suppose company A gets raw material from company B to produce final product which is to be delivered to the company C by company A. if company B fails to provide material because of which company A cannot fulfill the order of company C, will company B be liable for loss incurred by company A because of the repudiation of contract between company A and C? and what the bare essentials used?

3 Answers 3


I would say that company B is liable to company A due to not fulfilling its obligations to company A, whatever they may be and whatever contractual remedies there may be. I do not see that company C's problems with company A are any of company B's responsibilities.

As an example, company A does not deliver a life-saving product to company C, resulting in huge, expensive tragedy, due to company B not delivering a common boring commodity to company A.


will company B be liable for loss incurred by company A because of the repudiation of contract between company A and C?

Ultimately, yes. But it is in A's best interest to ensure that his contract with B specifies the remedies available in the event of B's breach of contract.

If A's contract with B is unclear in that regard, B's liability will be harder to quantify after the fact.



In general, the remedy for a breach of contract by company B, is for damages to restore company A to the position they would have been in but for that breach.

This can include damages for pure economic loss such as that which flows from the breach of company A's contract with company C.

But ...

There are several big 'buts' here:

  • Foreseeability - Hadley v Baxendale [1854] EWHC J70 established that damages "should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it." That is, B is only liable for things that are an obvious consequence of its failure or that were explicitly in the minds of both A and B when they entered into their contract. If A made B aware of the details of the contract with C such that B knew they were critical to its performance than they would have liability. For example, a plumber working for a builder knows they are critical to the delivery of the house, the hardware store that supplies the nails probably isn't.
  • Causation - B's failure has to cause A's loss. If C has terminated the contract because this is the 7th time A has failed to perform, its hard to argue that B was the cause even if they were the proximate cause.
  • Mitigation - A must have done all that is reasonably practicable to mitigate their losses. If it was possible to source the product that B couldn't supply, A should have done so and, if they incurred costs, sue B for those rather than the (greater) costs of the lost contract with C.

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