Reference no: EM133031410

Teleflex Inc., an American company manufacturing aircraft components, knew that I.M.P. Group Ltd. was negotiating with the Brazilian government to carry out a program for the turbinization of its Tracker aircraft fleet. Teleflex offered to supply necessary parts, to which proposal I.M.P. responded with a purchase order for 13 quadrant assembly sets at $27 500 each. The shipping schedule was to commence in March 1990. Included was a provision whereby I.M.P. could order a suspension of the work with a reasonable price adjustment, and a further provision whereby I.M.P. could terminate the order with payment to Teleflex for both completed and uncompleted work, according to a formula that factored in lost profits. Thereafter, Teleflex commenced manufacturing the quadrant assembly units.

In September 1989, Teleflex received the first of a series of notices from I.M.P. requesting postponement of delivery of the units. Teleflex acknowledged receipt of these stop-work letters, advising that in the event of termination its termination liability schedule "attached to our original proposal will apply." I.M.P. continued to experience difficulties in closing the deal with the Brazilian government and finally, in 1994, indicated it would not be requiring fulfillment of the purchase order.

Teleflex treated this as a termination notice and advised I.M.P. that it would submit a termination claim based on work performed to date. The claim amounted to US$229 576 for materials, overhead, and profit. I.M.P. countered that no monies were payable because the contract had been frustrated by the Brazilian government, and further, no quadrant assembly units were ever delivered by Teleflex.