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Business Ethics 2016 - Case Study Guides (10) - Performance and Breach of Contracts

Business Ethics 2016


Case study guides and online resources (2016)





Chapter 10

Performance and Breach of Contracts


  1. Answers to Critical Legal Thinking Cases


10.1   Intended or Incidental Beneficiary

Ramos/Carson/DePaul (RCD) was an incidental beneficiary of the Phillies-DH agreement. RCD was not an intended beneficiary of the Philadelphia Phillies Agreement with Driscoll/Hunt Joint Venture (DH). The court held that because RCD was merely an incidental beneficiary of the Phillies-DH Agreement, the Phillies could not be held liable to RCD. RCD had not proffered any evidence to show that the Phillies and DH intended to give RCD the right to demand payment directly from the Phillies. There is no evidence showing that either the Phillies or DH intended to benefit RCD or the other subcontractors in drafting the Agreement’s payment provisions. Since RCD has failed to show that it was an intended third-party beneficiary of the Agreement between the Phillies and DH, RCD’s breach of contract claim against the Phillies was dismissed. The court held that RCD was not an intended beneficiary of the Phillies-DH Agreement, but instead was an incidental beneficiary to the Agreement and therefore had no right to sue the Phillies as a third-party beneficiary. Ramos/Carson/DePaul, a Joint Venture v. The Phillies, L.P., 2008 Phila. Ct. Com. Pl. Lexis 282 (Common Pleas Court of Philadelphia County, Pennsylvania, 2008)


10.2   Liquidated Damages

Yes, the liquidated damage clause is enforceable and 845 UN Limited Partnership (845 UN) may keep the $8 million down payments paid by Cem Uzan and Hakan Uzan for condominiums to be built by 845 UN as liquidated damages because of their breach of the contract. A liquidated damages clause is a clause in a contract that stipulates the damages that will be paid by a breaching party. Here, there was a liquidated damage clause in the contract between the builder and the buyers that permitted the builder to keep the buyer’s down payment as liquidated damages if the buyer breached the contract and failed to purchase the condominiums sold by 845 UN. The court found the liquidated damage not to be a penalty. The supreme court of New York, appellate division, sided with 845 UN and held that Cem and Hakan had breached their contract with 845 UN and that 845 UN was entitled to keep the 25 percent down payment as liquidated damages. The appellate court of New York affirmed the decision. Uzan v. 845 UN Limited Partnership, 10 A.D.3d 230, 778 N.Y.S.2d 171, 2004 N.Y. App. Div. Lexis 8362 (Supreme Court of New York, Appellate Division, 2004)


10.3   Specific Performance


Yes, an order of specific performance is an appropriate remedy in this case. Specific performance may be decreed where the goods are unique or in other circumstances where monetary damages do not adequately compensate the plaintiff. In this case, the court found that the uniqueness of Claiborne’s cosmetics line, including its distinctive package, is obvious. Moreover, the court found that monetary damages would not adequately compensate Claiborne for such intangibles as how the destruction of the Claiborne cosmetic line will affect the other business carried on under the Claiborne name. The closing of a much-publicized venture and its failure to supply stores would do nothing to enhance its reputation with suppliers, distributors, retailers, and customers. Therefore, the court held that monetary damages would be inadequate to compensate Claiborne for damages to its reputation and ordered Avon to fill and deliver in a timely and diligent fashion, all purchase orders placed by Claiborne in accordance with the contract. Liz Claiborne, Inc. v. Avon Products, Inc., 141 A.D.2d 329, 530 N.Y.S.2d 425, 1988 N.Y. App. Div. Lexis 6423 (Supreme Court of New York)


10.4   Unilateral Mistake

No. The court of appeal upheld that Wells Fargo’s unilateral mistake did not entitle it to relief from the judicial sale. Here, Wells Fargo was the only party that committed a mistake at the judicial sale of real property when the paralegal it sent, Harley Martin, misread his bid instructions and bid the wrong amount. The court stated, “We accept the trial court’s conclusion that the amount of the sale was grossly inadequate. This inadequacy, however, occurred due to an avoidable, unilateral mistake by an agent of Wells Fargo. As between Wells Fargo and a good faith purchaser at the judicial sale, the trial court had the discretion to place the risk of this mistake upon Wells Fargo.  We are certain that this result seems harsh to Wells Fargo. Nevertheless, Mr. Martin’s bid was accepted when the clerk announced ‘sold.’” The court of appeal held that Wells Fargo’s unilateral mistake did not entitle it to relief from the judicial sale. Wells Fargo Credit Corporation v. Martin, 650 So.2d 531, 1992 Fla. App. Lexis 9927 (Court of Appeal of Florida)


