Brief Analysis
Business relationships between companies are based on an honest partnership and perceived fairness on both sides; otherwise, there is a conflict between the principals. A similar situation characterized the agreement between Red-Holdings and Bluelands, who agreed (option) in writing to retain the commercial offer and price of $150 million for the sale of the Miami Beach site. With the exception of drinking wine while making strategic business decisions, the negotiations so far have been successful as the interests of both parties have been considered. Although Red-Holdings initially offered a 66 percent lower price, it was in the Bluelands’ power and responsibility to set their price. Twenty days after the agreement, however, the option, valid for at least another ten days, is unilaterally terminated by Bluelands and the commercial offer is no longer valid.
Legal Issues
A close reading of this case reveals several described legal nuances that ultimately caused the business conflict. First, Red-Holdings is structured as a publicly-traded company, which means that critical decisions are made by the board of directors (Kenton, 2021). The CEO in this system is a nominal figure who cannot make such grandiose purchases on his own without the consent of all shareholders (De Smet et al., 2021). In fact, when the head of Red-Holdings handed a $10,000 check to a Bluelands director, it was an act based on a business trust. The Red-Holdings CEO attempted to book the purchase opportunity and hoped for Bluelands’ honesty, but there was little validity to such an agreement. This also applies to the second side: the head of Bluelands did not have the right to decide on his own to freeze the price for a period of one month.
Second, the fact that the head of Bluelands quickly cashed the check confirms fraudulent intent on his part. Realizing that he had defrauded the general manager of the partner company, Bluelands tried to get the money in cash as soon as possible so that no further movement would be recorded. Thus, raising the price for the site from $150 million to $200 million is not legally improper because the original written agreement on paper between the two drinking directors had no official meaning. This may have been unfair and unpleasant to the director of Red-Holdings, whose trust was undermined, but strictly speaking, there was no violation of law in such a “breach” of a written agreement. The main problem, therefore, was the substitution of notions in the signing of the agreement between the directors, although they did not have the exclusive right to decide the commercial destiny of the company.
Outcomes
The current situation has several options for its development, which depend entirely on the intentions of the parties involved. The intervention of the billionaire Tom Richboy has created pressure because it has accelerated deadlines, the need to make decisions faster, and in either case, to disappoint one of the parties. For example, if Bluelands management decided by a majority shareholder vote to retain its business relationship with Red-Holdings and return the $150 million value, it would cause problems with Tom Richboy. Likewise, the opposite is true: selling the site for $200 million would set a precedent for conflict with Red-Holdings, who already feel cheated.
From this perspective, the outcome of this scenario depends on the Bluelands’ intentions: either to preserve Red-Holdings’ business credibility or to enrich themselves with Tom Richboy’s help. In addition, the CEO of Red-Holdings may try to sue the CEO of Bluelands because their personal agreements, backed by a monetary alliance, have been violated. These are the terms of an interpersonal business conflict in which the Bluelands CEO stole money from Red-Holdings by failing to fulfill his part of the written agreement (Pantekoek, 2020). However, the judicial resolution of this conflict is not expected to lie between Red-Holdings and Bluelands.
References
De Smet, A., Lund, F., Weiss, L., and Nimocks, S. (2021). Boards and decision-making. McKinsey. Web.
Kenton, W. (2020). Joint-stock company. Investopedia. Web.
Pantekoek, K. (2020). Breach of contract and lawsuits. FindLaw. Web.