Answer to Scenario 2

Scenario 2

The manager of Company A, a printing company, ordered a new colour printing machine from Company B to be delivered on 1 November. The machine was not delivered on time, but because there is a low demand for printing services between November and February, the manager of Company A did not contact Company B about the matter until 20 February of the next year, when he sent a fax to Company B enquiring about delivery of the machine. He was told by return fax that the machine would be delivered the following week. However, the machine was not delivered for another three months. Since the time when the manager of Company A enquired about the delivery of the machine, Company A has only been able to fulfil 50% of the printing jobs that it could have handled had they had the machine.

Can Company A purchase the printing machine from another manufacturer and sue Company B for damages (compensation)? Would the basis for the calculation of the damages be different if Company A had also lost a profitable printing order because they were not able to meet the deadline for delivering the work without the new machine?

Answer

Time of delivery is vital to the performance of a sale of goods contract. Company A is entitled to damages if it can show that the late delivery caused actual business loss. If Company A has to pay a higher price for a new printing machine from another manufacturer to meet its printing deadlines, then it can also claim for the additional purchase price (provided that Company A has exercised reasonable effort to obtain the best offer in the market).

However, Company A may not be entitled to claim for the loss of profits from the profitable order, as the order had not been converted into a formal contract and it is difficult for Company A to justify the loss.