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K?

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Ks Practice Question
« on: December 13, 2008, 12:35:59 PM »
Question from a practice exam, curious what people think.

In September 1982 the National Football League players went on strike.  For millions of Americans this
was a catastrophe of theretofore unexceeded proportions.  But not for Alice Booker, the owner of Booker Travel
Service.  For Alice saw the strike as an opportunity to make a bundle.  She contracted with Charter Airline Co. for a
charter flight on every Sunday in October and November 1982 to one of the Canadian cities in which a football
game was being played.  The plane was to leave at 9:00 a.m. each Sunday morning and return home that night.  The
flight to be to a different city each week, and the agreement specified which city was the destination for each of the
Sundays.  It also specified the price for each flight and called for payment on the Friday before the flight.  Alice set
about promoting the excursions and making the necessary arrangements in the Canadian cities.  Her efforts in both
endeavors were successful, and performance of the agreement went without hitch for five weeks, through October
31.  On the first excursion the plane was filled to seventy percent of capacity; on the second, to eighty-five percent
capacity; on the third and fourth, to capacity; and on the fifth to eighty percent of capacity.
 
On Friday, November 5, Alice delivered payment for the November flight, which was to be to Toronto. The
plane was to depart at 9:00 a.m. and arrive in Toronto at 10:30 a.m., in time for a 1:00 p.m. game.  On Sunday at
8:50 a.m., when Alice was sheperding the fans in the boarding area, a representative of Charter told her that the plane had experienced mechanical problems and would not be ready at 9:00 a.m., but that it would be ready soon thereafter, definitely in time to arrive in time for the game.  By 10:00 a.m. when the plane still was not ready, Alice had become very concerned.  She had a waiting room full of impatient fans, some of whom had been without football for over a month. (You can imagine what that was like.)  Alice contacted Charter and again was told that the plane would be ready to go very soon.  At 10:30 a.m. it still was
not ready, and Alice quickly made arrangements with two commercial airlines to transport her customers to Toronto
on regularly scheduled flights.  Ten minutes after Alice completed these arrangement the Charter representative told
her that the plane was ready to go and her group should start boarding.  She replied that she had made other
arrangements, thank you, and her group was about to take other flights.. Further more, she announced, she would
have nothing further to do with Charter and would not be using its flights for the remaining trips in November.  Her
group flew on the two commercial flights that day, arriving in time for the game.
 
On November 8, Alice set about finding another airline to charter flights to Canada.  The first several
airlines she contacted were willing to charter planes, but they either charged fifty to eighty percent more than the
contract prices with Charter or they had much smaller planes than Charter had agreed to provide.  So Alice kept
searching, canceled the flight planned for November 14, and refunded the money paid to customers for that flight. 
On November 15 she located an airline, Redwing that was willing to provide the right-sized plane at a price only
fifteen percent in excess of the prices under. the Charter contract.  On November however, before  she formed a
contract with Redwing, the football strike
ended.  Alice realized that there would  no longer be any demand for her a excursions, and she dropped the
negotiations with Redwing.
 
On November 29 Charter Airline Co. sued Alice Booker for her failure to pay the sums due on November
12, 19, and 26.  Alice counterclaimed for all appropriate relief.  To what relief, if any, are the parties entitled?

Thoughts?
B < PL

DirkDiggler

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Re: Ks Practice Question
« Reply #1 on: December 17, 2008, 02:21:35 PM »
My study partner and I outlined this response. It seems like we're missing an argument for Alice being able to recover Nov. 14 damages.

Nov. 8 Flight
Charter’s 1.5 hour delay is likely a breach.
Anticipatory Repudiation: discuss whether or not Alice’s breach was justified despite receiving assurances.
Assuming she’s justified: Alice’s Likely Recoverable Damages = Price she paid Charter + cost of commercial flight.
Materiality: time was of the essence, so a delay in performance is likely material. However, a good argument can be made otherwise.
However, Charter’s failure to bring a claim for this week’s flight means they are potentially conceding that they breached by not having the flight ready on time.

Nov. 14 Flight
Charter’s recovery for Alice’s breach on the remaining flights depends on whether or not Charter’s Nov. 8 breach was material. If the Nov. 8 breach was material, Alice is justified in terminating the rest of the contract. If her termination is justified, she would be able to recover expectation damages for Nov. 14 and probably will not recover for Nov. 21 and 28 (based on commercial frustration).
Commercial Frustration: It will depend on whether or not the CFL games were a basic assumption on which the contract was based. Look at the contract language for this (further facts needed). If it says something like, “flights to Canadian cities,” then the games are likely not a basic assumption. If the contract language is something like, “charters to CFL games,” then the games are a basic assumption. Good arguments could be made for either side.
If Charter tries to recover from Alice for Nov. 21 and 28, she can argue commercial frustration. If Alice tries to recover from Charter for Nov. 21 and 28, they can argue that she was commercially frustrated and that the flights wouldn’t have happened regardless.
Foreseeability might be relevant here (as it is under impracticability), but my knowledge is limited.
Mitigation: Alice likely made reasonable efforts to mitigate damages after Charter’s Nov. 8 breach.

Nov. 21 Flight
Charter likely cannot recover because the strike had already ended – Alice has a commercial frustration defense. The same applies for Alice.

Nov. 28 Flight
Again, based on commercial frustration, most likely no one will recover.