Toymaker Speaks With Forked Tongue
LAW/421 - CONTEMPORARY BUSINESS LAW
Instructor: Rosalie DrawbaughBig Time Toymaker
The Big Time Toymaker Company makes and distributes toys and games to different parts of the world. The inventor of the game, “Strat” enters into an exclusive negotiation rights contract with BTT detailing strict rules that everything must be in writing or there is no contract. The contract period was to last for 90 days, and a few days prior to ending the two parties met and verbally talked out the details of what was to be a contract. The next day an e-mail was sent detailing the items discussed the prior day. Chou believed that the e-mail was to replace the suggestion that he draft a contract. No contract had been drafted or signed by either party. BTT had a change in the management several months later and was no longer interested in the distribution of the Strat game.
BTT and Chou were to enter into a distribution contract for the game Strat, unfortunately during the exclusive negotiation rights agreement, no contract was documented. Both parties were under an agreement for terms for the contract but under the prior agreement all contracts must be in writing. Chou did not draft or sign any such contract for distribution or any agreement prior to the ending of the 90-day negotiation rights period. Legality for the contract to be valid, it must have been drafted and signed by the ending date set forth in the negotiation rights agreement. For the parties to have met the terms for the distribution contract, both parties would have sign the contract prior to the ending of the set agreement. However, an express contract may have existed if the parties strictly had not stipulated that no contract existed if not in writing.
Chou may try to render the action as an Objective Intent if it were not for that he agreed to the terms of the agreement and then did not comply with the terms. Mere belief of a contract is not in legal standings with any court if a party signed otherwise. Chou and BTT only had an agreement for exclusive negotiation rights and seeking an objective intent require that both parties have serious intention to become bound by the offer. The BTT Company did have an agreement with Chou, and the terms were certain at the point of the end of the negotiation rights agreement. This certainty did not prelude to after the agreement had expired and several months later no contract had been established. To use the Objective Intent, Chou should have requested a contract be drawn at the point of the expiration on the negotiation agreement had ended.
Having the parties communicate via e-mail keeps both informed and update to the happenings of the said contract. This communication does not constitute a contract and is only part of the basis of reaching an agreement for a contract. Today, if an e-mail or sequence of e-mails clearly expresses an offer for entering into an agreement with all of the material terms and the other side responds by e-mail accepting the terms, there's a strong possibility that a valid contract has been formed, even though no signatures have been exchanged. Chou did not correspond with the e-mail that was sent and thus failed to enter into any contract with BTT.
Statute of Frauds
To form an enforceable contract a mutual assent must be completed. Mutual assent is the combination of an offer and an acceptance to the offer. The law requires that only the parties’ acts or words lead the other party reasonably to belief that an agreement has been reached. Chou stated that he did believe that the e-mail was to replace the earlier notion that he should draft a contract. Beyond the agreement, three other factors must be reached to validate a contract. The agreement must be supported by consideration, and the parties must have the capacity for fulfill the contract. Last, the subject matter and