4 - Remedies

Question 1

Heavy Metal in Chicago makes a contract to sell to a Holiday Inn hotel in Detroit one commercial-grade multi-station weightlifting machine for $20,000 for use in the hotel’s fitness room. The contract provides that the goods will be delivered on or before June 1, “FOB Seller’s Place.” Payment is due on July 1. On May 30, Heavy Metal has Dependo, a reliable third-party carrier, come pick up the machine for delivery after Heavy Metal gives timely notice of this fact to Holiday Inn. Dependo picks up the machine but severe flooding on the highways from Chicago to Detroit ruins the machine by rusting the metal parts. When Holiday Inn receives the machine on May 31, it immediately rejects the machine because of the severe rust. Will Heavy Metal be able to recover from Holiday Inn in an action for the price of the weightlifting machine?

(A) No, because Holiday Inn never accepted the goods.

(B) No, because Heavy Metal failed to deliver conforming goods to Holiday Inn.

(C) No, for both of the reasons given in (A) and (B).

(D) Yes, and the result would be the same even if the delivery term had been “FOB Buyer’s Place.”

(E) Yes, as long as Heavy Metal brings its action for the price within a commercially reasonable time after risk of loss has passed to Holiday Inn.

Answer 1

E

Question 2

Heavy Metal in Chicago makes a contract to sell to a Holiday Inn hotel in Detroit one commercial-grade multi-station weightlifting machine for $20,000 for use in the hotel’s fitness room. The contract provides no FOB delivery term in the contract and nothing is said about risk of loss in the contract. Payment is due on July 1. On May 30, Heavy Metal has Dependo, a reliable third-party carrier, come pick up the machine for delivery after Heavy Metal gives timely notice of this fact to Holiday Inn. Dependo picks up the machine but severe flooding on the highways from Chicago to Detroit ruins the machine by rusting the metal parts. Holiday Inn does not notice the rust problem with the machine and initially accepts the machine. A couple of weeks later, however, Holiday Inn attempts to revoke its acceptance when it discovers the rust on the machine after some hotel guests complain about it. Now will Heavy Metal be able to recover from Holiday Inn in an action for the price of the weightlifting machine?

(A) Yes, because Holiday Inn still had risk of loss as to the defect on which it bases its attempt to revoke acceptance.

(B) Yes, because even a justified revocation of acceptance by Holiday Inn does not change the fact that once Holiday Inn accepted the goods, Heavy Metal became eligible to recover for the price of the goods.

(C) No, because Heavy Metal had the risk of loss as to the damage caused to the machine that was the basis of Holiday Inn’s revocation of acceptance.

(D) No, because the acceptance that gives rise to an action for the price under §2-709(1)(a) includes only cases in which there has been no justified revocation of acceptance.

(E) No, for the reasons given in both (C) and (D).

Answer 2

A

Question 3

Houston Seller (“Seller”) agrees to sell a drill-press machine to Los Angeles Buyer (“Buyer”) for $450,000, “FOB Buyer’s Place of Business.” The cost of delivering the goods from Houston to Los Angeles is $15,000. The machine arrives to Buyer on the stated delivery date, and Buyer wrongfully rejects the machine. A week later, Seller is able to resell the machine in a commercially reasonable and procedurally proper resale for $360,000 to a different Los Angeles buyer that agrees to pick up the machine at its own expense from the rejecting buyer. The market price for this drill-press machine on the date of tender is $390,000 in Houston and $375,000 in Los Angeles. Assuming that Seller is not a lost-profits seller, for what amount may Seller recover from Buyer?

(A) $90,000.

(B) $45,000.

(C) $75,000.

(D) $60,000.

(E) $105,000.

Answer 3

A

Question 4

Houston Seller (“Seller”) agrees to sell a drill-press machine to Los Angeles Buyer (“Buyer”) for $450,000, “FOB Buyer’s Place of Business.” The cost of delivering the goods from Houston to Los Angeles is $15,000. Buyer repudiates the contract with Seller a month prior to the performance date (and prior to delivery by Seller), and Seller ultimately decides not to resell the machine in question. The market price of the machine on the date of Buyer’s repudiation is $380,000 in Houston and $365,000 in Los Angeles. The market price of the machine on the performance date is $390,000 in Houston and $375,000 in Los Angeles. Assuming that Seller is not a lost-profits seller, for what amount may Seller recover from Buyer?

