SCENARIO:

Elijah owned a ranch where he farmed wheat. In March, Elijah began to look over all his farm equipment and get it ready for spring planting the following month. He noticed that part of the hydraulic system needed to be replaced on his planter, and he called his local repair shop for a quote. The shop manager sent Elijah an estimate for the job, which included almost $5,000 for the parts and another $3,000 for the labor. Elijah signed the bottom of the estimate and returned it to the manager who, in a subsequent phone call, said he would send someone out to Elijah's ranch as soon as the parts arrived in about a week.

In the meantime, Elijah decided to look into purchasing a new planter at the BigEquip Co. dealer nearby. After talking with the salesperson and looking at his options, Elijah signed a contract to lease the Planter-5000 for 4 years at a cost of $3,400 per month. The lease stated that Elijah would perform ordinary maintenance necessary on the equipment and would return the property the same condition as it was when he received it. The lease exempted normal wear and tear to the equipment. In the agreement, Elijah also promised to carry insurance on the equipment and would repair or replace equipment that was destroyed by flood, fire, or other cause beyond his control.

When Elijah returned home, he phoned the repair shop and told them he didn't want to go through with the repairs, since he had leased a new machine. He said they could cancel his order for parts. The manager stated the parts had already been ordered, and Elijah would have to pay for them, but, they wouldn't charge him for the labor costs.

Later that same week, Elijah placed an order for 3.5 million pounds of seed (enough to plant his entire 30,000 acres) with The Seed Store. Using The Seed Store's standardized order form, he specified the amount of seed needed along with a notation that the seed must be non-GMO and organically grown. These factors were important to Elijah, because he intended on selling a large amount of his harvest to a buyer in Canada, who would only accept non-GMO and organically grown products. He faxed the form to The Seed Store. Several hours later, a sales rep called to schedule delivery in early April.

Elijah was able to successfully plant his crops that spring, and he harvested them in mid-August. He took his harvest to the grain elevator, a complex designed to store grain in large quantities, where his grain was separated from other farmers' harvests. While there, Elijah's Canadian buyer arrived and took samples of the wheat for testing (to ensure the crop was non-GMO and that there were no traces of pesticides), prior to him accepting delivery of his order. Unfortunately, the test revealed that the wheat was genetically modified, so he refused to take any of the wheat.

Elijah immediately called The Seed Store who stated that they would not have been able to provide him such a large quantity of non-GMO seed by his needed delivery date, and therefore they substituted a portion of the order with GMO seeds. Elijah was furious and explained that he was unable to sell his harvest due to the presence of GMO seeds. The Seed Store explained that their order form clearly stated on the back:

The Seed Store will make every effort to fulfill your order as described. However, there may be cases in which a substitution for all or part of your order will be necessary to meet scheduling deadlines. If you would prefer we not substitute any part of your order, please make a note "NO SUBSTITUTIONS" on the front of this form.

Elijah argued that the substitution of another brand of non-GMO seeds would have been reasonable, but the substitution of GMO seeds for non-GMO seeds was a breach of contract.

In October of that year, Elijah was still battling The Seed Store for a refund for the cost of his entire order. In the meantime, he was able to find another buyer for that portion of his wheat harvest, though it was at a lower price than the Canadian buyer was willing to pay. Moreover, the Canadian buyer needed to find another source of non-GMO wheat, and though he was eventually able to, it was at a much higher price that he was contracted to pay Elijah. Because of the price difference, the Canadian buyer was threatening suit against Elijah for the difference in price.

Unfortunately, during this time, a large winter storm struck the area, not only destroying part of the grain elevator and damaging the crop, but also causing $50,000 in damage to Elijah's newly leased equipment.

DISCUSSION QUESTIONS:

Answer each of the following questions:

1. Considering the passage of title and risk of loss, what would a grain buyer or sellers' position be on the best way to ship a harvest? Via shipment or destination contract?

2. Elijah argued that the substitution of another brand of non-GMO seeds would have been reasonable, but the substitution of GMO seeds for non-GMO seeds was a breach of contract. Do you agree with his opinion? Why or why not?

3. Should Elijah be treated differently than someone who has a large garden and sells surplus at a farmer's market? Why or why not?

Assume Elijah never paid for the parts from the repair shop, and they want to sue him for breach of contract. What is the repair shop's best argument for why they have a valid claim against Elijah?

Assume The Seed Store's order form also stated, "Buyer agrees as a condition of this contract not to save any seed produced from the harvest arising out of the planting of the seeds subject to this order." The clause was designed by The Seed Store to prevent growers from developing their own stockpile of seeds, thereby eliminated the need for The Seed Store's supply and essentially becoming a competitor of The Seed Store. Is the provision to limit the fruits of the planting unethical? Would it be unethical for the farmer to save seed from his harvest to avoid paying the Seed Store for new seed next year?

Divide into groups, where half the group represents Elijah and the other half represents The Seed Store. The group representing Elijah should develop arguments for why The Seed Store owes him money and calculate how much they owe.

The group representing The Seed Store should be prepared to defend any arguments that will be presented against it for a breach of contract.

At the end of your allotted preparation time, present your arguments.