Contract Case
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Big Time Toymaker (BTT) develops, manufactures, and distributes board games and other toys to the United States, Mexico, and Canada. Chou is the inventor of a new strategy game he named Strat. BTT was interested in distributing Strat and entered into an agreement with Chou whereby BTT paid him $25,000 in exchange for exclusive negotiation rights for a 90-day period. The exclusive negotiation agreement stipulated that no distribution contract existed unless it was in writing. Just three days before the expiration of the 90-day period, the parties reached an oral distribution agreement at a meeting. Chou offered to draft the contract that would memorialize their agreement. Before Chou drafted the agreement, a BTT manager sent Chou an e-mail with the subject line "Strat Deal" that repeated the key terms of the distribution agreement including price, time frames, and obligations of both parties. Although the e-mail never used the word contract, it stated that all of the terms had been agreed upon. Chou believed that this e-mail was meant to replace the earlier notion that he should draft a contract, and one month passed. BTT then sent Chou a fax requesting that he send a draft for a distribution agreement contract. Despite the fact that Chou did so
immediately after receiving the BTT fax, several more months passed without response from BTT. BTT had a change in management and informed Chou they were not interested in distributing Strat.
1. At what point, if ever, did the parties have a contract?
2. What facts may weigh in favor of or against Chou in terms of the parties' objective intent to contract?
3. Does the fact that the parties were communicating by e-mail have any impact on your analysis in Questions 1 and 2 (above)?
4. What role does the statute of frauds play in this contract?
5. Could BTT avoid this contract under the doctrine of mistake? Explain. Would either party have any other defenses that would allow the contract to be avoided?
6. Assuming, arguendo, that this e-mail does constitute an agreement, what consideration supports this agreement?
At the end of the scenario, BTT states that it is not interested in distributing Chou's new strategy game, Strat. Assuming BTT and Chou have a contract, and BTT has breached the contract by not distributing the game, discuss what remedies might or might not apply.
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Step 1
Normally the contract would have been formed when before the expiration of the 90 day period the parties reached an oral distribution agreement at the meeting. However, the exclusive negotiation agreement stipulated that no distribution contract existed unless it was in writing. The contract was formed when the BTT manager sent the "Strat Deal" to Chou. Since the e-mail contained all the key terms of the distribution agreement including price, time frames, and obligation of both parties, the e-mail complied with the requirement that the contract should be in writing. When the BTT manager sent the e-mail, the contract was formed (Andrews. N, 2011).
Step 2
There is an objective manifestation of intent to contract. The first manifestation of the intent to contract is the payment by BTT of $25,000 in exchange for exclusive negotiation rights for a 90-day period. The second manifestation of the intent to contract is the meeting between BTT managers and Chou where they reached an oral distribution agreement. Third the sending of e-mail drafted by BTT manager shows the intent to contract. Fourth, the stating of all the terms that had been agreed upon in the BTT manager e-mail shows the intent to contract (Barnett. R, 2010). ...
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