(A) $75,000.

(B) $60,000.

(C) $85,000.

(D) $70,000.

(E) Zero damages, at least if we assume that a resale by Seller was possible here.

Answer 4

B

Question 5

Lessor and Lessee enter into a three-year lease of a drill-press machine for $10,000 per month. Fourteen months into the lease, Lessee has missed two lease payments and Lessor repossesses the machine according to its rights under the contract. Lessor spends three months and $2,000 in advertising costs from the point of repossession trying to re-lease the machine, and finally is able to enter into a substantially similar lease with a new lessee. The new lease is for five years at $9,000 per month. The old lease, but not the new one, required Lessor to do an annual maintenance treatment midway through each lease year that cost Lessor $2,000 for each treatment, one of which was performed under the old lease. Assuming that Lessor is not a lost-volume lessor and putting aside discounting to present value, for what amount of damages may Lessor recover from Lessee?

(A) $67,000.

(B) $37,000.

(C) $71,000.

(D) $65,000.

(E) None of the above.

Answer 5

A

Question 6

Lessor and Lessee enter into a three-year lease of a drill-press machine for $10,000 per month. Fourteen months into the lease, Lessee has missed two lease payments and Lessor repossesses the machine according to its rights under the contract. Lessor ends up selling the machine three months following the repossession, and Lessor does not spend any advertising costs to find the buyer for the machine. The market rent at the place the machine is located for a substantially similar lease as of the date Lessor repossessed the goods is $12,000 per month. The old lease required Lessor to do an annual maintenance treatment midway through each lease year that cost Lessor $2,000 for each treatment, one of which was performed under the old lease. Assuming that Lessor is not a lost-volume lessor and putting aside discounting to present value, for what amount of damages may Lessor recover from Lessee?

(A) $60,000.

(B) Zero.

(C) $20,000.

(D) $16,000.

(E) None of the above.

Answer 6

D

Question 7

Shortly before the new year, Toronto Seller (“Seller”) and New York City Buyer (“Buyer”) enter into a contract for the sale of 20 new Cadillac Convertible cars for $800,000, “FOB Seller’s Place of Business.” Seller explains to Buyer before signing the contract that by selling these 20 cars before the end of the calendar year, Seller will be receiving a $100,000 incentive bonus from its manufacturer for reaching an overall sales goal for the year. The day before the delivery date, Buyer repudiates the contract. The cost of shipping the cars from Toronto to New York City would have been $20,000. Upon learning of Buyer’s repudiation, Seller chooses to avoid the contract and resells the 20 cars to a local Toronto buyer for $770,000. In the resale contract, Seller has to spend $5,000 to deliver the cars to the local buyer. However, because the resale takes place just after the calendar year begins, Seller is no longer eligible for the $100,000 incentive bonus from its manufacturer. Assuming that Seller is not a lost-volume seller, for what amount of damages may Seller recover from Buyer under the CISG?

(A) $35,000.

(B) $135,000.

(C) $115,000.

(D) $15,000.

(E) None of the above.

Answer 7

B

Question 8

Shortly before the new year, Toronto Seller (“Seller”) and New York City Buyer (“Buyer”) enter into a contract for the sale of 20 new Cadillac Convertible cars for $800,000, “FOB Buyer’s Place of Business.” The day before the delivery date, Buyer repudiates the contract. The cost of shipping the cars from Toronto to New York City would have been $20,000. Upon learning of Buyer’s repudiation, Seller chooses to avoid the contract and uses the 20 cars as a rental fleet. In the resale contract, Seller has to spend $5,000 to deliver the cars to the local buyer. However, because the resale takes place just after the calendar year begins, Seller is no longer eligible for a $100,000 incentive bonus from its manufacturer (Seller does not give Buyer any notice of the special bonus that Seller will get with this sales contract). The market price for these 20 cars at the time of Seller’s avoidance is $775,000 in Toronto and $765,000 in New York City. Assuming that Seller is not a lost-volume seller, for what amount of damages may Seller recover from Buyer under the CISG?

(A) $35,000.

(B) $5,000.

(C) $115,000.

(D) $25,000.

(E) None of the above.

