Contracts VI--Remedies Flashcards
If a buyer receives goods that do not conform to the contract, what action can the buyer take to reject the goods
If a buyer rightfully rejects goods because they do not conform to the contract, one of her options is simply to cancel the contract.
Contracts VI–Remedies
Contracts>Remedies (A.2.a.1)
.
If a buyer has made at least part payment of the purchase price of gods that have been identified under a contract and the seller has not delivered the goods, under what circumstances may the buyer replevy the goods from the seller?
(1) The seller becomes insolvent within 10 days after receiving the buyer’s first payment; or (2) the goods were purchased for personal, family, or household purposes.
In either case, the buyer must tender any unpaid portion of the purchase price to the seller. [UCC § 2-502]
Contracts VI–Remedies
Contracts>Remedies (A.2.a.2.a)
.
Under what circumstances may a buyer replevy undelivered, identified goods from the seller?
The buyer may replevy undelivered, identified goods from the seller if the buyer, after reasonable effort, is unable to secure adequate substitute goods (i.e., cover). [UCC § 2-716(3)]
Contracts VI–Remedies
Contracts>UCC definitions (A.2.a.2.b)
.
What is a Breach of Warranty?
At common law, the rule was caveat emptor– let the buyer beware. Once goods were accepted, the sellers obligations were discharged. However, as we have seen, today seller’s give warranties as to the condition of the goods that apply even after acceptance. Failure to live up to these warranties constitutes a breach of warranty, for which a remedy is available.
Contracts VI–Remedies
Contracts>Breach of Warranty (V.E)
.
Why is specific performance always available for land sale contracts?
Specific performance is always available for land sale contracts because all land is considered to be unique. It is also available for goods that are rare or unique at the time performance is due (e.g. rare paintings, gasoline in short supply because of oil embargoes, etc.).
Contracts VI–Remedies
Contracts>Nonmonetary Remedies (VI.A.1.a)
.
Why is specific performance not available for service contracts?
Specific performance is not available for breach of a contract to provide services, even if the services are rare or unique. This is because of problems of enforcement (it would be difficult for the court to supervise the performance) and because the courts feel it is tantamount to involuntary servitude which is prohibited by the Constitution.
Contracts VI–Remedies
Contracts>Nonmonetary Remedies (VI.A.1.b)
.
When is specific performance available as a remedy for breach of contract?
If the legal remedy is inadequate, the nonbreaching party may seek specific performance, which is essentially an order from the court to the breaching party to perform or face contempt of court charges.
Contracts VI–Remedies
Contracts>Nonmonetary Remedies (VI.A.1)
.
When are monetary damages for breach of contract generally inadequate?
The legal remedy (damages) generally is inadequate when the matter of the contract is rare or unique. The rationale is that if the matter is rare or unique, damages will not put the nonbreaching party in as good a position as performance would have, because even with the damages the nonbreaching party would not be able to purchase substitute performance.
Contracts VI–Remedies
Contracts>Nonmonetary Remedies (VI.A.1)
.
What are the two broad branches of remedies available in breach of contract situations?
Monetary and Nonmonetary
Contracts VI–Remedies
Contracts>Nonmonetary Remedies (VI.A)
.
What is the primary nonmonetary remedy for breach of contract (for exam purposes)?
Specific Performance
Contracts VI–Remedies
Contracts>Nonmonetary Remedies (VI.A)
.
Fill in the blank: Aside from specific performance, Article 2 has a number of other specific nonmonetary remedies for certain situation involving contracts for the ____ __ ____.
Sale of Goods
Contracts VI–Remedies
Contracts>Nonmonetary Remedies (VI.A)
.
Laches
arises when a party delays in bringing an equitable
action and the delay prejudices the defendant. mere delay itself is not a
ground for this defense.
Contracts VI–Remedies
Contracts> Equitable Defenses Available
.
