ETHICAL ISSUES

National Steel Distributors ("National Steel") is a distributor of steel products used by other companies in the manufacture of their respective products.In December of last year, the price of steel was selling for $8.00 per ton, and due to a general business slowdown, there were few orders received by the company for steel products.In order to stimulate purchasing, National offered to lock in the price of steel for one of its best customers, Sleep Right Mattress Company ("Sleep Right") for a period of 6 months at the price of $8.00 per ton.In December of last year, Sleep Right entered into a contract with National Steel for the purchase of 20,000 ton of coiled steel for use in manufacturing mattresses, at a price of $8.00 per ton.The terms of the contract provided that the 20,000 tons of steel contracted for would be kept on hand at National Steel's warehouse, and would be delivered to Sleep Right on demand by Sleep Right, but in no event later than next May 31.In compliance with the terms of its agreement with Sleep Right, National Steel kept in its inventory 20,000 tons of coiled steel.

In March of this year, a steel shortage developed, and the price of steel jumped to $12.00 per ton.Because of the shortage, Wire Mesh Fences ("Wire Mesh") was looking for a supply of steel coil which it could use in the manufacture of its wire mesh fences.Wire Mesh approached National Steel seeking to purchase 20,000 tons of coiled steel at the price of $12.00 per ton.If National Steel sells the coiled steel it has earmarked for sale to Sleep Right, which is the only coiled steel it has in stock, it will not be able to honor its agreement with Sleep Right (due to the steel shortage, it will not be able to purchase enough steel in time to honor its agreement with Sleep Right).If National Steel does not timely deliver the coiled steel to Sleep Right, Sleep Right will be able to purchase the coiled steel from another supplier (who will not sell to National Steel), but at a cost of $10.00 per ton and National Steel will be liable for the additional cost to Sleep Right in the amount of $2.00 per ton.

John Darwin, general manager of National Steel, has contacted you for advice.John wants to know if National Steel should sell the steel it has on stock to Wire Mesh.In no more than one double spaced typed written page, summarize what advice you would give to John and the reasons for the advice given.Be sure to include a concise discussion of the ethical dilemma involved, the school of thought employed by the company, possible consequences of the ethical decision made by National Steel, how application of a model would help with making a good decision, and whether the policies of National Steel should have been different from its actual business practices, and your reason for your position.