Question 1

Jerchin encounters difficulties sourcing the raw materials it requires to produce the Carbon Fiber Bike Forks. Jerchin communicates to KL that this will cause a delay in final delivery of the Goods. Jerchin can produce 500 units by the specified delivery date, but the remaining half of the delivery will take and additional 60 days to produce and deliver.

KL has engaged in an aggressive marketing campaign for the new Tairy model, including taking pre-orders and committing to customer delivery windows. In order to minimize the impact to customer orders, KL engages with May OFB to rush manufacture units at a cost of $120 per unit. But, May OFB's minimum order quantity is 750 units.

Under the concepts we learned in Module 7, did KL suffer an incidental loss in having to acquire units from May OFB? Review Section 9 (WARRANTIES). Would KL be able to recover this type of damages from Jerchin? Do you agree or disagree with this outcome?

Question 2

Jerchin manufactures the Carbon Fiber Bike Forks according to the terms of the contract. KL makes its first two (2) milestone payments on time. Jerchin ships the full order of goods to KL via Diablos Express, the shipper designated by KL. The Goods are delivered on December 28, 2020 (1 day before the contract deadline).

KL is short-staffed due to the holiday season. Even though the shipment was received on December 28, 2020, no one inspected the order until January 16, 2020. KL discovered that five (5) units were defective. KL returns the defective units to Jerchin along with an invoice for shipping fees.

Who will bear the burden of the five (5) units in question? How does this result compare with your understanding how a breach should be resolved?

Question 3

In Section 14 (Arbitration), KL and Jerchin agreed that in order to resolve disputes under the Contract, the parties will agree tobinding arbitration(Links to an external site.)

. Do you agree or disagree with the parties negotiating to utilize this form of alternative dispute resolution, rather than solely relying on a court to resolve disputes?

