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Law/421 Case Study

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Case Scenario: Big Time Toymaker
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Law/421
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Case Scenario: Big Time Toymaker
Was There a Contract
In the scenario regarding Big Time Toymaker (BTT) and the inventor Chou BTT did grant Chou a binding option to enter into a contract at a later date. This binding contract is known as an option contract and offered the inventor $25 thousand to keep an offer open in exchange for exclusive negotiation rights during a period of time not to exceed 90 days. Essentially this option means that Big Time Toymaker purchased the rights to negotiate a distribution agreement for Chou’s invention. In this option contract prior to the end of the 90 day period if BTT and Chou could not reach an agreement on distribution then Chou would be free to enter into a contract with other business distributors while keeping the $25 thousand. This option contract is in fact a valid and enforceable contract between the two parties.
Facts that weight in favor of or against Chou
There are several factors that if considered weigh in favor of Chou. When Big Time Toymaker paid Chou $25 thousand for exclusive negotiation rights for his invention, Chou had a reasonable expectation that the toy company had the intent of reaching a distribution agreement. The meeting held between BTT and Chou concluded with an oral agreement and was followed up with an e-mail from the company’s manager solidifying the expectation of intent as well as specifying key terms within the agreement. Big Time Toymakers also sent Chou a fax requesting a draft for a distribution agreement contract, to which Chou immediately responded. Lastly, there was a significant amount of time spent by both parties acting under a contract.
When considering the factors that weigh in favor of Chou, one must also take into consideration the factors that work against him. Big Time Toymakers and Chou both agreed...

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