Spotlight on Taco Bell – Implied Contract
Do these facts satisfy the requirements for an implied contract? Why or why not?
Business Scenarios and Case Problems 11-3 (page 229): Spotlight on Taco Bell – Implied Contract.
11–3. Spotlight on Taco Bell—Implied Contract. Thomas Rinks and Joseph Shields developed Psycho Chihua-hua, a caricature of a Chihuahua dog with a “do-not-back-down” attitude. They promoted and marketed the character through their company, Wrench, L.L.C. Ed Alfaro and Rudy Pollak, representatives of Taco Bell Corp., learned of Psycho Chihuahua and met with Rinks and Shields to talk about using the character as a Taco Bell “icon.” Wrench sent artwork, mer-chandise, and marketing ideas to Alfaro, who promoted the character within Taco Bell. Alfaro asked Wrench to propose terms for Taco Bell’s use of Psycho Chihuahua. Taco Bell did not accept Wrench’s terms, but Alfaro continued to promote the character within the company. Meanwhile, Taco Bell hired a new advertising agency, which proposed an advertising campaign involving a Chi-huahua. When Alfaro learned of this proposal, he sent the Psycho Chihuahua materials to the agency. Taco Bell made a Chihuahua the focus of its marketing but paid nothing to Wrench. Wrench filed a suit against Taco Bell in a federal court claiming that it had an implied contract with Taco Bell and that Taco Bell breached that contract. Do these facts sat-isfy the requirements for an implied contract? Why or why not? [Wrench, L.L.C. v. Taco Bell Corp., 256 F.3d 446 (6th Cir. 2001), cert. denied, 534 U.S. 1114, 122 S.Ct. 921, 151 L.Ed.2d 805 (2002)] (See Types ofContracts.)
Sample Solution
The facts stated in the scenario do not satisfy the requirements for an implied contract between Taco Bell and Wrench, L.L.C. An implied contract is one that has not been explicitly stated but is instead inferred from a course of conduct between two parties (Scarne, 2019). In this case there was communication between Alfaro and Shields about the possibility of using Psycho Chihuahua as an icon for Taco Bell, however no formal agreement or promise was made to pay for its use. Additionally it appears that all promotional materials were sent from Wrench to Taco Bell with no payment in exchange meaning that any obligations on either side had yet to be established (Wrench,LLC v. Taco Bell Corp., 2001).
To form an implied contract there must be evidence demonstrating both parties intended to enter into a legally binding agreement such as proof of consideration or performance on either side (Scarne, 2019). Here this was not present since Wrench voluntary provided their artwork without any expectation of compensation while Taco Bell never accepted nor rejected their proposed terms which means they could at any time have decided not to proceed with using Psycho Chihuahua at all(Wrench LLC v.TacoBellCorp.,2001) .Therefore, while there may have been talks surrounding potential future collaborations these are insufficient in forming a mutually agreed upon arrangement.
In conclusion then, although conversation occurred regarding Psycho Chihuahua’s use within advertising campaigns it does not appear sufficient enough create enforceable agreements according current legal standards meaning that any claims brought forth through implication are unlikely succeed court given available information .
