Answers to Winter 2010
California Bar Exam Questions

The Writing Edge

Winter 2010 Bar Question 4

Remedies

In 2001, Lou was the managing partner of Law Firm in State X and Chris was his paralegal. Realizing that Chris intended to go to law school, Lou invited Chris and his father to dinner to discuss Chris’s legal career. Aware of Chris’s naive understanding of such matters, Lou, with the authority of Law Firm, made the following written offer, which Chris accepted orally:

1) After graduation from law school and admission to the Bar, Law Firm will reimburse Chris for his law school expenses;
2) Chris will work exclusively for Law Firm for four years at his paralegal rate of pay, commencing immediately upon his graduation and admission to the Bar;
3) Chris will be offered a junior partnership at the end of his fourth year if his performance reviews are superior.

In 2005, Chris graduated from law school and was admitted to the Bar, at which time Law Firm reimbursed him $120,000 for his law school expenses. Chris and his father invited Lou to dinner to thank him and Law Firm for their support. During dinner, however, Chris advised Lou that it was his decision to accept employment with a nonprofit victims’ rights advocacy center. Lou responded that, although Law Firm would miss his contributions, he and Law Firm would nonetheless support his choice of employment, stating that such a choice reflected well on his integrity and social consciousness. Nothing was said about Law Firm’s payment of $120,000 for Chris’s law school expenses.

In 2008, Chris’s father died. Chris then completed his third year of employment at the advocacy center. Not long thereafter, Law Firm filed a breach-of-contract action against Chris seeking specific performance of the agreement or, alternatively, recovery of the $120,000. In State X, the statute of limitations for breach-of-contract actions is five years from breach of the contract in question.

What legal and equitable defenses can Chris reasonably present to defeat the relief sought by Law Firm, and are they likely to prevail? Discuss.

All questions © 2010 California State Bar Exam. All rights reserved

Remedies
Question 4, Winter 2010

Legal defenses.
Chris can defeat Firm’s claim for legal damages if the contract is unenforceable.
Statute of Frauds. A contract which by its terms cannot be performed within one year of its making is voidable unless it satisfies the Statute of Frauds.

Here, the contract was entered in 2001 before Chris began law school. All three provisions of the contract require that Chris complete law school and be admitted to the bar. Law school is a three or four year program. Studying for and awaiting results of a bar exam generally takes three to six months more. Therefore, the contract cannot be completed within one year of its making in 2001.

Writing? The Statute of Frauds is satisfied if the defendant signs a writing. Here, Firm made a written offer but Chris accepted orally. Therefore, the Statute of Frauds  is not satisfied by a writing.

Part performance? The Statute of Frauds is satisfied if any provision of the contract is performed, regardless of whether the performance is by the plaintiff or the defendant. Here, Firm paid Chris his law school expenses of $120,000, as promised by the contract. Therefore, part performance satisfies the statute.

Conclusion: the Statute of Frauds is satisfied and the contract is not voidable.

Chris can defeat Firm’s claim for legal damages if he is not in breach.
Doctrine of Divisibility. When the terms of a contract are broken into separate units of performance and payment, defendant is not in breach if he completes performance of some units but not others. Here, there are three provisions in the contract.

In Provision 1 Firm promises to pay Chris’s law school expenses when he completes law school and is admitted to the bar. In Provision 2 Chris promises to work at Firm for four years as a lawyer but at the salary of a paralegal. In Provision 3 Firm promises to consider Chris for partnership after four years if his performance reviews are superior.

Arguably, the contract is divisible and Provision 1 is a single unit whereby Chris’s performance is completing law school and being licensed and Firm’s performance is reimbursing the costs of his education. However, there are problems with this interpretation. First, Chris does not make a promise to Firm to complete law school.
Second, if Provision 1 is divisible, there is no separate consideration for Provisions 2 and 3.

In Provision 2, Chris promises to work at a greatly reduced salary for four years. This does not stand alone as a unit of performance and payment. Arguably, Provision 2 and 3 are divisible from Provision 1. In that case, Chris promises to work for four years at a greatly reduced salary and Firm promises to consider him for partnership if his work is superior. Provision 3 does not really contain any consideration for Chris’s reduced salary. Firm only promises to consider Chris for partnership.  Furthermore, whether Chris’s performance reviews are superior is within the control and judgment of Firm. Therefore, Provision 3 does not provide Chris consideration for his four years at low pay.

Conclusion: the contract is not divisible.

Chris can defeat Firm’s claim for legal damages if his performance was excused.
Waiver? Defendant’s performance is excused if plaintiff tells defendant he no longer has a duty to perform a contract provision. Here, Firm paid Chris $120,000 fulfilling Provision 1 of the contract. Then Chris told Lou that he did not plan to work for Firm. Lou said Firm would support his choice of employment and said nothing about returning the $120,000.

