Revised Car Purchase Agreement

Revise your draft of the Car Purchase Agreement (Exercise 5-1) based on the material that you have covered so far this semester. In addition, include appropriate provisions to reflect the following changes to the transactions terms:

1. The Buyer has decided that it may want to do a bit of due diligence and not rely solely on the Sellers representations and warranties. The Seller has agreed that the Buyer has the right not to close if a mechanic of the Buyers choice determines that the car is not in the condition represented. The Buyer has agreed to pay for the inspection. You may create whatever facts you want to draft these business terms. Think about how the inspection would actually take place. What would be the sequence of events? For example, how does the car get to the mechanic? How will the parties know what the mechanic concluded? Draft these provisions from the Buyers perspective, but in a manner that would be reasonably acceptable to the other side. In deciding how to draft the provisions about the inspection, also think about the contracts organization Would it be more helpful to the reader to separate the provisions by contract concept or to put all the related provisions together or do some combination?

2. The Seller is insisting on a 10% down payment to be paid concurrently with the execution and delivery of the parties agreement. She also wants an additional 10% down payment after completion of the mechanics inspection.

3. The cars Vehicle Identification Number is 23456.

4. The Buyer has been looking for a job as an associate at a law firm and has received an offer from Hie Power & Stress LLP. He wants to be able to call off the closing if he does not receive the promised $5,000 sign-on bonus. To induce the Seller to accept this proposal, the Buyer agreed that if the Buyer did not close because he did not receive his sign-on bonus, the Seller could keep the first down payment. The Seller would also like some assurance in the contract that the Buyer has received an offer from Hie Power.

5. The Seller has agreed to deliver the car, the keys, and any manuals to the Buyers home on the Closing Date.

6. The Seller has told the Buyer that the car is still under the manufacturers warranty and that she has its documentation. The Buyer was delighted to learn this but wants to know what the warranty provides. He is not a trusting fellow and is unwilling to rely on the Sellers assessment of the quality of the manufacturers warranty. If the warranty is not reasonably acceptable, he does not want to purchase the car. Without stating the details of the warranty, provide the Buyer with the comfort he has asked for.

7. If either party makes a misrepresentation or breaches a warranty or covenant, the contract should terminate.

8. When working through the endgame provisions, follow the cash and provide for all appropriate contingencies as to the down paymentsboth if the transaction closes and if it does not close. You must separately analyze how the contract will deal with each down payment in each situation. If the facts do not state which party is entitled to one or both of the down payments under a particular circumstance, think through what makes sense from the Buyers business perspective and draft accordingly. Write a memo no longer than one page explaining which down payments went to which party and why.

9. The closing will take place at 1:00 p.m. at the office of the Buyers lawyers: Workhard & Succeed LLP. Its address is 278 Appletree Lane, Glencoe, Illinois.

Assume that the contract has not yet been executed. Each of these provisions, therefore, is part of the original contract and does not amend an existing agreement. In addition, as in Exercise 5-1, assume that no statutes apply to this transaction.

EXERCISE 5-1 FACTS:

1) The parties are Barbara Balram, the seller, and Tom Rogers, the buyer.

2) The car is a red, 20xx Acura.

3) It has been driven 26,000 miles.

4) The purchase price is $11,000. The buyer will pay seller with a certified check.

5) The seller owns the car, and it is not subject to any liens.

6) The car has been maintained in accordance with the owner's manual and is in good operating condition, normal wear and tear excepted.

7) The closing will take place on the last day of the month that follows the month in which the car purchase agreement is signed.

8) With respect to the period beginning on the day the agreement is signed and ending on the closing date, the seller promises not to paint the car and not to drive it more than 500 miles. The seller also promises to garage the car and to continue to maintain it.

9) The buyer only has to close if the seller has performed its covenants and if the seller's representations and warranties are true on the date that they were made and on the closing date as if they were made on that date, except to the extent the agreement contemplates that specific facts might change.

10) The date of the agreement is the date that this assignment is due.