slowly but surely Posted July 17, 2007 Report Share Posted July 17, 2007 So I'm studying for the CA Bar exam right now. Not too fun. But I perked up a little this evening when I came across this practice question (sorry this is the most interesting thing I have to contribute right now): QUESTION 2 Able is in the business of buying and selling rare coins. She buys coins for her inventory mostly at sales conducted by auction houses. Able uses the services of “purchasers,” who attend the sales and bid for coins to be added to her inventory. Each of the purchasers signs an agreement, the form of which is reproduced below: PURCHASER AGREEMENT The undersigned (“Purchaser”) agrees to act on behalf of Able (“Able”) as an independent contractor purchaser of rare coins. Purchaser shall attend sales specified by Able and bid on coins from a confidential listing supplied by Able (the “Buy List”), at a price not to exceed the amount shown on the Buy List. Purchaser shall not submit any bid until Able has given telephonic approval for the specific bid. Purchaser shall contract in the name of Purchaser for such coins, without disclosing the identity of Able. Funds for authorized purchases shall be supplied by wire transfer upon Purchaser’s request. Purchaser shall be compensated for travel expenses at the lesser of (i) Purchaser’s actual costs in attending such sales or (ii) a per diem of $150. Purchaser shall also receive a quarterly bonus equal to 25% of the savings effected by Purchaser on coins purchased during each quarter for less than the authorized prices set forth on the Buy List. This arrangement may be terminated upon notice by either Purchaser or Able. Baker signed a purchaser agreement. Baker thereafter attended several sales on Able’s behalf. At the first sale, Baker located coins on the Buy List. After calling Able for authorization, Baker contracted to buy the coins in his name at prices less than the Buy List prices. Able wired funds allowing Baker to consummate that transaction. Baker subsequently learned from the other purchasers that, although they have all been informed of the standard policy requiring them to get prior approval, they never call Able for authorization. If a coin is on the Buy List, they buy it if they can get it at or under the Buy List price. None of the other purchasers has ever had a problem getting the funds from Able to complete a purchase. Able has refused to forward the money only when the sale price has exceeded the Buy List price. After learning this information, Baker began purchasing coins at prices below the Buy List prices without Able’s prior authorization. Able always supplied Baker with funds to cover these purchases, despite the lack of Able’s prior approval. Last Saturday, Baker attended an auction and found a U.S. 1913 Leaping Liberty quarter in mint, uncirculated condition. The price shown on the current Buy List for a 1913 Leaping Liberty quarter is $50,000. Without calling Able, Baker contracted to buy the coin for $30,000, and now claims a bonus of $5,000 (25% of the difference between the $50,000 Buy List price and the $30,000 contract price). It turns out that the Buy List was in error. The entry should have read “1913 Leaping Liberty Quarter, mint, uncirculated condition: $20,000.” Able refused to wire the funds to close the transaction. What is the legal relationship between Able and Baker, and, in light of that relationship, what are the liabilities of Able and Baker to the third-party seller and to one another? Explain. Doesn't that sound like a good time! Link to comment Share on other sites More sharing options...
TreasureGirl Posted July 17, 2007 Report Share Posted July 17, 2007 I changed my mind, I don't want to be a dealer. That Leaping Liberty Quarter does sound intriguing, though Link to comment Share on other sites More sharing options...
Art Posted July 17, 2007 Report Share Posted July 17, 2007 It sounds like an interesting example. I think that the answer is very straight forward, but the thing that we call the "Law" may have a very different point of view. Link to comment Share on other sites More sharing options...
Topher Posted July 17, 2007 Report Share Posted July 17, 2007 I can't wait to get my first "Leaping Liberty" Quarter! LOL Just out of curiousity. What would the correct answer to the question be? Link to comment Share on other sites More sharing options...
thedeadpoint Posted July 17, 2007 Report Share Posted July 17, 2007 Able and Baker. Where's Charlie? Link to comment Share on other sites More sharing options...
jtryka Posted July 17, 2007 Report Share Posted July 17, 2007 I remember when I was in business school, I decided for fun to take a securities regs class in the law school, boy was that a culture shock! Link to comment Share on other sites More sharing options...
slowly but surely Posted July 17, 2007 Author Report Share Posted July 17, 2007 I can't wait to get my first "Leaping Liberty" Quarter! LOLJust out of curiousity. What would the correct answer to the question be? Able is SOL. Baker has "actual implied" authority to act without pre-approval. Able is going to have to pay the $30K for the coin and pay Baker his $5K bonus. The seller is in the best position. Because he never knew about Able, he can sue either Able or Baker to get his $30K (if he sues Baker, then Baker sues Able, and the laywers are happy ) Tons of fun. But, if it turns out I passed when the scores come out around thanksgiving, I'm going to get myself that lovely coin I have for my icon, and it will all have been worth it. Link to comment Share on other sites More sharing options...
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