Need Help With Damages Hypo

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jaicastel
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Joined: Tue Jan 31, 2012 1:53 pm

Need Help With Damages Hypo

Postby jaicastel » Fri Dec 07, 2012 10:17 pm

jose agreed to buy 1,000 widgets from Maria. The contract price is $20 per widget. The
contract also gives precise specifications for the widget. Stella spent $4 per widget in labor and material
costs making rough castings of all 1,000 widget. The next, and final, step would have been to finish and polish
them, at a cost of $6 per widget. Before that next step happened, however, jose called and said he cannot use the
widget and will not pay for them. At that time, it was reasonable to assume that the price for completed widget
bearings on the open market would be $8 per widget. maria stopped production and sold the 1,000 unfinished widgets,
unfinished widgets for scrap at $1 per widget.

Maria sues Jose for breach of contract. What damages can she recover?

I have tried to work though it. Can anyone walk me through it? also what ucc prov. would be the one who applies?

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renardthecrocs
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Re: Need Help With Damages Hypo

Postby renardthecrocs » Fri Dec 07, 2012 10:26 pm

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Last edited by renardthecrocs on Tue Dec 18, 2012 10:58 pm, edited 1 time in total.

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Tom Joad
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Re: Need Help With Damages Hypo

Postby Tom Joad » Fri Dec 07, 2012 10:35 pm

Jose could argue for less than $18,000. Maria expected $10,000 in profit. She had $4,000 in costs. And she mitigated $1,000. Even without getting into her mitigating improperly, Jose could argue that her expectation damages are $13,000.

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LetsGoLAW
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Re: Need Help With Damages Hypo

Postby LetsGoLAW » Fri Dec 07, 2012 10:36 pm

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Last edited by LetsGoLAW on Fri Dec 07, 2012 11:05 pm, edited 1 time in total.

jaicastel
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Joined: Tue Jan 31, 2012 1:53 pm

Re: Need Help With Damages Hypo

Postby jaicastel » Fri Dec 07, 2012 10:54 pm

LetsGoLAW wrote:Hello. I will give it my best shot. Since this was for a sale of goods and the buyer breached:

UCC 2-706 - Seller has a duty to mitigate. Difference between the original K price and the re-sale price. Since the market price went down, he can recover $20,000 (10,000 widgets x $20) less $8,000 (10,000 widgets x $8) which results in a $12,000 recovery, less costs avoided, so $11,000 if he re-sells at that time. If there were incidentals afterward, she can recover those too. Now if the market price shot above $20,000 there would be no recovery (not taking into account incidentals) because this would be an efficient breach. Since there might not be any other buyers because the product is specific, there are other remedies.

UCC 2-708(1) - Seller has the right to cover the difference between original K price and the market price at the time and place of performance. The hypo does not give the market price at the time and place for performance, but this could be a remedy if there are no other buyers.

UCC 2-708(2) - Seller has a right to lost profits if the seller is a volume dealer. A volume dealer has an "unlimited supply," similar to a car dealer. If a volume dealer does re-sell, he or she still out of luck for the profit of one car. However, since this was a specially made good and there were only 1,000, this does not seem to be an adequate remedy.

UCC 2-709 - Specific performance. Action for the price when the seller accepts the good and does not pay or has made a reasonable effort to re-sell but cannot or the circumstances say that the seller cannot re-sell (no other buyers). The seller can get the full price of the goods, so $20,000 less costs avoided, $19,000.


Would it not be 2-708(1)? It looks like buyer is repudiating.
The article would be basically 20k - 8k (Market Price) - 6K saved from not having to complete + 1k mitigation = 7k? But this seems really wrong, as the goal is basically to get the seller to their expected damages.

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LetsGoLAW
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Re: Need Help With Damages Hypo

Postby LetsGoLAW » Fri Dec 07, 2012 10:59 pm

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I think I figured it out.

UCC 2-706 - She covered. So $20,000 (K price) - $1,000 (re-sale price) = $19,000 - $6,000 (costs avoided for not having to perform) = $13,000. I agreed with Joad, I was just trying to figure out how to use the UCC to get there. I think this is right.

And we can't use 2-708(1) because that is the price of a COMPLETED good. She sold an incomplete one.




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