Contracts II Exam Model Answers

Parol Evidence Rule

Intro
X seeks to supplement the written contract by proffering TERM. Because TERM is prior or
contemporaneous to the written agreement, yet relates to the subject matter of the written agreement, and is not
made for separate consideration, TERM can only be presented to the factfinder if it satisfies the Parol Evidence
Rule. If TERM satisfies the Parol Evidence Rule, then TERM can be presented to the fact finder to supplement
the written contract.
The Parol Evidence Rule says that if a written agreement is integrated, or complete, as to the proffered
term, then the term may not be presented to the fact finder. If the written agreement is not integrated at all, then
any parol evidence terms may be presented to the fact finder. If the written agreement is completely integrated,
then no parol evidence terms may be presented to the fact finder. If the written agreement is partially
integrated, then parol evidence terms may be presented to the fact finder only if the written agreement is not
integrated as to the proffered terms.
Y will argue the written contract is totally integrated because there is a contractual merger clause. Y will
argue that, when a valid merger clause exists, the agreement is totally integrated and no parol evidence terms
may be proffered. UAW v. Hotel. However, X will argue that the many courts hold that a written agreement
cannot prove its own completeness, and that a merger clause is merely evidence of integration and not
conclusive evidence. Dissent in UAW v. Hotel. Additionally, X will argue that if the agreement, on its face, is
obviously incomplete, or the merger clause or agreement was inspired by fraud, then the merger clause is
considered invalid. However, Y will note that fraud as to the proffered term is not enough. [If UCC: More
likely to be enforced].
If Partially Integrated
Assuming the agreement is partially integrated, the next step is to determine whether the agreement is
integrated as to the proffered term. If it is, the proffered term may not be presented to the fact finder. [If
Common Law: According to RSC 216, an agreement is not integrated as to the proffered term if that term might
naturally be omitted from the writing.] [If UCC: According to UCC 2-202, an agreement is integrated if the
additional terms, if agreed upon, would have certainly been included in the document.]
If this court is in a four corners jurisdiction, it may only look at the plain meaning of the written
document, without regard to extrinsic evidence to figure out whether the document is integrated as to TERM.
According to RSC 209, there is a rebuttable presumption of the four corners rule.
If this court is not in a four corners jurisdiction, the court will consider extrinsic evidence to help
determine whether the written agreement is integrated as to TERM. For instance, they can consider the
relationship and bargaining between the parties (Masterson v. Sine), and other such extrinsic evidence.
Regardless of whether this court is a four corners jurisdiction or not, if this transaction involves a sale of
goods, then the court will consider course of performance, course of dealing.
X will argue ___. Y will argue ____. Compare to cases.
Consistency
The Parol Evidence Rule also states that a proffered term may not be presented to the fact finder to
supplement a written agreement if it is inconsistent with the agreement. Thus, to present TERM to the fact
finder, TERM must not be inconsistent with the written agreement.
X will argue that a term is only inconsistent when it contradicts or negates a term of the written
agreement. Hunt v. Doliner. However, Y will argue that the term can also be inconsistent with the agreement if
it contradicts or negates silence, or the implied terms of the agreement. Masterson v. Sine Dissent.
Interpretation
Intro

