Big Time Toymaker


November 10, 2014

Big Time Toymaker
An agreement recognized by a court of law is called a contract. A binding contract is the result of an agreement, whether the agreement is verbal or written, providing certain requirements be met (Melvin, 2011). The purpose of contracts is to provide protection to both parties involved in the agreement. In this simulation, Chou had invented a revolutionary game, Strat, which had piqued the interest of Big Time Toymaker (BTT). Chou and BTT entered into an agreement that gave BTT exclusive rights to Chou’s inventory for the period of 90 days in exchange for a monetary transaction of $25,000 (Melvin, 2011). Evaluation of this particular situation will lead to the discovery of some of the pros and cons a contract can provide, how to determine if a contract is necessary in a situation, as well as a few remedies should a breach of contract occur.
Melvin (2011) stated, “BTT was interested in distributing Strat and entered into an agreement with Chou whereby BTT paid him $25,000 in exchange for exclusive negotiation rights for a 90-day period. The exclusive negotiation agreement stipulated that no distribution contract existed unless it was in writing” (p. 155). These are concrete terms that form a verbal agreement, which was held in place, that lead to the creation of a written agreement. Even though none of the e-mails exchanged between Chou and BTT ever actually contained the word “contract”, the e-mails clearly showed that all of the terms were agreed upon by both parties involved, which meets the requirements that outline a contract.
Positive and Negative Facts of Agreement
This particular simulation provides several facts that are in favor of and against Chou in terms of the parties’ objective intent to form a contract. The first fact in Chou’s favor is the first meeting where an agreement was made with BTT regarding the monetary exchange for exclusive negotiation rights. BTT sending over a follow-up e-mail that clearly stated their agreed upon terms was a second fact in favor of Chou, as well as the fax from BTT requesting that Chou create a draft for an actual contract. Chou also had in his favor the fact that both parties spent a notable amount of time acting under the agreed upon terms of the drafted contract. However, because the negotiation agreement stated that there would be no contract for distribution unless otherwise stated in writing, and BTT’s e-mail that repeated the agreed upon terms did not contain signatures from either party, binding the contract, the oral negotiation agreement passed the 90-day deadline with no technical contract in place. It was not until several months had passed that that BTT had requested a draft of a contract.
Impact of E-mail
Thanks to the evolution of technology, in the paperless world of electronic communications, a paper communication is no longer necessary to hold to the bond of an agreement. The e-mails exchanged between Chou and BTT outlines an agreement made by both parties based on the terms agreed upon in the meeting regarding distribution. Without the e-mail exchange identified as a “contract” by written words, it displays an acknowledgment by Chou and BTT of an existent contract. According to Melvin (2011), because the e-mail provided a senders name at the bottom of the message, the Mailbox rule applies, and the name is to be considered an electronic signature.
Statute of Frauds
Melvin (2011) states, “Under the Uniform Commercial Code, the statute of frauds applies to any contract for the sale of goods for $500 or more, and any lease transaction for goods amounting to $1,000 or more” (p. 151). Because the $25,000 was received by Chou under the negotiation agreement, the sale of goods should be considered for the Strat game. The electronic signature at the bottom of the e-mail from BTT to Chou is also considered, especially since the e-mail clearly stated the agreed upon terms. Chou could use the fact that the whole scenario was misleading because there was an exchange of money for goods, a verbal agreement, and an e-mail containing all of the elements of a contract.
Doctrine of Mistake
Melvin (2011) defines a mutual mistake as “A mutual mistake may be the basis for canceling a contract (also called avoiding the contract) when both parties hold