Question

Campus Bus Service entered into a contract with Smith Bus Company to purchase 10 buses. One week before Campus Bus was scheduled to receive the buses, a fire destroyed Smith's warehouse and the buses inside. As a result, Campus Bus had to purchase its buses at a slightly higher cost from another manufacturer. Campus Bus sues Smith Bus for damages for breach of contract under these circumstances. Assume Campus Bus did not bear the risk of loss of the goods under the contract. In this scenario, _____.

Answer 1

Options:

• Smith Bus should be excused from performance under the clause for the rights on improper delivery
• Smith Bus should not be excused from performance because it did not act in good faith
• Smith Bus should be excused from performance under the test of commercial impracticability
• Smith Bus can exercise its right of anticipatory repudiation

Answer:

Correct answer is Option c.

Smith Bus should be excused from performance under the test of commercial impracticability

Explanation:

In this case, Smith cannot fulfil the contract obligation due to an unforeseen event. Hence, Commercial impracticability shall apply.