A Dilemma in Designing…
Chandi has always been dreaming of having her own business ever since her days at the school where she did a highly commendable job of managing the school cooperative. So it was obvious that Chandi would set her mind in the direction of entrepreneurship right after her school days were over.
Thus at the age of 21 she is a proud owner of her own operation where her company undertakes the design, manufacture and sale of uniforms, outfits, overalls etc. to the corporate sector. The business is healthy with steady growth over the previous two years and her company Chandi Solutions (Pvt) Ltd has already made its presence felt in this niche market and few newcomers too have joined the fray recently seeming to emulate the success of Chandi.
Recently Chandi has obtained her very first overseas opportunity with the soon- to- be established Arabian Nights Hotels for the design and manufacture of a complete package of uniforms for its staff of 3,000, working in 50 Arabian Nights resorts in the region. Chandi was delighted at her first crack at an international deal and appointed Upul and Hishan the newly recruited marketing executives of the company to formulate the entire project.
Though highly qualified but lacking in experience, the two decide to do a research on the attire of a number of international hotel chains and make a short list in order to help develop the designs for Arabian Nights Hotels.
Later at their first official meeting with the executives of Arabian, the final designs were shown and the Arabian team showed a keen interest in 6 out of the 12 designs presented. They requested the immediate supply of the selected designs and told Chandi to begin production of the garments with the new logo of the hotel added to the outfits. Later that evening the hotel chain sends the official email making the formal order for the manufacture of 10,000 units of garments of various designs with the contract to be signed by Chandi and the managing director of Arabian Nights who was scheduled to arrive in Sri Lanka two days later. However on the day before the contract was to be signed, a director of Arabian sends another email requesting the colour of the logo to be in a darker shade of blue.
The parties signed the contracts two days later and the production begins in full swing on the same day.
However once the first batch of 6,000 units of uniforms were sent to Arabian , the entire set was rejected by the hotel due to the inclusion of the logo of the hotel in a lighter shade of blue instead of a darker one ,which was in fact slightly different from the company logo. The error was due to a decision by Hishan and Upul to ignore the second email as irrelevant.
Arabian refuses to accept delivery of the consignment when it discovered one week later that the logo was defective and demand a replacement delivery within a week as the hotel operations were to begin the same week. Chandi refuses to comply stating that the design was done according to the formal contract made by the parties. But the Arabian insists that Chandi was wrong to ignore a request made by one of its directors.
The negotiations fail and Chandi decides to stop further production. Arabian Nights had to postpone the launch by one month due to unavailability of uniforms.
Arabian Nights Hotel files legal action against Chandi Ltd for breach of contract and demand compensation for the delay and the loss of profits. However Chandi files counter action for the nonpayment of the contract fees. Chandi further states that the design and the manufacture were done according to the agreement made at the negotiations and that the logo printed in the uniforms exactly matches with the logo of the hotel chain.
Your tasks will be to:
1. State whether there has been a valid contract between the parties with specific reference to invitation to treat, offer, counter offer, and performance.
2. All of the final designs approved by the Arabian were very similar to the uniforms of XERATON HOTELS, a well known chain of tourist hotels. Discuss the possibility of Xeraton taking legal action had the uniforms been used by Arabian.
3. The design defect was identified by the hotel chain almost one week after the outfits were issued to the hotel staff. Therefore most of the uniforms were already worn by the employees by the time the hotel decides to reject the consignment. Chandi demands payments from the hotel stating that the Arabian had already legally accepted the consignment. Discuss this issue under the Sale of Goods Ordinance.
4. Advice the parties on their respective legal rights