Blackgold+Case_2_

Blackgold+Case_2_ - Blackgold Petroleum Part I Blackgold is...

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Blackgold Petroleum Part I Blackgold is a petroleum distribution and marketing company. In the past, the president of Blackgold has provided customers with refined product under long-term supply contracts at guaranteed prices. Recently, the prices that Blackgold must pay for petroleum have risen sharply. The President consulted his legal advisers to see if the supply contracts might be relaxed in any way. They told him that the contracts contained a clause stating that Blackgold could refuse to supply up to 10% of the promised amount due to circumstances beyond company control. On the other hand, the lawyers felt that the price escalation situation did not justify revoking supply and that the customers would probably sue Blackgold for such an action. During the course of a lawsuit, Blackgold would be free to sell the contested 10% on the open market at the prevailing market price. However, the lawyers estimated that Blackgold would probably lose the lawsuit and have to pay large damages. The President was faced with a certain loss of $4,800,000 this year due to these
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This note was uploaded on 02/03/2011 for the course IEOR 166 taught by Professor Oren during the Spring '08 term at Berkeley.

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Blackgold+Case_2_ - Blackgold Petroleum Part I Blackgold is...

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