Class 6: Remedies for Default of Contracts for Sale & Closing the Sale Transaction - Jan. 29 Flashcards
What happened in Uzan v. 845 UN Limited Partnership (2004)? (Q/TB)
Deposits receive limited judicial supervision, less than EM. Contract will be enforced unless: disparate bargaining power, duress, fraud, illegality, or mutual mistake. These deposits will only be refunded on a showing of one of the following factors: (1) disparate bargaining power between the parties, (2) duress, (3) fraud, (4) illegality, or (5) mutual mistake.
What happened in Lefemine v. Baron (1991)? (Q/TB)
“Have your cake and eat it too” a contract that specifies fixed “liquidated” damages but also leaves the possibility to sue for actual damages is an unenforceable liquidated damages clause, it is a penalty. (this case is Florida, WA and several other states disagree) (Bender thinks Florida is right)
What happened in Mahoney v. Tingley (1975)? (TB)
$200 EM for $20,000 purchase. Buyer refused to close. Property sold for less, plus costs = $3141.
EM forfeiture for breach that is identified as “liquidated damages” forecloses options for other damages even when the contract specifies an alternative.
What is the forfeiture remedy? (Emanuel)
Contracts can provide that if buyer defaults seller can keep the deposit. (69)
What are liquidated damages? (Emanuel)
Liquidated damages are damages that the parties agree to in the contract and function as prearranged contract damages. (70)
What two tests must liquidated damages meet? (Emanuel)
Liquidated damages must meet the actual damages are not easy to ascertain and reasonable amount tests.
When must actual damages not be easy to ascertain when it comes to liquidated damages? (Emanuel)
As determined at the time of contracting.
What does it mean that liquidated damages must be a reasonable amount? (Emanuel)
The liquidated damages must be reasonable and cannot operate as a penalty.
What are expectation damages? (Emanuel)
Either party may recover expectation damages for loss of bargain. Damages are based on the fair market value of the property at the time of the breach. (67 - 68)
Is the time of resale generally the game as the time of breach? (Emanuel)
The time of resale is not generally the same as the time of the breach.
What are reliance damages? (Emanuel)
Either party may recover reliance damages, including out-of-pocket costs and lost profits, if proven and foreseeable. (68)
How is fairness determined in fair market value? (Emanuel)
Fairness depends on the method of calculating the loss.
What market is used to determine fair market value? (Emanuel)
The appropriate market for calculating the loss depends on geographical proximity and the type of property.
How is value determined in fair market value? (Emanuel)
The three primary ways to calculate value are comparable sales, replacement cost, and income flow.
What is specific performance? (Emanuel)
Traditionally the buyer or the seller is entitled to cause a breaching party to perform through specific performance. Uniqueness and mutuality of remedy are the usual explanations. The trend is to require that each party show an independent basis for this relief. (70–71)
