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Case scenario: grocery, inc. Essay

            Under contract law, both parties to a contract must be competent, adult parties.  This means each party to the contract must have capacity to enter into a contract.  Minor children, below 18 years of age, do not have the capacity to form a contract.  A contract entered into with a minor is voidable, if one of the parties has the option to terminate the contract (Wikipedia, 2006).  In the case at bar, Jeff Fresh, being 17 years old, is considered a minor with no legal capacity to enter into a valid contract.  The contract between Jeff and Smooth Sales Used Cars is a voidable contract.

            However, most jurisdictions have statutes declaring that capacity of both parties to enter into a contract is presumed.  Anyone who refuses enforcement of the contract on the grounds of lack of capacity to be bound has the burden of proving the issue of capacity (Wikipedia, 2006).  Thus, as one possible outcome for this scenario, if assuming My Town, U.S.A. is governed by a statute that allows for such presumption of capacity to be bound, then Smooth Sales Used Car was justified in presuming Jeff had capacity to enter into a contract.  In such a

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case, then Jeff has the burden of persuasion to prove his lack of capacity.  While the presumption of his legal capacity to enter into a contract lies in favor of Smooth Sales, the latter can sue Jeff for damages or specific performance of his obligation.

            It should also be noted that the contract between Jeff and Smooth Sales is an installment contract, governed by the Uniform Commercial Code (UCC), Article 2, Section 612 (§ 2-612).  As such, default on one or more of the installments due substantially impairs the value of the entire contract.  In other words, there is a breach of the whole contract upon Jeff’s non-payment of one or more of the installments due.  As the aggrieved party, Smooth Sales has the right to demand damages or specific performance for the breach of the contract by Jeff.

            For the second scenario, the UCC provides that, pursuant to the Gap-Filling Rule, a contract does not fail for indefiniteness if the parties intended to make a contract.  Open terms can be read into a sales contract, which may include matters pertaining to price, payment terms, delivery time, place of delivery, and assortment of goods.  Quantity of good to be delivered may likewise be indefinite.  Contract with such “gaps” are not rendered unenforceable, as long as there is a reasonable basis for giving an appropriate remedy, such as when a reasonable price can be determined for the goods delivered at the time of their delivery [UCC § 2-204(3), UCC § 2A-204(3)], and there is a reasonable.  In the case at bar, the contract between Grocery and Cereal, Inc. did not specify the type of cereals to be delivered or how delivery should be done in terms of dividing the 20 cases between Grocery’s 20 stores in Any State.  A fortuitous event – a flood – also occurred, for which Cereal is not liable in the absence of breach, delay or negligence.

            Cereal, Inc. can turn to the Gap-Filling Rule as basis for its remedy and claim that the contract was indefinite as to the type of cereals Grocery wanted.  Cereal can claim that since Grocery did not specify what type of cereal it needed, then Cereal could deliver Soggy Flakes.  It should be noted that Grocery, in its subsequent facsimile, only specified manner of deliver (15 cases to be delivered to various Grocery outlets, and 5 cases to be delivered to Grocery’s warehouse).  Another remedy Cereal can claim was that the flood, a fortuitous event, left it with no choice but to deliver the only available cereals it had in stock – Soggy Flakes, which, again, was not excluded in the contract since the contract did not state definitely what type or brand of cereals Grocery required.

            However, Grocery’s remedy is that the contract did specify that Grocery wanted 20 cases delivered.  On delivery date, Cereal only delivered 10 cases.  Grocery can sue Cereal for breach of contract for failure to delivery the 20 cases specified.  Grocery can also point out that, though the contract was indefinite as to the type of cereals to be delivered, they did however fax Cereal 12 days before delivery date as to the mode of delivery (15 cases to Grocery stores, 5 cases to the Grocery warehouse).  The additional terms are valid, since they did not materially alter the original contract, with Cereal indicating implied acceptance to such terms when it failed to seasonably object to the additional terms (UCC, § 2-207).  Grocery’s remedy then against Cereal is for damages and specific performance, since there was non-compliance by Cereal of its obligation to Grocery.

REFERENCES

Uniform Commercial Code, Article 2

Contract.  (2006).  Wikipedia, The Free Encyclopedia.  Retrieved February 15, 2006 at http://en.wikipedia.org/wiki/Contract

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