ABSTRACT
This chapter discusses a case study of PumpCo manufactures, supplies pumps for deep mining around the world. PumpCo wishes to sell a pump to CoalCo and CoalCo wishes to purchase a pump from PumpCo. The tradables are: price; what warranty obligations PumpCo will give CoalCo; installation time – that is, the time by which PumpCo will agree to having its pump up and running; force majeure provisions; and the currency of the contract. Liquidated damages place a cap on the amount of damages a seller can require a supplier to pay for a breach of a warranty. Liquidated damages are often stated as a percentage of the value of the contract and they may be limited to the duration of the contract or to some time period within it. Force majeure that absolves a supplier from liability to compensate the buyer if the reason(s) for the delay or failure to perform are outside of the supplier's control.
