Final MBE stuff to know 2 Flashcards
Building contract in instalment. Builder partially performed and then breaches. What does the homeowner get?
Cost of completion minus installments is the correct measure of damages because the facts give us the breach of a construction contract by the builder during construction. In such cases where the builder breaches after partially performing, the owner of the land is entitled to the cost of completion plus reasonable compensation for any delay in performance. Courts generally allow the builder to offset or recover for work performed to date to avoid the unjust enrichment of the owner
Lost volume seller situation
A franchised United States dealer of a very popular German car contracted with a doctor to sell him the car for $29,000 cash, the sale to be consummated after delivery to the dealer of the car, which the dealer ordered from the manufacturer specifically for the doctor. The average retail markup in such sales is 30%. The signed retail contractual document was a form drafted by the dealer’s lawyer, and the doctor did not question or object to any of its terms. When the car arrived from Germany, the doctor repudiated the contract. The dealer at once sold the car for $29,000 cash to another buyer, for whom the dealer had also ordered from the manufacturer a car identical to the doctor’s.
In an action against the doctor for breach of contract, how much will the dealer recover?
A $29,000 minus what it cost the dealer to purchase the car from the manufacturer.
B $29,000 minus the wholesale price of an identical car in the local wholesale market among dealers.
C Nominal damages only, because the dealer resold the car to the other buyer without lowering the retail price.
D Nothing, because the parties’ agreement was an adhesion contract and therefore unconscionable.
The dealer can collect his lost profits, i.e., the difference between the contract price ($29,000) and what the dealer paid to purchase the car from the manufacturer. In a contract for the sale of goods, a seller can collect his lost profits when the buyer breaches if the seller cannot be made whole by a subsequent sale of the item contracted for. This occurs where the seller can obtain or manufacture as many goods as it can sell (e.g., a car dealership), because in such a situation, the seller would have been able to sell to the subsequent purchaser anyway. This is known as a lost volume situation, and in such a situation, the UCC allows the seller to sue for his lost profits. Generally, lost profits are measured by the difference between the cost of goods and the contract price, less the seller’s saved expenses.
Restitution situation
A homeowner purchased a large recreational vehicle. Local ordinances in the homeowner’s suburb prohibited residents from parking recreational vehicles on the street or in an open driveway, so the homeowner contacted a local contractor and explained his requirements for a garage. The contractor measured the vehicle and then entered into a written contract to build a garage for the homeowner at a price of $5,000, payable on completion of the job. When the garage was finished but before the contractor was paid, the homeowner drove the vehicle into the garage, only to discover that the garage was three inches too short to accommodate the vehicle. The homeowner was told that it would cost $4,000 to partially dismantle the garage and rebuild it to fit the vehicle. The homeowner refused to pay the contractor anything for the job. The contractor consulted with several independent real estate appraisers, and they all agreed that the garage had enhanced the value of the homeowner’s property by $6,000.
If the contractor sues the homeowner, what amount will the contractor likely recover?
A $5,000, because a three-inch variation in length is, at most, a minor breach.
B $2,000, measured by the difference between the amount that the garage enhanced the value of the property and the cost to rebuild the garage to specifications.
C $1,000, measured by the difference between the contract price and the amount it would cost to rebuild the garage to specifications.
D Nothing, because the three-inch error was a material breach, and the contractor will be unable to successfully claim substantial performance.
The contractor will recover $1,000 in a restitution or quasi-contract action. Despite having built a garage, the contractor has breached the contract here. He was to build a garage that would fit the homeowner’s recreational vehicle and the garage that he built is too short. Moreover, the breach was material, even though the garage was a mere three inches short, because the homeowner did not receive the substantial benefit of his bargain—a place for his vehicle. Therefore, the contractor cannot recover in contract and (A) is incorrect. Nevertheless, courts agree that where the breach is not willful, the contractor can recover on the failed contract in restitution or quasi-contract to prevent unjust enrichment. Here, it is clear that the breach was not willful.
(D) is therefore incorrect. Regarding the amount of recovery, most courts would limit the recovery to the contract price (rather than the benefit received by the nonbreaching party), offset by the damages to the nonbreaching party (here, the $4,000 cost of rebuilding the garage as bargained for). Thus, (C) is correct and (B) is incorrect.
Another volume seller situation
An automobile dealer agreed to sell a car to a buyer for $30,000, with a down payment of $6,000 due at the time the sales contract was signed and the balance payable in monthly installments over a period of five years. Under the written contract, delivery would be made within 30 days. Two weeks after making the down payment, the buyer told the dealer that he lost his job and could not afford to go through with the purchase. The dealer, which could get as many of that model of car as it required from the manufacturer for a wholesale price of $21,000, put the car in question back in its inventory but refused to return the buyer’s down payment. A short time later, the dealer sold it to someone else for $28,500.
