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Contracts
University of Dayton School of Law
Morris, Jeffrey B.

CONTRACTS I
SPRING 2011
PROF. JEFFERY MORRIS
BOOK: CONTRACTS CASES AND COMMENT 9TH Ed.
AUTHORS: DAWSON, HARVEY, HENDERSON, &  BAIRD
Remedies of Contracts
·         Expectation; put the promisee in the same position he would have been in had the promisor performed his promise, usually lost profits.
·         Burden on the plaintiff
·         Calculation Damages= contractual- what plaintiff received+ other losses(incidental & consequential damages)-any cost avoided for nonhaving to perform
·         Sale of Goods U.C.C 2-712 “Cover”
·         Incidential Damages; resulting from the seller’s breach include expenses reasonably incurred.
·         Consequential damages; loss resulting from breach in which breacher had reason to know, which can’t be prevented by cover
·         Reliance; loss incurred by the promisee because he relied on the promisor, intent to put the promisee in the position he was in before the promise was made reasonably foreseeable.
·         Restitution; a promise may be enduced by the promise to confer a benefit on the promisor and then, because of the promisor’s breach not receive the promised benefit. Intent not to prevent unjust enrichment of the promisor.
CHAPTER 1
THE LEGALLY ENFORCEABLE PROMISE: BASIC AND RECURRING THEMES
Hawkins v. McGee pg. 3
Rule;
An award of pain and suffering cannot be included in the breach of warranty for an unsuccessful surgery.
Facts;
·         Dr. promised patient to make hand 100% new.
·         Operation was unsuccessful plaintiff sued.
Reasoning.
Court reasoned pain and suffering not viable for contracts.
 
Cost of completion for builder breach
Groves v. John Wunder Co. pg. 9
Rule;
the cost to complete the contract ($60k) is the proper measure of damages
Even though it exceeds the potential diminution in value of the land ($12,160)
Facts;
1.       Contract to lease land, in the contract to return land to reasonable grade.
2.       Defendant did not return land to agreed status because would be more than the property worth.
Reasoning;
When the breach is willful, the breaching party may not sue on the contract nor invoke the benefit of the doctrine of substantial performance to limit damages to the diminution in value.
Notes; Peevyhouse v. Garland Coal & Mining Co. ruled opposite of the Groves case and refused to put the non- breacher in a better position.
Acme Mills & Elevator Co. v. Johnson; pg. 22
Rule;
 A plaintiff may not recover for damages for breach of contract if the contract price plaintiff would have paid exceeds the market price on the day of delivery.
Facts;
1.       Defendant did not deliver the wheat on the agreed day .
2.       Plaintiff sued
Reasoning;
Plaintiff actually benefited from the breach. The measure of damages for failure to comply for delivery of personal property at a fixed time and a designated place, damages are the difference between the contract price and the market price of the property at the time and place of delivery.
LIMITATION UNDER THE UCC.
Missouri Furnace Co. v. Cochran pg. 27
Rule;
 if the seller breaches an installment sales contract, the buyer may not recover damages based on the increased expense of a substitute installment sales contract
Facts;
1.       Plaintiff contracted with defendant for daily deliveries.
2.       Defendant discontinued deliveries
3.       Plaintiff made similar contract with different party for much higher
4.       The market price dropped lower than the original contract price before the termination of the original contract price.
5.       Plaintiff wanting to recover the difference between the two.
Reasoning;
If the delivery is made by the installments, the measure of damages will be determined by the market value at the time each delivery should have been made.
Comment UCC 2-712 and 2-713
Neri v. Retail Marine Corp.
Rule;
A seller may recover lost profits and incidental damages when the buyer repudiates a sales contract and the seller then resells to another buyer for the same price.
Facts;
1.       Plaintiff made deposit for the boat
2.       Defendant ordered the boat
3.       Plaintiff rescinded the contract because medical expenses
4.       Defendant refused to refund the deposit.
Reasoning;
UCC 2-208 provides the standard of measure. However if this measure is inadequate to put the seller in as good a position as performance would have done then the measure of damages is lost profit and incidental damages.
Illinois Central Railroad Co. v. Crail pg.
Rule;
 No the established measure of non delivery of a shipment of merchandise the amount required to replace the exact amount of the shortage at the contractual time and place of delivery regardless of the buyers actual loss.
Facts;
1.       Plaintiff bought coal, upon delivery the coal was short 5500 lbs.
2.       Plaintiff sued for the retail amount
Reasoning;
Plaintiff nevered suffered a loss therefore, therefore no compensation.
Chicago Coliseum Club v. Dempsey pg. 41
Rule;
1.       If damages for lost profits are not reasonably attainable they will not be awarded.
2.       Defendant not liable for risk assumed prior to contract
3.       Could recover expenses after making the contract
Facts;
1.       Defendant (Boxer) and  the plaintiff (promoter) had contract for fight and not to engage in any other fights
2.       Defendant repudiated the contract
Reasoning;
To many varaibles to determine the loss profits to reasonably make a decision on loss profits.
Preparation Expenses
L. Albert & Son v. Armstrong Rubber Co. pg. 52
Rule;
A promisee is entitled to recover its preparation expenses when the promisor defaults in performance.
Facts;
1.       Buyer defendant and plaintiff seller agreed to purchase 4 refineries.
2.       2 were delivered the other 2 where delivered over 1 year later.
3.       Buyer refused both because of delayed delivery.
4.       Court granted recovery for the foundation layed for the refineries
Reasoning;
Promisee damages for breach of contract include the value of the promised performance, less its outlay, including expenses to prepare for performance. However the promisor default in performance does not make him insurer of the promisee venture.
LIMITATION ON EXPECTATION DAMAGES
Mitigation-non breaching party duty to recover damages that he could have avoided by reasonable efforts.
·         Duty to mitigate damages under construction contract- there is no duty for a builder to secure another contract during the period in which he would have worked .
·         Builder cannot increase damages after learning of the breach by the owner.
Rockingham County v. Luten Bridge Co. pg. 60
Rule;
Plaintiff cannot recover full contract price of construction after being informed of the defendants breach.
Facts;
·         County contracted to build bridge.
·         County rescinded contract.
·         Bridge co. continued to build the bridge after notice of breach and sued for damages
Reasoning;
The court reasoned the plaintiff so far as he can without loss to himself, mitigate the damages caused by the defendant wrongful acts.
No duty  to accept inferior employment.
Parker v. Twentieth Century-Fox Film Corp. pg
Rule;
A wrongfully discharged employee does not have a duty to accept available inferior employment.
Facts;
1.       Actress hired for film.
2.       Film co. rescinded the film contract offered another film
3.       Plaintiff refused the 2nd film and sued
Reasoning;
First movie was musical while the second was a western so the talents required would be substantially different. Also plaintiff had control of the director in the 1st film but not the 2nd.
Damages arising from special circumstances.
Hadley v. Baxendale pg. 75
Rule;
Damages arising from special circumstances may be awarded if the plaintiff informs the defendant of special circumstances or if these damages are reasonably foreseeable by the defendant at the time that the contract was formed
Facts;
1.       Plaintiff contracted with defendant (shipper) to ship shaft in reasonable amount of time.
2.       Defendant was negligent in shipping the shaft, and plaintiff lost profits for delay
Reasoning;
The court determined the were as special circumstances were not communica