The court must consider whether to interpret a contract when the meaning of the terms might be
indefinite. This occurs when a term is ambiguous (has more than one potential meaning, such as in Raffles v.
Wichelhaus) or vague (not a precise description, requires relative reference, or grammatical vagueness).
Common Law?
In a common law contract, courts differ on the evidence they allow to interpret an agreement. In an
objectivist jurisdiction, a court will no interpret the agreement unless it has ambiguity/vagueness on its face,
without regard to extrinsic evidence. Dissent in In Re Sopers Estate. In other words, the court is limited to
figuring out ambiguity or vagueness by the express terms of the agreement. In a contextualist jurisdiction the
court will allow using extrinsic evidence to find a latent ambiguity/vagueness. In Re Sopers Estate. This
means the court will first look at the express terms of the agreement, then the course of performance, course of
dealing, and trade usage to see if there is ambiguity or vagueness. RSC 203.
The parties will argue ___.
If the court finds ambiguity/vagueness, it will next determine what the terms mean. Depending on the
evidence the court allows to be presented, it will interpret by using pieces of evidence such as the ordinary sense
of language used by the parties, the negotiations leading up to the agreement, the course of performance (RSC
202(4)), course of dealing (RSC 202, 223), trade usage (RSC 202(5), 222), and other such extrinsic evidence.
The parties will argue ___.
RSC 203 suggests some guidelines for interpretation. First, courts should try to interpret the agreement
in a way that gives effect to all of the terms. Secondly, the court should favor the meaning that validates the
contract. Thirdly, specific terms get greater weight than general language. Finally, the court should favor
negotiated terms over boilerplate.
UCC?
In a sale of goods contract, UCC 2-202 governs. The UCC, unlike the common law, is always
contextualist, meaning that it always allows the use of extrinsic evidence to figure out whether there is
ambiguity or vagueness and to interpret the agreement. If the court finds that the terms are ambiguous or vague,
it will attempt to determine the meaning of the ambiguous or vague terms.
The court must look at the agreement in light of the trade usage to determine the meaning of the terms
(UCC 1-205). According to UCC 2-202 and Frigaliment v. BNS, it is assumed that the parties agreed to the
trade usage if (1) usage is pertinent to the term at issue; (2) usage exists in the trade/market where the
transaction occurred; (3) both parties are sufficiently connected to the market or knew or had reason to know
trade usage would apply to this transaction.
Parties will argue ___. Trade usage is ___.
However, trade usage can be disavowed in several ways. First, the parties express terms can disavow
trade usage (but must do so explicitly and not through boilerplate). Secondly, course of performance can
override trade usage if (1) pertinent to contractual meaning; (2) without protest/reservation of rights; (3)
conduct is known to both parties; (4) the more extensive/repetitious, the stronger the inference. UCC 2-208.
Finally, trade usage can be disavowed if the course of dealing, or prior relationship between the parties before
the transaction in question differs from trade usage. [According to RSC 203, Express > C.O.Perf. >
C.O.Dealing > TradeUsage]
Parties will argue ___.
Finally, the interpretation cannot contradict the written agreement. If the interpretation contradicts the
written agreement a different interpretation must be used. UCC 2-202, Southern Concrete v. Mableton.
Parties will argue ___.
[See 203 in common law section for guideline arguments]
Mistake
X claims that he should be excused from performance because of mistake. According to RSC 152, a
party is excused from performance if (1) there is a mistake of present fact; (2) that goes to a basic assumption of
the contract; (3) that has a material effect on the agreed upon exchange of performances; and (4) the risk of the
mistake has not been allocated explicitly or implicitly to the aggrieved party. Additionally, according to RSC

157 and Anderson Bros. v. OMeara, courts will consider the fault of the parties in determining whether to grant
relief. Furthermore, if the mistake is unilateral, rather than mutual, courts require that the party seeking relief
pass the above test, and prove (1) the effect of mistake means enforcement of the contract is unconscionable; or
(2) the other party knows or has reason to know of the mistake or his fault caused it. RSC 153.
Parties will argue:
Present Fact. Alcoa (could be actuarial error), must be something parties know exists that
can be ascertained by objective evidence not an unknown-unknown. (Atlas Corp.)
Basic Assumption. (entered into it anyway?)
Material Effect. (not really so bad b/c of cover?)
Risk not allocated: see RSC 154, Alcoa test.
Fault: Note that fault is not the whole game.
Unilateral: Is it unilateral? Reasonable to know of mistake?
If the court finds there is mistake, then generally it will declare the contract to be voidable by the party
seeking relief. RSC 152. If the contract is then voided, generally the parties can sue each other, generally for
restitution damages. However, in some cases, particularly when the mistake relates to transcription, the court
will reform the contract to cure the mistake. See Alcoa. Reformation may require the court to engage in
interpretation to figure out the true intent of the parties.
Parties may argue ___. (perhaps for reliance, not really expectation)
Impossibility
X claims he should be excused from performance because performance has become impossible.
According to RSC [262(person), 263(thing)], a party is excused from performance if (1) after the contract is
made; (2) performance becomes impossible due to an occurrence contrary to a basic assumption of the contract.
The parties will argue:
Was the event supervening?
Impossible: Objective or Nearly Impossible? (Sietz v. Mark-O-Lite)
Basic Assumption: RSC 263: An implied term of the contract, exists because of default rule
at the time (Taylor v. Caldwell, Carroll v. Bowersock trade usage, previous dealings, text of
the deal, etcetera)
o I.E. I want Joes apples, not Bobs.
o Also: you cant always perform, but you can always PAY.
Without Fault: If performance becomes impossible because of your fault, youre screwed.
Canadian Alcohol v. Dunbar.
Risk allocation this was foreseeable or the parties discussed it, the risk may have been
allocated.
If the court determines that performance is impossible, it will generally rescind the contract. RSC
262/263. Parties can then sue, generally for restitution damages.
Impracticability
X claims he should be excused from performance because performance has become impracticable.
Common Law
According to RSC 261, performance is excused when (1) performance becomes impracticable; (2) by
the occurrence of an unforeseen event, the non-occurrence of which was a basic assumption on which K was
made; (3) without complainants fault. Additionally, it is assumed the party seeking relief does not bear the risk.
Eastern Air Lines v. Gulf Oil Corp.
Parties will argue:
See same arguments for UCC.
UCC

