Fact Pattern

In Part II of the Semester Skills Assignment, we find the project from Part I underway and, as is often the case, some difficulty with performing the contract has arisen.

After a period of negotiation, Galactic and Solutions concluded a definitive agreement under which Solutions would deliver their licensed software, the InteGREATER 2k and provide professional services to develop and implement four Custom Integrations to connect some of Mini's systems with Galactic's.

Work began shortly thereafter with Solutions installing their Software and beginning the design phase of the Custom Integration development. At this point, Solutions discovered that Mini Corp., now a division of Galactic, had previously been notified by one of their vendors, NoGood Co., that a mandatory software update would have to be implemented by the time the Solutions-Galactic contract was signed. The advisory put Mini on notice that the New Version would be incompatible with many custom software products due to major changes to its Application Programming Interface (API) and went on to say that all existing integrations with the system would need to be reviewed and updated.

Mini had not provided this information to Galactic before the merger was completed and Galactic did not know of the changes at the time they concluded the contract with Solutions, Inc.

Later, Solutions' engineers working on the design of the Custom Integrations, determined that the New Version was actually incompatible with InteGREATER 2k software. They further determined that changing the InteGREATER 2k software to make it compatible with the New Version would be a difficult, protracted, and expensive project that could not be done within the budget or schedule required by the Solutions-Galactic contract.

Solutions notified Galactic of this problem and advised that they would not be able to finalize the Custom Integration for the New Version system and asserted that it was Galactic's fault because they had not provided accurate information about Mini's systems.

Galactic responded that they still required Solutions to provide the four Custom Integrations and that Solutions was responsible for the problem because Solutions should have discovered information about the New Version. In fact, Solutions stated in their proposal that they had made a "careful analysis of both companies' (Galactic and Mini) systems" but did not find out about this potential problem.

Other Background Information

In commerce, it is not unusual for difficulty to arise during the performance of a contract. Sometimes, the problems arise from the parties' pre-contract conduct or a misunderstanding. In other cases, the problems may be caused by changes in circumstances after the contract was formed.

Note that the scenario as presented does not include all of the facts. In the following questions, you will consider a series of alternative additional facts. In each instance, please address the likely argument that each party, Galactic and Solutions, would put forth to support their positions. These arguments will be based on the legal doctrines discussed in the Practical Law articles. Factors to consider may include:

• Was a mistake made? If so by which party or parties?
• Was a party negligent in the pre-contract process?
• Did an unanticipated change in external circumstances occur? If so, when?
• Was any party dishonest during or after the contract negotiation?

Questions

Questions about Pre-Formation Issues

1. What if, because the notice from NoGood was very late getting to Mini, neither Solutions or Galactic actually knew, or should have known, about the New Version prior to contract execution?
2. Instead, What if Galactic actually had been notified by Mini of the New Version during the contract negotiation, but neglected to give this information to Solutions?
3. What if, instead of neglecting to give Solutions the information they knew about the New Version, Galactic intentionally decided not to tell them because they believed it might result in a price increase from Solutions?

Questions about Post-Formation Issues

1. Assume that instead of the New Version being released by NoGood before the Solutions-Galactic contract was executed, it was released shortly after the contract was signed. The effect of the New Version would remain the same and it would cause substantial additional time and cost to complete the Custom Integration for the now obsolete system that the parties had expected to integrate.
2. Instead assume that shortly after the Solutions-Galactic contract is signed, NoGood enters bankruptcy and terminates all support for their existing products. Mini's license to continue use of the now unsupported products will expire at about the same time Solutions could complete the Custom Integrations for any of Mini's systems.