Contracts : Briefs-Fa11 ‘05-Winter ‘06
Chapter 1: Remedies for Breach of Contract
Section 1. Goals of Contract Damages
General Notes/ Terms:
*Liability for breach of contract is understood to be strict; the promisor who fails to keep a promise ordinarily can’t defend by showing good motives of the practice of due care. Unlike torts, intent is immaterial when dealing with breach of contract.
* To except: to take objection; in contracts, statutes or deeds, a statement that some matter is not included
*Writ: written order of a judge req. specific action; complaint
*Assumptist: an action for the recovery of damages by reason of the breach or non-performance of a simple contract, either express or implied, and whether made orally or in writing
Hawkins V. McGee (Hairy Hand Case)
Supreme Court of NH 1929
Facts: π sues Δ surgeon for breach of warranty of operation success – “I guarantee to make a 100% perfect hand.”
PP: Trial by jury. Verdict of $3000 for π.
Issue: Was there a K and a breach? Were damages appropriate?
Reasoning:
· There was a K and a breach. Damages measure should have been expectation damages.
· Warranty was established by doc’s promise and “guarantee” to make hand 100% good.
· Judge found that instruction to jury was erroneous—that if plain. is entitled to damages, he is entitled to recover for pain and suffering he has endured and for injury he sustained over and above the original.
· Suffering doesn’t count in damages because π agreed to pain as part of surgery in agreeing to undertake it. Also, issue not damage to hand, but failure to improve hand even if hand was not made worse by the act.
· Breach of contract doesn’t depend on making worse off, but just on not delivering the goods.
Rule(s):
Damages is intended compensation for a breach, measured in the terms of the contract.
Purpose of damages is to put the π in as good a position as he would have been had the contract been kept. (Expectation Damages) Difference b/t value to him of a perfect hand and value of hand in present condition, which includes any ill effect (the ill effect is not a separate element of damages; it’s included in expectations measure)
Holding: New trail ordered due to erroneous jury instructions (as to damages calculation)
Class Notes:
For breach of contract—have to prove there is a promise and that the promise was broken.
Statement as to hospital stay only a prediction of what will happen—according to the judge; essence of the agreement was a perfect or good hand, not length of recovery and hospital stay
Expectation damages (what you expected to have minus what you got; ie. give him what you promised or what he reasonably expected to have) are for contracts not reliance damages (torts-what you had and what you loss; ie. make him whole and give him what he had)
Sullivan v O’Conner (nose job gone awry) pg 7-8
Facts: Entertainer underwent surgery for better nose; instead got a worse nose.
Issue: What’s measure of damages – expectation or reliance?
Reasoning: Don’t know how much money she could have been making w/a perfect nose.
Credibility of patients re: alleged statements of their doctors.
Holding: Reliance damages as measure
Class Notes:
-Court says it is ok with reliance damages; a public policy move. It is the middle ground, causing doctors to be cautious and only allowing for alleged contract with a heavy burden of proof. Doctors can be reassuring while being honest. Scares off charlatans.
Reliance Measure of Damages: the amount of damages that would put the Pl in the position Pl would have been in if Pl had not relied upon D’s promise—return to the status quo
My thoughts—also hard to measure expectation damage wise what her profits would have been b/c of a proper nose job
Groves v John Wunder Co. (gravel and grading land)
Supreme Court of Minnesota 1939
Key Terms:
-Substantial performance doctrine: if a good faith attempt to perform does not meet terms of agreement, the agreement is still considered complete if the essential purpose of contract is accomplished.
Facts: π contracted with Δ to lease land to Δ for removal of gravel using Grove’s screening plant provided Δ leave premises at an agreed grade. Π executed his part of contract, but Δ did not hold to agreement regarding grade of land—leaving it broken and uneven. Cost to bring land to grade originally agreed upon was $60,000. Value of land at time of contract was $12,160.
PP: π got judgment for $15,000. Appealed b/c sum too small. Court based damages on difference between market value of land at time of contract execution and what it would have been had the defendant performed contract (plus interest) not on the cost to repair land that π would have liked (4x the judgment)
Issue: Which kind of expectation damages is correct – diminution in value or cost of performance?
Rule(s):
-Where the contractor willfully and fraudulently breaches a construction contract he cannot sue thereon and have the benefit of the equitable doctrine of substantial performance (see key terms)
– In determining damages for breach of a construction contract, law aims to give disappointed promisee what he was promised (monetarily)
-The law does not require damages to be measured by a method requiring economic waste (ie. tearing down a tower and rebuilding it). If no such waste is involved, the cost of remedy is the damages due to failure to render the promised performance (diminution in value—compare to Pinches and Jacob v Young )
Holding: Judgment reversed and new trial ordered. Remedy must be equal to cost of remedying the defect as compensation for failure to performed contracted duties.
