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.”

  • 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.

  • Theory of efficient breach explains this default rule. We want to give sellers incentive to breach when it is the efficient thing to do!
  • 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.
  • Lost Profits – Courts reluctant to award damages for lost profits b/c hard to prove what profits are or what they would be. (Ferav. 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.)

  • Nose is hard to value.
  • 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)

  • Cost of performance = background default rule

-Things to look at in land questions:

  • Value the land how?
  • Personally? (cost of performance)
  • 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 πmitigate damages? (RockinghamCountyv. 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.

  • fixed versus variable costs
  • 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)

  • 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)

  • In this case, ∆ had no way of knowing that π needed the damn crank shaft so desperately.
  • 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.
  • Like the mitigation rule in that both try to reduce the loss.

-Uncertainty: Emotional Distress damages NOT cool. (Valentinev. 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. (Freundv. 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.

  • Was benefit conferred?
  • 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 Statesv.Algernon Blair, p.103)

  • Reasonable value of the performance.
  • Not affected by any loss which would have been incurred by complete performance.
  • Standard for measuring = amount for which services could have been purchased.

-Relevant decision reached before π attempts to recover restitution? (Oliver v.Campbellp.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. Lawyer only recovers the rest of his contract, NOT the restitution amount of $5000.)

-Employment – Default rule: In employment contract (for a term of years), it’s all or nothing. In the situation of a contractor/building a house contract, though, it’s restitution. Oddball outcome: Britton v. Turner (p.115) where worker gets restitution for “service actually performed.” Instead of the default rule, the court follows what it perceives to be the “community norm.”

CONTRACTUAL CONTROLS ON DAMAGES

DAMAGES CLAUSE / LIQUIDATED DAMAGES

-Test of enforceability (Pacheco v. Scoblionko p.132 where kid ends up not being able to go to summer camp, Restatement Second §356.)

  • difficult to estimate accurately
  • reasonable forecast of what is just compensation

-“Contract damages, broadly speaking, aim at compensation, NOT at punishment.” (City of Ryev. Public Service Mut. Ins. Co.p.133 where city’s contract damages clause doesn’t really measure any monetary damages the city experiences when builder doesn’t complete buildings in time. Court reasons that the penalty is really just an incentive for the builders to get things done quickly. Court questions if liquidated damages are just exploitation.)

-Damage to reputation a difficult thing to measure and when business partners agree not to voluntarily participate in litigation against the other with fixed liquidated damages and one ends up doing so, then the court upheld the damages. (Yockey v. Horn p.135)

-Tricky situation if the contract has a lot of provisions and a single liquidated damages clause. Courts don’t like it when the single clause refers to ANY breach of ANY part of the contract. (Wilt v. Waterfield, p.141)

-Limited liability clause is enforceable and different from single liquidated damages clause (i.e. in Wilt) b/c limited liability doesn’t purport to make an estimate of the harm caused by the breach (it’s flexible; “up to $50”). (Fretwell v. Protection Alarm Co. p. 144 where alarm company had a contract clause that said they’d be liable up to $50)

  • Alarm company NOT an insurer against burglary.
  • Having a limited liability clause allows company to keep rates low.

EQUITY

SPECIFIC PERFORMANCE

-Specific performance is less common than $$ damages. To get specific performance, have to show that $$ damages NOT adequate.

-Specific performance for ordinary real estate sales.

-Specific performance NOT an appropriate remedy in property lease of “unique” billboard space. Damages are adequate. Weigh factors: (Van Wagner Advertising Corp.v. S & M Enterprises, p.151)

  • How difficult is it to measure the value of it for $$ damages? This can mean uniqueness if its uniqueness means no established market value. (NOT a question of the inherent physical uniqueness but the uniqueness in valuation.)
  • Would specific performance create an undue hardship for the ∆?
  • ALSO, damages are appropriate for the ENTIRETY of the contract, NOT just up to the breach or up to the trial, etc.

-Specific performance NOT common as a remedy for contracts involving ordinary personal property.

  • Ordinary personal property that is NOT unique does not merit specific performance. (Paloukos v. Intermountain Chevrolet Co. 161 where pickup truck sale was NOT a “limited edition Corvette Indy Pace car.”)
  • BUT, in case where it’s SO difficult for other party to go out there and get the same product, court might award it. (Curtice Bros. Co.v. Catts p.155 where farmer contracted to deliver a crapload of tomatoes.)

-Court might award when there’s a third party who would be affected. (Laclede Gas Co. v. Amoco Oil Co. p.162 where ∆’s not fulfilling propane gas contract would affect neighbors.)

-Specific performance NOT common as a remedy for contracts involving personal service.

  • 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)
  • BUT specific performance awarded in case where negative injunction prevents football player from playing for another team. (Dallas Cowboys v. Harris p.175)
  • 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!
  • 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)

  • 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.
  • “After you leave us, you’re not to compete with us for a certain amount of time.”
  • 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.)

GROUNDS FOR ENFORCING PROMISES

FORMALITY

VALID CONTRACT

-According to the UCC, if these are left blank…

  • quantity blank  NOT valid
  • price blank  market price used
  • date blank  reasonable customs (Acme, p.43)

-Consideration – Promise needs to be supported by consideration and bargain or by reliance.

