Case study:

ACE Construction Inc. is a company primarily engaged in the business of supplying heavy equipment used in construction. As part of the company's economic plan to expand business, ACE became interested in the rock crushing industry.

ACE had become aware that International Metals Company Ltd. ("IMCO") required a contractor to crush, weight, and stockpile approximately 250 000 tones of ore. As ACE believed this was an excellent opportunity to venture into the rock crushing business, it decided to tender on the IMCO contract.

In order to tender on the contract, ACE set out to purchase the necessary equipment to crush the material. ACE was contacted by a represented of Rock Busters Ltd., a company which sold such equipment. After visiting the IMCO site and determining the nature of the material to be crushed, the representative discussed the IMCO contract with ACE. After performing a number of calculations, the representative determined and guaranteed that the equipment Rock Busters would provide would be capable of crushing the material at a rate of 175 tonnes per hour. On the basis of this guarantee, Rock Busters and ACE entered into a contract. Rock Busters agreed that if ACE were successful in its tender to IMCO, Rock Busters would provide the equipment for a price of $400 000. The contract also contained a provision limiting Rock Busters's total liability to $500 000 for any loss, damage, or injury resulting from Rock Busters's performance of its services under the contract.

Based on the information provided by the representative, ACE prepared and submitted its tender to IMCO. IMCO accepted the tender and entered into a contract with ACE to crush the material.

The rock crushing equipment was set up at the IMCO site by employees of Rock Busters and crushing operations commenced. However, from the beginning, there was trouble with the operation. One of the components of the crusher, called the cone crusher, consistently became plugged by the accumulation of material. Each time the cone crusher became plugged, the operation would have to be shut down and the blockage cleared manually. In some cases, such blockages caused damage to the equipment. Rock Busters made several unsuccessful attempts to correct the defect by making modifications at the site and at its factory. The crushing equipment was never able to crush more than 30 tonnes of material per hour.

In order to meet its obligations under the IMCO contract, ACE hired another supplier to correct the defects in the Rock Busters equipment. For an additional $500 000 the supplier replaced the cone crusher with one manufactured by another company. The modified equipment was able to crush the material at the rate of 180 tonnes per hour. The total amount which had been paid by ACE to Rock Busters was $350 000.

Explain and discuss what claim ACE can make against Rock Busters in the circumstances. Would ACE be successful in its claim? Why? In answering, please includeasummaryofthedevelopmentofrelevantcaseprecedences. Inparticular, point out how the law changed because of these relevant case precedents. Identify the legal principles on which the precedent decisions were based and apply the appropriate legal principle to the facts.