1. Explain how these situations arise in business based on what happened in this case.

2. Offer some ideas on what those involved in purchasing should be doing when ordering goods from manufacturers.

Grandoe is a family-owned manufacturer of gloves located in Gloversville, New York. In the early 2000s, Grandoe began selling winter gloves to Gander Mountain, a national retailer of outdoor sporting goods. At that time, it was customary in the glove-making industry for the manufacturer to rely on a retailer’s oral commitment for the purchase of gloves. For the first few years of their relationship, Gander Mountain and Grandoe abided by this custom; Gander Mountain would orally agree to purchase a quantity of gloves, Grandoe would manufacture the gloves, and Gander Mountain would periodically issue written purchase orders for smaller shipments of gloves as the need for them arose, the sum of which was consistent with Gander Mountain’s oral commitment.

In 2007, Gander Mountain attempted to change this practice by posting a document called the Vendor Buying Agreement (VBA) on its website. The VBA stated: Any communications from Gander Mountain in the form of forecasts, commitments, projections or other estimates provided to Vendor are for planning purposes only, do not constitute an Order and shall not be binding upon Gander Mountain unless, until and only to the extent that Gander Mountain expressly agrees in writing.

The VBA also stated that it “represent[ed] the entire and integrated Agreement between Gander Mountain and Vendor, superseding all prior negotiations, representations or agreements, written or oral” and that “by accepting [a purchase order], Vendor acknowledges and agrees to be bound by the Vendor Buying Agreement.”

After posting the VBA on its website, Gander Mountain e-mailed Grandoe’s vice president, asking him to “[p]lease read the attached document that explains our [purchase order] policy changes that will be effective in June.” The attached memorandum explained that Gander Mountain was “updating terms and conditions” and that any manufacturer that did business with Gander Mountain would henceforth be bound by the VBA. Grandoe’s vice president did not respond to the e-mail or acknowledge in any way that he had read the memorandum or the VBA.

Subsequently, over a series of meetings in 2008, representatives from the two companies negotiated a deal whereby Grandoe would manufacture $3.05 million worth of gloves for Gander Mountain. At one of these meetings, Grandoe’s president and vice president presented Gander Mountain’s representative with spreadsheets detailing the quantities of gloves Grandoe would produce in each style. Gander Mountain’s representative orally approved these spreadsheets. At another meeting, the parties signed a Resource Allowance Contract (RAC), which set forth certain percentage discounts and other ancillary terms for Gander Mountain’s purchase of gloves from Grandoe. The parties also agreed that, consistent with their past practice, some of the logistical aspects of the deal, when and how many gloves would be shipped, would be specified in Gander Mountain purchase orders that would be sent to Grandoe.

On April 16, 2009, after Grandoe had manufactured most of the gloves, Gander Mountain told Grandoe that it would not honor the full oral commitment. Gander Mountain sent Grandoe purchase orders for approximately $940,000 worth of gloves, which Grandoe filled. Gander Mountain then ceased ordering gloves. Grandoe was able to resell some of the gloves it had manufactured for Gander Mountain, but a large number of the gloves— some $1.5 million worth—had been embroidered with Gander Mountain’s logo and were largely worthless to anyone else.

Grandoe sued Gander Mountain for breach of contract. Gander Mountain asserted that the VBA and RAC voided any oral agreement the parties had allegedly reached. The court denied Gander Mountain’s motion for summary judgment and submitted the case to the jury along with the VBA and RAC and instructed the jury to consider all of the evidence. The jury found that the parties had entered into a valid oral contract and awarded Grandoe $1,557,284.40 in damages. ……………………..