Safe stop could not purchase the patent rights

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Reference no: EM13510442

The Safe Stop Co. was a brake manufacturing company. It experienced great financial difficulties in the fall of 2007. It had a chance to obtain the patent rights to a new brake which would last four times longer than other brakes on the market. Manufacturing this brake might put Safe Stop back on its feet. Unfortunately, Safe Stop had a large debt outstanding - it owed Fast Financing Co. $2,600,000 for an overdue loan. Safe Stop could not purchase the patent rights until it removed the debt owed to Fast from its books.

Fast's loan officer met with the officers of Safe Stop. Safe Stop's officers explained the whole situation, its desire to be able to purchase the patent rights and the fact that to obligate itself to buy the patent rights, which were very expensive, it would have to wipe clean the loan from Fast. After some negotiation, the Fast Financing Co. and Safe Stop entered into a written agreement as follows: Safe Stop promised to pay $1,400,000 to Fast Financing, and in return, Fast promised to accept that amount as full and complete satisfaction for the loan to Safe Stop and thus to cancel the balance due of $1,200,000. Safe Stop paid the $1,400,000.

Pursuant to this agreement, Safe Stop purchased the patent rights at great cost. Four months later Fast Financing sued Safe Stop to recover the balance of the loan - $1,200,000. Safe Stop contended that Fast Financing has no right to the additional money. Who will win? DISCUSS the arguments of BOTH parties.

Reference no: EM13510442

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