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Consideration of the Contract Flaw - Giant v Little

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You are the Chief Financial Officer of the Giant Candy Company (Giant). Giant has been operating at a loss. Giant believes it must cut costs. Your boss decides to review all of the company's contracts to determine if there are any contracts that can be terminated. You find the following contract written by Little Candy Company:

"Giant Candy Company (Giant) agrees to buy and Little Candy Company (Little) agrees to sell all of the candy coating that Giant requires for a period of five years. The candy coating shall be purchased at the current list price as determined by Little. Orders will be shipped ten days from the placement of order. Applicable taxes extra. Contingencies beyond the control of Little to be sufficient excuse for failure to comply with the contract.

Dated: September 12, (Two years ago.)

/s/ Giant Company President
/s/ Little Company President"

Giant has used Little to supply candy coating for two years. It has placed 14 orders and has been charged a different price each time. All orders have been delivered on time. Giant's purchasing department has informed you that an identical candy coating can be purchased at a lower cost from another vendor.

Prepare a Memorandum of Law directed to the Chief Operating Officer (COO) of Giant that discusses the following issues:
Is there a flaw in the consideration of the contract that would allow Giant to stop honoring the contract and allow it to buy from another vendor?

What could Little do, if anything, to cure any alleged flaw in the consideration?

How does the fact that Giant has honored the contract for two years affect your argument?

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Solution Summary

A memorandum of law is drawn up as a PDF, addressing the flaw and how to cure it.

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