Analyze and identify ethical issues as well as contract law issues
Issue 1 – Law of Contracts and Sales – 77 points (of 80 points!) (1,000-word limit)
Ryan is an officer of XYZ Company. He is dealing with ABC Company in his capacity as an officer of XYZ. Ryan also deals with DEF Co.
Ryan is an officer of XYZ, Inc. In his capacity as an officer, he is contacting ABC Company as a vendor. Ryan is also buying from DEF Co. for other purposes. Ryan meets Tim from ABC who provides him a price for widgets at $ 10 each on his card on December 1, 2013. Tim also provides a business card that indicates Building A can be rented for $ 100/month. In addition, he provides a business card with a note that computer consultation services are provided for $ 50 per hour for five hours per month. Similarly, that day, Ryan sees that DEF Co, in the shopping mall, has dollhouses for sale. A salesman, Fred, gives him a card quoting the price on the Sleeping Beauty Dollhouse at $ 200.
Ryan contacts ABC on January 2 and sends several faxes. The faxes are purchase orders from XYZ, Inc. that read:
Fax 1: Please provide 40 widgets at $ 10 each to me by January 31. See address below. Mail direct and I will pay within 30 days. Please provide an additional 40 widgets at the end of every month in 2014.
Fax 2: Please provide the A Building for our rental February 1-April 30. Please provide keys to all five rooms. Will pay the $ 100 rent each month. I will rent the building for all of 2014.
Fax 3: Please provide 5 hours per month of computer consulting. I will use these services each month in 2014.
Ryan also calls in the order at DEF for the Dollhouse for delivery to his home January 31.
ABC responds January 3:
We will provide the widgets at the $11 each, the rent at $ 110 per month with the trade group escalator clause, and the computer consulting services at $ 60 per month in early February subject to our limitation of liability clause. We will provide Building A February 5-April 30 subject to our “no animals or children” provision.
Ryan contacts his attorney on February 2 when the widgets, building, dollhouse and computer consultation services have not been provided. He asks him what his options are. Please include an analysis of the situation on February 2. He also wants to know what options he has about the dollhouse.
On February 10, XYZ obtains Building A. However, two rooms are locked and inaccessible.
On February 20, Ryan calls ABC and explains “I just mailed you a check for $ 1000 to cover building B for March (replacing building A) and an order of 50 super widgets (replacing the widget order for that month) at $ 15 each. I need the super widgets by March 1 delivered to building B. Thanks! I will also need on March 1 the website developer for 2 hours at $ 75 per hour as we discussed today.” The ABC salesman indicates that will not be a problem. Ryan also calls the DEF Co. Ryan indicates he wants to change his order from the dollhouse to the dollhouse plus garage for $ 200 as indicated by the salesman February 3. Ryan indicates delivery is needed February 15 at his house.
On March 2, Ryan contacts his attorney because Building B has not been made available and only ten percent of the super widgets have arrived. No dollhouse has been delivered either. What would you tell Ryan about the situation as the attorney for XYZ?
On March 3, Ryan stops payment on his checks to ABC and DEF. On March 10, both ABC and DEF discover that the checks for the January 31, Feb 28 and March 31 items, rentals and services have been rejected. ABC and DEF had provided much of Ryan’s January 1 requests. Specifically, ABC provided all the keys for building A, 30 widgets of the 50 ordered for January, and four hours of consulting services on March 4. ABC turns to you as its attorney (ignore the conflict of interest), what do you tell them about the situation?
Similarly, DEF provided the Dollhouse March 4 without the windows (looking to add those soon because it made the 2013 advertisement which included windows). DEF also turns to you for advice as to its options.
On March 20, Ryan sends purchase orders from XYZ to ABC for all the orders made in the January phone call except Ryan indicates he wants all of this each month until May 31, 2015. . ABC sends a letter back with terms and conditions for each deal on March 21. The ABC insurance clause contradicts XYZ’s purchase order. Ryan has terms on the back of the XYZ purchase order that indicates that it is not XYZ’s responsibility to insure goods, property or services. However, XYZ would be obligated to obtain insurance for each under the terms of ABC’s written acceptance of the various contract proposals in Ryan’s March 20 letters.
Ryan shows both the March 20 purchase order and the March 21 response to his company attorney. What would you tell Ryan based on these written documents?
Ryan wants to expand the contract to include building T, weekend cleaning services, and a quarterly shipment of advanced widgets.
On April 1, Ryan, under the belief that he has an agreement with ABC, writes ABC in a fax that ABC needs to expand the rental agreement at no additional cost to include Building T from April 15 until the end of July. He also indicates that he is purchasing weekend cleaning services from May 1 until June 30 rather than computer consulting for that period and that on May 1 he needs a delivery of 50 super widgets for the same total monthly price as the regular widgets.
A fax comes back indicating with specific reference to each modification that ABC accepts the changes in terms.
In August, Ryan finds that ABC failed to comply with any of his April 1 requests. He consults you as his attorney. What can you tell him?
The escalator clause specified January 3 for the prices on the original deal for goods and services were set on a sliding scale to be adjusted as the Local Trading Index changed. The index increased 300% each month. The Local Trading Index is controlled by ABC (60% of votes and two other companies with the remaining votes on pricing) though two other companies sit in on the meetings and have votes. Both parties signed this deal in mid-August (3 separate contracts-one for the rental of land and building, one for the widget sales and one for cleaning services). Services are provided each month along with widgets, building rentals and other services. In December, Ryan notices that the bill for each tripled each month! It went from $ 2000 in August to $ 6000 in September and $ 18000 in October, $54000 in November and now $ 162000 in December!! Yet the quantity of the orders was the same each month! Ryan calls his attorney to see if there is something that can be done about this. This simply does not appear to be fair. As his company attorney, what can you tell Ryan?
Ryan decides the next year to do business with GHI Inc. On January 2, 2016, Ryan calls in an order for 3 super advanced widgets for $ 200 each and five hours of internet consulting services at $ 100 per hour in the next two weeks. On May 15, GHI writes Ryan and indicates that the super advanced widgets are not available in the quantity requested.
Ryan buys the famous TV star pony “Flicka” from DEF for his daughter’s birthday He calls in the order for $ 700 on January 2.
GHI does not respond but it ships the goods late on May 30. Ryan uses the goods in June despite the fact that the advanced super widgets rather than the super advanced widgets (as the super advanced widgets were a one-time production run that can never be repeated and those widgets were inadvertently sent to XYZ’s competitor MNO Inc. which uses the widgets to win a huge wartime contract). . Similarly, Ryan uses the consultant despite the fact that it was an accountant rather than an internet expert.
Ryan receives a donkey at the birthday party. The girls ride it all day but the donkey is not friendly like a pony. The donkey lunges at one girl, hits its head and dies. The girls are horrified. Ryan does not want to pay for this animal.
Ryan comes to you for advice. DEF comes to you for advice. GHI comes to you for advice
(Ignore the conflict of interest and advise each).
By 2017, Ryan decides to buy all his needs from MNO Inc. He enters four written contracts with MNO, Inc