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Contracts II
Southern Illinois University School of Law
Robertson, RJ

Contracts II Outline

a) Compensation
a) Goal: Compensation of P’s loss, not to punish ∆ or deterrence of future breach
b) Ask: How can we make P whole?
c) For most part, ∆’s motive for breach doesn’t matter
(1) Exception: Doctrine of Impossibility
b) Substitution
a) Give P $ as a substitute for breach (can’t do that with land b/c can’t be substituted for)
b) Exception: Specific Performance (see below)
c) Expectation
a) To Calculate:
(1) Try to put P in position would have been if K had been performed
(2) Make up difference b/t economic position now and what would have been if there was no breach

a) Buyer
a) Cover §2-712
b) Market price minus K price §2-713
c) Specific Performance §2-716
b) Seller
a) Resale §2-706
b) K price minus Market price §2-708(1)
c) K price §2-709(1)
d) Loss profits §2-708(2)

a) An exception to Substitution and Compensation, but consistent w/ Expectation. If overriding goal of remedy is to put P in the position would have been if there was no breach, SP is OK.
b) Traditional Equitable Maxim =
a) Equitable Relief is only available if there is not adequate remedy at law.
(1) SP is inappropriate where damages are recoverable and adequate…if $ damages are good enough, then no SP

c) Available When…
a) UCC §2-716
(1) SP may be decreed when [1] goods are unique or [2] in other proper circumstances
(a) Unique = 1 of a kind, can’t find anywhere else, etc
(b) Other proper circumstances?
(i) Inability to Cover (Comment)
(ii) Figuring damages under other remedies purely speculative (completely different K so can’t count as “covering” or find “market price”)
b) Requirement and Output Ks
c) Contracts for Sale of Land

d) Not Available When…
a) K for the sale of most goods (Can almost always cover)
b) Personal Service Ks/Employment K
(1) If employee breaches, usually can find another employee to cover
(2) What if employee can’t be replaced? (i.e. Shaq)
(a) Won’t typically enforce SP because:
(i) Contempt
1. Leads to Supervisory Problem – Court would have to watch
(ii) Involuntary Servitude
(iii) Foistein Problem
1. Equity will not get involved in compelling people to work closely if clear that relationship already damages
c) Ks requiring Judicial Supervision

4) REMEDIES FOR BUYERS – Compensation Remedy – 2 Ways to Calculate Damages
a) UCC §2-712
(1) After a breach, a buyer may “cover” by making in good faith and w/o unreasonable delay any reasonable purchase of or a K to purchase goods in substitution for those due from the seller
(2) Buyer may recover from the seller as damages the difference b/t the cost of those “cover” goods and the K price together w/ any incidental or consequential damages
(a) Basically buyer needs 3 things to c

I promise to pay $1000 for your car…You breach and my CA is $1000 b/c I didn’t have to spend it
b) LV minus CA is basically a way to express profit

e) Loss Avoided (LA)
a) ONLY HAPPENS IN CASES WHERE BUYER BREACHES…Seller is the innocent party
b) If seller turns around and sells the items that were supposed to go to the breaching buyer, the seller has avoided a loss
c) Have to deduct the $ made from reselling b/c couldn’t have done that if had already sold to breaching buyer

6) Expectation When Performance Already Started but Not Completed
a) FORMULA: PROFIT + CR + OL – LA (should end up w/ same thing as other formula)
a) Profit = LV minus [CostCompletedPerformance – CostReliance] or LV – CCP

a) UCC 2-706(1)
a) Seller may resell the goods concerned or the undelivered balance
(1) 2 requirements in resell:
(a) Act in good faith
(b) Act in a commercially reasonable manner
(2) Remedy: Contract price minus the Resale price
b) 2-706(3) and (4) is the trap
(1) Seller MUST GIVE NOTICE to buyer BEFORE they resell the goods (or can’t use as remedy)
(3) = Private Sale, (4) = Public sale