Question 7

1 point possible (graded)

7. Synergy Inc. makes televisions, which it sells to consumers through a network of independent distributors. Matthew owns one such distributorship in Storyville, Ames. The relationship between Synergy and Matthew is governed by an elaborate contractual agreement, which among other terms provides price schedules for Matthews wholesale purchases, sales incentives for dealing lots of Synergy televisions, and a term that allows either party to cancel the agreement without cause by giving ten days notice to the other party.

For thirty years, Matthew sells Synergys televisions with great success, generating large profits for Synergy and providing a nice lifestyle for Matthew and his family in Storyville. One day, though, the son of Synergys CEO decides that he wants to sell Synergy televisions through his new distributorship in Clarksville, Ames (a mere 5 miles from Storyville). Attempting to drive Matthew out of business, Synergy notifies him that it is cancelling the thirty-year old agreement, effective twenty days later. Matthew is heartbroken, seeing his entire livelihood crumble before him.

Eventually, he calms his emotions and speaks to Vince, Matthews high school friend and longtime lawyer. Vince, knowing that Matthews life has been built on the basis of selling Synergy televisions, tells Matthew that he can use contract law to prevent Synergy from pulling the deal out from under him. Is Vince correct? (Select 1)

1. Yes, because there is a long-established course of dealing (over 30 years) between the parties.

2. Yes, because the contract term allowing cancellation of the agreement is unconscionable.

3. No, because any argument that Vince might make about acting in good faith or the course of dealing between the parties is defeated by the contract term on cancellation.

4. No, because changed circumstances frustrated the contracts objective.