Shan Steel Limited ('SS') is a Hong Kong incorporated company. It sells scrap steel. Bai Recycling Limited ('BR') is also a Hong Kong incorporated company. It purchases scrap steel for onward sale to smelting plants in the Mainland.

In January 2021 BR entered into a contract with SS on SS's standard terms and conditions for the purchase of 10,000 tonnes of scrap steel. The price was HK$ 3000 per tonne. The steel was to be supplied in 10 equal monthly instalments of 1,000 tonnes, with the first instalment to be delivered to BR on 1st February 2021. BR had entered into a contract with a Mainland smelting company Golden Alloys ('GA') to resell the scrap steel to GA at HK$ 5,000 per tonne.

The first three instalments were delivered to BR by SS in containers. As BR was under pressure from GA to deliver the scrap steel to GA as soon as possible, BR delivered these instalments to GA without checking the content of each container.

BR had just received delivery of the fourth instalment from SS when BR was informed by GA that it was rejecting the three instalments so far received because of the high percentage of impurities. Each consignment had contained 40% impurities (comprising wire, dust, stones and plastic). GA stated that while it is normal to expect some impurities in the scrap steel 40% was unacceptably high as it made the steel too expensive to process.

BR checked the fourth instalment and found no impurities. However because of the problems with the first three instalments it had lost faith in SS and was worried about losing its good reputation with GA. BR therefore informed SS on 20^th May 2021 it was rejecting the first three instalments delivered and also terminating its contract with SS. In its termination email BR stated that, as it was ending its contract with SS, BR no longer wanted delivery of any further instalments and requested SS to collect the four instalments so far supplied. Also it demanded the return of the price paid for each instalment so far received and damages of HK $ 20 million for the loss of profit on its sub-contract with GA (this represents the difference between the contract price and the resale price).

Responding to BR's complaints SS stated:

1. It denied there was anything wrong with the goods as the impurities could have been easily been removed by BR before delivering the steel to GA.
2. As it was scrap steel BR could not expect perfection-there was bound to be some impurities in the steel.
3. BR had acted far too quickly in terminating the contract as there was no certainty there would be any similar problems with the remaining instalments.
4. If, which was denied, BR had the right to reject the goods, BR had accepted the goods by reselling and delivering to GA the first three instalments.
5. If ,which was denied, it was in breach, the amount being claimed was excessive as the market price for scrap metal on 20^th May 2021 was HK$ 4,000 per tonne and thus BR's loss was HK $1 million
6. It was protected by the following clause in its standard terms and conditions:

Advise BR as to its rights and remedies against SS.

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.

Jurisdiction: HK/UK