Solved: Contract analysis scenario two—remedies determination: Mundo manufactures printing

Contract analysis scenario two—remedies determination: Mundo manufactures printing presses. Extra, a publisher of a local newspaper, had decided to purchase new presses. Rep, a representative of Mundo, met with Boss, the president of Extra, to describe the advantages of Mundo’s new press. Rep also drew rough plans of the alterations that would be required in Extra’s pressroom to accommodate the new presses, including additional floor space and new electrical installations, and Rep left the plans with Boss. On December 1, Boss received a letter signed by Seller, a member of Mundo’s sales staff, offering to sell the required number of presses at a cost of $2.4 million. The offer contained provisions relating to the delivery schedule, warranties, and payment terms but did not specify a particular mode of acceptance of the offer. Boss immediately decided to accept the offer and telephoned Seller’s office. Seller was out of town, and Boss left the following message: “Looks good. I’m sold. Call me when you get back so we can discuss details.” Using the rough plans drawn by Rep, Boss also directed that work begin on the necessary pressroom renovations. By December 4, a wall had been demolished in the pressroom, and a contract had been signed for the new electrical installations. On December 5, the President of the United States announced a ban on foreign imports of computerized heavy equipment. The ban removed—from the American market—a foreign manufacturer that had been the only competitor of Mundo. That afternoon, Boss received an email from Mundo stating, “All outstanding offers are withdrawn.” In a subsequent telephone conversation, Seller told Boss that Mundo would not deliver the presses for less than $2.9 million. In a minimum of a 1,000-word contract analysis, discuss the following questions: Was Mundo obligated to sell the presses to Extra for $2.4 million? Assume Mundo was so obligated. What are Extra’s rights and remedies against Mundo?

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A contract is a mutual agreement between two or more parties that is legally binding and can be enforced by law. For a contract to be legally binding there must be; offer, acceptance, consideration and consent to bind. Offer is whereby one party makes a demand which must be met by the other party. When an offer is made, the other party can either reject or accept the offer. The offer must be rejected or accepted within the stipulated timeline put forth by the offering party

Consideration is something of value which is foregone by both parties in order to honor the agreement. Under the consent to bind, there must be a “meeting of the minds “between the two parties entering into a contract.

However, there are incidences when the above conditions are not met or honored by one of the parties involved. This could lead to a breach of contract .one of the legal ways to remedy a contract are through paying of damages. The defaulting party in an agreement will be required to pay damages in order to remedy the breach of contract.

                 ExtraInc.V.MundoInc.

Extra, a publisher for a local newspaper is suing Mundo, a manufacturer of printing presses on breach of contract. Mundo was to supply Extra with a new printing press at a cost of $2.4 million but later renegaded on the deal by coming up with a new price $2.9 million which if not paid there will be no deal.

Mundo is obligated to sell the printing press to Extra at a cost of $2.4 million because that was the offer which was agreed upon on the contract. Furthermore, Mundo did not specify any particular mode of acceptance to be followed by Extra. Extra has the right to terminate the contract on the grounds that Mundo is acting in bad faith. However, Extra can still sue Mundo to compensate for the damages incurred to demolish the new wall and new electrical installations.

As printing presses are manufactured goods UCC will govern this transaction. Mundo is a merchant in this case.

Contract formation: In this case the elements of offer, acceptance and consideration do exist. Seller’s letter to Boss qualifies as an offer under the UCC as well as under the common law. This is because the content of the letter included details regarding the parties to the contract, the price, and the provisions relating to delivery schedule as well as warranties and payment terms. Thus a valid acceptance by Boss would have created a binding contract between both the parties.

Also as the Seller’s letter did not specify a particular mode of acceptance of the offer it would mean that Boss is able to accept the offer by any means that is considered reasonable. Boss’s action of calling up Seller and his action of leaving an unambiguous message will be construed as a valid acceptance both as per provisions of common law as well as UCC. Thus a valid contract is to be found in this case.

The phone message from Boss was an effective acceptance the moment Boss left it at Seller’s office. Thus Seller and his company Extra would be liable under the terms of the agreement under UCC as well as common law.

Consideration is also present in this case. Consideration is the amount of $2.4 million that has been agreed upon.

There is also the presence of foreseeable reliance in this case. Acts of reliance in this case are – Boss using the rough plans from Rep to start renovations and signing of contract for new electrical installations. These acts of reliance happened between December 1 and December 4 and this was before Extra’s attempted withdrawal of its offer on December 5. Thus foreseeable reliance will estop Mundo from denying the existence of a contract.

Mundo’s email for withdrawal was ineffective as the offer was accepted on December 1 and Mundo was estopped from denying the existence of the contract.

Mundo’s action of stating a new price of $2.9 million will be viewed as a breach of contract as the offer had already been accepted.

Mundo do not have a defense to the breach. Defenses can be in the form of impossibility, impracticability and frustration. None of these defenses are present here.

Conclusion: As a valid contract exists Mundo is obligated to sell the press to Extra for $2.4 million.

Rights and remedies: The remedy that is typically available for UCC contracts are cover remedy. As per this remedy the buyer can get goods from another seller at a higher price and recover the difference from Mundo. In this case the competing seller has been removed and so damages are inadequate.

Restitution: As no benefit has been conferred on Extra it cannot obtain any benefit via this theory.

Specific performance: This is the appropriate remedy in this case.

Mutuality of performance: This is present as demonstrated by the facts of the case.

Defense: Mundo has breached a valid contract in this case with a cynical objective in mind to make extra profit. Thus there are no valid self defenses that it can present in court of law.

Thus Extra will win specific performance and Mundo will have to sell and deliver the press for $2.4 million to Extra.

References

Ewan McKendrick (2005).”Contract Law – Text, Cases and Materials” Oxford University Press

Posner,R.(1977)Economic Analysis of Law, LittleBrown,Boston

Randy E. Barnett(2003)”Contracts” Aspen Publishers

Rogerson,W.(1980)Economic Efficiency and Damage Measures in Contract Law, California Institute of Technology

Wilmot et al, 2009”Contract Law” Third Edition, Oxford University Press

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