Law of Commercial Transactions Handout 9
L.S. 4523 / 5523
Handout 9
Spring, 2013 1. What is a material breach of contract? There are three types of material breach. Anticipatory repudiation: A repudiation of contract obligations before they become due. Must be unequivocal (clear statements of a parties refusal to preform when performance is due.) No assurance (demanded writing exceeds 30 days) = repudiation.
1.) Waffling Seller: A seller who equivocates when asked if he’s going to deliver the goods as promised.
2.) Cash Short Buyer: Seller learns that the buyer isn’t paying bills as they become due. Total non-performance when it is due. Substantial non-performance: If a buyer rightfully rejects or revokes acceptance of goods (when seller materially breaches contract) or when the buyer wrongfully rejects and refuses to pay for goods (the buyer has materially breached). 2. Be prepared to describe the Seller’s and Buyer’s rights in the event of the other’s insolvency. Seller’s Remedies: (Buyer’s insolvency) If the seller delivers goods on credit to an insolvent buyer, then the seller has the right to reclaim those goods within 10 days of buyer’s receipt of them. SELLER’S CLAIM SUPERSEDES THAT OF BUYER’S OTHER CREDITORS. Buyer Remedies: (Seller’s insolvency) If the goods are identified and the buyer has paid at least part of the contract price for the goods, then the buyer, by tendering the balance of the contract price, has, consistent with his special property right arising from identification, the right to claim the goods. BUYER’S RIGHT SUPERSEDES THAT OF SELLER’S OTHER CREDITORS. 3. Is it possible that a court would choose not to enforce a liquidated damages provision in an otherwise valid contract? Why or why not. Yes, if the contract doesn’t explicitly state the seller’s/buyer’s damages in the event of the buyer’s/seller’s breach, or that “liquidated damages” provision will not apply if the agreed-upon measure doesn’t reasonably approximates the actual
Handout 9
Spring, 2013 1. What is a material breach of contract? There are three types of material breach. Anticipatory repudiation: A repudiation of contract obligations before they become due. Must be unequivocal (clear statements of a parties refusal to preform when performance is due.) No assurance (demanded writing exceeds 30 days) = repudiation.
1.) Waffling Seller: A seller who equivocates when asked if he’s going to deliver the goods as promised.
2.) Cash Short Buyer: Seller learns that the buyer isn’t paying bills as they become due. Total non-performance when it is due. Substantial non-performance: If a buyer rightfully rejects or revokes acceptance of goods (when seller materially breaches contract) or when the buyer wrongfully rejects and refuses to pay for goods (the buyer has materially breached). 2. Be prepared to describe the Seller’s and Buyer’s rights in the event of the other’s insolvency. Seller’s Remedies: (Buyer’s insolvency) If the seller delivers goods on credit to an insolvent buyer, then the seller has the right to reclaim those goods within 10 days of buyer’s receipt of them. SELLER’S CLAIM SUPERSEDES THAT OF BUYER’S OTHER CREDITORS. Buyer Remedies: (Seller’s insolvency) If the goods are identified and the buyer has paid at least part of the contract price for the goods, then the buyer, by tendering the balance of the contract price, has, consistent with his special property right arising from identification, the right to claim the goods. BUYER’S RIGHT SUPERSEDES THAT OF SELLER’S OTHER CREDITORS. 3. Is it possible that a court would choose not to enforce a liquidated damages provision in an otherwise valid contract? Why or why not. Yes, if the contract doesn’t explicitly state the seller’s/buyer’s damages in the event of the buyer’s/seller’s breach, or that “liquidated damages” provision will not apply if the agreed-upon measure doesn’t reasonably approximates the actual