Contract Breach and Remedies Flashcards

What is 'efficient breach' theory in contract law?

Answer: The idea that breach may be economically rational if the breaching party can pay damages and still profit

Efficient breach theory holds that a party may rationally breach a contract when it is more economically efficient to pay damages and redirect resources to a higher-valued use.

A seller repudiates a contract before the delivery date. The buyer does nothing and waits. Market prices then fall. How are the buyer's damages measured?

Answer: At the contract delivery date when performance was due

Under the majority rule, damages for anticipatory repudiation are measured at the time performance was due under the contract, not at the time of repudiation.

When a non-breaching party elects rescission as a remedy, what are the consequences?

Answer: Both parties are restored to their pre-contract positions and the contract is treated as void

Rescission cancels the contract and requires mutual restoration of whatever each party received, returning both parties to their pre-contractual positions.

A homeowner contracts with a painter for custom interior work for $10,000. The painter abandons the job after receiving a $3,000 deposit. The homeowner hires a second painter for $12,000. What are the homeowner's expectation damages?

Answer: $5,000 ($12,000 cost minus $10,000 contract price, plus $3,000 deposit)

The homeowner recovers the $3,000 deposit plus the $2,000 extra cost to complete ($12,000 − $10,000), totaling $5,000 to be placed in the expected position.

Under UCC Article 2, when may a seller cure a defective tender?

Answer: Before the contract delivery date has expired, or within a reasonable time if the seller had reasonable grounds to believe the tender was acceptable

UCC §2-508 allows the seller to cure a defective tender before the performance date, or after if the seller had reasonable belief the nonconforming tender would be accepted.

What is 'nominal damages' in a contract breach action?

Answer: A small, symbolic damages award given when breach is proven but no actual loss occurred

Nominal damages—typically a small sum like $1—are awarded when a technical breach is proven but the plaintiff suffered no measurable financial loss.

A buyer breaches a contract to purchase a unique painting for $50,000. The seller cannot resell the painting at any price. What is the seller's best remedy?

Answer: Specific performance compelling the buyer to pay the contract price

When the seller cannot resell unique goods, specific performance compelling the buyer to pay the contract price may be the most appropriate remedy.