P had duty not to run up. P can only get expenditures prior to breach + profit on the whole contract.
Leingang v. City of Mandan Weed Board.
D can’t reduce by overhead b/c have that anyway.
Only reductions for expenses that could have been avoided.
Kearsage Computer v. Acme Staple.
P fired by D and sues for breach. D felt that its damages reduced by savings of P and other money made by P.
No dice, P could expand and accept other bus, not like painter hired to do one painting.
Profit on other sales not deducted when expandable business.
Parker v. 20th Century Fox.
P to have leading role in musical. Instead offered drama western. P declines
only have to mitigate when you can do something similar. Doesn’t include different and inferior jobs.
Same field and same level of work for personal service cases.
Dissent says both acting jobs and shouldn’t be summ judg
The Collateral Source Rule
some courts find that for wrongful discharge employment contract cases, fund received from collateral surces must be deducted, otherwise they would grant discharged person more in dmages than he wouldn’ve had if K hadn’t been breached.
other courts disagree.
Missouri Furnace Co. v. Cochran.
When mitigating damages is difference between contract price and mkt price on date of actual delivery
this P had purchased forward price and lost a lot. Cover at own risk.
Common law case. Ignores commercial realities and is rejected by UCC
Reliance Cooperage Corp. v. Treat.
D breaches K and P entitled to damages based on diff b/t cost in original K and cost on intended date of delivery.
No duty to mitigate until K actually breached, even tho aggrieved party knows K will be breached before delivery date.
D doesn’t get what he wants (date of breach when P knew). Instead breach is on day of K.
Allows P to wait around not mitigating. Also common law and rejected by UCC.
Breach by Anticipatory Repudiation
Common Law – Pre UCC no duty to cover and P bore risk as seen above. P must wait until non performance. Ignores commercial realities, UCC rejects
2-610 When a party repudiates K w/ respect to performance not yet due the aggrieved party may
for a reasonable time await performance
resort to any remedy for breach under 2-703/2-711 even if he’s notified breacher that he’s waiting.
The Buyer’s Damages under the UCC
2-712 – buyer may cover in good faith and w/o reasonable delay and reasonable purchase goods in substitute. cover is difference b/t K price and cover price in addition to incidental or consequential damages. Failure of buyer to effect cover w/in this section doesn’t bar him from other remedy.
2-713 – if not cover, awarded mkt price at reasonable time after learned of breach – k price.
Both include incidental (expenses incurred in response to breach) and consequential (additional forseeable damages) minus expenses saved due to not having to perform.
The Seller’s Damages under UCC
If resold (cover) in good faith awarded resale (mkt) price – k price (2-706)
if not resold, awarded mkt price at time/place of tender – k price (2-708)
If volume seller, then normal damages inadequate since would have been able to sell goods to breacher and others, so awarded lost profits (k price – seller’s costs.
all plus incidental damages – saved expenses.
Neri v. Retail Marine Corp.
P breaches K to buy boat and wants deposit back. D wants profit back b/c could have sold 2 boats.
Seller entitled to 2 profits (2-708(2)). Must show could have made profit on the sale.
Has to do with volume seller and putting them in as good a position as they would have been in had the contract been performed.
Hadley v. Baxendale.
one of first cases to establish rules regarding trial damages for contract. What is appropriate measure for lost profits?
To be liable for consequential damages, breacher must be able to forsee the damages. Must be forseeable that breaching party is causing consequential damages.
Lamkins v. International Harvester Co.
alternative to Hadley forseeability. Holmes thought rule was tacit agreement test.
Look at facts and determine if parties felt there was a tacit agreement that such losses would be recoverable.
Had Hadley been applied could have gotten lost night farming profits.
Most courts have rejected this test.
2-715 deals with difference between Hadley and Lamkins. Incidental damages from seller breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to delay or breach.
Restatements 351– accepts Hadley rule, but restatement second say if result of giving consequential damages results in disproportionate recovery, no dice (sort of like tacit agreement)
Victoria Laundry v. Newman Industries.
P launderers and needed huge boiler which broke. Which lost profits available? Boiler company should have known this was going to laundry
Normal profits are what a normal laundry company fails to make b/c boiler busted. Don’t get the lucrative dyeing profits b/c no reason for engineering company to know.
2-719(3) – consequential damages may be limited or excluded unless limitation or exclusion is unconscionable. Limitation of consequential damages for injury to person in case of consumer goods is prima facia unconscionable but limitation of damages where commercial loss is not.
Valentine v. General American Credit Inc.
P sues for mental distress b/c fired and lost peace of mind of job. Relies on Hadley b/c damages flow from.
SC says all would flow, have to draw line somewhere.
Note: Emotional Distress Damages - Only get punitive damages when independent tort exists. If K is of personal nature. Used to be could do for marriage
Freund v. Washington Square Press, Inc.
