Contracts Flashcards

A buyer under a contract for the sale of goods notified the seller two weeks before the delivery date that he would not accept the goods. What doctrine applies, and what may the seller do immediately?

Answer: Anticipatory repudiation; the seller may treat the contract as breached and sue for damages immediately

Anticipatory repudiation occurs when a party unambiguously indicates before performance is due that it will not perform, entitling the non-breaching party to treat the contract as breached and seek immediate remedies.

Under the common law, which factor is LEAST relevant when determining whether a breach is material?

Answer: The color of ink used to sign the contract

Materiality of breach is assessed using the Restatement factors, including extent of deprivation, likelihood of cure, and hardship to the breacher — the physical characteristics of the signature are irrelevant.

A contractor breaches a construction contract. The owner's expectation damages are calculated to put the owner in the position she would have been in had the contract been performed. Which measure of damages best describes this?

Answer: Expectation damages

Expectation damages restore the non-breaching party to the economic position they would have occupied had the contract been fully performed, including lost profit and cost to complete.

After a seller breaches a contract, the buyer fails to make any effort to find substitute goods even though comparable goods were available at the same price nearby. What is the legal consequence?

Answer: The buyer's damages will be reduced by the amount that could have been saved through reasonable mitigation

A non-breaching party has a duty to mitigate damages, and failure to take reasonable steps to reduce loss will reduce the recoverable damages by the avoidable amount.

A contract between two commercial parties contains a liquidated damages clause specifying $5,000 for any breach. At the time the contract was formed, actual damages were difficult to estimate and $5,000 appeared to be a reasonable forecast. At trial, actual damages are proven to be only $500. Under Texas law, is the liquidated damages clause enforceable?

Answer: Yes, because the clause was a reasonable estimate at the time of contracting and actual damages were difficult to ascertain

Texas enforces liquidated damages clauses when (1) actual damages were difficult to estimate at the time of contracting and (2) the stipulated amount was a reasonable forecast — the comparison is made at formation, not breach.

A homeowner hires a painter who substantially completes the job but uses a slightly different shade of white paint than specified, reducing the home's value by $200. The homeowner refuses to pay the $10,000 contract price. Under the substantial performance doctrine, what is the painter entitled to recover?

Answer: The contract price minus the cost to remedy the defect or the diminution in value

Under the substantial performance doctrine, a party who substantially (but not perfectly) performs may recover the contract price minus the cost to remedy the defect or the resulting diminution in value.

A buyer breaches a contract for the sale of land. The seller resells the land at $20,000 less than the contract price. Which remedy best describes the seller's recovery?

Answer: The difference between the contract price and the resale price as expectation damages

When a buyer breaches a real estate contract and the seller resells, the seller's expectation damages are typically the difference between the contract price and the lower resale price, plus incidental costs.