Breach of Contract & Remedies Flashcards
Anticipatory Breach/Repudiation - CL
The promisor party clearly and unequivocally indicates through words or acts that is will not perform.
Nonbreaching Party Can:
1) treat the repudiation as a breach of contract and sue immediately
2) suspends its own performance and demand performance from the promisor
3) cancel the contract, or
4) wait for the date of performance, and then sue for breach
Retraction: The promisor party can retract its repudiation until/unless the other party
- acts in reliance on the repudiation
- accepts the repudiation, or
- has already filed an action for breach of contract
Anticipatory Breach/Repudiation (generally)
Occurs when a promisor party indicates that it will not perform prior to the date that performance is due.
Anticipatory Breach/Repudiation - UCC
Occurs when a buyer/seller:
- unequivocally refuses to perform, or
- fails to provide timely adequate assurances
Either party can demand assurances in writing if it has reasonable grounds to be insecure about the other party’s ability to perform and may suspect performance until it receives assurances. Failure to provide assurances within a reasonable time (must not exceed 30 days) can be treated as a repudiation.
Nonbreaching Party Can:
1) treat the repudiation as a breach of contract and sue immediately
2) suspends its own performance and demand performance from the promisor
3) cancel the contract, or
4) wait for the date of performance, and then sue for breach
Retraciton: The promisor party can retract its repudiation of the contract until/unless the other party has:
- cancelled the contract
- materially changed position on the basis of the repudiation, or
- otherwise indicated that he considers the repudiation to be final.
Expectation Damages
Are generally calculated by comparing the value of performance without the breach (contract price for performance) with the value of the performance with the breach (fair market value of performance).
Diminution in Value: If the award of expectation damages would result I economic waste, then courts may instead award damages equal to diminution in value. BUT if breach is willful, then court may award expectation damages even if the award would result in economic waste.
Consequential Damages
Reasonably foreseeable damages other than expectation damages that are related to the breach of contract (e.g., loss of profit).
To recover, three elements must be met:
1) Foreseeability - must have been foreseeable at time contract was formed
2) Causation - P must show damages caused by D’s breach
3) Certainty - P must prove dollar amount with reasonable certainty (if amount too speculative, the court will not award consequential damages)
Reliance Damages
Damages that the nonbreaching party incurs in reasonable reliance upon the promise that the other party would perform.
Incidental Damages
Damages that arise when the nonbreaching party is trying to remedy the breach (e.g., in a commercial contract, the cost of finding a replacement seller of goods).
Duty to Mitigate Damages
The nonbreaching party must avoid or mitigate its damages by taking reasonable steps to seek replacements/substitutes for goods and/or services. Failure to take reasonable steps to mitigate damages will reduce the damages recovered by the nonbreaching party.
Restitution
Allows nonbreaching and breaching parties to recover damages under an unjust enrichment theory (i.e., not based on the contract).
Nonbreaching Party:
- Cannot seek restitution if it has performed all of its duties and the only performance due from the other party is payment under the contract.
- Based on the reasonable value of the benefit conferred on the other party.
Breaching Party:
- If a party has not substantially performed, it will be in breach, and cannot recover under the contract. BUT if the nonbreaching party has benefitted from the breaching party’s performance, the breaching party can recover for the benefit conferred minus the damages the nonbreaching party is entitled to.
Quasi-Contract
If there is NO enforceable contract, a court may award restitution damages on the basis of quasi-contract if:
- the P conferred a measurable benefit on the D
- the P acted without gratuitous intent (intended to be paid), and
- it would be unfair to let D retain the benefit
Specific Performance
The nonbreaching party can ask the court to order the breaching party to perform the contract.
Elements:
1) There must be a valid contract
2) The terms of the contract must be certain/clear enough to allow a court to make an order
3) The nonbreaching parry has satisfied any conditions precedent, so the breaching party’s performance is now due
4) Money damages are inadequate
5) It is feasible for the court to enforce and supervise the breaching party’s performance
Note: Courts won’t force people to perform service contracts.
UCC: Buyer’s Remedies - Failure to Tender
The buyer may recover the market price minus the contract price.
The buyer may purchase similar goods elsewhere and recover the replacement price minus the contract price.
The buyer may demand specific performance for unique goods or if the buyer is unable to cover.
UCC: Buyer’s Remedies - Non-Conforming Tender
Buyer has the right to accept or rect all or part of the goods.
Buyer has a right to inspect the goods before deciding whether to accept or reject.
Payment does NOT constitute acceptance if there is no opportunity to inspect the goods before payment.
Rejection:
- A valid rejection requires that the buyer give notice to the seller within a reasonable time, before acceptance.
- Rejection triggers the seller’s right to cure.
Acceptance:
- The buyer accepts the goods by expressly stating acceptance, or suing the goods, or failing to reject the goods.
- A buyer may revoke an acceptance of goods if there is a defect that substantially impairs their value to the buyer, and (1) the seller failed to cure, or (2) seller gave assurances goods were conforming but the nonconformity was hard to discover and buyer accepted.
- Buyer must inform seller of its discretion to revoke within a reasonable time after the nonconformity is discovered or should have been discovered.
UCC: Seller’s Remedies
If the buyer wrongfully rejects a tender of goods, the seller is entitled to incidental damages as well as one of three alternative remedies:
1) Collect damages
2) Resell the goods
3) Recover the price (only if seller unable to sell grids at reasonable price after effort)
