06 Jun MGMT 520 Week 4 Contract Case Analysis SpongeBob NEW
SpongeBob is a farmer who contracted with Progresso soup to provide 6 tons of clams worth $3000/ton to be delivered at Progresso each month. Progresso soup needs this particular amount of clams each month for their soup in order to meet their production expectations for their customers. The contract contained some very lopsided provisions that excused Progresso soup from purchasing the clams in the event of many outlined reasons (25 pages of the contract listed out all of the reasons why Progresso could refuse to accept the clams), but prevented SpongeBob from selling his clams elsewhere without permission. After a gulf coast oil disaster, the price of clams went up to $8000/ton. SpongeBob delivered his clams to Progresso on time, but Progresso (who had lost a case filed against Progresso by Campbell’s soup for infringing on Campbell’s clam chowder soup recipe) refused to accept delivery. SpongeBob requested permission to sell the clams to Campbell’s (who had just doubled their own clam chowder sales), but Progresso refused to grant permission. The terms of SpongeBob’s contract with Progresso stated:
“In no event will Progresso’s refusal to accept delivery of clams excuse SpongeBob from being required to follow all other terms of this contract, including the “no sale to competitors without written permission of Progresso” clause. Progresso may withhold permission for any reason.”
Another clause says, “In the event that a court finds any portion of this contract to be illegal or void, all other portions will remain valid and enforceable.”
Another clause says, “Progresso’s liability cap on this contract is no more than the total value of the contract as stated. No 3rd party liability is assumed under this contract.”
At the time of Progresso’s refusal to grant permission, Campbells had offered SpongeBob $8500/ton for his 6 tons of clams. Instead, the clams rotted and had to be disposed of. An animal rights group is outraged at the waste and blew up SpongeBob’s boat, destroying it.
SpongeBob wants to sue Progresso. On what bases can SpongeBob sue, recover and what will be his damages? What defenses does Progresso have? Can Progresso include Campbell’s in the lawsuit? Is the animal rights group a potential party to the contract dispute? Can SpongeBob recover for the loss of his boat against Progresso? Why or why not? Explain fully your answer.
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