According to UCC 2-615, delay in delivery or non-delivery is not breach if performance is made (1)
commercially impracticable; (2) by the occurrence of a contingency, the non-occurrence of which was a basic
assumption of the contract; (3) unless the seller assumed the risk. Moreover, courts will not excuse
performance if the impracticability is the fault of the party seeking relief. UCC 2-615 note 8 assumes trade
usage, course of performance, and course of dealing in the agreement, unless negated by agreement.
Parties will argue:
Commercially impracticable: must be extreme, unduly burdensome (2-615 Note 4,
Transatlantic v. US).
Basic Assumption (RSC 263): implied term of K, exists b/c of default rule @ the time, trade
usage, course of dealing, etcetera)
Assumed the risk: Foreseeability (Eastern Air Lines v. Gulf)
Fault: See impossibility fault cases, RSC 261.
Remedy
If the court grants impracticability, it generally relieves of the duty of performance, and both parties
must return the value of their performances.
Frustration
X seeks to avoid performance under the contract due to frustration of purpose. According to RSC 265, a
partys duty to perform is discharged if (1) after the contract is made; (2) without his fault; (3) the partys
principal purpose is substantially frustrated by the occurrence of an event, the non-occurrence of which was a
basic assumption of the contract. Additionally, the party seeking relief cannot have assumed the risk. Lloyd v.
Murphy.
Parties will argue:
After K made? Parties may mention RSC 266, but this is generally not followed.
Without fault? If purpose frustrated b/c you screwed up one of your contracts that would
combine with this one for your purpose, you dont get off.
PRINCIPAL Purpose: must not be a side purpose of the contract.
SUBSTANTIALLY Frustrated: Cannot simply mean failing to make a profit; total or near
total destruction of purpose required. Yes: Krell v. Henry; No: Lloyd v. Murphy. WTF:
Alcoa.
Risk.
If the court grants remedy for frustration, it will usually be to discharge the
partys duty to perform.
Anticipatory Repudiation
Is there Anticipatory Repudiation?
X argues that Y has anticipatorily repudiated. Anticipatory repudiation occurs when, prior to the date of
performance a partys (1) clear, positive, unequivocal; (2) voluntary words or conduct; (3) imply he put it out of
his power to perform or does not intend to perform. Taylor v. Johnston; RSC 250.
The parties will argue:
Clear, Positive, and Unequivocal: Truman v. Sara Lee.
Voluntary: must be something the party does, not an outside event.
Put it out of his power (Taylor) / does not intend (Hochster).
It is breach if it is after the date of performance.
UCC
Rights of Aggrieved After Anticipatory Repudiation
If Y has anticipatorily repudiated, Xs legal rights with respect to the repudiation are governed by UCC
2-610. X has the right to: (1) for a commercially reasonable time, await performance; or (2) resort to buyers or

