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Ambassador Steel Co. v. Ewald Steel Co.
Michigan Court of Appeals
190 N.W.2d 276 (1971)
Ambassador Steel Co. (Ambassador) (plaintiff) sold steel to Ewald Steel Co. (Ewald) (defendant). Ewald resold the steel to a third party. But the steel cracked when the third party welded the steel to railroad cars, and Ewald lost money on the third-party transaction. Ewald refused to pay Ambassador the full purchase price, claiming that Ambassador’s steel was not of commercial quality. Ambassador sued Ewald for breach of contract. Ewald admitted that it had not paid the full contract amount. However, Ewald claimed that Ambassador’s damages should be reduced by the amount Ewald lost to the third party. Ewald argued that Ambassador had breached the implied warranty of merchantability by selling Ewald substandard steel. Ewald presented evidence that the carbon content of commercial steel was between 1010 and 1020, and that Ambassador’s steel was below that range. The trial court agreed that this meant Ewald deserved a setoff for the actual cost of the steel, and the court entered judgment for Ambassador on just the amount of lost overhead. Ambassador appealed, challenging the setoff amount.
Rule of Law
Holding and Reasoning (Fitzgerald, J.)
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