Contractual Penalty for Late and Defective Delivery of ExcavatoLegal Analysis on Special Expert Witnesses and the Jurisdiction of a Single Judge in Criminal Proceedingsrs
Contractual Penalty for Late and Defective Delivery of ExcavatoLegal Analysis on Special Expert Witnesses and the Jurisdiction of a Single Judge in Criminal Proceedingsrs
The Royal Irrigation Department purchased five excavators from Sell-Dee Engineering Co., Ltd. at the price of Baht 500,000 per unit, making a total contract price of Baht 2,500,000. The contract stipulated that, should the seller fail to deliver the goods in strict conformity with the specifications annexed to the agreement by 1 January 1978, the seller would be liable to pay a contractual penalty at the rate of 0.2% per day of the price of the goods not duly delivered, calculated from the date of default until complete and proper delivery had been effected.
On 1 January 1978, the seller delivered only three excavators. However, it was subsequently discovered that the tires fitted to those excavators, having a total value of Baht 60,000, did not conform to the contractual specifications. The buyer’s inspection committee therefore rejected the delivery as non-compliant and required the seller to replace the defective tires. Thereafter, on 12 January 1978, the seller replaced the tires with conforming ones and simultaneously delivered the remaining two excavators. The buyer’s inspection committee accepted the goods on that date, while expressly reserving the buyer’s right to claim the contractual penalty.
The legal issue is whether the buyer is entitled to calculate the penalty only on the value of the defective tires and the two excavators delivered late, or on the price of all five excavators.
The proper conclusion is that the buyer is entitled to claim the penalty on the basis of the price of all five excavators, not merely the value of the defective tires. Although three excavators were physically delivered within the contractual period, such delivery was not a legally sufficient delivery under the contract because the excavators were equipped with non-conforming tires and therefore could not be accepted or put to use in accordance with the contractual purpose. In other words, the buyer could not derive the intended benefit from those three machines until the defects were cured. Accordingly, the delivery was not complete and proper until 12 January 1978, when the seller both replaced the defective tires and delivered the remaining two excavators.
Therefore, the buyer is entitled to recover the contractual penalty at the rate of 0.2% per day of Baht 2,500,000 for the period from 2 January 1978 to 12 January 1978, inclusive, being 11 days in total.
Calculation:
Baht 2,500,000 × 0.2% = Baht 5,000 per day
Baht 5,000 × 11 days = Baht 55,000
Conclusion:
The buyer may lawfully claim a contractual penalty of Baht 55,000 from the seller.