Case 7-1: Case Study Paper
Great Western Bank
I. PROBLEM STATEMENT:
The Great Western Bank of San Diego placed an order of 12 special purpose accounting machines with the Data Max Corporation of Cincinnati, OH. Great Western Bank and Data Max, both agreed to a firm-fixed price of $9,500 per unit and FOB the shipping point. The purchasing manager of the bank designated a particular carrier (yellow freight) and Data Max returned the signed acknowledgement without making any changes to the terms and conditions.
Great Western Bank paid the invoice in full on the order completion to avail 2% discount. The Bank did check the invoice but did not pay attention on the shipping details since they assumed that Data Max will ship machines through Yellow Freight. The order was shipped by a different shipping company than what Data Max designated.
The truck gets involved in an accident when it was passing through Illinois and all the machines were a total loss. Data Max told the bank that title was passed to the bank when the goods were loaded in the truck and the machines were sold to you F.O.B. Cincinnati. So, it is not Data Max’s responsibility to refund the money. Great Western Bank made a point that they designated a particular carrier, but the goods were shipped via a different carrier. Data Max replied by saying that, still the Bank paid the invoice to get discount.
Data Max advised the bank to contact the truck line and file a claim with them.
II. SUMMARY OF THE FACTS:
It is true to say that Data Max took a wrong step by not shipping through the designated carrier (Yellow Freight). Without asking Great Western Bank, Data Max shipped the machines by a different carrier which was cheaper. Great Western Bank never mentioned to Data Max to give them a discount, but still Data Max offered them 2% discount by shipping through a different carrier. Great Western Bank was also at fault because it did not check the invoice properly and it seems that they ignored the shipping details stated on the invoice. They went ahead and paid the invoice before receiving the machines to get 2% discount. Another fact related to this case is that the goods were sold to Great Western Bank F.O.B. Cincinnati. This means that the title transfers to the buyer when the goods are loaded on the truck and the buyer pays for the shipping too. So, if the goods are lost or damaged in transit then it is not Data Max’s responsibility. Since, the title was passed on to Great Western Bank; Data Max suggested the bank to deal with the carrier and to file a claim with the carrier for the damaged machines. Another fact which cannot be ignored is that Data Max shipped the machines through a different carrier than what was designated by the bank.
III. ANALYSIS OF THE FACTS:
Data Max was a fault for not shipping the accounting machines through the designated carrier (Yellow Freight). It was made clear by the Great Western Bank purchasing agent that they want Yellow Freight as the carrier. Data Max also acknowledged the terms and conditions and returned the signed copy without making any change in the terms, that they could change the carrier or any other condition. It was decided in the purchase order that it will be F.O.B. Cincinnati, so the title passed on to the bank when the goods were loaded in the truck. Once the machines where loaded in the truck, the title passed to them and they will own the machines. So, when the truck gets involved in an accident, and all the machines are damaged, the loss needs to be borne by the bank, since they owned the machines. Another mistake which was made by the Great Western Bank was that they paid the invoice before the goods were received. Just to save some money by getting 2% discount for paying early, they took a big risk. They did not even read the invoice carefully because it said the shipping details, which were the changed shipping details. But since they assumed that Data Max...
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