Determine whether certain contract remedies exist in the following scenario:
Forrest Gump is a famous table tennis player. He enters into a contract with Alabama Sports Marketing to advertise the latest ping pong game and to serve as the computer-generated imagery (CGI) model for the development of the video game. Gump is perfect for this job as there are not many world famous ping pong players who have a following similar to his. The game is set to start development on March 1 and will be completed on July 31, so the game can be released at Thanksgiving—a major video game release period. Both parties have agreed and stipulated to the fact that the game must be completed on time to maximize the profits.
Gump will make 20% of the net proceeds from the sales of the game. In addition, the contract has a liquidated damages
clause that indicates that if Gump does not participate in the marketing, does not solve as the CGI model, or breaches the contract in any way, he will owe Alabama Sports Marketing $2 million.
Based on this fact pattern and the information presented in this unit, answer the following questions in a minimum of 250 words each.
1. One day, Gump gets into an argument with the developer. Gump refuses to perform any work until the problem is
solved. In this situation, can Alabama Sports Marketing seek specific performance of the contract? If yes, why? If no, why not?
2. How would the court determine whether the liquidated damages clause is valid? is this clause valid? Explain your answers.
Forrest Gump Case Analysis
A contract is a legally binding agreement that can be enforced by the court of law and can be made between two or more individuals. Therefore, in the event of any argument regarding the contract and its execution, either of the parties is invited to seek the intervention of the court of law. In the case given in this assignment, it is clear that Forrest Gump is in a legally enforceable contract considering that the contract he entered with the Alabama Sports Company has all the elements of an enforceable contract. According to the law of the country, a legally binding contract must have an offer, acceptance, legal consequences and consideration which are all present in the contract signed by Gump and the company (Kubasek, 2016).
It is worth noting that there are a few remedies a party may seek if the other party in the contract fails to meet their promise and end of the bargain. One of the most sought out remedies is specific performance of the contract. The specific performance of the contract is a specific remedy utilized by the court of law when no other rectify such as money will fully correct the other party. In the case given, the Alabama sports can seek specific performance of the contract after Gumps refuses to honor his promise. According to the law, the company needs to establish that there is a binding contract on foot and Gump has breached. The breach of contract may be actual or anticipated. In this case, the breach of contract can be categorized as anticipated since Gump intends not to honor the contract until the problem that has developed has been fully settled (Erbach & European Parliament, 2015). According to the law, an anticipatory breach occurs when one party in the contract threatens to refuse to perform his or her obligation in the contract like Gump.
A liquidated damage clause helps in specifying an already set amount of money that must be compensated for damages in the event of relapse to perform under a contract. Notably, the amount of the liquidated damages should be to the individuals best evaluate at the time they enter into the contract of the satisfaction that it would be prompted by a breach (Kubasek, 2016). According to the law, the validity of the liquidated damages is significantly affected by factors such as:
The negotiations of the clause – for the clause to be valid, the court of law has to determine whether the clause was buried in the boilerplate language or was freely negotiated to suit both parties.
The court needs to determine the surrounding environment when negotiating the clause. Therefore, the thoughts, views, and feelings of both parties during the signing of the contract must be put into account when determining its validity.
Additionally, the validity of the clause is determined by the level of knowledge that each party had about what might happen in the event of a breach of the contract (Erbach & European Parliament, 2015).
Therefore, given the above factors and conditions, it is correct to state that the clause in the above case was valid. Both parties were fully aware of what was expected of them in the case they breached the contract, and the clause was freely negotiated by the parties making it a reasonable liquidated damage clause.
Erbach, G., & European Parliament. (2015). Negotiating a new UN climate agreement: Challenges for the Paris climate change conference : in-depth analysis. Luxembourg: Publications Office.