Assignment task: AJM, Inc. ("AJM") is a manufacturer and producer of various forms of condiments. Primarily a supplier of ketchup, mustard, mayonnaise, and salad dressing, AJM recently decided to enter the barbeque sauce market. As such, AJM developed a habanero pineapple sauce called Hawaiian Fire
AJM entered into an agreement with Sam Anderson. Sam was notorious in the barbeque business for his excellent marketing abilities in the highly specialized field of barbecue sauce. AJM directed Sam to advertise, market, and sell Hawaiian Fire to restaurants and grocery stores within the state of Michigan. AJM directed Sam to sell Hawaiian Fire at the highest price possible, but further advised that the anticipated price would be $2.00 per bottle.
Problem 1: Sam entered into an agreement to provide Big Al's ShopMart with 100 cases of Hawaiian Fire at $1.50 per bottle. At all times, Big Al's ShopMart believed Sam was the maker and manufacturer of Hawaiian Fire. Who is bound to the terms of this contract if Big Al's ShopMart is located in Michigan? Why? Who is bound to the terms of this contract if Big Al's ShopMart is located in Colorado? Why? Do either of your answers change if, two days after the agreement, AJM sent a thank you note for their recent purchase? Why?
Problem 2: Later that year, during Sam's visit to one of AJM's Michigan based customers, Downtown Grocers
("Downtown"), the manager of Downtown asked Sam whether he was traveling with any sauce. The manager explained that Downtown was down to its very last bottle of Hawaiian Fire. Sam affirmed that he did have a few cases of sauce in his company vehicle. Sam had two cases of sauce in his vehicle: one intended for customers in just such circumstances, and the other returned by another customer because it had an expiration date that past several months prior. Sam grabbed and delivered to Downtown what he believed was the non-expired case of sauce. Neither the manager nor Sam realized that Sam gave Downtown the expired case of sauce. Several weeks later, Downtown informed Sam they were being sued by a customer who became very ill as a result of consuming the expired sauce. Downtown advised they were contemplating their own lawsuit against Sam and AJM.
Can Downtown Grocers successfully sue Sam and/or AJM? Walk these facts through the appropriate liability evaluation discussed in this week's coursework and explain who you think will be liable and why.