Once completed the original examination shall be placed in an envelope with the following information written on the front of the envelope “Completed Final Examination HRTM Fall 2013-Joseph Dworak.”  The envelope shall be returned on the scheduled date for the Final Examination Thursday, December 12, 2013 at 5:00 p.m., SPX 209.  
[Performance Evaluation]
This examination is a fill-in examination.  You are required to read the Factual Pattern.  After you read the Factual Pattern, proceed to the Report.  You will note that there are numbers throughout the Report.  A word or phrase has to be used in place of each number to make the sentence correct.  Utilizing the words listed at the end of the Examination, choose the word or phrase which best fits.  Write that word next to the appropriate number on the list which appears at the end of the Examination.  Do not write numbers.
Factual Pattern
The annual sales meeting of Happy World Hotel (“Happy World”) is this afternoon.  You are the legal advisor assigned to the sales department of Happy World.  At the sales meeting, the Vice President of Sales must report on all outstanding material legal issues involving contracts.  The Vice President, with the help of others, has prepared a draft report.  The draft report is missing a number of legal terms and phrases which are necessary to identify and explain the various legal issues.  You are to replace the numbers with the pertinent legal terms and you have two hours to do so.
Over the last year, Happy World has been involved in several unique contract disputes.  Hotel operations have changed, and the transition has not been without problems.  Happy World also has had disputes with former employees and others who were previously employed by Happy World.  Happy World is also working with the United States Attorney General.  
The first legal issue deals with a dispute that Happy World had with its former employee, John Smart.  Mr. Smart conceived for Happy World a new and innovative machine used to more effectively clean and sanitize hotel rooms (especially against viral diseases such as the swine flu), which utilized cutting edge technology that had not yet been used by anyone in the industry.  Happy World believes it owns all rights to this technology.  Happy World filed all the applicable documents to obtain the exclusive right to use this technology.  Happy World did so by filing a (1) application.  Mr. Smart left the employment of Happy World and started a company to manufacture the machine using Happy World’s technology to sell to the larger hospitality industry using non public information, which over the years Happy World had not disclosed and which gave Happy World an advantage over its competitors.  Happy World considered this information a (2).  Over the years, Happy World has also developed the unique names and processes for making hotels easier to clean and the names have become so well known that they are subject to (3) protection.  Happy World sued Mr. Smart because Happy World believed that its intellectual property rights were being infringed.  
The case against Mr. Smart was settled because Happy World was able to enlist the help of the U.S. Attorney General.  Happy World requested the filing of a criminal complaint in addition to its own civil complaint.  Happy World contended that the property that Mr. Smart was using was, in effect, stolen from Happy World.  Through civil discovery procedures, Happy World received the relevant information regarding what Mr. Smart was doing.  This information was turned over to the U.S. Attorney, and the U.S. Attorney determined that there was (4) to allow the U.S. Attorney to conduct a raid and seize documents and other material from Mr. Smart consistent with the protections afforded Mr. Smart by the (5).  Once this information was obtained, Mr. Smart did not have the basis or the incentive to contest the civil complaint.  Thereafter, the matter was settled by Mr. Smart paying Happy World a substantial amount of money.  However, in exchange for the payment, Mr. Smart wanted assurances from Happy World that it would not pursue him any further.  In other words, he wanted a signed settlement agreement.  However, Happy World did not want to give him a (6), which typically would have included a provision pursuant to California Civil Code Section 1542 of a (7).  For this reason, Happy World agreed to a (8).  In the settlement agreement Happy World included a confidentiality provision.  Happy World recognized that should Mr. Smart breach the confidentiality provision, the monetary injury would be difficult to ascertain.  For this reason Happy World included a (9).  Happy World was careful on how this part of the settlement agreement was drafted because Happy World recognized that if the court considered this part of the contract to be a (10), the courts would not enforce it.  The matter with Mr. Smart has been successfully resolved and Happy World does not anticipate having any further problems with him.
