Pop Co Was a Small Producer and Bottler of Carbonated Beverages

question 56

Essay

Pop Co. was a small producer and bottler of carbonated beverages and employed the services of Distribu Co. to promote and distribute its products to grocers and restaurants. The sales of Pop Co.'s products had been steadily increasing and they were gaining considerable popularity among consumers. Distribu Co. had an agreement for five years with Pop Co. under which it received a commission of 10% of gross sales revenue as remuneration for its services. As the costs of advertising and promotion increased Distribu Co. wished to renegotiate its arrangement with Pop Co., particularly since its other clients were paying between 25% and 35% for similar services. During the negotiations that ensued, Distribu Co. pointed out that it was no longer profitable to work for Pop Co. Moreover, if Pop Co. did not increase its commission to 30% of gross sales, Distribu Co. would be forced to remove its services. Pop Co. finally agreed to double the commission as it had always been very satisfied with the services provided by Distribu Co. and did not want to have to establish a relationship with a new distributor. Pop Co.'s sales showed a substantial increase over the next quarter. When Pop Co. received the first quarterly commission invoice pursuant to the new arrangement it was astounded to discover the amount represented 30% of gross sales revenue. Pop Co.'s president immediately telephoned Distribu Co. and told its finance officer that had Pop Co. realized how much the new commission would cost in dollar terms he would never have agreed to it as it was both unfair and exorbitant. He also stated that he would pay the invoice but at the long-standing rate of 10%.
Discuss the legal issues and arguments which may be raised by the parties involved and the likely outcome if legal action should ensue.

---

Definitions:

Property Damage

Harm or destruction that affects the value or use of physical property.

Personal Injuries

Physical or emotional harm caused to an individual, often leading to legal action in order to receive compensation.

Appraisal Clause

A provision in insurance policies requiring disputes over the value of a claim to be resolved by an independent appraiser.

Impartial

Unbiased and neutral without favoring one side over another.