Sample contract

MANUFACTURING CONTMCT Order Number: 123456 This Contract (this "Contract") is made effective as of November 13, 2020, by and between Jerchin Manufactm-ing, of 1234 Alpha Strem, Phoenix, Arizona 85001, (Jerchin), and KL Enterprises, of 9076 Bravo Street, Boston, Massachusetts 01002, {KL}. 1. PURPIJSE 0F CDNTRACT. KL is in the business of designing and fabricating bicycles, and has developed a new model of commuter bicycle, the \"'Tairy." Jerchin agrees to manufacture a carbon ber bike fork to be included in KL's product[s), hereinafter referred to as the \"Goods", in the quantity, price, and specications determined in this agreement. 2. MANUFACTURED ITEMS. Jerchin agrees to sell, and KL agrees to buy, the following products {the "Goods\"] in accordance with the terms and conditions of this Contract: Description Quantity Unit Price Total Price Carbon Fiber Bike Forks 1,000 $100.00 $100,000.00 TIDTAL 5100 000.00 3. PRODUCT STANDARDS. Goods shall be manufactured according to KL Enterprises design specification document A5 1392-20, in a matte black finish. 4. TITLEIRISK OF LOSS. Buyer shall pay reasonable shipping costs in accordance with its shipping instructions, but the seller shall be responsible for packaging, shipping and safe delivery and shall bear all risk of dainage or loss until the goods are delivered to the Buyes address. 5. PAWENT. Payment shall he made to 1234 Alpha Street, Phoenix, AriZona 00000. KL agrees to pay the sum of $100,000.00 as follows: $20 scans Sea of Production $30 scam Acc- tance of Deliv- $50 000.00 TOTAL $100,000.00 If any invoice is not paid when due, interest will be added to and payable on all overdue amounts at 11 percent (11%} per year, or the maximum percentage allowed under applicable law:, whichever is less. KL Enterprises shall pay all costs of collection, including without limitation, reasonable attorney fees. In addition to any other right or remedy provided by law, if KL fails to pay for the Goods when due, Jerchin has the option to treat such failure to pay as a material breach of this Contract, and may cancel this Contract andfor seek legal remedies. Page 1 of5 Failure to remit timely payment according to the schedule of payment milestones shall be considered a material breach of the Contract. 6. DELIVERY. Tirne is of the essence in the performance of this Contract. Jerchin will arrange for delivery by carrier chosen by KL. Delivery shall be completed by December 29, 2020. 1'. PAYMENT DF TAXES. KL agrees to pay all taxes of every description, federal, state, and municipal, that arise as a result of this sale, excluding income taxes. 3. INDEMNITY AND INSURANCE. Jerchin agrees to hold KL harmless and to defend any and all actions, claims, suits, or proceedings that may subject KL to liability for defects in the Products. Jerchin represents that it now has in force a valid comprehensive liability insurance policy in the amount of Sl,{llllID,IIl-DID.DD with Zeus Insurance Co., and that the policy covers the risk of liability for defects in the Products. If this insurance coverage should change or lapse, Jerchin agrees that KL may pay the insurance premiums and deduct this expenditure from the payment due on the Pmducts, beginning with the fast shipment of Products following the expenditure. 9. WARRANTIES. Jerchin warrants that the Goods shall be free of substantive defects in material and workmanship and in conformity with specifications. JERCI-IIN SHALL IN NO EVENT BE LIABLE FOR AWEr [NCDJENTAL, SPECIAL, CIR CONSEQUENTIAL DAMAGES OF ANY NATURE, EVEN IF JERCHIN HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. Jerchin agrees to indemnify, hold harmless, and protect KL, its affiliates, successors, assignees, cUstomers, and users from any and all claims, demands, suits at law or equity, and all expensas including attomeys' fees, involving mfringement or alleged infringement of any patent, trademark, or copyright resulting from the purchase, use, or sale of the Goods. III]. INSPECTION. KL, upon receiving possession of the Goods, shall have fteen (15) days to inspect the Goods to determine if the Goods conform to the requirements of this Contract. Any Goods not rejected within this fifteen {15) day period will be deemed accepted as conforming. If KL, in good faith, determines that all or a portion of the Goods are non-conforming, KL may return the Goods to Jerchin at Jerchin*s espense. KL must provide written notice to Jerchin of the reason for rejecting the Goods. Jerchin will have 3D days from the return of the Goods to remedy such defects Under the terms of this Contract. 11. DEFAULT. The occurrence of any of the following shall constitute a material default under this Contract: a. The failure to make a required payment when due. b. The insolvency or baokmptcy of either party. c. The subjection of any of either party*s property to any levy, seizure, general assignment for the benet of creditors, application or sale for or by any creditor or government agency. d. The failure to make available or deliver the Goods in the time and manner provided for in this lContract. 12. REMEDIES UN DEFAULT- In addition to any and all other rights a party may have available according to law, if a party defaults by failing to substantially perform any provision, term or condition of this Contract (including without limitation the failure to make a monetary payment when due}, the other party may terminate the Contract by providing written notice to the defaulting party. This notice shall describe with sufcierrt detail the nature of the default. The party receiving such notice shall have 15 days from the effective date of such notice to cure the default(s). Unless waived by a party providing notice, the failure to cure the default(s) within such time period shall result in the automatic termination of this Contract. 13. FDRCE h'lAJEURE. If performance of this Contract or any obligation under this Contract is prevented, restricted, or interfered with by causes beyond either party's reasonable control (\"Force Majeure"), and if the party unable to carry out its obligations gives the other party prompt written notice of such event, then the obligations of the party invoking this provision shall be suspended to the extent necessary by such event. The term Force Majeure shall include, without limitation, acts of God, the, explosion, vandalism, storm or other similar occurrence, orders or acts of military or civil authority, or by national emergencies, insurrections, riots, or wars, or strikes, lock-outs, work stoppages, or other labor disputes. The excused party shall use reasonable efforts under the circumstances to avoid or remove such causes of non-performance and shall proceed to perform with reasonable dispatch whenever sueh causes are removed or ceased. An act or orniSSion shall be deemed within the reasonable control of a party if committed, omitted, or caused by such party, or its employees, ofcers, agents, or affiliates. 14. ARBITRATION. Any controversies or disputes arising out of or relating to this Contract shall be resolved by binding arbitration in accordance with the then-current Commercial Arbitration Rules of the American Arbitration Association. The parties shall select a mutually acceptable arbitrator knowledgeable about issues relating to the subject matter of this Contract. In the event the parties are Unable to agree to such a selection, each party will select an arbitrator and the txvo arbitrators in turn shall select a third arbitrator, all three of whom shall preside jointly over the matter. The arbitration shall take place at a location that is reasonably centrally located between the parties, or otherwise mutually agreed upon by the parties. All documents, materials, and information in the possession of each party that are in any way relevant to the dispute shall be made available to the other party for review and copying no later than 3t] days after the notice of arbitration is served. The arbitratort's] shall not have the authority to modify any provision of this Contract or to award punitive damages. The arbitrator(s) shall have the power to issue mandamry orders and restraint orders in connection with the arbitration. The decision rendered by the arbitrator(s) shall be final and binding on the parties, and judgment may be entered in conformity with the decision in any court having jurisdiction. The agreement to arbitration shall be specically enforceable Under the prevailing arbitration law. During the continuance of any arbitration proceeding, the parties shall continue to perform their reapectiv'e obligations under this Contract. Both parties acknowledge that during the course of this Contract, each may obtain confidential information regarding the other party*s business. Both parties agree to treat all such information and the turns of this Contract as condential and to take all reasonable precautions against disclosure of such information to Unauthorized third parties during and after the term of this Contract. Upon request by an owner, all docmnents relating to the condential information will be returned to such owner. 15. CDNFIDENTIALITY. Upon termination of this Contract, Jerchin will return to KL all records, notes, documentation and other items that were used, created, or controlled by Jerchin during the term of this Contract. 16. NDT ICE. Any notice or conunUnication required or permitted Under this Contract shall be sufficiently given if delivered in person or by certied mail, return receipt requested, to the addresses listed above or to such other address as one party nray have furnished to the other in writing. The notice shall be deemed received when delivered or signed for, or on the third day after mailing if not signed for. 11'. ENTIRE CDNTRACT. This Contract contains the entire agreement of the parties regarding the subject matter of this Contract, and there are no other promises or conditions in any other agreement whether oral or written. This Contract supersedes any prior written or oral agreements beiteat the parties. 13. AMENDMENT. This Contract may be modied or amended if the amendment is made in writing and signed by both parties. 19. SEVERABILITY. If any provision of this Contract shall be held to be invalid or Unenforceahle for any reason, the remaining provisions shall continue to be valid and enforceable. If a court finds that any provision of this Contract is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision shall be deemed to be written, construed, and enforced as so limited. 2t}. WAIVER OF CONTRACTUAL RIGHT. The failure of either party to enforce any provision of this Contract shall not be construed as a waiver or limitation of that party's right to subsequently enforce and compel strict compliance with every provision of this Contract. 21. ATTORNEY'S FEES. If any action at law or in equity is brought to enforce or interpret the provisions of this Agreement, the prevailing party will be entitled to reasonable attomeys' fees in addition to any other relief to which that party may be entitled. 22. HEADINGS. Headings Used in this Agreement are provided for convenience only and shall not be used to construe meaning or intent. 23. APPLICABLE LAW. This Contract shall be governed by the laws of the State of Massachusetts.