Contracts II Outline
UCC Remedies-Try to put the harmed party back in the position they would have been in, not necessarily punish the breacher
· Note:Four Types of Actions in Contract:
o Expectation Damages – calculated to put injured party in position it would have occupied had contract been performed (i.e. damages make up the difference between position plaintiff is currently in as result of breach and position plaintiff expected to be in had contract been performed)
o Reliance Damages – calculated to put injured party in position it occupied (with respect to ALL its property) immediately before entering the contract.
o Restitution – calculated to return to plaintiff all benefits conferred on defendant by plaintiff (i.e. to put plaintiff in same position it was in solely with respect to the defendant prior to entering into the contract); corrects unjust enrichment.
· Note: There are three ways a buyer can seek damages when a seller repudiates:
o Buyer can cover and seek the difference between cover price and original price;
o Buyer can choose not to cover and seek damages in reliance on the contract;
o Buyer can request specific performance.
· UCC Remedies
· Specific Performance (Not the preffered option)
o § 2-716. Buyer's Right to Specific Performance or Replevin.
§ Specific performance may be decreed where the goods are unique or in other proper circumstances [long-term contract which makes it very difficult to calculate damages (weighed against the inefficiency of judicial administration)].
o Steps for determining if specific performance is appropriate:
§ Start with the broad concept: the purpose is to put the plaintiff back in the same position it would have been in had the breach not occurred. For specific performance, money damages are inadequate to do this.
§ Ask the following two questions:
· Are the goods unique? (real property, artwork, etc.)
· Are there proper circumstances? (Is there a public interest)
§ Final questions:
· Is there a judicial efficiency reason?
· Is there an inability to cover?
· For that reason, are damages inadequate?
o Specific Performance is given when money damages are inadequate
§ Unique Goods-family heirlooms, patents and copyrights, artwork, etc.
· Morris v. Sparrow-Sparrow wants specific performance for a horse. They agreed to $400 for 16 weeks of work and the horse if he does a good job. Sparrow trains horse and Morris refuses to horse over
· Horse was unique because Morris trained the horse therefore he was invested in it.
· Damages would be price for a comparable horse at the time contract was made.
· Could also get investment value of the horse (training) if specific performance is allowed
· Limited Availability-When the procurement is reasonably difficult and poses serious financial burdens or costs
§ Long Term Supply- When the procurement is reasonably difficult and poses serious financial burdens or costs
· Laclede Gas Co. v. Amoco-Shortage of gas so Amoco is only going to supply 80%. Laclede says that is not enough. Amoco argues there is no mutuality to end the contract
o Propane was not unavailable but they could not get a supplier in that time frame specific to the injured party
o Also the uncertainty of the cost of replacement is weighed
o There was also a public interest in enforcing the contract (heating houses)
§ Uncertainty of Damages
· Cannot figure out what damages to give because of the length of the contract, etc
§ Unavailable Within a Reasonable Time Frame
· Canned Tomatoes case-Not able to get the tomatoes within a reasonable time frame
o When the Court Will Not Grant Specific Performance
§ If court cannot enforce specific performance
· often in construction Ks
§ Service Contracts
· Northern Delaware Case-Wants specific performance to add 300 workers to finish job
o Court will grant specific performance if it is in the public interest or Conveyance of land
o Generally speaking courts do not grant specific performance for construction
o Almost done
o It is in the public interest
o Linked to the conveyance of land
o Lack of courts ability to craft appropriate order
§ Indefiniteness in the K
o Insecurity of Enforcement of the non-breaching party
§ Not sure the non-breaching party will hold up their end of the bargain
· Campbell Soup v. Wentz-Campbell Soup wants specific performance (the carrots). Money damages were not adequate in this case because they were unique
o Although the carrots were unique and unavailable, Wentz wins because the contract was unconscionable.
§ The contract price was way too low
§ Money damages would have been difference between contract price and purchase price
o Also won because they would have to grow carrots
§ Available (Adequate Substitute)
· Klein v. PepsiCo, Inc.-Agreement to buy jet but then Pepsi rescinds offer after agreement Klein asking for specific performance
o Specific performance of a contract is appropriate only if the goods are unique or “in other proper circumstances.”
o There were 3 comparable jets on the market. Price increases are no reason to order specific performance. Money damages would clearly be adequate.
· McAllister v. Patton- McAllister (P) entered into a contract with Patton (D) for the purchase of a Ford car. McAllister was required to pay a $25 deposit and enter a queue to wait for a car to become available. Patton was required to deliver a car as soon as possible to McAllister at Patton’s regular price
o The court held that in this case it was not alleged that the car ordered had any special or peculiar qualities not commonly possessed by others of the same make so as to make it practically impossible to replace it in the market.
o The inconvenience of not being able to o
crane rental. Plaintiff then sued to recover in quantum meruit the value of labor and equipment already furnished
· Recovery for quantum meruit is equal to the reasonable value of performance and is not diminished by any loss that would have been sustained by complete performance.
· Plaintiff has the option of recovering damages for a breach of contract (which is a losing proposition here since completion of performance would have resulted in a loss) or in quantum meruit for the value of the performance already completed.
· Limitations on damages
§ When something is foreseeable
· What could be foreseen when entering the K
· Is it a loss that would naturally flow frol breach
· Is it foreseeable to breaching party
· Is it objectively foreseeable-would a RPP realize the likelihood of its occurrence
· Loss does not have to be probable
§ Expenses incurred had you not entered into the contract
§ Put you back in the position you were in before you entered into the contract
o Liquidated Damages
§ Contractual provision that lays out damages in the event of a breach
§ Court will not uphold these if they are a penalty
§ Wasserman’s Inc. v. Township of Middleton-Lease of property 18 years earlier. City breaks the lease. Price of the building shot up. Wasserman says they are entitled to liquidated damages per the contract which included 25% of gross profits and percentage of cost of improvements. City says hell no. Should the damage award be upheld?
· Court says they are going to uphold cost of improvement provision
· Court says gross receipts was not an accurate representation of what he was bringing in. They do not consider costs.
· It is not liked in any way to the time of the least
o How much of the contract has been satisfied
§ 3 part test to determine whether to uphold liquidated damages
· Parties must have intended to agree on damages in advance of the breach
· Anticipated damages are difficult to measure
o Play into the reasonableness in element 3
o The more difficult to measure the more likely it gets upheld
· Amount stipulated was a reasonable forecast of losses that would ensue in the event of a breach (Most important)
o Upheld if reasonable at the time contract was made or at the time of the breach