Fall 1998  Question I -- 33%

(Dealing primarily with material covered during Spring Semester at Capital University Law School)

Limit your answer to 5 pages in a Bluebook

On Monday, February 2, Fred Franklin, the president of Franklin Fabrics called Mike Miller, sales agent for Miller Manufacturing for purchase of a new "calender", a large machine, used to make paper, cloth, or plastic smooth by pressing it between large rollers. Franklin indicated that the calender would need to be custom built to meet Franklin Fabric's performance specifications, with the specific design to developed by Miller Manufacturing. Franklin specified that the goods must be completed by December 15, for a price of $1,000,000, with the final design subject to approval of Everest Engineering, the engineering firm utilized by Franklin to approve designs, as is customary in its industry, in connection with custom equipment it purchases.

Mike responded that he thought this could be accomplished, but that he would have to check with his supervisors after receiving a copy of Franklin's performance specifications. Fred immediately faxed the specifications to Mark on a separate phone line, while they were still talking. After confirming their receipt by Miller, Fred advised Miller that a few days wouldn't matter and that "if you get back to me by the end of next week, we've got a deal."

Ten days later, on Thursday, February 10, before the expiration of Franklin's deadline, Miller drafted a letter and sent it to Franklin. The text of the letter provided:

Miller's letter was delivered to Franklin on Saturday, February 14, but was not opened by anyone at Franklin until late afternoon, Tuesday, February 17 (Monday was a holiday). Fred was so pleased that he had gotten a good price, he didn't pay attention to the paragraph regarding the time for payment.

Miller immediately commenced work on a design for the machine, incurring $150,000 in expenses. In April the design was completed, but never sent to Franklin for approval by Everest. Two months later, when the machine was 50% complete, at an additional cost to Miller of $400,000, Mike called Fred to inquire about the 20% down payment. Fred responded that he had never agreed to make a down payment and was still waiting to receive the design for approval by Everest, as they had agreed during their phone conversation. Miller remembered the conversation regarding the need for Everest to approve the design but didn't believe that this term was made part of their agreement. Nevertheless, confident that Everest would approve the design, he sent it to Franklin. Everest, however, at Franklin's urging, disapproved the design requiring changes that would cost Miller thousands of dollars with no apparent benefit to Franklin. Miller is reluctant to either make the changes or to continue work on the existing design, without receiving some partial payment from Franklin as specified in Miller's letter.