Posted: August 13th, 2013
Theory of Practice
Case Scenario Big Time Toymaker
At what point, if ever, did the parties have a contract? The two companies, BTT and Chou did not enter into a valid contract. They had agreed that no contract would be entered unless through writing. The parties only entered into an agreement orally and this defies their earlier agreement on the terms and conditions. The distribution agreement was invalidity and was not binding to either party. They reached an agreement 3 days to the end of the 90-day duration allowed according to their prior negotiations. Since their agreement was based on the negotiations where the conditions of a written contract were established, then there was no valid contact between the parties. The email sent by BBT does not show proof of a contract since neither of the two parties signed to make it a written agreement.
What facts may weigh in favor of or against Chou in terms of the parties objective intent to contact? Chou Company had received an amount of $25,000 from BTT for negotiation rights and this action made Chou believe that BTT was interested in the Strat game. However they agreement was not written and no made within the allowed duration. An email sent to Chou by BTT shows that there were prior agreements for both parties. Chou was advised by BTT to send them the draft of the contract. These facts weigh in favor of Chou. However, the lack of a signature on the contact makes it invalid, which is a fact against Chou.
Does the fact that the parties are communicating by email have any impact on your analysis in Questions 1 and 2 (above)? With the level of globalization experienced today, the role of technology deserves appreciation from businesses in their transactions. The use of papers for writing is slowly fading and electronic documents have taken over. The law recognizes electronic mode of entering into contracts. However, the use of an email in this scenario as a proof of a contract, does not exempt the requirement of a signature. The role of signatures from both parties is to prove agreement of terms and conditions that are specified in the contract hence an electronic signature was necessary. The absence of the signatures makes it difficult to determine whether there was a mutual agreement by both parties. However, if the signatures were present, then it would be deemed a valid contract.
What role does the statute of frauds in this contract? The statute of fraud applies in this case since it is a contact for the sale of goods in consideration of an amount above $500. The use of an email is used to determine the grounds for this particular contract. There is presence of two parties and therefore the statute of fraud would be used in the ruling.
Could BTT avoid this contract under the doctrine of mistake? Explain. Would either party have any other defenses that would allow the contract to be avoided? The doctrine of mistake cannot apply in this scenario since there was no wrong assumption on the basics of the contract involved. There was an email used containing all the facts of the agreement hence both parties were well aware of them. One of the parties cannot argue using the doctrine of mistake as defense. BBT however has an option of arguing that no binding contract was entered into.
Assuming, arguendo, that this email does constitute an agreement, what consideration supports this agreement? The issuing of $25,000 by BBT and its acceptance by Chou supports the arguendo agreement. Chou was bound to benefit through the distribution of its products across BTT’s outlets while BTT would benefit through the charges of distribution.
At the end of the scenario, BTT states that it is not interested in distributing Chou’s new strategy game, Strat. Assuming BTT and Chou have a contract, and BTT has breached the contract by not distributing the game. Discuss what remedies might or might not apply.
Chou could seek compensation damages for the loss of the anticipated damages because of the withdrawal of BTT from the agreement. The compensation could be in monetary form by calculation of the current losses incurred because of the unfulfilled role of BTT and inclusive of future losses expected due to this situation.
Specific performance is a remedy applicable in this case where Chou could require the court to order BTT to fulfill its part of the deal by distributing the products. This involves the distribution of the products by BTT as earlier agreed upon to reduce the loss that Chou would have incurred for the lack of fulfillment of the promises made.
Delegation is applicable where BTT could delegate the distribution to another party instead of doing the actual distribution.
Injunction is a remedy that is also applicable in favor of Chou by requesting the court to prohibit BTT from distributing a similar product. This could help Chou by ensuring it does not incur any more losses due to the new developments.
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