Dean Builders Agrees to Purchase All of Its Sump Pump

question 37

Multiple Choice

Dean Builders agrees to purchase all of its sump pump requirements for the new houses it builds from Satisfactory Sump Pump,Inc.These two business have had similar agreements the last three years and Dean's requirements have averaged 100 sump pumps per year.This year there was an unusually wet spring and Dean's requirements doubled to 200 sump pumps.Because of the high demand of sump pumps,the market price of the pumps tripled.Satisfactory Sump Pump,Inc.delivers 100 pumps at $75,the contract price.Satisfactory has exhausted its inventory and cannot deliver any more,so Dean buys the other 100 pumps from other suppliers at $225 each.Dean sues Satisfactory Sump Pump,Inc.for the additional expense.What is the most likely result?

• A) Satisfactory Sump Pump, Inc. wins; output and requirements contracts are not enforceable since no quantity is stated.
• B) Dean wins; Satisfactory Sump Pump, Inc. agreed to meet the needs of Dean and did not do so, which is a breach.
• C) Satisfactory Sump Pump, Inc. wins; requirements contracts are governed by a good faith standard, and it was unreasonable for Dean to demand so many additional pumps.
• D) Dean wins; the requirement of good faith applies only between merchants, and Dean is not a merchant.

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Definitions:

Material Misrepresentations

False statements or omissions of facts that are significant enough to influence an individual's decision to enter into a contract or transaction.

Truth In Lending Act

A United States federal law designed to protect consumers in credit transactions by requiring clear disclosure of key terms of the lending arrangement and all costs.

Magnuson-Moss Warranty Act

A federal law established to protect consumers from deceptive warranty practices, ensuring warranties on consumer goods are clear and terms are fully disclosed.

FTC Act Section

Specific provisions within the Federal Trade Commission Act, which regulates business practices and protects consumers.