BLAW

$3$

$0$

$0$

: Contract Negotiation and Drafting Buver's Instructions: You are the head of a division of an electronics company, Honeycrisp, headquartered in St

$.$

$$Paul$,$ Minnesota, and you will be releasing a new cell phone. In order to deliver long battery life but compact size, you will utilize lithium batteries in your device. You will be meeting with the CEO of a lithium battery manufacturer, Libatt, to discuss having them supply

$1$

$0$

$0$

$,$

$0$

$0$

$0$

$.$

lithium batteries for you

$($

one for each cell phone

$)$

$.$

$$In preparation for this meeting, you have collected some important information from within your company. Your company has determined

$($

with absolute certainty

$)$

$$that you will be able to sell all of these cell phones for $

$1$

$0$

$0$

$$each$.$ With the exception of the battery costs, all other costs

$($

including inputs, marketing, etc.

$)$

$$will total $

$6$

$0$

$$for each device. Consequently, you could generate a profit from your cell phones, as long as the total cost

$($

including any shipping charges that you pay, plus any expected damage payments that you are responsible

$)$

$$for all batteries is below four million dollars

$($

$

$4$

$,$

$0$

$0$

$0$

$,$

$0$

$0$

$0$

$)$

$.$

$$One of the key concerns with lithiund batteries is the possibility that the batteries may catch fire or explode. There have been a number of recalls for lithium batteries for laptops and other devices. A number of house fires have been attributed to lithium battery faults. These problems are caused by small metal particles that sometimes show up in the lithium solution inside a battery cell. When heated significantly, such as during extended use of a battery, these metal particles may cut into the separator, between battery cells. This causes a short circuit, which can lead to a fire or explosion. You face a major problem in buying these batteries from Libatt. You have heard that Libatt uses two different techniques: one essentially eliminates the risk of fire or explosion, while this risk remains for the other. Your problem is that, once manufactured, you will be unable to determine which technique was used for your batteries

$($

the differences are within the sealed liquids, and you may not trust the external markings

$)$

$.$

$$Your engineers have constructed estimates of possible fires, explosions, and monetary damages that would result from these. These are included in the table below. You should consider whether you might want some sort of legal protection from Libatt when you cannot tell which technique has been used.

$($

What legal concept would protect you in case of a fire or explosion?

$)$

$$You are expecting to have a good product launch, but it is essential for the batteries to be available to your Shakopee, Minnesota manufacturing facility by August

$1$

$5$

$$of this year

$($

you may lose all sales if you miss this deadline

$-$

$$i

$.$

e

$.$

$$your revenues will be zero!

$)$

$.$

$$You also have information about your exclusive shipping contractor, Consolidated Express

$($

which is the only one you are allowed to contract with

$)$

$.$

$$The cost for shipping

$1$

$0$

$0$

$,$

$0$

$0$

$0$

$$batteries from anywhere within the United States will be $

$1$

$0$

$0$

$,$

$0$

$0$

$0$

$.$

$$Libatt may use another shipper. Furthermore, as you can probably tell, you are extremely busy, and do not want to deal with the long delays and cost of litigation. You would prefer using an alternative, if any dispute arose. You have heard that the American Arbitration Association can provide a fair and unbiased alternative procedure. Below is a table with some data provided by your company, and some calculations that you should do to help in your negotiation: how would I complete the table and assignment questions?