The buyer sues the dealer to get back his deposit, and the dealer counterclaims for damages. For purposes of this question, do not include incidental damages in your calculations.
Who will prevail and for what amount?
A The buyer will recover $6,000.
B The buyer will recover $4,500.
C The dealer will recover $9,000.
D The dealer will recover $3,000.
The dealer will recover $3,000, which is the difference between its lost profits and the buyer’s down payment. When the buyer repudiates or refuses to accept goods, the usual measure of the seller’s damages is the difference between the contract price and the market price or the difference between the contract price and the resale price of the particular goods. However, neither of those measures of damages gives adequate compensation for the buyer’s breach where the seller has an unlimited supply of the goods (i.e., a lost volume seller), because, but for the buyer’s breach, the seller would have made two sales instead of one. In this type of case, lost profit is measured by the contract price less the cost to the seller. Here, the dealer could have made two sales of that model of car because it could get as many as it needed from the manufacturer. Hence, it lost a profit of $9,000 as a result of the buyer’s breach. This amount is offset against the amount of the down payment that the buyer made, resulting in a net recovery of $3,000 by the dealer.
Consequential damags, what about them?
They are those damages that were predictable at the time of the breach. So, at the time of the breach th other party would have known that the OTHER PARTY (NOT someone else) would have suffered X amount of damages.
A homeowner contracted with a builder for the remodeling of the homeowner’s bathroom and kitchen at a cost of $10,000. The contract was in writing and specified that the work was to be completed within two months after the date of execution of the contract. Two weeks after entering into the contract with the homeowner, the builder was offered an extremely lucrative job that would take all of his time and effort for several months. The builder told the homeowner that he was not going to perform. The homeowner diligently called many other contractors over a period of several weeks and none of them could offer a price anywhere near as low as $10,000 for the remodeling work that he wanted done. Two months after entering into the contract with the builder, the homeowner sued the builder for specific performance.
What is the likely result of the suit?
A The court will order specific performance, because the homeowner was ready and able to perform his part of the contract.
B The court will order specific performance, because, despite diligent efforts, the homeowner could find no one who could perform the desired services at a competitive price.
C The court will not order specific performance, because the doctrine of laches applies.
D The court will not order specific performance, because the remedy at law is adequate.
Here I thought it was a situation where no specific performance because we are talking about services. However, it’s actually because the homeowner should simply have hired another dude and sued for the difference in price.
Specific performance is available only when monetary damages are inadequate. The court will not order specific performance merely because the builder had a much lower price than anyone else. Instead, the court will require the nonbreaching party to hire a different contractor, and the builder would be liable for the difference between the new price for remodeling and the original $10,000 price. It should be noted that nothing indicates that the builder was hired for his unique talents; even if he were, specific performance would not be granted because of difficulties of supervision and a reluctance to force one person to work for another
On March 15, a vineyardist entered into a written agreement with a winery that provided that the vineyardist would sell 1,600 tons of tokay grapes to the winery for $750 per ton, delivery to be no later than November 1 of the same year. By November 1, the vineyardist had delivered only 700 tons of grapes and had informed the winery by fax that she had used the remainder of her crop in the production of wine for her own shop. The winery purchased an additional 900 tons of tokay grapes from other growers at the then-prevailing market price of $800 per ton. The vineyardist has submitted an invoice to the marketing department of the winery for $525,000.
Ignoring incidental costs of cover, how much should the winery pay the vineyardist?
A $525,000, since by accepting delivery of the 700 tons of grapes, the winery waived an objection to the vineyardist’s breach.
B The market value of her 700 tons of grapes as of November 1, less the cost of cover for the remaining 900 tons.
C $480,000, which represents the contract price for the grapes she delivered less the cost of cover for the remaining 900 tons.
D Nothing, since she will be unable to enforce any claim for payment in court.
What vineyard gave: 700 x 750: 525
What winery should have paid for the rest 900= 900 x 750: 675
What the winery actually paid for the rest 900= 900 x 800= 720
So, winery must pay 525 (amount done) - what I had pay in addition for your mess up (720-675)
The vineyardist is entitled to the contract price for the grapes delivered and accepted, but the winery is entitled to cover—to purchase grapes at the market price prevailing at the time of performance and to deduct any increase over the contract price. (A) is wrong because the winery is entitled to cover and does not “waive” the breach by accepting a part performance.
