CAPITAL UNIVERSITY LAW SCHOOL - FALL 1998 CONTRACTS FINAL
PROF. JEFF FERRIELL

© Jeffrey T. Ferriell, 1998

Question II – 33% - One Hour

Limit Your Answer to 5 Pages in a Bluebook

Kent is an accomplished chef who has always wanted to operate his own restaurant. When he inherited some money last year he decided it was time to give it a try. He rented a commercial storefront and began preparations for the new venture.

Kent had always been disappointed in the quality of bread, baked goods, and desserts, served at other restaurants in his city and wanted to make sure that he served nothing but the best. Accordingly he contacted Tish, a friend from cooking school, who worked at a local bakery, and was as good a baker as Kent was a chef. Kent told Tish about his plan for a new restaurant and of his desire for good bread and desserts. He told Tish that if she opened her own bakery, and baked breads, rolls, desserts, and other baked goods that satisfied his taste, he would purchase all that he needed for his restaurant, from her.

Convinced that this was the opportunity she had been looking for to start her own bakery Tish agreed. She entered into a written 12 month lease of premises suitable for use as a bakery, agreeing to pay $500 a month rent. The lease permitted her to terminate the lease at any time, for a $2000 fee. The Landlord told Tish that the $2000 was designed to cover the typical $500 expense of cleaning and advertising the vacant premises, as well as the 3 months of lost rent that he usually experienced when the premises were vacated. Tish also purchased 2 new commercial bakery ovens, for $5000 each. In addition, she obtained a favorable price on the specialized high-quality flour and other materials she would need from "Bakery Supplies" in exchange for agreeing, in writing, to purchase all of the bakery supplies she required for her business for a period of a year. Furthermore, she persuaded Dave, one of her co-workers, to leave his current job and help her out in her new venture, promising him a permanent position.

A week before both the bakery and Kent's restaurant were scheduled to open, Tish and Dave drove by the location of Kent's place and noticed the sign the was being installed above the door: "Bar: Scotch & Cigars". Tish immediately called Kent about the name. Kent told her that he had decided to change the name and format of his new place to more of a meeting place and singles bar, with snacks and light appetizers, but no regular meals. He advised Tish that he would not be need any bread, desserts, or other baked goods from her for the foreseeable future, at least not until the Scotch & Cigars bar became a success and he was able to return to his original idea of opening a high-class restaurant.

Tish was devastated. Without Kent's business she had no customers at all for her breads and desserts. She contacted several high-class restaurants in town, but quickly found that they already had long-term contracts to purchase baked goods and desserts from Tish's competitors. She was approached by several more mundane eateries about supplying baked goods and desserts, but turned them down when it became apparent that they didn't want to purchase the specialized breads and desserts that she specialized in making and were only interested, instead, in the more common fare that she refused to prepare. To make matters worse for Tish, Dave had threatened to sue and, her initial inquires have revealed that she cannot get more than $3500 for the ovens, which are now regarded as "used."

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