Clark Oil agreed to sell Amerada Hess several hundred thousand

Clark Oil agreed to sell Amerada Hess several hundred thousand barrels of oil at $24 each by January 31, with the sulfur content not to exceed 1 percent. On January 26, Clark tendered oil from various ships. Most of the oil met specifications, but a small amount contained excess sulfur. Hess rejected all of the oil. Clark recirculated the oil, meaning that it blended the high-sulfur oil with the rest, and it notified Amerada that it could deliver 100 percent of the oil, as specified, by January 31. Hess did not respond. On January 30, Clark offered to replace the oil with an entirely new shipment, due to arrive February 1. Hess rejected the offer. On February 6, Clark retendered the original oil, all of which met contract terms, and Hess rejected it. Clark sold the oil elsewhere for $17.75 per barrel and filed suit. Is Clark entitled to damages? Argument for Clark: A seller is entitled to cure any defects. Clark did so in good faith and offered all of the oil by the contract deadline. Clark went even further, offering an entirely new shipment of oil. Hess acted in bad faith, seeking to obtain cheaper oil. Clark is entitled to the difference between the contract price and its resale price. Argument for Hess: Hess was entitled to conforming goods, and Clark failed to deliver. Under the perfect tender rule, that is the end of the discussion. Hess had the right to reject non-conforming goods, and it promptly did so. Hess chose not to deal further with Clark because it had lost confidence in Clark’s ability to perform.


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