressed, Bookkeeper decided to purchase some cocaine from a man (later identified as Mack) standing on a street corner in Wilmington. Bookkeeper asked Mack if he had any cocaine to sell. Mack said that he did not, but that his supplier had some. Mack said he would need a ride to his supplier's house.

On the way to his supplier's house, Mack asked Bookkeeper to stop at a liquor store. They stopped and Mack went inside. After a few minutes, Mack returned with beer and with another man, Archie. Mack walked up to the driver's side of the car while Archie walked up to the passenger side. Mack told Bookkeeper that he and Archie intended to take Bookkeeper's money and his car. Archie said that if Bookkeeper did not comply voluntarily, they would be forced to get rough. Bookkeeper saw Archie's right hand drop out of sight behind the car door. At the same time, Mack reached into the car and grabbed Bookkeeper's car keys from his hand. Fearing that Archie was reaching for a weapon, and that he might get hurt, Bookkeeper gave Mack his wallet and got out of his car. Mack and Archie drove off. Bookkeeper ran to the nearest phone and called the police.

Mack and Archie celebrated their success by driving to Philadelphia where they partied all night long and got very intoxicated. They returned to Delaware driving southbound on I-95, with Archie at the wheel. Once in Delaware, Archie drove past another vehicle.

The driver of that vehicle, David Driver, was angered by Archie's maneuver and accelerated to a position next to Archie. Driver rolled down his window, shook his fist and screamed obscenities at Mack and Archie, threatening to kill them. Mack pulled out a .25 caliber semi-automatic handgun, which he had been carrying concealed constantly for the past couple of days, and pointed it at Driver, causing Driver to veer away from Mack and Archie.

This incident was witnessed by Walter Witness, who called the police on his cellular telephone. Within minutes, both Archie and Mack were arrested. It was determined after following proper procedures that Archie's blood alcohol concentration was .12% and Mack's was .20%.

Bookkeeper, Mack and Archie were all arrested. Bookkeeper's attorney retained Dr. Forensic, a psychiatrist, to examine him. Dr. Forensic's report concluded that, because of his compulsive gambling, Bookkeeper was unable to refrain from stealing from SCC, although he knew it was wrong to do so.

Based upon the above facts, discuss what criminal charges (including the appropriate degree of the crime) may be properly brought against each of the following persons and the defenses to each such charge:

(1) Bookkeeper;

(2) Mack; and

(3) Archie.


QUESTION 7

Tammy Tenant decides to rent a house in Wilmington, Delaware from Otto Owner. Tammy signs a rental agreement, which is for one year, and gives Otto a check in the amount of $2,500 -- $1,000 for the first month's rent and $1,500 as a security deposit. Otto gives Tammy a set of keys and a copy of the rental agreement. The rental agreement provides that Otto shall not be responsible for any damage to the property of any tenants resulting from any pre-existing defect in the property of which they have notice.

When Tammy arrives at the house at the beginning of the rental period, she is shocked by the condition of the house. Although the utilities and appliances are operational, the walls are in desperate need of paint and the carpeting is badly stained. Tammy complains to Otto about the condition of the house, but when she moves in she discovers that nothing has been done to remedy the problems. After two weeks, Tammy writes to Otto complaining of the conditions, but Otto does not respond. Three weeks thereafter, Tammy pays $500 to have the walls painted and carpets cleaned.

1. What claims and remedies does Tammy have against Otto and what defenses does Otto have to those claims?

Otto also owned a beach cottage and contracted to have a new deck built in the back of the cottage. Otto hired Contractor to do the work. Contractor subcontracted the job to Subcontractor. Otto paid Contractor one-half of the contract price in advance, but failed to pay the balance of the contract price for the deck on completion. Contractor made repeated requests to Otto for payment, but Otto did not respond. Contractor told Subcontractor that he made efforts to collect the balance owed for the deck construction from Otto, but to no avail. Two months after completion of the work, Subcontractor filed a statement of claim for a mechanics' lien which identified Otto, the work done and the amount owed, but gave no other information.

Betty Buyer agreed to purchase the cottage from Otto. The contract for sale provided that the title was to be free of liens and encumbrances. Otto did not tell Buyer of the amount owed for the deck or that a statement of claim for a mechanics' lien had been filed by Subcontractor. After purchase of the cottage, Buyer received notice of the lien proceeding. In order to try to resolve the matter, Buyer paid Contractor the balance of the contract price, expecting Contractor to pay what is owed to Subcontractor.

