Contract and Chou Essay.
The case scenario under review by our team includes a contract law situation involving a board game company and a game inventor. Big Time Toymaker (BTT) is a board game company which develops, manufactures, and distributes board games, and Chou is the name of the inventor of a new strategy game. In this scenario, what began with a payment made from BTT to Chou for exclusive negotiating rights for 90 days, ended in a change in management at BTT, leading to their company no longer having interest in distributing Chou’s game.
Several questions will be asked about the validity of the terms agreed upon by the parties involved, including at what point did the parties have a contract, and what role does the statute of frauds play in this contract? Our objective is to analyze the case scenario, including the previously stated questions, and provide the answers to those and other questions pertaining to the scenario and contract law. Question 1 At what point, if ever, did the parties have a contract?
There was mutual agreement between Chou and BTT via verbal agreement, and a subsequent email verifying that an agreement had been tentatively reached.
According to the terms of distribution between Chou and BTT a contract was only valid if formalized in writing. An argument may be made that three days prior to the 90 day time limit a mutual agreement was reached and valid via an E-contract law. There was mutual assent between both Chou and BTT. The argument for the other side will state there was never a formalized written contract from either Chou or BTT, only an email with a subject heading stating Strat Deal.
Is the email a valid contract? Question 2 What facts may weigh in favor of or against Chou in terms of parties’ objective intent to contract? Facts show that BTT sent an email with a subject heading of Strat Deal with information stating that Chou and BTT have reached an agreement. The writing states that after months of no response from BTT and with no management in place the company no longer wishes to distribute Chou’s intellectual property. Chou was in compliance with BTT at all times regarding issues pertaining to Strat.
Chou will allege that there was a contract between himself and BTT that was of mutual assent and under E-contract law the emails were valid. Question 3 Does the fact that the parties were communicating by email have any impact on your analysis in questions 1-2 above? According to CA Civil Code 1624, b 3, a, online contracts are endorsable even if writing is required by the statute of frauds. Communication of contracts is valid under E-contract law. There is no impact on analysis made of above stated questions because of online communication. Question 4 What role does the statute of frauds play in this contract?
A key factor in any contract is acceptance, and in this case a verbal agreement had been reached three days before the exclusive negotiation right was expired. Chou then said he was going to draw up the contract. Big Time Toymaker (BTT) then sent Chou an email outlining all of the things that they had agreed upon that would be included in the contract. Seeing the email, Chou then assumed that this was the contract to be enforced and did not respond to BTT. Even though Chou received the email, he did not respond to it, thereby giving Chou the defense that silence is never acceptance.
However, in E-contact law dictated by CA Civil Code 1624, b, 3, a, it says that online contracts are endorsable even if writing is required by the statute of frauds. In addition, the “Click On” or “Click Wrap” agreement clause states that these agreements are enforceable since the opportunity to read and acknowledge was given. The statutes of frauds do play a part in this contract due to the Uniform Commercial Code requiring that the statute of frauds applies to any contract for the sale of goods for $500 or more.
However, the exact amount of “Strat” units that Big Time Toymaker (BTT) will sell or at what cost of each unit is unclear to the reader, it was described in detail in the email BTT sent to Chou. Question 5 Could BTT avoid this contract under the doctrine of mistake? Explain. The new management at BTT cannot avoid this contract under the doctrine of mistake because a mistake was not made by both Chou and the old management team. The mistake by Chou was accepting the email outline of the contract terms as an actual contract agreed to by both parties.
Scienter applies to Chou in this case by accepting a seemingly legitimate contract. Would either party have any other defenses that would allow the contract to be avoided? The change of management brought about individuals bound to the same company as the old management team was, therefore, scienter applies to the new management team in privity. The draft sent from Chou and received by BTT is a negotiable instrument. BTT thereby becomes a holder in due course. The inaction of BTT after the draft was sent is in violation of the UCC requirement that all offers are to be open for a reasonable period of 90 days.
Chou was under the impression that a contract had been made before that 90 days had expired. Chou has real defense as well as personal defense due to breach of contract and fraud. Question 6 Assuming, arguendo, that this e-mail does constitute an agreement, what consideration supports this agreement? By law, statute of frauds would support this agreement. Due to the terms, there cannot be a lawsuit that can be upheld on particular contracts or arrangements, except if it is written and signed by the authorized party or representative.
Under the statute, certain kinds of contracts have to be in writing in order to be enforceable in a court of law (Contracts: Statute of Frauds, 2013). The writing also has to be signed by the person who is held responsible for the contract or by that person’s agent. To evade the justification of the Statute of Frauds, one would need to make sure the contracts are in text and signed by the other party; so, if the opposing party does not hold his or her end of the agreement, one would gain from that particular party. Question
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. It is obvious BTT’s manager did not think clearly about protecting BTT from liability. He carelessly wrote the emails, and his careless actions put BTT at risk. This led Chou to believe that this e-mail was meant to replace the earlier notion that he should draft a contract. Although the word contract was not ever used in the e-mail, it said that all of the terms had been agreed upon.
The compensation would be awarded to Chou by the court in a civil action due to the wrongful conduct, being the breach from the other party, BTT. If the contract is breached by BTT, Chou will be granted equitable relief by the court, which comes in the form of specific performance, injunctive relief, or reformation. Monetary damages could also be in effect, in which they can be compensatory, resulting from a loss due to nonperformance. Also, consequential, which are indirect but to be expected from non-completion.
Restitution would also take place that would be equivalent to total the party has been unfairly supplemented by the non-breaching party, and liquidated, which damages are a preset value rendering from the agreement. The compensatory damages for recovery Chou suffered by the non-breaching party would be the damages that would be awarded to the party in the same situation he would have been in if the other party had executed as agreed upon (Melvin, 2011).
After review of the case scenario involving Big Time Toymaker and Chou the game inventor, we have concluded that not only was there a contract agreement between the parties, but that according to E-contract law, Chou may be bound by the terms included in the original email sent from BTT. In addition, the doctrine of mistake cannot be used in this situation because of scienter toward Chou and the old and new management of BTT. Several questions were asked of our team in accordance with contract law and the scenario provided by the textbook. This completes our analysis of the scenario and answers to the questions we were presented.