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Business Law Case Study In the case presented, Biff Smith, the Chief of Police of the local department ordered a set of bicycles off of a local storeowner, Dirk Right. This was no simple order though, in fact Biff intended on starting a bike patrol unit within the local department. Biff went to Dirks Bicycle shop to place an order. The order was for five mountain bikes to be used for patrol so they had to be custom made in order to sport the police decals.
Biff was very familiar with the Schwinn bicycle company so he asked Dirk to order him five “top of the line” bikes at the “best price”. This simple statement implied that Biff not only wanted the bikes but he intended on paying for them as well. So soon after Dirk accepted the deal by saying, “you got it Biff”, there for creating an offer and acceptance situation. Biff would be considered the offeror because he was quoted to say, “Get me 5 top of the line Schwinn bikes, get me the best price you can” and Dirk was the offeree who accepted this offer by saying, “you got it Biff”.
At this point there is only a simple interaction between the two parties, Dirk and Biff, there was never a written contract drawn up to be signed or documented so when the conflict arises there are many grey areas to be touched upon. The only document there is to work with is the letter from the PBA that Biff signed and noted, thanking dirk for the order of the bikes. Price was never a factor brought into consideration but came to be the most important part of the entire case.
After Dirk placed the order for the special bikes at Biffs request, the grand total came out to be $17,500. These “top of the line” bike cost $3,500 per bike due to the custom police decals and accessories needed in order to fulfill Biffs order. As Biff previously asked for the best price, Dirk did just that. Dirk was only charging Biff for the cost of the bike because he wanted to do something good for his community; he wasn’t trying to make any profit off of this deal just an act of good faith.
The custom police mountain bikes were delivered to Biff in a timely fashion and the final price was made aware to Biff. As stated from Biff, he claimed it to be “highway robbery”; obviously the price tag of $3,500 per bike seemed to be a little high in Biffs mind so he decided to cancel the order. The trouble is that they were specially ordered items and could not be returned or exchanged; as a result, Dirk obviously didn’t pick them back up and was left with the only option of suing the P.
D. for his losses due to a breach of contract. The only way Dirk has a chance of coming out on top strictly depends on if there was a contract established or not. In order to speculate whether a contract was formed all elements of a contract would have to be taken into consideration. The elements of a contract include: offer, acceptance, consideration, capacity and legality. First there has to be an offer made to and accepting offeree, which in this case as stated above is Biff and Dirk.
Biff would be considered the offerer because of his request for the custom Schwinn mountain bikes and Dirk would be the offeree because of his clear, “You got it” acceptance to order them. Once the offer is made, it is either accepted or not accepted, in this case there was acceptance by the offeree which formed a clear contract. After the offer is made and accepted by Dirk then consideration must be present. Consideration is the promise or performance that the promisor demands as the price of the promise. It is what each party to a contract gives up to the other in making the agreement.
Now the question is, was there consideration? Yes, there was consideration, Dirk decided to sell the custom police bikes to Biff at his cost as a way of contributing them to the community. Biff was to simply pay Dirk the cost of the custom police bikes in return for ordering them. However, there was no set stated price when the oral agreement was made. This mutual misunderstanding concerning the ‘top of the line’, ‘special order’, “Schwinn” mountain bikes and the cost that comes with it means there was no price consideration.
There was also no fraud or deception by Dirk in any way as he was acting on good faith by not adding extra cost to the custom police bikes in any way as a kind gesture to contribute to the community; therefore, selling the custom police bikes at Dirk’s cost, even though he did have the right to charge for additional fees. The fourth element to consider is competence, or being able to perform and act, having full capacity by meeting all requirements of capacity. The contract must be between competent parties, being Dirk the storeowner and Biff the chief of police.
Both Biff and Dirk seemed to understand the agreement they came upon dealing with the custom bikes, no arguments or debating occurred, and as far as the case goes each seemed to be in a healthy state of mind when making these decisions. Finally, the last element in a contract would be all legality issues involved. It must be made for a lawful objective, which means the contract must be for legal purposes only. The purpose of the agreement is in fact legal which satisfies this element as a contract because the contract was for the legal sale of goods.