Answer 8

E

Question 9

Buyer makes a contract to purchase 10 widgets from Seller for a total cost of $100,000. Buyer wrongfully repudiates that contract, and Seller resells the widgets to a new buyer for $100,000. The market price of the widgets at the time and place for tender is $98,000. Seller has fixed annual expenses of $100 million overall, and in addition spends $5,000 in direct labor costs and $3,500 in direct material costs for each widget produced. Assuming that Seller is a lost-volume seller, for what amount of damages may Seller recover from Buyer for Buyer’s breach?

(A) Zero.

(B) $2,000.

(C) $15,000.

(D) $17,000.

(E) None of the above.

Answer 9

C

Question 10

Buyer and Seller enter into a contract in which Seller agrees to build a custom-designed drill-press machine for Buyer for a total price of $3.2 million. Seller plans to spend $1.2 million in direct labor costs and $800,000 in direct materials costs. Buyer repudiates the contract in mid-production, at which point Seller has purchased and used $400,000 in raw materials and has expended $800,000 in direct labor costs. Assume that Seller knows that if Seller completes the machine, there is a different buyer to whom Seller could sell the completed machine for $1.9 million. Seller also knows that if Seller ceases production at this point, no other buyer will buy the partially completed machine. If Seller decides to complete the machine at this point, will a court uphold that decision as commercially reasonable on Seller’s part?

(A) No, because Seller expected to sell the completed machine for $3.2 million and this new buyer is offering to pay $1.3 million less than that.

(B) No, because if Seller completes the machine, Seller will end up spending a total of $2 million in direct labor and material costs for a sale that will only yield $1.9 million for the purchase price.

(C) No, because the marginal cost of completion for Seller here is greater than the resale of the finished product minus the scrap value.

(D) Yes, because the marginal cost of completion for Seller here is less than the resale of the finished product minus the scrap value.

(E) Yes, but only if Seller can show that it would not have made the sale to the new buyer if the original Buyer had not breached its contract to buy the machine.

Answer 10

D

Question 11

Buyer and Seller enter into a contract in which Seller agrees to build a custom-designed drill-press machine for Buyer for a total price of $3.2 million. Seller plans to spend $1.2 million in direct labor costs and $800,000 in direct materials costs. Buyer repudiates the contract in mid-production, at which point Seller has purchased and used $400,000 in raw materials and has expended $800,000 in direct labor costs. Assume that Seller knows that if Seller completes the machine, there is a different buyer to whom Seller could sell the completed machine for $1.9 million. Once Seller completes production of the machine and sells it for $1.9 million to the new buyer, what will Seller’s damages be against the original Buyer?

(A) $3.2 million, in an action for the price.

(B) $1.3 million, but Seller’s damages would be even more than that if Seller could show that in the absence of Buyer’s breach, it could have made both the sale to the original Buyer as well as the sale to the new buyer.

(C) $1.3 million, whether or not Seller could show that in the absence of Buyer’s breach, it could have made both the sale to the original Buyer as well as the sale to the new buyer.

(D) $1.2 million, which represents Seller’s lost profits in its contract with the original Buyer.

(E) Zero, because Seller actually made a profit with the new buyer by only having to spend $800,000 more in direct labor and material costs from the point of the original Buyer’s repudiation in order to earn $1.9 million for the sale to the new buyer.

Answer 11

C

Question 12

Buyer and Seller enter into a contract in which Seller agrees to build a custom-designed drill-press machine for Buyer for a total price of $3.2 million. Seller plans to spend $1.2 million in direct labor costs and $800,000 in direct materials costs. Buyer repudiates the contract in mid-production, at which point Seller has purchased and used $400,000 in raw materials and has expended $800,000 in direct labor costs. Seller realizes that by spending an additional $80,000 in direct labor costs, Seller will be able to sell the scrap for $1.4 million in a sale that Seller never would have made had Buyer not breached. Assume that Seller reasonably opts to spend the additional $80,000 and sells the scrap for $1.4 million. For what amount of damages can Seller recover from Buyer?

(A) $1.2 million.

(B) $1.28 million.

(C) $1 million.

(D) $1.88 million.

(E) None of the above.