2. What claims does Buyer have against Otto? What defenses can Otto raise to Buyer's claims?

3. What defenses can Buyer raise to Subcontractor's lien proceedings? What can Subcontractor argue in response?

The cottage Buyer purchased from Otto was located on a one-acre parcel carved out of Otto's 10-acre farm. The one-acre parcel was bounded on one side by a river, albeit narrow and shallow at that point, and on the remaining three sides by land owned and actively farmed by Otto himself. The only access from the cottage to the paved main road was a dirt road beginning at the edge of Buyer's one-acre parcel and continuing across the edge of Otto's field. Otto also used the dirt road to enter and leave his farming operation. During negotiations, the parties discussed the issue of access to the property and discussed the feasibility of Buyer building a bridge across the river to connect to a second paved road. Buyer recalls that Otto, in response to Buyer's concern about access to the property, said something to the effect that Otto would have to use the dirt road in order to access the main road. No writing, either the agreement of sale, the deed or a separate agreement, addressed the issue of the use of the dirt road.

Buyer traveled on the dirt road daily by foot, bicycle or in her enormous sport utility vehicle, except when she was ill and when she was on her annual three-month-long trips to Australia for work. Occasionally, Buyer passed Otto either on the dirt road or working in a barn near it, and Otto waved or spoke to her.

On January 1, 2025, Buyer awoke to find that Otto had blocked her access to the dirt road by a locked metal gate and had posted "No Trespassing" signs.

4. Identify and discuss all arguments Buyer can make in support of her claim that she is entitled to use the dirt road. What defenses can Otto raise to each argument? What, if any, are Buyer's responses to Otto's defenses?


QUESTION 8

Dora owns a beach house fronting on the boardwalk in Rehoboth Beach, Delaware. Dora recently started a business making her sunblock lotion, Homebrew. She makes Homebrew in a large vat in her basement. Noxious fumes created by the process often waft downwind to the property of her next-door neighbor, Paul. Dora disposes of Homebrew's sludge byproduct by pouring it into a drainage pipe in her basement. Unknown to Dora, the sludge has backed up into Paul's basement, covering the basement floor and damaging his personal items.

1. Paul sues Dora. Analyze and discuss fully all claims and defenses. Also discuss the relief that Paul may seek.

Dora sold containers of Homebrew to three separate buyers, each of whom used the product while at the beach.

After using Homebrew, Buyer 1 was driving home from the beach when he began to itch all over his body. He continued to drive while attempting to scratch, and lost control of his car. It careened onto the sidewalk and struck Mary, causing serious bodily injury. As a result of her injuries, Mary can no longer work.

2. Mary sues Buyer 1. Analyze and discuss fully all claims and defenses. Also discuss the relief that Mary may seek.

3. What claims may be brought against Dora by Mary? Analyze and discuss fully all claims and defenses.

After using Homebrew all afternoon, Buyer 2 developed a severe rash. By the end of the day, the itching associated with the rash made him extremely shorttempered. Becoming irate at his beach companion, Buyer 2 threw a thermos at him, but missed. The bottle struck Fred, a 4-year-old child. Knocked unconscious, Fred fell into the water and drowned.

4. What claims may be brought against Buyer 2, and by whom? Analyze and discuss fully all claims and defenses, as well as the relief that may be available.

Buyer 3's skin also became irritated after using Homebrew. To soothe the pain, he ran into the ocean. Unable to swim, Buyer 3 began thrashing in the water. Jake, a member of the Rehoboth Beach patrol, swam out to rescue him. Attempting to keep his head above water, Buyer 3 kicked Jake, causing internal injuries. In the course of the rescue, Buyer 3 suffered a broken arm and dislocated shoulder.

