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Breach Of Contract By Hospital On Surgical Company

Question

Washington Hospital enters into an agreement with Acme Surgical Instruments to purchase surgical instruments from Acme for a two-year period. The contract sets forth quality standards that require at least 95% of the surgical instruments to be suitable for Washington Hospital’s purposes. From the first month of the arrangement, only 90% of the surgical instruments met the quality standards. At first, Washington Hospital does not advise Acme of the problem because Washington Hospital needs to keep its operating rooms performing and it hopes that Acme will improve its performance. However, after six months, Washington Hospital wants to terminate the contract.

1.    What contract clause or clauses should Washington Hospital review before terminating the agreement? Please explain your answer.
2.    Assume the same facts except Washington Hospital’s Hospital Administrator orally tells Acme that it can live with the 90% quality level but Acme needs to improve its performance. Does this modify the contract? What contract clause or clauses would you review to determine your answer to this question and why? Would your answer be different if the Hospital Administrator sent a letter? Why or why not?
3.    What defenses could Acme assert against Washington Hospital?
4.    Assume that Acme sues Washington Hospital. Since Acme is a small company with few resources, Acme wants to recover its attorneys’ fees. Is this possible? What contract clauses should be reviewed and why?

Summary

The question belongs to Law and it discusses about a scenario where a hospital contracts a surgical company for supplying equipment and sets a quality standard of 95%. But the surgical company does not confirm to the quality standards. The hospital wants to terminate the contract. This has been discussed in the solution.

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