Reasoning:
-Breach was willful and small judgment rewards bad faith and deliberate breach
-damages should be based on reasonable cost of performance. Affect of performance on value of land is immaterial. Cost of remedying defect is proper measure—especially when breaching party has been paid in advance.
Acme Mills & Elevaor Co. v Johnson pg 23 (Court of Appeals of KY, 1911)
UCC 2-711,
Facts:
K for D to deliver 2k bushels of wheat at $1.03 ea. to Pl, who furnished sacks
PP:
Pl action to recover damages: $240 + $80 value of sacks
D admits breach of K, but not damages to Pl b/c wheat worth only 97.5 cents/bushel at time, Pl had suspended business and had no $ to pay for wheat (23)
D admits indebtedness for $80 of sacks
Pl alleges D sold wheat early for $1.16/bushel earlier than claimed
Verdict for Pl for $80 for sacks, plus costs (23)
Reasoning:
Trial court error in not allowing Pl amended reply to be filed, which said the D was estopped by his conduct from claiming that he threshed later & Pl not damaged
Damages is “the difference b/w the contract price and the market price of the property at the time and place of delivery” (24) (i.e. a negative number)
No evid. Of Pl. fraudulently delaying threshing (24)
Refuses to apply estoppel (26)—i.e. D’s pleading that he didn’t thresh until late—“Estoppel can only be invoked where a party by his conduct has led another to act to his prejudice.” (25)
Holding: When D is not damaged by breach K, and no fraud by Pl intended, no estopel can apply.
Decision: Judgment for Pl affirmed (25)
Equitable estoppel (see above) to prevent a litigant from repudiating a representation that has reasonably induced reliance by the person to whom it was made (25)
UCC 2-711: Buyer’s Remedies in General; Buyer’s Superior Interest in Rejecting Goods
(1) A breach of contract by the seller includes the seller’s wrongful failure to deliver or to perform a contractual obligation, making of a nonconforming tender of delivery or performance, and repudiation.
(2) If the seller is in breach of contra
profit. Had π not performed at all, it would be contract price minus cost to perform = profits.
Reasoning: P had duty to mitigate upon knowledge that Δ would not be able to perform. Punishing π b/c now we have much more waste – a bridge nobody uses or wants.
Parks v. 20th Century Fox
Calif. Supreme Court 1970
Key Terms:
summary judgment: A judgment granted on a claim or defense about which there is no genuine issue of material fact and upon which the movant is entitled to prevail as a matter of law. • The court considers the contents of the pleadings, the motions, and additional evidence adduced by the parties to determine whether there is a genuine issue of material fact rather than one of law. This procedural device allows the speedy disposition of a controversy without the need for trial.
Facts: Δ to pay $750,000 to Shirley MacLaine to play female lead in “Bloomer Girl,” musical comedy. Δ offered her lead role in “Big Country, Big Man,” a western drama, instead. Π declined, demands contract salary + interest. Δ alleges deliberate failure to mitigate damages-affirmative defense.
PP: Summary Judgment for π
Issue: Did π fail to mitigate damages by rejecting alternative offer?
Holding: Summary Judgment for π affirmed
Reasoning: So as long as the alt. employment is comparable or substantially similar to that which she contracted for, then she should accept it. But 2 ways role is substantially different – doesn’t add to reputation–role not as prestigious; western more difficult to make.
Dissent says comparability of roles is question of fact and therefore should have gone to jury.
Rule:
Measure of recovery by a wrongfully charged employee is “agreed salary upon the period of service, less the amount which the employer affirmatively proves the employee has earned or with reasonable effort might have earned from other employment…” (49)
But projected earnings from other employment not sought or accepted by employee can not be applied in mitigation unless: employer shows that other employment was “comparable or substantially similar” (50)—no mitigation for employee’s rejection of “different or inferior” employment
Leingang v. City of Mandan Weed Board (44)
N.D. 1991
Facts: π awarded contract to cut weeds on lots greater than $10k sq ft. City breached contract by allowing competitor to cut large lots
PP:
π suit for damages: price of work improperly awarded ($1933)-expenses avoided (gas, oil, repairs: $211)=$1722 (44)
City contends that some of overhead expenses should be deducted from damages as well (44)
Tr. Ct. uses π’s tax returns to deduct additional overhead expenses and calculates 20% profit margin and awards 20% of price of lost work, or $386
App ct. finds error, awards new trial on damages (45)
Rule:
When contract for service is breached, value is 1) π’s reasonable expenditures toward performance (45)—in this case none 2) and anticipated profits.
It was error to deduct π’s overhead, b/c that has to be paid anyway regardless of breach—or at least city should determine whether those costs remained constant
