Contracts

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uvabro
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Contracts

Postby uvabro » Tue Oct 09, 2012 7:24 pm

What remedies are available exactly to a Seller if the Buyer repudiates the contract? UCC is pretty confusing here.

I know if Seller can find replacement buyer it's the difference in price.

But what if they can't? Do they just get market value difference + incidentals, or can the seller be forced to buy it?

z0rk
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Re: Contracts

Postby z0rk » Thu Oct 11, 2012 10:34 am

uvabro wrote:What remedies are available exactly to a Seller if the Buyer repudiates the contract? UCC is pretty confusing here.

I know if Seller can find replacement buyer it's the difference in price.

But what if they can't? Do they just get market value difference + incidentals, or can the seller be forced to buy it?


Good question -- sellers don't usually get specific performance remedies because their interest is money. If a seller were to be awarded expectation damages pursuant to a purchasers breach of contract, then those damages could be awarded in a number of ways given the nature of the contract. Sellers can also seek damages for reliance and/or restitution, depending on the nature of the contract. Like many things in law school, the answer to this question is "it depends."

On your question about specific performance: If a seller finds a replacement buyer the damages awarded aren't necessarily the difference in price, but profits plus incidental damages. See Neri v. Retail Marine Corp., 30 N.Y.2d 393, 334 N.Y.S.2d 165 (N.Y. 1972) (where a retail boat seller was awarded the expected profit plus incidental costs to insure and maintain a boat pursuant to a buyers repudiation of purchase); UCC § 2-716; and UCC § 2-708.

RPK34
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Re: Contracts

Postby RPK34 » Thu Oct 11, 2012 10:47 am

z0rk wrote:
uvabro wrote:What remedies are available exactly to a Seller if the Buyer repudiates the contract? UCC is pretty confusing here.

I know if Seller can find replacement buyer it's the difference in price.

But what if they can't? Do they just get market value difference + incidentals, or can the seller be forced to buy it?


Good question -- sellers don't usually get specific performance remedies because their interest is money. If a seller were to be awarded expectation damages pursuant to a purchasers breach of contract, then those damages could be awarded in a number of ways given the nature of the contract. Sellers can also seek damages for reliance and/or restitution, depending on the nature of the contract. Like many things in law school, the answer to this question is "it depends."

On your question about specific performance: If a seller finds a replacement buyer the damages awarded aren't necessarily the difference in price, but profits plus incidental damages. See Neri v. Retail Marine Corp., 30 N.Y.2d 393, 334 N.Y.S.2d 165 (N.Y. 1972) (where a retail boat seller was awarded the expected profit plus incidental costs to insure and maintain a boat pursuant to a buyers repudiation of purchase); UCC § 2-716; and UCC § 2-708.


Did you seriously just answer a forum post with bluebook form?

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ndirish2010
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Re: Contracts

Postby ndirish2010 » Thu Oct 11, 2012 10:53 am

RPK34 wrote:
z0rk wrote:
uvabro wrote:What remedies are available exactly to a Seller if the Buyer repudiates the contract? UCC is pretty confusing here.

I know if Seller can find replacement buyer it's the difference in price.

But what if they can't? Do they just get market value difference + incidentals, or can the seller be forced to buy it?


Good question -- sellers don't usually get specific performance remedies because their interest is money. If a seller were to be awarded expectation damages pursuant to a purchasers breach of contract, then those damages could be awarded in a number of ways given the nature of the contract. Sellers can also seek damages for reliance and/or restitution, depending on the nature of the contract. Like many things in law school, the answer to this question is "it depends."

On your question about specific performance: If a seller finds a replacement buyer the damages awarded aren't necessarily the difference in price, but profits plus incidental damages. See Neri v. Retail Marine Corp., 30 N.Y.2d 393, 334 N.Y.S.2d 165 (N.Y. 1972) (where a retail boat seller was awarded the expected profit plus incidental costs to insure and maintain a boat pursuant to a buyers repudiation of purchase); UCC § 2-716; and UCC § 2-708.


Did you seriously just answer a forum post with bluebook form?


Once you start, it's hard to get yourself out of that mode.

sangr
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Re: Contracts

Postby sangr » Thu Oct 11, 2012 12:11 pm

if youre selling a business and buyer repudiates and you find a substitute

we have the original contract price minus the substitute.

how do costs of the original contract work? (so the original money u paid to the real estate broker). are these added into the money u get? or are they subtracted from the money u get since its money that wouldve been taken out of ur profits anyways?

what about money that u pay to broker on the substitute contract? im pretty sure those are added to your damages since its money that u had to use due to the breach. but what im sure of is for the original contract. does the plaintiff also get money back
for the money he had to expend on the real estate broker on the ORIGINAL deal?

uvabro
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Re: Contracts

Postby uvabro » Thu Oct 11, 2012 12:21 pm

yeah, i meant if you don't find a replacement buyer. according to my understanding of the UCC, seller can choose value diff b/w time of contract and breach (like if real estate prices drop), or expected profit, whichever puts them in the best position?

sangr
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Re: Contracts

Postby sangr » Thu Oct 11, 2012 12:28 pm

ooh, so there is a split between

contract price minus market value (or substitute contract)

or

expected profits?

are they two different approaches? isnt the former basically a profits thing too?

uvabro
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Re: Contracts

Postby uvabro » Thu Oct 11, 2012 12:32 pm

sangr wrote:ooh, so there is a split between

contract price minus market value (or substitute contract)

or

expected profits?

are they two different approaches? isnt the former basically a profits thing too?

