Harrow Ltd contracts to buy 500 units from a supplier at £40 each. The supplier fails to deliver. On the delivery date the same units are freely available in the market at £46 each. Harrow waits a week and then buys replacements at £49 each, although nothing stopped it buying earlier. Applying the market price rule, how much can Harrow recover as damages for non-delivery?

Correct answer: C) £3,000

Explanation

Where there is an available market, damages for non-delivery are normally the difference between the contract price and the market price at the date when delivery should have been made. Here that is (£46 − £40) × 500 = £6 × 500 = £3,000. The extra £3 per unit from waiting a week was avoidable and is not recoverable. £4,500 uses the later £49 price, and £20,000 and £23,000 wrongly use the whole contract price or the whole market price.