Case Scenario: Big Time Toymaker
1. At what point, if ever, did the parties have a contract? Big Time Toymaker (BTT) granted Chou a binding option to enter a contract, known as an option contract. BTT (offeror) pays Chou (offeree) $25K to keep an offer open in exchange for exclusive negotiation rights for a 90-day period. Therefore, BTT purchased the rights to negotiate a distribution agreement for Chou’s invention (a board game). The agreement stipulated that at the end of the 90-day period, if the parties could not come to terms on a distribution deal. Chou would be free to enter into a contract with another distribution company and keeps the $25K. This is a valid enforceable oral contract between BTT and Chou.
Upon close study, I do not believe that the parties concerned ever had a distribution agreement contract. The negotiation agreement specified that no distribution contract existed unless it was in writing. The two came to an oral agreement three days before the 90-day deadline. Immediately, following the meeting the BTT manager sent Chou an e-mail with “Strat Deal” in the subject line, reiterating the key terms of the oral distribution agreement in regard to price, time frames, and obligations of both parties (Melvin, 2011). However, there was no evidence to show that Chou ever accepted the offer via e-mail in accordance with the governing common law mailbox rule. Only an oral agreement was reached; with no legally binding draft and the signature of both parties present, no contract exists.
2. What facts may weigh in favor or against Chou in terms of the parties’ objective intent to contract?
Facts that weight in favor of Chou:
• BTT had paid out $25K for the exclusive negotiation rights for his board game; this would cause Chou to believe that the company had intent in arriving at a distribution agreement
• Meeting that concluded with an oral