Course is obligated unless the contract is terminated

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Reference no: EM131423354

Marc's Beverage Company purchases bottles from Bob's Bottling Company at the rate of 10,000 bottles per week. Bob's Bottling Company produces bottles for many customers, not just Marc. Working with minimal inventory (Just In Time Inventory Control) Marc will suffer severe losses (in excess of $6000 per week) if his ability to deliver product to his distributors is interrupted. Marc typically contracts with the lowest responsible bidding bottlers for six month contracts.

Marc's contract with Bob reads Marc to pay Bob $3000 per week for 26 weeks. Bob is to produce 10,000 bottles per week for 26 consecutive weeks. However, the contract states Marc is not to pay Bob until the end of the 26 week contract.

Bob produces bottles for the first 9 weeks of the contract. In week 10, Bob does not produce any bottles. Bob claims that his machines were jammed for one day and that by the time he finished other customer bottling, he could not do Marc's except on overtime. As he bid very competitively on Marc's work, he would lose money if he did such work on an overtime shift.

Marc, in a rage, declares a breach of the contract, tells Bob to stop all further work, and refuses to pay for any of the past or future work. Marc then contracts with Carol's Bottling Company to produce bottles for the remaining 16 weeks at $3100 per week. Of the $3000/week charged by Bob, $2700/week was used to cover costs. Marc and Bob bring suit against each other for breach.

a. Who wins, how much, and WHY?

b. Same facts as Question 1, but the contract contains a clause permitting Marc to terminate the contract at will without cause. Bob, of course is obligated unless the contract is terminated by Marc. Who wins, how much, and WHY?

c. Discuss all appropriate rules of law raised by questions 1a and 1b.

Reference no: EM131423354

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