Answer 12

E

Question 13

Seller, a Chicago company, agrees to sell to Buyer, a Houston company, a shipment of six dozen widgets for a contract price of $430,000, “FOB Chicago.” Delivery date in the contract is July 9. Buyer arranges and pays for shipment, and on July 9 the widgets arrive in Houston on time. However, they are clearly defective and Buyer immediately rejects them. The cost of shipping six dozen widgets from Chicago to Houston is $25,000. The market price of six dozen widgets on July 9 is $395,000 in Chicago and $460,000 in Houston. Assuming Buyer has not pre-paid any of the purchase price (or shipping charges) and Buyer chooses not to cover, for what amount of damages may Buyer recover from Seller?

(A) $30,000.

(B) $5,000.

(C) Zero.

(D) $55,000.

(E) None of the above.

Answer 13

A

Question 14

Seller, a Chicago company, agrees to sell to Buyer, a Houston company, a shipment of six dozen widgets for a contract price of $430,000, “FOB Chicago.” Delivery date in the contract is July 9. Seller (without giving any advance notice to Buyer) fails to deliver the goods at all on July 9. The cost of shipping six dozen widgets from Chicago to Houston is $25,000. The market price of six dozen widgets on July 9 is $395,000 in Chicago and $460,000 in Houston. Assuming Buyer has not pre-paid any of the purchase price (or shipping charges) and Buyer chooses not to cover, for what amount of damages may Buyer recover from Seller?

(A) Zero.

(B) $30,000.

(C) $35,000.

(D) $10,000.

(E) None of the above

Answer 14

A

Question 15

Seller, a Chicago company, agrees to sell to Buyer, a Houston company, a shipment of six dozen widgets for a contract price of $430,000, “FOB Chicago.” Delivery date in the contract is July 9. Buyer arranges and pays for shipment, and on July 9 the widgets arrive in Houston on time. However, they are clearly defective and Buyer immediately rejects them. Buyer spends a week searching around town and is able to purchase six dozen substitute widgets of the same type for $465,000. Buyer also spends $3,000 to have the substitute widgets delivered to Buyer’s place of business. Finally, Buyer ends up spending $2,000 to store the defective widgets until Seller can pick them up. Assuming Buyer has not pre-paid any of the purchase price (but Buyer did pay the $25,000 shipping cost from Chicago to Houston), for what amount of damages may Buyer recover from Seller?

(A) $32,000.

(B) $65,000.

(C) $40,000.

(D) Zero.

(E) None of the above.

Answer 15

C

Question 16

Super Cater is a high-end catering business that prepares and delivers gourmet dinners for fancy corporate events. Earth Dance, a not-for-profit organic farm, makes a contract with Super Cater to purchase dinners for 200 guests for Earth Dance’s annual fundraising event. Tickets to the dinner are $100 each, and Super Cater agrees to serve the 200 guests for a total price of $8,000. On the morning of the big dinner, Super Cater calls Earth Dance to say that it will not be able to serve the dinners that night. Earth Dance frantically calls around and is unable to locate another caterer who can handle such a big job on such short notice. Earth Dance reluctantly has to cancel this year’s fundraising dinner and refunds everyone’s ticket price. When Earth Dance sues Super Cater for $12,000 in damages, what should be the result?

(A) Super Cater wins, unless Earth Dance can show that Super Cater’s prices were significantly below the market.

(B) Super Cater wins, because Earth Dance cannot recover consequential damages when there is no injury to person or property.

(C) Earth Dance wins, even if Super Cater did not know that these dinners were for Earth Dance’s annual fundraising event.

(D) Earth Dance wins, but only if Super Cater had reason to know of Earth Dance’s annual fundraising event.

(E) Earth Dance wins, and would still win even if cover had been possible.

Answer 16

D

Question 17

Mexico City Buyer (“Buyer”) makes a contract with Houston Seller to purchase five brand-new dump trucks for $750,000, “FOB Buyer’s Factory.” Two weeks before delivery of the trucks is due, Houston Seller wrongfully repudiates the contract. The reason that Buyer made this contract with Houston Seller is that Buyer had arranged to sell to Mexico City Construction Company five brand-new dump trucks for $950,000. Buyer was going to use the trucks from Houston Seller to fulfill its own contract with Mexico City Construction, which had agreed to pick up the trucks from Buyer once Buyer had the trucks. If Buyer had made reasonable cover efforts, it could have purchased the same trucks from Dallas Seller for $800,000, “FOB Seller’s Factory.” Delivery costs from Dallas to Mexico City would have been $30,000. No cover is available in Mexico City, and Dallas is the closest place that offers a feasible cover. Because Buyer does not make these reasonable cover efforts, Buyer is unable to fulfill its own contract with Mexico City Construction Company. Fortunately, Mexico City Construction Company has made it clear that it will not be suing Buyer for Buyer’s breach in failing to supply the dump trucks. For what amount may Buyer recover from Houston Seller?

