Anticipatory Repudiation, Lecture notes of Contract Law

Download Anticipatory Repudiation and more Lecture notes Contract Law in PDF only on Docsity!

A N T I C I P AT O R Y R E P U D I AT I O N

CONTRACTS I

§ 250: WHEN A STATEMENT OR AN ACT

IS A REPUDIATION

A repudiation is (a) a statement by the obligor to the obligee indicating that the obligor will commit a breach that would of itself give the obligee a claim for damages for total breach under § 243, or (b) a voluntary affirmative act which renders the obligor unable or apparently unable to perform without such a breach.

§ 2-609: RIGHT TO ADEQUATE

ASSURANCES

(1) A contract for sale imposes an obligation on each party that the other's expectation of receiving due performance will not be impaired. When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return. (2) Between merchants the reasonableness of grounds for insecurity and the adequacy of any assurance offered shall be determined according to commercial standards. (3) Acceptance of any improper delivery or payment does not prejudice the aggrieved party's right to demand adequate assurance of future performance. (4) After receipt of a justified demand failure to provide within a reasonable time not exceeding thirty days such assurance of due performance as is adequate under the circumstances of the particular case is a repudiation of the contract.

CONCEPT MAPPING!

DEFINITE & UNEQUIVOCAL

• (^) Standard is relaxed under U.C.C. view (action that reasonably indicates a rejection of the continuing obligation).
• (^) Standard is relaxed under Restatement (Second) Contracts (must be sufficiently positive to be reasonably interpreted to mean party will not or cannot perform).

MANIFESTATION THAT PERSON WON’T

RENDER PERFORMANCE

• (^) Statement by party that indicates it is unable to perform.
• (^) Statement by party that indicates it is unwilling to perform.
• (^) Voluntary action that makes breach apparently inevitable. - (^) Threat of partial breach is not a repudiation. - (^) Threat to delay performance for a short time that does not substantially impair valuate of the contract and is not a material breach. - (^) Mere financial difficulty or insolvency. Examples Non-Examples

U.C.C. ARTICLE 2: IS THERE A

REPUDIATION

Way #1: Overt communication of intent that demonstrates clear determination not to continue with performance. Way #2: Action that reasonably indicates a rejection of the continuing obligation. Way #3: Failure to provide adequate assurances when required to do so (prospective inability to perform).

PROSPECTIVE INABILITY TO PERFORM Reasonable Grounds for Insecurity?

• (^) If two merchants, look to commercial standards (depends on party’s words, actions, course of dealing, course of performance, and nature of the contract, and industry where transaction occurs).
• (^) Buyer discovers seller selling defective items to other customers (unless contract requires buyer to make payment before inspecting goods).
• (^) Rumors of declining financial situations of seller from reliable source. Yes No - (^) Information that buyer did not yet get loan it may need to pay for goods (with no other evidence). - (^) Non-employed person says further shipments by seller will not be made.

PROSPECTIVE INABILITY TO PERFORM Were Adequate Assurances Provided?

• (^) Verbal assurances may be enough.
• (^) May require bond, funds placed in escrow, or another similar mechanism.
• (^) Must be supplied in a reasonable time (not to exceed 30 days).

PROSPECTIVE INABILITY TO PERFORM What is Effect if Adequate Assurances Not Provided?

• (^) Can treat as a repudiation.
• (^) Right to terminate contract + seek damages.
• (^) Could urge retraction or await performance for a commercially-reasonable time.

TWENTY-FOUR COLLECTION, INC. V.

WEINBAUM CONSTRUCTION, INC.

PROBLEM 8- Was Oscar unreasonable by asking Allen if he would miss the wedding? Would the answer differ if the day after the church services, Oscar had seen Allen in the waiting room of a specialist doctor for maladies of the ears, nose and throat?

PROBLEM 8- Would Thompson be justified in doing so? Would it matter if the buyer was not an individual, but a manufacturer of a consumer product, which contract was for 100 motors per month for a year? See FLA. STAT. § 672.609 (2017). Would it be different if Thompson was a blender manufacturer who regularly ordered motors from Motors Corp.?

PROBLEM 8-

• (^) The action of treating a bad weather front as a likely repudiation is probably wrongful use of anticipatory repudiation.
• (^) At worst, it might justify a demand for adequate assurances, especially for a non-experienced lay person. In this case, a request to confirm timely delivery, coming from a lay person/non-merchant, is probably valid.
• (^) Again, if it were a merchant, there is the UCC § 2- 609(2) requirement that any request for adequate assurances be based on some reasonable basis.