Analyzing Business Law Issues: Compact Business Systems Case Study

This case study analyzes the legal issues surrounding Compact Business Systems, a company formed by Sidney Greenwood and Nancy Fitzgerald. The analysis focuses on a three-year contract with International Tire Inc., highlighting potential breaches related to repair timeframes and the validity of the contract given a non-compete clause with their former employer, National Business Systems. The study examines the implications of the non-compete agreement, the concept of 'time is the essence of the contract,' and potential damages. Furthermore, the case delves into scenarios involving fraudulent misrepresentation by a desk clerk and the application of the doctrine of caveat emptor. The analysis also explores potential outcomes based on various legal precedents and the specific facts presented, including mistake of fact and undue influence. The document provides a comprehensive overview of business law principles as applied to this case.

Running head: BUSINESS LAW
BUSINESS LAW
Name of the Student
Name of the University
Author Note

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1. In the scenario, it has been held that Sidney Greenwood and Nancy Fitzgerald's
company Compact Business Systems signed a three-year agreement with International
Tire Inc. According to the Terms of the contract, including the requirement the at
Compact was required to repair all of the assignment of International Tire's computers
promptly The contract was said to be signed by the President of International Tire, on
behalf of International Tire Inc. and by Sidney Greenwood. According to the other
term of the contract required Compact to pick up, repair and return the computers
within a time limit of 4 business days.
It can be seen from the fact of the case that both Sidney and Nancy went into a
non-competitive agreement with National Business System, which is their previous
employer and signed an obligation that they will not enter into similar trade or work
for a competitor for three years after the end of their employment. Therefore,
according to the term of the covenant, the business running by both of them is
completely established upon the breach of the non-competitive covenant they have
made with the National Business System at the time of their employment. A non-
competitive covenant can be defined as a condition by which one party agrees to
restrain from similar trade practice like that of the other party for a particular period
and within a particular geographical location (Buenstorf et al., 2016) However, the
Covenant must specify about the restrictions related to time-frame, the geographical
location of its applicability and specify trade practices to secure the owner right of the
other party. In the case of Shafron v. KRG Insurance Brokers (Western) Inc. 2009
SCC 6, held that in case of a non-compete agreement, geographical locations must be
legally defined.
Therefore, it can say from this case that the business of Sydney and Nancy
similar to that of National Business is said to be void and any agreement made in

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place of such business is void. Therefore, National Business can sue both Sydney and
Nancy along with their company Compact Business Systems for breach of the non-
compete clause and claim damages. Further, the agreement between Compact
business and International Inc is void.
2. If the contract between International Inc and Compact Business was valid, it can be
said that then Compact Business is said to have a breach of the terms of the contract
which stipulated the computer to be repaired and delivered within a time limit of 4
business days. Therefore, applying the principle of 'time is the essence of the contract'
it can be said that the Computer business system delivered the product after 3 days of
its original time of delivery (Schellhorn & Atkin, 2018). In the case of Dove v. Rose
Acre Farms, Inc., the court held that, when an express term specifies the time limit
within which a contract is supposed to be performed, then the contract must be
performed within such stipulated date to avoid a breach of contract. However, such
time must be constructed as a reasonable time, that is, it must be considered taking
into account all the important factors. In the case of, Foundation Development Corp.
v. Loehmann's Inc., the court held that a minor delay cannot be constituted as a
breach.
Therefore, in the present case, a delay of 3 days without the intention of
parties and if because of such delay the other party, that is the International Inc. if did
not suffer any gross damages, then according to the rule opined by the court in
Foundation Development Corp. v. Loehmann's Inc., the contract must be performed.
3. The court while deciding the case between Compact Business System and
International Contract, will take into consideration various factors such as the
previous relationship between the two parties regarding the prior business dealing,
whether the Compact business had breached the contractual provisions or delayed in

