Case Study Lucid v. Black Box
Lucid is an up-and-coming Chilean distributor of home entertainment technology. Black Box is a
well-known television manufacturer headquartered in the United Kingdom. Black Box was
interested in reaching out into the South American market and found Lucid to be sufficiently
well connected to reach customers throughout the continent. In January of 2008, Lucid signed an
exclusive three-year contract to establish a distribution network for Black Box High Res flat
screen televisions throughout South American using Black Box’s logo. The contract included the
1. Lucid has the exclusive right to sell Black Box’s High Res televisions and any updates to
the High Res product line.
2. Lucid must establish a distribution network within the agreed region.
3. Lucid must order 4,300 High Res televisions or £1,000,000.00 worth of product before
January 1, 2011.
4. If Lucid fails to meet these conditions, Black Box has the right to rely on other
distributors within South America.
5. If either party is in breach of this contract, the nonbreaching party may terminate this
agreement after three months’ notice.
In August 2008, Lucid placed an order for 1,000 High Res television sets, but the shipment was
delayed for several months with no explanation from Black Box. Lucid was frustrated because
Black Box’s delay in shipment caused Lucid to be late in supplying the televisions to the retailers
with whom Lucid had contracted. As a result, some of these retailers terminated their agreement
with Lucid before the shipment finally arrived, leaving Lucid with a surplus of High Res
televisions and in need of new retailers.
In June 2009, Lucid placed an order for 1,000 High Res television sets, which arrived shortly
thereafter. Lucid discovered that a few retailers had High Res televisions with Black Box logos
in stock, despite that they were not contracting with Lucid. Lucid believed that Black Box must
have contracted directly with these retailers, or perhaps relied on other distributors in violation of
the exclusive contract. Either way, Lucid was frustrated that Black Box was competing with
them in their agreed-upon distribution region.
In November 2009, Black Box released a new television, the 3-D Flat Screen, and began
marketing this in South America. Lucid wrote an angry letter to Black Box because Lucid
believed they had the exclusive right to market updates to the High Res product line. Black Box
replied that the 3-D Flat Screen was in a distinct product category different from the High Res
line, so the contract did not apply.
In June 2010, Lucid was still far from reaching the minimum order requirement in the contract,
but felt this was due to the actions of Black Box. Then Black Box sent Lucid a termination letter
that stated Lucid had failed to establish a distribution network to their satisfaction. Fed up with
Black Box’s poor communication and feeling as though they had been treated unfairly, Lucid
executives met with their legal advisors and asked what their options were. The attorneys for
Lucid say there are four options available: Lucid can litigate, arbitrate, mediate, or negotiate with
Black Box to resolve this dispute.
1. What are the sources of conflict between Lucid and Black Box?
2. Which dispute resolution procedure should Lucid use? Why?
3. If Lucid decides to negotiate with Black Box, what kind of negotiation tactics should be
4. How can Lucid and Black Box improve their supply chain relationship?
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