Legume and Arrow Contract Order
IRAC Method Assessment of Case Study
Statement of Facts
Issue (Question at Hand)
Rule (Statement of the Law)
Case Name: This is a case between K.K. Legume Inc. which is a sweater manufacturer and Arrow LLC signs a contract with them stating that Arrow will buy a certain amount of brand Arctic Ice which are 100% wool for a one year agreement of $12.00 per unit (Path Finder Advisors, n.d.).
Statement of Facts: However legal action has been determined in the case of contract because two different yet unexpected issues took place that neither company anticipated. The first problem that has been defined is that there is a sheep shortage for making the sweaters which is obvious because there are less and less sheep to shear for the increase in the demand for wool which has affected the suppliers that K.K. Legume Inc. buys their sheared wool from in bulk. The demand was such a drastic increase in price that the increase was raised by 1,000%. Next, there was an unexpected cold front that came in which the demand ended in a 500% enhancement in Arrow’s wool sweater orders they placed with Legume compared to any other order average in history. Therefore, Legume requests for Arrow to augment the per unit purchase price to $36.00, however, Arrow rejects the high price per unit to be altered within the contract, and will not pay that amount per unit. Then Legume administration decides to put a hold on the next delivery of sweaters declaring, if Arrow does not do as the contract says and follow through with buying the sweaters that need to be delivered and paid for, then it could lead to Legume becoming bankrupt if they made anymore orders that were not bought at that price from Arrow. Furthermore the two businesses have a very close and long lasting relationship in business, yet Legume claim that since the two companies have a lengthy position in doing business together, that Arrow should feel compelled to do carry out their end of the bargain they had worked out by paying the increased prices regardless of the relationship and their commitment to purchase sweaters to supply their consumers. These unexpected issues have arose and the disagreements between the long time associates are having to be worked out by their attorneys (Path Finder Advisors, n.d.).
3. Issue or (Question at Hand): Even though Legume and Arrow have worked out a one year agreement for Arrow to pay $12.00 per Arctic Ice 100% wool sweater, but there has been a problem that has risen. Since the two unexpected dilemmas causing the price of wool to increase where Legume has to charge three times as much at $36.00 for each sweater Arrow feels they should not have to pay for the increase because they agreed to pay $12.00 a unit for one year, yet Legume feels that their commitment and long time trading history should reflect on Arrow and they should feel compelled to pay it because it is the ethical thing to do in this situation according to Legume. Arrow disagrees, and they feel they should not have to pay it, and they will not pay it regardless of the price increase because that is not what the agreement was made upon, and the two administrations are unable to work their problems out without contacting legal advice. Should Arrow be made to pay the increased price and still commit to buy from Legume for one year? Or should Legume reconsider this situation and understand that the contract was made out for one price and for one year, even though they look to blame Arrow if they do not stick to the contract or they will go bankrupt? Who is in the right here by law (Path Finder Advisors, n.d.).
4. Rule (Statement of the Law): There are laws that apply to business deals and contracts because there are specific duties that both parties need to accomplish by their companies when they start a pact, and when this is not rewarded the regulations of a company and the government calls this a law as a “Breach of Contract.” Depending on the particulars of a contract, a violation can transpire when a party, such as Arrow in this alleged suite has stopped working to complete the deal in harmony with the conditions of the conformity and does not aspire to carry out the contract at all like Arrow considers at this time because they think it is unjust and not right in their position. The law requires for the contract to be classified as either as a matter of material (which in this case it is because of the manufacturing of the sweaters) or immaterial for the rationale of concluding what is the right officially authorized explanation or “remedy” for the violation (FindLaw, 2011).
5. Application: This is the analytical aspect that the courts must determine since they will review this IRAC so they have ample information and other types of law decisions to resolve the issue at hand here and state which company they favor and will require what stipulations will happen once they know the facts. As the analyst preparing this IRAC, the facts are that there was a contract made with the two companies, K.K. Legume and Arrow LLC. On September 1, 2010 when both committees representing each company were present. The contract stated that Arrow does agree to buy the 100% wool Arctic Ice sweaters for a term of contract lasting from June 1, 2010 to June 1, 2011 to pay for each sweater which has a per unit price of $12.00. Furthermore, the contract also reads, and both parties have signed in the agreement that this is the only rate that Arrow will charged unless the price of the wool increases due to supply and demand. If the prospect came to the increase that exceeded more than 500% that Arrow should not feel required to pay for the Arctic Ice Sweater and a new contract would be considered and changed if the price continued to rise or stay the same as above that limit of the 500%. When it got closer to looking at importing in Arrow’s fall and winter wardrobe the accounting department seen that it was going to be at least a 500% increase in each sweater unit, and they notified superiors when they contacted Legume and refused to pay and breach their contract on September 18, 2010 (Path Finder Advisors, n.d.).
6. Conclusion (Final Conclusion): As part of the panel that determines for the courts on whether the company K.K. Legume demand Arrow L.L.C. To pay for the 500%+ increase in the cost of sweaters, we conclude that this rate of $36.00 per sweater unit is above the contract limit and exceeds the increase amount agreed upon in the agreement among the two companies. Furthermore, we feel that K.K. Legume should destroy all contracts with Arrow L.L.C. regarding any wool material and reassess the situation and meet back with Arrow within the next 60 days to determine what types of trades/bargains/sells they can make in order to reestablish a business association for a profit that both of them can work out. If K.K. Legume is having that much of a difficult time with the possibility of going bankrupt we suggest administration reevaluate their current products with other consumers and buyers. At this time the contract is to be destroyed.
FindLaw. (2011). Breach of contract and lawsuits. Retrieved from http://smallbusiness.findlaw.com/business-forms-contracts/business-forms-contracts-overview/business-forms-contracts-overview-breaching.html
Path Finder Advisors. (n.d.). How to brief a case brief format irac method. Retrieved from http://pathfinderadvisors.org/classwork/Briefing%20Cases/HOW%20TO%20BRIEF%20CASE.pdf