Az Ltd operates a shipbuilding business which specialises in constructing and modifying ships to order. In 2011, Az Ltd entered into an agreement with Bob to completely rebuild a ship to Bob’s specification for a total contract price of £7 million.
However after completion, Bob informed Az Ltd that, due to the downturn in the world economy, he no longer needed the ship. Az Ltd had already expended £5 million on altering the ship, and immediately started an action against Bob for breach of contract.
However, in the week before the case was to be decided in the court, Az Ltd sold the ship for the same amount of money that they would have received from Bob.
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Mock question
Task
What level of damage can alex co claim?
7 million
0 million
2 million
5 million
Sir the answer is 0 million
Explanation is that since alex ,by selling the machinery to new client, got the same amount as the contract price i.e. 7 million
But my doubt is even if alex had got less money,for eg 6 million, from new client, how he could have succeded in claiming the damage of 1 million as the downturn in economy was an impediment that cannot be under control nor it can be reasonably expected
Kindly explain and show me the correct path
3y ago#2First question ... "Who the f*ck is Alex?" to quote a well known variation of an equally well known song!
Next, a downturn in the economy is a risk that a buyer has to take into account when entering into a contract.
It surely isn't the fault of AZ Ltd that there has been a downturn. AZ Ltd gave a price and were rather hoping that they hadn't under-priced their quotation. They were lucky.
On the other hand, there's Bob :-(
But AZ Ltd were very lucky that they found a second buyer for $7 million. If they had only been able to sell for $6 million, then poor old Bob would have to pay the missing $1 million and get nothing in return.
OK?
So sir
Downtturn in economy is impediment beyond control
But it must be reasonably expected to be taken into account
3y ago#4Well, it looks to me that AZ Ltd DID take a downturn into account, but Bob didn't. Why should AZ Ltd be penalised because of Bob's lack of foresight?
OK?
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