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contracts & sales > breach of contract and remedies > Flashcards

breach of contract and remedies Flashcards

1
Q

breach of K - in general

A

once duty to perform exists, nonperformance is a breach unless duty is discharged

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2
Q

breach of K - common law: material breach

A

(nonbreaching party does not receive substantial benefit of bargain)—allows nonbreaching party to withhold any promised performance and to pursue remedies for breach, including damages

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3
Q

breach of K - common law: minor breach

A

(breaching party has substantially performed)—nonbreaching party entitled to pursue remedies for nonmaterial breach (damages) but must perform under the K

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4
Q

break of K - UCC

A

In general, seller must strictly perform all obligations under K or be in breach
- Material breach only applies to installment Ks or when parties stipulate it in K

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5
Q

anticipatory repudiation - common law

A

Promisor repudiates before time of performance is due—repudiation must be
clear and unequivocal through words or acts

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6
Q

anticipatory repudiation - common law: nonbreaching party’s options

A

o Treat repudiation as a breach, or
o Ignore repudiation and demand performance of promisor, but suspend any performance by promisee if it would increase promisor’s damages
o If date of performance has not passed and the only performance left is payment,
must wait for actual breach before filing suit

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7
Q

anticipatory repudiation - common law: retraction of repudiation

A

can be retracted until:
- promisee acts in reliance on repudiation,
- accepts repudiation, or
- commences action for breach of K

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8
Q

anticipatory repudiation - common law: unilateral Ks

A

anticipatory repudiation does not apply

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9
Q

anticipatory repudiation - UCC

A

Anticipatory repudiation occurs when there has been an unequivocal refusal of buyer/seller to perform or when reasonable grounds for insecurity arise and the other party fails to provide adequate assurances within reasonable time (not to exceed 30 days)

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10
Q

anticipatory repudiation - UCC: retraction of repudiation

A

permitted if other party has not canceled the K or materially changed position

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11
Q

anticipatory repudiation - UCC: prospective inability to perform

A

party’s expectations of performance may be
diminished by an event occurring after K formation:
o A party can demand assurances if reasonable grounds for insecurity about other party’s ability to perform (and may suspend performance until provided); the demand must be in writing
o Failure to provide adequate assurances within reasonable time (limited to 30 days) treated as repudiation

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12
Q

what are the types of remedies/damages for breach of K? (8)

A

(1) expectation damages
(2) consequential damages and foreseeability
(3) incidental damages
(4) liquidated damages and penalties
(5) punitive damages
(6) nominal damages
(7) attorney’s fees
(8) mitigating damages

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13
Q

expectation damages in general

A

o Intended to put nonbreaching party in same position as if K had been performed
o Must be calculated with reasonable certainty
o Expectation damages = loss in value + other loss – cost avoided – loss avoided
-If using this formula, plaintiff should not
recover separately calculated consequential
and incidental damages

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14
Q

expectation damages - partial performance

A

partially performing party recovers work performed + expectation damages for work not yet performed

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15
Q

expectation damages - defective performance: construction Ks

A

damages; generally the cost to correct the defect

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16
Q

expectation damages - defective performance: sale of goods

A

damages equal to the difference between the value of the goods as warranted and the actual value of the tendered nonconforming goods

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17
Q

expectation damages - defective performance: real estate

A

damages for failure to perform = difference between K price and market value; damages for late delivery = fair market rental value

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18
Q

expectation damages - economic waster

A

applies to construction contracts:
o Occurs when the cost to fix or complete construction is clearly disproportional to
any economic benefit/utility gained as a result; court can award damages equal to the diminution in the market price of property
o If the breach is willful and only completion of the K will give the nonbreaching party the benefit of its bargain, court can award damages to fix or complete construction even if it results in economic waste

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19
Q

expectation damages - UCC breach of warranty damages

A

difference between the value of the goods
accepted and the value they would have had if they had been as warranted (often,
repair costs)

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20
Q

consequential damages and foreseeability - direct damages

A

necessary and usual result of D’s wrongful act (i.e., “loss of value)

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21
Q

consequential damages and foreseeability - consequential damages

A

damages that result from the breach, but arise out of special circumstances unique to the parties to the contract; must be reasonably
foreseeable to the breaching party (but need not be a usual result of D’s conduct), caused by the breach, and reasonably certain in value to be recovered

