REMEDIES
DAMAGES
GOALS:
– Hawkins v. McGee (p.3) where π goes in to get skin graft and comes out with malformed hand: Try to put injured party “in as good a position as he would have been in had the ∆ kept his contract.”
o Don’t allow punitive damages. Damages should already take these into account.
– True measure of damages is the difference btw value to π of what was promised him and that which he actually received.
– Expectation damages = default form of damages, the amount of money that would be necessary to put the victim of the breach into the same position if the contract had been performed.
o Theory of efficient breach explains this default rule. We want to give sellers incentive to breach when it is the efficient thing to do!
o Covering – When seller turns around and sells the no-longer-desired contracted item on the market. The damages would then be the difference btw that market price the seller receives on the market and the price contracted for.
o Lost Profits – Courts reluctant to award damages for lost profits b/c hard to prove what profits are or what they would be. (Fera v. Village Plaza, Inc. p.85 where ∆ gives π’s rental spot to another person, Freund v. Washington Square Press, Inc. p.82 where calculating lost royalties, delay of promotion, etc. is difficult b/c too speculative.)
– Did π REALLY believe the procedure would do what ∆ said it would? (Sullivan v. O’Connor p.7 where doctor says to patient she’ll have a great new nose that will make her face more beautiful.)
o Nose is hard to value.
o Solution to patients who misrepresent their beliefs:
§ don’t believe them
§ give them a high burden of proof
LIMITATIONS:
– Commercial actors = diminution of value (b/c they supposedly don’t care about the goods themselves)
– Private actors = cost of performance (b/c there might be other factors going on – i.e. they really do want the ugly fountain on their front lawn)
o Cost of performance = background default rule
– Things to look at in land questions:
o Value the land how?
o Personally? (cost of performance)
o Commercially? (diminution of value)
– Restatement 347, 348 – Injured party has right to damages based on expectation interests if the loss of value is a result of the other party’s breach.
– π is entitled to be made whole and NO more. (Louise Caroline Nursing Home, Inc. v. Dix Constr. Corp. p. 38 – π can’t get any damages b/c π can, in theory, just turn around and use another contractor for the same bargained contract price.)
– Did π mitigate damages? (Rockingham County v. Luten Bridge Co. .41 where π bridge builders didn’t stop building the bridge when ∆ county told them to stop.) Also anticipatory breach in Luten.
o fixed versus variable costs
o damages denied for costs π could have avoided
– Damages in broken contract for sale of goods (where vendor didn’t deliver) are the difference btw the contract price w/vendor and the market price at the time delivery should have been fulfilled. Damages are NOT the price of the new contract that buyer enters into. (Missouri Furnace)
o UCC §2-712 changes this up a little. Use a spot market technique (take difference btw contract price and the market price as it changes throughout the year).
– Foreseeability “As may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach of it.” (Hadley v. Baxendale, p.70)
o In this case, ∆ had no way of knowing that π needed the damn crank shaft so desperately.
o information forcing – Hadley rule is trying to get the party in the best position to contract for the circumstances. The party with the most information and knowledge (the miller who knows a crankshaft is crucial) to reveal this information in order to get compensation.
o Like the mitigation rule in that both try to reduce the loss.
– Uncertainty: Emotional Distress damages NOT cool. (Valentine v. General American Credit, Inc. p.77 where woman wanted emotional distress damages for being fired from her job, Restatement §353.)
– Unusual market situation where calculating damages is difficult and cost of performance is not the right remedy. Other factors involved such as both parties’ benefiting from the performance. (Freund v. Washington Square Press, Inc., p.82 – publishing house doesn’t publish π’s manuscript)
ALTERNATIVE INTERESTS: RELIANCE AND RESTITUTION
RELIANCE
– Reliance damages – Backward looking: Amount of money necessary to put you in the position that you were in when the contract was entered. Trying to get your expenses back, given that you can’t get any profits. (As opposed to expectation damages, which are forward looking and look at where you’d be if the contract was fulfilled.)
– No recovery for expenses incurred PRIOR to contract.
– Expenses incurred after signing of the agreement and before the breach recoverable “if in furtherance of the general scheme.” (Chicago Coliseum Club v. Dempsey p.95 boxer who breaches contract to fight)
RESTITUTION / QUANTUM MERUIT / UNJUST ENRICHMENT / IMPLIED CONTRACT
– Restitution if ∆ was enriched by π’s actions.
o Was benefit conferred?
o Measured by $ of benefit conferred.
§ money paid by him
§ property delivered
§ services rendered in accordance with and upon the faith of the contract
– No award of restitution if ∆ was NOT enriched by π’s actions. (Boone v. Coe p.101)
– Quantum meruit: Allow a promise to recover the value of services he gave to ∆ irrespective of whether he would have lost money on the contract and been unable to recover in a suit on the contract. (United States v. Algernon Blair, p.103)
o Reasonable value of the performance.
o Not affected by any loss which would have been incurred by complete performance.
o Standard for measuring = amount for which services could have been purchased.
– Relevant decision reached before π attempts to recover restitution? (Oliver v. Campbell p.109, where lawyer whose services were worth $5000 was fired before divorce papers fully go through but after court makes its decision regarding the divorce. Law
personal service.
o Specific performance NOT awarded in case where chauffeur and employer are at odds and employer kicks chauffeur out. If specific performance were awarded, they’d be forced to live together when they obviously don’t want to. They’d treat each other poorly. (Fitzpatrick v. Michael p.170)
o BUT specific performance awarded in case where negative injunction prevents football player from playing for another team. (Dallas Cowboys v. Harris p.175)
o Distinctions:
§ Uniqueness of the personal service. Who else is there who can perform the same work? Fitzpatrick renders basic services whereas Harris is a professional football player, a little more unique.
§ Personal relationship important. Don’t want employer in Fitzpatrick to employ someone he doesn’t want to employ. The court feels inhibitions in forcing people to have employment relationships that they don’t want to.
§ Who’s suing for injunction?
· In Fitzpatrick, it’s the employee seeking an injunction against employer.
· In Harris, it’s the employer seeking injunction against employee.
§ Effect of injunction on Fitzpatrick’s employer would be bad – a negative injunction would prevent old man from hiring another nurse!
o Courts tend NOT to order specific performance for personal service.
§ Hard to monitor employees to ensure they behave appropriately.
§ Uneasy ordering people to work b/c it’s too much like servitude or FORCED slavery.
§ Courts might order negative injunction to prevent employee from working for a competitor.
– Covenant not to compete is an attempt to provide in the contract for an injunction against the seller. (Fullerton Lumber Co. v. Torborg p.177)
o Illegal in California.
§ Actually helped with information sharing.
§ Tech startups did well b/c knowledge spread through Silicon Valley as ex-employees opened up their own companies.
o “After you leave us, you’re not to compete with us for a certain amount of time.”
o Threshold: Must be reasonable. Similar to liquidated damages, the courts are hostile to covenants not to compete.
§ Courts have sometimes made reasonableness dependent on the type of industry.
§ Three dimensions to covenants not to compete:
· scope of the industry
· geographic scope
· temporal scope
§ Analysis: The narrower the dimensions, the more likely the court will enforce.
– Is it practical? (Northern Delaware Indus. Dev. Corp. p.180 where court doesn’t issue specific performance when π wants to requisition 300 more workmen for a night shift.)
