- A technology firm entered into a contract to buy 5,000 specialized computer chips from a manufacturer, to be delivered in five monthly installments of 1,000 chips. The first installment arrived on time but contained 200 defective chips. The firm sent a written demand for assurances that future shipments would be conforming. The manufacturer responded, "We are having some quality control issues. We cannot guarantee that future shipments will be 100% free of defects."
Answer: The manufacturer's response is a failure to provide adequate assurances and can be treated as a repudiation of the entire contract.
This question tests your understanding of adequate assurances under the UCC, specifically how inadequate assurances can constitute anticipatory repudiation in installment contracts.
When a buyer has reasonable grounds to believe the seller won't perform, they can demand adequate assurances of performance. Here, 20% defective chips in the first installment clearly gives the firm reasonable grounds for insecurity. The manufacturer's response that it "cannot guarantee that future shipments will be 100% free of defects" fails to provide adequate assurances because it essentially admits it cannot or will not cure the quality problems. Under UCC § 2-609, failure to provide adequate assurances within a reasonable time constitutes repudiation of the contract, allowing the buyer to treat the entire contract as breached.
Answer A is wrong because honesty alone doesn't make an assurance adequate—the manufacturer must actually assure conforming performance, which it explicitly refused to do. Answer B misapplies installment contract rules; while buyers normally can't reject the whole contract for defects in one installment, the adequate assurances doctrine provides an exception when the seller fails to provide assurances about future performance. Answer C confuses two different concepts—you don't need substantial impairment of the whole contract when dealing with failed adequate assurances, which is a separate ground for repudiation.
Remember: Adequate assurances must actually assure future conforming performance. A seller's admission that it cannot guarantee conformance is the opposite of adequate assurance and constitutes repudiation, regardless of the seller's honesty about its problems.
- A cruise line contracted with a shipyard to refurbish a cruise ship. The contract specified that the shipyard would have exclusive use of a certain drydock. Before performance began, the shipyard leased that specific drydock to another company for the entire period it was supposed to be used for the cruise ship's refurbishment. The shipyard did not communicate with the cruise line.
Answer: A repudiation has occurred because the shipyard's action was a voluntary, affirmative act making its performance impossible.
The correct answer is C. An anticipatory repudiation can occur through conduct as well as words. A party repudiates if it takes a voluntary, affirmative action that renders its own performance impossible or demonstrates a clear determination not to perform. By leasing the essential drydock to another party for the contract period, the shipyard has made its own performance impossible. This action is a repudiation. A is incorrect because repudiation can be by conduct alone. B is incorrect because the definitive nature of the act makes performance impossible; the mere theoretical possibility of reacquiring the drydock does not negate the repudiation. D is incorrect because the act is so definitive that it constitutes a repudiation itself, not merely grounds for insecurity.
- A landlord and tenant signed a two-year commercial lease. One year into the lease, the tenant sent a letter to the landlord stating, "Our business has failed, and we will be vacating the premises at the end of the month and will not make any further rent payments." The tenant then vacated. The jurisdiction follows the majority rule regarding a landlord's duty to mitigate.
Answer: The landlord can treat the tenant's letter as an anticipatory repudiation and must make reasonable efforts to re-let the premises.
The correct answer is B. The tenant's letter is a clear anticipatory repudiation of the lease agreement. This is a total breach. Under the majority rule, when a tenant abandons a property in breach of the lease, the landlord has a duty to mitigate damages by making reasonable efforts to re-let the premises to another suitable tenant. The landlord can then sue the original tenant for the difference between the original rent and the rent received from the new tenant, plus costs of re-letting. A is incorrect because it ignores the landlord's duty to mitigate. C is incorrect because anticipatory repudiation allows the landlord to sue for damages for the entire breach, not just one month at a time. D is incorrect because repudiation is a breach; it does not automatically terminate the contract or the landlord's right to damages.
