CTW vetoed four of KT’s potential products; the upside down Ernie shirt, Big Bird and Elmo shirt, the Bert and Ernie shirt, and the Elmo smoking shirt. Of these four, KT claims that three were unreasonable and should be paid damages. I agree that one of the four incurred an unreasonable veto which entitles KT to damages, but CTW is not responsible for paying KT production and profit loss damages for using power, granted within an agreement of both parties. It is in CTW’s best interest to veto any article produced that would harm the existing image it currently holds being a children’s entertainment corporation.
The purpose of all corporations, to create a sustainable profit, is fulfilled by protecting its image. Considering the damages requested by KT, one has to consider the potential damage CTW would incur as a result of the release of KT’s product. While this discrepancy may seem simple, it is quite complicated. On one hand, KT wants damages for production and profit costs losses, but if the court grants these damages, companies will be less willing to enter into copyrighted contracts that would be efficient, but as a result of the ruling in this case yield a high risk for potential law suites.
Both KT and CTW have to be protected by the court within this trial for the represent two important aspects of American corporation attempting to increase profits by working together. CTW exercising its right to veto products proposed by KT was accurate in three of their four judgments, but KT’s right has to be protected concerning one of the vetos. KT is entitled to damages in the amount of $47,000. 00 for the unreasonable veto of the Big Bird and Elmo shirt. This amount has been rewarded for their development costs and lost profits.
The damages received by KT regarding the Big Bird and Elmo shirts are to discourage corporations for making unreasonable decisions simply because they have the power to do so. Whereas KT has been rewarded damages for an unreasonable veto, the other vetoes CTW made were reasonable and KT’s loss in profit will act as a sign to future investors regarding the power they knowingly give to another party and its ability to negatively harm them(KT). The definition of a partnership, as defined by Posner is (review what Posner says about partnerships).
It can be argued that CTW and KT, by signing this contract agreed to a temporary partnership and with this partnership, certain economic rules apply to future decisions made. With this in mind, KT’s decision to sell the Sesame Street jackets for $3 at their Happy Fun restaurant, and $12 at all other locations is a direct breach of the implied contact concerning their partnership with CTW. KT sold the Sesame jackets at their restaurant at a discounted price to attract customers to their store, neglecting to include CTW, their partner, in this increase in profits.
Had KT informed CTW that KT would sell the jackets at a discounted price at the restaurant, KT gaining additional profits and CTW not, CTW would have been able to realize that they would be gaining less profits due to the significant decrease in price. CTW and KT agreed that CTW would receive 25% of pre tax profit for the sale of the jackets instead of the $2 royalty compensation for the other goods sold. At the price of $3, CTW gains . 75; in contrast, at the normal price of $12, CTW gains $3 per jackets sold (25% of pre-tax profit). As seen, there is a $2.
25 loss is the selling of the discounted jacket, while KT balances this loss by attracting customers to their restaurant, CTW has no incentive to agree to this discount. Concerning the jacket discrepancy, I awarded CTW and additional $225,000. 00 as compensation for their losses incurred by the selling of discounted jackets in KT’s Happy Fun restaurant. While it is fair to consider that KT is entitled to the benefits of a brilliant marketing plane to attract customers to the restaurant, we must not forget the president that this case will have in the future.
As a court we want to encourage brilliant marketing ideas without harming the potential opportunities for corporations to trustfully work together to increase profits. If I allow KT to profit by taking advantage of a company who failed to realize how they could be cheated, more executive would waist time reviewing contracts instead of increasing societies benefit by improving their product. The parties entered into the contract with two very different ideas of selling the jackets.
CTW rightly assumed that the jackets would be sold at market price which yields the highest efficiency for both parties, but KT, without consulting CTW, sold the jackets at a lower than market price creating more consumer surplus than necessary. The final dispute concerns CTW’s ownership of KT. In the case is is clear that the parties agreed that CTW and KT accepting the contract would ward CTW 20% ownership in KT. The fact in question is weather KT had a right to sell CTW’s share of KT to a venture capitalist.
Holding shares in a company is essentially linked to the stock market and holding a percentage of the company as your own. CTW, taking a stake in KT has a right to 20% of the company, but the selling of parties shares is not an uncommon practice. Although KT sold CTW’s share, they(CTW) are entitled to 20% of the companies assets. KT had a right to sell CTW’s ownership, if and only if when the time came where CTW wanted to sell the stock, KT would be able to provide CTW with their rightful returns.
The lawyers defending CTW did not argue their side very well, they failed to reveal the importance of CTW holding KT’s stock and theirfore hurt their case. Acknowledgeing the fact that one party selling another parties stock is not always viewed as efficient, I look at the president set by this behavior. The purpose of any firm is to maximize profit. Parties buy stock for the sole reason of making a profit and projecting the success of a firm.