Happy World did, however, have problems with their original manufacturer who was responsible for making the cleaning machines for Happy World.  Apparently, the original manufacturer became concerned that Happy World did not have the rights to use the technology for the manufacturing of the cleaning machines.  The original manufacturer sought to take advantage of the issues raised by Mr. Smart.  Happy World believed that the manufacturer was trying to get out of the contract it had with Happy World by claiming that they would be sued if they manufactured the cleaning machine because, at least according to the argument raised by Happy World’s original manufacturer, Mr. Smart and not Happy World owed the intellectual property rights to what is being manufactured.  Happy World believed that the manufacturer wanted out of the contract because it simply had negotiated a bad deal and was trying to raise legal issues as to why it should not perform.  Happy World believes that the issues raised by the original manufacturer were motivated, in part, because it, the original manufacturer, had agreed to allow Happy World to extend the contract for a period of two years for which Happy World gave independent consideration.  Basically, Happy World had an (11).  Apparently, the manufacturer was claiming that because Happy World allegedly did not have the rights to the technology or the other intellectual property rights to the cleaning machine that Happy World had manufactured that the manufacturer should be excused from further performance under the concept of (12).  Happy World, of course, established that the technology was legally owned by Happy World, and when the manufacturer refused to manufacture what Happy World was going to order but had not yet ordered, the manufacturer’s action was an (13) of the contract.  As a result, Happy World covered and attempted to recover its losses by obtaining a substitute manufacturer.  Typically, a non breaching party in the position of Happy World would be able to collect any additional costs it had to pay for the items manufactured elsewhere.  These damages are generally referred to as (14).  Happy World would not be able to recover the losses it occurred because of its inability to launch an entirely different product line of “green” cleaning technology products which was going to be financed by the profits from the sales that Happy World anticipated making from the existing product line.  Happy World would not be able to recover these types of damages which are considered to be (15) because this type of loss was not in contemplation of either Happy World or the original manufacturer when the contract was first entered into.  
Odd as it may be, it turned out that the purchasing department of Happy World quickly found a new supplier which was motivated to do business with Happy World.  The new supplier agreed to manufacture at a lower cost the products needed by Happy World.  Under these circumstances, all that Happy World would be entitled to recover from the original manufacturer would be (16).  It would not make economic sense for Happy World to file a lawsuit to recover this type of loss unless the contract with the original manufacturer included a (17).  Unfortunately, the contract with the original manufacturer contained no such provision, and to pursue litigation would merely be an expensive as well as a time consuming endeavor without the ability to recover any substantial award or the cost of pursuing such a case.  
Although Happy World was able to find a new supplier or manufacturer, the circumstances surrounding how that arrangement was reached had its own unique problems.  Originally, the manufacturer was contacted by telephone, and the contract was entered into over the telephone.  This presented a problem because both Happy World and the new manufacturer are merchants and the agreement because it (18) was covered by the (19).  This meant, of course, that the agreement had to be in writing, and if not, the telephone agreement could be (20) by the new manufacturer.  If this happened, Happy World would still have to pay for the reasonable value of goods received.  The legal arrangement would be considered to be a (21), and the amount Happy World would be required to pay for the goods received would be determined by the legal concept of (22) because if it did not pay that amount, it would be (23).  
Because the contract with the new manufacturer is such a good deal for Happy World, we are concerned that at some point the new manufacturer will try to raise legal argument to (24) or get out of the contract.  Happy World should evaluate these various legal theories the new manufacturer might raise and determine whether these theories are available to the new manufacturer.
The contract would not be considered a (25) because it was negotiated and made at arms’ length.  In particular, Happy World first made an offer which at common law under the (26) meant that the (27) had to be in the same manner as presented.  It was not.  Rather, the new manufacturer rejected the original offer and the new manufacturer changed the terms of the offer and made a (28).  It was not (29) before Happy World agreed to it which meant that Happy World still had the (30) which we exercised.  Because our mutual intent at all times was manifested by our oral communications, the contract is not an (31).  Nor would the new manufacturer have any basis to claim that the manufacturer’s assent to the contract was obtained involuntarily by some action on our part which put their business at peril, which defense is typically referred to as (32).  Even if the new manufacturer would have liked to have had better terms, there is nothing procedurally wrong with how the contract was entered into, nor was there anything substantially onerous about any of the provisions of the contract to allow the new manufacturer to claim that the agreement was an (33).  
At this point, Happy World should be careful to outline all the terms in a written agreement to be presented to the new manufacturer.  If a written document is signed and Happy World has a dispute about what was agreed to with the new manufacturer, it is likely that the court would find that the agreement is an (34) such that the court would not need to require the introduction of any evidence extrinsic or external to the four corners of the document.  Rather, the court would look at the words written to ascertain the respective rights and obligations of Happy World and the manufacture based upon the (35).  