10.5   Guaranty Contract

No. The court of civil appeals held that Mary R. Page’s alleged oral promises to guarantee her husband’s debts to Jerry Sellers were not in writing, as required by the Statute of Frauds, and were therefore not enforceable against her. Glenn A. Page, Mary’s husband, owed Sellers money. Sellers obtained alleged oral promises from Mary to pay her husband’s debts. However, a promise to pay the debt of another is barred by the Statute of Frauds unless it is in writing. It is not disputed that Mary did not sign a note, guaranty, or any other writing promising to pay any part of Glenn’s debts. Therefore, if the purported agreement to pay Glenn’s debt is within the Statute of Frauds, Mary is not liable even if the trial court found Seller’s testimony to be credible. Mary’s alleged oral promises are not enforceable under the Statute of Frauds. The court held that Mary’s alleged promises to guaranty to pay Glenn’s debts fell within the Statute of Frauds, and therefore, because they were allegedly oral promises, were not enforceable. Page v. Gulf Coast Motors, 903 So.2d 148, 2004 Ala. Civ. App. Lexis 982 (Court of Civil Appeal of Alabama, 2004)


10.6   Rescission of a Contract

Yes. The court of appeal found that Patricia Dianne Hickman’s relatives, including her father Joe Hickman and her cousin Keith Bates, had taken advantage of her and engaged in fraud in getting her to sign sales contracts by which she sold her interests in the two properties to the Bates. After substantial pressure from her relatives, including her father, she agreed to sell the two pieces of property worth $280,000 to the Keith Bates for $500. The court noted that Patricia’s intellectual abilities are limited, both from her lack of education and from her mental condition that requires medicine. Considering her situation, her youth (she was then 20 years old), and her limited abilities, as well as her lack of prior knowledge of the purpose of the visit, and her father’s illness, and the fact that she trusted her father and her cousin, the court found that Keith had a responsibility to make sure Patricia was informed fully about the transactions and make sure that she understood everything she was doing and the import of everything she was doing, including the fact that she would own nothing, and including the price considerations involved before she signed those documents. The court held that Keith’s failure to inform his young and limited first-cousin was intentional and was done to obtain an advantage over her. That is, of divesting her interest in two pieces of real property “for a pittance.” The court held that Patricia rightfully rescinded the contracts and awarded her attorney’s fees. Hickman v. Bates, 889 So.2d 1249, 2004 La. App. Lexis 3076 (Court of Appeal of Louisiana, 2004)



VII. Answer to Ethics Case


10.7   Ethics Case

There is a special fiduciary duty that exists between and author and his or her publisher. An author signs a contract with a publisher with the expectation that the publisher will publish and promote his or her book once the author has completed the book and it meets the quality requirements of the contract. Here, Rafael Chodos, entered into a publishing contract with Bancroft-Whitney, the leading publisher of legal texts, to write a treatise on fiduciary duties.

      Chodos spent more than 3,600 hours during a three-year period writing the manuscript. During this period, the publisher worked closely with Chodos in developing and editing the manuscript. In the meantime, West Publishing (West) purchased Bancroft-Whitney. The editors of West continued to work with Chodos in developing and editing the book. However, when Chodos submitted the manuscript for publication, West refused to publish it because it did not fit their product mix. Chodos sued West for breach of contract. The court held that West had breached the contract, and eventually awarded Chodos $300,000 in damages.

