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ACCA Applied Skills · Corporate and Business Law (Global) · Obligations of the seller and buyer, and provisions common to both

Epsilon Ltd agreed to buy 1,000 units from Zeta Ltd at 50 per unit under a CISG contract. Zeta wrongly refuses to deliver. Epsilon avoids the contract and, in a reasonable substitute purchase made within a reasonable time, buys 1,000 units at 56 per unit. What damages can Epsilon claim for the price difference, ignoring other losses?

Epsilon can claim 6,000. After avoidance and a reasonable substitute purchase, the CISG allows recovery of the difference between contract price and replacement price, which is 6 per unit on 1,000 units. Avoiding the contract does not remove the right to damages.

  1. A6,000, being the difference between the contract price and the replacement priceCorrect
  2. B56,000, being the full replacement cost
  3. C50,000, being the original contract price
  4. DNo damages, because Epsilon avoided the contract

Explanation

If the buyer avoids and makes a reasonable cover purchase, it may recover the difference between the contract price and the substitute price: (56 - 50) x 1,000 = 6,000, plus any further damages. Avoidance does not remove the right to damages. Claiming 56,000 would ignore that Epsilon would have paid 50,000 anyway.

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