Also, required by law, a contract used as evidence must be in writing for the sale of goods that are priced at $500 or more under the UCC sec. 2-201. However there is an exception with this case, under the UCC sec 2-201 there are stated exceptions for specially manufactured goods. No writing is required when the goods are specially made for the buyer and are of such unusual nature that they are not suitable for sale in the ordinary course of the seller’s business. Therefore Dirks specially ordered custom bikes for the police department upon the request from Biff are considered specially made.
The custom bikes were a special order because they contained unique decals displaying “POLICE”. Therefore Dirk can enforce the oral contract against Biff despite the price being an excess of $500, (under Revised article 2). Analyzing the case with all elements in mind, we concluded that a contract was in fact created. Dirk, who is pursuing Biff in court, will put up a case due to the oral contract that was indeed made. In this case there is no need for a written contract because Biff verbally agreed to buy five Schwinn custom police mountain bikes specially ordered by Dirk.
For this non-resellable goods exception to apply, the seller, Dirk, must have made a substantial beginning in manufacturing the goods. To show this is true, Dirk went out of his way to create an order for Biff that was special for the Police department, and by doing so, Dirk cannot return/resell the bikes, and he is at a loss of $17,500. The most important factor working in Dirks favor is the letter he received from the local PBA. The end of the letter had a hand written signature thanking Dirk for ordering the bikes.
This is hard evidence that a deal was made because the note brings up the agreement for the bikes in writing and is signed by the second party, Biff. Dirk has enough evidence to bring Biff to court and prove that an oral contract was indeed established even though it was for the sale of goods over $500, because they were specially ordered items. However we do not feel that the contract is enforceable because the goods must be received and accepted from the buyer, which did not happen. Biff called Dirk back and told him to pick the bikes back up, which means he only received the good but did not accept them.
Shortly after having the bikes delivered, Biff rejected the order leaving the contract to be non-enforsable because there was no acceptance upon delivery. Dirk is not completely out of luck here though, the court may order that Biff and/or the PBA may have to pay for all or a majority of the bill for the custom police bikes. Dirk, who can be considered the plaintiff in this case in court, would state how there was an oral contract established and that he fulfilled his duties in the ordering of the custom bikes while Biff, the defendant, did not pay for the “specialty ordered top of the line bikes”.
The plaintiff in this case will try to prove that the defendant had knowledge of the Schwinn bicycle company, and when asking for a top of the line product could have anticipated the cost to be higher than normal. The plaintiff is seeking the cost of the custom bikes paid because he did not order them for any other reason other than to provide them to Biff on his request. This was solidified throughout by a letter signed by Biff, the defendant.
The letter proves that there was an oral contract created and a personal thank you signed by the defendant showed clear merit that there was a mutual agreement between both parties that the custom bikes should be ordered. In the end, having the defendant leave the plaintiff with five custom police bikes that he can do nothing with should call for the courts to have Biff pay for the bikes because with these specialty ordered items there was no need for a written contract even though it is over $500.
On the other hand, Biffs defense would be that there was no set price talked about in the arraignment, therefore leaving Biff with only an offer out on the table and never stating that he would pay the full price for the bikes. Biff only requested that Dirk get him the best price, not that he would be paying that price in the end. There are factors that allow Biff to fight Dirks case but they do not seem as strong as the opposing party. Dirk is only suing for his losses and nothing else so the court may rule in his avor just based on the fact that there was a contract created. Even though Biff didn’t accept these items they still may rule that he has to come up with the money for the custom bikes. From the start there should have been an agreement, or at least a conversation about price. Asking for the best price leaves it to be open so any price can be the best one no matter what it may be. If Biff knew so much about the Schwinn bicycle company then he should have expected to pay a lot for the bikes.
The least he could have done was set a maximum amount that he would be willing to spend. As for Dirk, it would have been in his best interest to tell Biff about the cost before the order was processed just for his protection. These bikes are not returnable or resellable so for Dirks safety the cost should have been brought to the buyer’s protection. Second, Dirk should have made an official written contract so that all aspects of the deal were ironed out and that both partied agreed upon all the terms.
In the end, if a court came to a decision that indeed a contract was established then Biff would be the responsible party. He acted as an agent for the PBA and went ahead to place an order on five top of the line custom mountain bikes. Dirk made the promise to Biff that he would order him the bikes, which he did, and in the end it was Biff who refused to pay for them in return. Biff did end up breaching the contract in the end so Dirk should be awarded the cost of the custom bikes on Biffs behalf.