C is corrent because Frost’s letter to Kemp constituted anticipatory repudiation. Anticipatory repudiation discharges the nonrepudiating party (Kemp) from the contract and gives this party two options: (1) sue immediately for breach of contract or (2) for a commercially reasonable time, ignore the breaching party’s repudiation and wait for the repudiating party to perform at the appointed time. If the repudiating party does not subsequently perform, the nonrepudiating party may then sue for breach. The market value to be used in computing the buyer’s damages would be the market value at the time the buyer learned of the breach. Kemp learned of the breach on May 15 when the seller repudiated the contract. Consequently the market value used in computing Kemp’s damages is $.40 per pound. Thus, Kemp’s damages are $500 [5,000 pounds x ($.40 - $.30)].
A is incorrect because the market value to be used in computing the buyer’s damage would be the market value at the time the buyer learned of the breach. Kemp learned of the breach on May 15 when the market value was $.40 per pound. Thus, Kemp’s damages are $500 [5,000 pounds x ($.40 - $.30)]. In addition, consequential damages would not be available in this situation.
B is incorrect as the buyer can only collect consequential damages when such damage could not reasonably be prevented by cover. The problem states that Kemp could have reasonably purchased sugar elsewhere at the time of the repudiation and chose not to do so. Thus, Kemp cannot collect consequential damages.
D is incorrect because the market value to be used in computing the buyer’s damage would be the market value at the time the buyer learned of the breach. Kemp learned of the breach on May 15 when the market value was $.40 per pound. Thus, Kemp’s damages are $500 [5,000 pounds x ($.40 - $.30)].
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