1. Claudia runs a vineyard and winemaking business in the Hunter Valley, NSW. She

enters into a contract with Jed for Jed to design and construct on-site a special apparatus

for fermenting her grapes. Jed has experience in constructing such devices for

winemakers in the region. It is a term of the contract that the device will be reasonably

fit for its intended purpose, and Claudia explains her winemaking technique to Jed prior

to contract. The date for completion of the apparatus is 1 March. This, Claudia expects,

will coincide with the harvest of her grapes.

Harvest occurs in early March as usual in the Hunter Valley, but Jed does not finish the

apparatus until 31 March. Claudia has no other means of processing her grapes in the

meantime, so about half of her crop rots and must be discarded. Jed has also been

negligent in constructing the apparatus. The defective construction causes the wine to

become contaminated by bacteria. It is widely known in the wine industry that

contamination by this type of bacteria is a possibility if the apparatus is not constructed

properly, but the contamination in this case is extraordinarily severe. The entire batch of

wine is ruined and unsaleable. Claudia is particularly annoyed because she had a special

arrangement with a wine club to sell her some of her wine at a 15% premium to its usual

retail price.

Advise Claudia on what would be the

appropriate measure of loss.