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CJ

Answered

Henry leads a group of 20 in a fast-paced telemarketing center.He stopped his own work to console one of his followers who was struggling with a personal issue unrelated to his work.He is using which servant leader behavior?

A) helping followers grow and succeed
B) emotional healing
C) creating value for the community
D) empowering

On Sep 28, 2024


B
CJ

Answered

In 1969, XYZ Co. Ltd., a manufacturer of small appliances, entered into a 20-year contract with ABC Smelters Inc. who agreed to process molten aluminum for XYZ's manufacturing needs. The parties undertook lengthy negotiations to determine the terms of the complex agreement which governed their relationship. In particular, the pricing clause was quite complicated based upon various factors. The price to be paid by XYZ was to vary in accordance with two of those factors. After a base price was agreed upon, 20 percent of that price would vary with changes in the Wholesale Price Index for Industrial Commodities (WPI). This portion was referred to as the "production charge." An additional 20 percent of the price would vary with changes in the hourly wage rates of ABC Smelter employees. A major component of the production charge for the smelting of aluminum was the cost of electricity.
The parties performed under the contract for several years applying the pricing formula appropriately to the basic price. However, in 1973, the Arab oil producing nations imposed an oil embargo that severely affected most of the world's economies causing rapid inflation, particularly in sectors which were substitutes for oil based energy. The cost of electricity rose at a rate greatly in excess of the rate of increase in WPI, of which electricity was only one of many factors. At this point, ABC Smelters realized that continuing with the contract as it stood to the end of its term would result in a loss of over $60 million to the company and would likely result in its bankruptcy. ABC then ceased performing under the contract and instituted legal action to attempt to relieve its onerous obligations under the agreement.
a. Discuss the nature of the action and the arguments which may be used by ABC.
b. Whether ABC is successful or not, what further steps may the parties take to revive their contractual relationship?
F. Supp. 53, this situation examines the doctrines of frustration and the principles of substituted agreement.
a. The legal action brought by ABC is based in frustration in order to bring the contract to an end and relieve the parties from further performance. The external event of an oil embargo causing huge increases in the cost of electricity was neither foreseeable nor caused by any fault of the parties. Its effect was to change the circumstances and conditions under which the agreement was to be performed such that performance becomes virtually impossible for ABC without risking the company's demise. Furthermore, given the long-term nature of the contract, it was an event for which the parties would likely have provided for discharge of the agreement had it been foreseeable and the changes in conditions apparent. The defendants may raise an argument that ABC is attempting to have the contract declared frustrated simply because performance became more expensive than contemplated at the outset. However, the courts, recognizing the difficulty in predicting future conditions in long-term contracts, especially those of an unexpected nature, would likely treat the contract as frustrated. This is particularly true in light of the great care and thorough negotiations which the parties undertook at the outset. Thus, the frustrated contract is brought to an end and the parties would be relieved of further performance.
b. The parties may agree to substitute their original contract with a new agreement with material alterations to the terms. The new substitute agreement will discharge the existing agreement if it has not already been discharged as frustrated by the courts. The alteration in the pricing terms of the agreement would be sufficiently material to effectively discharge the original agreement.

On Sep 23, 2024


Based on Aluminum Company of America v. Essex Group, Inc. (1980), 499 F. Supp. 53, this situation examines the doctrines of frustration and the principles of substituted agreement.
a. The legal action brought by ABC is based in frustration in order to bring the contract to an end and relieve the parties from further performance. The external event of an oil embargo causing huge increases in the cost of electricity was neither foreseeable nor caused by any fault of the parties. Its effect was to change the circumstances and conditions under which the agreement was to be performed such that performance becomes virtually impossible for ABC without risking the company's demise. Furthermore, given the long-term nature of the contract, it was an event for which the parties would likely have provided for discharge of the agreement had it been foreseeable and the changes in conditions apparent. The defendants may raise an argument that ABC is attempting to have the contract declared frustrated simply because performance became more expensive than contemplated at the outset. However, the courts, recognizing the difficulty in predicting future conditions in long-term contracts, especially those of an unexpected nature, would likely treat the contract as frustrated. This is particularly True in light of the great care and thorough negotiations which the parties undertook at the outset. Thus, the frustrated contract is brought to an end and the parties would be relieved of further performance.
b. The parties may agree to substitute their original contract with a new agreement with material alterations to the terms. The new substitute agreement will discharge the existing agreement if it has not already been discharged as frustrated by the courts. The alteration in the pricing terms of the agreement would be sufficiently material to effectively discharge the original agreement.