M221 Business Law Llb : Assessment Answers

The Statute of Frauds. Kendall Gardner agreed to buy a specially built shaving mill from B&C Shavings. He planned to use the mill to produce wood shavings for poultry processors. B&C faxed an invoice to Gardner reflecting a purchase price of $86,200, with a 30 percent down payment and the “balance due before shipment. Gardner paid the down payment. B&C finished the mill and wrote Gardner a letter telling him to “pay the bal- ance due or you will lose the down payment. By then, Gardner had lost his customers for the wood shavings, could not pay the balance due, and asked for the return of his down payment. Did these parties have an enforceable contract under the Statute of Frauds? Explain. [Bowen v. Gardner, 2013 Ark.App. 52, 425 S.W.3d 875 (2013)] (See The Formation of Sales and Lease Contracts.)

Answer:

Issue

The case B & C v Gardner is about two parties in which Gardner is the buyer, whereas B & C is the seller.  Gardner requested B & C to build a special shavings mill costing $86,200, in which he intended to pay a thirty percent down payment. On the other hand, B & C agreed to the request and asked for down payment, which was paid by Gardner. The parties agreed that the balanced will be paid before the shipment. However, after a short while before the shipment day, Gardner discovered that the customer he intended to sell the shavings mill to was no longer interested. Therefore, he cancelled the agreement and requested for a refund of his deposit of which B & C refused to pay. Finally, B & C sold the shaving mill after incurring an extra $ 10,406 in reconstructing it for it to meet the requirement of the new customer. As a result, this paper intends to determine whether there was an enforceable contract under the Statute of Fraud between B & C and Gardner.  

Decision

A contract is created when there is an offer, acceptance and consideration. In the case B&C v Gardner, it is clear that Gardner placed an offer by requesting B&C to build a special shavings mill costing $86,200 for him, and in return B&C accepted the offer, while expecting something valuable in return, showing that there was consideration (Wechsler, 2014).  Therefore, it is clear to say that there was an enforceable contract between B&c and Gardner, involving more than $500. As a result, each party was expected obligated to perform its responsibilities under the contract.

Legal Explanation

The conditions set in a contract are reasonable basis for determining a breach and providing the correct remedies. Under Uniform Commercial Code (U.C.C) Section 2 (201) such contracts must be in writing (Miller, 2017). However, there are some exceptions to this law where an oral contract where goods worth $500 or more gets enforced. Having determined that contract existed, it can be concluded that Gardner breached the contract. It is because he promised to buy the shaving machine but failed to do so as he was obligated under the agreement. He also interfered with B&C performance. In such events, the U.C.C provides some remedies for the seller (Agenique, 2017).

When the buyer fails to pay the agreed amount before or due on, or rejects parts or whole of the affected goods, then the innocent seller may resell and recover the damages under Arkansas Code Annotated section 4-2-706. Therefore, by selling the shaving machine to another buyer, they relied on the Ark Code Ann 4-2-706. This section also provides ways by which the damages can get calculated in case of the breach but the buyer. Under section 4-2-703 and 4-2-710 the seller may recover the difference between the prices of the resale and contract in addition to any incidental damages (Miller, 2017). However, this should be less the expenses put aside as a result of the breach by the buyer. The court found that B&C spent $10,406 extra to produce what could be sold to another buyer. Being that $25,860 was already been paid as a deposit, Gardner was entitled to a refund of the difference, which was $15,454.

References:

Agenique, S. (2017). Contract Law- Statute of frauds violation precipitates MCL 2.116(C)(7) dismissal. Michigan Lawyers Weekly,

Miller, R. (2017). Fundamentals of Business Law Today (11th ed., p. 324). USA.

Wechsler, M. (2014). The Statute of Frauds and Contract Law. TheLaw.com. Retrieved 7 October 2017, from https://www.thelaw.com/law/the-statute-of-frauds-and-contract-law.247/