- A buyer and a seller entered into a contract for the sale of 1,000 widgets to be delivered on December 1. On November 1, the seller unequivocally repudiated the contract. At that time, the market price for widgets was $12 per unit. The buyer urged the seller to perform, but the seller refused. The buyer waited until November 20 to purchase replacement widgets, by which time the market price had risen to $15 per unit. The original contract price was $10 per unit.
Answer: The buyer can recover damages based on the $15 market price only if waiting until November 20 was commercially reasonable.
When a seller repudiates a contract before performance is due, you need to analyze both the buyer's right to recover damages and their duty to mitigate those damages. The key tension here is between allowing buyers reasonable time to cover versus preventing unnecessary damage accumulation.
Under contract law, when a seller repudiates early, the buyer can either cover (purchase replacement goods) or seek market damages. However, the buyer has a duty to mitigate damages through reasonable efforts. The critical question becomes: what constitutes "reasonable" mitigation efforts?
Answer D correctly captures this principle. The buyer can recover based on the $15 market price, but only if waiting until November 20 was commercially reasonable under the circumstances. Courts consider factors like market volatility, availability of substitute goods, and business customs when determining reasonableness.
Answer A is wrong because buyers don't have an absolute right to wait until the performance date—the duty to mitigate can require earlier action. Answer B goes too far in the opposite direction; failing to cover immediately doesn't automatically bar all damages if the delay was reasonable. Answer C incorrectly suggests damages are always capped at the repudiation-date market price, but this ignores situations where reasonable commercial practices justify waiting.
The difference between covers at $12 versus $15 represents $3,000 in additional damages ($3 × 1,000 units), making the reasonableness determination crucial.
Study tip: In repudiation cases, look for fact patterns that test the balance between mitigation duties and commercial reasonableness. The answer often hinges on whether the buyer's timing was reasonable, not on rigid rules about immediate action.
- You are representing a client who runs a catering business. The client had a contract to cater a large corporate event for $50,000. One month before the event, the corporation's CEO called your client and said, "We're going with another caterer unless you agree to cut your price to $40,000." Your client refused.
Answer: The corporation's statement is an anticipatory repudiation because it conditioned its performance on a demand not in the original contract.
The correct answer is B. A statement that a party will not perform unless the other party agrees to a new demand that goes beyond the terms of the original contract is an anticipatory repudiation. The corporation's statement was not a mere request for modification; it was a threat of non-performance unless the price was cut. This is a clear repudiation. A is incorrect because the statement was a condition on performance, not just a proposal. C is incorrect because the repudiation allows for an immediate lawsuit. D is incorrect because the statement was a clear repudiation, not merely grounds for insecurity, so the client can sue directly without first demanding assurances.
- Painting contract: payment due on completion. Owner says 'I won't pay' after completion. This is?
Answer: Actual breach not repudiation
Because payment became due when the painting was completed, the owner's refusal to pay is a present failure to perform an existing obligation. That is an actual breach. Anticipatory repudiation is tempting, but it applies only when the promised performance is not yet due; here completion already triggered the duty to pay.
- A developer had a contract to buy a parcel of land from a landowner for $1 million, with the closing set for June 1. The contract required the landowner to deliver marketable title. On May 1, the developer discovered that the land was subject to a substantial, undisclosed easement that made it unsuitable for development. The developer informed the landowner that he considered this a breach. The landowner replied, "The easement is a mistake on the title report, and I will have it cleared by closing."
Answer: The landowner's promise to cure the defect before closing prevents the developer from treating the contract as repudiated.
This question tests your understanding of anticipatory repudiation in real estate contracts and the seller's right to cure title defects before closing.
When a buyer discovers a title defect before closing, the key issue is whether the seller has repudiated the contract or is merely facing a curable defect. In real estate transactions, sellers typically have until the closing date to deliver marketable title, and courts generally allow reasonable attempts to cure defects when the seller promises to do so and closing hasn't yet occurred.
