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Contracts II
University of Oregon School of Law
Mooney, Ralph James

REMEDIES FOR BREACH
 
·         Relief is presumptively compensatory instead of specific.
·         When a party breaches, the court usually grants the other party its expectation – its economic situation had there been no breach.
 
SPECIFIC PERFORMANCE
 
·         A court compels the breaching party to perform the contract.
o   Generally, a court will not compel specific performance on a personal services contract.
§ But may, in some cases, allow a negative injunction (ex: opera singer, sports player).
 
·         Modern trend is toward increasing specific relief. (UCC 2-716)
 
·         General requirements for specific performance:
o   1) Money damages are inadequate or incredibly difficult to calculate. (Walgreen v. Sara Creek)
o   2) The relief sought is unique. (Morris v. Sparrow)
o   3) Relief is discretionary. (Campbell v. Wentz)
 
èCampbell Soup v. Wentz (3d Cir. 1948) – Wentz agreed to sell Campbell all of its Chantenay carrots for $30/ton. The market price skyrocketed, and Wentz breached and Campbell sought specific performance.
o   Campbell is entitled to specific performance on delivery of the carrots because, at the time, it was impossible to find this type of carrot, which was important to Campbell’s production of uniform soup.
o   (But Campbell ultimately lost because contract was unconscionable.)
 
èKlein v. PepsiCo, Inc. (4th Cir. 1988) – Pepsi breached contract with Klein for the sale of a G-II jet.
o   Klein is not entitled to specific performance because:
§ 1) Money damages would make Klein whole.
§ 2) The jet was not unique. Other similar jets were available for sale.
o   Intro to UCC 2-716.
§ (1) “Specific performance may be decreed where goods are unique or in other proper circumstances”
 
·         Specific Performance & Investment – A court may want to take into account a party’s planning and investment when deciding whether to grant specific performance.
 
èMorris v. Sparrow (Ark. 1956) – Morris breached a contract with Sparrow for Keno the roping pony, which Sparrow had broken and trained.
o   Sparrow is entitled to specific performance because this is not just any horse. Sparrow transformed it from a green, unbroken pony (investment). Keno has a “peculiar and unique value.”
 
èWalgreen Co. v. Sara Creek Properties (7th Cir. 1992) [Posner] – In lease, Sara Creek agreed not to lease space in a mall to another pharmacy. Sara Creek breached. Walgreen sues for specific performance in the form of an injunction against leasing to a new pharmacy.
o   Permanent injunction granted because, when costs and benefits of granting an injunction are weighed, an injunction is appropriate.
§ Benefits: Allows parties to more accurately determine the cost of the defendant’s breach.
§ Costs: Might require court supervision; creates “bilateral monopoly.”
o   Here, Walgreen’s damages would have been inaccurate and costly to project because they would have to be projected over ten years.
o   This was a case of “efficient breach.”
 
TYPES OF DAMAGES
1)      Expectation
2)      Restitution (Algernon Blair)
3)      Reliance (moves injured party back to ‘go’)
4)      Burden shifting (aggrieved contractor must sue for expectation, but burden for cost avoided is on breaching party)
 
EXPECTATION DAMAGES
 
·         Usual remedy is putting aggrieved party in position he would have been in had breaching party performed.
 
R 2d § 347
Three factors in determining expectation damages:
1) loss in value to promisee                 +
            2) any other loss cause by breach        –
            3) any cost avoided by not having to perform
 
Overhead Costs
 
èVitex Manufacturing v. Caribtex (3d Cir. 1967)
o   RULE: Do not include any overhead costs in costs avoided, because overhead costs (like rent

foreseeable when the contract was entered
3)      Certainty – you can only recover the amount that is reasonably certain
 
Foreseeability and certainty rules are softening.
 
Avoidability
 
One may not recover a loss that could reasonably have been avoided (R 350)
 
If there is a market for the goods, buyer’s damages are based on the assumption that the buyer could reasonably have avoided greater loss by obtaining substitute goods on the market (UCC 2-713)
 
èRockingham Cty. v. Luten Bridge Co. (4th Cir. 1929) – County breached contract for building a bridge, but builder finished anyway.
o   County does not have to pay for finishing, because costs incurred in finishing could have been avoided.
o   It was builder’s duty to do nothing to increase the damages resulting from the breach.
 
Employment & Avoidability
 
Generally, a wrongfully discharged employee must:
1)      make reasonable efforts to find comparable employment, AND
2)      accept comparable employment if it’s offered
 
èParker v. Twentieth Century Fox (Ca. 1970)
o   The duty to mitigate damages (avoidability) from the breached movie contract did not mean plaintiff has to agree to do a different and arguably inferior movie. A bad movie can ruin a career, so she’s getting more leeway than the average employee.
 
Cost to Complete v. Diminution in Value
 
èJacob & Youngs v. Kent (NY 1921) [Cardozo] – Builder built owner a house and used the wrong brand of pipe, but the pipe was otherwise identical. Owner refused to pay.