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Axel co, a German company operates a business making specialist machinery for the international car manufacturing industry.In 2011,Axel co entered into an agreement with
Bold co a Danish manufacturer to build a specific piece of machinery to bold co specifications. The total contract price was 7 million. However just before the completion of the machinery, Bold co informed axel co that due to the downturn in the world economy it no longer needed the machinery.Axel co which had already expended 5 million in producing the machinery, immediately started an action against bold co for breach of contract.
However in the week before the case was to be decided, axel sold the machinery to a new client for exactly the same amount of money that they would have received from bold co
Task
What level of damage can Axel co claim for breach of contract?
A 7million
B 0 million
C 2 million
D 5 million
Sir i got that the answer here will be 0 million.
Explanation given is that since axel was able to sell to new client for exactly the same amount i.e. 7 million there is not loss.
I got this sir but my doubt is:
If for example alex co sold the machinery to the new client for 6 million….
Still he won’t be able to succeed in claiming damage of 1 million from bold co since the failure to fulfill the obligation was by economic downturn which is an impediment that cannot be controlled or reasonably be expcted to taken into account
If i am wrong kindly enlighten me clearlyWhat are your grounds for claiming that an uncontrollable economic downturn would be a justifiable ground for breaching a contract?
What are your grounds for claiming that an uncontrollable economic downturn would be a justifiable ground for breaching a contract?
As they are beyond the control
Cannot reasonable to expect to take into account
And consequences cannot be avoided
So they are part of general provision of exemption from damages????I cannot agree with the second ground – why could it not reasonably be anticipated? Surely this is part of risk management.
If Putin’s invasion of Ukraine had been involved, then, ok, I could see that that would not likely have been anticipated.
But economies around the World are subject to upturns and downturns.
Something that is beyond control, cannot reasonably be taken into account and has unavoidable consequences might be, for example, a tsunami caused by an underwater volcanic eruption,
I doubt that even the devastating earthquakes in Turkey / Syria would qualify on the grounds that a known earth fault line is located there. In addition, in order to ameliorate the consequences, there could have been / should have been stricter enforcement of much stronger building regulations.
But downturns in economies? No – that should have been taken into account (and it looks like it WAS taken into account by AZ Ltd)
OK?
I can go with that – that’s what the concept of risk-management is about. Companies (certainly in the UK) are required to show in their annual financial statements the risks that the company faces and which the board has identified. And then identify the steps that management has taken to manage those risks.
OK?
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