Running head: MEDIATION MEMORANDUM 1
Mediation Memorandum
Liberty University
Marshall Petersen
Mandatory Mediation
Page 1 of 7
TO: Alexis Fairchild
FROM: Marshall Petersen
DATE: June 1, 2015
SUBJECT: Mandatory Mediation
Facts of the Case
As owner of the local health food products business, I was approached a little over a year ago by
the defendant after attending a Sunday school class that he taught. Once he found out that I was
the owner of a local health food products business, he began soliciting his family’s business. He
told me that his family grew and sold Muscadine grapes and other Muscadine products, and that
they were very high in antioxidants. Next the defendant asked me if I might be interested in
promoting either the grapes or some of the other products they sold using their seeds. He later
supplied me with some samples and my customers seemed to respond positively to them, so I
began to place orders with his company. I began to see the potential in the Muscadine grapes and
increased the volume of my orders. Thus, I spent an ever increasing amount of money
advertising the Muscadine grapes.
After months of doing business with the defendant and investing heavily on advertising the
Muscadine grapes, I thought it might be a good idea to have a requirements contract in place. I
had the contract drafted and just so happen I ran into the defendant’s son, who was delivering a
shipment of Muscadine grapes. I handed the deliveryman/son the contract and he looked over it
and signed it. It has been brought to my attention since then, that the son was a minor at the time
of the signing and I am unsure of whether he is of majority currently. We did continue to do
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Mandatory Mediation
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business with the contract in place for a time period of around six months and the contract has
yet to be rescinded by the defendant or his son.
The defendant called me one evening and told me that his company was swamped with orders
and would no longer be able to supply me with the Muscadine grapes. He then suggested the
names of a few other suppliers in the area. However, I did not feel that this was adequate because
my customers are accustomed to the Muscadine grapes that I have been purchasing from the
defendant. Also, believing that we had a long-term agreement I spent a considerable amount of
money advertising the Muscadine grapes. I explained to the defendant that we had a
requirements contract between our businesses and I expected him to comply. I informed him that
I expected him to supply all the product I need, when I need it, and at the prices we had always
agreed on, or he would be breaching the contract and not be in accordance with the implied duty
of good faith and fair dealing. He stated that he did not know of the agreement, so I faxed him
over a copy that his son had signed.
Contract(s) at Issue
Requirements Contract
In the requirements contract I agreed to buy all of my Muscadine grapes and grape products that
the defendant produces exclusively from him. In return he agreed to continue to sell me the
quantity I need to satisfy my customers, at the agreed upon set price that had been established
during our past business transactions. The terms were to be in place for one year from the signing
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Mandatory Mediation
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of the contract which was six months ago with six months remaining. This contract was to renew
if neither party gave 30 days’ notice before the automatic renewal.
Implied Covenants of Good Faith and Fair Dealing
Even if the defendant wants to dispute the validity of the requirements contract, he is also bound
to our agreement through the covenants of good faith and fair dealings. In the case Sons of
Thunder, Inc. v. Borden, Inc, 1997 the implied covenant of good faith and fair dealing can
override an express and unambiguous termination clause in a contract. Even though this is a little
different, I do believe this shows that even if there is a disagreement to the validity of the
contract that we still had a business partnership that was believed to be long-term and ongoing.
So, the underlying facts are that we had an ongoing business partnership, where I bought the
defendant’s Muscadine grapes and related products. He delivered these products when and at
quantities requested. Understanding that we had a long-term agreement I invested significant
money advertising the Muscadine grapes and related products. If at any time I would have
believed that a long-term relationship was in doubt and not going to continue, I would not have
invested the company’s limited resources in advertising the defendant’s products.
Legal Issues
The first legal issue is the requirements contract. The defendant insist that it is not valid but I
believe that it continues to maintain its integrity. The requirements contract was drawn up to
ensure that we would have a continuing business relationship. This contract was entered into in
good faith and being a bilateral contract it involves both parties to exchange one promise for
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Mandatory Mediation
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another (Kubasek, Brennan, & Browne, 2015). This provided the defendant with protections as
well as protection for myself. In the requirements contract I committed myself to purchase my
Muscadine grapes from the defendant and he would supply them at a fixed price as needed
(Axelrod, 1981).
The defendant argues that an employee for a business cannot bind a company to a contract. A
principal is liable for its agent’s conduct where the agent is acting within his authority or
apparent authority (Theo & Sons, Inc. v. Mack Trucks, Inc., 2000). The delivery driver that
signed the contract was not only an employee but also the active owner’s son. Thus, a reasonable
person would believe that he would have reasonable stake in the company and the authority to
bind the company to a legally signed contract.
The defendant has also argued that the son was under the age of majority when the contract was
signed. This fact was unknown at the time of the contract signing. We will not argue this fact but
will argue that the defendant’s inaction to rescind the contract shows an ongoing willingness to
comply with it. As stated by Edwards (1974) “certain contracts were valid and binding upon the
infant unless he repudiated them before or within a reasonable time after the attainment of his
majority”. I know that with the majority age of Alabama being 19 this does not prevent them
from rescinding the contract in the future but the fact that they did not rescind it within a
reasonable time shows that the defendant had adhered to the contract.
Requested Remedies
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Mandatory Mediation
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We would ask for specific performance in this matter. This would require the defendant to
continue to supply the Muscadine grapes and related products as per contract and in good faith of
our prior business transactions.
If specific performance does not occur, we would like to recover the damages incurred, due to
lost revenue and to recover advertising expenditures related to advertising the defendant’s
products.
Conditions Under which Settlement may be achieved
Primary condition is that defendant continue to supply Muscadine grapes and related products at
the continued needed quantity, established price and when needed.
To show continued good faith we would be willing to negotiate a 10% price increase to offset
any financial burden to the defendant until the inflated Muscadine grape prices have subsided.
Conclusion
We feel that we have acted in good faith and that it is in the best interest of both parties to
continue our established business relationship. We acknowledge that there may be questions
concerning the contract, but also believe that the defendant could have rescinded it in a timely
manner if he were not willing to comply with it. A working long-term business relationship was
established, which was demonstrated by our willingness to invest heavily on advertising the
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Mandatory Mediation
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defendant’s products. We seek only to enforce our established business relationship and believe it
will be beneficial to both parties in the long-term.
Marshall Petersen
Mandatory Mediation
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References
Axelrod, E. (1981). The requirements contract – what is required?, Drake Law Review, 31(2), 83-
110.
Edwards, K. B. (1974). Below the age of majority. Accountancy, 85(974), 118-120.
Kubasek, N. K., Brennan, B. A. & Browne, M. N. (2015). The legal environment of business: A
critical thinking approach (7th ed.). Upper Saddle River, NJ: Pearson.
Sons of Thunder, Inc. v. Borden, Inc., 148 N.J. 396 (1997).
Theos & Sons, Inc. v. Mack Trucks, Inc., 431 Mass. 736, 745 (2000).
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