Open Terms
Subject:ManagementPrice: Bought3
Open Terms. In 1988, International Business Machines Corp. (IBM) and American Shizuki Corp. (ASC) signed an agreement for “future purchase by IBM” of plastic film capacitors made by ASC to be used in IBM computers. The agreement stated that IBM was not obligated to buy from ASC and that future purchase orders “shall be [ASC]’s only authorization to manufacture Items.” In February 1989, IBM wrote to ASC about “the possibility of IBM purchasing 15,000,000 Plastic Capacitors per two consecutive twelve (12) month periods. . . . This quantity is a forecast only, and represents no commitment by IBM to purchase these quantities during or after this time period.” ASC said that it wanted greater assurances. In a second letter, IBM re-expressed its “intent to order” from ASC 30 million capacitors over a minimum period of two years, contingent on the condition “[t]hat IBM’s requirements for these capacitors continue.” ASC spent about $2.6 million on equipment to make the capacitors. By 1997, the need for plastic capacitors had dissipated with the advent of new technology, and IBM told ASC that it would no longer buy them. ASC filed a suit in a federal district court against IBM, seeking $8.5 million in damages. On what basis might the court rule in favor of IBM? Explain fully. [American Shizuki Corp. v. International Business Machines Corp., 251 F.3d 1206 (8th Cir. 2001)]
