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SOS - MId Sample Question.pdf

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Department
Business
Course
BU231
Professor
Valerie Irie
Semester
Winter

Description
Laurier  SOS:  Students  Offering  Support             Business  231   Mid-­‐Term  Exam-­‐AID   Review  Package     Course  Coordinator:  Chris Alexander Coordinator  E-­‐mail:  [email protected] Tutors:  Brendan Forbes, Chance Nguyen       Students  Offering  Support  sponsors:     Raising  Marks,  Raising  Money,  Raising  Roofs   www.laurierSOS.com   Laurier  SOS:  Students  Offering  Support     Sample  Question:            Jennifer  has  developed  a  new  method  for  manufacturing  cell  phone  cases.    Her  method   allows  the  plastic  to  be  molded  to  the  shape  of  the  desired  phone  and  hardens  permanently  to   the  new  shape  within  5  seconds.    This  allows  for  her  to  make  more  cell  phone  cases  faster  and   cheaper  than  her  competitors.    Jennifer  hires  Mark  to  be  her  sales  manager.                Jencell  is  progressing  slowly  as  a  company.    Jennifer  works  hard  on  improving  her  molding   technique.    She  has  two  large  cell  phone  manufacturers  as  regular  clients  for  their  phone  cases   and  is  just  able  to  keep  up  with  orders,  manufacturing  10,000  cases  per  week  (5,000  each).     Mark  thinks  it  is  time  to  expand  business  so  that  they  can  see  a  better  profit.    Mark  solicits  five   more  cell  phone  companies  and  enters  contracts  with  them  to  fill  orders  of  1,000  cases  per   week  each  (for  5,000  cases).    He  tells  the  factory  staff  to  increase  the  speed  of  the  process  by   half  again.                    For  the  first  2  weeks  the  machinery  is  able  to  pump  out  the  15,000  cases,  but  during  the  3  d week  after  only  8,000  cases  are  made  before  the  machines  break  down.    Jennifer  is  called  in  to   check  the  machines.    She  forwards  4,000  cases  each  to  her  first  two  clients  and  calls  them  to  let   them  know  that  she  will  be  delayed  in  delivering  the  remaining  cases  to  them.    She  then  repairs   the  machines  and  sets  them  to  running  again.    The  company  then  produces  another  5,000  cases   which  are  shipped  out  to  Mark’s  clients.                During  the  4  week,  the  machines  break  down  again,  but  this  time  after  only  4,000  cases  are   made.    Jennifer  has  her  staff  ship  2,000  cases  each  to  her  two  clients  and  once  again  advises   them  of  the  shortfall.    She  examines  her  machine  and  discovers  that  major  parts  have  been   burned  out.    She  will  need  to  get  replacement  pieces  and  that  will  take  4  weeks  to  be  delivered.            Shortly  thereafter,  Jennifer’s  two  clients  both  return  the  last  shipment  of  cases  and  tell  her   that  she  is  in  breach  of  her  contract.    Likewise,  she  receives  notice  that  the  five  other  cell  phone   companies  are  likewise  suing  her  for  breach  of  contract.     a. What  is  the  type  of  breach  of  contract  experienced  by  the  two  big  cell  companies   and  what  are  their  legal  rights?  What  remedies  are  available  to  them?     b. What  is  the  nature  of  the  relationship  between  Jennifer  and  the  other  5  cell  phone   companies,  and  what  legal  action  is  available  to  them?       Raising  Marks,  Raising  Money,  Raising  Roofs   www.laurierSOS.com   Laurier  SOS:  Students  Offering  Support     ANSWERS     A:              The  second  breach  is  a  major  breach  of  the  contract.  It  is  a  breach  of  a  condition.    A   condition  is  an  essential  term  of  the  contract.    The  number  of  cell  phone  cases  to  be  delivered   and  the  date  they  are  due  are  both  essential  terms  of  the  contract  in  this  instance.              The  type  of  breach  is  either  an  express  repudiation  or  a  failure  of  performance,  or  more   particularly  in  this  instance,  grossly  inadequate  performance.    As  Jennifer  called  the  cell  phone   companies  to  advise  them  that  the  delivery  was  short,  she  has  expressly  informed  them  of  the   breach.    Repudiation  can  occur  after  performance  has  been  rendered  in  situations  where  there   is  ongoing  or  continuous  performance,  as  in  this  case.  However,  failure  of  performance  can  only   occur  at  the  time  performance  is  due  and  in  this  case  Jencell  performed  the  contract,  but  failed   to  meet  the  required  number  of  cases  and  therefore  did  not  perform  adequately.            The  second  occasion  where  only  2000  cases  are  sent  is  a  major  breach  in  the  contract.    The   cell  phone  companies  have  the  op
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