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Ms. Jane, TransCom International manager, is considering entering the company into a new contract while still bound by another. In 2005, TransCom Steel International Company entered into a ten years business contract worth $1000000 with Caterpillar T International to supply and repair their machines. The contract agreement was binding on both companies for ten years. However, if any of the parties violated the signed contract agreement, they would be liable to compensate the actual loss suffered plus an additional 10% of the contractual value. TransCom Steel’s market share has increased significantly over the years. The demand for TransCom Steel’s leading products such as nails, iron sheets, bolts, nuts, barbed wires, and assorted car parts is likely to grow further. The company is considering purchasing machines that are more efficient. Deere P & Company, a fierce rival of Caterpillar T in the heavy equipment manufacturers industry, manufactures these machines. Ms. Jane faces the problem of choosing between their current contract, and the offer from Deere P & Company. The contract with Caterpillar, cannot be considered as a case of impossibility of performance since the company is still in a position to deliver the machines assigned in the contract. However, TransCom International Company’s decision to cancel the contract is reasonable; they have a great increase in demand which has led to the need for better machines that Caterpillar does not manufacture. Nonetheless, the law of contracts stipulates that Caterpillar is entailed to compensation in monetary damages suffered. Since damages are not recoverable for losses that TransCom did not have reason to foresee at the time of signing the contract 10 years earlier, Caterpillar will be compensated the value of canceled contracts worth $ 300000. The case of Deere P & Company is still considered an offer. A contract is considered existent when an offer is unequivocally accepted by parties involved and the parties have the requisite capacity to enter into a contract. The parties must have a consideration between them and involve in the legal business. The two companies have expressed interest in entering into a legal agreement. Deere offers the latest machine models that are cost-effective and efficient. However, the machines are more expensive as each sells at $ 10000. If the company goes ahead to cancels the contract with Caterpillar, it may taint its image in many ways. First, it will send an alarm to other suppliers and contracted companies that when the time comes; they will go down the same way. This will only result in poor business relationships. Secondly, the company will have to incur extra operational costs as it will spend over $ 10000 in purchasing only one new machine. Lastly, the company may get involved in a legal tussle over the cancellation of Caterpillar’s contract. On the other hand, entering into a new contract with Deere P & Company will bring many benefits. First, the company will gain a competitive advantage, as its products will be of high quality. Secondly, the company will be saving on cost in the end since one new machine will need fewer personnel and produce more. Lastly, the adoption of new technology will boost the confidence of customers hence increasing sales. In spite of the high initial outlay of acquiring the new machines and the damage of $ 30000 to Caterpillar for canceling their contract, the company should sign the new contract. Since the machines work twice faster and have half the operational cost of the existing ones, the company has all reasons to sign the contract.
References
Bank, W. (2008). Doing Business: Comparing Regulation in 181 Economies. Danver: World Bank Publications.
Office, A. N. (2007). Fairness and transparency in purchasing decisions: probity in Australian Government procurement : better practice guide. Melbourne: Australian National Audit Office.
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