STANFORD UNIVERSITY WINTER 2000 DEPT. OF MANAGEMENT SCIENCE MS&E 281AND ENGINEERING LEGAL STRATEGY & ANALYSIS MidTerm ExaminationTime: 2 HoursPlease return your completed exam to Vicki Fahrenholz, Terman Room 321, at or before 12 noon, Monday,February 14.1. Mike Michelangelo makes Betty Rembrandt an offer of $5,000 for a painting Mike thinks is an original.Betty accepts. Mike doesn't realize Betty actually steamed the painting off the lid of a cigar box, and that itis only worth 50 cents. Before the transaction takes place, Mike discovers the mistake, and refuses to gothrough with the agreement. When Betty sues, Mike defends on the grounds of "mistake." Betty claimsunilateral mistake does not excuse performance. What is the legal position of each party?2. SJ is building a monument to himself, and needs a rock cutting machine. He finds one in the StanfordDaily Trader, offered by M for $10,000. S goes to M's house to inspect the machine, and offers her $10,000for it. She accepts the offer. Before the transaction takes place, S finds out the rock cutter will not cutmarble, which is the type of stone he would be using (unbeknownst to M). Can S avoid the contract due tohis mistake?3. Common gossip had it that Ripov McSleaze ("Rip" to his friends, "R.I.P." to his enemies) was a leader inthe emerging field of mathematical investment technology. Rip was a colorful character who had started hiscareer as a professor of Mathematical Engineering at The Palo Alto Institute of Technology and Science(The P.I.T.S.) When his investment theories started making money just at the time of a general stock marketboom (through no fault of his own - but he neglected to broadcast this), he resigned from P.I.T.S. andstarted his own consulting firm in a thirty story building in the business dictrict of San Francisco. His officeoccupied the entire thirtieth floor, with a commanding view of the Bay, from the Golden Gate all the way tothe fragrant garlic fields of Gilroy. On one wall hung the speaking trumpet through which Admiral Nelsonhad gasped his last command at Trafalgar. Fixed to the floor was a steering wheel recovered from thewreckage of the Titanic. Rip thought of himself as a great captain of finance and a navigator of the turbulentinvestment waters. Often, late at night, he would stand at the Titanic wheel, Nelson's megaphone in hand,and bark investment commands to the foggy San Francisco night sky.Jan Heiress, who had just inherited a minor family fortune, approached Rip and offered him $200to design a computerized investment strategy to convert her inheritance into a lifelong stream of regular,very large cash flows. Rip declined, explaining that Kolmogorov's Law of Large Numbers does not workwith numbers that small. Jan then raised her offer to $300, but Rip again declined, pleading that he hadmore important projects to take care of. Jan was undeterred, and said, "if you deliver my investment systemby February 14, I will pay you $500." Rip's eyes lit up and he replied, "you're on!"Rip started working on the system, and by February 12 he had designed a prototype, although hehadn't started writing any code yet, when he received a call from Jan. She informed him that she haddecided to spend her entire inheritance on a cruise to Alaska and that he should therefore not create theinvestment system.What is Rip's legal position?4. Civil and criminal trials follow essentially the same procedure. There are, however, several importantdifferences between them. In criminal trials, the defendant must be proven guilty beyond a reasonabledoubt, while in civil trials, the defendant need only be proven guilty by a preponderance of the evidence.Discuss possible reasons for these differences.5. A video game manufacturer develops a gladiators video game with distinctive graphics. Can thedeveloper prevent a competitor from producing another game based on gladiators? Can the developerprevent competitors from copying the graphics? 6. Leonardo Grim-Baldy, a cheerful and hirsute citizen of Minnesota, was seriously injured while shoppingin a franchise of a Meat & Potatoes deli chain, named "The Slice is Right." Leonardo was concussed by afalling coconut, while stuffing himself with caviar-filled blinis as if there weren't a single sturgeon left in theCaspian sea. The franchise where the accident took place is jointly owned and operated by Andy Meat-Carver and Chris French-Fry, and is located in Minneapolis, Minnesota. "The Slice" is incorporated underthe laws of Delaware and headquartered in Pennsylvania. Although "The Slice" has numerous franchiseslocated in the northeastern United States, its only store in Minnesota is the one in Minneapolis. Leonardoplans to sue "The Slice" for negligence. Can he bring his lawsuit in Minnesota?7. HealthSmart mailed a flier to one million U.S. households promoting a new product, "BactraSpray."HealthSmart claimed that BactraSpray killed E.Coli bacteria in food. In actuality, BactraSpray was simplysugar water. Has HealthCare committed a crime? Explain your