Answer A is correct because the landowner's promise to cure the easement defect before the June 1 closing prevents this from being treated as a repudiation. Since there's still time before closing and the landowner has committed to resolving the issue, the developer cannot immediately terminate the contract.
Answer B is wrong because anticipatory repudiation requires a clear, unequivocal refusal to perform. Here, the landowner didn't refuse to perform but instead promised to cure the defect, which is the opposite of repudiation.
Answer C is incorrect because the developer isn't required to close if the title defect isn't cured by closing. The developer can refuse to close if marketable title isn't delivered as promised.
Answer D is wrong because price reduction isn't the developer's only remedy. If the landowner fails to cure the defect by closing, the developer can terminate the contract and seek other remedies including return of any deposits.
Study tip: Remember that in real estate contracts, sellers generally have until closing to cure title defects, and a promise to cure prevents finding anticipatory repudiation.
- A buyer contracted to purchase a commercial property, with the closing scheduled in 90 days. The contract was contingent on the buyer obtaining financing. Thirty days after signing, the buyer sent a letter to the seller stating, "I repudiate the contract. My financing was denied." In fact, the buyer never applied for financing. The seller wishes to sue for breach.
Answer: The buyer repudiated the contract because he had an implied duty to use good faith efforts to obtain financing.
The correct answer is B. When a party's duty is subject to a condition, there is an implied promise that the party will use good faith efforts to cause the condition to occur. Here, the financing contingency imposed a duty on the buyer to seek financing in good faith. By failing to even apply, the buyer breached this duty. His statement of repudiation, based on a condition that failed due to his own fault, is therefore a wrongful repudiation and a breach of contract. A is incorrect because the condition did not simply fail; its failure was caused by the buyer's breach of his duty of good faith. C is incorrect because the buyer's statement was a clear repudiation, allowing the seller to sue immediately. D is incorrect because the buyer's statement was an outright repudiation, not just a cause for insecurity.
- A supplier contracted to sell 10,000 pounds of coffee beans to a roaster, with delivery on May 1. On April 1, the supplier repudiated the contract. The roaster immediately filed suit for breach. On April 15, while the lawsuit was pending, the supplier attempted to retract the repudiation. The roaster had not yet purchased replacement beans.
Answer: The retraction is ineffective because the roaster had already filed a lawsuit for total breach.
The correct answer is C. The right to retract a repudiation ends once the aggrieved party has materially changed their position in reliance on it OR has indicated that they consider the repudiation to be final. Filing a lawsuit for total breach is considered a definitive indication that the aggrieved party is treating the repudiation as final. Therefore, the supplier's right to retract was cut off when the roaster filed suit. A is incorrect because filing suit is a sufficient indication of finality, even without a material change in position like covering. B is incorrect because the performance date is not the dispositive factor. D is incorrect because there is no rule conditioning the effectiveness of a retraction on the payment of attorney's fees.
- A concert promoter had a contract with a famous singer for a performance on New Year's Eve. On December 1, the singer was seriously injured in a car accident and was hospitalized. The singer's agent immediately informed the promoter that the singer would be unable to perform. The promoter wants to sue the singer for breach of contract.
Answer: The agent's statement is not a repudiation because the singer's performance has been discharged by impossibility.
This question tests the distinction between anticipatory repudiation and discharge by impossibility in contract law. When performance becomes impossible due to circumstances beyond a party's control, you need to determine whether the contract is discharged or breached.
Here, the singer's hospitalization from a car accident created objective impossibility - the singer literally cannot perform due to physical incapacity. When performance becomes impossible through no fault of the promisor, the contract is discharged by operation of law, not breached. The agent's communication is simply informing the promoter of this impossibility, not repudiating the contract.
Answer A is correct because the singer's performance has been discharged by impossibility, so the agent's statement merely communicates this legal discharge rather than constituting a repudiation.
