TX Bar Contracts 2 — Questions and Answers
Question 1: 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?
- Impossibility; the seller is discharged from performance
- Anticipatory repudiation; the seller may treat the contract as breached and sue for damages immediately (Correct answer)
- Substantial performance; the seller must deliver and then sue
- Accord and satisfaction; the parties must negotiate a substitute
Correct 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.
Question 2: Under the common law, which factor is LEAST relevant when determining whether a breach is material?
- The extent to which the breaching party will suffer forfeiture
- The likelihood that the breaching party will cure
- The color of ink used to sign the contract (Correct answer)
- The extent to which the non-breaching party received the expected benefit
Correct 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.
Question 3: 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?
- Reliance damages
- Restitution damages
- Expectation damages (Correct answer)
- Nominal damages
Correct 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.
Question 4: 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?
- The buyer may recover full damages with no reduction
- The buyer may recover punitive damages for the seller's willful breach
- The buyer's damages will be reduced by the amount that could have been saved through reasonable mitigation (Correct answer)
- The contract is void and no damages are available
Correct 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.
Question 5: 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?
- No, because actual damages were far less than the stipulated amount
- Yes, because the clause was a reasonable estimate at the time of contracting and actual damages were difficult to ascertain (Correct answer)
- No, because liquidated damages clauses are per se unenforceable in Texas
- Yes, but only if the plaintiff also proves actual damages
Correct 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.
Question 6: 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?
- Nothing, because the painter did not strictly comply with the contract
- The full $10,000 with no deduction
- The contract price minus the cost to remedy the defect or the diminution in value (Correct answer)
- $200 in nominal damages only
Correct 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.
Question 7: 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?
- Restitution of the seller's out-of-pocket expenditures
- The difference between the contract price and the resale price as expectation damages (Correct answer)
- Punitive damages for intentional breach
- Specific performance compelling the buyer to purchase
Correct 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.
TX Bar Contracts 2
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?