Reference no: EM133133588

ACBUS201A Commercial Law - TAFE NSW

Assessment Event - Portfolio

The NSW Beef Farmers [‘NSWBF'] breeds a mix of Mashimi and Wagyu cattle, producing a unique and expensive beef product selling for $200 per kg on wholesale markets. In November 2019, NSWBF signed a binding agreement with China Beef Imports [‘CBI'] to provide 500kg of their beef, each week during 2020 to 2023, with NSWBF responsible for delivering the beef to the CBI warehouse in Beijing as part of the agreed price. NSWBF arranged freight contracts with Wantas Airlines to fulfil these deliveries, at a cost of $9 per kg. NSWBF's agreements with CBI and Wantas made no mention of pandemics, flight cancellations, or Government restrictions on flights or trade.

In April 2020 Wantas cancelled all scheduled flights to China, due to the Covid19 pandemic. Freight remained possible via special Wantas flights, or alternative flights via Hong Kong or Singapore, but with limited cargo space on each flight, the cost of freight has increased to $290 per kg.

CBI has received an exemption from import restrictions for Australian beef products, as the beef products are very popular amongst wealthier people in Beijing. CBI is insisting that NSWBF meet their contractual obligations and continue beef deliveries. NSWBF has a cost of production of $110 per kg of beef, and will lose a large mount of money each week if they continue to make deliveries to CBI paying the increased freight costs.

Discuss whether NSWBF must still deliver beef under their contract, given the rise in freight costs between Sydney/NSW and China.