sellers remedies for breach even after notifying the repudiator that he would await performance and has urged
retraction; and (3) in either case, suspend his own performance or proceed in occurrence with provisions of 2704 regarding sellers rights, such as resale. Additionally, X has the right to demand assurances.
Rights of Anticipatory Repudiator
If Y has anticipatorily repudiated, his legal rights with respect to the repudiation are governed by UCC
2-611. Y may retract his repudiation, prior to the date a performance is due, unless (1) the aggrieved party has
cancelled; (2) materially changed his position; or (3) indicated he considers the repudiation final. Y may retract
in any method clearly indicating the intent to perform, and must include any assurance justifiably demanded
under 2-609. Once retraction occurs, the repudiating partys rights are reinstated, but with due excuse to the
aggrieved party for delay due to repudiation.
Arguments For Rights of Each Party:
Did X wait for a commercially reasonable time?
Was it commercially reasonable to suspend performance?
UCC remedies stuff.
Did retraction occur prior to cancellation / material change? (Truman)
Did Y include assurances?
Was delay reasonable?
Demanding Assurances
If Ys acts or outside events have called his ability to perform into question, X may be able to demand
assurances. According to UCC 2-609, (1) when reasonable grounds for insecurity arise with respect to a partys
performance; (2) the other may, in writing, demand adequate assurance of due performance; and (3) until he
receives such assurance may, if commercially reasonable, suspend any performance for which he has not
already received the agreed return. Additionally, if the party whose performance has called into question does
not provide assurances within a reasonable time, not exceeding 30 days, the court will consider it a repudiation.
The parties will argue:
Reasonableness. Determined between merchants, according to commercial standards.
In writing.
Did Y provide adequate assurance in response.
Reasonable time.
Reasonable assurances: if you demand too much and refuse to perform without receiving the
assurances, then you have anticipatorily repudiated. Bartlett.
Ceasing performance: if you cease performance without reasonable grounds, or for things
you have already received performance for, you have anticipatorily repudiated.
Common Law
Rights of Aggrieved After Anticipatory Repudiation
If Y has anticipatorily repudiated, X has several legal options. First, he can treat the contract as
breached and sue immediately. RSC 253; Hochster v. De La Tour. Secondly, if reasonable, he may suspend his
performance and wait to see if the other party retracts. RSC 255. Thirdly, he may demand assurances in a
proper case. Finally, whether or not he takes advantage of one of the three options, he may urge retraction of
repudiation. RSC 257.
Rights of Anticipatory Repudiator
If Y has anticipatorily repudiated, he may retract his repudiation if he chooses. According to RSC 256,
Y may retract prior to the date a performance is due, unless (1) the aggrieved party has cancelled; (2) materially
changed his position; or (3) indicated he considers the repudiation final. Y may retract in any method clearly
indicating the intent to perform, and must include any assurance justifiably demanded. Once retraction occurs,

the repudiating partys rights are reinstated, but with due excuse to the aggrieved party for delay due to
repudiation.
Arguments for Rights of Each Party:
Same as UCC.
Demanding Assurances
If Ys acts or outside events have called his ability to perform into question, X may be able to demand
assurances. Under the common law, not all jurisdictions allow parties to demand assurances, however, RSC 251
suggests that courts apply essentially the same test as UCC 2-609. Thus, this suggestions says that (1) when
reasonable grounds for insecurity arise with respect to a partys performance; (2) the other may, preferably in
writing, demand adequate assurance of due performance; and (3) until he receives such assurance may, if
reasonable, suspend any performance for which he has not already received the agreed return. Additionally, if
the party whose performance has called into question does not provide assurances within a reasonable time, the
court will consider it a repudiation.
The parties will argue:
Similar arguments as UCC but note the differences (not in writing, not necessarily commercially
reasonable, no 30 day limit)
Remedies
The only thing to note here is the Roye Realty exception for a cash term in the contract. Otherwise, see
Remedies section.
Common Law Remedies
X v. Y
Which Base Damages to Award?
When X Breached & Contract is Valid
There can only be one breaching party. Therefore, if X breached and is attempting to sue, he can only
receive restitution damages. Additionally, according to RSC 374, the breaching party who sues for restitution
may only recover any benefit he conferred on the other party in excess of loss caused by his breach.
Furthermore, he cannot claim any more than the contract price, and he is still bound by valid damage limitations
in the contractual terms. Britton v. Turner.
When Contract is Invalid
If the contract is deemed invalid, courts will probably allow the parties to sue for restitution damages to
prevent unjust enrichment.
When Contract is valid and
- Expectation damages are reasonably non-speculative? -> Expectation
- Construction contract and/or breaching party left a defective/unfinished condition -> Cost of
Completion or Diminution in Value
- Expectation damages difficult to calculate?
o Reliance or Restitution, depending on which is closer to expectation.
Special Cases
- Specific Performance: may be used if damages would be inadequate to protect expectation interest
(RSC 359); when (1) goods are unique; or (2) in other proper circumstances. (UCC 2-716)
- Punitive: if there is (1) commission of tort in addition to breach of K; (2) punitive damages in favor
of public interest; (3) amount is reasonable.

