Question

On March 1, Shoshanah agreed to manufacture and sell a widget to Marshall for a total price of $50 000. He paid $20 000 immediately and promised to pay the remainder on June 15. The contract required Shoshanah to deliver the widget to Marshall on June 1. On April 15, Marshall spent $10 000 altering his production plant in a way that would accommodate the widget that he expected to receive from Shoshanah. On May 20, Shoshanah informed Marshall that she would not be able to deliver as promised. On June 1, the market value of a widget was $65 000. Marshall can acquire a similar widget for that amount, but he will have to once again spend $10 000 in renovations to his production plant to accommodate that substitute. (No two widgets are exactly alike and each one has unique requirements.) Is Marshall entitled to receive damages? If so, on what basis and in what amount? Which one should he choose?

Answer 1

Solution

Marshall can look to have expectation damage as per cause of action for contract breach

Contract's Initial Value - $50000

Paid to Shoshanah - $20000

Amount left - $30000

When Shoshanah pays $35000 to him then only the contactual obligation can be met

Otherwise, Marshall can ask for reliance damage as per cause of action in the contract breach

In reliance on contract, $20000 was paid to Shoshanah and $10000 was recived by third party for renovation

All these expenses are useless, as Shoshanah was not able to deliver the widget

Marshall can claim $30,000 on basis of Reliance damage

In both the cases, sum to be recovered by Marshall is $30000, He can chose any one of them

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