Due to the change in manufacturing, Happy World also decided to make a product change.  This meant that the new products will be slightly different from our original products.  The sales department has determined that there is no market for these older products once the new products have been announced to the marketplace.  For this reason, Happy World has determined that the old products would be sold by auction.  Happy World has to determine, however, what type of auction to conduct.  If Happy World wants a minimum price that the goods will sell for, then the auction should be (36).  On the other hand, if we simply want the product sold to the highest bidder, then the auction should be an auction (37).  
Another issue to be addressed is the desire of the new manufacturer to assign the rights to manufacturer the products sold to Happy World to another entity.  Happy World would not like this to happen, and the contract protected Happy World by a prohibition against the assignment which is typically referred to as a (38).  At this point, it is not clear that the prohibition will work.  If it doesn’t and the assignment goes through, this does not mean that Happy World would have no rights.  To the contrary, Happy World would have the additional right to sue this new party even though Happy World is not in privity of contract with that new party.  Happy World would be considered the (39) of the agreement between the new manufacturer and the person with whom the new manufacturer contracted with to actually do the manufacturing of the goods that Happy World is purchasing from the new manufacturer.  However, if under the circumstances Happy World is considered merely an (40), then Happy World would only be able to sue the new manufacturer and not the person or entity which was assigned the manufacturing contract.
Happy World is in the hospitality business, and although the cleaning machine is used to clean hotels, Happy World should “spin off” this technology and sell it through another related but different business.  The machine is likely to be a market success, and if it is sold through a separate entity, that entity has to afford more protection than one person starting and running the business which is a (41).  Management responsibilities and additional capital will be needed.  Others can share in the ownership and management and a (42) can be used.
Alternatively, if Happy World wants to keep all management responsibility, and only needs capital investment, it could become a (43).  In both these forms of organization the owners have unlimited liability.  Also any profits will ultimately be reported on the individuals’ personal tax return which, of course, is a (44).  These types of entities are not tax paying entities, but rather tax reporting entities and the income is reported to the individuals by a (45).
If they want to protect against having unlimited liability to their creditors but want a consolidated and simplified management decision making process, they may elect to be a (46).  Yet, this form also limits growth because the amount of capital depends upon the number of the members.
The likely form of organization is one which has more structured management as well as protection against liability to the creditors of the business.  The question is how large the company will become.  If the goal is to be a company whose stock is listed on a national stock exchange, the company must follow the process to sell its stock, which process is commonly called an (47).  Once this approval is obtained the company’s stock can be sold on a stock exchange, and once the company is commonly referred to as a (48).  If this route is followed, the most likely code of the state of incorporation will be the (49) because it is much more management friendly than the (50).  In either case, under the rules of the Internal Revenue Code for tax purposes, the corporation will likely be a (51) as opposed to a (52).  Often shareholders who make decisions focusing on tax issues also seem to run into problems on how they run the business.  A corporation is a separate legal entity and should be treated as such.  If the shareholders fail to do so, they may become the (53) of the corporation and lose their protection of limited liability under the equitable concept of (54).
The second of these two tax code provisions will mean that any taxable income of the corporation will not be shown on the shareholder’s tax return, but the corporation will file its return.  The typical way for profits to be given to the shareholders or owners of the corporation is by the declaration of a (55), which results in the problem commonly referred to as (56), which basically means income is reported and paid both at the corporate level and individual corporate level.
Lastly, this report also addresses the legal issues surrounding the injury that occurred at the Happy World facility in Vermont and what the company should expect to happen based upon recent events.  To summarize, a child in Vermont was using a complimentary bicycle that we make available to our guests and the forks allegedly failed, causing a serious accident.  The child broke his neck and is a quadriplegic.  This is the first claim of its kind raised against Happy World.  This report will address the rules regarding the process to be followed, which are typically referred to as (57), and in the later section of this memorandum I will address the (58) which deal with the respective rights and obligations of the parties.  