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22
Q

consequential damages and foreseeability - foreseeability

A

o Unforeseeable—not recoverable unless the breaching party had some reason to
know about the possibility of the unforeseeable consequential damages
o Damages are recoverable if they are natural and probable consequences of breach,
or if they were contemplated by the parties at K formation, or if they were
otherwise foreseeable

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23
Q

consequential damages and foreseeability - causation

A

D’s defense that P’s losses would have occurred regardless of D’s breach

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24
Q

consequential damages and foreseeability - reasonable certainty

A

o Dollar amount of damages must be proven with reasonable certainty
o If lost profits are too speculative, courts may limit recovery to reliance damages
(reasonable expenditures made in connection with the K)

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25
Q

consequential damages and foreseeability - limitation by agreement

A

An agreement to expressly exclude or limit consequential damages is generally enforceable

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26
Q

consequential damages and foreseeability - UCC

A

o Only buyers can seek consequential damages under the UCC; sellers permitted to seek consequential damages based on common law or other statutes
o Limitation of consequential damages for personal injury in the case of consumer goods is prima facie unconscionable
o Limitation of damages when the loss is commercial is NOT prima facie unconscionable

27
Q

incidental damages - in general

A

compensation for commercially reasonable expenses incurred as a result of other party’s breach

28
Q

incidental damages - seller’s breach

A

expenses incurred in inspection, receipt, transportation, care, and custody of goods rightfully rejected; expenses in effecting cover; and any other reasonable expense incident to the delay or other breach

29
Q

incidental damages - buyer’s breach

A

any expenses incurred in stopping delivery; in the transportation, care, and custody of goods after the buyer’s breach; in connection with return or resale of the goods; or otherwise resulting from the breach

30
Q

liquidated damages and penalties

A

damages stipulated by the parties to the K as a
reasonable estimation of actual damages to be recovered in the event of a breach

31
Q

when are liquidated damages and penalties enforceable?

A

Enforceable if:
o Parties intended to agree in advance to damages that might arise from breach
o Stipulated amount was reasonable at time of K, bearing some relation to damages that might be sustained, and
o Actual damages would be uncertain in amount and difficult to prove

32
Q

punitive damages

A

rarely available in K actions but may be available if conduct

33
Q

nominal damages

A

when no damages are alleged/proven

34
Q

attorney’s fees

A

in K, not recoverable absent express agreement or specific law

35
Q

mitigating damages

A
  • Party to K must avoid or mitigate damages to the extent possible by taking steps that do not involve undue risk, expense, or inconvenience
  • Nonbreaching party held to standard of reasonable conduct in preventing loss
  • Services K—a party is generally not required to accept any type of employment (only employment of the same type as the party was contracted to perform)
  • Failure to mitigate reduces damages that may be recovered by nonbreaching party
36
Q

restitution and reliance recoveries - restitutionary damages

A

restores to a party the benefit conferred on the other party:
* Measured by either the reasonable value of the D obtaining that benefit from another
source, or increase in the D’s wealth from having received that benefit
* If P has not substantially performed and is in breach, P not permitted to recover

37
Q

restitution and reliance recoveries - restitutionary damages: recovery by nonbreaching party

A

o Nonbreaching party may recover for any benefit conferred on breaching party by
way of part performance or reliance
o Nonbreaching party may not recover restitution if he has fully performed and the
only remaining performance by the other party is the payment of a definite sum of
money

38
Q

restitution and reliance recoveries - restitutionary damages: recovery by breaching party

A

o If D has benefitted from P’s performance, P can recover for benefit conferred less
the D’s damages for the breach
o P generally cannot recover if P’s breach was willful or if K provides that
nonbreaching party may retain the value of the breaching party’s performance as
liquidated damages

39
Q

restitution and reliance recoveries - reliance damages

A

reasonable out-of-pocket expenses incurred by nonbreaching party:
* Recoverable if nonbreaching party incurs expenses in reasonable reliance upon the
promise that other party would perform
* Party cannot recover both reliance and expectation damages

40
Q

specific performance in general

A

an equitable remedy possible when damages are an inadequate remedy

41
Q

specific performance - factors considered in determining whether damages are adequate

A
  • Difficulty of proving damages with reasonable certainty
  • Hardship to D
  • Balance of the equities
  • Wishes and understandings of the parties
  • Practicality of enforcement
  • Mutuality of agreement
42
Q

specific performance - real property

A

specific performance granted because real property is considered unique

43
Q

specific performance - UCC

A

specific performance may be granted to the buyer when goods are rare or unique

44
Q

specific performance - equitable defenses

A

laches (prejudicial delay in bringing the action) or unclean hands (nonbreaching party guilty of some wrongdoing in the transaction) may be raised by breaching party

