Need to Analyse the Three Cases

Key Topics

Requirement

Case 1. In a dispute involving a commercial contract, there is often a clause that prescribes escalating steps to resolve a dispute. If you were writing such a clause, what dispute resolution steps would you include, and why? I am not asking you to write a contract clause, just tell me what steps in dispute resolution you would choose.
Case 2. You are the purchasing agent for a company that has just entered into a contract with a vendor for 100 widgets to be delivered 10 per month starting in three months after the contract is signed. You should respond briefly to just one of the following scenarios. Feel free to add facts to make it more interesting.
• Sixty days after the contract is signed, the vendor's plant is flattened by a tornado. What are your options? Can you cancel the contract? What clause do you need to protect your options in this case?
• The vendor has made three monthly deliveries, but each one was 10 days late. Now you hear that the vendor's workforce is about to go on strike. What are your options?
Case 3. You are the purchasing agent for a company that just purchased a new accounting and invoicing software system. The vendor's service people have installed the software and have trained your company's people in using the software. The first week the software mistakenly surpluses half of your inventory, sending it to salvage and also invoices all of your customers at 1/100 the actual price. The next week, the software sends your best customer an invoice that is 1000 times too high and the customer cancels all contracts and posts an angry comment on your company's blog. Because of the blog post, your company loses a new bid for $10,000,000 worth of business. By now, you have called in the salespeople for the vendor, who says, “Oh, yea. We've had some problems with this software. We thought that had all been fixed.” The next week you learn that the software contained a virus that has infected your entire IT system requiring your IT people to shut down the company for two weeks to clean out every computer. So you take the vendor to court; during discovery, you find an email from the vendor's Vice President of Marketing to the President that says “you know this software is a mess. It's going to really screw up the company's invoicing and who knows what else, but that company is too stupid to know what's going on. We can make a mint sending in our service people to straighten it all out.' The President responded “Go for it. We need to make our numbers this quarter.”
So what kind of damages might be appropriate in this case?

Solution

Case 1. The dispute resolution steps that I would choose are:

  • I would firstly arrange a meeting with the parties.  The agenda of the meeting would be to discuss the issues that the parties face with each other. This step will also involve counseling of both  the parties

  • Then I would start the negotiation process which will aim to arrive at a win-win situation.

  • If the dispute does not get resolved by negotiation, then I would appoint an arbitrator that will help the parties in making a decision.

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Case 2. The contract is to get 100 widgets delivered in the form of 10 per month after three months of signing the contract. But, after sixty days of signing the contract i.e. two months, the plant of the vendor got flattened by a tornado. In this case, the contract can be canceled because of the ‘impossibility of performance’. Since the area of operation has been destroyed, so the vendor cannot produce and hence it is impossible for him to fulfill the obligation of delivering 100 widgets.  
The clause that can protect this option is: if the vendor is unable to deliver the widgets due to any hazard or miss-happening, then he is liable to fulfill his obligation via a third-party and the vendor will be solely responsible for the products, its quality, and delivery on behalf of the third party. 

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Case 3. The appropriate damages in this case are:

  • Compensatory damages- The Company can ask for the monetary amount for the loss that it has suffered and the customers that it has lost because it will have to invest more in getting back the customers. 

  • Punitive damages- This will punish the software developers so that they do not harm any other company in the future intentionally.

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