      Did West act unethically in this case? It is likely that it did. Here an author labored for years producing a manuscript for a book that West agreed to publish. West admitted that the manuscript was of high quality and met their literary standards. And West encouraged Chodos to continue writing the manuscript during the entire process. So backing out of its obligation to publish the manuscript with asserted reason that it no longer “fit with [West’s] current product mix” was made with only West’s interests in mind, without considering the interests of the author Chodos. This was a selfish and unethical decision by West, and one that violates its fiduciary duty to act with good faith and fair dealing with its authors. Chodos v. West Publishing Company, Inc., 2004 U.S. App. Lexis 4109 (United States Court of Appeals for the Ninth Circuit, 2004)





Free Business Ethics Resources

1. See full list of videos: 

Link 1 - Youtube channel www.youtube.com/ecomftu2012

Link 2 - Youtube channel 

2. Free Business Ethics - 2016 Ebooks (free download)

Legal Environment of Business: Online Commerce, Ethics, and Global Issues, 8th Edition, 2016, Henry R. Cheeseman

REVEL for Ethics and the Conduct of Business -- Access Card, 8th Edition, 2016, John R Boatright, Jeffery D. Smith

Business Ethics: Concepts and Cases, 7th Edition, 2012, Manuel G. Velasquez, Santa Clara University


3. Link to power point slides (Free Download)

REVEL for Ethics and the Conduct of Business -- Access Card, 8th Edition, 2016, John R Boatright, Jeffery D. Smith


Legal Environment of Business: Online Commerce, Ethics, and Global Issues, 8th Edition, 2016, Henry R. Cheeseman


Business Ethics: Concepts and Cases, 7th Edition, 2012, Manuel G. Velasquez, Santa Clara University

4. Test Bank - Free download

Legal Environment of Business: Online Commerce, Ethics, and Global Issues, 8th Edition, 2016, Henry R. Cheeseman

Link - Test bank - free download 

REVEL for Ethics and the Conduct of Business -- Access Card, 8th Edition, 2016, John R Boatright, Jeffery D. Smith

Link - Test bank - free download


For Test Bankz, Quiz Answers and Case study Guides, email to: This email address is being protected from spambots. You need JavaScript enabled to view it.


Good Luck and Success, Enjoy Your Study !






Business Ethics 2016, Lecture, Video, Case Study Guides and Quiz, Test Bank, Free Download
Revel for Ethics and the Conduct of Business, 8th Edition, 2016, John R Boatright, Jeffery D. Smith
Legal Environment of Business: Online Commerce, Ethics, and Global Issues, 8th Edition, 2016, Henry R. Cheeseman
Business Ethics: Concepts and Cases, 7th Edition, 2012, Manuel G. Velasquez, Santa Clara University

1. Ethics in the World of Business
2. Ethical Decision Making
3. Ethical Theories
4. Whistle-Blowing
5. Business Information and Conflict of Interest
6. Privacy
7. Discrimination and Affirmative Action
8. Employment Rights
9. Health and Safety
10. Marketing and Advertising
11. Ethics in Finance
12. Corporate Social Responsibility
13. Governance, Accountability, and Compliance
14. International Business Ethics
Part I: Legal and Ethical Environment

1. Legal Heritage and the Digital Age
2. Ethics and Social Responsibility of Business
3. Courts, Jurisdiction, and Administrative Law
4. Judicial, Alternative, and E-Dispute Resolution

Part II: Constitution and Public Law
5. Constitutional Law for Business and E-Commerce
6. Torts and Strict Liability
7. Criminal Law and Cyber Crimes
8. Intellectual Property and Cyber Piracy

Part III: Contracts, Commercial Law, and E-Commerce
9. Formation and Requirements of Contracts
10. Performance and Breach of Contracts
11. Digital Law and E-Commerce
12. UCC Sales Contracts, Leases, and Warranties
13. Credit, Secured Transactions, and Bankruptcy

Part IV: Business Organizations, Corporate Governance, and Investor Protection
14. Small Business, General Partnerships, and Limited Partnerships
15. Limited Liability Companies, Limited Liability Partnerships, and Special Forms of Business
16. Corporations and Corporate Governance
17. Investor Protection and E-Securities Transactions

Part V: Agency, Employment, and Labor Law
18. Agency Law
19. Equal Opportunity in Employment
20. Employment Law and Worker Protection
21. Labor Law and Immigration Law

Part VI: Government Regulation
22. Antitrust Law and Unfair Trade Practices
23. Consumer Protection
24. Environmental Protection
25. Real Property and Land Use Regulation

Part VII: Global Environment
26. International and World Trade Law

Part VIII: Accounting Profession
27. Accountants’ Duties and Liability
PART ONE Basic Principles

