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MEMORANDUM

UNIVERSITY OF PHOENIX

DATE:  April 28, 2015

TO:               Lisa Johnson

FROM: Sean Lovejoy

RE:         Snack Company Says It Lost $20 Million After Starbucks Allegedly Broke Contract By Susanna Kim via Good Morning America

ARTICLE SYNOPSIS

Starbuck allegedly breached a contract signed by them and Mellace Family Brands. Starbuck complained about their product and so Mellace Family Brand is suing because they believe the bad product is due to a gas leak at Starbucks itself. The suit is said to pay out 20 million dollars if they win. The initial contact signed was for Mellace Family Brand to provide product for Starbucks, but the original amount was not stated in the article.

LEGAL ISSUE

A breach of contract is one legal issue, Starbucks allegedly breached the contract signed by both parties to include the purchase of product. Starbucks did not want the product after complaints of the product not being good. Mellace Family brand is saying that Starbucks is breaching the original contract based on there being nothing wrong with the product and instead the product defectiveness was due to a gas leak at Starbucks.

MANAGERIAL PERSPECTIVE

The legal issues effect business because Mellace Family Brand is not receiving payment for their product and are not selling any product to Starbucks at this time. Starbucks is a large company and a bad reputation from them could put a business under and out of business. To sum up that means a large cash flow will be effected due to this legal issue. The problem could have easily been avoided if both parties investigated the problem and then fixed the issues and moved on from it. If the product was indeed not what Starbucks was looking for then they could have found this out before ordering the product which would have also help in avoiding this problem. Another way this could have been avoided is if Starbucks handle things internally with Mellace Family Brand about their product to determine why the product was not up to standards. Together they could corrected the problem without involving lawyers and the courts and no breech of contract would he occurred on either side.

The most likely outcome of this problem is that Starbucks will have to pay the amount Mellace Family Brand is suing for. If they find out that the product indeed was defective by no fault of Starbucks and therefor they did not breech the contract then Mellace Family Brand will be out a customer and will not get paid. This will most likely end in Mellace Family Brand having issues getting any more customers in the future which could result in the business closing down all together.

References:

http://abcnews.go.com/Business/calif-snack-company-sues-starbucks-claiming-broken-contract/story?id=17209438