Question

a)   Buyer A has entered into a contract for the sale of goods with Seller B. The contract provides that Seller B will deliver the goods on May 1, 2010. On May 1, 2010, Seller B informs A that it will not be able to perform the contract. Assume Buyer A was going to pay $3,000 for the goods under the contract with Seller B. Seller C will sell Buyer A the goods for $4,000 plus a transportation cost of $200. What remedies are available to A in this case?

b)   Buyer A has entered into a contract for the sale of goods with Seller B. The contract provides that Seller B will deliver the goods on May 1, 2010. On May 1, 2010, Buyer A informs B that it will not be able to perform the contract. Assume Buyer A was going to pay $3,000 for the goods under the contract with Seller B. Buyer C will buy the goods for $2,000. Additionally, during the time between the breach and Buyer’s C offer, it cost Seller B $500 to care for the goods. What remedies are available to B in this case?

c)   Buyer A has entered into a contract for the sale of goods with Seller B. The contract provides that Seller B will deliver the goods on May 1, 2010. On May 1, 2010, Buyer A informs B that it will not be able to perform the contract. Assume Buyer A was going to pay $3,000 for the goods under the contract with Seller B. The market price for the goods at the time of tender was $1,500. What remedies are available to B in this case?

Answer 1

In case of breach of contract there are usually four types of remedies

• Damages – monetary compensation for loss incurred
• Rescission – making the contract void
• Special performance – injunction or substitute performance ordered by court
• Restitution – defendant forfeits the gain received from the contract

In the case provided below, the ideal situation is to provide damages to the plaintiff. However, let’s review them one by one

A

Seller A will now need to purchase the goods from seller C at a higher price. The difference is $1000 more and the transportation cost of $200. Thus the compensatory damages of $1200 will be a suitable remedy for breach of contract by seller B.

B

Seller B will incur a loss of $1000 from the original sale value. In addition, they will also incur a holding cost of $500. Thus a compensatory damages of $1500 will be the appropriate remedy for the breach of contract by seller A

C

In this case, the market price of the goods are $1500 but A was going to pay $3000. By breaching the contract, A Seller B will likely not suffer loss but lose out on the opportunity to make additional profit. An appropriate remedy may be to order special performance where A is asked by the court to purchase the goods at $1500 instead of $3000.