Cengage Advantage Books: Essentials of Business Law 5th Edition by Jeffrey Beatty,Susan Samuelson

Exercise 7

YOU BE THE JUDGE WRITING PROBLEM Brewster manufactured plastic bottles. Dial made personal care products at many plants around the country, including one in Salem, Virginia. The companies agreed that Dial would purchase from Brewster all of the plastic bottles it needed for its Salem factory. Dial estimated its requirements for one year at 7,850,000 bottles, but added a clause stating that "quantities are estimated only and do not bind Dial to purchase any minimum quantity." A few months later, Dial concluded that its Salem plant was unprofitable. The company closed the factory and notified Brewster that it would buy no bottles at all. Brewster sued. Did Dial have the right to reduce its orders to zero Argument for Brewster: The parties had a clear contract for a massive number of bottles. Dial knew that this contract was extremely important to Brewster. Although Dial had some right to adjust its orders, it had no right to reduce them to zero. Argument for Dial: The issue is whether Dial acted in good faith. It did. The company had a legitimate reason for closing the factory-it was losing money-and with no factory it certainly did not need any bottles.