y enriches the seller.
Facts;
1.       Plaintiff contracted to purchase condo$78,800, put down payment of 10%, which the contract designated as liquidated damages in case of default.
2.       Plaintiff transferred to another state wanting recovery of the down payment.
3.       By the time of trial 6 years later the condo was worth $160k
Reasoning;
The court reasoned the trial court erred in the by using the increase in the value of the property between the date of the contract sale and the date of the trial. There was no evidence to show the seller was not injured by the purchasers breach. The court left for the purchaser to prove the condo could have been sold for a higher price to compensate for any incidental and consequential damages. Or purchaser may provide proof to avoid the liquidated damages. The burden of proof is on the purchaser
Contractual Controls on the Damage Remedy
Muldoon v. Lynch pg.135
Rule;
A contract clause is unenforceable penalty if it provides for daily forfeiture of part of the contract price and there is no proof of actual monetary damages caused by the default.
Facts;
1.       Payments of $1725 and the lump sum $11,887 upon completion of the whole
2.       Clause if the monument was not completed within the 4 months of from the date of the contract and the balance in 12 months of the contract under forfeiture of $10 per day until the completion.
Reasoning;
Defendant cannot show where the defendant was damaged. If it appears that the parties intended the sum named to be considered liquidated damages, courts will not interfere with the contract. If the intended purpose was forfeiture or penalty then the party whose in favor of the penalty must prove their damages.
Samsung Sales Inc. v. Honeywell Inc. pg.145
Rule;
If a liquidated damage clause may be deemed a penalty if it is greatly disproportionate to the contract price and the amount of actual damages likely to  result from breach
Facts;
1.       Burglary occurred defendant refused to pay more than $50
2.       Plaintiff sued for $68,303 for the merchandise loss and the defendant negligence failure to transmit the alarm signal to the police, which was a breach
Notes;
Liquidated damages are valid if
1.       Actual damages would be uncertain as to the amount and difficulty of proof
2.       The contract as a whole is not unconscoinble
3.       The conclusion the parties intended that damages in the amount should follow the breach.
Liquidated damages are not enforceable if they lead to awards that are unreasonably small or large.
Reasoning;
Liquidated damages are valid and enforceable although in cases where the clause is manifestly inequitable and unrealistic it may be deemed a penalty.
Enforcement in Equity
·         If legal remedies are inadequate, the injured party may resort to equitable remedies.
·         Specific performance not available for if enforcement causes great hardship, or if contracted resulted from misrepresentation, mistake or other unfair acts.
Specific Performance of a Lease
Van Wagner Advertising Corp. v. S&M Enterprises. Pg. 151
Rule;
A party may not obtain specific performance of a lease covering unique billboard space.
Facts;
·         Plaintiff leased property and the property was sold.
·         New lessor terminated the lease.