GOLDEN GATE UNIVERSITY

School of Law

Final Examination 
December 11, 2001
Business Torts
Professor Jones

INSTRUCTIONS

This is a closed book exam. Please abide by all that that implies.

The exam consists of two problems of equal weight, though not of equal length. You must answer all questions in both problems in three hours. Budget your time prudently.

Write your answers as if this were the California Bar Exam. Organize thoroughly; use headings frequently. Prefer quality to quantity; avoid lengthy introductions and discussions not responsive to any question asked. Save time by not repeating a point made earlier; simply refer to your prior discussion and indicate how it applies to your present discussion. On the other hand, respond fully to the questions asked and discuss fully all debatable issues.

Answer the questions according to legal theories and principles of general application accepted today in American courts. It is not important to know the sources of law that support your answer. But if you do recall the popular name for a source of law that a California Bar Exam reader is likely to know, such as a U.S. Supreme Court case or the Restatement, it helps to add it to your essay. (The danger is that your effort to recall the name of a case or the fact pattern that gave rise to the opinion will divert valuable time and distort your analysis.)

The Bar Examiners state your goal this way:

Your answer should demonstrate your ability to analyze the facts in the question, to tell the difference between material facts and immaterial facts, and to discern the points of law and fact upon which the case turns. Your answer should show that you know and understand the pertinent principles and theories of law, their qualifications and limitations, and their relationships to each other.

Your answer should evidence your ability to apply the law to the given facts and to reason in a logical, lawyer-like manner from the premises you adopt to a sound conclusion. Do not merely show that you remember legal principles. Instead, try to demonstrate your proficiency in using and applying them.

I

Ty, the owner of Ty Building, had been trying to sell it for some time.  Pam persuaded TV that she was the only person interested in purchasing it. Reluctantly, Ty lowered his asking price from ten to seven million dollars and verbally agreed with her to sell it to her for that price. Each party promised to perform in thirty days. They shoot hands and got out some wine to celebrate in Ty's office.

Pam signed documents binding her to their agreement. But before Ty signed any documents, Fred burst in with his old friend Rich.  Ty and Pam were astonished.  After Fred introduced his old friend, Rich stated that he wanted to buy the Ty Building, explaining that he had a special use for it that made it worth ten million dollars to him.  Pam replied with excitement that she had just contracted to purchase it from Ty, and offered to sell it to Rich if he raised the price to eleven million dollars.  Rich refused; he conceded that he could easily pay that amount, but asserted that it was only worth ten million.  Ty and Fred agreed with Rich's evaluation.

When Pam left, Fred confessed that he once loved Pam (his former wife) but now he hated her.  Ty told Rich and Fred that he had not signed anything.  Fred then explained that as a retired real estate professional, he had learned (correctly under the state's statute of frauds) that Ty was not bound to a written real estate contract until Ty had signed it. Accordingly, Fred urged Ty to convey the Ty Building to Rich in exchange for ten million dollars, a price they all knew was a fair one.

When Fred left, Rich and Ty quickly agreed with Fred's recommendation.  They entered into a written and signed contract to convey the Ty Building from Ty to Rich in exchange for ten million dollars.  They each performed this contract the next day.

When Pam learned about all this, she threatened to sue Ty, Rich and Fred.

What are Pam's rights, if any, against Ty, Rich and Fred? Discuss.

ll

One morning on a freeway over City, Carla negligently steered her car into the path of a Gasco truck driven by Gus, Gasco's employee. To avoid hitting the car, Gus swerved into a solid object on the shoulder of the freeway.

While Carla escaped all harm, Gus suffered serious permanent injury. The Gasco truck was damaged beyond repair; its cargo, a huge quantity of gasoline that Gasco had contracted to sell to Sam's Service Station, spilled out from the cylindrical tank attached to the truck. The gasoline poured down to the street below. Fearing an explosion and fire, occupants in the buildings near the pools of gasoline were evacuated from their buildings for the rest of the day. However, the local police and fire fighters prevented any explosion; there was no fire.

A.

The only asset that Carla owns that is available to pay Gus for the serious injury her negligence caused him, is her liability insurance policy she has with Insurco. Gus settled his negligence claim against Carla when Insurco paid him one million dollars, the limit of Insurco's obligation to any one person under the terms of the insurance contract.

Gasco sued Carla for damages for the pre-accident value of (1) its truck and cargo (2) the profit it would have made under its contract with Sam's Service Station and (3) the services that Gus would have rendered to Gasco had Carla not disabled him.

Is Carla liable to Gasco for each of these items? Discuss.

B.

Brokerco occupied one of the buildings that had to be evacuated. As a result, its employees failed to perform many transactions in stocks and bonds that its customers were seeking.

Brokerco sued Gasco and Tankco for damages. Assume that under the relevant precedents, both these defendants would have been strictly liable in tort for all personal injury that would have resulted had the gasoline exploded. For example, Gasco would have been liable to pedestrians on the sidewalk for burns on the theory that Gasco's transportation of gasoline in bulk by truck was an ultra-hazardous activity. Tankco, the manufacturer of the huge tank attached to Gasco's truck from which the gasoline spilled, would have been strictly liable on the theory that the tank leaked because it was defective in design. Assume also that Tankco's employees were negligent in designing the tank, and that this negligence was a proximate cause of the gasoline spilling out from the tank.

Is either Gasco or Tankco liable to Brokerco for the financial gains it would have received had their offices not been evacuated? Discuss.