CASE 1
Sterling, Inc. is a manufacturer of state-of-the-art computers. For the past ten years, Sterling has acquired all of its microchips from NoBugs Corporation, the only producer of chips meeting Sterling’s high specifications. The relationship has been mutually profitable. Sterling could not have built its reputation as an industry leader without NoBugs’s reliable and consistently high-quality products; Sterling’s business has enabled NoBugs to grow rapidly while providing its investors with an attractive rate of return.
Some months ago, several of Sterling’s computers exploded shortly after installation. Upon investigation, Sterling discovered that tiny imperfections in NoBugs’s microchips had aggravated a dormant design defect in the computers, causing the explosions. Analysis of the chips indicated that they were indeed below specifications and that the imperfections were caused by a slight miscalibration of NoBugs’s encoding equipment. NoBugs recalibrated the equipment and promptly resumed production of perfect chips.
Sterling’s losses from the explosions—lost profits, out-of-pocket costs associated with compensating customers for the explosions, and injury to business reputation—are estimated to exceed $20 million. Sterling and No Bugs disagree on the amount of the loss for which No Bugs should be responsible. Sterling has a strong legal case for breach of contract against No Bugs. Sterling’s CEO is considering a lawsuit. She asks you to prepare a report discussing litigation strategy and the advantages and disadvantages of litigation, and discussing pretrial planning should the company opt for litigation.
Using IRAC your answer should include the pro and cons outlined in the reading material. You should also discuss the elements of the cause of action, defenses, and your ultimate conclusion based on the fact pattern.
CASE 2
Ron supervises the delivery of flowers for a wholesale distributor of fresh flowers, Flowers. Inc. In order to accommodate one of the company’s best customers, Ron offers to immediately rush a delivery of fresh peonies. All of the delivery trucks are currently out on delivery. Ron directs an employee, Ruth, to use her own vehicle to deliver the flowers.
Ruth carelessly parks her car on a steep hill, leaving the car in neutral and failing to engage the parking brake. The car rolls down the hill, knocking down an electric line. The sparks from the broken line ignite a grass fire. The fire spreads until it reaches a gasoline station one mile away. There is a tanker truck offloading gasoline to the station’s gas tanks. The fire ignites the gasoline being pumped into the tanks, and one of the tanks explodes, causing part of the station structure to fall on and injure a passing motorist, Jim.
- Can Jim recover damages from Ruth; from Flowers’ Inc? Why or why not?
- Identify the cause of action. Discuss each element of the cause of action, and relate them to your assessment of whether Jim has a cause of action against Ruth.
- Discuss the legal doctrine under which Jim might also recover from Flowers, Inc.
