Free Order - District Court of Federal Claims - federal


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Case 1:98-cv-00720-GWM

Document 416

Filed 02/16/2006

Page 1 of 2

In the United States Court of Federal Claims
____________________________________ ) ) ) ) Plaintiff, ) v. ) ) THE UNITED STATES, ) ) Defendant. ) ____________________________________) PRECISION PINE & TIMBER, INC., ORDER The Court ORDERS that the parties shall both be prepared to address the following hypothetical situations at the closing argument scheduled for February 17, 2006: Hypothetical 1: Assume that on February 17, 2006, defendant enters into a contract with plaintiff to supply plaintiff with ten pounds of coal at a price of $50 per pound, to be delivered on March 1, 2006. Plaintiff is in the business of manufacturing diamonds from coal by means of a special machine that applies extreme pressure to the coal. Ten pounds of coal can produce ten carats of diamonds. The process of turning the coal into diamonds takes one day to complete. On February 18, 2006, due to an energy crisis, the United States government passes a law forbidding any sales of coal between private parties from that date forward. Coal sales may only be made to the Government, which will ration it out at a fixed price as it deems appropriate. The law does not affect the validity of any contracts for coal entered into before the law was enacted. On February 28, 2006, defendant informs plaintiff that he is having trouble mining the ten pounds of coal and will not be able to provide the coal on March 1, 2006 as promised. Plaintiff cannot purchase substitute coal in the market because of the February 18, 2006 law. On March 1, 2006, the market price of diamonds (both artificial and naturally occurring) is $2,000 per carat. The price remains at $2,000 per carat until April 1, 2006, when due to the discovery of an enormous number of natural diamonds in South Africa, the market is flooded diamonds to the point that supply exceeds demand. The price of diamonds plummets to $700 per carat. On April 1, 2006, defendant delivers ten pounds of coal to plaintiff. Plaintiff accepts the delivery, manufactures the ten pounds of coal into ten carats of diamonds using the special machine, and sells all of the diamonds in the market on April 3, 2006. On April 3, 2006, the market price for diamonds was still $700 per carat. How should plaintiff's damages be calculated?

No. 98-720 C

Filed February 16, 2006

Case 1:98-cv-00720-GWM

Document 416

Filed 02/16/2006

Page 2 of 2

Hypothetical 2: Assume that on February 17, 2006, defendant enters into a contract with plaintiff to supply plaintiff with ten pounds of coal at a price of $50 per pound, to be delivered on March 1, 2006. Plaintiff is in the business of manufacturing diamonds from coal by means of a special machine that plaintiff rents from Miller's machines which applies extreme pressure to the coal. Ten pounds of coal can produce ten carats of diamonds. The process of turning the coal into diamonds takes one day to complete. On February 18, 2006, due to an energy crisis, the United States government passes a law forbidding any sales of coal between private parties from that date forward. Coal sales may only be made to the Government, which will ration it out at fixed prices as it deems appropriate. The law does not affect the validity of any contracts for coal entered into before the law was enacted. On February 28, 2006, defendant informs plaintiff that he is having trouble mining the ten pounds of coal and will not be able to provide the coal on March 1, 2006 as promised. Plaintiff cannot purchase substitute coal in the market because of the February 18, 2006 law. On March 1, 2006, the market price of diamonds (both artificial and naturally occurring) is $2,000 per carat. The price remains at $2,000 per carat until April 1, 2006, when due to the discovery of an enormous number of natural diamonds in South Africa, the market is flooded diamonds to the point that supply exceeds demand. The price of diamonds plummets to $700 per carat. On April 1, 2006, defendant delivers ten pounds of coal to plaintiff. Plaintiff accepts the delivery and runs five pounds of coal through the special machine, making five carats of diamonds. After five pounds of coal have been put through the machine, a gentleman from Miller's machines shows up and repossesses the special machine for non-payment of rent. Plaintiff sells the five carats of diamonds in the market on April 3, 2006. On April 3, 2006, the market price for diamonds was still $700 per carat. The remaining five pounds of coal sits in a warehouse unused. How should plaintiff's damages be calculated? In hypothetical 2.a., assume that plaintiff's failure to pay rent on the special machine is due to a lack of operating income as a result of defendant's delay in delivering the coal. In hypothetical 2.b., assume that plaintiff's failure to pay rent on the special machine is due to internal problems at plaintiff's company that are unrelated to defendant's delay in delivering the coal. IT IS SO ORDERED. s/ George W. Miller GEORGE W. MILLER Judge

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