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    Contract - Employee Mistake, Outcome for Company?

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    Castle Fabrics contracted to sell fabric to Fortune Manufacturers. After the fabric was delivered, a dispute arose as to it quality. As a result, Fortune refused to pay for the fabric and returned it unused to Castle.

    Castle gave Fortune only partial credit for the returned fabric and threatened to sue Fortune if it did not pay the balance due. Fortune refused and produced a credit memorandum from a Castle employee indicating that Fortune would be given full credit for the fabric if it was returned without injury.

    Although the regular responsibilities of this employee included sending such memorandums, Castle's general manager had specifically instructed the employee not to send a "full credit" memo to Fortune. By mistake, the employee sent Fortune the wrong memo.

    Fortune argued that Castle was responsible for any mistake made by Castle's own employee; thus, Castle must give Fortune full credit for the returned fabric. Castle argued that Castle could not be held responsible for the acts of its employees who disobeyed specific instructions.

    What will the outcome be?

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    Law, Contracts
    Year 1
    contract
    Castle Fabrics contracted to sell fabric to Fortune Manufacturers. After the fabric was delivered, a dispute arose as to it quality. As a result, Fortune refused to pay for the fabric and returned it unused to Castle.

    Castle gave Fortune only partial credit for the returned fabric and threatened to sue Fortune if it did not pay the balance due. Fortune refused and produced a credit memorandum from a Castle employee indicating that Fortune would be given full credit for the fabric if it was returned without injury.

    Although the regular responsibilities of this employee included sending such memorandums, Castle's general manager had specifically instructed the employee not to send a "full credit" memo to Fortune. By mistake, the employee sent Fortune the wrong memo.

    Fortune argued that Castle was responsible for any mistake made by Castle's own employee; thus, Castle must give Fortune full credit for the returned fabric. Castle argued that Castle could not be held responsible for the acts of its employees who disobeyed specific instructions.

    What will the outcome be?

    No files attached.
    Bid Credits: 2 Deadline: April 6, 2005, 11:30 am EDT

    Case: Castle Fabrics contracted to sell fabric to Fortune Manufacturers. After the fabric was delivered, a dispute arose as to it quality. As a result, Fortune refused to pay for the fabric and returned it unused to Castle. Castle gave Fortune only partial credit for the returned fabric and threatened to sue Fortune if it did not pay the balance due. Fortune refused and produced a credit memorandum from a Castle employee indicating that Fortune would be given full credit for the fabric if it was returned without injury. Although the regular responsibilities of this employee included sending such memorandums, Castle's general manager had specifically instructed the employee not to send a "full credit" memo to Fortune. By mistake, the employee sent Fortune the wrong memo. Fortune argued that Castle was responsible for any mistake made by Castle's own employee; thus, Castle must give Fortune full credit for the returned fabric. Castle argued that Castle could not be held responsible for the acts of its employees who disobeyed specific instructions. What will the outcome be?

    Issues: Is Castle responsible for a mistake made by Castle's own employee? Does Fortune have the right to return the goods regardless?

    A contract for sale imposes an obligation on each party that the other's expectation of receiving due performance will not be impaired. When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return (U2-609). Fortune has failed to act "in good faith" and return Fortune's money after the inspecting the goods to find them of poor quality and within a reasonable time.

    Under UCC (U2-608), regardless of whether the employee issued a full credit slip or not, Fortune has the right to the "revocation of acceptance" which must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods, which is not caused by their own defects. It is not effective until the buyer (i.e., fortune) notifies the seller of it. A buyer who so revokes has the same rights and duties with regard to the goods involved as if he had rejected them (see http://assist.neded.org/uccpt2.html).

    If Fortune rightfully rejects or justifiably revokes acceptance of the goods, meaning that after inspecting the goods he found them of poor quality, he can return them for full refund within a reasonable time. Under UCC (section 2-612), "revocation of acceptance" respect to any shipment goods involved, and with respect to the whole shipment if the breach goes to the whole contract (section 2-612), the buyer may cancel and be recover so much of the price as has been paid (U2-711). Fortune would win the case and Castle would have to pay them back the remainder of the money.

    FINAL COMMENTS you may want to check out the UNIFORM COMMERCIAL CODE: Section 2 -- SALES more fully at http://assist.neded.org/uccpt2.html or UCC http://www.law.cornell.edu/ucc/ucc.table.html.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com December 24, 2021, 5:14 pm ad1c9bdddf>
    https://brainmass.com/law/contract-law/contract-employee-mistake-outcome-company-37229

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