California First-Year Law Students' Exam (Baby Bar) — MCContractsMedium
A buyer and a seller enter into a contract for the sale of 100 custom-made widgets for $10,000, to be delivered on October 1st. On September 1st, the seller sends a letter to the buyer stating, 'Due to unexpected production issues, I will not be able to deliver your widgets on October 1st, or at any time.' What action can the buyer immediately take?
- ADemand adequate assurances of performance from the seller.
- BTreat the contract as breached and seek remedies.
- CSue for specific performance of the contract.
- DWait until October 1st to see if the seller performs.
Show answer & explanationAnswer & explanation
Correct answer: B. Treat the contract as breached and seek remedies.
The seller's clear and unequivocal statement that they will not perform constitutes an anticipatory repudiation. Upon anticipatory repudiation, the non-breaching party (buyer) can immediately treat the contract as breached and seek remedies, without waiting for the performance date.
Why the other options are wrong
- A. Adequate assurances are requested when there are reasonable grounds for insecurity, but not a clear repudiation. Here, the repudiation is explicit.
- C. Specific performance is typically for unique goods or real estate, and while custom widgets might be unique, the buyer's immediate right is to treat as breach and seek general remedies, including damages, not necessarily specific performance.
- D. The buyer does not need to wait; anticipatory repudiation allows for immediate action.
Anticipatory Repudiation
A clear and unequivocal statement or act by one party, made before the performance date, indicating that they will not perform their contractual duties. This gives the non-repudiating party the option to treat the contract as immediately breached and seek remedies.
- Occurs before performance is due.
- Must be clear and unequivocal.
- Non-repudiating party can treat as immediate breach.
- Non-repudiating party can sue for damages immediately.
Memory trick: Timing matters: Some breaches let you act now, others make you wait.