Loral Corp. (defendant), a government contractor, placed orders from Austin Instruments (plaintiff) for parts needed for Navy radar sets. Subsequently Loral received an additional government contract for radar equipment. Austin offered to supply the parts needed for the new contract, but demanded retroactive price increases on the first contract and the right to furnish similar parts on the second contract. Negotiations for the second contract began and continued without successful resolution. Austin stopped work on the first contract and refused to continue unless Loral met its demands for the price increases and awarded it the second contract. During this time, Loral received deliveries of parts manufactured by Austin under the first contract. Austin eventually stopped work on the first contract. Loral contacted several other suppliers but did not attempt to procure items due under the first contract from these suppliers. Loral wrote Austin a letter advising that Loral faced severe consequences if it defaulted on its first contract and that it had no choice but to meet Austin’s conditions. Loral failed to pay the balance due on the delivered parts. Austin filed suit.