Sales
Hood
Spring 1999
The home shopping network, "Buy-It-Now" (BIN), holds an annual "Klondike Gold
Rush Day" every May 1. The "Klondike Gold Rush Day" is always a big hit because it comes just
in time for last minute Mothers' Day shopping. Consequently, it's critical that BIN get its inventory
in time to stock it properly and prepare for the show.
In 1998, BIN entered into a contract with Sutter's Mfg. to provide all of the jewelry
BIN would require for its event. The contract provided that BIN would pay Sutter's Mfg. $2
million for an assortment of necklaces, bracelets, earrings, watches, anklets and pendants, and
that half of the assortment would be in 14K gold and half in 18K gold. Delivery was to take
place on April 15.
However, at a jewelry trade show on April 1, BIN heard rumors that Sutter's was in
financial difficulty. Concerned that Sutter's would not have the necessary merchandise by April 15,
BIN faxed a letter on April 2 to Sutter's requesting assurance that the delivery would take place as
scheduled. By April 12, BIN still had not heard from Sutter's. BIN then faxed Sutter's a letter
informing Sutter's that BIN was canceling the contract.
On April 13, BIN faxed a purchase order to Fool's Gold requesting delivery of an
assortment of necklaces, bracelets, earrings, watches, anklets, and pendants for delivery on April 15,
at a price of $2 million. The purchase order also stated that half of the assortment was to be in 14K
gold and the other half in 18K gold, and that any disputes would be resolved in court with the
prevailing party to pay the attorneys' fees.
Fool's Gold faxed back an acknowledgment of the order that half would be 14K and half
would be 18K, but that the price would have to be $3 million because of the short notice. The
acknowledgement form also disclaimed any express or implied warranties, limited remedies to
"repair or replace", and included an arbitration clause. BIN then faxed back a letter agreeing to the
increased price, but did not mention the other terms because BIN did not notice them. Though they
were on the front of the form, the terms were standard boilerplace provisions in regular type at the
end of the page.
On April 14, BIN called Fool's Gold and asked Fool's Gold to provide a goldsmith
to demonstrate jewelry making on one of the show's scheduled for May 1. BIN also asked
Fool's Gold to provide four special necklaces for the "Once In A Lifetime" show, each
necklace to be valued at approximately $2,500. Fool's Gold agreed. However, these requests
were never reduced to writing.
Later that same day (April 14), Sutter's Mfg. called BIN and advised BIN that it would be
able to perform and would deliver the next day. BIN advised Sutter's again that it considered the
contract cancelled and that BIN would not accept delivery.
On April 15, Fool's Gold delivered an assortment of gold jewelry, but only one fourth was
18K gold. The rest was 14K gold. Fool's Gold also only provided two necklaces for the "Once In
A Lifetime Show." BIN discovered these problems while stocking the inventory in preparation for
the big day, but could not obtain and stock the correct proportions of gold in time for the show.
During the "Klondike Gold Rush Day", BIN sold out of the 18K gold it stocked, but was left with
one fourth of the 14K gold.
Discuss.