TX Bar Contracts 2

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?

Accepted Answer

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

Answer

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?

Accepted Answer

The color of ink used to sign the contract

Answer

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?

Accepted Answer

Expectation damages

Answer

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?

Accepted Answer

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

Answer

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?

Accepted Answer

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

Answer

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.

(TX Bar) Texas Bar Exam Practice Test

(TX Bar) Texas Bar Exam Practice Test

TX Bar Contracts 2