An Appliance Manufacturer Contracts to Purchase a Quantity of Steel

question 43

Essay

An appliance manufacturer contracts to purchase a quantity of steel from Megasteel Corporation to be delivered to the appliance manufacturer on June 1,2002.On April 1,2002,there is a massive explosion at Megasteel's only steel mill that destroys the mill.According to newspaper reports,the mill will take at least one year to be rebuilt and put back into operation.The appliance company purchasing manager makes a frantic phone call to Megasteel asking,"Is it true you won't be making any more steel for at least a year?" The Megasteel representative says that it is true it will not be able to make any steel for at least a year.The appliance manufacturer immediately contracts with another steel company to deliver similar steel on June 1.A shipment of steel is received from each company on June 1.Has the appliance manufacturer breached its contract with Megasteel if it refuses to accept and pay for the Megasteel steel?

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Definitions:

Interest Rate

The percentage of a loan that is applied as interest for the borrower, usually shown as a yearly rate.

Import Quotas

Restrictions set by a government on the quantity of a specific good that can be imported into a country.

Net Exports

The value of a country's total exports minus the value of its total imports, which is a component of a country's GDP.

Import Restrictions

Measures imposed by a government to control the quantity of goods coming into a country, often to protect domestic industries.