Chapter 1 Ethics and Business
1.1 The Nature of Business Ethics
ON THE EDGE: Was National Semiconductor Morally Responsible?
1.2 Ethical Issues in Business
ON THE EDGE: A Traditional Business
1.3 Moral Responsibility and Blame
ON THE EDGE: WorldCom’s Whistleblower
ON THE EDGE: Gun Manufacturers and Responsibility
Slavery in the Chocolate Industry
Aaron Beam and the HealthSouth Fraud

Chapter 2 Ethical Principles in Business
2.1 Utilitarianism: Weighing Social Costs and Benefits
2.2 Rights and Duties
ON THE EDGE: Should Companies Dump Their Wastes In Poor Countries?
ON THE EDGE: Working for Eli Lilly & Company
ON THE EDGE: Conflict Diamonds
ON THE EDGE: ExxonMobil, Amerada Hess, and Marathon Oil in Equatorial Guinea
Traidos Bank and Roche’s Drug Trials in China

PART TWO The Market and Business

Chapter 3 The Business System: Government, Markets, and International Trade
3.1 Free Markets and Rights: John Locke
3.2 Free Markets and Utility: Adam Smith
3.3 Free Trade and Utility: David Ricardo
3.4 Marx and Justice: Criticizing Markets and Free Trade
ON THE EDGE: Commodification or How Free Should Free Markets Be?
ON THE EDGE: Marx’s Children
3.5 Conclusion: The Mixed Economy, the New Property, and the End of Marxism
ON THE EDGE: Napster’s Lost Revolution
ON THE EDGE: Brian’s Franchise
The GM Bailout Accolade versus Sega

Chapter 4 Ethics in the Marketplace
4.1 Perfect Competition
4.2 Monopoly Competition
ON THE EDGE: Drug Company Monopolies and Profits
4.3 Oligopolistic Competition
4.4 Oligopolies and Public Policy
ON THE EDGE: Fixing the Computer Memory Market
ON THE EDGE: Oracle and Peoplesoft
Intel’s “Rebates” and Other Ways It “Helped” Customers
Archer Daniels Midland and the Friendly Competitors

PART THREE Business and Its External Exchanges: Ecology and Consumers

Chapter 5 Ethics and the Environment
5.1 The Dimensions of Pollution and Resource Depletion
5.2 The Ethics of Pollution Control
5.3 The Ethics of Conserving Depletable Resources
ON THE EDGE: Ford’s Toxic Wastes
ON THE EDGE: The Auto Companies in China
ON THE EDGE: Exporting Poison
The Ok Tedi Copper Mine
Gas or Grouse?

Chapter 6 The Ethics of Consumer Production and Marketing
6.1 Markets and Consumer Protection
6.2 The Contract View of Business Firm’s Duties to Consumers
6.3 The Due Care Theory
ON THE EDGE: The Tobacco Companies and Product Safety
6.4 The Social Costs View of the Manufacturer’s Duties
ON THE EDGE: Selling Personalized Genetics
6.5 Advertising Ethics
ON THE EDGE: Advertising Death to Kids?
ON THE EDGE: New Balance and the “Made in USA” Label
6.6 Consumer Privacy
Becton Dickinson and Needle Sticks
Reducing Debts at Credit Solutions of America

PART FOUR Business and Its Internal Constituencies

Chapter 7 The Ethics of Job Discrimination
7.1 Job Discrimination: Its Nature
ON THE EDGE: Helping Patients at Plainfield Healthcare Center
7.2 Discrimination: Its Extent
7.4 Affirmative Action
ON THE EDGE: Driving for Old Dominion
ON THE EDGE: Peter Oiler and Winn-Dixie Stores
Should Kroger pay now for what a Ralphs’ Employee did in the Past
Wal-Mart’s Women

Chapter 8 Ethics and the Employee
8.1 The Rational Organization
8.2 The Political Organization
8.3 The Caring Organization
ON THE EDGE: HP’s Secrets and Oracle’s New Hire
ON THE EDGE: Insider Trading or: What Are Friends For?
ON THE EDGE: Delivering Pizza
ON THE EDGE: Sergeant Quon’s Text Messages
ON THE EDGE: Employment at Will at Howmet Corporation?
Death at Massey Energy Company
Who Should Pay?
key words
Ethical Decision Making,
Ethical Theories,
Conflict of Interest,
Discrimination, Affirmative Action,
Employment Rights,
Health and Safety,
Ethics in Finance,
Corporate Social Responsibility,
Governance, Accountability, Compliance,
International Business Ethics,

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