Answer B incorrectly treats this as anticipatory repudiation. Anticipatory repudiation requires a clear indication that a party will not perform when performance is still possible. Since performance is impossible here, there can be no repudiation.
Answer C misunderstands both impossibility and repudiation. The promoter doesn't need to wait because the legal issue is already resolved - the contract is discharged. The possibility of recovery doesn't restore the contractual obligation once impossibility occurs.
Answer D wrongly assumes this is a breach requiring damages. Since the contract is discharged, not breached, no damages are recoverable at all.
Remember: impossibility discharges contracts, while repudiation breaches them. When you see physical incapacity or other objective impossibility, think discharge first, not breach.
- Seller repudiates before delivery. Buyer urges performance; seller never delivers. Buyer sues. Valid?
Answer: Suit allowed; no waiver found
After an anticipatory repudiation, you may urge the seller to perform without giving up your right to sue. Calling on the seller to deliver isn't an election to waive the breach; if no delivery comes, you can bring suit. The tempting mistake is thinking your demand for performance bars the claim, but it does not. No cover or second refusal is required to preserve your remedy.
- On April 1, a farmer contracted to sell her entire organic wheat crop to a bakery for a fixed price, with delivery scheduled for September 1. On May 1, the farmer sent an email to the bakery stating, "I am repudiating our contract." On May 10, the bakery's owner called the farmer and urged her to honor the deal. The farmer said she would think about it. On May 15, before the bakery had taken any further action, the farmer sent a second email stating, "I retract my prior repudiation and will deliver the wheat as agreed on September 1."
Answer: The farmer's retraction is effective because the bakery had not yet materially changed its position in reliance on the repudiation.
The correct answer is C. A party who has repudiated a contract can retract the repudiation as long as the other party has not yet materially changed their position in reliance on the repudiation, or indicated that they consider the repudiation to be final. Here, the bakery only urged performance and had not entered into a substitute contract or taken any other action in reliance. Therefore, the farmer's retraction was timely and effective, reinstating the original contract. A is incorrect because consent is not required for a valid retraction. B is incorrect because repudiations are retractable under these circumstances. D is incorrect because while the bakery could have demanded assurances after the initial repudiation, the retraction itself reinstates the contract without a mandatory assurance requirement, unless the circumstances still create insecurity.
- A manufacturing company had a contract to purchase a custom-built industrial press from a supplier for $500,000, for delivery on October 1. The contract was governed by the UCC. On August 10, the company's CEO learned from a reliable trade publication that the supplier had accepted a new, larger order that would monopolize its production capacity through the end of the year. The CEO immediately sent a written demand for adequate assurances of performance. The supplier failed to respond.
Answer: The supplier's silence for a reasonable time not exceeding 30 days operates as a repudiation of the contract.
The correct answer is B. Under UCC § 2-609, when reasonable grounds for insecurity arise, a party may demand in writing adequate assurances of due performance. The other party's failure to provide such assurance within a reasonable time, not to exceed 30 days, is a repudiation of the contract. The supplier's silence in response to a valid demand constitutes such a failure. A is incorrect because the failure to provide assurances is itself a breach by repudiation. C is incorrect because a third-party report, while creating grounds for insecurity, is not a direct and unequivocal repudiation from the supplier itself, making a demand for assurances the proper first step. D is incorrect because the company is entitled to treat the contract as breached and seek damages; specific performance or an injunction would only be available if the press were unique and damages were inadequate.
- A distributor had a contract to sell 1,000 cases of wine to a retailer, for delivery on March 1. On February 1, the distributor sent a fax stating, "We will not be able to deliver the wine as per our agreement." The retailer immediately responded by fax, "We consider your refusal to perform to be a final breach of contract." On February 3, before the retailer had entered a substitute contract, the distributor sent another fax stating, "Disregard our previous message. We have resolved our supply issues and will deliver on March 1 as promised."
