Rick Ltd is a manufacturer of synthetic materials for industry based in Uluru which has a customer base both in Australia and overseas. 75% of its business and a little over 80% of its profit come from the manufacture of Machineboss, a synthetic metal. It is a product in high demand (indeed sales have increased by over 20% in the last year and continued growth is anticipated) from airline and motor vehicle manufacturers because whilst stronger than steel it is extremely light, heat resistant and easy to mould and manipulate. Whilst there are other products which can substitute for Machineboss none can match its performance.

The secret to Machineboss is the use of a small amount of a chemical known as B-256 in the manufacturing process. Rick ltd has a contract for 5 years from 1 January 2019 with Chugg Minerals Ltd (Chugg) under which Chugg is to supply Rick LTD with the raw mineral from which B-256 is extracted at a fixed price, with annual increases (the supply contract). Chuggs mine is the only one in Australia whose minerals contain B-256 in sufficient concentration to make extracting it economic. Whilst there are a handful of other mines in the world which can also produce B-256 their supplies are fully committed under either contract or in some cases by legislation for supply to various defence and space exploration organisations.

The supply contract provides that Chugg will supply and Rick Ltd will purchase the whole of Chuggs production of the raw mineral it extracts. There is also an option in Ricks favour for renewal of the supply contract for a further 5 years on the same terms other than future pricing which is to be set by reference to an agreed formula contained in the supply contract.

In February 2022 Chugg contacted Rick to discuss some issues with the contract. At the meeting between the CEOs that followed Chugg requested Rick to agree to determine the supply contract from 30 June 2022 After Rick rejected the request Chugg made an offer to pay Rick a sum of $10,000,000.00 as a break fee if Rick would agree. After Rick responded by advising that it was not interested in foregoing the contract the Chugg CEO told the Rick CEO that Chugg had an offer to purchase all of the B-256 it could extract at a price several times the contract price under the Rick supply contract. She also indicated that a vacancy on the Chugg Board of Directors was going to arise shortly, and the Rick CEO would be a perfect fit for it. She mentioned that it was an easy Directorship which would be extremely rewarding, particularly if Chugg was able to accept the new offer for B-256.

After a Board meeting of Rick on 1 March 2022 the Rick CEO advised Chugg that Rick had no interest in terminating the supply contract at any price as it believes not only will the ongoing production of Machineboss for the life of the contract and the option be profitable but it will also position Rick as a world leader in the production of synthetic metals which will afford Rick even greater opportunities in the future.

On 12 March 2022 Rick was served with a document titled NOTICE OF TERMINATION from Chugg, which purports to terminate the supply contract, effective 30 April 2022, and cites ongoing difficulties with payments and generally as the reason for the purported termination. All payments have in fact been made on time and apart from the February 2022 meeting no other difficulty or issue with the supply contract has previously been raised by Chugg. The supply contract itself contains no provision for early termination.

Rick wants the contract to be performed in full or otherwise to obtain billions in damages. Without it the production of their mainstay product would have to cease, and any alternative would not have Machinebosss unique qualities. At best Rick would have to cut its operations by at least 50%, and would suffer losses including

1. the profit, including continuing growth it would otherwise have made from Machineboss for the balance of the supply contract and the option period;
2. it would have a workforce far exceeding its future needs at the reduced level of operations, so would have to make at least 150 employees redundant;
3. its premises which are leased for a further 5 years would be substantially in excess of its needs and until it was able to sub-lease the redundant part the continued rental wil be wasted;
4. it has been investing heavily in research of further synthetic metal technology, anticipating that this would provide further opportunities down the track. That research is some years from fruition, could not be afforded to continue on the reduced operations and effectively would have to be scrapped as it has no commercial value at this time; and
5. damage in losing its reputation as a world leader in the field, which Rick considers to be incapable of calculation.

What are the possible remedies that may be available to Rick arising from the notice it has received from Chugg.