A dealer sent an e-mail to a wholesaler stating “Send 500 ‘Granny Rocker’ chairs at your usual price.” The wholesaler responded, also by e-mail, “Will ship our last 500 ‘Granny Rocker’ chairs at $100 per chair, our usual price. ‘Granny Rocker’ line is being discontinued.” The wholesaler’s staff immediately began the paperwork for processing the order and started preparing and packing the chairs for shipment. The dealer e-mailed back to the wholesaler, “Cancel order for ‘Granny Rocker’ chairs; your price is too high.” The dealer had found a mill outlet that was the only other source of the chairs. Although the outlet’s price was also $100 per chair, it was more convenient for the dealer to buy the chairs from the outlet. The day after receiving the dealer’s cancellation, the wholesaler was able to sell the 500 “Granny Rocker” chairs in its stock to a furniture chain for $100 each. The wholesaler’s staff immediately began the paperwork for processing the order and repacked the chairs for shipment to the chain’s stores.
If the wholesaler sues the dealer for damages, how much should the wholesaler recover?
A Nothing, because this was a contract between merchants and the dealer canceled within a reasonable time.
B Nothing, because the wholesaler was able to cover by selling the chairs at the same price it would have received from the dealer.
C $50,000, the full contract price, because the dealer breached the contract and $100 per chair was a fair price.
D The wholesaler’s incidental costs of preparing the paperwork and other office costs connected with preparing and repacking the chairs for shipment to the chain’s stores.
The wholesaler will recover only its incidental damages, i.e., the costs of preparing to ship the chairs the second buyer. An offer calling for shipment of goods, such as the offer here, may be accepted by prompt shipment with notice or by a promise to ship. Acceptance forms a contract. Here, the wholesaler accepted the dealer’s offer by promising to ship (the warning that the wholesaler had no more chairs was unimportant surplusage since it could fill the dealer’s order), and a contract was formed. The dealer breached the contract by canceling its order. When a buyer breaches by repudiating its offer, as the dealer did here, the seller has a right to recover either the difference between the contract price and the market price or the difference between the contract price and the resale price, plus incidental damages. Here, the chairs were resold. The resale price was the same as the contract price, so there are no losses there. If the seller is a lost volume seller, meaning they can obtain as many goods as they can sell, the seller will have lost out on additional sale and is entitled to profits from that lost sale. Here, the wholesaler is not a lost volume seller because it is not able to obtain additional chairs—these were the last of the inventory and were discontinued—and so the wholesaler did not lose out on an additional sale. Therefore, the wholesaler lost no profits. It made what it would have made if the sale with the dealer had gone through. Thus, the wholesaler would be limited to its incidental damages under the first two measures of damages.
A psychotherapist group hired a construction company to construct a one-story building for $900,000 to use as the group’s offices. The contract provided that the group would pay one-third of the contract price (i.e., $300,000) on completion of the foundation, another one-third ($300,000) on completion of the roof, and the balance ($300,000) when the rooms were carpeted. After completing work on the foundation, the construction company abandoned the project. The group hired another contractor to complete the building.
How much, if anything, can the construction company recover?
A $300,000, the contract price for the work that it completed.
B $300,000, offset by whatever damages the group suffered in getting the job completed by someone else.
C Nothing, because the construction company committed a material breach of the contract.
D Nothing on the contract, because this construction contract is not divisible in nature, but it might be entitled to restitution.
The construction company cannot recover on the contract but it may recover restitution for the work it did. The issue here is whether this contract is divisible. A contract is divisible if: (i) the performance of each party is divided into two or more parts under the contract, (ii) the number of parts due from each party is the same, and (iii) the performance of each part by one party is the agreed-upon equivalent of the corresponding part from the other party. The third requirement is the problem here. There is no indication that the parts the construction company is to perform are the equivalent of the payments the group is to make. Rather, these payments appear to be unrelated to the actual work and merely represent progress payments. Thus, this contract is not divisible in nature. Because the construction company breached the contract by ceasing performance before completion of the entire job, it is not entitled to the contract price. However, it may be entitled to restitution. Modern courts permit a breaching party to recover restitution where the party has conferred a benefit on the other that will result in unjust enrichment of the other if no compensation is paid. Here, the construction company properly completed the foundation, and this conferred a benefit on the group. Therefore, restitution may be available to the construction company.
An electronics store located in Los Angeles, California, purchases electronics from an electronics corporation located in San Antonio, Texas. On January 19, the electronics store mailed to the corporation an order for $200,000 worth of electronics, specifying that delivery was to be no later than February 25, F.O.B. South Texas Railroad Depot, San Antonio, Texas.