Answer: The distributor's retraction is ineffective because the retailer stated that it considered the repudiation final.
This question tests your understanding of anticipatory repudiation and retraction under contract law. When a party clearly communicates they won't perform before the performance date, the non-breaching party can either treat it as a breach immediately or wait to see if performance occurs.
The key principle is that a repudiating party can retract their repudiation, but only if the other party hasn't materially changed position in reliance on the repudiation. However, there's an important exception: if the non-breaching party communicates that they're treating the repudiation as final, the repudiating party loses the right to retract.
Here, the retailer's immediate response stating "We consider your refusal to perform to be a final breach of contract" was a clear communication treating the repudiation as definitive. This cuts off the distributor's ability to retract, making the distributor's February 3 message ineffective.
Looking at the wrong answers: B) misses the critical fact that the retailer communicated finality—even without material change of position, retraction was barred by the retailer's response. C) incorrectly suggests timing before the performance date is the only factor, ignoring the retailer's communication. D) creates a non-existent formal requirement—contract law doesn't mandate signed letters for retraction.
Study tip: Remember the two ways retraction becomes impossible: (1) the non-breaching party materially changes position, or (2) they communicate that they're treating the repudiation as final. Either one alone prevents retraction, regardless of timing or formalities.
- A property owner hired a construction company to build a garage. The contract required the owner to make three progress payments. After making the first payment, the owner told the company's president, "I just lost my job. There's no way I'll be able to make the last two payments." The company immediately stopped work.
Answer: The owner's statement constituted an anticipatory repudiation, justifying the company's suspension of performance.
This question tests anticipatory repudiation and when a party may suspend performance due to the other party's conduct. When one party clearly indicates they won't perform their contractual obligations, you need to determine whether this constitutes repudiation and what remedies are available.
The owner's statement "There's no way I'll be able to make the last two payments" constitutes an unequivocal repudiation of his future obligations under the contract. An anticipatory repudiation occurs when a party clearly communicates, either through words or conduct, that they will not perform their contractual duties when the time comes. The owner's definitive statement about his inability to pay isn't merely expressing concern—it's a clear declaration that he cannot fulfill his payment obligations. This justifies the company's immediate suspension of performance under the doctrine of anticipatory repudiation.
Choice A is incorrect because the owner's unambiguous statement about being unable to make payments clearly constitutes repudiation—it's not merely expressing doubt or concern. Choice B misapplies the law; while demanding adequate assurances is sometimes appropriate when there are reasonable grounds for insecurity, it's not required when there's already a clear repudiation. The owner has already stated definitively that he cannot pay. Choice C is wrong because once anticipatory repudiation occurs, the non-breaching party isn't required to continue performance and can treat the contract as breached immediately.
Remember: Clear, unequivocal statements about inability to perform future obligations constitute anticipatory repudiation, allowing the other party to suspend performance immediately without demanding assurances or continuing work.
- Seller repudiates before delivery, then retracts before the due date. Buyer did nothing. Is retraction valid?
Answer: Yes, absent changed position
Under UCC 2-611, a repudiating seller can retract before the due date unless the buyer has canceled, materially changed position, or treated the repudiation as final. Buyer did nothing, so the retraction is valid and the contract stands. The tempting wrong answer is that buyer consent is required; consent isn't needed, only absence of reliance or finality.
- A software company licensed its proprietary accounting software to a large corporation for a three-year term, with the corporation paying a significant upfront fee. One year into the term, the software company was acquired by a rival firm. The rival firm then sent a notice to the corporation stating that, as a matter of corporate policy, it would no longer provide the contractually required technical support or software updates for the licensed product.
Answer: This is a repudiation of a future obligation, which allows the corporation to sue for damages and seek a different software provider.
