Question

Business Systems agreed to provide supplies to IBM as a subcontractor to a deal to update computer systems of the Chicago Transit Authority. The budget for this deal was set at $3.6 million; however, only $2.2 million of services were actually performed under the contract. Business Systems sued IBM, believing that it was entitled to an additional $1.4 million that it had not received in the performance of the project. As evidence of contract, Business Systems produced a spreadsheet detailing the ways in which the $3.6 million would be spent and an e-mail claiming “mutual agreement” to the $3.6 million budget. IBM claimed that it had performed all of its obligations under the contract and that Business Systems was not entitled to the $1.4 million because there was no contract specifying the amount that Business Systems was entitled to. Do you think that Business Systems was entitled to the $1.4 million? What consideration was exchanged between the two parties?

Answer 1

Business Sysstems was not entitled to the $1.4 million as the contract did not specify any amount. The budget was set at $3.6 million, but it is only a prediction & not the actual.

The consideration that was exchanged between both parties was a mutual agreement to help IBM in updating computer systems to the Chicago Transit Authority. It was a service agreement & did not include any tangible aspects.

IBM took services from Business Systems till the time it requuired them & then moved on once the need was satisfied. As, Business Systems was a sub-contractor, they were not given any guarantees on the amount of money they will receive. Business Systems assumed that the budgeted amount is what they are entitled to. Since, budget is only a prediction, the amount that Business Systems actually received could have also been more than the budget. But in reality, it turned out to be lesser than the expected budget.