Nellie Nimble, purchasing manager for Fast Color Paint Company, mailed a purchas

Question

Nellie Nimble, purchasing manager for Fast Color Paint Company, mailed a purchase order to AB Can Corporation for 100,000 cans of high-gloss white paint at $15 per gallon wholesale. The order form mailed by Nellie contained 17 printed conditions on its reverse side. The third condition stated: "Buyer may reject any defective goods within 30 days of delivery."

The order form also stated that payment would be made as follows: 50% upon receipt of the goods, and 50% within 30 days of the receipt of goods. AB Can (the seller) sent a signed letter confirming the order, but the letter stated: "Any objection to goods shipped must be in writing within five (5) days of receipt of goods." AB Can's letter specified the same payment schedule as Fast Color's purchase order, but stated, in addition, "Interest at the rate of 12% per year will be charged on late payments." Fast Color's purchase order said nothing about interest on late payments.

AB Can delivered the cans (100,000) and Fast Color sought to object to 10,000 of the cans as defective on the seventh day after receipt of the cans. Fast Color paid 50% of the order

Explanation / Answer

1)Every contract has two important element :offer and acceptance.every offer must be accepted to be valid contract otherwise it is null and void.However when the cans are accepted by Fast color it means they have accepted the change terma of AB can and thus change terms are legally binding on fast color.

Thus fast color has no right to reject cans after 7 days as it is against the conditions of offer.

2)Yes, fast color owe interest for 10 days as payment is made after 30 days.

AS fast color has to make extra payment of interest If 50% payment is not within time.

3)As there is a condition in original contract to make payment as per the schedule that is 50% on receipt and 50% within 30 days,.so even if interest clause is not there if payment is not made within time ,it is a breach of contract and thus enforceable in court.and other party can claim compensation in that case.

So the condition of interest does not materially alters the contract.

4)The additional condition is :

To reject cans within 5 days of receipt of delivery.in writing

Interest will be charged @12% if payment is not made as per schedule mention in offer letter.

In my opinion the outcome is fair as it is a part of normal trade practice to charge interest if payment is not within time otherwise party will not make payment on time.

Also the terms to return cans within 5 days is also valid otherwise as a part of practice.

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