The correct answer is B. The rival firm's statement is a clear and unequivocal refusal to perform its future contractual obligations (providing support and updates). This constitutes an anticipatory repudiation. The corporation can treat this as a total breach, terminate the contract, and sue for damages, which would include costs to acquire and implement a replacement software solution. A is incorrect because the contract involved ongoing duties, not just the initial license transfer. The refusal to perform these future duties is a repudiation. C is incorrect as the doctrine of anticipatory repudiation allows the aggrieved party to act immediately rather than waiting for multiple, successive breaches. D is incorrect because the statement was a direct repudiation, not merely a statement creating insecurity; thus, the corporation can treat the contract as breached without first demanding assurances.
- A university hired a famous architect to design a new law library, with construction to begin on June 1. On March 1, the architect sent a letter to the university's president stating that she was taking a different, more lucrative project and would not be designing the library. On March 15, the university's board of trustees held an emergency meeting and voted to hire a different architectural firm. They signed a contract with the new firm on March 16. On March 20, the original architect called the president to retract her repudiation.
Answer: The architect's retraction is invalid because the university treated the repudiation as final by hiring a replacement firm.
The correct answer is C. A repudiating party's right to retract is terminated once the aggrieved party materially changes their position in reliance on the repudiation or otherwise indicates they consider the repudiation final. By signing a contract with a new firm, the university materially changed its position. Therefore, the architect's subsequent attempt to retract was ineffective. A is incorrect because the right to retract can be cut off long before the performance date. B is incorrect because the non-breaching party has no duty to notify the repudiator before acting in reliance on the repudiation. D is incorrect because while the vote shows intent, the signing of the new contract on March 16 is the definitive act of material reliance that makes the retraction invalid.
- A farm co-op contracted to sell 100 tons of soybeans to a food processor at a specified price. The contract was silent as to the source of the beans. A severe drought destroyed the co-op's own soybean crop. The co-op notified the processor that it would be unable to deliver any soybeans. Soybeans are readily available for purchase on the open market, albeit at a higher price.
Answer: The co-op's notification is an anticipatory repudiation because the contract did not specify its beans as the sole source.
The correct answer is B. The doctrine of impracticability due to destruction of the subject matter applies only when the contract identifies a specific source. Because this contract was for 100 tons of generic soybeans, not soybeans from a specific farm, the co-op had a duty to obtain the beans from another source. Its failure to do so, and its notification of non-delivery, constitutes an anticipatory repudiation. A is incorrect for the reason stated above. C is incorrect because the repudiation allows the processor to 'cover' (buy substitute goods) immediately and sue for the difference. D is incorrect because the processor is entitled to expectation damages (the cover-contract price differential), not just restitution.
- A vineyard owner has a written contract with a barrel maker to purchase 100 custom-toasted oak barrels for $800 each, to be delivered on August 1. On June 1, the barrel maker sends a letter to the vineyard owner stating, "Due to a massive surge in lumber costs, we will be unable to produce the barrels at the agreed-upon price. We will not be delivering the barrels on August 1." The vineyard owner immediately contracts with another supplier to purchase similar barrels for $950 each.
Answer: The barrel maker's letter constituted an anticipatory repudiation, giving the owner the right to sue immediately.
The correct answer is C. The barrel maker's letter was a clear and unequivocal statement that he would not perform under the contract. This constitutes an anticipatory repudiation. Upon repudiation, the non-breaching party may (1) treat the repudiation as a total breach and sue immediately, (2) suspend their own performance and wait to sue until the performance date, (3) treat the contract as discharged, or (4) urge the repudiator to perform. Here, the owner was entitled to treat the contract as breached and sue immediately. A is incorrect because the doctrine of anticipatory repudiation allows the non-breaching party to sue before the performance date. B is incorrect because securing a substitute contract ('cover') is a proper and required form of mitigation. D is incorrect because a mere increase in cost, even a massive one, is a foreseeable business risk and does not typically rise to the level of commercial impracticability, which requires an unforeseen event that makes performance vitally different from what was contemplated.
