While a student at Ivy League University located in Prestige, Michigan, Beth Houser, developed an idea for a device that she felt could revolutionize the healthcare industry. Her goal was to produce a device with the capacity to process a number of different tests with a single drop of blood rather than a full vial(s) from a vein from the arm as was the standard. Beth, inspired to be a successful entrepreneur rather than an undergraduate, dropped out of Ivy League University after just two years and went on to found One-Drop Pro, Incorporated. She headquartered One-Drop Pro, Inc. (ODP) in Prestige, Michigan as this was the epicenter of the latest tech boom.

Beth recruited some of the biggest players in the tech and science industries to help get her start-up underway. Her goal was to model the device that would process the single drop of blood after one of the most popular smartphones on the market – she wanted the hand-held design to be both sleek and contemporary. Beth entrusted the development of the device to ODP’s main investor, Sunny Sham. On September 1st, after just six months of development, Sunny met with Beth to show her the prototype and advised that he felt the device was “good enough” to begin the manufacturing process. Beth inquired as to the accuracy of the test results on the prototype and Sunny simply shrugged his shoulders and stated that extensive beta testing could be completed once manufacturing was underway.

While out at happy hour in downtown Prestige that Friday evening, Beth met the CEO of Good Neighbor Pharmacy, Inc., Jake Jarvis, who happened to be in town for work. Good Neighbor Pharmacy (GNP) was the preeminent nationwide pharmacy retailer with 5,000 locations. Beth couldn’t believe her good luck! Over a beer, Beth explained ODP’s device to Jake and promised that the device could process “over 200 different tests with 99% accuracy” from a single drop of blood. Jake was intrigued at the idea of partnering with ODP to install blood processing centers into his store locations to provide an additional service to his customers. Jake invited Beth and Sunny to his office on September 10th to view the prototype and discuss the potential of a deal between the two companies. Sunny guaranteed Jake that ODP comprehensively tested the device and had the results certified by a Nobel Award winning scientist. Beth, swearing Jake to secrecy, also affirmed that the device was currently being used by U.S. military medical personnel. An unknowing Jake was thrilled at Beth and Sunny’s false affirmations and immediately agreed to purchase 5,000 devices at $10,000 each, one for each of his GNP locations.

Jake wanted to install the device in his stores as soon as possible, so Beth and Sunny decided to forgo the beta testing process and ordered the ODP factory begin manufacturing the devices the following week. ODP and GNP had their respective attorneys draw up the $50 million dollar sales contract to formalize the transaction. The parties agreed that delivery of 2,500 devices would be made to GNP on or before January 1st and the remaining 2,500 devices would be delivered no later than March 1st. ODP warranted that the devices would process over 200 different tests with 99% accuracy from a single drop of blood. See detailed contract below. The sales contract stipulated that the sale was for the device only; the operation of the device and processing of the blood test was solely GNP’s responsibility. On December 27th, ODP shipped 2,000 devices to GNP. Jake contacted Beth on January 2nd to inquire about the remaining 500 devices; Beth profusely apologized and advised that there had been some manufacturing glitches and the 500 devices would be shipped out promptly. Jake took Beth at her word and distributed the devices to 2,000 GNP store locations to be used by trained lab technicians.

The response from GNP’s customers was outstanding and the lab technicians were soon running thousands of tests per week nationwide. Very quickly, reports of horrendously inaccurate test results came rolling in from hundreds of GNP customers. Numerous customers had been misdiagnosed and subsequently treated by doctors for various (and serious) medical conditions that they, in fact, did not even have. Upset customers began flooding social media with complaints and many threatened lawsuits. Jake, quite disturbed by the news that the devices were not working as promised, contacted Beth to request the data and documentation produced by ODP during the beta testing process. On March 2nd, GNP received a shipment of 1,000 devices. Beth never responded to Jake’s repeated requests for the documentation, so Jake hired the world-famous ABC Lab Co. to conduct an independent study of the to determine the accuracy of the ODP device. ABC’s study of the device found that it was only capable of producing results for 10 different blood tests with approximately 15% accuracy. On May 1st, GNP immediately discontinued use of the devices in its locations. Jake’s repeated requests to connect with Beth were ignored and ODP did not ship any other devices to GNP.

CONTRACT FOR THE SALE OF GOODS

This contract for the sale of goods is between One-Drop Pro, Inc., organized under the laws of the State of Michigan (the “Seller”), and Good Neighbor Pharmacy, organized under the laws of the State of New York (the “Buyer”).

One-Drop, Pro, Inc. agrees to sell a total of 5,000 devices at $10,000 per unit to Good Neighbor Pharmacy, Inc. for a total of $50,000,000. Delivery of 2,500 devices to be made to Good Neighbor Pharmacy’s New York headquarters location on or before January 1st and the remaining 2,500 devices to be delivered no later than March 1st. One-Drop Pro warrants that such devices are capable of processing over 200 different health-related tests with 99% accuracy from a single drop of blood.