The first question that comes to mind is where will we be sued?  The headquarters of Happy World are located in California, but the injury occurred in Vermont.  Hence, the first question is whether Vermont has (59), and that will be determined upon whether Vermont has a (60).  If it does, then the company may be sued in the state court of Vermont.  If we are sued there, we will need to be concerned about whether a Vermont State Court would be unduly sympathetic to a citizen of their state.  For that reason, we should determine whether we can have a federal court hear the claim based upon the fact that we are an out of state company and (61) exists.  If both the state of Vermont and the federal court located in Vermont have the power to hear this case, then (62) is said to exist.  If the matter can only be heard in the Federal court because it exclusively legislated in this area, then (63) exists.
Another question we need to determine is who will actually be the person filing the lawsuit.  This person is referred to as a (64).  Will it be the injured child or his parents?  Typically, the parents, as guardians, will sue on behalf of the child.  Since we are being sued, we will be the (65).  Regardless of the technical issue of who is the proper person to sue, this is a relatively sympathetic case and we may have considerable exposure although we may have no legal culpability.  Therefore, before proceeding to litigation, we should consider whether any type of (66) procedures are available.  If so, I recommend (67), because this will afford us the opportunity to see if the matter can be settled with the help of a (68) without having an adverse determination on the merits of the lawsuit.  Alternatively, if we want to hear the dispute outside of the court system, we may want to consider (69).  This can either be (70), where the case is heard and decided by an arbitrator and the decision is a final decision enforceable by the court.  On the other hand, we might have (71), whereby if either side is unhappy with the resolution they can still seek to have the case heard in court.  There are two types of service providers who can provide this service.  I have checked and the (72) which is the service provider that has a longer history has offices in Vermont.  However, we might want to hire a retired judge from (73).  
If we are not able to agree to keep this matter out of the court system at some point a lawsuit will be filed.  A lawsuit will be initiated by the filing of a (74).  After it is filed, we will have to be given formal notice of that occurrence, which is typically referred to as (75).  When that happens, we will receive a copy of another document that notifies us of our obligation to respond, which is typically referred to as a (76).  Because the child who was injured presents a sympathetic case, if this matter is heard by a jury the award may be quite large.  Hence, I have looked at whether it must be heard by a jury.  I have determined that the right to jury is guaranteed by the (77).  Recognizing that we may be stuck with a jury, we need to spend much time making sure that the jury selected has no particular biases.  I would suggest we start thinking about those questions that we give to the lawyer during the process of (78).  Obviously, much more will need to be done before we get to that stage of the litigation, including the items I will mention next.
We should immediately begin to think about what information might help us defend against the lawsuit and what we need from the other side and what information the other side will need from us.  This is typically referred to as (79).  The tools available to us will be the ability to get documents or other relevant information, generally referred to a (80).  Additionally, we will be able to interview the child and parents and other witnesses under oath in front of a court reporter, typically referred to as a (81).  One of the things we may be concerned about is whether there is some prior injury to the child which exacerbated the injuries the child suffered while riding Happy World’s bicycle.  If so, we may want to get from the child or his parents information about his medical history through the sending of written questions typically referred to as (82).  If they are unable to provide that information, then we may need to obtain that information from his doctors and we will need to prepare a (83).  Whether we will get this medical information depends upon whether those medical records are protected from being disclosed or deemed to be (84) documents.
One of the issues that we may want to address to resolve the case without the necessity of trial is the legal consequence of the fact that we have been told that the child modified the bicycle by changing the handle bars and the seat.  Although we need to research the issue under Vermont law, misuse of the product, if it can be proved may be a defense.  If there is no disputed issue of fact that the bicycle was modified and misused and Vermont law acknowledges the defense, we might be able to win the case on a (85).  
We have also learned that the injured child’s parents have been very aggressive about commenting upon Happy World.  They have raised questions about the safety of our facilities and we are beginning to lose sales.  We would like to see these statements stopped.  To stop these comments, if at all, we would need to ask the court for an (86).  If we can establish that what they are telling people is untrue that is (87).  On the other hand, if the defamatory information is written, then we would have to sue for (88).  However, one of the things that we are going to come up against is whether the (89) of the United States Constitution allows them to speak their minds within impunity.
