Question MBA–Law Issue In Business/ Making a Contract/ Information below is just the requirements and infos for the CONTRACT

MBA–Law Issue In Business/ Making a Contract/ Information below is just the requirements and infos for the CONTRACT
Your client is ACME Widgets, Inc. (“ACME”), a local manufacturer of widgets located at 123 Main Street, Paxton, MA. ACME has fallen on hard times in recent years. The widget industry has largely moved from the United States to Asia. ACME has been approached ABC Corporation of Malaysia (“ABC”), a company with a principal place of business at 456 Main Street, Kuala Lumpur in Malaysia, with a domestic operation at 789 Main Street, Fresno, CA, with a possible solution to this problem.

ACME wants to buy the widgets from ABC to resell to its customers. ACME feels it can keep its customers satisfied, lower the sales price of the widgets, and still keep the same margin of profit. ACME is concerned because the widget market is volatile. It expects ABC can handle its requirements for widget orders, but wants assurances that ABC will fill all orders.

ACME anticipates approximately fifty million dollars of revenue from the order of two million widgets in 2013. ACME’s annual increase in business under normal operating conditions is about five percent in orders per year. ACME sells widgets for twenty-five dollars each with a production cost of about twenty dollars per widget. ABC sells widgets for about seventeen dollars each. The cost of importing widgets is about one dollar per widget

ACME has made its reputation on producing the finest quality widgets in the marketplace. It has tested a production run of ABC widgets, and feels the ABC widgets meet ACME quality specifications; however, ACME wants assurances that the ABC widgets will be subject to quality control procedures defined by ACME and subject to revision from time to time. At a minimum, ACME wants to be able to inspect ABC production facilities whenever ACME feels that an inspection is warranted.

ACME plans to have ABC manufacture the widgets and use the ACME name on all widgets. ACME does not want to give ABC any additional rights to the ACME name.

When ACME places an order, the widgets will be shipped directly from ABC to the customer. The customer will pay ACME directly on net forty-five day payment terms. ACME wishes to pay ABC thirty days after ACME has received payment from its customer. ACME customers can return defective widgets to ACME any time within one year after the ACME customer has accepted the widgets. ACME customers do receive widgets returned from end-users of widgets. ACME accepts returns from any ACME customer that has received a return from an end user under the same terms and conditions.

ACME Customers may also reject defective widgets upon shipment. ACME’s customers can request replacement, repair, refund or credit for widgets returned for any valid reason. ACME pays all return costs for widgets returned from the continental United States. Customers and end users pay the cost of return for all shipments to and from ACME outside the United States. ACME wants to make sure that that ABC will cover any and all costs for repair, replacement, refund, or credit given by ACME under any return scenario.

ACME widgets are not especially dangerous, but ACME has had a few product liability cases from widgets in the marketplace in recent years. ACME wants to ensure that any product liability or damages arising from widget use is covered by ABC. In the event of any product recall, ACME wants to ensure that ABC is paying for all costs of the recall.

ACME is also concerned that it may not be able to adequately reach ABC if ABC breaches the contract. ACME wants to make sure that it can obtain judgment in the United States and collect money from the United States. ACME wants a domestic insurance policy with ACME as the named beneficiary in the amount of twenty million dollars. ABC’s Fresno office has a relationship with Jones Bank, which will guarantee all obligations of ABC for up to two hundred million dollars, with said guarantee being backed up by a letter of credit.

ABC wants a contract that has an initial three year term with fixed prices for widget manufacturer. After three years, both parties can agree to cancel. If the parties don’t agree to cancel the contract, the contract renews under the same terms with an increase in five percent for the cost of widgets. ACME wants to be able to terminate at any time, and is willing to pay up to one million dollars for the right to terminate early. The one million dollars would be the only consideration ACME would provide to ABC for early termination.

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