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Unformatted text preview: Contracts 2 - Kniffin Spring 2002 Joe Scroppo Contracts II Outline I. Remedies for Breach A. General Principles 1. Contract law is not punitiveno punitive damages awarded 2. Money damages are the norm 3. Expectation damages are the norm B. Summary of available remedies 1. Buyer a. Specific performance b. Money damages i. Cover formula (cover price minus contract price + incidental and consequential damages costs avoided) ii. Market formula (market price minus contract price + incidental and consequential damages - costs avoided) c. Replevin 2. Seller a. Contract price for good already delivered (equiv. of specific performance) b. Resale formula (resale price minus contract price) c. Market price formula (market price minus contract price) d. Lost profits e. Replevin. f. Withhold delivery of goods. C. Specific Relief 1. Situations when specific performance will be given a. money damages are not adequate to give the aggrieved party their expectation (Klein v. Pepsicorare jet planes) i. the item is unique (e.g., land contract), or ii. the calculation of damages would be impossible or too difficult (Laclede Gas Co. v. Amoco Oil) (e.g., a five-year output contract with fluctuating prices), or iii. Extreme difficulty or impossibility of obtaining cover. Mere extra expense for cover does not justify specific performance b. the court will not be required to do extensive supervision of the specific performance (Northern Delaware Industrial v. E.W. Bliss) c. the contract terms are clear enough to allow the court to write an order of specific performance i. vague terms such as efficiency may obviate specific performance ii. when the quality of performance is crucial (e.g., personal services contracts, building to specifications), specific performance may not be suitable (Northern Delaware Industrial v. E.W. Bliss) d. the specific performance does not require antagonistic individuals to associate with each other i. based on constitutional rights to be free of involuntary servitude) ii. but, might force non-competition with aggrieved party 2. General principles a. The above four principles apply to both UCC and non-UCC transactions b. Specific performance is an equitable remedy, and courts have discretion as to whether or not go grant it. There is no jury. c. Personal services contracts not amenable to specific performance d. Money damages is the preferred remedy 3. Injunctions (Walgreen Co. v. Sara Creek Property) a. Benefits i. parties will negotiate efficiently to dissolve injunction ii. costs of finding agreement shifted to the parties b. Costs i. Continuing court supervision is costly ii. costs are sometimes imposed on 3 rd parties iii. creates bilateral monopoly that can lead to aggressive bargaining and failure to agree 4. Damages a. Benefits i. no supervision or 3 rd party costs b. Costs i. Inefficient ii. High transactional costs D. Measuring Expectation Damages 1. Buyers remedies a. Specific performance b. Replevin c. money damages...
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