45
Q

UCC remedies - buyer’s remedies in general

A

when seller fails to perform or makes a nonconforming tender

46
Q

UCC remedies - buyer’s remedies - failure to tender goods: cancel K

A

Cancel K—if breach of installment K goes to entire K

47
Q

UCC remedies - buyer’s remedies - failure to tender goods: recovery of payments

A

upon cancellation, buyer entitled to recover payments made for tender; on rejection or revoked acceptance, also gets security interest in goods in buyer’s possession

48
Q

UCC remedies - buyer’s remedies - failure to tender goods: damages

A

market price minus K price plus incidental and consequential damages

49
Q

UCC remedies - buyer’s remedies - failure to tender goods: cover

A

buyer may purchase similar goods elsewhere and recover replacement price minus the K price

50
Q

UCC remedies - buyer’s remedies - failure to tender goods: specific performance

A

for unique goods

51
Q

UCC remedies - buyer’s remedies - failure to tender goods: replevin

A

buyer can obtain undelivered goods from seller if at least partial payment is made or the buyer is unable to effect cover

52
Q

UCC remedies - buyer’s remedies - nonconforming tender in general

A

buyer has right to accept or reject all or part of the goods (and the right to inspect before making that decision)

53
Q

UCC remedies - buyer’s remedies - nonconforming tender: rejection

A

buyer can reject goods if he gives notice to seller within a reasonable
time and before acceptance, and is then entitled to a return of any payments made
or to seek same remedies as if no tender was made

54
Q

UCC remedies - buyer’s remedies - nonconforming tender: acceptance

A

buyer accepts goods by expressly stating acceptance, using the goods, or failing to reject the goods; to recover damages, buyer must give seller timely notice of breach; damages measured by difference between value of nonconforming goods and value of conforming tender (usually cost of replacement or repair), plus consequential and incidental damages

55
Q

UCC remedies - buyer’s remedies - nonconforming tender: right to cure

A

seller has right to cure defective tender if time of performance under K has not yet elapsed or seller had reasonable grounds to believe that buyer would accept despite the nonconformity

56
Q

UCC remedies - seller’s remedies - right to price

A

seller may recover the full price if buyer has accepted goods; conforming goods are destroyed or lost after risk has shifted to buyer; seller cannot reasonably sell identified goods

57
Q

UCC remedies - seller’s remedies - right to reclaim goods

A

from insolvent buyer if he makes a demand within 10 days after buyer receives goods

58
Q

UCC remedies - seller’s remedies - stoppage of goods in transit

A

permitted if buyer breaches or is insolvent

59
Q

UCC remedies - seller’s remedies - wrongful rejection by buyer

A

seller can collect damages, resell the goods, or
recover the price, and, if the seller is a “lost volume” seller, lost profits; seller can also
collect incidental damages

60
Q

UCC remedies - risk of loss: unidentified goods

A

if goods are damaged/destroyed and there is no breach, risk of loss is on seller until he satisfies delivery obligations (and then risk shifts to buyer)
o Shipment K—risk of loss passes to buyer when the seller gives possession of the
goods to the carrier and makes proper contract for their shipment
o Destination K—risk of loss passes to buyer when the seller tenders the goods at the
place specified in the K

61
Q

UCC remedies - risk of loss: identified goods

A

seller is excused if goods are totally destroyed through no fault of the seller prior to the risk of loss being shifted to the buyer

62
Q

UCC remedies: effect of a breach of K: seller’s breach

A

if seller delivers nonconforming goods, risk of loss remains on the seller until buyer accepts or there is cure

63
Q

UCC remedies: effect of a breach of K: buyer’s breach

A

if buyer breaches/repudiates after goods have been identified but before risk of loss shifts, then risk immediately shifts to buyer (to extent of lack of insurance coverage by seller)

64
Q

statute of limitations on a breach of a sales K or warranty

A
  • Four years after cause of action accrues
    • Generally, cause of action accrues when
      breach occurs, regardless of whether
      aggrieved party knows
  • Parties may reduce four-year limitations period to not less than one year, but they may
    not extend it

contracts & sales (6 decks)

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