(A) Zero.

(B) $200,000.

(C) $80,000.

(D) $50,000.

(E) None of the above.

Answer 17

C

Question 18

Mexico City Buyer (“Buyer”) makes a contract with Houston Seller to purchase five brand-new dump trucks for $750,000, “FOB Buyer’s Factory.” Two weeks before delivery of the trucks is due, Houston Seller wrongfully repudiates the contract. The reason that Buyer made this contract with Houston Seller is that Buyer had arranged to sell to Mexico City Construction Company five brand-new dump trucks for $950,000. Buyer was going to use the trucks from Houston Seller to fulfill its own contract with Mexico City Construction, which had agreed to pick up the trucks from Buyer once Buyer had the trucks. If Buyer had made reasonable cover efforts, it could have purchased the same trucks from Dallas Seller for $800,000, “FOB Seller’s Factory.” Delivery costs from Dallas to Mexico City would have been $30,000. No cover is available in Mexico City, and Dallas is the closest place that offers a feasible cover. Because Buyer does not make these reasonable cover efforts, Buyer is unable to fulfill its own contract with Mexico City Construction Company. Mexico City Construction Company successfully recovers $140,000 in damages from Buyer due to Buyer’s breach. For what amount may Buyer recover from Houston Seller?

Answer 18

E

Question 19

Lou’s Used Cars has now gotten into the business of leasing certain new cars. Lou’s has decided to lease the new Toyota Corolla Hatchback model, since this is the first time that Toyota has offered the Corolla in a Hatchback. Lou enters into a three-year lease of a new Corolla Hatchback with Joanne Gavin, who is super-excited to lease the aqua blue model that Lou has in stock. Unfortunately for Lou, after Joanne signs that lease, one of Lou’s sales staff accidentally leases the last aqua blue Corolla Hatchback to another customer. Joanne is very disappointed upon hearing the news but is able to find a different aqua blue Corolla Hatchback to lease from a different local dealer. Lou’s lease with Joanne, that he breached was for three years at $250 per month with a purchase option at fair-market value at the end of the lease. Joanne was able to get her new lease for four years at $260 per month. That was actually a good deal for Joanne, since the market price for comparable leases at the time of Lou’s breach had gone up to $300 per month. Joanne’s new lease, unlike Lou’s (or most others on the market), requires her to have the car tuned up each year at an approximate cost to her of $150 per year. The new lease has a fair-market value purchase option at the end of the lease. Both the original lease and the new lease allow the lessee to terminate at any time by paying a one-time termination fee of $250. If Joanne decides to sue Lou for his breach of the original lease contract, for what amount of damages should Lou be liable (putting aside discounting to present value)?

(A) $1,800.

(B) $2,250.

(C) $360.

(D) $810.

(E) $960.

Answer 19

D

Question 20

Lou’s Used Cars has now gotten into the business of leasing certain new cars. Lou’s has decided to lease the new Toyota Corolla Hatchback model, since this is the first time that Toyota has offered the Corolla in a Hatchback. Lou enters into a three-year lease of a new Corolla Hatchback with Joanne Gavin, who is super-excited to lease the aqua blue model that Lou has in stock. Unfortunately for Lou, after Joanne signs that lease, one of Lou’s sales staff accidentally leases the last aqua blue Corolla Hatchback to another customer. Joanne is very disappointed upon hearing the news and she was not able to find another aqua blue Corolla Hatchback in town to lease. Instead, she ended up leasing an aqua blue BMW sedan with a three-year lease for $500 per month. The new lease has a fair-market value purchase option at the end, it allows the lessee to terminate at any time for a one-time $250 termination fee, and it requires the lessee to tune up the car annually at a cost of approximately $400 per year. That was actually a good deal for Joanne, since the market price for comparable leases at the time of Lou’s breach had gone up to $300 per month. Lou’s lease with Joanne, that he breached was for three years at $250 per month with a purchase option at fair-market value at the end of the lease. If Joanne decides to sue Lou for his breach of the original lease contract, for what amount of damages should Lou be liable (putting aside discounting to present value)?

