Anticipatory Repudiation + Expectation Damages

Question 1

What is the difference b/t CL and UCC in constructive condition of exchange?

Answer 1

CL: Failure to substantially perform means the other side may withhold their own performance.

UCC: Perfect tender. Seller must perform all obligations or be in breach.

Question 2

True or false, under CL’s constructive condition, one party may withhold payment if the other party has substantially performed

Answer 2

False. Payment may not be withheld, but the non-breaching party may be entitled to recovery

Question 3

What is constructive condition of exchange?

Answer 3

Implied conditions that connect contract performances together through conditional relationships implied from the agreement, thereby determining the parties’ order of performance.

Question 4

What is anticipatory repudiation?

Answer 4

Words or conduct by a contracting party that evinces an intention not to perform or not to be bound by provisions of the agreement that require performance in the future

Question 5

If a party clearly and unequivocally repudiates a contract, what options does the non-breaching party have?

Answer 5

1) Treat the repudiation as a breach and sue immediately for damages

2) Ignore the repudiation, demand performance and see what happens?

Question 6

Can a party who’s waiting for payment sue the other party for breach (repudiation) if the performance has been completed in full?

Answer 6

No.

Question 7

What are the conditions for a party to be allowed to retract its repudiation?

Answer 7

1. If the other side has not commenced a lawsuit
   OR
2. If the other side has not acted in reliance on the repudiation (by materially changing its position)

Question 8

Under the UCC, what happens if a party has reasonable grounds for insecurity about the other side’s performance and thus demands adequate assurance and the other party doesn’t respond?

Answer 8

If the party fails to respond within a reasonable time, you can treat this as repudiation.

Question 9

What is the typical remedy in contract law?

Answer 9

MONEY!

Question 10

Define expectation damages

Answer 10

To put a party in the same economic position it would be in if the contract had been performed as promised

Question 11

How are expectation damages measured?

Answer 11

Value of the performance without the breach - value of the performance with the breach.

Question 12

What are the three major limits on expectation damages?

Answer 12

1. Reasonable certainty
2. Unforeseeable Consequences
3. Mitigation

Question 12

What are the two categories of damages?

Answer 12

1. General Damages: the type of loss that almost anyone would incur from a breach (includes incidental damages)
2. Consequential Damages: losses that are unique or special to this plaintiff

Question 13

When are unforeseeable consequential damages recoverable?

Answer 13

Not recoverable unless the breaching party had some reason to know about the possibility of these special damages at the time of contracting (the Hadley rule)

AND

Assuming that there are no other disclaimers in the contract.

Question 14

True or false: breached-against party must take reasonable steps to reduce damages from breach

Answer 14

True. If a party refuses to mitigate, the law will calculate damages as if the party did mitigate.

Question 15

True or false: the plaintiff bears the burden of proving mitigation failure

Answer 15

False. This is the defendant’s job. And they demonstrate lack of mitigation efforts must be reasonably similar to the original contract (think: Shirley MacLaine)

Question 16

How could seller prove that it was legitimate to seek lost volume profits?

Answer 16

If the seller is a 1) retailer 2) who sells this type of product all the time, the seller might try to claim lost volume profits.

Aka, demonstrate that there were plenty widgets to sell and few buyers

Question 17

True or false: If the paying party breaches in a partially completed building contract, the builder can continue to work on the job?

Answer 17

False b/c this runs counter to mitigation—it would be “running up the damages.”

Question 18

What is the formula for adjusting expectancy damages for a partially completed contract?

Answer 18

Contract Price – Amount already Paid – Amount that Would Be Needed to Finish the Job = Adjusted expectancy damages

Question 19

Define diminution in market value

Answer 19

Diminution in market value (“DMV”)—How much lower is the market value of what you got versus what you wanted?

Question 20

What is the requirement for DMV damages?

Answer 20

The breaching party normally must have acted in an innocent and unintentional manner