I thought about this for way too long. My guess is if you're dealing with a penny stock or a volatile market maybe substitute performance isn't likely, and profit won't help?

For example, if I sell you my house for 100,000 when I paid 90,000 for it and you breach when the value goes down to 30,000 because of the 2008 recession, the 10k won't help me as much as getting the difference in value - 70k?

Am I correct?

uvabro
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Re: Contracts

Postby uvabro » Thu Oct 11, 2012 12:49 pm

Sorry, I just like to throw in real life confusing shit when I don't understand something to make sure I can apply it in real life.

z0rk
Posts: 328
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Re: Contracts

Postby z0rk » Thu Oct 11, 2012 4:35 pm

sangr wrote:ooh, so there is a split between

contract price minus market value (or substitute contract)

or

expected profits?

are they two different approaches? isnt the former basically a profits thing too?


Dimunition in value vs. profit are two different concepts. The dimunition in value could be more than just the loss of profits it could be other costs incurred as a result of the breach (i.e. relisting fees, marketing fees, lower market price that what could have been made under the K or at market price sale on the date the K was breached). In cases where there is an efficient breach, that is where the buyer repudiates and the seller is able to get a better deal in the market, there typically is not a finding of damages.

sangr wrote:if youre selling a business and buyer repudiates and you find a substitute

we have the original contract price minus the substitute.

how do costs of the original contract work? (so the original money u paid to the real estate broker). are these added into the money u get? or are they subtracted from the money u get since its money that wouldve been taken out of ur profits anyways?

what about money that u pay to broker on the substitute contract? im pretty sure those are added to your damages since its money that u had to use due to the breach. but what im sure of is for the original contract. does the plaintiff also get money back
for the money he had to expend on the real estate broker on the ORIGINAL deal?


Could you elaborate more on your real estate broker question? Is it a seller recovering broker fees upon a buyers repudiation? Or is it a buyer recovering broker fees upon a sellers repudiation? It makes a small difference, but one worth noting.

If the buyer were recovering damages for a sellers breach in real property there could be a case, although it is not a frequent occurrence, for specific performance. What was the cause for the breach? Did the seller find another buyer? If a court declines to grant specific performance because the property is not so unique and the market is bountiful with similar options, perhaps quantum meruit is an appropriate remedy for the non-breaching seller. Or what if significant reliance was made upon representations of the seller? See Wheeler v White 398 S.W.2d 93, (Tex. 1965) (where the court held that a buyer was entitled to reliance damages because a seller could not meet a promise to acquire a loan for the buyer). Such relief would grant the non-breaching buyer their broker’s fees. What if part performance was made on the land? (can’t find this case, a son works on fathers land there was no K but promissory estoppel applied because the son partially performed in reliance upon the father’s promise to gift the land to him).

I assume you are asking if the buyer could recover the original brokers fee from the breached deal if they mitigated on another property. The answer is it depends on how much they saved in aggregate in mitigating damages.

If the seller were recovering damages for a breach of contract on real estate, I think it would depend on a few elements: 1.) was a good contract made? See Empro Mfg. Co. v. Ball-Co Mfg., Inc., 870 F.2d 423 (7th Cir. 1989) (where the court held that a contract was not formed upon a letter of intent, a situation analogous to various condition precedent contracts in the realm of real estate) 2.) If a security deposit was paid on the contract? See Vines v Orchard Hills, Inc., 181 Conn. 501, 435 A.2d 1022 (1980) (where the court held that a deposit paid on a real estate contract formed an earnest money agreement that was sufficient for liquidated damages for buyers breach of contract) 3.) Did the seller meet any precedent conditions that required the seller to incur cost at the benefit to the buyer? See Omni Group, Inc. v Seattle-First Nat’l Bank 32 Wash.App. 22, 645 P.2d 727 (1982).

uvabro
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Re: Contracts

Postby uvabro » Thu Oct 11, 2012 6:02 pm

I wasn't asking like a test question - just to make sure I'm up to par.

I'm saying I buy a house for 90k. Next week we make a valid contract for a house for 100k. You sign.

Come payment date, you breach.

Between the contract date, and the breach the value of the house went down 50%. You're a real estate tycoon so there's no difference in knowledge between us.

Do I get 60 (100k value down to 50k value) + the 10k expected profit according to bll?

z0rk
Posts: 328
Joined: Sun Jun 29, 2008 8:11 pm

Re: Contracts

Postby z0rk » Thu Oct 11, 2012 10:50 pm

uvabro wrote:I wasn't asking like a test question - just to make sure I'm up to par.