Liquidated Damages: when you write damages into K itself

Expectation Damages
Generally, a court will award expectation damages. Expectation damages are an attempt to put the nonbreaching party in the position they would be if the contract had been completely and properly performed. To
calculate expectation damages, the court will first calculate the benefit of the bargain. This is the loss in value
to the non-breaching party caused by the other partys deficient performance, plus any reliance expenses
incurred. From this, the court will add any incidental and consequential damages, and then subtract any costs
avoided by the non-breaching party due to breach. RSC 347.
The parties will argue:
Expectation damages are improper/speculative/etc.
Benefit of bargain is different
Reliance expenses were not related to contract.
Limitations.
Construction Contract Damages
If the breaching party, left an unfinished or defective condition, and the damages are not proved with
sufficient certainty, the court may allow X to recover damages based either on (1) diminution of in value; or (2)
reasonable cost of completion. RSC 348. The court will award damages based on diminution in value if (1) the
breach was in good faith and unintentional; (2) completion would involve unreasonable economic waste; (3) the
breach was incidental to the main purpose of the contract; (4) completion would be disproportionately costly.
American Standard v. Schectman. However, if the diminution in value test is not met, courts will award the
reasonable cost of completion. Schetman.
Parties will argue:
Schetman contrasted with Peevyhouse.
Jacob & Youngs v. Kent.
What is the reasonable cost of completion/diminution.
Are these values speculative?
Specific Performance
The courts will rarely grant specific performance. According to UCC 2-716, specific performance may
be awarded when (1) goods are unique; or (2) in other proper circumstances. Other Proper Circumstances
refer to when the buyer cant adequately cover with reasonable effort. Essentially, courts will not grant specific
performance except for dealing with rare, extremely valuable items. The court will never grant specific
performance if damages would be adequate to protect the expectation interest of the injured party. RSC 359.
Parties will argue:
Unique: very difficult prong to meet. Must relate to a MATERIAL uniqueness to the buyer.
Charlies Chevrolet.
Other Proper Circumstances: what exactly does this mean? Charlies Chevrolet, Klein v. Pepsico
Reliance Damages
When courts grant reliance damages, they grant enough damages to put the aggrieved party back in the
position they were before they entered into the contract. According to RSC 349, reliance damages are
expenditures made in preparation for performance or in performance, less any loss the party in breach can prove
with reasonable certainty the injured party would have suffered had the contract been performed. Sullivan v.
OConnor. Courts are not supposed to award more in reliance damages than they would with expectation
damages. Kizas v. Webster.
Parties will argue:
What the proper value of reliance is.

What is covered? Did the expense fall within contractual reliance or an external expense?
Kizas, Sullivan.
Was this a losing bargain?