The corporation delivered the electronics to the railroad depot on February 15 and notified the electronics store by fax that its order was scheduled to arrive at the Southern Pacific Railroad Depot in Los Angeles on February 20. On February 17, the corporation learned that the electronics store was insolvent. The corporation demands immediate payment in cash for the electronics.
Is this demand permissible?
A No, because the corporation may only refuse to tender delivery of the goods by stopping them in transit.
B No, because the contract terms specifying delivery F.O.B. at the South Texas Railroad Depot passed title to the goods to the electronics store when the goods were delivered to the South Texas Railroad Depot.
C No, because the payment terms were expressly stated in the purchase order of January 19.
D Yes, because the electronics store is insolvent.
The corporation’s demand is permissible. If a buyer is insolvent, UCC section 2-702 permits the seller to refuse to deliver except for cash, including payment for all goods previously delivered under the contract. It does not matter that title passed on delivery to the Southern Pacific Railroad Depot. Thus, (D) is correct, and (B) is wrong. (A) is wrong because while the corporation could stop the goods in transit under UCC section 2-705, even after title passes, it could also demand cash payment. (C) is wrong because the UCC provisions allow the above modifications to payment terms upon finding the buyer insolvent.
Quasi-contract elements/ restitution
Hoping to gain a position on a campaign staff, an unemployed law student sent a detailed outline of a campaign strategy to a candidate for Congress. The candidate turned the materials over to his campaign manager, who advised the candidate to adopt some of them in his commercials. The candidate wrote the law student, thanking him for his interest in the campaign and stating that although he had a campaign staff and strategy in place, some of the ideas were good and he adopted them. He added, “To say ‘thanks’ to a future constituent, I’d like to offer to pay you for your expenses in developing the materials you sent me. Send the bill to my campaign headquarters.” Nevertheless, the candidate lost the election. One week after election day, the law student’s bill for $1,500 arrived at the candidate’s campaign headquarters. Campaign debts were high, and the candidate told his campaign manager not to pay the bill. The law student filed suit against the candidate to obtain payment of the bill plus an additional $10,000 for his ideas.
What additional fact, if true, would most strengthen the candidate’s defense against the law student’s suit?
A The candidate lost the election by a close margin.
B The law student is a relative of the candidate.
C The candidate did nothing to solicit the law student’s proposal.
D The law student sent a similar campaign strategy to the candidate’s opponent.
If true, the fact that the candidate did nothing to solicit the law student’s proposal would most strengthen the candidate’s defense. Since there is no consideration supporting the candidate’s promise to pay the law student, the only way the law student could recover is off contract; i.e., by seeking restitution in a quasi-contract action. Where there is no existing contractual relationship between the parties, restitution may be recovered in a quasi-contract action if: (i) the plaintiff has conferred a benefit on the defendant by rendering services or expending property, (ii) the plaintiff conferred the benefit with the reasonable expectation of being compensated, (iii) the defendant knew or had reason to know of the plaintiff’s expectation, and (iv) the defendant would be unjustly enriched if he were allowed to keep the benefits without compensating the plaintiff. Here, the law student conferred his services expecting to be compensated, or at least to obtain employment, and the candidate received the benefit of using the law student’s ideas. However, if the candidate did nothing to request that the law student send him ideas, then the third prong of the prima facie case cannot be established. (A) is incorrect because it is irrelevant whether the candidate won or lost the election. The benefit conferred was the use of the law student’s ideas, and their value cannot be measured by the candidate’s success (e.g., perhaps the results would have been the same absent the suggestions or the candidate would have won without the suggestions; it cannot be known)
A homeowner entered into a written agreement with a contractor whereby the contractor agreed to completely remodel the homeowner’s bathroom “to her specifications” at a cost of $10,000. The homeowner’s specifications were highly detailed and required custom-made fixtures that would not be usable in other bathroom remodeling jobs. The contractor ordered the custom-made fixtures and paid $4,000 for them when they were delivered to his place of business. Figuring up the cost of the fixtures and labor, the contractor estimated that he would make a total profit of $2,000 on the job after payment for materials and workers. Before the contractor began work on the project, but after he had paid for the fixtures, the homeowner told the contractor that she had had a change of heart and would probably be selling the house the following year, and so would not need a custom bathroom. The contractor made no attempt to sell the fixtures to another contractor and filed suit against the homeowner for damages.
What is the contractor likely to recover?
A Nothing, because he failed to mitigate damages.
B His expectation damages of $2,000.
C $4,000, the cost of materials as restitution.
D $2,000 as expectation damages, plus $4,000 in reliance damages.