However, a waiver serves as an excuse only if plaintiff excuses defendant’s performance before it is due. Here, once Chris graduated and was admitted to the bar and received Firm’s reimbursement his duty to work exclusively for Firm for four years was absolute. Chris accepted other employment and then told Lou. Therefore, Chris had already breached before Lou said he supported Chris’s decision. Since a waiver only excuses later performance and here Chris breached before the waiver, it is not effective.

Conclusion: waiver does not excuse Chris’s breach.

Equitable defenses.
Chris can defeat Firm’s claim for specific performance by showing that the elements of specific performance are not met.
Specific performance requires: inadequate remedy at law, definite and certain contract, and feasibility of enforcement.

Inadequate legal remedy. If money makes plaintiff whole, a court will not order specific performance. Here, Firm paid Chris $120,000. If Chris pays Firm $120,000, then Firm has received all that it lost. Therefore legal remedies are adequate.

Definite and certain contract. If the terms of the contract are not clear, a court will refuse to order specific performance. Here, the meaning of “superior performance reviews” is not certain. Therefore, a court will refuse to order specific performance.

Feasibility of performance. A court must be confident that it can enforce compliance with its order. A court does not favor orders which require continued monitoring. Here, the order would be to force Chris to work for Firm for four years. Enforcing defendant’s labor is not feasible. A court cannot order an employee to work for an employer. Further, the court would have to monitor compliance for four years. Therefore, the remedy is not feasible.

Conclusion: The elements of specific performance are not met, and a court will refuse to grant specific performance.

Chris can defeat Firm’s claim for specific performance by proving
equitable defenses.
Unclean hands. A court will not order equitable relief if the plaintiff has acted inequitably concerning the contract. Here, Lou knew that before Chris attended law school, his understanding of the contract was naïve. The question is whether the contract took unfair advantage of Chris based on his naivete. Stated another way, is Chris working as an attorney for four years at paralegal pay adequate consideration for what the Firm is providing.

First it should be noted that the costs were reimbursed only after the fact, so that the Firm did not make it possible for Chris to go the law school. The analysis might be different if the firm provided Chris the money for law school expense before he began law school. Making law school possible where it might not have been otherwise is another form of consideration. And the interest on the money over four years is an additional consideration. But, as it was, Chris had to find his own financing. So the payment of the $120,000 after the fact is just a cash trade for the contract’s other two provisions.

Provision 2 requires Chris to work as an attorney for paralegal wages for four years.
This represents Chris’s repayment at $30,000 a year. The question is whether the difference in pay between a paralegal and a lawyer is greater than $30,000 a year. It almost certainly is greater. That means that Chris is paying significantly more than he is receiving.

It could be argued that Provision 3 also provides consideration to Chris for his sacrifice in pay, in that Chris might make partner after four years. On the one hand it is possible that being made partner after only four years faster than normal and is a benefit to Chris. On the other hand Firm has within its control whether it gives Chris superior performance reviews, and even in defining what superior reviews means. Firm is not promises any actual consideration in Provision 3. Therefore provision 3 of the contract does not provide Chris any additional consideration for his four years of low paid labor.

Therefore the bargain boils down to paying Chris $120,000 in advance in exchange for his working as a lawyer at only $30,000 a year above the paralegal wage rate.

While a court will not inquire into the adequacy of consideration to determine the validity of a contract, it will examine whether unfair advantage was taken of the defendant when weighing equitable relief. 

The contract terms heavily favor the Firm and Lou apparently took advantage of Chris’ naivete in making the contract. Therefore, a court will refuse to order specific enforcement because of the Firm’s unclean hands.

Laches. Equity will be denied when the plaintiff has waited an inequitable length of time to sue. It is inequitable when the delay prejudices the defendant by loss of evidence needed to defend the suit. Here, the Firm waited to bring suit against Chris until after Chris’s father died. Chris’s father was a witness to the original offer and also to the dinner in which Chris breached and Lou did not insist on the Firm’s rights.

The question is what evidence could Chris’s father provide that would be instrumental to Chris’s defense. The original contract is in writing, so it does not seem as if the father’s evidence is necessary. As to the dinner after law school, Chris might need his father’s parol evidence to prove that Lou forgave Chris’s obligations to work for Firm. However, if there is evidence that Chris had already accepted another job, he is already in breach and no matter what Lou said it will be ineffective to excuse Chris’s breach. Therefore, a court will not refuse equitable relief based on laches.

Conclusion: A court will refuse to issue equitable relief because Lou has unclean hands.

Answers © 2010 Vivian Dempsey, The Writing Edge™ All rights reserved.

© 2010 Vivian Dempsey The Writing Edge™
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