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Contracts II
University of Mississippi School of Law
Barnes, Richard L.

Contracts II

Class

Section

Professor

Term

Outline Author

Textbook
: Farnsworth, Young 6thEd.: Brad Morris: Spring 2006: Barnes: 2
This outline based upon an original outline by Emily Cox prepared in Spring 2002. The original outline has been heavily edited to reflect 1) the content of my notes during Spring 2006, and 2) my personal style of study.

Table of Contents

Section 1: Remedies for Breach

I. Remedies for Breach – Generally
II. Equitable Relief (specific relief)

III. Damages (substitutional relief)

IV. Limitations on Damages
V. Liquidated Damages and Penalties Clauses

Section 2 Finding the Law of Contracts

I. Parol Evidence Rule
II. Interpreting the Language in Contracts

III. Gap Fillers

Specific Performance
Injunction

Section 1:

Remedies for Breach

I. Remedies for Breach – Generally

Remedies for breach of K are designed to provide relief to the aggrieved party.
Courts make four fundamental assumptions when enforcing promises:

Relief of promisee is to redress breach.
Relief granted to promisee should attempt to put promisee in the position they would have been in had the promise been performed.
The appropriate form of relief is substitutional rather than specific.
Punitive damages cannot be awarded for a breach of K.

Generally, relief for breach of K is either:

Specific

Substitutional

– (damages) – when it provides a substitute for that which was promised. – (equitable relief) – when it secures to the promisee that which was promised, OR
II. Equitable Relief (specific relief)

If money damages cannot adequately compensate the aggrieved party and the determination of damages would be too speculative, it may be appropriate for the court to grant equitable relief.

Specific Performance
– generally only granted when damages are inadequate and the subject is unique. – Specific Performance for the Buyer – specific performance may be decreed when the goods are unique.
UCC 2-716

Counter-argument: If there’s any way that the person could get another item like the desired item, it is arguably not sufficiently unique. Courts are more prone to offer SP when it is difficult to determine damages.

Klein v. Pepsico

Laclede v. Amoco

Northern Delaware Industrial v. E.W. Bliss Co.
: Breach of K for the sale of a jet. Issue was whether or not the jet was sufficiently unique to warrant specific performance. Held: Jet was not sufficiently unique.
2. Injunction – an injunction directs a party to refrain from doing a particular act.
The classic illustration of an injunction in a Contracts case is breach of an employment K. Court will rarely award specific performance for employment contract, because ordering employee to perform smacks of involuntary servitude. Instead, court will prevent the employee from working for a competitor.

Walgreen v. Sara Creek

Normally, an injunction is only granted when the P’s damage remedy is inadequate.

Benefits of substituting an injunction for damages:

shifts the burden of determining the cost of the D’s conduct from the ct to the parties.
Parties can agree on an amount for dissolving the injunction.

Costs of substituting an injunction for damages:

Bi-lateral monopoly – arises when 2 parties can only deal w/ each other.
Continuous supervision of the 2 parties is costly.

: Injunction granted because damages would have been costly to determine and inaccurate.
o
Unique: land, art, limited edition autos, antiques.
o
Scarcity alone is seldom enough of a “unique” characteristic to warrant specific performance
o
Money damages would be adequate to put him back in the same place he would have been in had the breach never occurred; therefore, no specific performance.
o
Klein wanted to turn around and sell the jet for a profit, which could have been a factor in not getting SP.
o
: Breach of service K to provide facilities for natural gas. Amoco refused to supply gas, and purports to terminate K. P sues for specific performance – a decree ordering D to continue supplying propane. Issue: Is a long-term K to deliver propane for a fixed period of time sufficient to warrant SP when no one else will supply the propane for a fixed period of time. Held: Yes.Sale of goods case, so UCC is applicable. (UCC 2-716)
o
Requirements K is unique.
o
Damages would be diffic

less.
·
Loss in Value
§
contract value
§
FMV
§
Difference in Value
·
Jacobs & Young v. Kent
·
Other Loss
§
i.e. – other loss to buyer of home: closing costs, hotel, rent
§
i.e. – other loss to seller/builder: moving the crew, phone calls
·
Costs Avoided
§
whatever benefits, if any, the P received from not having to complete his own performance
·
Losses Avoided
§
i.e. – Reallocating resources that would have been devoted to the performance of the K – amount salvaged by the injured party – amount injured party saves by not having to perform (ex: builder’s cost saved of materials) – includes incidental and consequential damages: Ct held that loss in value was the difference in value b/w the Reading pipes (what should have been received ) & the pipes that were used (what was received) (value if performed vs. value after breach) of product/work – buyer wants a house built for $100,000, if it doesn’t get built his loss in value will be the FMV of a similar house – seller builds a house for $100,000 and buyer breaches the K value is $100,000- Difference b/w the value to the injured party of performance that should have been received & the value of what was actually received. May be measured by:
Expectation damages are the usual measure of damages for breach of K. In some situations, expectation is the only measure of damages available.
In awarding expectation damages, the court attempts to put the P in the position she would have been in had the K been performed by the D.

Normally means P is awarded the profit that would have been made if K were performed.

Expectation Damages may take 1 of 3 forms

Specific Performance
Cover
Compensatory Damages (most common) in the form of money
:: Contracts II