Unclean Hands
arises when the party seeking specific performance is
guilty of some wrongdoing in the transaction being sued upon
the wrongdoing must be related to the transaction being sued upon; it is not sufficient that the plaintiff has defrauded other persons in similar transactions.
Contracts VI–Remedies
Contracts> Equitable Defenses Available
.
Sale to a Bona Fide Purchaser
If the matter of a goods or land contract has already been sold to another who purchased for value and in good faith (i.e., a bona fide purchaser), the right to specific performance is cut off
Contracts VI–Remedies
Contracts> Equitable Defenses Available
.
when may a court enjoin a breaching employee from working for a competitor
a court may enjoin a breaching employee from working for a competitor
throughout the duration of the contract if the services contracted for are rare
or unique.
Contracts VI–Remedies
Contracts> Injunction as an Alternate Remedy
.
When will most courts grant an order of specific performance to enforce a contract not to compete?
- the services to be performed are unique (thus rendering money damages inadequate); and
- the covenant is reasonable
Contracts VI–Remedies
Contracts>Covenant Not to Compete
.
What factors must be satisfied to deem a covenant not to compete ‘reasonable’
- the covenant must be reasonably necessary to protect a legitimate interest of the person benefited by the covenant
- the covenant must be reasonable as to its geographic scope and duration; and
- the covenant must not harm the public
Contracts VI–Remedies
Contracts>Covenant Not to Compete
.
What are seller’s nonmonetary remedies?
Seller’s right to withhold goods, Seller’s right to recover goods, Seller’s ability to force goods on buyer limited.
Contracts VI–Remedies
Contracts- Remedies- Under Article 2- Seller’s Nonmonetary Remedies
.
What is buyer’s right to specific performance?
Right closely related to the buyer’s right to replevy is her right to specific performance ‘where the goods are unique or in other proper circumstances.’ [UCC §2-716(1)] The court may order specific performance even where the goods have not yet been identified to the contract by the seller. The comments to section 2-716 say that inability to cover is ‘strong evidence of other circumstances.’ Thus, buyers in inability-to-cover situations have their choice of replevin or specific performance remedies. Of course, a specific performance remedy is always discretionary with the court, and unclean hands, laches, etc., might bar an equity action but would not affect a replevin recovery. In any case, keep in mind that replevin will lie only for identified goods, while specific performance may be decreed even though the goods have not previously been identified.
Contracts VI–Remedies
Contracts- Remedies- Under Article 2-Buyer’s Nonmonetary Remedies
.
What is seller’s right to withhold goods?
If the buyer fails to make a payment due on or before delivery, the seller may withhold delivery of the goods. The seller may also withhold goods when the goods are sold on credit and, before the goods are delivered, the seller discovers that the buyer is insolvent. However, in such a case, the seller must deliver the goods if the buyer tenders cash for their payment. [UCC §2-702]
Contracts VI–Remedies
Contracts- Remedies- Under Article 2-Seller’s Nonmonetary Remedies
.
What are seller’s right to recover goods?
Right to recover from buyer on buyer’s insolvency, Right to recovery shipped or stored goods from Bailee
Contracts VI–Remedies
Contracts- Remedies- Under Article 2-Seller’s Nonmonetary Remedies
.
What is the right to recover from buyer on buyer’s insolvency?
If a seller learns that a buyer has received delivery of goods on credit while insolvent, the seller may reclaim the goods upon demand made within 10 days after the buyer’s receipt of the goods. However, the 10-day limitation does not apply if a misrepresentation of solvency has been made in writing to the particular seller within three months before delivery. Note that the seller’s right to reclaim the goods is to the rights of a buyer in the ordinary course or any other good faith purchaser. [UCC §2-702]
Contracts VI–Remedies
Contracts- Remedies- Under Article 2-Seller’s Nonmonetary Remedies
.
When does Seller have the right to recover shipped or stored goods from Bailee?
