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Contracts
Rutgers University, Newark School of Law
Hyde, Alan

Alan Hyde

Contracts

Fall 2015

Remedy Unit

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.

Expectation D = V promised – V delivered

(Hawkins v. McGee)

B.

Difference between contract price and market price

Cover: U.C.C. 2-712, buyer may purchase substitute goods and recover as damages the difference between cost of cover and contract price. Buyer must act in good faith and without unreasonable delay.

Cover D = P COV – P K + incidental damages + consequential damages

Hypothetical cover: U.C.C. 2-713, buyer may recover damages based on the difference between the market price at the time of the breach and the contract price. This applies only when the buyer doesn’t cover. Replacement goods must be of the same kind and in the same branch of trade (reasonable replacement).

Hypo Cover D = P M – P K + incidental damages + consequential damages

Incidental damages: include storage and shipping costs, U.C.C. 2-715 (1)

(Egerer v. CSR West)

C.

(Increased) cost of completion v. loss in value of plaintiff’s property

Peevyhouse problem: Restatement §348, diminution in value is usually awarded when cost of remediation is grossly disproportionate to cost of completing contract. Court should avoid economic waste and should not put plaintiff in a better position than if the contract was fulfilled.

(Schneberger v. Apache)

D.

Sunk cost plus anticipated net profit

D = ANP + CU (unavoidable costs) = P k – ES (expenses saved)

(Rockingham v. Luten Bridge)

E.

Limitations on protecting expectations, plaintiff may not recover damages that were:

Avoidable: plaintiff has a duty to mitigate damages in a breach of contract if breach created opportunity for other employment that would not been possible without the breach

Burden lies on the breaching party to prove failure of duty to mitigate damages

General rule for wrongful discharge of employee: measure of recovery is the amount of salary agreed upon for period of service, less the amount the employer affirmatively proves the employee earned or might have earned with reasonable effort and without risk of substantial loss

Employer must show that substitute employment is substantially similar than that of which the employee has been deprived, can’t be of a different or inferior kind

(Parker v. 20th Century Fox)

Lost volume seller theory: U.C.C. 2-708 (2), the seller would have generated a

second buyer irrespective of the breach and it follows that the lost seller cannot possibly mitigate damages

3 criteria for lost volume seller: (1) seller has capability to perform both contracts simultaneously, (2) that second contract would be profitable, (3) that the seller would have entered into the second contract even if the first one had not been terminated

(Jordan v. WorldCom)

F.

Limitations on protectin

ific performance/equitable relief, U.C.C. 2-716

Specific performance can be decreed when no adequate remedies at law exist to satisfy damages

Affirmative specific performance: e.g. you must sell your crops to buyer A, a receiver will be set up to harvest the crops of necessary

Negative specific performance: you can’t sell your tomatoes to another buyer

Legal damages = money, equitable damages = injunction or specific performance

Injunction often used in employment law, non-compete litigation, trying to prevent an employee from leaving and going to a rival company, non-compete clause

(Curtice Bros. v. Catts)

Specific performance is often used when damages are difficult to calculate, however, it is not adequate to argue that equitable relief is necessary just because it is difficult to calculate precise damages

U.C.C. 2-716 (1): specific performance may be granted when goods are unique, e.g. Memorex toner is unique and other toners are of inferior quality, there is no reasonable substitute

California courts refuse to grant specific performance when immediate enforcement is impossible, can’t require a continuing series of enforcement to successfully complete specific performance, costly for the courts to continue to monitor