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Yo-Ho-Ho and breach of contract involving rum

When consumers walk into a store or click around an online retailer, they do not generally give much thought to the number of steps involved in bringing them various products. For example, when an individual goes to a liquor store in search of a bottle of rum, he or she probably doesn't trace the steps that it took to bring it from sugarcane to shelf.

However, those of us in the business world are acutely aware of the steps involved in creating, producing and distributing any kind of product for the benefit of the masses. Unfortunately, every step in the business process comes with the potential for toxic business relationships, failure to deliver and other broken promises in the form of breach of contract claims.

One recent case involving Captain Morgan rum highlights the importance of fair dealing and delivery at every step of the manufacturing process. The case revolves around an alleged breach of contract and a dispute related to tax rebates.

The corporation Diageo produces Captain Morgan rum. A small Puerto Rican company is suing the North American corporation for breach of contract. Essentially, the company used to supply Diageo with components for its rum products, but then Diageo moved its production facilities and began using a new supplier.

At the heart of the dispute is an alleged promise made by Diageo to purchase an additional 900,000 or so gallons of rum from the company to offset its decision to move its production facilities. Diageo says that if it does purchase these gallons, it will use them to produce wares for its European market. This decision would have profoundly negative tax consequences for the small supplier.

When dealing with corporations large and small, it is vital that all contracts are crafted carefully and that all parties strictly adhere to the terms of those contracts. Failure to ensure a smooth and fair process can costs businesses everything they have.

Source: Virgin Island Daily News, "Puerto Rico rum supplier sues Diageo, claiming breach of contract," Oct. 5, 2012

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