  • Consideration = legal benefit for the promisor or detriment to the promisee.
  • No enforcement of the promise when there’s no consideration/bargain or reliance. (Congregation Kadimah Toras-Moshe v. DeLeo p.192 where π wanted to enforce oral promise from guy on deathbed for $25K. An oral gratuitous pledge.)
  • Allocated in their budget NO reliance
  • Name a library after him  NO consideration
  • If this gift were made inter vivos (when he was still living), then it’d probably be okay. Gifts aren’t necessarily bad; we’re just skeptical about allowing people to make promises to give gifts.
  • Idea of detriment-benefit central to contract law.

-The Seal used to be employed where you could make a promise w/o detriment-benefit and it would still be enforceable if it was under seal.

BARGAIN

-In consideration, ask:

  • What’s the benefit to promisor?
  • What’s the detriment to the promisee?

-Consideration is where one gives up what one has the legal right to do. This is a detriment to the promisee. (Hamer v. Sidway p.204 where court upholds uncle’s promise of $5000 provided nephew stops carousing, drinking, gambling, etc.)

  • Distinction from DeLeo – the naming opportunity that congregation tries to say is consideration did NOT induce the monetary benefit.
  • In Hamer, the “stop carousing” was accompanied by the promise of money.
  • Courts concerned with whether or not there’s an inducement.
  • A return promise, some kind of act, waiving of a legal right that is the motivation for the promise.
  • How can we tell? Ask question of whether or not the promise is enforceable by the promisor.
  • ex: Earle v. Angell p.206 where promise is enforceable. Aunt will give nephew $500 if he comes to her funeral.
  • Benefit: She has peace of mind knowing that he’ll be there.
  • Detriment: Being at the funeral prevents him from being at another place at that time.

-Restatement (Second) § 71–To constitute a consideration, performance or a return promise must be bargained for.

  • Bargain
  • sought by the promisor in exchange for his promise
  • given by the promisee in exchange for that promise
  • Performance can be
  • an act
  • a forebearance
  • creation, modification, or destruction of a legal relation

-Consideration of $1 is NOT valid consideration for the property. This is treated as a joke and completely unrelated to the arrangement. (Fischer v. Union Trust Co. p.210 where $1 “in consideration” for the property and father’s promise to pay mortgage is NOT enforceable. Treat the property as a gift.)

-Nominal consideration (i.e. inadequacy of consideration) ordinarily won’t vitiate the contract.

  • Exception: Where the exchange is of unequal sums of money (things of “fixed,” not “indeterminate” value) where fixed or “known” worth is definitely less than the $ given in consideration.

-Situational circumstances might influence enforcement.

  • Wartime?
  • Situation in wartime Greece such that a contract to loan 500K drachmae (worth ~$750) and to repay in the amount of $2000 is upheld. Court doesn’t want to second-guess the parties.
  • Don’t inquire into adequacy of consideration. “Mere inadequacy of consideration will not void a contract.”
  • Court doesn’t want to be in the business of figuring out what stuff is worth to people.
  • Situation in wartime Greece might be one like where a glass of water (essentially free) is worth a WHOLE BUNCH to a man dying of thirst. (Batsakis v. Demotsis p.214)

-Allotments sale against the law when beyond the current crop year. Not allowed to sell allotments for future years. (Duncan v. Black p.220 where π“giving up legal claim to the future allotment” is stupid and worth nothing b/c π didn’t have any way of knowing he’d have those acres to give up.

-Restatement (Second) §74 – Giving up a claim/defense: Forbearance to assert or the surrender of a claim or defense which later proves to be invalid IS consideration if the forbearing/surrendering partybelieves that the claim or defense given up may be “fairly determined to be valid.” (p.222)

  • Why such a hardlinerule?
  • Want people to settle.
  • An objective standard of “honest and reasonable belief in possible validity” (the first phrasing of it) might lead to a lot of litigation and courts want to avoidfrivolous lawsuits.
  • If court in Duncanv. Black followed this, then Duncanv. Black likely would have turned out differently b/c the π DID believe he had a valid claim to the land.

-Implied contracts: Intentions of the parties could be inferred from their acts rather than expressed explicitly. “An agreement which legitimately can be inferred from the intention of the parties as evidenced by the circumstances and the ordinary course of dealing and the common understanding of men.” (Hertzog v. Hertzog in Martin v. Little, Brown & Co. p.223.)

  • Two types
  • implied in fact = parties’ intention, matter of actual fact that this is what they thought and expected
  • expectation damages b/c it’s a breach of an actual contract then
  • implied in law = unjust enrichment, π conferred benefit to ∆
  • restitution for benefit conferred
  • NO contract btw student who offers information on plagiarism in a book.
  • Court says that the facts are insufficient to establish a contractual relationship btw the two parties.
  • Common business practice to supply work and information and receive payment for that work/information NOT good here.
  • It’s not clear what amt. that payment would be.
  • The only thing student offered was the finding of the information.
  • NOT unjust enrichment b/c unjust enrichment requires it to be shown “by the facts pleaded that a person wrongly secured or passively received a benefit that it would be unconscionable to retain.”
  • Student here is just a volunteer.

-Time might prove important in determining whether something is an implied contract. (Collins v. Lewis p.226 where ∆’s lack of action re: π’s taking ∆’s cows makes the care of the cows an implied contract btw π and ∆ to care for them. An implied contract is “inferred from the conduct of the parties though not expressed in words.)

  • Distinction from Martin – πin Collins informed ∆ that he was taking care of the cows.
  • Need consent for a real contract, and might be able to imply consent from activities.
  • π in Collins NOT a volunteer. π was doing his duty/job.

PAST PROMISES