An option that we have is not to answer the lawsuit filed in Vermont based on the grounds that we do not think it has the legal power to hear the case.  If that occurs, then a (90) will be entered against us once a court form entitled (91) is prepared and filed with the court if the procedures in Vermont are similar to those in California.  When the court in Vermont awards money to the plaintiff because we failed to respond, the award will be referred as a (92), and will then be brought to California to determine whether it can be enforced.  This will occur only after we have been afforded our rights of (93) which at a minimum will require the plaintiff to schedule a hearing on the Courts (94).  The question of whether California has to recognize the Vermont judgment will depend upon the application of the (95) clause of the United States Constitution.
Another issue that we should explore is the recent legislation that has been enacted by the United States Congress governing the protection of children who are injured by bicycles sold in interstate commerce.  We will need to look at this statute to determine whether it exclusively regulates the area and has (96) this area of law.  If it has, then we will only need to be concerned about federal law as opposed to state law based upon the (97) of the United States Constitution.
We should also look to see if we have insurance coverage.  The policy will typically be a (98) policy.  We should (99) the claim to see if the claim is accepted.  If so, then the insurance company will have recognized its (100) and will have coverage for the claim.  If not, we should expect to receive a (101) letter.  If the insurance company sends us this type of missive, then it will have only acknowledged its (102).  If the insurance company fails to recognize any coverage and does so wrongfully and we are on our own to defend our case, we can later sue the insurance company for (103), rather than (104) which if it applies is a claim the defendant has against our insurance company.  If we have to sue, we will sue the insurance company and seek to recover (105) in addition to any other losses we have suffered.  Such a recovery is permissible to make an example out of the insurance company and to deter other insurance companies from acting in a similar manner.  If we do not get full coverage but only a defense, and we think the lawyer hired by the insurance company has a conflict, we should think about asking the court to appoint (106) who we can be assured will be looking out for our best interests.
Now that I have covered the major issues regarding the methods of enforcing these various rights, I will, as I mentioned earlier, review the (107) law issues, which consists of those laws that create the applicable legal obligations.  I have conducted some preliminary research and found that the Legislature in Vermont has not enacted any laws in this area typically referred to as (108).  Since the Legislature hasn’t spoken, I then conducted legal research and looked at the case law, typically referred to as (109).
The area of law that covers this is generally referred to as (110) law because we do not have a contract with the inured child.  The claim that most likely will be brought is the unintentional tort of (111) because it is claimed that we fell below the applicable standard of care.  In looking at this area of law, it seems to me that the injured child or his parents need to show that we owed the child a (112) of care and that we (113) that duty and that the child suffered (114) and that those were (115) by us.  As far as I know, we are aware of the incident, but no lawsuit is filed.  It must be filed within two years.  Under the (116) if a lawsuit is not filed within that time, it will be barred.
I do not think we will be lucky enough to avoid being sued.  In fact, we fully expect to be sued, and I should explain how the matter should be prepared for trial.  Typically the lawyers will be doing a variety of things once all relevant information has been exchanged.  The lawyers will be preparing documents in anticipation of trial which are given to the Judge prior to the trial.  These include documents outlining what law will be told to the jurors by the judge and are generally referred to as (117).  Also, sometimes there are issues that come up during the litigation that are not relevant to the dispute and only have a tendency to distract the trier of fact.  Other times, information is revealed during the course of the exchange of information which one party or the other would not like to have considered by the trier of fact.  Under these circumstances the lawyer, prior to trial, will prepare pleadings and other documents generally referred to as (118).  These documents are usually given to the judge the first day of trial and there is a meeting with the judge prior to the beginning of the trial to discuss the issues raised.
Once this preliminary meeting is concluded, the Judge will ask the clerk to call potential jurors from the jury room.  At this particular time, generally 12 jurors and 2 alternative jurors are selected and the lawyers are given the opportunity to ask the jurors questions.  This procedure I have already mentioned, but did not explain.  I will now.  One of the things the lawyers are trying to ascertain during this questioning is whether the jurors are biased.  In addition, the lawyers are trying to determine whether they feel, for whatever reason; the jurors will be good jurors or not so good jurors in light of the unique facts of the case.  If, during this questioning the lawyers discover that one or more of the jurors either knows the parties or expresses some bias, then the juror may be excused by a (119).  On the other hand, there are some jurors who, for whatever reason, a particular lawyer may not think will be in his or her client’s best interest.  Although there are a limited number of these, the lawyer can excuse these jurors by exercising what is generally referred to as a (120).
