Question 2 On April 1, 2000, Betty Buyer calls Marco Manager, the sales director

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Question 2

On April 1, 2000, Betty Buyer calls Marco Manager, the sales director at Silicone Chips, Inc., to ask about the cost of computer chips. As the patent owner of the Mega Computer Chip, which is well-known in the industry for its speed and durability, Silicone Chips, Inc. has 80% of the market share in the industry for computer chips. Betty is the purchasing officer for High Tech Computers Corp. which is in the business of assembling and selling computers to the retail consumer. In order to boost business, Betty realizes that her company needs to start manufacturing computers with the Mega Computer Chip in order to remain competitive and profitable. Although High Tech Computers Corp has tried to create imitations of the Mega Computer Chip, it has not been very successful and therefore, now realizes it needs the real thing. Because Silicone Chips, Inc. is very selective about who they do business with, Betty had to promise her cousin Vinnie free computer upgrades for three years in order convince Vinnie to contact Marco. Vinnie has been best friends with Marco since they went to elementary school together. As a result, Betty was given the chance to call Marco. During her phone call with Marco, Betty asked him to quote the lowest price he could give for the Mega Computer Chip. 3 Marco said, “Since you’re Vinnie’s cousin, I can give you a special quote of $30 for a 4MB unit, $40 for an 8 MB unit, and $50 for a 16MB unit. However, at these prices, the maximum number of units that we sell to you is 16,000MB and will ship within 10 days of hearing from you.” Betty is thrilled by the quotes but decides to play it cool and tells Marco that she’ll think it over and call him back.

Later that same day, Marco receives an email from Betty stating, “We accept your offer for the Mega Computer Chips. We will require 16,000MB in total. Specifications will follow.” Betty has not sent the specifications.

On April 20, 2000, Marco calls Betty and tells her, “The prices for Mega Computer Chips have gone up so we will not be able to fill your order at the quoted prices.” Betty tells Marco, “That’s too bad for you since we already have a binding agreement.” High Tech has since filed a breach of contract lawsuit against Silicone Chips.

On April 20, 2000, the market prices for the Mega Computer Chips were as follows: $50 for 4MB units, $70 for 8MB units, and $90 for 16MB units. After Betty’s call, Silicone Chips, Inc. finalized a five-year contract to sell the Mega Computer Chip to a large Chinese computer manufacturer, which resulted in a $10 market price increase (from the quoted prices on April 20, 2000) for all units of the Mega Computer Chip.

Advise High Tech as to its rights and potential remedies against Silicone Chips, Inc. Are there any defenses that Silicone Chips, Inc. can assert? Who should win and why?

Explanation / Answer

High Tech has every right to file the lawsuit against Silicone Chips, inc because as per the vocal and verbal communication from Marco, Silicone Chips has quoted a price to Betty and Betty has confirmed acceptance through email. High Tech should claim the order of 16000 MB at the rate of $30, $40 and $50 for 4MB, 8MB and 16MB chip respectively and Silicone has to abide by the order because it was promised by them.

Silicone Chip possess various amenities for their defense, firstly the quote that Marco pitched to Betty was a vocal communication in the phone call and there was no written document for the same. Betty replied back in mail that they accept the order. So, Silicone chip may deny the conversation here as there is no written evidence of the quote. Secondly, while replying to the mail, Betty mentioned that they accept the order and specifications will follow but there was no communication after that, so Silicone is not aware of the products that High Tech actually requires and how they will segregate the 16000 MB into chips of 4MB, 8MB and 16MB.

In the lawsuit, Silicone chips will win because basic norms of business communication is not followed by High Tech in this context as there was no mail communication from Silicone Chips and also there was no order specification mail from High Tech which is a big reason because of which the order may not stand or considered by the law. It will be very much tough for High Tech to prove the validity of the phone conversation and even if the phone conversation is considered valid, then the order specification will turn important which was not provided by Silicone Chips.

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