Commercial law--jurisdiction HK/UK

Golden Wonder ('GW'), a Hong Kong incorporated company, entered into a contract with Sky Garments ('Sky'), a garment manufacturer in Hong Kong, for the purchase of 24,000 handmade woollen cardigans of a particular design at a price of HK$300,000. The contract specified that the cardigans should be of three different sizes: 8000 small; 8000 medium; 8000 large. It was explained to Sky before the contract was made that the cardigans were going to be resold to a German retailer who had "very exacting standards." The contract provided that the cardigans were to be delivered in four equal instalments of 6000, with 2000 small, 2000 medium and 2000 large sizes being delivered in each instalment. It was also agreed that GW would inspect each completed instalment at Sky's premises to ensure compliance with the contract before delivery.

Before the contract was made GW visited Sky's factory to inspect three completed cardigans in order to check that they are of the quality required. GW found the three cardigans to be of a satisfactory standard. When the first 500 cardigans had been completed GW made a surprise visit to Sky's factory to check the quality of the cardigans so far completed and was again very satisfied with the standard. On being notified that the first instalment of 6000 cardigans was ready for delivery, GW informed Sky "As our German customer wants the cardigans earlier than we had anticipated we have no time to inspect them so just send the first instalment to us." When the first instalment arrived GW sent the cardigans off to Germany without inspecting them as its German customer was demanding a quick delivery. However one week after delivery to Germany, GW was informed that its German buyer was rejecting the first instalment and refusing to take any more cardigans from GW for the following reasons:

1. The cardigans were not in three equal sizes, 1300 being small size, 1500 medium size and 3200 were large.
2. The general quality of the cardigans was variable as some had seams that were not quite straight and the buttonholes on some cardigans did not have sufficient reinforcement, thus making them too fragile. This meant that they were not suitable for selling at the price the German buyer had planned, and it did not want to sell them at a lower price as its profit margin would be too low.

Given the rejection by their German customer GW no longer wanted to continue with its contract with Sky. It therefore informed Sky it was cancelling its order for the remaining cardigans for the reasons stated by GW above and wanted a refund of the price paid for the first instalment as well as HK$100,000 damages for the profit it has lost under the German contract. Sky's response to GW's cancellation was: "Regarding the size, your customer is actually better off getting more of the larger size as they will sell quicker since German consumers prefer larger sizes. However if it really means that much to your German customer I will supply 2700 small and 2500 medium in the second instalment to rectify the problem. We agree there were some imperfections on some of the cardigans but they are very minor, most of them are fine and at the price you are paying us you cannot expect high-end brand perfection. We think your German customer has changed its mind about the contract it made with you and is using these trivial complaints as an excuse to get out of the agreement. Finally can we remind you that you have not complied with the condition in Clause 6 of the contract you made with us."

Clause 6 states "Liability - We regret that we will be not be liable for the quality of any goods supplied unless the buyer informs Sky Garments in writing within 5 days of delivery that the goods are unsatisfactory. If this condition is complied with and if, in the opinion of an independent expert, the goods are not of satisfactory quality we will refund the price to the buyer. However we shall not be liable for any other loss or damage direct or consequential."

Sky is refusing to refund the price or pay the HK$100,000 damages and is demanding compensation from GW for its refusal to take any more cardigans.

Advise Sky as to its rights and remedies under the Sale of Goods Ordinance. In your answer focus only on sale of goods law. Do not consider misrepresentation or breach of express terms of the contract in giving your advice.

references:

https://uk.practicallaw.thomsonreuters.com/4-626-3149?transitionType=Default&contextData=(sc.Default)&firstPage=true

https://www.coursehero.com/file/64957542/2014-Implied-terms-under-SOGO-FINAL-Powerpointppt/

https://www.coursehero.com/file/17409277/10010259-commercial-law-lectures-sale-of-goods-1-introduction-2012-13/

https://www.coursehero.com/u/file/94120045/Commercial-Law-Seminar-3-Consolidated-Notes-Duties-and-remediesdocx/#question

Many thanks in advance:))