Contracts and Sales Flashcards

A buyer of a defective machine covers by purchasing a replacement at $12,000 when the contract price was $9,000. Under the UCC, the buyer's basic cover damages are:

Answer: $3,000, the difference between cover price and contract price, plus incidentals

Under UCC 2-712, a covering buyer recovers the difference between the cover price and the contract price, plus incidental and consequential damages.

A contract for the sale of a house includes a clause requiring $100,000 in 'liquidated damages' for any breach, regardless of severity. A court will most likely find this clause:

Answer: Unenforceable as a penalty if it is not a reasonable forecast of harm that was difficult to estimate

Liquidated damages clauses are enforceable only if damages were difficult to estimate and the amount is a reasonable forecast; otherwise they are void penalties.

A singer contracts to perform exclusively at one venue for a year, then breaches to sing elsewhere. The venue's most likely equitable remedy is:

Answer: A negative injunction preventing the singer from performing at competing venues

Courts will not compel personal services but may enjoin a breaching performer from working for competitors under an exclusivity clause.

A dry cleaner loses a customer's suit needed for a job interview, and the customer sues for the lost job's salary. The customer will likely fail to recover the salary because such damages are:

Answer: Not foreseeable to the dry cleaner at contract formation

Under Hadley v. Baxendale, consequential damages are recoverable only if foreseeable to the breaching party at the time of contracting.

A builder completes a house with a minor deviation: the wrong brand of equally priced pipe was installed inside the walls. The owner refuses to pay anything. The builder's best theory of recovery is:

Answer: Substantial performance, entitling the builder to the contract price minus any damages from the defect

Under the substantial performance doctrine, a builder who performs with only minor deviations recovers the contract price less damages caused by the defect.

A seller of goods learns the buyer is insolvent while the goods are in transit. Under the UCC, the seller may:

Answer: Stop delivery of the goods in transit

UCC 2-705 permits a seller to stop delivery of goods in transit upon discovering the buyer's insolvency.

An employee wrongfully fired under a one-year contract sits idle and rejects a comparable job offer in the same city. Her damages will be:

Answer: Reduced by what she could have earned from the comparable employment she declined

The mitigation doctrine reduces damages by amounts the plaintiff could have earned through reasonably comparable substitute employment.