Contracts Fall 2015 Outline – Professor Hyde
A contract, according to the Restatement, is described as “a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.”
REMEDIES:
EXPECTATION DAMAGES:
A. Expectation: the normal action for breach of contract seeks money damages calculated to put the aggrieved party in the position that full performance would have
B. Formula
a. Difference between K price and market price
b. Consequential damages: the amount plaintiff lost on other things because defendant didn’t fulfill the K.
c. Incidental damages
C. Remedies:
a. Uniform Commercial Code (UCC): governs remedies for sale of goods cases
i. Buyers remedies
1. § 2-711
2. §2-712
a. Cover
3. §2-713
a. (Market damages: 1. Hypothetical Cover & 2. Difference money)
b. DB – PM – PK + incidental damages + consequential damages – expenses saved
4. 2-715
a. ((1) Incidental Damages and (2) Consequential Damages – I lost other deals because you did not supply me with something)
5. 2-716
a. Specific performance (copy/lease)
ii. Seller’s Remedies
1. §2-703
2. §2-706 – Resale
3. §2-708 – Market damages & lost profits on this transaction
4. §2-709 – action for the price (rare)
5. §2-710
D. Cases for Expectation Damages
a. Hawkins v. McGee:
◦ Doctor guaranteed a 100% perfect hand through repeated solicitation. Plaintiff got a hairy hand. Court says basis for plaintiff’s claim is the guarantee of a 100% perfect hand
◦ Court says the standard by which his conduct is to judged is objective – would a reasonable person have understood the statements made by the doctor to be contract or an opinion
◦ a contract was formed in this but why was this a contract
§ 1.) Statement
§ 2.) Doctor
§ 3.) Course of treatment
§ 4.) Word like guarantee
§ 5.) Interpretation of a reasonable person
§ 6.) doctor’s solicitation to engage in the operation
◦ To calculate damages, look at where plaintiff would be if defendant had fully performed
◦ The true measure of plaintiff’s damages is the difference between the value to him of a perfect hand or a good hand, such has the jury found the defendant promised him, and the value of his hand in his present condition, including any incidental consequences fairly within the contemplation of the parties when they made their contract
◦ Value of the hand promised – value of the hand now = buyer’s damage
◦ It’s the general rule of breach of contract – you were promised something and you didn’t get it so you are awarded something
◦ (Vpromise-Vpost-breach)
◦ Typical contract action is an action for money damages designed to put the plaintiff in the promise position –> in the positon that full performance would have been
◦ Rule: when one party breaches a contract, the non-breaching party may recover damages based on the difference between the value of the contract as fully performed and the actual value of the non-breaching party’s present condition, plus any incidental damages reasonably foreseeable to all parties at the time of the contract formation
B. Formulas for awarding expectation damages
i. Difference between contract price and market price
b. Egerer v. CSR West, Inc.
◦ The defendant admits making a contract and admits that it was breached
◦ He promised Egerer landfill .50 per cubic yard that CSR breached
◦ It was breached because the state was willing to pay $33 to the same soil
◦ The deal went out because seller had a better deal
◦ Pk = .50
◦ Buyer has two remedies under UCC when a seller fails to make a delivery of goods to a buyer: either 2-712 cover price or 2-713 Market Damages” called Hypothetical cover
◦ “Hypothetical cover” damages are best reasonable alternative
§ Keep in mind: Egerer sued for market damages because in his mind he didn’t cover
◦ Damages = Market price at the time of the breach – price of contract
◦ Court determined Egerer was limited to damages for non-delivery
§ Damages for non-delivery (also known as hypothetical cover) UCC 2-713: the buyer may recover damages from the seller “the difference between the market price at the time when the buyer learned of the breach and the contract price.
· UCC 2-713.
· Db = Pm – Pk
o Pk = price of contract
◦ Cover is where the buyer may purchase substitute goods and recover as damages the difference between the cost of this cover and the contract price, provided the buyer covers in good faith and without unreasonable delay.
§ In other words – he can go buy new goods and do the difference between the cost of new items and the contract price
· UCC 2-712
· Db = Pcover – Pk
◦ UCC 2-713 is used “hypothetical cover” rather than (UCC 2-712, which is “cover”) because Egerer lost opportunity – no incidental/consequential damages in this case
◦ Mr. Egerer is limited to damages reflecting the difference between CSR contract price
◦ Under these general rules, plaintiffs would be entitled to recover the reasonable costs of repairing the damage to their property as specified in the settlement agreement
◦ However, Oklahoma case law has limited recovery of repair and restoration costs so that recovery cannot exceed the depreciated value of the land itself Peevyhouse V. Garlnd Coal & Mining Co.
◦ The farm was probably not worth much, the court is stuck in a record of the value of the land cleaned up and the value of the land not cleaned up
◦ There are two valid theories of contract damage that could be applied to this situation
◦ The damage of land you would expect the land of the land now and the land it was suppose to be but in situations like this (where the land wasn’t worth much to begin with)
◦ the majority decide the Schneberger only the diminution in land
◦ they have a precedent (Peeveyhouse case)
◦ This court concludes that diminution in value was the proper measure of damages based on Oklahoma statutes which limit the recovery of damages to an amount that an aggrieved party would be gain by full performance
◦ Therefore, Apache contends that under the rule established in Peevyhouse, plaintiffs recovery should be limited to the diminution in value since remediation costs are grossly disproportionate to the loss in value of the land
◦ Apache relies on Peevyhouse for the proposition that the correct measure of damages for breach of the settlement agreement is the loss in value of the plaintiff’s property.
◦ The usual approach is value choices by the court, if the court thinks we can remedy it in a reasonable way you would get the amount to fix the defect but if the court thinks you wont use it to fix the land then you will get the diminution value
◦ This court affirms that the diminution in value is the correct measure of damages in the present action
§ Restatement 348: cost of performance is right if it doesn’t involve unreasonable economic waste and diminution in value if construction and completion with contract would involve unreasonable economic waste
