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[B] Witham tendered successfully for the supply of coal to the Great Northern over a period on one year. In his tender, Witham undertook to supply such quantities as Great Northern may order from time to time. Assume that the tender was on Feb 15, the winner was announced onMarch 15 and the obligations pursuant to the tender began on April 1. Suppose that on June 15, Witham informed Great Northern of intent to opt out and 8 days later Great Northern received the registered letter to that effect.. Suppose that Great Northern placed the following orders on Witham on the following dates:

Date of Order Coal (tons)

April 12 25,000

May 3 75,000

June 18 45,000

June 30 100,000

July 15 85,000

August 12 65,000

Sept 5 85,000

Sept 15 35,000

Oct 8 110,000

If in the tender the opt out notice period is stipulated as two weeks from date of the receipt by the tender awarder as evidenced by return receipt:

q1 On what date will obligations of the tender awardee cease pursuant to the opt out? ___________ (date) [ILO A1] (1 ½ marks)

q2 How many tons will the tender awardee be obligated to supply the tender awarder? ____________ (number) [ILO B2] (1 ½ marks)

q3 Assume that the tender awarder supplied no coal to the tender awardee and plans to sue the tender awarder. How much ordinary damages is the tender awarder likely to be awarded if, in 1873, the price of anthracite coal in the market (PM) was $4.27 but in the tender the price was stipulated contract price (PK) of $3.77 for that year.

Answer :

q1. Obligations of the tender awardee cease pursuant to the opt-out notice date: The opt-out notice period in the tender is two weeks from the date of receipt of the registered letter. The date of receipt of the registered letter is June 23, 1873, which means two weeks from that date will be July 7, 1873.

q2. The tender awardee will be obligated to supply the tender awarder with 560,000 tons of coal. The tender awardee undertook to supply as much coal as Great Northern may order from time to time, according to the tender. As per the orders placed by Great Northern, the quantity of coal required is as follows: April 12: 25,000 tons May 3: 75,000 tons June 18: 45,000 tons June 30: 100,000 tons July 15: 85,000 tons August 12: 65,000 tons Sept 5: 85,000 tons Sept 15: 35,000 tons Oct 8: 110,000 tons Total tons of coal: 560,000 tons

q3. The tender awarder will likely be awarded $672,200 as ordinary damages if they sue the tender awardee. As per the tender, the contract price was stipulated as $3.77 for that year. In 1873, the market price of anthracite coal was $4.27. Therefore, the difference between the contract price and market price is $0.50 per ton of coal. The total quantity of coal required by Great Northern is 560,000 tons.

Thus, the ordinary damages that the tender awarder is likely to be awarded if they sue the tender awardee can be calculated as follows: Difference between the contract price and market price per ton of coal: $4.27 - $3.77 = $0.50Total quantity of coal required: 560,000 tons

Therefore, the total damages can be calculated as: Total damages = difference in price per ton x total quantity of coal required = $0.50 x 560,000 = $280,000

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