Once a jury is selected, the case begins and it typically begins with the lawyer who represents the plaintiff who gives an (121).  Thereafter, witnesses are called.  The lawyer who calls the witnesses conducts what is referred to as (122).  The lawyer who does not call the witness then is afforded the opportunity to engage in (123).  Once a plaintiff has finished his case, then we as a defendant can either put on evidence regarding any defense that we have to the complaint or put on evidence regarding our (124) if we responded to the complaint by filing its own responsive lawsuit.  For example, if we sued the child’s parents for negligence because they allowed the child to modify our product we will have to prove that case or set of facts.  After the case is concluded, the jury renders its decision, which is typically referred to as a (125).  Thereafter, the losing party may challenge the jury’s decision on a number of grounds, including one procedure referred to as (126).  If that is not successful, then a judgment will be entered.  At that time, one of two things will happen.  Either the case is appealed or it is not.
If the case is appealed, two types of documents among others need to be prepared and sent to the reviewing court.  One concerns what was said during the course of the trial, which is generally referred to as the (127).  The other is copies of all documents that were presented during the trial, which is generally referred to as the (128).  If there has been a money judgment awarded by the court, then to stop the enforcement of that judgment a bond has to be posted.  If a bond is not posted, then the person in whose favor the judgment is entered has the ability to engage in efforts to collect the money.  Typically the procedures to collect the money involve the recordation of documents with the various county recorders’ office that are referred to as (129).  These documents, once recorded, become liens on any of the real property owned by the person who owes the money pursuant to the judgment.  In addition, if there are assets other than real property, the person who is owed the money based upon the judgment may also file with the Secretary of State a document generally referred to as a (130).  Also, the person who is owned money may engage in efforts to determine the nature, extent and location of the various assets owned by the person who owes the money.  This is typically done through a court proceeding referred to as a (131).  If after undertaking this proceeding information is obtained about the nature, extent and location of the assets, then the person who is owed the money can obtain from the court documents which will allow the money to be retrieved.  For example, if the person who is owed the money learns that the person who owes the money has a bank account, then documents may be issued on the bank to take that money and these documents are referred to as (132).
[Additional Factors for Evaluation]
This section is optional.  You are not required to write anything or provide any additional information.  If you have done well on the tests and are satisfied that your final grade will be based on your test results you may wish to ignore this section.  On the other hand, if you feel there are other factors which you feel should be considered in the evaluation of your final grade then this section affords you the opportunity to provide any relevant information such as the depth and scope of your class participation if any, how you enhanced, if at all, the learning experience of all students, or any other information you consider meaningful in evaluating your grade for the class as well as providing an explanation of what grade you believe you have earned as a result of the consideration of these other relevant factors.
[Additional Factors for Evaluation]

4th amendment
1040 Return
abstracts of judgment
alter ego
alternative dispute resolution
American Arbitration Association
anticipatory repudiation
attorneys’ fees
binding arbitration
C Corp
California Corporations Code
challenge for cause
clerk’s transcript
common law
concurrent jurisdiction
contract of adhesion
covenant not to sue
Cumis counsel
default judgment calendar
Delaware Corporations Code
direct examination
diversity of citizenship
double taxation
due process
duty to defend
duty to indemnify
economic duress
exclusive jurisdiction
First Amendment
first party bad faith
full faith and credit
General Partnership
implied in fact contract
incidental beneficiary
integrated agreement
intended beneficiary
involved a sale of goods valued over $500
IPO (Initial Public Offering)
judgment by default
jury instructions
K-1 Return
Limited Partnership
liquidated damage provision
LLC (Limited Liability Company)
long arm statute
mirror image rule
motion for summary judgment
motions to exclude/in limine
nominal damages
non-binding arbitration
opening statement
option contract
order of examination (OEX)
peremptory challenges
personal property lien
piercing the corporate veil
plain meaning rule
power of acceptance
probable cause
procedural rules
Publicly Traded Company
punitive damages
quantum meruit
quasi contract
reporter’s transcript
request to enter default
request to produce
reservation of rights
restraint against alienation
service or process
Sole Proprietorship
statute of frauds
statute of limitations
Sub S Corp
substantive rules
supervening illegality
supremacy clause
third party bad faith
trade secret
U.S. Constitution
unconscionable contract
unjustly enriched
voir dire
waiver of unknown claims
with reserve
without reserve
writs of execution