Contract Breach and Remedies Flashcards

Which factor do courts consider in determining whether a contractual liquidated damages clause is enforceable?

Answer: Whether the amount was a reasonable forecast of actual harm at the time of contracting and actual damages are difficult to prove

Courts enforce liquidated damages clauses only when the amount represents a reasonable pre-estimate of harm and actual damages would be uncertain or hard to prove.

Builder fully performs a construction contract but installs the wrong brand of pipe, which would cost $50,000 to replace but adds no functional value. The contract price was $100,000. How will a court likely measure damages?

Answer: Diminution in value of the property, likely near $0 since function is unaffected

When curing a technical defect would cause economic waste disproportionate to the benefit, courts use diminution in market value rather than cost of completion.

A vendor repudiates a software services contract. The client immediately brings suit. The vendor then attempts to retract the repudiation. When is retraction of an anticipatory repudiation effective?

Answer: Before the non-breaching party materially changes position or treats the repudiation as final

A repudiating party may retract the repudiation until the other party has materially relied on it, accepted it as final, or commenced an action based on it.

Reliance damages in a breach of contract case are intended to:

Answer: Reimburse the plaintiff for expenses reasonably incurred in reliance on the contract

Reliance damages restore the non-breaching party to their pre-contract position by reimbursing expenditures made in reasonable reliance on the contract.

Under the UCC, if a buyer wrongfully rejects conforming goods and the seller cannot resell them at a reasonable price, what remedy may the seller pursue?

Answer: The full contract price under the action for the price (§2-709)

Under UCC §2-709, a seller may sue for the full contract price when the buyer wrongfully rejects goods and the seller is unable to resell them at a reasonable price.

A party enters a contract based on a mutual mistake of a material fact. What is the appropriate remedy?

Answer: Rescission of the contract, restoring both parties to pre-contract positions

When both parties share a mistake about a material fact at the time of contracting, the contract is voidable and the mistaken party may seek rescission.

A contractor completes a project but the owner refuses to pay, claiming breach. The contractor sues for the contract price. The owner counterclaims for defective work. What principle governs the contractor's right to recover?

Answer: If the contractor substantially performed, they may recover the contract price minus damages for any defects

Under substantial performance, a contractor who has substantially—though not perfectly—performed is entitled to the contract price less the owner's damages for any deficiency.