Business Finance
BUL 2131 University of Jaffna Sri Lanka The FUN Vs SADs Dispute Case Study

BUL 2131

Faculty of medicine university of jaffna Sri Lanka

BUL

Question Description

I need an explanation for this Business Law question to help me study.

This is your class paper assignment, worth 85% of your final grades. You are an assistant to the attorney for the FUN Company. To complete this assignment you must write a two-to-three page report discussing the issues and likely outcome of the case below:

Several weeks ago, SAD Co. CEO met with FUN’s CEO for lunch to discuss potential business ventures between both companies. After a few shots of whiskey, SAD’s CEO tells FUN’s CEO that SAD is interested in purchasing a commercial building that FUN owns in a central area in West Palm Beach. SAD is interested in this building because of the specific location in which it is located. SAD believes that owning a building in that specific location will increase their business significantly. SAD’s CEO offers FUN’s CEO to purchase that specific building for $5 million. FUN’s CEO responds that FUN estimates that the building is worth $9 million and that they are willing to sell the building for that price give that they have no use for it. SAD’s CEO takes out a $1.00 bill gives it to FUN’s CEO and says “this is my payment so that you give me time to talk to my board and see if we are willing to pay $9 million.” FUN’s CEO laughs and puts the $1.00 bill in his pocket. Both CEO’s shake hands and say goodbye and leave. The next day SAD’s CEO calls an emergency meeting to discuss the $9 million purchase price and the board agrees to the purchase of the building for $9 million. Immediately after the meeting, SAD’s CEO calls FUN’s CEO on the phone and tells him that SAD agrees to purchase the building for $9 million. FUN’s CEO tells SAD’s CEO that FUN has decided not to sell the building because after their meeting yesterday they realized how much potential the building actually had. SAD is now demanding that FUN honor its word and sell them the building for $9 million.

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Final Answer

Attached.

The FUN Vs. SAD’s Dispute – Outline
Thesis Statement: SAD cannot compel FUN to honor its words. This is because the kind of
agreement that the CEOs of the two companies had made is not enforceable. The contract lacks
acceptance, consideration and certainty of terms. Above all, a contract regarding the sale or
transfer of lands and buildings ought to be in writing.
I.
II.

Introduction
Offer and Acceptance

III.

Consideration

IV.

Certainty of Terms

V.
VI.

Necessity of Writing
Conclusion


Running head: FUN VS. SAD’S DISPUTE

1

The FUN Vs. SAD’s Dispute
Name
Institution

FUN VS. SAD’S DISPUTE

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The FUN Vs. SAD’s Dispute
Introduction

Contracts are integral parts of business activities or deals. No business operates in
isolation. When an individual or a company want to engage in a business deal, it enters into a
contract with another company or an individual. These contracts can be made either orally or in
writing. For business purposes, it is recommended that the contracts be made in writing.
Nonetheless, both verbal and written contracts are enforceable. It depends on whether a contract
meets the basic requirements of a valid contract. As part of the CEO’s duties, SAD’S CEO and
FUN’s CEO met to discuss some business matters. In this regard, SAD’s CEO discloses to
FUN’s CEO that Sad has an interest in purchasing a commercial building owned by FUN. This is
mainly because of its strategic location. In response, FUN’s CEO confirmed that the company
would be willing to sell the building to SAD but only at the cost of $9 million. SAD offered to
buy the building at $5 million. However, after SAD’s CEO held further consultations with the
board, the company agreed to buy the building at $9 million. Nonetheless, FUN’s CEO told
SAD’S CEO that the company have decided not to sell the building. In this regard, SAD cannot
compel FUN to honour its words. This is because the kind of agreement that the CEOs of the two
companies had made is not enforceable. The contract lacks acceptance, consideration and
certainty of terms. Above all, a contract regarding the sale or transfer of lands and buildings
ought to be in writing. No writing was done in this case.
Offer and Acceptance
A contract begins when one party makes an offer to the other. This is the expression of
willingness to form an agreement with a party (Savelyev, 2017). In this case, SAD through its

FUN VS. SAD’S DISPUTE

3

CEO made an offer to FUN. This happened when SAD’s CEO disclosed the plan of SAD to
purchase the building owned by FUN. To further show the interest, SAD’s CEO explained the
core reasons why SAD want to purchase the building. He even went ahead to negotiate the cost
of the building. According to him, SAD’s offer was to buy the building at $5 million. However,
this cost was low compared to what FUN had valued the building. Therefore, SAD’s CEO did
not make an acceptance that SAD would sell the building to SAD. Acceptance is an expression
of the other party to enter into a proposed contract or agreement. In this regard, an offer can
either be accepted or be declined. If it is accepted, the contract goes ahead (Savelyev, 2017).
However, if it is declined, the contract does not proceed. In this case, the CEOs differed in terms
of the price of the building. So, FUN declined SAD’S offer of buying the building at $5 million.
Consideration
Once offer and acceptance had been made successfully, consideration is done. This
involves giving something that is of equal value to the item for which the contract is made. Once
the consideration is made, the contract becomes automatically enforceable (Sanga, 2018). In this
case, no consideration was made. The $1.00 bill that SAD’s CEO gave to FUN’s CEO does not
constitute consideration. Something becomes a consideration if its value is equivalent to that of
the goods or services that form the subject matter of the contract (Garmaise, 2011). In this
regard, consideration would be $9 million. This is the value of the building that is the subject
matter of the agreement between the two companies. Since SAD did not pay FUN this amount, it
has no right to compel, it’s to honor the promise. Indeed, by the time SAD’s CEO and FUN’s
CEO were discussing the issue, they did not agree on the price of the building.

FUN VS. SAD’S DISPUTE

4
Certainty of Terms

For a contract to be enforceable, it must have clear terms. This outlines the specific
parties to the contract, the subject matter or purpose of the contract, items to be exchanged in the
contract and their conditions (Garmaise, 2011). Moreover, the contract should state the
obligations of each party. More importantly, the contract should state the prices of the items at
the centre of the agreement. In this case, the terms were incomplete and vague.
Necessity of Writing
Contracts can be enforced, whether they are oral or written. However, some contracts are
better enforced when they are in writing than otherwise. In this regard, the writing guarantees the
enforceability of the contract (Sanga, 2018). For instance, contracts involving the sale of real
estate properties ought to be in writing. The subject matter in the agreement between SAD and
FUN is real estate. However, no writing was done. Moreover, contracts that involve the sale of
goods above $500 should be in writing. The value of the building in the agreement between SAD
...

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