Restitution Damages
Non-Breaching Party Sues
Because Y breached, X is always allowed to forego any suit on the contract and claim only the
reasonable value of performance. U.S. v. Zara Contracting Co. If X chooses to do so, the courts will award X
the benefit he conferred on Y. Additionally, because X is not the breaching party, his damages are not limited by
the contract price or any of the terms of the contract. U.S. v. Zara Contracting Co.
Parties will argue:
Which of Zaras five methods should be used to measure damages?
o RSC 371 says the defaults are: (1) mkt price of doing the work OR (2) increase in market
value.
What is this value? Was the benefit conferred very high early in the contract and low later?
Speculative?
Losing bargain -> does not matter if you entered into a losing bargain if the other party breaches
here.
Breaching Party Sues:
Because X breached, he cannot sue under expectation or reliance and is left to take his remedies under
restitution. The court here will award damages based on the benefit conferred on the other party less the
amount of damage caused by their breach, unless an express stipulation in the contract shows the contrary.
Britton v. Turner. In this case, Xs potential recovery is also limited by the contract price.
Parties will argue:
Same arguments as for non-breaching party, but the losing bargain argument is in favor of the
defendant.
Punitive Damages
Courts will rarely grant contractual punitive damages, and even when contractual punitive damages are
granted, they are arguably granted for a tort. According to Miller v. Best Beers of Bloomington, the court will
only grant punitive damages if the defendant commits a tort for which punitive damages can be awarded by law.
Parties may argue:
Batchelor mingling case not good law any more.
Punitive damages must be in the public interest
Amount must be reasonable see outline.
Liquidated Damages
X/Y argues that the punitive damages written into the contract should be enforced. Courts will only
enforce liquidated damages if they are [RSC 356: reasonable in light of the (1) anticipated or actual harm
caused by the breach; and (2) the difficulties of proof of loss / UCC 2-718: reasonable in light of (1) the
anticipated or actual harm caused by the breach; (2) the difficulties of proof of loss; and (3) the
inconvenience/non-feasibility of otherwise obtaining an adequate remedy.] Essentially, if the liquidated
damages clause is supposed to serve a reasonable purpose of estimation, the courts will enforce it; if it is merely
supposed to act as a penalty to dissuade breach, the courts will not enforce it. Lake River Corp. v.
Corborundum Co.
Parties will argue:
UCC: Is ANY OTHER damage remedy appropriate? (2-718)
Is it a penalty?
Was the calculation to get there reasonable?

Reasonable anticipated OR actual?

Limitations on Remedies
Certainty Limitation
Y, or perhaps the court, will raise the certainty limitation. Y will argue that Xs damages are not certain
because they are merely speculative. ___________. X will argue that damages are not speculative, because of
marketing forecasts, expert testimony, comparison with like businesses, etcetera.
Foreseeability Limitation
Y, or perhaps the court, will raise the foreseeability limitation. According to Hadley v. Baxendale, the
breaching party must only pay, in addition to damages arising from the breach of contract itself, damages that
were reasonably in the breaching partys contemplation at the time of contract formation, and damages made
known by the non-breaching party to the breaching party at the time of contract formation.
Parties will argue:
Y told X he did not agree to pay for the extreme damages.
Y is in the industry exception (i.e. FedEx) and does not need to pay for extreme special damages.
Were damages reasonably foreseeable?
o Spang Industries v. Aetna: when parties enter into a K with performance to commence at
an agreed upon future date, the knowledge of the consequences of failure to perform is
imputed to the defaulting party.
Were damages made known?
o Cricket Alley v. DTS: particular needs of the buyer must generally be made known to the
seller while the general needs rarely must be made known to charge seller with
knowledge.
Although perhaps the category of damages were foreseeable, is the amount of damage
foreseeable?
Duty to Mitigate
Y, or perhaps the court, will raise the duty to mitigate. According to RSC 350, damages are not
recoverable for loss the injured party could have avoided without undue risk, burden or humiliation. [UCC 2704(2): an aggrieved seller may, if goods are unfinished, exercise reasonable commercial judgment for purposes
of avoiding loss and either complete manufacture or case and resell for scrap/salvage or any other reasonable
manner.] Moreover, according to Parker v. 20th Century Fox, a party is not obligated to mitigate if the only
potential cover is not reasonable, or comparable to the original good. Furthermore, according to Rockingham
Country v. Luten Bridge Co., a party has both an active and passive duty to mitigate: he must both cover, if
possible, and he must cease incurring expenses after the other party has breached, when reasonable.
Parties will argue:
Was mitigation appropriate?
Was mitigation necessary/unduly burdensome?
Distinguish Parker because she is an artist, from seeking employment.
Courts mostly say you are not required to mitigate with the breacher (but this really doesnt
matter same overall result for mitigator)
Damages for Sale of Goods
Sellers Damages
Intro/Cover
Because this is a contract for sale of goods, and the buyer has breached, damages are governed by UCC
2-703. Under 2-703, the court first must determine whether the seller covered and should receive damages

