Does arrow have an ethical responsibility to pay a higher

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Reference no: EM1373493

K. K. Legume, Incorporated is a reputable as well as popular sweater manufacturer. Based upon Legume's status and popularity, Arrow Stores, L. L. C. arrives into a contract with Legume. The contract is a requirements contract, specifying that Arrow will purchase whatever number of Arctic Ice brand 100% wool sweaters it wants for a one-year period, at a per-unit price of $12.00.

Two developments consequence in litigation between Legume and Arrow. First, due to an unexpected sheep shortage, with substantially fewer sheep to shear the price of wool skyrockets 1,000 percent. Second because of an unexpected cold snap, consumer request for wool sweaters increases dramatically, resulting in a 500% surge in Arrow's wool sweater orders to Legume, equated to order averages over the previous ten years (the parties have a long-standing business relationship.)

Legume appeals Arrow to increase its per-unit purchase price to $36.00, however Arrow refuses to alter the price term stipulated in the contract. When Arrow rejects to pay a higher price for the sweaters, Legume ceases delivery, appealing that it would be bankrupted by continuing to fill Arrow orders, supplementary, Legume claims that based upon the longstanding business association between the parties, Arrow has at minimum an ethical obligation to pay a higher price.

Who wins? Does Arrow have an ethical responsibility to pay a higher price, based upon such an unexpected change in circumstances?

Reference no: EM1373493

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