National University

Legal Aspects of Business I

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LAW 204 - Assignment #4

Question 1:

Larry, a comedy writer, entered into a contract with Jerry, a comedian. The contract provided that Larry would create a 15 minute comedy monologue for Jerry to use for his upcoming appearance on "Comedy Hour" a local radio program. In exchange, Jerry would pay Larry $250.

All performers appearing on "Comedy Hour" are paid $500 per appearance. As Larry knows, the last time Jerry appeared on "Comedy Hour" he was asked to make special guest appearances at three local comedy clubs using the same monologue. He earned a total of $750 for those three performances.

Shortly before Jerry was scheduled to appear on "Comedy Hour," Larry told him that he did not prepare the monologue as he had promised. As a result, Jerry was forced to cancel his appearance on "Comedy Hour" and had no additional appearances.

Jerry has now sued Larry for breach of contract. As the judge, what damages is Jerry entitled to, if any, how much, if any, and why?

Questions from Chapter 19:

Answer questions 2, 4, and 10 in the "Questions and Case Problems" section at the end of Chapter 19.

Question 2:Self-described "sports nut" Gary Baker signed up for a three-year club-seat "package" that entitled him and a companion to tickets for 41 Boston Bruin hockey games and 41 Boston Celtic basketball games at the New Boston Garden Corporation's Fleet Center for approximately $18,000 per year. After one year, Baker stopped paying for the tickets thinking that he would simply lose his $5,000 security deposit. New Boston sued Baker for breach of contract, seeking the balance due on the tickets of $34,866. At trial, Baker argued to the jury that although he had breached his contract, New Boston had an obligation to mitigate damages, for example, by treating his empty seats and those of others in the same situation as "rush seats" shortly before game time and selling them at a discount. New Boston argued that just as a used luxury car cannot be returned for a refund, a season ticket cannot be canceled without consequences. Decide.

Question 4: Manny Fakhimi agreed to buy an apartment complex for $697,000 at an auction from David Mason. Fakhimi was obligated to put up 10 percent of the agreed to price at the auction as a deposit. The agreement allowed Mason to keep this deposit should Fakhimi fail to come up with the remaining 90 percent of the auction price as liquidated damages for the default. Shortly after the auction, Fakhimi heard a rumor that the military base located near the apartment complex might be closing. Fakhimi immediately stopped payment on the check and defaulted on the agreement. Mason sued Fakhimi for the liquidated damages specified in the sales contract.

Question 10:

JRC Trading Corp (JRC) bought computer software and hardware from Progressive Data Systems (PDS) for $167,935, which it paid in full, to track move- ment of its trucks with inventory and to process transactions. The purchase agreement also called for a $7,500 per year licensing fee for an 18-year period, and it stated that in the event of default PDS could "accelerate and declare all obligations of Customer as a liquidated sum." A dispute arose between the parties, and when the case was litigated the only actual contract charges owed PDS were the license fees of $7,500 for two years. The application of the liquidated damages clause would yield an additional $120,000 cash for PDS for the future fees for 16 years without any reduction for expenses or the present cash value for the not-yet-earned fees. JRC contends that actual damages were clearly ascertain able and that the liquidated damages clause was a penalty provision that should not be enforced. Progressive argued that the court must interpret the contract as written, stating that the court has no power to rewrite the contract.