Wally Whiteman is a high school teacher. One day he is talking with a former student, Jimmy Pink, and they discover that they both like to brew their own root beer at home. After a few experiments, they come up with a unique type of chili pepper spiced root beer that all of their friends love. In addition to the unusual ingredients, the root beer has a distinctive blue color.
They decide that they should start selling their root beer as a way to make some extra money. After 3 months, sales are booming & they need to expand operations. They write down the following plan:
? New Facility: Due to low construction prices and increasing rent, Wally & Jimmy decide to build a new facility in which to produce the root beer. They tour a few different food production facilities to get ideas for the design they want before meeting with the owner of EZ Construction Company to negotiate the construction contract.
? Supplies: Wally & Jimmy have all of the equipment they need to brew the root beer and they have a steady supply of quality ingredients, including the unique chili peppers. But Wally thinks they can differentiate their product from competitors’ root beers because of its unique blue color, if they market it properly. Wally found an online company, Lennox Ice-glass Art Resources, which produces, among other things, colored glass soda bottles. He thinks the "Blue Sapphire" colored bottles would be a perfect way to display the product on store shelves.
? Incorporate: They decide to form a corporation called "Black Hat Root Beer Company" through the online site legalzoom.com.
After an exhaustive process of reviewing floorplans & visiting other facilities for ideas, Black Hat Root Beer Company entered into an agreement with EZ Construction Company for the construction of the building. During the contract negotiations, Wally remembered seeing waterproof rubber floors in one of the facilities that he toured. He thought that would be great for Black Hat Root Beer Company because soda is often spilled during production and the sugar creates a sticky mess. If they had that flooring, a spill could be quickly hosed down with water and squeegeed into the drains.
When Wally requested that a provision for the rubber flooring be added to the contract, the construction manager for EZ first said it was impossible to install that kind of floor in such a large facility. But after Wally showed him pictures of the other facility, the construction manager said "huh, I guess it can be done, okay I guess we will do rubber floors," and the provision was included in the written contract.
Meanwhile, Jimmy used his iPhone to call Lennox Ice-glass Art Resources ("LIAR" for short) to make sure it had the "Blue Sapphire" soda bottles in stock. LIAR told Jimmy, "Yes! Just go to our website and order whatever you want, we have never been late on a shipment!" Jimmy hung up and placed an order for 100,000 "Blue Sapphire" glass soda bottles. The shipment was to arrive at Black Hat Root Beer’s temporary warehouse on March 2nd. EZ Construction was scheduled to finish the new building on April 1st.
On March 1st, Wally & Jimmy decided to drive to Albuquerque for a week-long Southwest Soda-Pop Convention. They made enough root beer to last several months while they transition to the new facility, so they were in no hurry to get back home. At the convention, they met Gustavo, the owner of a fast food chicken restaurant who was intrigued by the quality of the unique blue root beer. Wally & Jimmy saw this as an opportunity to make a huge sale, so they ended up staying in Albuquerque for the rest of the month of March to "woo" Gustavo into selling Black Hat Root Beer in his restaurants.
On March 31st, the night before Wally & Jimmy planned to drive home to see the new facility, they met Gustavo at an upscale tavern to try to finalize a deal. Gustavo agreed to buy all the root beer he needs, but only if Wally & Jimmy would agree not to sell the root beer to any other restaurants. Wally & Jimmy were not thrilled about the idea of an exclusive dealings contract, but as the night went on, and several bottles of expensive wine later, they finally signed the agreement Gustavo wanted on a cocktail napkin at the tavern. In the morning, both Wally & Jimmy woke up with a terrible hangover and both of their memories of the previous night were a little foggy.
When Wally & Jimmy returned on April 1st, they saw the boxes of soda bottles that LIAR had delivered almost a month earlier. Wally opened up one of the boxes and pulled out one of the bottles – a perfect blue hue infused in the glass merged perfectly into a blazing fire engine red at the neck of the bottle. "These are great!", Jimmy exclaimed. Wally said, "you idiot, they’re supposed to be ‘Blue Sapphire’ not blue and red." Jimmy pulled out his phone to check his receipt – "100,000 Blue Sapphire bottles." He went to LIAR’s website and scrolled down the list of products…ight under the Blue Sapphire bottle was a product called "Blue Sapphire with Flares" - which appeared to be what they received. Jimmy said, "these are even better - the blue root beer also has chili pepper inside – so blue and red is great." Wally disagreed and stormed out of the room to go check out the new facility.
Wally pulled up to the new building and thought it looked amazing. He walked inside and immediately noticed that the floor was concrete, not rubber. Still furious about the glass bottles, Wally stormed out and immediately called the manager of EZ Construction – "what happened to my rubber floors?! Keep the building, the entire contract is canceled and we are not paying you a dime!" Jimmy thought the facility was terrific and didn't understand what the fuss was all about.
Questions:
1. Black Hat Root Beer Company’s lawyer, Saul Sweetbro, is unavailable. But Wally knew you just took BLAW 321, so he emailed you the facts above. He wants to know (a) Will EZ Construction Company win if it sues Black Hat Root Beer Company for not paying for the building? (b) What legal rights does he have involving Lennox Ice-glass Art Resources?