Question

Saber Energy, Inc. (Saber), entered into a sales contract with Tri-State Petroleum Corporation (Tri-State). The contract called for Saber to sell Tri-State 110,000 barrels of gasoline per month for six months. Saber was to deliver the gasoline through the colonial pipeline in Pasadena, Texas. The first 110,000 barrels were delivered on time. On August 1, Saber was informed that Tri-State was canceling the contract. Saber sued Tri-State for breach of contract and sought to recover its lost profits as damages. Tri-State admitted its breach but claimed that lost profits is an inappropriate measure of damages.

Topic Questions:

1. 1. In Saber's lawsuit against Tri-State, who wins and why?
   2. How would a court interpret the contract if it simply required Tri-State to pay Saber $1 Billion as liquidated damages?
2. 1. What are the social and ethical issues involved with the subject matter of this assignment?

Answer 1

Note: the asnwer is based on the fact given in the question.

Going by the case fact it is the breach of contract and if the contract was written and executed by both the parties then both the parties are liable to execute the end of the contract. It is not mentioned in the case whether the contract terms were difficult to execute due to any terms and conditions already mentioned in the contract. Therefore, going by the case fact it the Saber who will win the lawsuit for the damage. Saber dependency was on the tristate for the supply of gasoline and any unplanned interruption of supply will lead to financial loss to the Saber.

There are two ways that court can adopt for estimation of the liquidated damage.

a. loss can be determined if the clause for losses is mentioned in the contract itself if the supplies are not made in any particular month and the same proportion can be used to determine the loss of 5 months of non-supply and related consequences.

b. The other option court can take is to determine the profit earned by Saber by obtaining the first month of supply of gasoline, based on the profit earned in the first month the losses for the next 5 months along with other consequential damage can be determined.

The other cost which Saber saved due to the breach of contract should also be taken out from the compensation amount.

The social and ethical issue involved in this case is that we are not aware of the situation why the supply was denied, we must understand the reason due to which the contract was not being executed by tri-state and tri-state should be given the opportunity to explain their position. The availability of the product also need to be examined as to whether it was a deliberate attempt or the reason is some external factors beyond the control of tristate.