CASE 8-4--AUSTIN INSTRUMENT, INC. v. LORAL CORPORATION

Summary of the Facts. In July of 1965, Loral was awarded a $6,000,000 contract by the Navy for the production of radar sets. The contract contained a schedule of deliveries, a liquidated damages clause applying to late deliveries and a cancellation clause in case of default by Loral. The latter thereupon solicited bids for some 40 precision gear components needed to produce the radar sets, and awarded Austin a subcontract to supply 23 such parts. That party commenced delivery …

…money by waiting until July, 1967, long after the termination date of the contract, to disaffirm it. Loral did delay making its demand for a refund until three days after Austin's last delivery on the second subcontract explaining that Loral feared another stoppage of deliveries. Considering Austin's conduct in the past, this was perfectly reasonable, as the possibility of an application by Austin of further business compulsion still existed until all of the parts were delivered.