Reference no: EM133282451
German Seller negotiated with PRC Supermarket for selling 100,000 kilo of living Atlantic Herrings at a price of US78,000. PRC Supermarket showed its strong interest in closing the deal because these herrings were selling for US156,000 during the Chinese New Year last year.
During the negotiation, they agreed and summarized the following points in the email for record:
"Subject to contract" and "Acceptance subject to inspection"
German Seller shall arrange the delivery of the 100,000 kilo of Atlantic Herrings to Port of Shanghai and be inspected there before acceptance.
The living herring fishes shall delivery to the port of Shanghai between January 20 to January 30 of 2023.
If German Seller engages in conduct that material breach of this contract, German Seller shall pay US156,000 to PRC Supermarket.
PRC Supermarket can reject any dead herring fishes during the inspection and setoff the selling price accordingly.
In case of disputes, both parties agreed that UK Common Law shall apply, and the case shall be decided by the courts in Hong Kong.
About two days after the above email, the PRC Custom Department in the port of Shanghai announced a new Covid-19 measure that may negatively affect the exporting of living herring from Europe to PRC. As a result, German Seller informed PRC Supermarket that he wanted to cancel the deal.
During these two days, both German Seller and PRC Supermarket did not engage in any activity related to the deal, so they did not incur any actual financial loss.
PRC Supermarket argues on two grounds: (1) according to the contract, German Seller shall pay US156,000 for engaging in conduct that will material breach of the contract, and (2) canceling the deal will be a material breach.
Question: In your opinion, explain the likely treatment of this case by the Hong Kong judge according to the terms of the negotiation recap email ?