5. Jake sues Buyer 3. Analyze and discuss fully all claims and defenses, as well as the relief that may be available.

6. Buyer 3 sues Jake for negligence. Analyze and discuss fully the defenses that Jake can raise.



Question 1 | Question 2 | Question 3 | Question 4
Question 5 | Question 6 | Question 7 | Question 8
Question 9 | Question 10 | Question 11 | Question 12


QUESTION 9

Buyer, an experienced real estate developer, purchased a parcel of land (the "Property") from Seller. During negotiations, Buyer had told Seller that Buyer intended to develop the property for single-family housing. Shortly after the closing on the purchase and sale, Buyer was told by Agent, a realtor who represented Seller in the sale while working for Land Brokers Inc. ("LBI"), that the Property had been used 50 years ago as a manufacturing facility, and that the Property might be contaminated by toxic waste. Buyer then sued Seller in the Delaware Court of Chancery, seeking rescission of the transaction on grounds of misrepresentation, mistake and failure of consideration. A few days after Buyer filed suit, Agent was killed in a car accident.

At trial, the following evidentiary issues arise:

Buyer attempts to offer evidence that Seller had told Agent that the Property might be contaminated. Specifically, Buyer offers into evidence an intake sheet, on a preprinted form bearing the letterhead of LBI. Secretary also testifies that the handwritten entries on the form are in Agent's handwriting. One of the handwritten entries on the intake sheet states: "Seller thinks there may be toxic waste contaminants on the Property, but Seller does not want any information of this type voluntarily disclosed to prospective purchasers." Seller objects, on hearsay grounds, to the introduction of the intake sheet. Secretary, who worked as Agent's assistant and took care of Agent's files at LBI, testifies that Agent completed the intake sheet form, in accordance with LBI's policy, when Agent first met with Seller to negotiate the agency relationship.

1. How should the Court rule on Seller's objection? Explain.

Buyer next calls as a witness Lawyer, an attorney who represented Seller in connection with the contract between Seller and Buyer. (Lawyer does not represent Seller at the trial.) While Lawyer was representing Seller, and before the contract between Buyer and Seller was signed, Seller approached Lawyer and Lawyer's spouse at a cocktail party, and said that the Property was contaminated. Lawyer responded that Seller should disclose this fact to Buyer. At trial, Buyer's trial attorney questions Lawyer about this conversation, but Seller's attorney objects on the ground that the conversation was privileged.

2. How should the Court rule on Seller's objection? Explain.

Buyer's attorney also questions Lawyer about a telephone conversation between Seller and Lawyer on the day after the cocktail party. In that conversation, Seller told Lawyer not to mention anything about contamination during the negotiations with Buyer. To justify this instruction, Seller falsely told Lawyer that Buyer was aware that the Property might be contaminated, but that Buyer wanted to "keep it quiet" and proceed with the purchase and development of the Property anyway. At trial, Seller's attorney objects to the questioning about this conversation, again on the ground that it was privileged.

3. How should the Court rule on Seller's objection? Explain.

Buyer's attorney next calls Driver as a witness. The accident that caused Agent's death occurred while Agent was a passenger in Driver's car. In the last ten minutes of Agent's life, as Agent lay injured at the accident scene, Agent confessed to Driver that Seller had told Agent that the Property was contaminated. When Buyer's attorney questions Driver about Agent's statement, Seller's attorney objects on hearsay grounds.

4. How should the Court rule on Seller's objection? Explain.

In the defense's presentation, Seller calls as a witness Employee, who works for Buyer. Seller's attorney asks Employee whether Employee has heard of Buyer's reputation for being a generally careful and meticulous person, and whether Buyer routinely obtains an environmental site assessment of a property before consummating a purchase transaction. Buyer's attorney objects to these questions. In response, Seller's attorney argues that the evidence is admissible to prove that Buyer did not reasonably rely on Seller's nondisclosure of what Seller knew about possible contamination.

5. How should the Court rule on Buyer's objection? Explain.

Seller testifies at trial that, at the time Seller and Buyer entered into their contract, Seller had no knowledge of any fact suggesting that the Property might be contaminated. Buyer's attorney, hoping to raise doubts about Seller's credibility, asks Seller about Seller's misdemeanor conviction two years ago for possession of marijuana, and Seller's conviction twenty years ago (when Seller was nineteen years old) for felony theft. Seller's attorney objects to these questions, and also points out that Buyer's attorney had not warned Seller's attorney that such evidence would be offered.

