Contracts Flashcards
Anticipatory Repudiation
- AR occurs when a promisor, prior to the time for performance of his promise, unequivocally indicates that he will not perform when the time comes;
- The non-repudiating party has the option to sue immediately for breach.
Must be a bilateral contract with executory duties on both sides.
Impossibility/Impracticability
Definition: If the non-occurrence of the event was a basic assumption of the parties in making the contract, and neither party assumed the risk of the event occurring, then contractual duties may be discharged.
Effect: If the event was unanticipated at the time of contracting and its nonoccurrence was a basic assumption, the courts will discharge contractual duties if they can only be performed with EXTREME AND UNREASONABLE difficulty OR EXPENSE.
However, Seller usually assumes the risk of unforeseen events and must continue to perform unless the parties would not have placed such a risk on the Seller. Increase in costs are rarely a sufficient reason unless they change the nature of the contract.
Misc:
- Unprofitable not the same as impossible.
- Impossibility is objective, it must be impossible for Defendant or anyone else to perform.
3.
Specific Performance
- If legal remedy is inadequate, the non-breaching party may seek specific performance which is a court order requiring the breaching party to perform;
- Generally, legal remedy is inadequate if the subject matter of the K is rare or unique.
- The UCC grants specific performance if, after reasonable effort, the buyer is unable to secure substitute goods.
- Purpose of specific performance is to produce as near as possible the same effect as would have been produced if the K had been performed.
UCC: Expectation Damages
If Seller breaches by failure to deliver goods, the buyer’s basic damages are: difference between the K price and the cover price, plus incidental and consequential damages OR difference between K price and market price.
Notes:
- If suit is result of AR then damages measured as of the time he learned of the breach.
- Buyer not REQUIRED to cover, but if Buyer does cover must make a reasonable contract for substitute goods in good faith and without reasonable delay.
Incidental Damages
Incidental damages include expenses reasonably incurred by the buyer incident to the seller’s breach.
UCC: Consequential Damages
- Consequential damages are special damages (usually lost profits) resulting from the non-breaching party’s particular circumstances and reflect losses over and above standard expectation damages.
- A seller is liable for consequential damages if he had reason to know of the buyer’s particular requirements, and the subsequent loss resulting from those needs could not have been prevented by cover.
- If Buyer is in the business of reselling goods, the seller is deemed to have knowledge of the resale.
Lost Profits
- To recover lost profits the P must show that the losses suffered were certain and not speculative.
- When the issue is lost profits, it can depend on whether the business is an existing business or a new business.
- May accept evidence of profits of similarly situated businesses.
- Six months is usually enough time to be in business.
Cost Saved
Damages are reduced by any costs saved as a result of the breach.
Replevin
A buyer can bring an action to recover goods (replevin) if:
- The goods are identified in the K; and
- Buyer after reasonable effort is unable to secure adequate substitute goods, or the circumstances indicate such an effort would be futile.
Preliminary Injunction
- Irreparable injury
- Harm to P outweighs harm to D if PI is granted; and
- Likely to prevail on the merits.
Granted at discretion of the court. May require moving party to post bond.
Minor vs. Material Breach
Every breach gives a nonbreaching party a right to provable money damages, but only a material breach excuses the nonbreaching party from performing.
- Breach is minor if the obligee gains a substantial benefit of the bargain despite the defective performance;
- A material breach means the obligee did not receive the substantial benefit of the bargain.
In determining whether a breach is material, the court will look not only at whether there was a material breach, but the totality of the deviations from the contract terms.
Materiality
Courts generally consider the following factors in determining the materiality of the breach:
- The extent to which the nonbreaching party will receive the benefit he expected;
- The extent to which the nonbreaching party can be compensated by damages;
- The hardship to the breaching part if the K is terminated;
- The extent to which the breach was negligent or willful;
- The extent to which the breaching party has performed, and the likelihood of full performance.
Remember, where K specifically provides that a minor breach would be a material breach, it is treated as material.
Restitution
- Restitution is based on preventing unjust enrichment;
- Even when party is in breach they may recover;
- Measure of damages is the benefit conferred minus innocent party’s damages.
