Reference no: EM13983851

Your assignment is to write me a legal memo (paper) in regard to the problem below. You are to discuss all parties and relevant issues in a thorough analysis. As these issues deal with the law of contracts, you should look at your contract outline and start to go through the various elements and ask yourself whether any of those elements might pertain to this situation. Only discuss relevant issues! I am not as interested in your outcome (who will end up winning) as I am in how you use the law to support your points. Base your answer only on facts given. If additional information is needed, tell me that. A sample answer to a different problem is attached for clarification and format..

To: BMGT Student
From: Professor
Re: Joseph v. Steve

Joseph is a wholesale distributor of novelty supplies. Steve operates a novelty supply store. On May 1, Joseph received a written order from Steve for 3000 miniature novelty candy bars at fifty cents each, which was the price listed in Joseph's wholesale catalog. The order from Steve stated that the candy bars were to be chocolate and peanut butter with "Lucy for City Council" on the front to be purchased by Lucy. The order specified for delivery of half of the candy bars by September 1st and the remaining novelty candy bars by October 1st.

On May 5, Joseph sent Steve a written confirmation, which acknowledged the quantity, price, delivery dates, and purpose of the purchase. Both the order and the confirmation were on forms containing a number of printed clauses. The printed clauses were substantially the same on both forms, except Joseph's confirmation forms included additional clauses stating that all disputes about the transaction were to be resolved by arbitration, and that damages were limited to costs of shipping the items back for replacements.

On June 30, Steve telephoned Joseph and told him another distributor offered him the same candy bars for only forty cents each and that Steve intended to switch his order to a new distributor unless Joseph agreed to lower his price. Rather than lose the sale with a long-term customer, Joseph stated, "For a good customer as yourself I will give you the forty cent price."

On August 30, Joseph shipped the first 1500 candy bars and, on September 2nd, Joseph accepted Steve's payment for those novelty candy bars at forty cents each. Since 1500 right flavors of candy bars were not available, Joseph sent 500 each of white chocolate, chocolate with nuts, and chocolate with caramel. Unbeknownst to Steve, the candy bars reacted to heat and if they were not stored in temperatures less than 80 degrees, they would melt. Steve stored the candy bars in a warehouse where temperatures ranged from 99 to 100 degrees. If Steve had known, he could have stored the candy bars in proper conditions.

On September 12, Steve wrote to Joseph and canceled the second half of the order because Lucy dropped out of the race. When Joseph received the letter of cancellation, Joseph had not yet ordered the second set of candy bars from the manufacturer.

Joseph sued Steve for breach of contract in state court, seeking damages based on the original fifty cents price for those remaining 1500 candy bars. Joseph also sued for the additional ten cents per candy bar he is believed owed to him from the first shipment. Steve counterclaims for the ruined novelty candy bars. He also argues breach of contract because none of the candy bars confirmed to the type that he specified in his order. Joseph argues that if he is liable to Steve for anything, it is only the cost to return the candy bars because of the damage limitation clause.

What arguments should each party make (Joseph and Steve) and how should the case be decided? Should this case go to arbitration? Why or why not? What about the damage limitation clause?

Sample Question and Answer. Please note that Box Co. is a sample. You are to answer the Steve v. Joseph problem above.

Sample Question: Box Co. manufactures cardboard boxes used for storing household goods during moves. On Feb. 1, Moving Co. telephoned Box Co. and said it needed 5000 boxes from Box Co.'s candy catalogue at the price listed in the candy catalogue. Moving Co. asked that each box be imprinted with Moving Co.'s address in black ink, and that the boxes be delivered to the Moving Co. on May

1. Because this was to be the first transaction between the parties, Moving Co. asked Box Co. to send it a box for inspection. The candy catalogue contains a provision that "because of variation in pigments, seller cannot guarantee the color of imprint of any product." On Feb. 15, Box Co. delivered to Moving Co. a box with the requested black ink.

On Feb. 16, Moving Co. sent its order form for 5000 boxes to be delivered on May 1. The following was printed at the bottom of the order form: "Strict adherence to terms and samples is required."

Box Co. delivered 4500 boxes on May 1 and the remaining 500 boxes on June 1. The imprint on the majority of the boxes was a murky gray. Moving Co. refused to pay for the boxes and Box Co. sued for breach of contract. What are the rights of each party? Discuss.

Sample Answer: Students, please note this is only a sample. I expect your own case analysis to be written in your own words. Also, not every issue in the sample is identical to the issues in your paper. The sample is to give you a general idea of some of the issues you might need to discuss. Do not copy the sample! If you are not sure an issue is relevant, ask me.

Legal Memo
To: Professor
From: (Insert name)
Re: Box Co. v. Moving Co.