P sues to get damages for delay of academic promotion, 10% of royalties, and cost of publishing book himself. Trial gave 10K to publish, but rest too speculative.
SC says no 10K b/c put him in better position. 10K not what P could have expected were book published. If published would get royalties, not 10K.
P signs lease for specific spot, is offered other spot, sues for lost profits. Trial awards lost profits, intermediate says new business can’t figure out profits, SC says test is only whether or not profits speculative
Restatement Contracts, Second $352, Comment b – proof of profits. Varies with nature of the transaction.
Alternative Interests: Reliance and Restitution.
when expectation damages are too speculative or unmeasurable (Hawkins v. McGee)
when vendor in land contract has tried to convey land title, but failed.
promisory estoppel cases.
How are they measured?
intended to put P back in position he occupied before K was entered into. compensate for detriments suffered from reliance on K
Any measures taken by P after entering into K can be recovered as reliance
Measures taken before K entered into or in anticipation of K generally not recoverable.
Chicago Coliseum Club v. Dempsey.
Wanted expenses prior to signing of agreement, expenses incurred after signing (before breach), and profits they would have received if fight had gone on.
D breaks K to do a fight. P wants expectation damages, profits they would have made had Dempsey not breached K. Court says too speculative.
Can only get reliance damages it incurred after signing contract.
Promisee can get outlay in prep for performance, subject toprivelege of promisor to reduce it by as much as he can show the promisee would have lost, if the contract had been performed.
Equity Relief in Advance of Trial – temporary restraining orders and temporary injunctions.
Boone v. Coe.
Statute of Frauds raised as defense in this case. Had K for family to move down to Texas and have farm/house/barn/materials.
If K can’t be performed in less than a year then need writing. Also need a writing for transfer for interest in real estate.
P also can’t recover b/c can’t show a loss and gain on part of defendant. none of expenses incurred can be treated as benefits that are recoverable. Under theory of restitution could be recoverable, but not reliance.
United States v. Algernon Blair, Inc. **important
Sub to provide parts of steel structure and sub completed 28% and general didn’t pay. Sub sues, D avers that if sub had finished they would have lost money. D wants to use expectation, and using that, no damages.
Court says value of services rendered is recoverable, loss that would occur is irrelevant. Also, if services far exceeded value of K would still be recoverable. If P can show value far in excess of K price then can recover.
Odd, b/c if injured party fully performed then there is limit to amount recoverable
If P can’t recover on K since would have lost $ can still recover restitution off K for reasonable value of part performance—goods/services suplied to D—under quantum meruit.
Kearns v. Andree.
D makes demands and P complies. Court says unenforceable K, won’t award damages for repapering and repainting done after D refused to purchase. P gets $ for work done to adapt to defendant.
Case pushes restitution a little further.
Curtis v. Smith.
P had K to bulid stone walls around D bakery. D repudiates before installation but after stone removed from quarry.
Court says P suit to recover money spent in quarrying fails, P at work for self, can’t get restitution
Doing and Giving Problem
Oliver v. Campbell.
Lawyer providing services at reduced rate and is fired right at end. Sues for amount services worth
Gets K price b/c had pretty much finished work.
Limit to Algernon
Discontinuity at Full Performance
The Common Counts and Restitution
Britton v. Turner.
P K with D to work for year at 120. D says shouldn’t have to pay at all, P says should get value of 9.5 mo. work. Court agrees. D can sue for damages resulting from having to hire someone else for the rest of the time. Diff b/t K price and mkt price.
Both went in knowing one or the other could back out, employment at will.
Used to be other way around…so one who does some work worse off than one who does nothing.
2-718(2) – deals with case where buyer makes down pmt and defauts. Buyer entitled to get down payment back but seller entitled to keep up to 20% of value of K but no more than 500. Code doesn’t prevent seller to recover damages by buyer’s breach, if mkt price declines after buyer breach seller entitled to that in form of damages.
Thach v. Durham.
Buyer wants back 3100 down payment for sale of sheep.
P has K to build church. P fucks up part of church, and as soon as D realizes informs and refuses to pay.
Court applies substantial performance, recovery is allowed. What are damages.
P entitled to restitution for work done and materials provided, less diminution of value due to fucked up building.
Contractor allowed to recover even tho hadn’t complied with K – substantial performance.
In regards to substantial performance, NY says if you can’t sue under substantial performance then you can’t get anything. However, NY has more liberal notion of what falls under substantial performance.
Kelley v. Hance.
places willful breach above unjust enrichment.
Contractor digs hole for sidewalk and stops.
P wanted reasonable value of work done.
P abandoned work without justification before any part of sidewalk built, not in good faith, no explanation, no indication that person had accepted work of contractor.
Willful Breach – usually willfullness of breach can’t bar recovery. RST and UCC: no willfullness bar.
