Big Time Toy Maker

We were asked to answer questions one through six based on the scenario in the “Theory to Practice” section, and to include the following in our response:

1. At what point, if ever, did the parties have a contract?

My Answer: When both parties agreed Big Time Toymaker (BTT) and Chou agreed to the terms, obligations, which covered intent, and followed through when BTT paid Chou $25,000 in exchange for exclusive negotiation rights for a 90-day period.

2. What facts may weigh in favor of or against Chou in terms of the parties’ objective intent to contract? My Answer: The verbal agreement weighed in favor of Chou, as it was stated three days before the end of the exclusive negotiation rights for a 90-day period. Also the email sent thereafter from a BTT management representative was sent to Chou with the specifics of the agreement, which stated specific terms, requesting Chou to send a draft of the contract, as a form of confirmation. Terms that may have weighed against Chou was that there were no signatures to confirm the agreement.

3. Does the fact that the parties were communicating by e-mail have any impact on your analysis in Questions 1 and 2 (above)?  My Answer: The fact that the parties were communication by email absolutely impacts my analysis, of questions 1 and 2, because the email specifics stated in the email and the requested documentation, according to the Internal Revenue Service are now considered a form of business communication (“Organization, Finance and Management,” 2012), and electronic signatures are considered validation for formal documents. Therefore, the verbal agreement now transforms into a written agreement.

4. What role does the statute of frauds play in this contract? My Answer: The statute of frauds plays no role in this contract, because statute of frauds encompasses goods, and this is a service contract.

5. 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? My Answer: Chou might consider “the doctrine of anticipatory repudiation allows a nonbreaching party to suspend performance and recover damages before performance is due if the other party has made an unequivocal statement or action suggesting that performance will not occur (p.170).” In my opinion, neither party can void this contract, because neither violated the terms set forth in the contract. Even after BTT had a change in management and informed Chou they were no longer interested in distributing Chou’s game and move on.

6. Assuming, arguendo, that this e-mail does constitute an agreement, what consideration supports this agreement? My Answer: Chou could make a good argument to recover his out of pocket expenses of $25,000, because he felt as though BBT was not acting in good faith, which affected his potential profits. Other remedies might include (Melvin, S. P., (2011): Injunctive Relief: The court could issue and injunction forbidding BTT from distributing a similar game, producing a similar game or financially benefiting from a similar game to protect Chou from suffering due to their intimate knowledge and trade secrets relating to the disclosures during initial negotiations loss of estimated potential profits. Specific Performance: As a services contract; by law, BTT could be liable, if they refused to distribute the game called Strat. Delegation: BTT could substitute sub-contract the distribution of the game, but would still be liable for any loses, damages, or breach.

Injunctive Relief: For example, suppose that BTT promises to distribute the game within 30 days. Chou, the owner of the game learns that BTT intends to breach the contract and changes management to get out of the contract. In this case, both money damages and specific performance are inadequate because Chou still wants BTT to distribute his game; even though they have changed management instead of just letting the contract be done. Chou could bring charges of injunction relief against BTT that would prevent from terminating the contract, and favor Chou’s request as an equitable remedy consistent with the notion of putting the aggrieved party in the same position as if the other party (new management) had made the agreement, and forbid BTT from distributing any game similar to Chou’s Strat game.

In conclusion, if a party ti an agreement owes a duty to perform and fails to fulfil that obligation, it is said to be a breached contract. In the case with BTT and Chou, where the breach can be considered material, as it could affect Chou’s future profits, it can be considered a total breach, and the nonbreaching party will be entitled to either suspend performance or to be discharged from their obligations completely. The party that suffered the breach is also entitled to sue the breaching party in an attempt to recover money damages. Money damage awards are one of the ways in which the law provides a method to compensate the nonbreaching party for losses suffered. These methods are known as remedies.

References
Melvin, S. P., (2011). the Legal Environment of Business: A Managerial Approach: Theory to Practice, New York, NY: McGraw-Hill/Irwin. Organization, Finance and Management, (2012), Standards for Using Email, 3: (1.10.3), 1.10.3.3.1.