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Contracts II by Mike Shordine

Contracts II by Mike Shordine - Contracts II Outline Mike...

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Contracts II Outline Mike Schordine Spring 2006 Professor Kniffin Specific Performance Generally: o It is an equitable remedy. Requirements: o Money damages are inadequate to give aggrieved party expectation (for example, uniqueness, or an output contract where money damages can’t be adequately calculated) o It would not require too much supervision by the court o The contract terms are clear enough for the court to write a clear order of specific performance o It won’t cause antagonistic individuals to have to work together (rings of involuntary servitude) Courts prefer money damages. If the contract is for the sale of real property, money is almost always considered inadequate. Cases o Klein v. PepsiCo: held that specific performance was not warranted in a contract for the sale of a jet, when there were other such jets on the market. o Laclede Gas v. Amoco Oil: specific performance warranted when the public has an interest. In this case there was no adequate remedy for Laclede other than specific performance. o Northern Delaware Industrial Development Corp. v. Bliss: specific performance not granted because an order requiring more workers to be used would be too difficult to supervise. o Walgreen v. Sara Creek: specific performance warranted because money damages would be too difficult to calculate (future profits, impact of unfair competition, inflation, etc.) o Statutes o UCC § 2-716: Specific performance when “the goods are unique, or in other proper circumstances” Expectation Damages “The Benefit of the Bargain” A breach can affect the injured party in 4 ways: o Loss in Value: the difference between what should have been received and what was received. o Other Loss: any loss that is not loss in value, i.e., injury to person or property, or expenses incurred in an attempt to salvage the transaction after breach o Cost Avoided: if the injured party decides to stop performance and treat contract as terminated, the breach may have a beneficial effect to the injured party by saving it further expense. o Loss Avoided: the injured party may be able to reallocate resources if the contract is terminated. Example: Mfr contracts to make 2 widgets, and the buyer repudiates after the manufacture of one. Reselling the first widget would be loss avoided, and not making the second would be cost avoided. Partial Performance o Formula A: Damages = Contract Price – Cost Avoided o Formula B: Damages = Cost Expended + Profit Cover
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o Laredo Hides v. H&H Meat: H&H breached an output contract for hides. Laredo’s damages are the difference between contract and cover price, plus additional expenses incurred, plus interest. o May only cover for items of same quality (unless better items are the only ones available) o When an injured party covers, it’s up to the breaching party to prove that cover was unreasonable.
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