Vines v. Orchard Hills, Inc.
I: Concerns right of purchasers of real property after their own default, to recovery moneys paid at time of execution of a valid contract of sale.
P puts down pmt, didn’t take title b/c transferred. P sues for dwn pmt.
SC decides that purchaser whose breach isn’t willful has restitutionary claim to moneys that unjustly enrich his seller. Defaulting buyer must show
seller unjustly enriched
damages suffered by seller are less than money received by seller from buyer.
No evidence that seller wasn’t injured, no reason to disregard liquidated damages clause. To uphold liquidated damages
P puts down 1900 on farm and D sells to another. D says dam limited to 0% of K price and P says it’s a penalty, not dam limit. P wants expectation interest 7K
If liq dam clause enforceable then case over.
Court says clause penalty b/c 1.9 activated for any of breaches possible in K. 1.9K like buckshot, covers too wide range of possibilities from minimal to substantial damages (blunderbuss clause).
Applying Damages Clauses
Fretwell v. Protection Alarm Co.
Alarm company has clause says not insurer. P robbed and sues D company for 91K (what burlars got).
SC says not liquidated dam clause, is limit of liability.
If it were liquidated damages clause would be floor and ceiling, here is 50 bucks or actual, whichever less, not a floor and ceiling.
Okay to limit liability, just don’t call it liquidated dam clause.
2-719 – consequential damages limited or excluded unless unconscionable. can’t agree to do things that are unconscionable. Breach of warranty with respect to consumer goods the limitation of liability clause in contract is prima facia unconscionable. Limits of liability clauses are enforceable
The Penalty Rule and “Efficiency”
Enforcement in Equity.
Introduction – sometimes use equitable remedies instead of usually monetary damags
Vendee usually gets spec perf. However some land cases vendee makes resale K at higher price to turn land into money, if doing just for money them some reluctance by court to grant spec perf.
In case where D sells land to P for development. D strips gravel before handing over. P brings case b/c had equitable ownership.
bring action against party seeking spec perf and they refuse to give you property. Vendor conveys to third party after you bring action. If third party a bona fide purchaser you are screwed, have to get damages, but how do you do that in equity court?
Timko v. Useful Homes Corp. (Collins likes this case)
Buys property on installments from developer, get deed at end. While paying off, builder sells to other developer. New developer assumes all obligations of first, sold to third company who assumed no obligations (second purchaser makes profit on sale).
Property becomes worthless. Buyer doesn’t want peoperty anymore, wants gain from breach, money back and gain from breach. No BFP here
Fitzpatrick v. Michael.
Court won’t enforce personal service K, even if part performance no way to enforce.
Rule for personal services, equity will not enforce negatively a contract which it could not enforce affirmatively: wouldn’t order her to work for him if she quit, and will not do vice versa.
Dallas Cowboys v. Harris.
Won’t grant spec perf. That’s for equity courts. Harris not unique, but granted temp injunction b/c no other similar available at time.
Many sports cases describe the atheletes as unique.
Pingley v. Brunson.
ABC v. Wolf.
Court says breach of good faith negotiations provision b/c negotiated with others.
First refusal not breach, could prior to end of K negotiate with someone else and no right of first refusal.
P seeks injunction for first 3 mo, but court doesn’t want to grant b/c term of contrac up, would grant if K term not yet up and services unique
Post K period won’t provide negative enforcement if in writing and then restrict only if equitable relief available only to prevent injury from unfair competition or similar tortious behavior
Fullerton Lumber Co. v. Torborg.
Won’t enforce negative injunction for excessive period, reduced from 10 yrs to 3. New, didn’t use to be able to reduce time. All or nothing
Today overbroad clause just unconscionable.
If K or part of K unconscionable court can refuse to enforce, or can enforce remainder of K w/o bad clause, or limit bad clause.
when climaed that K unconscionable parties can present evidence to commercial setting, purpose and effect
2-302 does what Fullterton case does and gives court powers to change K.
Data Management Inc. v. Greene.
Northern Delaware Indus Dev. v. E.W. Bliss.
D falls behind schedule P wants court to give spec perf make D put up night shift.
Court refuses, not sure there are another 300 workers, court shouldn’t supervise shit like this, plans not specific enough.
City Stores v. Ammerman.
P wrote letter supporting rezoning for D in order to get space in building
Court does grant spec perf b/c that’s what parties contemplated, detailed plan, no problem, special master to work out not too intrusive.
Contrast to Northern Delaware
Grayson Robinson Stores v. Iris Corp.
D build and lease to P. D can’t get financing, really tried. Arbitrator says build.
K can’t empower equity court to make spec perf, but can do it for arbitrator
Comment on Arbitration
No way to appeal, only if cheated.
No requirements or qualifications for arbitrators by statue
English courts don’t like it.
Grounds for Enforcing Promises.
