Legal Advice for Hearty Foods: Contract Termination and Liquidation

QUESTION

Hearty Foods is a small organic vegetable producer that has been supplying organic vegetables to Winter Warmers Soup Company for several years. Last week Jill, the CEO of Winter Warmers, asked Hearty Foods to enter into a similar contract with Winter Warmer’s new subsidiary company called Summer Smoothies. However, Jill says, the prices paid under the contract with Summer Smoothies must be reduced by 40% from the usual price charged by Hearty Foods, because Summer Smoothies is a start-up.  Jill also tells Hearty Foods that unless they agree to the contract with Summer Smoothies, Winter Warmers will terminate its own contract with Hearty Foods.

Despite the fact that the price paid by Summer Smoothies will mean that Hearty Foods will make a loss on the deal, Hearty Foods agrees to the terms.

Two years later Winter Warmers goes into liquidation.  Hearty Foods now wants to pull out of the contract with Summer Smoothies.

REQUIRED

Explain the relevant law to Hearty Foods and advise them of their legal situation.