Client letter · 60 minutes
Advise a client whether it must pay a supplier's demanded increase and what to do. You have 60 minutes. To: Associate. Use the File and the Library only, then compare your draft with the rubric and the model answer below.
To: Associate. From: Helen Ostrowski, Partner. Re: Greenline Farms and Pacific Packaging. Greenline Farms buys 50,000 cartons a month from Pacific Packaging at $1.00 each under a written contract for the next 12 months. Pacific has now said it will stop shipping unless Greenline agrees to pay $1.20 a carton, and Greenline's owner has asked what she must do. Please draft a letter to the client, Alicia Brandt, explaining whether she must pay the higher price, what her options are, and what to do next. Use only the Library. Write in plain language and do not cite cases.
Written agreement dated January 5 between Pacific Packaging and Greenline Farms: 50,000 cartons per month for 12 months at $1.00 per carton; delivery on the 10th of each month; payment within 30 days. The contract says: 'This agreement may be changed only by a written amendment signed by both parties.' Greenline has paid on time each month.
Our raw material costs went up 25 percent. We will not ship the April, May, or later orders unless you agree to $1.20 per carton starting now. Please reply by April 5.
Ms. Brandt has no other carton supplier that could ship in less than six weeks and would charge $1.35. Her packing season starts April 20. She is willing to pay the higher price temporarily if it is legal to do so, but she does not want to give up her rights.
(1) An agreement modifying a contract for the sale of goods needs no consideration to be binding, but must meet the requirement of good faith. (2) A signed agreement that excludes modification except by a signed writing cannot be otherwise modified, though an attempt at modification that does not satisfy the requirement can operate as a waiver. (3) A party who has made a waiver affecting an executory part of the contract may retract it by reasonable notice that strict performance will be required, unless the other party has materially changed position in reliance.
Section 2-609: A party who has reasonable grounds for insecurity may demand adequate assurance of performance in writing and may suspend its own performance until it receives it. Failure to provide assurance within a reasonable time, not over thirty days, is a repudiation. Section 2-712: If a seller repudiates or fails to deliver, the buyer may cover by purchasing substitute goods in good faith without unreasonable delay, and recover the difference between the cost of cover and the contract price plus incidental damages.
A modification made under duress, or one extracted by a threat to break the contract without a legitimate commercial reason, is not in good faith. A seller's increase in costs that is caused by a genuine, unforeseen market change may support a good-faith request, but a mere refusal to perform unless the price is raised is bad faith where the seller has a contract at a fixed price.
Graders score a response against these criteria, and every one of them depends on using only the facts in the File and only the rules in the Library, so treat the list as a check for your draft after the first pass and again before you stop writing.
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