The parties agree as follows:

1. Sale of Goods. The Seller shall sell to the Buyer and the Buyer shall purchase from the Seller the goods set forth on Exhibit A (the “Goods”) in the quantities and at the prices stated in Exhibit A. Unless otherwise stated in Exhibit A, the Buyer shall pay all taxes and third-party expenses imposed on, in connection with, or measured by the transaction contemplated by this agreement in addition to the prices set forth on Exhibit A.
2. Invoices; Payment. Unless otherwise stated in Exhibit A, payment for the Goods is due within 30 days of the date of the Seller’s invoice, which date will not be before the date of the Seller’s delivery of the Goods. The Buyer shall pay a delinquency charge of the lesser of (1) 1% per month and (2) the highest rate allowed under applicable law on all overdue amounts until the amounts are paid.
3. Delivery; Title; and Risk of Loss. Unless otherwise stated in Exhibit A, the Seller shall deliver the Goods FOB the Buyer’s facility in New York, and title to and risk of loss of the Goods will pass to the Buyer upon such delivery by the Seller. The Seller will be liable for any losses, damages, penalties, or expenses for failure to meet any delivery date.
4. The Buyer acknowledges that it has relied on the statements or representations of the Seller with respect to the quality or condition of the Goods. The Buyer acknowledges that it has relied solely on the investigations, examinations, and inspections confirmed by the Seller. Buyer waives its right to formal documentation of the Goods’ performance.
5. Limitation of Liability. The Seller will not be liable for any indirect, special, consequential, or punitive damages (including lost profits) arising out of or relating to this agreement or the transactions it contemplates (whether for breach of contract, tort, negligence, or other form of action) and irrespective of whether the Seller has been advised of the possibility of any such damage. In no event will the Seller’s liability exceed the price the Buyer paid to the Seller for the specific Goods provided by the Seller giving rise to the claim or cause of action.
6. Limitation of Actions. No action arising out of or relating to this agreement or the transactions it contemplates may be commenced against the Seller more than 12 months after the basis for such claim could reasonably have been discovered.
7. Security Interest. The Buyer hereby grants to the Seller a security interest in the Goods sold to the Buyer under this agreement and any proceeds therefrom (including accounts receivable), until payment in full for the Goods has been received by the Seller. The Buyer shall sign and deliver to the Seller any document to perfect this security interest that the Seller reasonably requests.
8. Governing Law and Designation of Forum. (a) The laws of the State of Michigan (without giving effect to its conflicts of law principles) govern all matters arising out of or relating to this agreement and the transactions it contemplates, including, without limitation, its interpretation, construction, validity, performance (including the details of performance), and enforcement.

(b) A party bringing a legal action or proceeding against the other party arising out of or relating to this agreement or the transactions it contemplates must bring the legal action or proceeding in any court of the State of Michigan sitting in Davenport County. Each party to this agreement consents to the exclusive jurisdiction of the courts of the State of Michigan sitting in Davenport County and its appellate courts, for the purpose of all legal actions and proceedings arising out of or relating to this agreement or the transactions it contemplates.

1. Force Majeure. The Seller will not be liable for delays in performance or for non-performance due to unforeseen circumstances or causes beyond the Seller’s reasonable control.
2. Assignment; Delegation. The Buyer may not assign any of its rights under this agreement or delegate any performance under this agreement, except with the prior written consent of the Seller. Any purported assignment of rights or delegation of performance in violation of this section is void.
3. Recovery of Expenses. In any adversarial proceedings between the parties arising out of this agreement or the transactions it contemplates, the prevailing party will be entitled to recover from the other party, in addition to any other relief awarded, all expenses that the prevailing party incurs, including legal fees and expenses.
4. Entire Agreement. This agreement constitutes the entire agreement between the parties with respect to the subject matter of this agreement and supersedes all other agreements, whether written or oral, between the parties.
5. No amendment to this agreement will be effective unless it is in writing and signed by both parties.
6. Effectiveness; Date. This agreement will become effective when both parties have signed it. The date this agreement is signed by the last party to sign it (as indicated by the date associated with that party’s signature) will be deemed the date of this agreement.
7. Counterparts; Electronic Signatures. This agreement may be signed in one or more counterparts, which together will form a single agreement. This agreement may be signed electronically.

Each party is signing this agreement on the date stated opposite that party’s signature.

[Insert dated signature blocks.]

EXHIBIT A

Please completely address all of the following questions in your essay. Your essay will be judged on your capacity to present strong, analytical and logical discussions that support your conclusions. 

• Discuss the validity of the sales contract between ODP and GNP.
• Did ODP breach it’s contract with GNP? Thoroughly explain and explore all relevant issues related to a breach in this case.
• Discuss which legal remedies that might be available in this case and why they are applicable here.
• Discuss whether there are any equitable remedies available in this case and why they are applicable here.
• Discuss which warranty (or warranties) apply in this case and why.
• If were the attorney representing GNP in a product liability lawsuit against ODP, what argument would you present? What would ODP’s best defense be? Explain.
• If were the attorney representing one of GNP’s customers who received inaccurate test results, would you pursue a claim against GNP or ODP? Explain.
• Is the sales contract between ODP and GNP flawed in any way? Discuss what errors are present in the contract, if any, and what changes you would recommend to each party.

The assignment should be presented in APA format and be a minimum of 5 pages, pages to be double-spaced, typed in 12-point font. The point allocation and grading parameters are outlined in the grading rubric for this activity. Please download and print a copy of the grading rubric to use as a reference.