(A) $9,000.

(B) $10,200.

(C) $1,800.

(D) $3,000.

(E) Zero.

Answer 20

C

Question 21

On September 22, San Francisco Seller makes a contract with San Diego Buyer to sell 1,000 widgets on October 9 for a total price of $320,000, “FOB Seller’s Place.” The cost of delivering 1,000 widgets from San Francisco to San Diego is $20,000. On September 23, San Diego Buyer makes a contract to sell to Los Angeles Buyer 1,000 widgets for $380,000, “FOB Seller’s Place,” delivery date October 10. The cost of delivering 1,000 widgets from San Diego to Los Angeles is $10,000. On October 8, San Francisco Seller announces to San Diego Buyer that it will breach its contract to sell the widgets. It is too late for San Diego Buyer to arrange suitable cover, and from October 8 to October 10 the market price for 1,000 widgets is $450,000 in Los Angeles, $410,000 in San Diego, and $420,000 in San Francisco. Assuming that Los Angeles Buyer will recover from San Diego Buyer whatever damages the UCC allows and that no buyers here have pre-paid any of the purchase price, for what amount of damages may San Diego Buyer recover from San Francisco Seller under the approach in the Allied Canners case?

(A) $170,000.

(B) $100,000.

(C) $70,000.

(D) $80,000.

(E) Zero.

Answer 21

C

Question 22

On September 22, San Francisco Seller makes a contract with San Diego Buyer to sell 1,000 widgets on October 9 for a total price of $320,000, “FOB Seller’s Place.” The cost of delivering 1,000 widgets from San Francisco to San Diego is $20,000. On September 23, San Diego Buyer makes a contract to sell to Los Angeles Buyer 1,000 widgets for $380,000, “FOB Seller’s Place,” delivery date October 10. The cost of delivering 1,000 widgets from San Diego to Los Angeles is $10,000. On October 8, San Francisco Seller announces to San Diego Buyer that it will breach its contract to sell the widgets. It is too late for San Diego Buyer to arrange suitable cover, and from October 8 to October 10 the market price for 1,000 widgets is $450,000 in Los Angeles, $410,000 in San Diego, and $420,000 in San Francisco. Assuming that Los Angeles Buyer will recover from San Diego Buyer whatever damages the UCC allows and that no buyers here have pre-paid any of the purchase price, for what amount of damages may San Diego Buyer recover from San Francisco Seller under the approach in the Texpar case?

(A) $170,000.

(B) $100,000.

(C) $70,000.

(D) $80,000.

(E) Zero.

Answer 22

B

Question 23

On September 22, San Francisco Seller makes a contract with San Diego Buyer to sell 1,000 widgets on October 9 for a total price of $320,000, “FOB Seller’s Place.” The cost of delivering 1,000 widgets from San Francisco to San Diego is $20,000. On September 23, San Diego Buyer makes a contract to sell to Los Angeles Buyer 1,000 widgets for $380,000, “FOB Seller’s Place,” delivery date October 10. The cost of delivering 1,000 widgets from San Diego to Los Angeles is $10,000. On October 8, San Francisco Seller announces to San Diego Buyer that it will breach its contract to sell the widgets. San Diego Buyer is able to cover by purchasing 1,000 widgets in Oakland for $320,000 plus $30,000 in delivery costs that it incurs to get the widgets to San Diego. As a result, San Diego Buyer is able to fulfill its contract with Los Angeles Buyer. For what amount of damages may San Diego Buyer recover from San Francisco Seller under the approach in the Allied Canners case?

(A) $20,000.

(B) $10,000.

(C) $30,000.

(D) Zero.

(E) $40,000.

