Cengage Advantage Books: Business Law 9th Edition by Arnold Goldman ,William Sigismond

Exercise 13

This case arises over a memorandum of understanding (MOU) between Fluorogas, a company that manufactures fluorine generators, and Fluorine on Call (FOC), owned by the Siegele brothers who sought to enter the fluorine generator market. FOC entered into a memorandum of understanding signed by both parties. (Generally, a memorandum of understanding is an agreement to agree and could lead to a contract). The MOU granted FOC the exclusive worldwide right to manufacture and supply fluorine generators. In return, FOC agreed to pay royalties. After the parties signed the MOU, FOC purchased a Fluorogas test generator to sell to another company so that this other company could decide whether or not to invest in Fluorogas. FOC claimed that this investment was in violation of the MOU. Fluorogas then notified FOC that it was terminating its relationship with them, stating that they were not bound by the MOU. It was not a binding contract but simply an agreement to agree. The question becomes: Could an MOU under certain circumstances constitute a contract? (Fluorine on Call Ltd. v. Fluorogas Limited et al., 380 F. 3d. 849)