(1) On buyer’s insolvency, (2) On buyer’s breach, (3) When goods may not be stopped, (4) Obligation of carrier or Bailee
Contracts VI–Remedies
Contracts- Remedies- Under Article 2-Seller’s Nonmonetary Remedies
.
What happens on buyer’s insolvency?
The seller may stop delivery of goods in the possession of a carrier or other bailee when he discovers the buyer to be insolvent. Of course, the seller must deliver the goods if the buyer tenders cash for their payment. [UCC §2-705(1)]
Contracts VI–Remedies
Contracts- Remedies- Under Article 2-Seller’s Nonmonetary Remedies
.
What happens on buyer’s breach?
The seller may stop delivery of carload, truckload, planeload, or larger shipments of goods when the buyer breaches the contract or when the seller has a right to withhold performance pending receipt of assurances. (See c., infra, on the right to demand assurances.) [UCC §2-705(1)]
Contracts VI–Remedies
Contracts- Remedies- Under Article 2-Seller’s Nonmonetary Remedies
.
What are Compensatory Damages?
The purpose of contract damages is to give compensation for the breach-I.e., to put the nonbreaching party in the position she would have been in had the promise been performed so fat as money can do this. The most common measure of this is value of the breaching party’s performance that was lost (expectation damages), plus incidental and consequential damages, less any loss or cost saved by not having to perform. [Restatement (Second) of Contracts section 347]
Contracts VI–Remedies
Contract> Monetary Remedy - Damages (VI.B.1.a)
.
Monetary Remedy - Damages
The most frequent sought remedy for breach of contract is an action at law for damages. Damages can be recovered only to the extent they can be proved with reasonable certainty and could not be avoided with reasonable effort. In cases of willful breach, courts are more likely to be flexible in determining the plaintiff’s damages alternatives.
Contracts VI–Remedies
Contract> Monetary Remedy - Damages (VI.B)
.
When Goods May Not be Stopped?
The seller may stop delivery of the goods to the buyer until the buyer receives: (i) the goods or a negotiable document of title covering the goods; or (ii) an acknowledgment from a bailee other than the carrier that it is holding the goods for the buyer. [UCC section 2-705(2)]
Contracts VI–Remedies
Contract> Non Monetary Remedies (VI.A.2.b.2.b.3)
.
What are the Obligations of Carrier or Bailee?
The seller’s notification must come in time to give the person in possession a reasonable time to stop delivery. If a negotiable document covers the goods, the carrier or bailee is not obligated to obey a stop order until the document is surrendered.
Contracts VI–Remedies
Contract> Non Monetary Remedies (VI.A.2.b.2.b.4)
.
When is a Seller’s Ability to Force Goods on Buyer Limited?
The seller’s ability to force goods on a buyer is limited to an action for price when the seller is unable to resell the goods to others at a reasonable price. (See B.2.b.2)
Contracts VI–Remedies
Contract> Non Monetary Remedies (VI.A.2.b.3)
.
When may a party have the Right to Demand Assurances?
Under Article 2, actions or circumstances that increase the risk of non performance by a party to the contract but do not clearly indicate that performance will not be forthcoming, may not be treated immediately as an anticipatory repudiation. Instead, if there are reasonable grounds for insecurity with respect to the other party’s performance, a party may demand assurances that the performance will be forthcoming at the proper time, The demand for assurances must be made in writing. Until the party receives adequate assurances, he may suspend his own performance. [UCC section 2-609] If the proper assurances are not given within a reasonable time (i.e., within 30 days after a justified demand for assurances), he may then treat the contract as repudiated.
Contracts VI–Remedies
Contract> Non Monetary Remedies (VI.A.2.c)
.
What is the certainty rule?
The plaintiff must prove that the losses suffered were certain in their nature and not speculative. Traditionally, if the breaching party prevented the nonbreaching party from setting up a new business, courts would not award lost profits from the prospective business as damages, because they were too speculative. However, modern courts may allow lost profits as damages if they can be made more certain by observing similar businesses in the area or other businesses previously owned by the same party.
