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Chapter 11, Case problem 11-3

The Client
JMAM, LLC
Background of the case
JMAM is a wholesaler of costume jewelry that provides a service to B.S. International (BSI)
dedicated to make costume jewelry. JMAM sent BSI a letter stating the terms for orders,
including the necessary procedures for obtaining credit for items that customers rejected. The
letter stated, By signing below you agree to the terms. Steven Baracsi, BSIs owner signed
and returned the letter. For six years, BSI made jewelry for JMAM, items rejected by customers
where sent back to JMAM, but where never returned to BSI (Page 276).
The clients problem
BSI filed a suit against JMAM, claiming $ 41, 294. 21 for the unreturned items.
1.
2.
3.
4.

Alternative courses of action


Face-to-face meeting to sign contract
For additional terms create a clause
A policy of Return item or Change item
Reports of the returned items

Evaluation
1.
1. Having a face-to-face meeting prior signing a contract would create more confidence
and would be the perfect moment to solve any question or situation that was not understood
regard to the contract.
Advantages
Generates confidence to both parties. Body language is very important in a meeting, You can
learn more about the person meeting them physically than with a telephone, email or a letter.
Creates longer bonds in business, BSI will continue to be in contract with JMAM.
Disadvantages
Ineffective if the listener is not attentive.
It can create tensions between the contractor and the contracted if there is a misunderstood.
2. Additional terms are to be constructed as proposals for addition to the contract, including a
P.S. It is better to notify the objection (P.S.) at the moment therefore JMAM can argued that
the information was given within reasonable time after the notice of BSI was received. A
P.S. Is not very formal it is better to state a clause.
Advantages
Avoids conflicts of interest between both parties.
It can help identifying what situations are unethical and state all potential solutions

JMAM will have clear and understandable contract stating every rights and obligations both
parties have to comply.
Disadvantages
The contracted may not understand or might not agree with the clause.
3.

3. The returned items should be sent back to BSI in order for this company to have the
opportunity to resell. If the items are not sold BSI could delivered the items to JMAM and
received its respective credit for them.
Advantages
As stated in the contract, JMAM is following the mirror image rule with BSI saying that what it
is stated in the contract is unequivocal and absolute acceptance of the contract.
Both parties win, even though the items will not be returned to JMAM this could win too by
having the opportunity to give away its inventory.
Disadvantages
The items might not get sold which can cause a high inventory and probably a loss.

4. 4. Having reports of the returned items would benefit both parties inventory. Also as already
stated in the contract BSI could have a control of the credits received.
Advantages
Understanding what you have can help lower cost, speed up fulfillment and prevent frauds.
Have access to current assets, right balance accounts and financial reporting.
Disadvantages
Now that the items are back into your inventory, you will have to reclassify the cost of the item
depending on what method you
use (LIFO, FIFO or Average) and this takes time.
Recommendation
With a clear and detailed contract that states both rights and obligations there is no need to have a
future issue.

References
Cross, F., Miller, R. (2015). The Legal Environment of Business: Text and Cases. (9th ed.).
Mason, OH: Cengage Learning.