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Business Associations

Exam 8
30 minutes

Fact Pattern

An inventor retained a woman to act as his agent to purchase 25 computer chips, 25 blue lenses, and 25 lawn mower shutoff switches. The inventor told her to purchase only:

• Series A computer chips,

• blue lenses that cost no more than $300 each, and

• shutoff switches that could shut down a lawn mower in less than one second after the mower hits a foreign object.

The woman contacted a chip manufacturer to purchase the Series A computer chips. She told the manufacturer that she was the inventor’s agent and that she wanted to purchase 25 Series A computer chips on his behalf. The manufacturer told her that the Series A chips cost $800 each but that she could buy Series B chips, with functionality similar to that of the Series A chips, for only $90 each. Without discussing this with the inventor, the woman agreed to purchase 25 Series B chips, signing the contract with the chip manufacturer “as agent” of the inventor. The Series B chips were shipped to her, but when she then took them to the inventor and explained what a great deal she had gotten, the inventor refused to accept them. He has also refused to pay the manufacturer for them.

The woman also contacted a lens manufacturer for the purchase of the blue lenses. She signed a contract in her name alone for the purchase of 25 blue lenses at $295 per lens. She did not tell the lens manufacturer that she was acting as anyone’s agent. The lenses were shipped to her, but when she took them to the inventor, he refused to accept them because he had decided that it would be better to use red lenses. The inventor has refused to pay for the blue lenses.

The woman also contacted a switch manufacturer to purchase shutoff switches. She signed a contract in her name alone for switches that would shut down a lawn mower in less than five seconds, a substantially slower reaction time than the inventor had specified to her. When she signed the contract, she told the manufacturer that she was acting as someone’s agent but did not disclose the identity of her principal. The switches were shipped to her. Although the inventor recognized that the switches were not what the woman had been told to buy, he nonetheless used them to build lawn mowers, but now refuses to pay the manufacturer for them.

All elements of contract formation and enforceability are satisfied with respect to each contract.


Questions

  1. 1. Who is liable to the chip manufacturer: the inventor, the woman, or both? Explain. 

    2. Who is liable to the blue-lens manufacturer: the inventor, the woman, or both? Explain. 

    3. Who is liable to the shutoff-switch manufacturer: the inventor, the woman, or both? Explain.

Question 1

1. Who is liable to the chip manufacturer: the inventor, the woman, or both? Explain. 

2. Who is liable to the blue-lens manufacturer: the inventor, the woman, or both? Explain. 

3. Who is liable to the shutoff-switch manufacturer: the inventor, the woman, or both? Explain.

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