Contracts VI–Remedies
Contracts>Certainty Rule (page 83)
.
What are consequential damages?
Consequential damages are special damages and reflect losses over and above standard expectation damages. These damages result from the nonbreaching party’s particular circumstances. Usually consequential damages are lost profits resulting from the breach. These damages may be recovered on if at the time the contract was made, a reasonable person would have foreseen the damages as a probable result of a breach. Foreseeability is the key issue for consequential damages. To recover consequential damages, the plaintiff must show that the breaching party knew or had reason to know of the special circumstances giving rise to the damages.
Contracts VI–Remedies
Contracts>Consequential Damages (page 82)
.
What are expectation damages/
Standard measure of damages?
In most cases, the plaintiff’s standard measure of damages will be based on an ‘expectation’ measure, I.e. sufficient damages for her to buy a substitute performance. This is also known as ‘benefit of the bargain’ damages.
Contracts VI–Remedies
Contracts>Expectation
Damages/Standard Measure of Damages?
(page 82)
.
What are incidental damages?
Compensatory damages may also include incidental damages. Incidental damages are most commonly associated with contracts for the sale of goods and typically include expenses reasonably incurred by a buyer in inspection, receipt, transportation, care, and custody of goods rightfully rejected and other expenses reasonably incident to the seller’s breach, and by the seller in storing, shipping, returning, and reselling the goods as a result of the buyer’s breach.
Contracts VI–Remedies
Contracts>Incidental Damage (page 83)
.
What are nominal damages?
Nominal damages (as known as token damages (eg $1)) may be awarded where a breach is shown but actual loss is proven.
Contracts VI–Remedies
Contracts>Nominal Damages (page 83)
.
What are punitive damages? And are they typically awarded?
These are awarded to punish a defendant for wrongful conduct. However, they are not generally awarded in contract cases.
Contracts VI–Remedies
Contracts>Punitive Damages (page 83)
.
What are reliance damages?
If the plaintiff’s expectation damages will be too speculative to measure, the plaintiff may elect to recover those damages she has suffered based on her reasonable reliance on the contract. Reliance damages award the plaintiff the cost of her performance (I.e. they are designed to put the plaintiff in the position she would have been in had the contract never been formed.
Contracts VI–Remedies
Contracts>Reliance Damage Measures
(page 82)
.
Seller Anticipatorily Breaches Contract - what damages?
Under section 2-713, the measure of damages when the seller anticipatorily breaches the contract is the difference between the market price at the time the buyer learned of the breach and the contract price.
Contracts VI–Remedies
Contracts>Remedies>Monetary Remedy-Damages>Contracts for Sale of Goods>Buyer’s Damages>Seller Anticipatorily Breaches Contract (IV.B.2.a.3)
.
What is the buyer’s notice requirement?
To recover damages for any defect as to accepted goods, the buyer must,
within a reasonable time after she discovers or should have discovered the defect, notify the seller of the defect. If she does not notify the seller within a reasonable time, she loses her right to sue. ‘Reasonable time’ is, of course, a flexible standard.
Contracts VI–Remedies
Contracts>Remedies>Monetary Remedy-Damages>Contracts for Sale of Goods>Buyer’s Damages>Seller Delivers Nonconforming Goods that Buyer Accepts>Notice Requirement (IV.B.2.a.2)
.
When can the buyer get warranty damages?
If the buyer accepts goods that breach one of the seller’s warranties, the buyer may recover as damages ‘loss resulting in the normal course of events from the breach.’ The basic measure of damages in such a case is the difference between the value of the goods as delivered and the value they would have had if they had been according to contract, plus incidental and consequen- tial damages. [UCC §2-714]
Contracts VI–Remedies
Contracts>Remedies>Monetary Remedy-Damages>Contracts for Sale of Goods>Buyer’s Damages>Seller Delivers Nonconforming Goods that Buyer Accepts>Warranty Damages (IV.B.2.a.2)
.