6. How should the Court rule on Seller's objection? Explain.

Seller offers the testimony of Expert, an established authority in toxicology. Expert is prepared to give an opinion that the soil and groundwater on the Property are uncontaminated and safe. Expert's testimony, if permitted, will inform the Court that Expert's opinion is based on a study by the Geology Department of the local state university, published in the Geology Today scientific journal six months before trial. The published study was conducted in compliance with established testing standards, and concluded that there were no toxic substances in the soil or groundwater on or under the Property, except in nonhazardous and insignificant quantities. Buyer's attorney objects to Expert's proposed reliance on and testimony about the published study, on the ground that the study is not admitted into evidence and any testimony about it by Expert would be inadmissible hearsay.

7. How should the Court rule on Buyer's objection? Explain.


QUESTION 10

Parent Co. is a Delaware corporation. It has two divisions: the Apple division and the Banana division. Substantially all of the value of Parent Co.'s business is in the Apple division. The Banana division derives all of its revenue from providing services to the Apple division, and would not be viable as a standalone business operating on its own. Lender, a bank, has lent money to Parent Co., secured only by the assets and revenue stream of the Banana division.

Parent Co. has a board of three directors: Ms. Morton, Mr. Nelson and Ms. Ogden. Mr. Nelson and Ms. Ogden are independent, outside directors. Ms. Morton owns 30% of the common stock and 100% of the preferred stock of Parent Co., which together constitute just over 51% of the issued and outstanding shares of Parent Co. The certificate of incorporation of Parent Co. does not address whether the common stock has any voting rights, but it does contain a provision that states:

Holders of shares of preferred stock shall have the right to vote upon any merger of the corporation with any other corporation, upon any dissolution of the corporation, and upon any amendment of this certificate of incorporation, but shall have no right to vote on any other matter.

Parent Co. receives a merger proposal from First Co., which offers to pay $100 for each common share and $200 for each preferred share of Parent Co. After a careful and complete analysis, all three Parent Co. directors conclude that this offer is fair. However, Ms. Morton announces that she will never vote her shares for a merger with First Co. because its Chairman is her bitter enemy. Ms. Morton then solicits and presents to the board an offer from Second Co. on terms identical to those of First Co.'s proposal, except that the price offered is $90 per common share and $215 per preferred share. Based on the number of shares outstanding, Second Co.'s proposal is worth less than First Co.'s offer overall, but worth more to Ms. Morton because of the preferred stock that she owns.

Mr. Nelson and Ms. Ogden ask First Co. if, instead of a merger, it would be willing to purchase the assets of Parent Co. First Co. is willing to purchase the Apple division assets, but does not wish to purchase the Banana division or to assume the Banana division's debt. Additionally, First Co. is willing to make an offer for the assets of Apple division only on the condition that Parent Co. agree, unconditionally, not to solicit, initiate, encourage or entertain a bid from any other bidder or to provide information to any other bidder to allow it to make a bid. The aggregate value to stockholders of First Co.'s asset purchase proposal is greater than the value stockholders would realize in the Second Co. merger proposal. An asset purchase agreement setting forth these terms is approved, over Ms. Morton's objection, at a duly called board meeting. A stockholders' meeting to consider the asset purchase agreement is thereafter timely and properly called.

Before the stockholders' meeting, Third Co. offers a merger proposal at a materially higher price than the value provided in the First Co. asset purchase agreement. Third Co.'s proposal is conditioned upon the receipt of confidential business information of Parent Co. Upon hearing of Third Co.'s proposal, Ms. Morton declares that she will never vote any of her shares to sell to Third Co., a longtime rival. The Parent Co. board then refuses to provide confidential business information to Third Co., citing the fact that the merger would be impossible to accomplish given Ms. Morton's opposition and the "no shop" provision in the First Co. agreement.

At the stockholders' meeting, 65% of the common stock votes in favor of a resolution to approve the asset sale to First Co., 5% abstains and Ms. Morton votes her 30% of the common stock against the sale. Ms. Morton also claims the right to vote her preferred stock on the sale, and submits a ballot voting all of the preferred shares against the sale. She points out that Section 271 of the Delaware General Corporation Law states that a corporation may only "sell ... all or substantially all of its assets when and as authorized by a resolution adopted by the holders of a majority of the outstanding stock of the corporation entitled to vote thereon...." The other directors disagree that the preferred stock has the right to vote on the sale. They complete the sale and distribute the proceeds (all of which constitute surplus) to the shareholders as a special dividend.

