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Contracts II
Southern Illinois University School of Law
Robertson, RJ

Specific relief, measuring expectation, limitations of damages (avoidability, foreseeability, and certainty), liquidated damages and penalties. Go through the notes from these class periods. P 451-542. Go through February 9.
 
Remedies
 
What is the purpose of contract remedies? Three principles:
Compensation:
To put the plaintiff in the position he would have been in if the contract had been performed
It does not matter why defendant breached—the loss is the same.
Substitution:
The manner in which the court compensates the plaintiff
Money damages
Exception: specific performance.
To get specific performance, you have to show that money damages would not be adequate to put the plaintiff in the same position he would have been in had the defendant performed his promise.
 
Expectation:
You have to measure the money damages’
Try to award money damages to put the plaintiff in the same position that the plaintiff would have been in had the defendant performed the contract.
 
Equitable relief is only available if there is no adequate remedy at law.
To get specific performance, you have to show that money damages would not be adequate to put the plaintiff in the same position he would have been in had the defendant performed his promise.
To calculate damages:
Take the cost of cover minus the contract price and award the buyer the difference.
The purchase that the buyer makes in cover, has to be goods in substitution, comparable to the item in the contract.
The goods should be the commercial equivalent, not identical, but close.
§ 2-713—damages are difference between market price at the time buyer learned of breach, and the contract price.
Market price: The price at which at willing buyer and seller would agree for the sale of the item.
Damages are the difference between the value (market price) and contract.
Why wasn’t Klein happy with money damages?
He wanted the jet itself.
It takes awhile to buy a jet.
Mr. Klein wanted to resell it for profit.
The price for these jets keeps going up.
Klein wouldn’t get any of that post-contract appreciation.
Also, if the market price and the contract price were the same, then he gets nothing.
§2-716—goods are unique or in ‘other proper circumstances.’
Designed to incorporate the traditional concept of equitable relief.
Inability to cover indicates ‘other proper circumstances.’
Buyer can’t find another product
No evidence that Klein couldn’t cover
 
Specific performance
Available:
Unique goods or inability to cover
You can’t get the same thing from any other seller
Output/Requirements Contracts
Difficulty in proving amount of damages
Contracts for sale of real property
Real estate is unique, mostly b/c of its location
You can’t find another piece of land w/the same location
Not Available
Most contracts for sale of goods
Easily replaceable
Personal services contracts
Employee quits a job unjustifiably
You don’t want people who hate each other working together
No way to determine whether the person is performing the service adequately or not. 
Violates the Constitution—involuntary servitude
Contracts requiring extensive judicial supervision
 
Measuring Damages—see Discussion 1-23
 
Understand the Formulas of damages
 
Four items in determining damages:
Loss in value
The difference between the value of what P was supposed to get and what P actually got.
When the buyer breaches, the seller’s loss in value would be the contract price.
Other loss-incidental damages.
Injuries that are caused by D’s breach, other than loss in value
Three types:
Personal injury
Property damage
Economic loss
Lost profits due to the D’s breach.
Cost avoided CA=CCP-CR (cost of complete performance-cost of reliance)
Sometimes a breach of contract results in some savings on the part of the plaintiff.
If D commits material breach, P can sue for damages, and does not have to perform his promise either.
Loss in value-cost avoided= lost pr

a given time.
How would you prove the market price of goods?
A seller has to be able to demonstrate that it could have made the additional sale to be able to collect damages for lost profits.
 
§2-208 (2)—Does this require P to reduce its damages by whatever payments it receives on the resale?
This clause only applies to those sellers who are reselling parts for scrap.
They have to reduce their damages by the amount they received in selling the components.
 
Losing Contracts
 
Formula A: D=LV-CA+OL-LA
Formula B: D=Profit+CR+OL-LA
 
Expectation: forward-looking remedy
Restitution: backward-looking remedy
D has been unjustly enriched and should be made to give back that enrichment.
P wants back the value of the performance it has already completed.
Try to put the plaintiff back in the position it would have been in if the promise had never been made.
Reliance: backward-looking remedy
P performed some of its promises in reliance on D’s promises
P has incurred some costs.
Giving back P’s costs it has incurred.
Under Formula B, P gets the cost he spent in reliance on the promise, as well as the profit he would have made on the transaction
General Rule: Ordinarily a P can attempt to measure damages by restitution unless it would be more difficult to calculate those damages.
Quantum meruit: aka restitution
When you have part performance by plaintiff and the defendant breaches, P has the right to sue for restitution rather than expectation.
United States v. Blair: this case measures damages by reliance not restitution.
Focuses on the P’s loss rather than D’s gain.