Fram, Inc. was the sole source of Framistans, an essential component of Fisker, Inc.’s unique electric cars. Under their contract, Fram agreed to supply 5,000 Framistans per month for $100,000, and Fisker agreed to pay 30 days after receipt. All went well until Fisker, which was undercapitalized, had no cash to make a payment. The companies agreed that Fram would continue to supply Framistans on a cashwith-order basis, at a price of $120,000 per 5,000 units – the $20,000 premium to be applied against the delinquent balance. The arrangement worked for three months. Then, Fisker filed voluntarily for Chapter 11 bankruptcy protection and began to construct a reorganization plan. Will the creditors support and should the court allow the company to continue buying and paying for Framistans? What about the premium?

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When a company files for bankruptcy under chapter 11 each member who needs to be illegible for any p... View the full answer