In the Court of Chancery:

1. Ms. Morton sues, claiming that the required stockholder vote was not obtained. She also asserts a claim against Mr. Nelson and Ms. Ogden for breach of fiduciary duty for not approving the Second Co. merger transaction.

2. A holder of common stock brings a class action against Ms. Morton individually and all three directors as members of the board. The stockholder asserts that Ms. Morton is liable for deterring both the First Co. merger proposal and the Third Co. merger proposal by announcing her refusal to vote her shares for them. The stockholder further asserts that the board breached its fiduciary duties in not providing Third Co. with access to the confidential business information it requested as a condition of its merger proposal.

3. Lender sues the members of the board for breach of fiduciary duty, claiming that even though the sale of the Apple division did not render Parent Co. insolvent, the foreseeable result of the sale and the distribution of the proceeds to stockholders is eventual insolvency since the Banana division now has no source of revenue.

You are the Chancellor. Write an opinion resolving these claims. You need not recite the foregoing facts except as necessary to show your analysis.


QUESTION 11

On March 1, 1997, Tricia Testatrix duly executed a Will that provided in pertinent part:

LAST WILL AND TESTAMENT OF TRICIA TESTATRIX

I, Tricia Testatrix, of Kent County, Delaware, declare this to be my Last Will and Testament.

1. I revoke all previous wills and codicils.

2. I hereby indicate my intention, in accordance with 12 Del. C. ยง 212, to prepare, and hereby refer to, a written statement or list, to be prepared at some later date, to dispose of items of tangible personal property, not otherwise specifically disposed of by this Will.

3. I give and bequeath unto my friend Felicia all of my stock in Corporation, Inc.

4. Except for those items disposed of in accordance with the written list referenced in paragraph 2,1 give and bequeath all of my tangible personal property unto my husband Harry.

5. I give, devise and bequeath all the rest, residue and remainder of my property unto my children, in equal shares.

6. I direct that all my debts, including funeral expenses, be paid out of the rest, residue and remainder of my estate.

7. I nominate and appoint my daughter Doris and my attorney Lance Lawyer as co-executors of my estate.

On March 10, 1997, Tricia duly prepared and signed a written statement providing that, on her death, the title to her 1991 sedan would become the property of her grandson George and that her $20,000 diamond pin would become the property of her granddaughter Greta.

On January 15, 1998, Tricia sold all of her Corporation, Inc. stock. She used all of the proceeds to buy Entity Co. stock. This was the only Entity Co. stock she had ever acquired.

On April 15, 1998, Tricia took her pearl necklace and gave it to her daughter Doris, stating, "I want you to have this." Doris took the necklace home with her that night. Tricia also told Doris, "The dining room furniture has been in my family for three generations. It is now yours. Please get it out of here [Tricia's house] as soon as possible." Because she required help in moving the furniture, Doris needed more than a week before the dining room furniture could be moved.

Tricia died on April 17, 1998.

Tricia's husband Harry wanted Tricia's funeral to be extravagant. He spent lavishly, including selecting the most expensive casket he could find and filling the entire church with flowers. The funeral therefore was twice the cost of an ordinary funeral (the type Tricia would have arranged). Harry made the arrangements with the funeral director and signed a contract for payment of the funeral bill.

Doris asked Lance Lawyer to serve not only as co-executor but also as the attorney for Tricia's estate. Doris and Lance were issued letters testamentary on May 10, 1998.

In June 1998, Doris learned for the first time that in 1997 Tricia had placed $30,000 in a bank account entitled "Tricia or Doris, joint tenants with right of survivorship." The bank could not find any forms used to open the account. Doris' brother Billy (Tricia's son) vaguely remembered something his mother had said about opening an account so that Doris could pay her bills, if necessary.

As Christmas 1998 approached, Billy and Doris wanted their inheritance. Doris, in good faith, decided that the assets should be distributed. The final accounting had been filed, but it had not yet been approved. Lance agreed that distribution would be appropriate, given the spirit of the season. Accordingly, Lance and Doris, on December 9, 1998, disbursed all estate assets; the residuary was divided equally between Doris and Billy. Billy immediately spent every penny he inherited on gifts and a two-week cruise for family and friends and was soon back to his impoverished lifestyle.

