Cengage Advantage Books: Business Law 13th Edition by Roger LeRoy Miller

Exercise 5

Implied Conditions Heublein, Inc., makes wines and distilled spirits. Tarrant Distributors, Inc., agreed to distribute Heublein brands. When problems arose, the parties entered mediation. Under a settlement agreement, Heublein agreed to pay Tarrant the amount of its "net loss" as determined by Coopers Lybrand, an accounting firm, according to a specified formula. The parties agreed that Coopers Lybrand's calculation would be "final and binding." Heublein disagreed with Coopers Lybrand's calculation, however, and refused to pay. The parties asked a court to rule on the dispute. Heublein argued that the settlement agreement included an implied condition precedent that Coopers Lybrand would correctly apply the specified formula before Heublein would be obligated to pay. Tarrant pointed to the clause stating that the calculation would be "final and binding." With whom will the court agree, and why?