The contractor can recover $2,000 as lost profits plus the $4,000 in costs he incurred before the homeowner breached the contract. The purpose of a damages remedy based on an affirmance of the contract is to give compensation for the breach; i.e., to put the nonbreaching party where he would have been had the promise been performed. In most cases, the plaintiff’s standard measure of damages will be based solely on an “expectation” measure, i.e., sufficient damages for him to buy a substitute performance. A reliance measure of damages, on the other hand, awards the plaintiff the cost of his performance, i.e., his expenditures in performing his duties under the contract. In certain situations, an award of compensatory damages will contain both an expectation and a reliance component.
In a construction contract, if the owner breaches the contract after the builder has already begun his performance, the builder will be entitled to any profit he would have derived from the contract plus any costs he has incurred to date.
This formula contains an expectation component (the profit the builder would have made) and a reliance component (the cost incurred prior to the breach). This formula is applicable to the facts in this case. The contractor has begun performance by ordering and purchasing the custom-made fixtures at a cost of $4,000. Because they are usable only for the homeowner’s purposes, their cost, which is treated just like any other expenditure of labor and material in a partially completed construction contract, can be recovered as reliance damages. The other element of his recovery is the $2,000 profit that he would have derived from the contract—his expectation damages. His total recovery will therefore be $6,000.
Horseowner pays dude 5000 to delivery two horses. Dude delivers horse 1 and then horse 2. Owner says I don’t want horse 2.
Dude now sells horse 2 for 3000.
Can owner recover from dude?
YUP.
When a party’s duty of performance is discharged, the other party is entitled to restitution of any benefits that he has transferred to the discharged party in an attempt to perform on his side
With the horse breeder’s contractual duty to deliver the second horse to the rancher’s fiancée discharged, the horse breeder would be unjustly enriched, to the detriment of the rancher, if he were permitted to keep the entire $5,000 paid to him by the rancher. The rancher conferred a benefit upon him by paying him $5,000 in exchange for two horses, one of which was to be delivered to the rancher, the other to the rancher’s fiancée.
Because delivery to the fiancée cannot be accomplished, the rancher finds himself in a position of having paid $5,000 for one horse, the fair market value of which is $3,000. Thus, if the horse breeder is permitted to retain the sum of $5,000, he will be unjustly enriched by $2,000. Therefore, the rancher should recover restitution of $2,000.
On February 1, a national department store chain entered into a written agreement with a canoe manufacturer providing that the manufacturer would sell the department store any quantity of 16-foot aluminum canoes that the department store desired at a price of $250 per canoe, deliveries to be made 30 days after any order. The agreement was signed by authorized agents of both parties. On March 1, the department store sent the manufacturer an order for 500 canoes to be delivered in 30 days. The manufacturer immediately e-mailed the department store a confirmation of the order. Ten days later, the department store sent the manufacturer an order for an additional 500 canoes, to be delivered in 30 days. Five days after receiving the department store’s second order, the manufacturer e-mailed the department store and explained that a large sporting goods chain was willing to purchase all of the manufacturer’s output of 16-foot canoes at $275 per canoe and that the manufacturer would be unable to fill any of the department store’s orders.
The department store found another canoe manufacturer willing to provide it with 16-foot aluminum canoes for $280 per canoe and on April 15 filed an action against the manufacturer seeking damages for the manufacturer’s failure to deliver the 1,000 canoes ordered.
How should the court rule?
A The department store is not entitled to any damages because no contract was formed by the parties’ communications.
B The department store is entitled to cover damages of $30 per canoe only for 500 canoes but is not entitled to any damages for breach of the duty of good faith.
C The department store is entitled to cover damages of $30 per canoe for 1,000 canoes but is not entitled to any damages for breach of the duty of good faith.
D The department store is entitled to punitive damages equal to the lesser of 10% of the total sale price or $500 in addition to any cover damages that are due because the manufacturer breached the duty of good faith.
B:
This question is best answered by eliminating the incorrect choices first. (A) is incorrect. A contract was formed here for 500 canoes. The original “agreement” between the parties was nothing more than an invitation seeking offers. It did not create a contract between the department store and the manufacturer because it was illusory—an agreement to buy only what is desired is not consideration. The “agreement” probably does not even qualify as an offer. An offer must express a commitment to conclude a bargain on the offered terms. Absent some quantity limitation, a court would probably find the “agreement” here too vague to constitute an offer; otherwise, the manufacturer could be committing itself to sell more canoes than it can supply. Thus, the department store’s first order will be construed as an offer, and the manufacturer’s confirmation will be construed as an acceptance of the offer, thus creating a contract.
“I will take all I need from you”
” Will take any quantity I want from you”
1st one ok. It is consideration to take all that I need from you.
2nd one NOT ok. NOT consideration to say I will take as much as I need.
