You are the Chief Financial Officer of Manufacturing for Market Caps, Inc. which manufactures baseball caps in Bronx, New York. For the last three years, your principal supplier of fabric has been Rays Rayon of Queens, New York under a contract, dated January 1, 2018. You sometimes use other manufacturers, but they are usually more expensive than Rays Rayon.

In preparation for the Spring, 2021 season, you ordered 5,000 bolts of fabric from Rays Rayon. The first 1,000 bolts were delivered to your Bronx warehouse in late January, 2021. Because of your long relationship with Rays Rayon, your warehouse manager did not carefully inspect the fabric but simply placed it in inventory. A second delivery of 1,000 bolts arrived on March 15, 2021. Your warehouse manager did inspect this delivery and found that twenty-five percent of these bolts of fabric are severely discolored and effectively unsaleable. He then inspected the first shipment and found the same problem, i.e. twenty-five percent are severely discolored and effectively unsaleable.

You contacted Rays Rayon on March 16, 2021 and received the following response the next day:

1. Rays Rayon is unwilling to provide any replacement or other accommodation regarding any of the fabric already delivered.

2. Due to the COVID pandemic and resulting shut-down of some of the manufacturing plants which supply unfinished fabric, Rays Rayon has experienced increased costs of raw materials. Therefore, Rays Rayon will require a fifteen percent increase in the price of the 3,000 bolts of fabric yet to be delivered.

3. Although Rays Rayon has, throughout the term of the contract, delivered the fabric to Market Caps warehouse in Bronx, New York and paid the costs of delivery, Rays Rayon now advises you that it will require Markets Caps to pick up the fabric from Rays Rayons facility in Queens, New York. You check the contract and see that it provides: FOB NYC.

Write a briefmemo to your CEO outlining Market Caps rights and obligations under its contract with Rays Rayon together with your recommendations for dealing with the issues arising Rays Rayons actions and communications.