Description
Timmco Case Study
Timmco, Inc. is a publicly traded corporation located in Denton, Texas that makes and sells high pressure industrial spraying equipment used in all sorts of commercial liquid spraying applications. It prides itself on top quality and promotes its products as “100% made in the USA”.
Sales have been declining recently due to competition from lower priced competitors and Timmco is looking for ways to reduce costs. One option under consideration is to find a new source for the high-pressure valves used in its products. These valves are complicated mechanisms that operate under very high internal pressure. If the valve was to burst, it would spray pieces of metal in all directions and pose a significant hazard to anyone standing nearby including the operator of the equipment. Timmco currently has a contract to purchase 1,000 valves a year at $2,500 per valve from Blagg Industries, a small privately owned business located in Boone, North Carolina. The contract has been in place for three years and has two more years to run.
Blagg Industries has a dozen employees. Timmco is its primary customer. If Blagg Industries loses Timmco’s business, it will have to lay off employees and might even go out of business.
Timmco is considering outsourcing the valves from Sanco, an overseas supplier in the country of Slawrovia, instead of buying valves from Blagg Industries. The Sanco valves only cost $1,000 each, but are known to be of lower quality than the Blagg Industries valves and are more likely to burst. Sanco can supply these valves at such low cost because they pay their workers, including children, less than the equivalent of $5 per day and work them long hours in hot, dangerous conditions.
Slawrovia is a poor country, but it has a large government bureaucracy and there is a lot of red tape involved in getting approval to export manufactured goods to other countries. In fact, it might take more than a year for Sanco and Timmco to obtain the necessary approvals for Sanco to export the valves to Timmco. Fortunately, the CEO of Sanco is related to the Slawrovia Minister of Commerce and has told Timmco that the necessary approvals can be obtained in less than a week if Timmco makes a $20,000 “gift” to the Slawrovia Minister of Commerce.
In addition to finding a new, low cost valve supplier, Timmco plans to increase sales by running a new marketing campaign that focuses on their commitment to American made quality. The tagline will be “Made in the USA by Americans, for Americans.”
You are a high-level executive at Timmco. Analyze the legal and ethical issues presented by the Timmco scenario. Your legal and ethical analysis should include breach of contract and remedies, negligent torts, product liability, the Foreign Corrupt Practices Act, and deceptive advertising and should incorporate a discussion and application of one or more of the ethical theories from Chapter 4 of the course textbook Business law: The Ethical, Global, and E-Commerce Environment.
Your legal and ethical analysis should,
- Analyze breach of contract and remedies
- Analyze negligent torts
- Analyze product liability
- Analyze the Foreign Corrupt Practices Act
- Analyze deceptive advertising
- Incorporate a discussion and application of one or more of the ethical theories from Chapter 4 of the course textbook Business Law: The Ethical, Global, and E-Commerce Environment.
Explanation & Answer
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Running head: CASE STUDY
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Case Study Analysis
Student's Name
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CASE STUDY
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Case Study Analysis
A company has to generate profits or losses in its business operations. Timmco Inc. sells
high-pressure engineering drenching equipment utilized in all kinds of industrial liquid spewing
uses. The firm is highly respected because of its top-quality products, which are 100% produced
in the United States. The notion of decreasing costs for survival in the highly competitive market
can make firms adopt some practices that can be deemed unethical and unlawful. Timmco Inc.
focuses on reducing cost has been mainly emphasizing on their valves, and precisely in the
agreement with Blagg Industries, which offers this essential article. Although Timmco had a
current legally binding agreement with Blagg, their intention of lowering cost has driven them to
seek services of other suppliers that offer similar services but at a reduced cost. Sanco, a firm
headquartered in Slawrovia, is seen as the best solution, though their work situation and quality
cannot be recommended Langvardt, Barnes, Prenkert, McCrory, & Perry, 2019). For Timmco to
make the right decision, the management requires to consider the legal and economic
consequences that would entail the breach of the existing agreement with Blagg Industries.
Besides, Timmco should examine the ethical elements of the transition and make a forecast on
how it will influence public views, negligence accountabilities, and general business
performance.
Analysis of Breach of Contract and Remedies
A contract is a legally binding pact that identifies and drives the rights and duties of the
parties to the agreement. A valid contract must contain elements like the offer, consideration,
mutuality of obligation, competency, and in some cases, a written document (Carter, 2011) since
Timmco Inc. has been facing financial issues because of decreasing sales. This has made the
company to consider another company for the supply of valves. However, there was a clear
CASE STUDY
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contract between Timmco Inc. and Blagg Industries that the latter would be the supplier. The
contract was expected to run for three years; one year was already gone, and two were
remaining. Blagg Industries supplies valves to Timmco at a unit cost of $2,500 for 1,000 valves
each year, which amounts to $2,500,000 each year. Another aspect is a consideration; the
expectations of the companies for the service given or acquired. Blagg Industries is contracted to
supply 1000 valves every year, while Timmco is contracted to provide payment for $2,500 for
every valve supplied on a timely basis.
When any party fails to fulfill is contractual obligations, this will be viewed as a breach
of consideration. Another aspect to consider in this case is the intention of legal obligation. A
written agreement must be in place to illuminate and establish appropriate requirements for both
parties to adhere to and avoid any misuse or negligence that goes against the initial arrangement.
A breach of contract is observed when the pact, consideration, and intentions are not respected.
In case Timmco resolves to stop its business with Blagg Industries before the end of three years,
a breach of contractual duty will be exemplified. This form of breach gives Blagg Industries a
chance to take legal action against the breaching party. A material breach is also present in this
case when there is an inability of one party to the contract failing to meet its promise causing
damage to the other party. Blagg Industries will mainly...