Facts of the Case:

Supercleen Limited, a manufacturing company, entered into an equipment supply contractwith Red Fire Mines Limited, Supercleen agreeing to design supply and install a dustcollection system at Red Fire Mine's northern Ontario smelter for a contract price of$200,000.00. The specifications for the dust collection systemspecified that the dustcollection equipment was to remove 98% of prescribed exhaust particles from theexhaust gases in order to comply with the requirements of the environmental controlauthorities in the area in which the smelter was located.

In addition, the signed contract between Supercleen and Red Fire Mines also contained aprovision limiting to $200,000.00,Supercleen's total liabilityfor any loss, damage orinjury resulting from Supercleen's performance of design, supply and installation servicesto Red Fire Mines pursuant to the contract.

The dust collection system as installed by Supercleen did not meet the specifications. In fact,only 60% of the prescribed exhaust particles were removed fromthe exhaust gases. As aresult, Red Fire Mines was faced with the threat of substantialfines and possibleshutdown by the environmental control authorities. Supercleen refused to remedy thedefective equipment without being assured of compensation fromRed Fire Mines of anycosts in excess of $200,000.00 incurred in connection with suchremedial work.

At the time of discovering that the system failed to meet the specifications, Supercleen hadalready received $180,000.00 from Red Fire Mines and Red Fire Mines refused to payanything further to Supercleen.

Red Fire Mines contracted another equipment supplier who, for an additional cost of$275,000.00 successfully designed and installed remedial equipment sufficient to cleanthe exhaust gases to the satisfaction of the environmental authorities and in accordancewith the original contract specifications between Supercleen and Red Fire Mines.

Case Analysis:

1) Is there a valid contract between Red Fire Mines and Supercleen?

2) Can Red Fire Mines assume that Supercleen has the capacity to fulfill their obligation?

3) Identify the breach and/or possible breach of contracts?

4) Who fundamentally breached the contract? Briefly explain.

5) If Red Fire Mines was to sue, how much money would they sue for (identify what you think theywould win)?