I'm saying I buy a house for 90k. Next week we make a valid contract for a house for 100k. You sign.

Come payment date, you breach.

Between the contract date, and the breach the value of the house went down 50%. You're a real estate tycoon so there's no difference in knowledge between us.

Do I get 60 (100k value down to 50k value) + the 10k expected profit according to bll?


I would think that the buyer in your scenario would pay for the profit plus the dimunition in value. A comment to a section in the first restatement addresses this:

g. A breach of contract may cause loss as well as prevent gain. Recoverable damages include the amount of losses, if their proof satisfies the rules as to certainty and foreseeability. A breach of contract may prevent a loss as well as cause one; it may save to the plaintiff the expense of completing his own performance. In so far as it prevents loss, the amount will be credited in favor of the wrongdoer in reduction of the claims against him. Restatement (First) of Contracts § 329 (1932).


This was covered in the second restatement:

Subject to the limitations stated in §§ 350-53, the injured party has a right to damages based on his expectation interest as measured by(a) the loss in the value to him of the other party's performance caused by its failure or deficiency, plus(b) any other loss, including incidental or consequential loss, caused by the breach, less(c) any cost or other loss that he has avoided by not having to perform. Restatement (Second) of Contracts § 347 (1981)


On your earlier question about specific performance, a seller cannot sue for the full purchase price and compel the breaching buyer to take the property.

uvabro
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Re: Contracts

Postby uvabro » Thu Oct 11, 2012 11:24 pm

Cool so hed get 60k then. Profit plus loss. Seems fair, if forward contracts are valid these should definitely be.

z0rk
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Re: Contracts

Postby z0rk » Thu Oct 11, 2012 11:25 pm

Also, if you have an E&E there is a section covering sellers remedies for specific performance (18.4.2 in the 4th ed.). It looks to UCC 2-706, 2-708, and 2-709. They back up what I wrote above.

Specific performance can only be given to a seller when damages are inappropriate. Essentially when the property has been conveyed or given to the buyer or if the property cannot be resold because they are lost by the buyer or they are not resellable. In your example that is not the case, I would think the diminution plus profits is the damages awarded.

uvabro
Posts: 405
Joined: Sun Aug 26, 2012 9:44 pm

Re: Contracts

Postby uvabro » Thu Oct 11, 2012 11:55 pm

z0rk wrote:Also, if you have an E&E there is a section covering sellers remedies for specific performance (18.4.2 in the 4th ed.). It looks to UCC 2-706, 2-708, and 2-709. They back up what I wrote above.

Specific performance can only be given to a seller when damages are inappropriate. Essentially when the property has been conveyed or given to the buyer or if the property cannot be resold because they are lost by the buyer or they are not resellable. In your example that is not the case, I would think the diminution plus profits is the damages awarded.

Yeah i have understanding contracts and our course book. I've learned the logic really well and he's a great teacher. The issue is most of our cases just get sent back to trial court because there wasn't enough evidence for dismissal so we don't learn anything definitive.

idk
Posts: 49
Joined: Mon Aug 27, 2012 6:26 pm

Re: Contracts

Postby idk » Sat Oct 13, 2012 6:57 am

ndirish2010 wrote:
RPK34 wrote:
z0rk wrote:
uvabro wrote:What remedies are available exactly to a Seller if the Buyer repudiates the contract? UCC is pretty confusing here.

I know if Seller can find replacement buyer it's the difference in price.

But what if they can't? Do they just get market value difference + incidentals, or can the seller be forced to buy it?


Good question -- sellers don't usually get specific performance remedies because their interest is money. If a seller were to be awarded expectation damages pursuant to a purchasers breach of contract, then those damages could be awarded in a number of ways given the nature of the contract. Sellers can also seek damages for reliance and/or restitution, depending on the nature of the contract. Like many things in law school, the answer to this question is "it depends."

On your question about specific performance: If a seller finds a replacement buyer the damages awarded aren't necessarily the difference in price, but profits plus incidental damages. See Neri v. Retail Marine Corp., 30 N.Y.2d 393, 334 N.Y.S.2d 165 (N.Y. 1972) (where a retail boat seller was awarded the expected profit plus incidental costs to insure and maintain a boat pursuant to a buyers repudiation of purchase); UCC § 2-716; and UCC § 2-708.


Did you seriously just answer a forum post with bluebook form?


Once you start, it's hard to get yourself out of that mode.

i appreciate this. i hope to get into that mode at some point...
:)

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salix
Posts: 93
Joined: Wed Jan 25, 2012 6:13 pm

Re: Contracts

Postby salix » Thu Oct 18, 2012 10:24 am

RPK34 wrote:
z0rk wrote:
uvabro wrote:
Did you seriously just answer a forum post with bluebook form?


Once you start, it's hard to get yourself out of that mode.

i appreciate this. i hope to get into that mode at some point...
:)


Totally feeling this.

And I liked your answer, z0rk.




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