The Use of Contracts to Protect Property Rights

The Use of Contracts to Protect Property Rights

University of Phoenix, School of Business

Business Law



This is a compilation of questions answered based on the Wrench LLC v. Taco Bell Corporation case. I was tasked with addressing the questions provided and researching a full court opinion, using the summary in the textbook to aid my understanding of the legal issues presented. The compiled messages below are examples provided from the course textbook along with other outside sources.

Wrench LLC v. Taco Bell Corporation case: IMPLIED-IN-FACT CONTRACTS

Appellants Thomas Rinks and Joseph Shields are creators of the “Psycho Chihuahua” cartoon character which they promote, market, and license through their wholly-owned Michigan limited liability company, Wrench LLC. Fast forward, Pollak and Alfaro also expressed interest in the Psycho Chihuahua character, which they thought would appeal to Taco Bell’s core consumers, males aged eighteen to twenty-four. Alfaro began promoting the Psycho Chihuahua idea within Taco Bell which led to the Wrench LLC vs. Taco Bell Corporation case.

Based on my readings and research, this is a case of copyright infringement and infringement of implied-in-fact contracts. Wrench, LLC (Plaintiff) entered into discussions with Taco Bell Corp. (Defendant) over the possible use of Plaintiff’s “Psycho Chihuahua” cartoon character. When Defendant introduced advertisements using a Chihuahua, Plaintiff sued, claiming that Defendant had breached an implied-in-fact contract.

In this case, Taco Bell has replicated the Feisty Chihuahua which was the creative production of Wrench, such ideas are protected under the Copy right Act law. When a creative idea is formed, in many countries, the copyright becomes lawful. It prevents the unauthorized copying of a work of authorship including creativity and originality. Yes, such ideas are also protected under implied-in-fact contracts.

Implied-in-law vs. Implied-in-fact contract

An implied-in-fact contract is a contract in which agreement between the parties has been inferred from their course of action. The performance of the contract would depend upon the conduct of each of the parties. The most important purpose fulfilled by implied-in-fact contract is to prevent the defendants from using any unfair form of enrichment against the plaintiff. It is also to protect the plaintiff from being exposed to unfair detrimental effects. (Cheeseman, 2016) The Implied-in-fact contracts was at issue as an infringement case.

With an implied at-law contract, the law imposes a duty to perform a contract, and will enforce a contract even against a person’s will, where circumstances are such that without this remedy one party would be unfairly enriched by another party’s action. In this situation, one party is entitled to restitution for the services provided, even if there was never any intent by either party to enter into an agreement. This type of agreement is considered a quasi-contract. A quasi-contract is where the law imposes an obligation upon parties where in fact the parties did not intend to enter into a contract and made no promise to perform.


Both parties could have protected their rights under the copyright act. It prohibits the imitation of creative ideas of the copyright holder. The primary objective of copyright is to induce and reward authors, through the provision of property rights, to create new works and to make those works available to the public to enjoy. The theory is that by granting certain exclusive rights to creators that allow these creators to protect their creative works against theft, creators receive the benefit of economic rewards and the public receives the benefit of the creative works that might not otherwise be created or disseminated. On the other hand, a written licensing contract between both the parties could have used to avoid this issue.

A Properly Written Contract

A properly written contract could have been sent by the Taco bell corporation when they saw Wrench’s psycho Chihuahua at the licensing trade show and could have negotiated the payment, other conditions, and material used for this character before promoting Wrench’s idea as their corporate image. Wrench would have sent them the acceptance in writing or counter agreement with the copyright notice printed on the copy to negotiate with them. This action would have given an idea to Taco Bell that replica of their work is prohibited as per law.


Intellectual property owners have every right to prohibit others to use their creation and provide licensing to use their ideas. They can permit others to use their rights with the condition of making any type of compensation in return. In this case, they were presented with a product by Wrench LLC in good faith. Taco Bell took the Psycho Chihuahua idea and used it for themselves. I believe they actually thought they could get away with taking it because Wrench, LLC was a small corporation and Taco Bell was a million dollar corporation. The idea was presented to them and they hired an outside agency to develop the character. Taco Bell could have saved themselves that 42 million dollars if they just would have given Wrench something for the use of their intellectual property in the beginning.