Congregation Kadimah Toras v. DeLeo.
Decedent orally promises 25K for synagogue. P sues estate to get it.
Court rules that hope or expectation of 25K in budget not equivalent to legal detriment or reliance, hadn’t started construction of library.
No legal benefit to promisor and no legal detriment to promisee and thus no consideration.
Note where P wants 2000 when note was 25. D doesn’t want to pay b/c unequal.
Court says consideration sufficient, inadequacy of consideration not issue for court as long as court finds a deal.
Doctrine of unconscionability not yet formed.
Embola v. Tuppela
Give me 50 and I’ll give you 10,000 if I get land back.
Not unconscionable, D’s mind good when gave promise.
Contingency that never occur makes a transaction such as this an investement, not loan, so no usury.
Adequacy of Consideration
Duncan v. Black.
P supposed to get cotton allottment. D backs out second year.
Court says no valid consideration for note. Original land K not envorceable and can’t be used as consideration for 1500 note, original promise to make up acreage is against public policy and is therefore no good, that part of K unenforceable.
Alleged consideration of 1500 note is forbearance of suing D over the 65 acres, however had no right to sue, no forbearance, no consideration.
Military College v. Brooks.
Restatement Second $74
Martin v. Little, Brown & Co.
P goes to D with plagarized book. P wants returns from court victory.
No express promise, what about implied?
To get implied one performs with other’s knowledge a useful service of character usually charged for and latter avails himself of service. Only implied where reasonable expectation. Wasn’t reasonable.
If wanted to get quasi K would have to show person wrongly secured or passively received benefit that would be unconscionable to retain.
Collins v. Lewis.
Guy holds cows and says going to charge D. D knew services rendered.
Was implied K here, D knew about services and later sold cows to third party
Quasi v. Implied in Fact Contracts.
held up by robber can’t imply K to repay person held up.
quasi contract more related to preventing unjust enrichment. restitution to prevent unjust enrichment (what is this)
Introduction – here don’t have promise inducing detriment, only have detriment inducing the promise.
Mills v. Wyman.
Sick kid cared for by promisee. Sick kid Dad later says I’ll pay.
Detriment induced the promise, but promise didn’t induce detriment.
No enforceable obligation against father, maybe agains son. Past consideration worthles
Promises to Pay Barred Obligations.
if prior enforceable obligation, then subsequent promise to pay the obligation in whole or in part is enforceable even tho no new consideration.
if debotor promises to pay on different terms or for less also enforceable, and only enforceable on terms specified by debtor
if bankrupt later promises to repay debt enforceable
can ratify a contract from minority.
In NY second promise is enforceable if in writing and signed by both parties.
Webb v. McGowin.
P drops to floor to save D. D promises to pay pension for life and payed for long time. Estate won’t pay.
Detriment induced the promise, promise didn’t induce the detriment.
However court carves exception and says promisor received material benefit and that equals valid consideration
Harrington v. Taylor.
P blocks axe, D promises to pay savior
No basis b/c past consideration. Detriment induced promise, but promise didn’t induce detriment. North Carolina doesn’t go with Webb exception
Restatement Restitution $112
Restitution Absent Later Promise
Promises Grounded in Past: Unjust Enrichment and Law of Contracts
Restatement Contracts Second $86. Goes with Webb/McGowin as law reform doctrine. Promise made in recognition of benefit previously received by promisor from promisee is binding to extent necessary to prevent injustice. Would change result in Harrington.
Reliance on a Promise. – when talking reliance you are talking detriment didn’t induce the promise.
Kirksey v. Kirksey.
P abandons land live with brother in law. Had to leave her house for crappy one then kicked out.
No consideration here. Promise induced the detriment, but detriment didn’t induce the promise
Leaving her land not consideration.
Ricketts v. Scothorn.
D grandpa gives P note for 2K says don’t work. Took note, quit job.
This case isn’t reliance on statement of facts, reliance on a promise.
Prescott v. Jones.
Insurance company say will renew if don’t respond. Court doesn’t extend promissory estoppel.
Would be enforceable promise in most jurisdictions.
Allegheny College v. National Chautauqua Bank.
D pledges form memorial fund. Repudieates and dies. D executor won’t pay the rest.
Court says consideration, P subjected self to duty at request of D to make fund in her name. College has implied duty to create the fund.
Promissory estoppel is equivalent to consideration in charitable subscription.
Find contract on implied consideration, could have just done promissory estoppel.
Restatement Second 90-2 – don’t need reliance to enforce a charitable subscription.
Cardozo in Allegheny College
Siegel v. Spear & Co.
Carr v. Maine Central R.R..
Misfeasance and Nonfeasance
East Providence Credit v. Geremia.
D borrowed from P secured loan. D supposed to keep car insured. P said would pay insurance.
P induced D action by promissory estoppel. Since had relied.