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Dispute Resolution

Sterling, Inc. is a manufacturer of state-of-the-art computers. For the past ten years, Sterling has acquired all of its microchips from NoBugs Corporation, the only producer of chips meeting Sterling's high specifications. The relationship has been mutually profitable. Sterling could not have built its reputation as an industry leader without NoBugs's reliable and consistently high-quality products; Sterling's business has enabled NoBugs to grow rapidly while providing its investors with an attractive rate of return.

Some months ago, several of Sterling's computers exploded shortly after installation. Upon investigation, Sterling discovered that tiny imperfections in NoBugs's microchips had aggravated a dormant design defect in the computers, causing the explosions. Analysis of the chips indicated that they were indeed below specifications and that the imperfections were caused by a slight miscalibration of NoBugs's encoding equipment. NoBugs recalibrated the equipment and promptly resumed production of perfect chips.

Sterling's losses from the explosions - lost profits, out-of-pocket costs associated with compensating customers for the explosions, and injury to business reputation - are estimated to exceed $20 million. Sterling and NoBugs disagree on the amount of the loss for which NoBugs should be responsible. Sterling has a strong legal case for breach of contract against NoBugs. Sterling's CEO is considering a lawsuit. She asks you to prepare a report discussing litigation strategy and the advantages and disadvantages of litigation; and discussing pretrial planning should the company opt for litigation.

3 page paper of a defense strategy apa style body of paper are to state: Areas and Principles of Law, key facts, argument, counterargument

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In compliance with BrainMass rules this is not a hand in ready paper but is only guidance.

Areas and Principles of law: The areas of law are a breach of contract. There is a binding agreement between Sterling and NoBugs and there is non-performance by NoBugs. If a party does not fulfill the contractual promise there is said to be breach of contract (1). Breach of contract is a civil wrong. The breach is a material breach and it permits the other party to the contract to either compel performance, or collect damages because of the breach (2). To decide whether it is a material breach, the judge will consider the extent to which the injured party will be deprived of the benefit which is reasonably expected, the extent to which the injured party can be adequately compensated, the extent to which the party failing to perform or to offer to perform will suffer forfeiture, and the likelihood that the party failing to perform will cure this failure, and the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing (3).

The key facts: Sterling acquires microchips from NoBugs, which is the only producer of chips meeting Sterling's high specifications. NoBugs has consistently supplied high quality microchips to Sterling. However, tiny imperfections in NoBugs's microchips had occurred which had led to aggravation of dormant design ...

Solution Summary

is explained in a structured manner in this response critically evaluates the relationship between two companies and the possible use of litigation for resolving a dispute. The answer includes references used.