Reference no: EM132197317

In a world of get-rich-quick schemes, few are mentioned more frequently than lawsuits. One of the reasons is the infamous McDonald’s coffee case (Liebeck v. McDonald’s Restaurants). This is what happened in 1992 in Albuquerque, New Mexico. Stella Liebeck, seventy-nine, was riding in a car driven by her grandson. They stopped at a McDonald’s drive-through, where she purchased a Styrofoam cup of coffee. Wanting to add cream and sugar, she squeezed the cup between her knees and pulled off the plastic lid. The entire thing spilled back into her lap. The searing liquid left her with extensive third-degree burns. Eight days of hospitalization—which included skin grafts—were required. Initially, she sought $20,000 from McDonald’s, which was more or less the cost of her medical bills. McDonald’s refused. They went to court. There it came to light that about seven hundred claims had been made by consumers between 1982 and 1992 for similar incidents. This seems to indicate that McDonald’s knew—or at least should have known—that the hot coffee was a problem. Most of the rest of the case turned around temperature questions. McDonald’s admitted that they served their coffee at 185 degrees, which will burn the mouth and throat and is about 50 degrees higher than typical homemade coffee. More importantly, coffee served at temperatures up to 155 degrees won’t cause burns, but the danger rises abruptly with each degree above that limit. So why did McDonald’s serve it so hot? Most customers, the company claimed, bought on the way to work or home and would drink it on arrival. The high temperature would keep it fresh until then. Unfortunately, internal documents showed that McDonald’s knew their customers intended to drink the coffee in the car immediately after purchase. Next, McDonald’s asserted that their customers wanted their coffee hot. The restaurant conceded, however, that customers were unaware of the serious burn danger and that no adequate warning of the threat’s severity was provided. Finally, the jury awarded Liebeck $160,000 in compensatory damages and $2.7 million in punitive damages (about two days’ worth of McDonalds’ coffee sales). The judge, however, reduced the $2.7 million to $480,000. McDonald’s threatened to appeal, and the two sides eventually came to a private settlement agreement.

In order for an implicit contract to arise, the following three conditions must be met: Both sides must enter the contract freely. Both sides must be reasonably informed of the agreement’s terms. Both sides must be honest. Were these three conditions met in the McDonald’s coffee case? Explain.

Make the case that the original offer by Liebeck—$20,000 from McDonald’s to cover the medical bills—is ethically recommendable within the structure of an implicit contract. Use the concept of an implied warranty.