Contracts Rules 8

Repudiation must be clear and unequivocal

Repudiation may be retractice until promissee acts on reliance on the repudiation, accepts repudiation, or commences action for breach of contract.

Those that arise naturally and obviously from the breach.

Equal to market value of performance minus contract price.

Reasonably foreseeable losses going beyond expectancy damages, such as loss of profits.

Reasonably foreseeable if in the contemplation of the parties at the time contract was made.

Amount of damages stipulated in the contract is reasonable in relation to either the actual damages suffered, or the damages that might be anticipated at the time the contract was made.

Penalty clauses unenforceable

Rarely available for contract actions

Parties must avoid or mitigate damages to the extent possible by taking such steps as do not involve undue risk, expense, or inconvenience.

Failure to mitigate will defeat only a claim for consequential damages.


NY rule: No duty to mitigate for real estate leases. I.e., there is no duty on landlord's part to re-let or attempt to re-let abandoned premises. In such situations, a landlord may do three things:

• Do nothing and collect full rent due under lease
• Accept tenant's surrenter, re-enter premises, re-let premises, and release tenant from further liability or rent
• Notify of entry and re-letting for benefit of the tenant. Rent then collected will be apportioned to paying the tenant's rent obligation, but tenant will still be responsible for any additional rent left.

Awards the fair market value of the benefit conferred.

Reasonable out-of-pocket losses by the non-breaching party.

Where damages are inadequate

Factors considered:

• difficulty of proving damages
• difficulty in procuring substitute performance through money damages
• likelihood that an award of damages will be collected.

Likely in real property contracts or where goods are unique or rare.

For failure to tender:

• damages (market price - contract price)
• cover
• specific performance (where goods are unique)
• Replevin

For nonconforming tender:

• Valid rejection (notice to seller within reasonable time before acceptance, retaining of possession until seller reclaism - remedies include all available as if no tender was made)
• Acceptance

Seller has a right to cure as long as time for performance has not elapsed or seller reasonably believed buyer would accept despite nonconformity.

Reclaim goods where nonpayment after 10 days from demand

For wrongful rejection of goods:

• Collect damages
• resell goods
• recover price (if goods not saleable in seller's ordinary course of business)
• Collect incidental damages
• Lost profits (for volume sellers)

Shipment contracts - shifts when seller gives possession to the carrier and makes proper ocntract for shipment.

Destination contracts - shifts seller tenders at place specified in contract.

No transfer of goods - shifts when buyer takes possession.

• nonconforming goods - risk remains on the seller until the buyer accepts or there is a cure.
• buyer rightfully revokes acceptance - shifts back to the seller to the extent of any lack of insurance coverage by the buyer.
• buyer repudiates or breaches after the goods identified but before risk - shifted to the buyer to the extent of any lack of insurance coverage on the part of the seller.
• contract deals with identified goods - seller excused if goods are totally destroyed without seller’s fault prior to the risk of loss being shifted to the buyer.