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the delivery of the computers in previous occasions as well or not. This is necessary to
determine because in case it has been found that Compact Business have breached the
provision of the business contract ample number o0f times and it is because of the
good faith of International Inc. they are continuing the 3 years business deal with
Compact business, then the court would decide the case in another way. However, the
most important factor to be kept in mind is that, whether due to the delay in issue
because of which International Inc terminated the contractual relationship with
Compact business system, have caused any grave loss on their part and whether
Compact business knew about the fact that delay in delivery would have cause such
loss to International Inc.
It can be contended by the Compact Business that due to the tight cash flow,
this breach has occurred and asked for the performance of the contract from
International Inc's side stating the decision of the judge made in Foundation
Development Corp. v. Loehmann's Inc., that a minor delay does not amount to a
breach of contract. However, if during the trial the fact of Non-compete covenant with
National Business comes into the picture, then the contract between International Inc
and Compact business would have been declared void and International business
would not have to perform their part of the contract or pay any price for the same.
4. In another scenario, it can be said that there exists no contract between the American
Tire corporation and Compact Business System due to the existence of a Non-
compete clause between the Compact Business System and the National System.
Henceforth, Compact cannot ask American Tire Corporation to perform their part of
the contract, which is void. However, if the Contract was Valid, then Compact
Business System could have asked for payment of $10000 per year for the 4-year
contract with American Tire Corporation stating the fact that there is a mistake of fact

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on their part to understand the term of the contract and such mistake in unilateral
which was known by ATC. Therefore, such a mistake cannot make the contract void
and hence it is avoidable. In the case of Couturier v. Hastie, when at the time of the
contract, the party at mistake does not know about the existence of the fact in
consideration, and then such a contract cannot be held void. However, in another case
of Wood v. Scarth, the court opined a contrary opinion and held that mistake
regarding the amount in a contract can hold the contract to be declared as void.
Therefore, Compact Business would have asked for the reformation of the terms of
the contract.
5. In this scenario, Shawna came to the shop to repair his computer which was not
working and she was unable to find the reason. The Desk clerk at the compact advised
that she should have purchased the Compact's Deluxe Upgrade Package at $750
which will be much cheaper than the repairing price of the computer she bought. She
bought the same and after a few days later she came to know that the maximum repair
price for her computer would have cost $200.
It can be said that the desk clerk fraudulently misrepresented the fact knowing
about its truth and further he has enforced undue influence over her knowing about
the fact that she could not detect the problem in the computer (Derry v. Peek).
Therefore, Shawna can successfully bring an action for causing fraudulent
misrepresentation and undue influence by the Compact business system regarding the
repair of the computer, where the business system compact can also be held liable for
being the employer of the desk person.
6. Shady cannot sue Compact Business as she by her own choice asked them to install
the software named Sketchysof and he did not even ask for the specifications about
the same from any of the members of Compact business system. Further, she could

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have read the specifications minutely. Therefore according to the doctrine of Caveat
emptor which states about the buyer should take reasonable measures before buying
any goods, he cannot claim anything from Compact Business for not disclosing the
terms to Shady (Shepard, 2017).

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Reference:
Buenstorf, G., Engel, C., Fischer, S., & Gueth, W. (2016). Non-compete clauses,
employee effort, and spin-off entrepreneurship: A laboratory experiment.
Research Policy, 45(10), 2113-2124.
Couturier v Hastie [1856] UKHL J3
Derry v Peek [1889] UKHL 1
Dove v. Rose Acre Farms, Inc. 434 N.E.2d 931 (Ct. App. Ind. 1982)
Foundation Development Corp. v. Loehmann's Inc. 788 P.2d 1189 (Arizona 1990),
Joh, E. E. (2017). The undue influence of surveillance technology companies on policing.
Schellhorn, T. J., & Atkin, R. G. (2018). Is Time of the Essence? Section 556 Safe-
Harbor Provision for Forward Contracts and Commodities Contracts. American
Bankruptcy Institute Journal, 37(7), 38-65.
Shafron v. KRG Insurance Brokers (Western) Inc. 2009 SCC 6,
Shepard, L. A. (2017). Formative assessment: Caveat emptor. In The future of
assessment (pp. 279-303). Routledge.
Wood v Scarth (1858) 1 F&F 293