Contracts II Outline

Outline for Contracts 2
 
Chap 1
I. Meaning of Enforcement
In enforcing K’s, courts compensate the breach, rather than punishing breachers. Thus, punitive damages are not recoverable in K breach actions. United States Naval Institute v. Charter Communications [ publisher breaches K to delay publishing Hunt for Red October], unless the breach also involved other torts
For example, a court may enforce a plastic surgeon’s promise of specific medical results by awarding compensatory damages, provided the promise is not merely a statement of medical opinion. Sullivan v. O’Connor [plastic surgeon ruins actress’ nose]. 
Even where the breach is willful and malicious, punitive damages are not (usually) recoverable. White v. Benkowski [water provider maliciously shuts off neighbor’s supply] Very infrequently, courts may award punitive damages for bad faith breaches.
For example, insurers’ refusal to settle claims to force claimants to abandon valid claims.
Other injunctive relief is also available to redress K breaches where money damages are inadequate.
Disgorgement: If a party earns profits which should properly accrue to another (e.g., performing someone else’s contract), courts may order the breacher to “disgorge” its profits to the proper party.
Constructive Trust: Alternatively, if the breacher has fiduciary relationship (a special obligation to put another’s interests before his own, e.g., employees, trustees, etc.), then courts may order his improper profits be placed in “constructive trust” for the proper party’s benefit. Snepp v. United States [ex-CIA agent who published unapproved book must surrender profits to CIA] Arbitration:
Arbitration is a private dispute-resolution hearing, which is usually faster and cheaper than litigation.
Sometimes, arbitrators may grant remedies not normally granted by courts, though some states prohibit them from awarding punitive damages.
However, arbitration is only available if both parties agree, either after the dispute arises, or before (through an arbitration clause in the original K).
K Enforcement in Practice: In reality, K disputes often settle, because litigation is prohibitively expensive, and because parties cannot recover their attorneys’ fees.
 
Chap 5
Specific Relief
Specific relief is a command to the D to do or not to do something. It is more limited than monetary damages.
It is an equitable remedy that is awarded only if monetary damages are not an adequate remedy.
Whether to award specific relief is within the court’s discretion.
“He who comes in to equity must come with clean hands” is a common equitable rule.
Courts do not order specific performance of personal service K’s.  Lumley v. Wagner.
Specific performance is an appropriate remedy only if goods for sale are unique. If a buyer can find the goods elsewhere, monetary damages are adequate. Klein v. PepsiCo.
Most civil law countries apply specific performance rather than damages.
The Vienna Convention [an international treaty] provides that a buyer may require specific performance.
However, it also provides that a court enforcing the Vienna Convention may follow its own law in determining whether to require specific performance. See Magellan Int’l Corp. v. Salzgitter Handel.
Specific performance is appropriate where a product cannot be obtained elsewhere except at considerable expense, trouble or loss, which cannot be estimated in advance.  Laclede Gas Co. v. Amoco Oil Co.
Comments 1 and 2 to UCC § 2-716 provide that Article 2 seeks to broaden the availability of specific performance to output and requirements K’s and to situations where there is an inability to cover.
Courts tend not to order specific performance of construction K’s where it would be impractical to enforce and supervise , unless there are special circumstances or the public interest is involved. Northern Delaware Industrial Development Corp. v. E.W. Bliss Co.
A court should weigh the costs and benefits of injunctive relief versus damages. Walgreen Co. v. Sara Creek Property Co.
Measuring Expectation Damages
Expectation damages provide a monetary award aimed at placing the injured party in the position he or she would have occupied had the K been fully performed.
The injured party’s “loss in value” is the difference between the value to the injured party of the performance that should have been received and the value to that party of what, if anything, was actually received.
The injured party’s “other loss” is loss other that loss in value, such as physical harm or expenses incurred to remedy the transaction after the breach.
The injured party’s “cost avoided” is the saving of further expenses that would have been incurred if performance had continued.
The injured party’s “loss avoided” is the loss the injured party avoided by salvaging and reallocating resources that otherwise would have been devoted to performing the K.
Damages may equal “loss in value” plus “other loss” minus “cost avoided” minus “loss avoided”
“profit” is the difference between “loss in value” and “cost of complete performance.”
Damages may equal “cost of reliance” plus “profit” minus “loss avoided” plus “other loss.”
Recovery for lost expectation may not be available if the injured party had no chance to make a similar alternative contract. Overstreet v. Norden Labortories.
When overhead expenses are not affected by the performance of a particular K, such expenses should not constitute a performance cost to be deducted when computing lost profits. Vitex Manufacturing Corp. v. Caribtex Corp.
Expectation Damages Under the UCC
Under UCC §2-712 (Laredo Hides Co., Inc. v. H&H Meat Products Co., Inc.), When a seller refuses to acknowledge a K or refuses to deliver the goods under a K, a buyer may:
“Cover by making in good faith and without unreasonable delay any reasonable purchase of or K to purchase goods