Lode Mines Enters into a Contract with Ajax Photo Labs,whereby

question 23

Multiple Choice

Lode Mines enters into a contract with Ajax Photo Labs,whereby Ajax agrees to purchase all its requirements of silver needed for photo finishing during the next year,from Lode,at $4.00 ounce.Over the last 4 years,Ajax has used an average of 10,000 ounces of silver per year.Lode only produces about 15,000 ounces of silver per year.About 2 months into the contract,the price of silver skyrockets to $50 per ounce.Ajax immediately orders an additional 50,000 ounces from Lode.Lode refuses to deliver,and Ajax sues.What is the most likely outcome?

• A) Lode wins; requirements contracts are not enforceable because they do not contain a quantity.
• B) Ajax wins; requirements contracts are enforceable.
• C) Lode wins; even if requirements contracts are enforceable,the parties must act in "good faith," and Ajax is acting in bad faith.
• D) Ajax wins; they are acting in "good faith," and this was a risk that Lode assumed.

---

Definitions:

Customer on Account

Transactions where a customer purchases goods or services on credit, creating an account receivable for the business.

Financial Statement

A formal record of the financial activities of a business, person, or other entity, presenting its financial performance and position at a given point in time.

Specific Date

A particular day singled out from others because of its significance or relevance to an event or action.

Supplies on Credit

The acquisition of business supplies with an agreement to pay the supplier at a later date.