Question

Ross Enterprises has a contract with Big Steel Company Limited in respect of Information Technology (IT) Services. The contract was signed on January 1^st 2020 and will be effected on the 1^st April 2020.

In mid-February 2020 Big Steel’s sales plummeted due to the Covid 19 pandemic. In addition, an already high long term debt, and operating cost, as well as Big Steel’s current negative cash flows situation placed the company in serious financial peril. Indeed if they cannot find a resolution soon to deal with their cash flow problems and debt, they will have to close operations permanently and send all employees home.

Upon hearing this pronouncement, the Trade Union representing workers at Big Steel advised management that they will take strike action. This further affected the operations of Big Steel and resulted in a loss of production, sales and the much-needed cash flows, which is critical to pay off their debt and meet current fixed operating cost. On 3^rd March 2016, Big Steel files for bankruptcy and sent all employees home.

On the 4^th March, Big Steel wrote Ross Enterprises advising of their circumstances and the virtual impossibility of implementing the sign contact for IT Services, which is scheduled to commence on 1^st April 2020.

Ross Enterprises is adamant that they have binding arrangement and wanted to proceed as per signed contract. However Big Steel has advised Ross that certain events, covid 19, global recession and a subsequent strike has culminated for which the company has little or no control of. Thus, it was impossible to implement the contract on the agreed start date due to these circumstances.

Advise Ross Enterprises on this matter using the IRAC method

Answer 1

Answer:

IRAC FOR ADVICE TO ROSS ENTERPRISES

1. Name of the case:

2. Statement of facts:

3. Issues

4. Rules (Statement of the Law)

5. Application

6. Conclusion

ROSS ENTERPRISES VS. BIG STEEL COMPANY LIMITED

STATEMENT OF FACTS:

1. Ross Enterprises entered into a contract with Big Steel Company Limited, for IT Services.

2. The commencement date of the contract was 1^st April 2020.

3. Due to the Impossibility of Performance, Doctrine of Frustration and Force Majeure the company Big Steel could not fulfill its part of obligations to provide IT services.

4. Ross Enterprises is adamant for the part of the performance from the other party.

ISSUE(S):

1. How Ross Enterprises can get the contract and the obligations of Big Steel Company Limited enforced.

2. What are the rights Ross Enterprises has in this scenario?

RULE(S): Statement of Law

The Contract Law of the United States of America:

Under the contract laws, this is a matter of Impossibility of Performance, Doctrine of Frustration, and Force Majeure.

Under Impossibility of Performance: a party is not liable for any kind of claim when the situation occurred is out of their control, just like the case of Big Steel Company Limited.

Under the Doctrine of Frustration: The contract gets frustration because of the impossibility of performance.

Under Force Majeure: A party is exempted from any liability if the impossibility of performance occurs due to the Act of God or Flood or any kind of pandemics like COVID-19.

APPLICATION:

Therefore, in this case, Ross Enterprises cannot impose the performance of the contract over Big Steel Company. As the situation explained by Big Steel which includes Covid-19 pandemic impacts over the financial condition of the company which led to strike and layoffs. Is covered under the above-explained Doctrines of Contract Law.

CONCLUSION:

As legal advice to Ross Enterprises, they can approach the appropriate jurisdictions of US Courts based on the signed contract and can claim damages that occurred to them due to the non-performance of the contract by Big Steel Company Limited.

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