X. Smart Chips, Inc. is a large semiconductor manufacturer that entered into a contract with Dandy BuildAll Contractors, Inc. to have Dandy build a clean room and provide production equipment for the clean room. The agreement called for $9 million in total to be paid by Smart Chips to Dandy, in installments as progress milestones were achieved. Dandy misjudged how much would be required to perform the contract, and about half way through the project, when Smart Chips had already paid $5 million to Dandy under the contract, Dandy stopped work and refused to proceed further unless Smart Chip agreed to increase the total payments by $2 million. Smart Chips refused to increase the payments, notified Dandy that Smart Chips was terminating the contract because of Dandy’s alleged breach, and entered into a contract with Excellent Contractors to finish the project for total payments to Excellent of $6 million. Excellent finished the project and was paid in full, but the delays resulted in Smart Chips being unable to fulfill $500,000 in orders that it would have been able to fulfill with production from the new clean room. Smart Chips would have had a profit of $75,000 on the cancelled orders. Explain whether Smart Chips would likely win or lose on a claim against Dandy for breach, and what amount of damages would likely be awarded if it were to win on its claim. Use specific dollar amounts and explain how you arrived at them.
A trucking company pays independent truckers to transport various loads along various routes with a 2-tiered payment formula: one amount for very flexible delivery times and a much higher amount for faster delivery times. For a particular route, for example, the trucker is paid $X for transporting the load within 48 hours from pick-up to delivery, and is paid three times that amount if it delivers within 18 hours from pick-up to delivery. To accomplish the faster delivery time, the driver must drive essentially nonstop for 18 hours. The company ascertains over time that the accident rate for serious injury accidents for its drivers over all is three times higher on the faster deliveries compared to the accident rate with the slower more flexible deliveries. Discuss what ethical issues and legal risks the company faces from this two-tiered payment system.
Company A and Company B are unable to pay their obligations as they come due and will file bankruptcy cases. Company A files a bankruptcy case under Chapter 7 and Company B files a bankruptcy case under Chapter 11. Explain the basic differences between a Chapter 7 bankruptcy and a Chapter 11 bankruptcy, noting in particular (1) what the usual end result will be for Company A and Company B, and (2) what the basic differences are in how general unsecured creditors get treated in the respective bankruptcy cases.