Answer 23

B

Question 24

On September 22, San Francisco Seller makes a contract with San Diego Buyer to sell 1,000 widgets on October 9 for a total price of $320,000, “FOB Seller’s Place.” The cost of delivering 1,000 widgets from San Francisco to San Diego is $20,000. On September 23, San Diego Buyer makes a contract to sell to Los Angeles Buyer 1,000 widgets for $380,000, “FOB Seller’s Place,” delivery date October 10. The cost of delivering 1,000 widgets from San Diego to Los Angeles is $10,000. On October 8, San Francisco Seller announces to San Diego Buyer that it will breach its contract to sell the widgets. San Diego Buyer is able to cover by purchasing 1,000 widgets in Oakland for $320,000 plus $30,000 in delivery costs that it incurs to get the widgets to San Diego. As a result, San Diego Buyer is able to fulfill its contract with Los Angeles Buyer. Assume that the court deciding the damages here is a court that follows the approach in TexPar rather than Allied Canners. In light of the cover purchase, for what amount of damages may San Diego Buyer recover from San Francisco Seller under the approach in the TexPar case?

(A) $20,000.

(B) $10,000.

(C) $30,000.

(D) Zero.

(E) $40,000.

Answer 24

B

Question 25

Buyer makes a $15,000 deposit toward the purchase of a $108,000 widget and then wrongfully repudiates her contract before the delivery date. Seller could show actual damages of $9,000 as a result of the breach. Under a literal approach to UCC §2-718(3), how much of Buyer’s deposit will Seller have to return to Buyer?

(A) Zero.

(B) $14,500.

(C) $15,000.

(D) $6,000.

(E) $5,500.

Answer 25

E

Question 26

Buyer makes a $20,000 deposit toward the purchase of a $108,000 widget and then wrongfully repudiates her contract before the delivery date. Seller could show actual damages of $11,000 as a result of the breach. Under the approach taken by the court in Neri v. Retail Marine Corp., how much of Buyer’s deposit will Seller have to return to Buyer?

(A) $11,000.

(B) $20,000.

(C) $8,500.

(D) $9,000.

(E) Zero.

Answer 26

D

Question 27

Seller agrees to sell a dozen widgets to Buyer for a total price of $20,000. The terms of the sales contract are that Seller will deliver the widgets to Buyer’s place of business at Seller’s expense on October 4, “cash on delivery.” On October 4, Seller’s carrier delivers the goods to Buyer and accepts Buyer’s personal check for $20,000 made out to Seller. Unfortunately, Seller learns on October 16 that Buyer’s check was dishonored by Buyer’s bank for insufficient funds and was returned to Seller unpaid. Upon receiving the dishonored check, Seller further investigates and discovers that Buyer has been insolvent for at least the past two months, although Buyer has not yet filed for bankruptcy. In light of all of the above, does Seller have the right to demand its widgets back from Buyer if Buyer is either unable or unwilling to pay Seller the $20,000 purchase price?

(A) No, because Seller is now just an unsecured creditor of Buyer’s, and unsecured creditors have no specific right to demand return of the goods that they sold.

(B) No, because Seller’s demand would need to occur within 10 days after Buyer’s receipt of the goods and those 10 days have now passed.

(C) Yes, because Seller qualifies for the special reclamation rights found in UCC §2-702(2).

(D) Yes, because Buyer’s rights to retain the goods under these circumstances is conditional on Buyer making the $20,000 payment that is due.

(E) Both (C) and (D) are true.

Answer 27

D

Question 28

Seller agrees to sell a dozen widgets to Buyer for a total price of $20,000. The terms of the sales contract are that Seller will deliver the widgets to Buyer’s place of business at Seller’s expense on October 4, “full payment within 30 days of receipt.” On October 4, Seller’s carrier delivers the goods to Buyer and accepts Buyer’s personal check for $20,000 made out to Seller. Unfortunately, Seller learns on October 16 that Buyer’s check was dishonored by Buyer’s bank for insufficient funds and was returned to Seller unpaid. Upon receiving the dishonored check, Seller further investigates and discovers on October 12 that Buyer filed bankruptcy on October 5. Finally, Seller also learns that Buyer has a perfected secured lender that has a security interest in all of Buyer’s widgets, including after-acquired widgets. If Seller pursues its reclamation rights in Buyer’s bankruptcy as to the dozen widgets that it sold to Buyer on credit, what will Seller be entitled to?

(A) No claim at all against Buyer’s bankruptcy estate.

(B) A general unsecured claim of $20,000 against Buyer’s bankruptcy estate.

(C) An administrative priority claim of $20,000 against Buyer’s bankruptcy estate.

(D) The right to the return of the dozen widgets that Seller sold on credit to Buyer.

(E) A lien on the dozen widgets that Seller sold on credit to Buyer.

Answer 28

C