A New York buyer of cheese and an Argentine seller of cheese agreed to a contract of sale for 20,000 pounds of No.1 quality Edam cheese produced by specified Argentinian dairy farms. The sales contract provided that the price of US $ 240,000 was to be paid by means of a letter of credit opened by a specified bank in New York. The delivery term stated that delivery was to be "CIF New York." The seller had the cheese loaded into four containers usually used to transport cheese by sea and delivered them to the carrier in Buenos Aires, Argentina. Two days after taking delivery, the buyer examined the cheese in the four containers and discovered that cheese in one of the containers was "mouldy" and therefore inconsumable. The buyer immediately sent a fax to the seller explaining the problem and stating that the buyer avoided the contract.

Within five days the buyer sold the three containers to another cheese merchant for $150,000 and the "mouldy" container to a food-processor for $5,000. Almost immediately after the sale the buyer received a fax from the seller requesting an opportunity to examine the cheese. The buyer immediately replied by saying that this was no longer possible because the cheese had been sold.

The seller consults you and asks the following questions:

1.Did the buyer have the right to avoid the contract?

2.Did the buyer effectively avoid the contract?

3.If the answer to either of the previous questions is no, what remedies does the seller have?

4.If, however, the buyer effectively avoided the contract, what damages may the buyer have?