PROBLEM: You are an attorney and your old friend John contacts you. John has rec

Question

PROBLEM:

You are an attorney and your old friend John contacts you.   John has recently started his own business to sell a new product he has developed.   The product is a new design for small, light-weight personal headphones, as would be used with an smartphone, digital tablet, MP3 player or a radio. His questions to you concern several issues of what he should look for in creating contracts for his business.

Question:

(4.)    John purchases magnets (one component necessary to make headphones) from the Rippov Corporation.   The salesperson for Rippov tells John that Rippov’s magnets are made of the highest quality rare earth materials found in the world. John enters into a contract to purchase 10,000 magnets for $5 each. Similar magnets sell elsewhere for $7 each. John obtains the first shipment of the magnets and they are of a lower quality and many contain surface cracks. This causes John’s production line to be shut down and he is unable to fulfill an order for headphones. John would have made $500 profit on this order.

A. Can John get out of the contract based on lack of consent? Explain why or why not, and mention and explain what specific doctrine(s) may apply. (Worth up to 5 points)

B.  Also, could John recover the additional $500 that he lost? Explain why or why not and mention and explain any doctrine(s) that may apply. You must fully answer all of the above.

Explanation / Answer

A. Yes John can get out of the contract on the basis of lack of consent. The contract involves lack of consent as the Rippov Corporation fraudulently represented their product as high quality rare earth materials which were proved as wrong when the first shipment arrived. John relied on the fraudulent explanation of Rippov Corporation; ordered 10,000 magnets from Rippov Corporation and undertaken the order for headphones from another party. Lack of consent can be proved based on these facts. The contract was induced based on the false information and the failure to provide the product quality assured lead to breach of contract and termination. The doctrine that may apply here is the doctrine of actionable misrepresentation. As the Rippov Corporation intentionally misrepresented their low quality magnets as high quality rare earth materials, it comes under fraudulent misrepresentation which would allow John to rescind the contract and release him from contractual obligations.

B. John can sue for the damages and recover the additional $500 lost under the doctrine of promissory estoppel. Promissory estoppel applies when the party has relied on the promise made by the other party and relied on that promise to his subsequent detriment. Here Rippov Corporation has made the promise to provide high quality rare earth materials and John relied on that promise to take his first order. The order should have provided him $500 profit and his reliance on Rippov Corporation’s promise led to detriment and loss of $500 as John is not able to fulfill the order due to low quality materials provided by Rippov Corporation.

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.