On December 27, 1998, a man named Sonny appeared at Lance's office and informed Lance that he, too, was Tricia's child. Although Tricia had never mentioned Sonny to Harry, Billy or Doris, who were thus unaware of Sonny's existence, Lance confirmed that Sonny was truly Tricia's child.

1. Who receives the 1991 sedan and the $20,000 diamond pin? Explain your answer.

2. Does Felicia receive the Entity Co. stock? Explain your answer.

3. To whom do the pearl necklace and dining room furniture belong? Explain your answer.

4. To whom does the amount in the joint bank account established in 1997 belong? Explain your answer. If Billy wants to challenge Doris' right to take all of the funds in that account for herself, what would he file? Evaluate his chances for success.

5. The funeral director is Harry's friend, and when Harry does not pay the funeral bill, the funeral director, unwilling to go after Harry, demands payment from the estate. Must Doris and Lance use estate funds to pay the funeral bill? Explain your answer.

6. What claims, if any, can Harry make against Tricia's estate? (Assume that Harry does not contest the Will.)

7. What are Sonny's rights, if any, as Tricia's child, to take as an heir under her Will? From whom would he be entitled to any payment? Explain your answer.


QUESTION 12

Sally Sister and Bobby Brother are siblings. When Sally was 18 and Bobby was 15, Grandmother Jones left each of them a one-of-a-kind, original painting signed by the artist, a family friend. Sally received Painting S and Bobby received Painting B. Upon Grandmother Jones' death, Sally investigated the value of these paintings. To her disappointment, she discovered that her painting was worth only $5,000, while Bobby's was worth $10,000.

Without telling Bobby about these values, Sally immediately suggested to Bobby that each give the other a one-half interest in their respective paintings to ensure an equal division of value. Bobby typically did anything that Sally asked; she was older and he often relied upon her judgment. This time, however, Bobby was angry with Sally for losing his favorite CD, and he refused.

A month later, Sally, undaunted, wrote out the following document, which she then presented to Bobby:

AGREEMENT

I, Sally, agree to sell one-half interest in Painting S to Bobby for $10.00. Bobby agrees to buy from me one-half interest in Painting S for $10.00, upon receiving money from Sally for a new CD.

I, Bobby, agree to sell one-half interest in Painting B to Sally for $10.00. Sally agrees to buy from me one-half interest in Painting B for $10.00 within 10 days of signing this agreement.

__________________(SEAL) ______________(SEAL)
Sally Bobby

Bobby, suffering from the flu and light-headed from his medication, did not read the document. Instead, he asked Sally what it said. Sally told him that it was her promise to give Bobby money to replace the CD that she had lost and an agreement obligating the two of them to share the paintings that Grandmother Jones had left them. Bobby and Sally signed the document. Ten days later, Sally gave Bobby $20.00. When Bobby asked her what the money was for, she told him that it was to replace the lost CD and to fulfill their written agreement. Bobby took the money. He purchased a new CD with some of it, but he never paid Sally $10.00. Fifteen years later, an art dealer offered Bobby $45,000.00 for Painting B by the now famous artist. Bobby asked for Sally's opinion on the offer. Sally told Bobby that half of any money he received for Painting B belonged to her. Bobby evidenced surprise, so Sally showed him the agreement they had signed fifteen years earlier. Bobby said he didn't remember any such agreement and that he would never have signed such a thing if he had understood what it meant. Sally just pointed to his signature and told Bobby that he would have to give her half of any proceeds from the sale of Painting B. Bobby said that this must mean that Sally would have to give him half of any proceeds from the sale of Painting S, but Sally said "No," observing that Bobby never paid her the $10 required by the agreement. Bobby then tried to give her the money, but she refused it.

Bobby then decided to seek legal counsel from a partner in the firm at which you are an associate. The partner asks you to write a memorandum discussing the following issues:

1. Does the Agreement satisfy the elements necessary to constitute a valid contract? Discuss.

2. What is the effect of having the contract signed under seal? Discuss.

3. Assuming the Agreement is a valid contract, is the contract enforceable against Bobby? Explain.

4. Does Sally's refusal to accept Bobby's $10 amount to an anticipatory repudiation? Why or why not?

5. Assuming that it does, what possible remedies are available to Bobby?

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