Question

Rob Motor Company, Inc. ("Rob" and "Lessee") is an automobile dealership in Nebraska. Rob leased its building and lot from Berry Rich, Inc., a property holdings company ("Rich" and "Lessor"). Last year, a fire destroyed part of the leased office building. The lease terms required the Lessor (landlord) to insure the building premises. The lease terms required the Lessee to insure the building contents.

Rob learned that Rich received $200,000 in insurance proceeds for the damages to the lease building premises. Rich refused to make repairs and kept the proceeds.  Rob sued Rich to recover the $200,000 insurance proceeds and $40,000 additional damages related to the loss.

Ten days before trial, Rich emailed Rob's attorneys a document titled, "Offer in Settlement", which proposed to pay Rob $150,000 in settlement for its loss. Rob responded to the Offer in Settlement by email, in a document titled, "Acceptance of Offer in Settlement." This document stated, in part, "Rob Motor Company, Inc. will accept Berry Rich, Inc. offer to settle the lawsuit for $150,000 if Berry Rich will execute a new three-year lease."

After receiving Rob's email and Acceptance of Offer in Settlement, Rich sent Rob another email, "We revoke the Offer in Settlement." After receiving this email, and not wanting to go to trial, Rob sent another email that stated, "Robert Motor Company, Inc. accepts Berry Rich's original "Offer in Settlement."

Rich did not respond to the email. At trial, Rob's attorney informed the Court there was a settlement, that Rob accepted Rich's Offer in Settlement. He asked the court to dismiss the lawsuit and compel (force) Rich to comply with the terms in the Offer in Settlement. Rich argued there was no settlement and argued basic contract principles to support his argument.

Discussion Questions:  

1. Who is right? Make sure to discuss the law and support your answer. This will require a comprehensive discussion about contract law (offer and acceptance). You will need to incorporate information you learned from the assigned reading materials to properly respond to this question.
2. What are the social and ethical issues involved with this fact scenario?  
3. What can you do in the future to protect yourself from the issues that happened in this scenario?

Answer 1

Though email is a written form of communication. The contract agreement is not valid on email. It is not signed by either of the parties and is thus, not a valid contract. Thus, Rich can refuse to abide by the email . This would be the legal decision by the court. But it is unethical on part of RIch to refuse to stand by his commitment . Also, he must have spent all $200,000 which he received from the insurance company for repairs of the building. Instead he refused to make the repairs and choose to keep the proceeds with self. However, when Rob sued him, he tried to settle it out of court through email. Though his proposal was accepted by Rob, Rich refused to abide by it. This is unethical behavior on part of Rich.

In future, Rob could have documented the email and taken Rich's signature on it as a proof of the contract agreement.