Legal Analysis - Business with Mr. Marshall Petersen

Business with Mr. Marshall Petersen

Cherie Randolph

Liberty University

Business with Mr. Marshall Petersen

I am a Sunday school teacher from Huntsville, Alabama.  My family has a produce company that sells Muscadine grapes and other various products.  Mr. Marshall Petersen is the husband of one of my Sunday school couples.  He owns a small, local health food products business and was interested in growing the business by adding some new product lines.   Therefore I provided him with some samples of my products.  Those samples turned out to be very popular in his store.  Consequently, Mr. Petersen placed regular, increasing phone orders, and began investing heavily in advertising for the Muscadine products at his store.

Due to the demand for Muscadines, my company has become inundated with orders, far in excess of our ability to meet the demand.  However, a company in Texas offered to pay me twice the going rate for my products, but the company also requires me to sign an output contract as part of the deal.  This contract would represent a substantial financial windfall for my company, however I feel bad about leaving Mr. Peterson out to dry.  Now I have to determine whether to continue doing business with Mr. Peterson or take on the offer from the company in Texas.  In order to do this I would need to weigh out the pros and cons for both and evaluate the business between Mr. Petersen and myself.  

Discussion

Mr. Marshall Petersen and I did not have a written or verbal agreement to do business with one another.  I simply provided him with some samples of my Muscadine grapes my family’s produce company sells because he was interested in adding new product lines to his business.  The samples were very popular in his store therefore, Mr. Petersen placed regular, increasing phone orders and he began to invest heavily in advertising for the Muscadine products at his store.  However, because I offered my product to Mr. Petersen at a consistent price and he agreed to pay it, we have entered ourselves into a legally binding contract.  Specifically, the business between Mr. Petersen and I would be considered an implied in fact contract. An implied in fact contract consists of obligations arising from a mutual agreement an intent to promise where the agreement and promise have not been expressed in words (Legal Information Institute, n.d.).  Our actions in this situation prove this to be an implied in fact contract.  

I could go about this situation two different ways.  If I continue to do business with Mr. Petersen we would have to develop a written contract that specifically states in writing the obligations of both buyer and seller.  Specifically, this contract will include information about both our expectations and we will have both our lawyers review it before it is signed so that there is no confusion or misunderstandings.  Therefore this contract would have to be very detailed.  Mr. Petersen’s late payments would no longer be acceptable; he would either be charged interest or penalties.  We would have to be professional individuals that know how to separate our business relationship from our personal relationship.    

On the other hand, I believe I have the right to discontinue my business with Mr. Petersen because he was frequently late making payments.  I feel I have been nothing but faithful with my commitment to sell my product to Mr. Petersen.  I have faithfully delivered everything he requested, promptly, and at consistent prices.  It is only right that Mr. Petersen return the due diligence by holding up his end of the commitment.  Mr. Petersen would make his payment anywhere from 15 to 30 days late and I never charged him any interest or penalties, even though I reserved the right to do so.  As the Golden Rule states and so does the bible, do to others whatever you would like them to do to you.  This is the essence of all that is taught in the law and the prophets (Matthew 7:12, New Living Translation).  Mr. Petersen made his orders faithfully expecting me to hold up my end of the bargain by delivering him my products but yet he did not make his payments when they were due.  In this case, I would be better off taking the offer from the company in Texas for twice the going rate for my products which would significantly help me financially.  

In addition to Mr. Petersen frequently making payments late, he also got my son to sign a contract that I was unaware about.  Apparently this contract was to guarantee a continuing business relationship.  Mr. Petersen was wrong for going to my son who was a minor at the time and getting him to sign a contract.  Mr. Petersen should have come to me with this contract.  His actions here is more than enough to make me want to consider discontinuing business with him.  

If I elect to stop doing business with Mr. Petersen, he may take my company to court for breach of implied in fact contract and breach of implied duty of good faith and good dealing.  When I informed Mr. Petersen of the offer presented to me and suggested to him names of other reputable potential suppliers in the area he was extremely upset.  He was under the impression that I would continue to supply him with all the products he needs, when he needs it, and at the prices he had always paid in accordance with an implied duty of good faith and fair dealing that had evolved based on our ongoing business relationship.  An implied covenant of good faith and fair dealing is broadly defined as each party to a contract makes the implied promise that each will not do anything to undermine or destroy the other’s right to receive the benefits of the agreement.  The purpose of the implied covenant of good faith and fair dealing is to ensure that parties act with faithfulness to an agreed common purpose and consistency with the justified expectations of the other party (USLegal, 2015).  If Mr. Petersen takes on legal causes, it would be because he believes I’ve acted unfaithfully by considering an offer and presenting him with options of other suppliers.  

Mr. Petersen could take me to court asserting a contractual claim because in his eyes I breached the implied covenant of good faith and fair dealing.  According to Alabama Law, damages awarded for breach of contract should return the party to the position he would have occupied had the contract not been violated.  Profits will be allowed as part of the recovery so long as the amount of the profit can be reasonably ascertained.  Damages may not be determined by mere speculation or conjecture (Wallace, Jordan, Ratliff & Brandit, 2015).  Therefore, I may have to continue selling my products to Mr. Petersen.