Can Coasters commit itself to the price increase and then change its mind with no adverse consequences?

How could Trackers have avoided from the outset this situation related to cost increases?

Transcribed Image Text:

Amritha Singh is a middle manager with Coasters Plus Ltd. (Coasters), a company that designs and manufactures roller coasters for amusement parks across North America. She has been appointed one of the project managers for the design and delivery of a special roller coaster for the Ultimate Park Ltd., an American customer. A major component of the project is the steel tracking, and one possible source is Trackers Canada Ltd. (Trackers). Amritha's supervisor has asked her to negotiate the necessary contract. This task causes Amritha some concern, since she has never been solely responsible for contractual negotiations before. She does know, however, that Coasters needs a reliable supplier who can deliver high-quality tracking for under $2 million, and in good time for installation at the Ultimate Park's site. Amritha, introduced in Chapter 5, began negotiations with Jason Hughes. Jason is a representative of Trackers, the steel tracking manufacturer willing to supply tracking to Coasters, Anuritha's employer. Amritha provided Jason with the plans and specifications for the roller coaster, and they negotiated on a number of points, including price, delivery dates, and tracking quality. A short time later, Jason offered to sell Coasters a total of 900 metres of track in accordance with the plans and spec- ifications provided. Among other matters contained in Jason's otffer were the pur- chase price ($1.5 million), delivery date, terms of payment, insurance obligations concerning the track, and a series of warranties related to the quality and perfor- mance of the tracking to be supplied. There was also a clause in the offer that stated: "Trackers will use its best efforts to secure insurance from the insurer named by Coasters." Another clause, inserted at Amritha's express request, required Trackers to pay $5000 to Coasters for every day it was late in delivering the tracking. After reviewing the offer for several days, Anritha contacted Jason and said, "You drive a hard bargain, and there are aspects of your offer that I'm not entirely happy with. However, I accept your offer on behalf of my company. I'm looking forward to doing business with you." Within a month, Trackers faced a 20 percent increase in manufacturing costs owing to an unexpected shortage in steel. Jason contacted Amritha to explain this development and worried aloud that without an agreement from Coasters to pay 20 percent more for the tracking, Trackers would be unable to make its delivery date. Amritha received instructions from her supervisor to agree to the increased purchase price in order to ensure timely delivery. Amritha communicated this news to Jason, who thanked her profusely for being so cooperative and understanding. Jason kept his word and the tracking was delivered on time. However, Coasters has now determined that its profit margin on the American deal is lower than expected, and it is looking for ways to cut costs. Anritha is told by her boss to let Jason know that Coasters would not be paying the 20 percent price increase and would remit payment only in the amount set out in the contract. Jason and Trackers are stunned by this development. Amritha Singh is a middle manager with Coasters Plus Ltd. (Coasters), a company that designs and manufactures roller coasters for amusement parks across North America. She has been appointed one of the project managers for the design and delivery of a special roller coaster for the Ultimate Park Ltd., an American customer. A major component of the project is the steel tracking, and one possible source is Trackers Canada Ltd. (Trackers). Amritha's supervisor has asked her to negotiate the necessary contract. This task causes Amritha some concern, since she has never been solely responsible for contractual negotiations before. She does know, however, that Coasters needs a reliable supplier who can deliver high-quality tracking for under $2 million, and in good time for installation at the Ultimate Park's site. Amritha, introduced in Chapter 5, began negotiations with Jason Hughes. Jason is a representative of Trackers, the steel tracking manufacturer willing to supply tracking to Coasters, Anuritha's employer. Amritha provided Jason with the plans and specifications for the roller coaster, and they negotiated on a number of points, including price, delivery dates, and tracking quality. A short time later, Jason offered to sell Coasters a total of 900 metres of track in accordance with the plans and spec- ifications provided. Among other matters contained in Jason's otffer were the pur- chase price ($1.5 million), delivery date, terms of payment, insurance obligations concerning the track, and a series of warranties related to the quality and perfor- mance of the tracking to be supplied. There was also a clause in the offer that stated: "Trackers will use its best efforts to secure insurance from the insurer named by Coasters." Another clause, inserted at Amritha's express request, required Trackers to pay $5000 to Coasters for every day it was late in delivering the tracking. After reviewing the offer for several days, Anritha contacted Jason and said, "You drive a hard bargain, and there are aspects of your offer that I'm not entirely happy with. However, I accept your offer on behalf of my company. I'm looking forward to doing business with you." Within a month, Trackers faced a 20 percent increase in manufacturing costs owing to an unexpected shortage in steel. Jason contacted Amritha to explain this development and worried aloud that without an agreement from Coasters to pay 20 percent more for the tracking, Trackers would be unable to make its delivery date. Amritha received instructions from her supervisor to agree to the increased purchase price in order to ensure timely delivery. Amritha communicated this news to Jason, who thanked her profusely for being so cooperative and understanding. Jason kept his word and the tracking was delivered on time. However, Coasters has now determined that its profit margin on the American deal is lower than expected, and it is looking for ways to cut costs. Anritha is told by her boss to let Jason know that Coasters would not be paying the 20 percent price increase and would remit payment only in the amount set out in the contract. Jason and Trackers are stunned by this development.