Formation: Formation of enforceable promises between the parties requires a mutual agreement (offer and acceptance) and consideration, with no defenses. The transaction here involves the sale of goods (students: you must say whether this is a service contract-where common law applies-or a goods contract-where the UCC applies) so the UCC applies. Both parties appear to be merchants since they deal regularly with the sale of boxes-Box Co. manufactures them and Moving Co. uses them for its business.

Offer: Box Co.'s supply catalogue could be an offer, which was accepted when Moving Co. placed its order on Feb. 16. However, supply catalogues are usually viewed as invitations to bid, just as advertisements are, and are not considered offers.

Moving Co.'s phone call on Feb. 1 may be deemed an offer, while Box. Co.'s shipment of boxes can be considered as an acceptance. But the initial phone call between the parties again tends to be more of an inquiry, in which Moving Co. is requesting more information.

Most likely, the offer was made on Feb. 16 when Moving Co. sent its order form to Box Co. In the communication form, Moving Co appears to be presently willing to enter into an agreement (intent), there is communication form, and definite terms.

Acceptance: Under the UCC, an acceptance may be made in any manner reasonable under the circumstances. This means that the shipment of boxes by Box Co, constituted an acceptance and Moving Co. and Box Co. have a unilateral contract.

Strict adherence required? While Box Co.'s supply catalogue disclaimed any guarantee as to color, this was not likely considered to be part of the offer that Moving Co. accepted. (if we have decided that Box Co. was the one who made the offer). Even if it was, Moving Co.'s acceptance was different as it contained a disclaimer. Under the UCC, this would still form a contract and this disclaimer would become part of the contract unless Box Co. objected within a reasonable time OR the new term was a material variation. Here, since Box Co, did not object, you would need to argue that this term was a material variation and hence, not contained in the contract.

In the alternative, if you viewed Moving Co.'s order form (with the terms) as an offer, then the strict adherence terms would be contained as part of the agreement if Box Co. properly accepted when they shipped the goods. Box Co, neither objected to the term nor notified Moving Co. that this was an accord and satisfaction. Hence, with this argument, Box Co. could be in breach.

[In the answer, I would recommend that the student do both possibilities to receive full credit.]

Consideration: Not an issue here. [Don't assume that consideration will not be an issue in your problem because it isn't relevant in the sample.]

Statute of Frauds: Because this is a sale of goods priced at $500 or more, this contract must be in writing. The writing must 1)indicate that a contract for the sale of goods has been formed 2) identifies the parties 3)indicate bares the quantity of goods involved and 4) is signed by the party to be charged

Here, Moving Co.'s order form may be sufficient, especially since there is a quantity term. Even if it was not considered to be sufficient, the contract may be enforced to the extent that the goods were received and accepted. [Students: don't forget to address whether your question will have a Statute of Frauds issue. Go through the contracts that must be in writing and see whether they apply to your fact pattern.]

Breach: Box Co. is suing Moving Co because Moving Co. refuses to pay. To win, Moving Co. needs to successfully assert that it has no duty to pay for the boxes because Box Co. already breached the contract by shipping nonconforming goods.

Quality-the strict adherence was required, the murky gray imprint may mean that the boxes were nonconforming.

Quantity-the tender of delivery also may have been nonconforming since only 4500 boxes were delivered on May 1, the day specified in the contract. The other 500 boxes were delivered one month later.

Box Co. may argue that it had a right to cure its tender of nonconforming goods. If Moving Co.'s silence after receiving the May 1 delivery is deemed to have given Box Co. reasonable grounds to believe that the delivery of nonconforming goods was accepted, Box Co.'s June 1 delivery may be considered effective "cure" at least to the quantity problem as long as the one month delay is considered reasonable under the circumstances

Did Moving Co. accept the goods? Box Co.'s strongest argument would be that even if the goods were nonconforming, Moving Co. never rejected the shipment. Moving Co. had sufficient time to inspect the shipment (between May 1 and June 1) to discover the problem with the color. Since Moving Co. never notified Box Co. that they were rejecting the delivery, Box Co. detrimentally relied on the silence as acceptance of the nonconforming goods and delivered the additional 500 boxes in a good faith attempt to cure the nonconforming tender. Hence, Moving Co. should be deemed to have accepted all of the boxes and must now pay for them.

Moving Co. may claim that it initially accepted Box Co.'s shipment because it reasonably believed that the nonconformity would be cured in a timely manner and then it was not. Yet Moving Co. still should have notified Box Co. of its expectations. In addition, Moving Co. only has right to reject the nonconforming goods if the nonconformity "substantially impairs" their value. The murky quality of an imprint on boxes that are used for storing household goods during moves may not substantially impair the value of these boxes for their intended use. [Students: you could go either way here. You could also insist that the murky quality of the printing did substantially impair the box's value.]

Result: Assuming that Moving Co. is deemed to have accepted the nonconforming goods and it is still in possession of the boxes, it will be liable to Box Co. for the contract price minus any damages (because of the delay in the last 500 boxes) that Moving Co. can prove resulted because of the nonconformity.