under 2-706. 2-706 damages are [K Price Resale Price + Incidental Damages Expenses Saved From
Breach]. To receive 2-706 damages, the goods must be resold in good faith and a commercially reasonable
manner. If the seller fails to do so, he must rely on 2-708 for damages.
Parties will argue:
Did not cover properly
Although covered, is a lost volume seller.
o Counter: Tesoro, Diasonics.
Hypothetical Cover
If the seller did not resell the goods, or did so in bad faith or a commercially unreasonable manner, the
seller must rely on 2-708 damages. 2-708 damages are [K price Market Price @ time/place of tender +
Incidental Damages Expenses Saved from Breach].
Parties will argue:
Did cover properly
Impossible to cover or some other 2-709 reason.
Lost Volume Seller
The seller may argue that he is a lost volume seller under 2-708(2), who was not covering by
reselling goods, but would have actually sold the goods to the person he resold to anyway, and thus is missing
out on profit. 2-708(2) damages are [Profit Seller would make with full performance (including reasonable
overhead) + incidental damages + costs reasonably incurred credit for payments/proceeds of resale].
However, it is not easy to be considered a lost volume seller. Courts generally will not give lost volume
damages if 2-706 looks proper. Tesoro v. Holborn. Additionally, according to the court in R.E. Davis v.
Diasonics, a seller claiming to be a lost volume seller must not only prove they had the capacity to produce the
breached unit in addition to the unit resold, but that it would have been profitable to produce and sell both.
Parties will argue:
Not a lost volume seller
Profit would be reduced b/c lower marginal profit each unit.
o Counter: economies of scale.
Action for the Price
The seller may argue that he should be awarded 2-709s action for the price. 2-709 damages are simply
the contract price (specific performance for the seller). To be awarded 2-709 damages, either (1) the buyer must
accept the goods (See Industrial v. Gross); (2) the goods are lost or damages within a reasonable time after their
risk has passed to the buyer; or (3) the goods are unable to be resold at a reasonable price or the circumstances
indicate such an effort will be unavailing.
Parties will argue:
Could have covered
Market well-developed
Goods accepted/not accepted (Industrial v. Gross)
Buyers Damages
Because this is a contract for sale of goods, and the seller has breached, damages are governed by UCC
2-711.
Buyer Has Not Accepted the Goods & Covers
If X has not accepted the goods, and, without unreasonably delay, makes a good faith and reasonably
comparable purchase in substitution for the goods due by the seller, his damages are governed by 2-712. 2-712
Damages are: [Cost of Cover K price + Incidental & Consequential Damages Expenses Saved].

Buyer Has Not Accepted the Goods & Does Not Cover
If X has not accepted the goods, but fails to cover or does not do so according to the requirements of 2712, his damages are governed by 2-713. 2-713 damages are [Market Price K Price + Incidental &
Consequential Damages Expenses Saved]. Market Price id determined as of the place of tender, at the time
when the buyer learned of the breach. [If the parties cannot figure out market price, can look to comparable
market price, spot sale price, or opinion evidence however this could be a good case for specific
performance]
Parties will argue:
When did buyer learn of the breach? See Cosden v. Karl O. Helm.
Couldnt cover because the market for these goods has dried up, so specific performance should
occur.
Buyer Accepts Goods & Claims Breach of Warranty
If the buyer accepts the goods, but then claims a breach of warranty, damages are governed by 2-714. In
essence, the buyer can recover two types of damages. First, the buyer can recover for loss resulting from nonconformity in matter of tender. This is likely to be minimal damages, for things like late delivery. Secondly, the
buyer can recover for the loss resulting from non-conforming goods, calculated as the difference between the
value of the goods as warranted, and the value of the goods as received.
Parties will argue:
Goods warranted: how to calculate? Possibilities from Cathlos: K price (default); fair market
value of goods; benefit of the bargain (see Cathlos dissent)
Goods received: market price as-is; expert witness testifying to substantial value (if the market
is not saturated enough.
Alternative to entire equation: cost of repair (if this is a suitable measure)
Everything is determined @ time/place of acceptance when is this?
Are you selling a good or a capability?