Coenen
Chapter 1 - Introduction
- Wis Sup Ct reinstated the $10 award - since the jury believed that this was
predicated on actual injury
- they agree with appeals court about the punitive damages - but say that
punitive damages cannot be awarded in an breach of contract case
- reasons for this holding -
- no such cases exist, relies later on persuasive authority from other
jurisdictions, relies on Chitty, Simpson, Corbin - legal thinkers
- court says that he did make a promise - it was implied that P would use
reasonable efforts to make the money, court implies a duty
- court relied on other terms in the contract - duties to account for profits, duties to
get copyrights, trademarks, etc
12. Weiner v McGraw-Hill
- employer promises to employee: the employee will not be terminated without
just cause and promises to retain employee absent just cause for firing
- the employee didn’t make any reciprocal commitment to employer
- employee gets fired and then sues employer
- court says that employee did give consideration
- gave up his previous job and benefits acquired
- employee turned down other jobs
- employee did show up for work - for quite a while
- don’t focus on the mutuality question - look for whether there is consideration
for the promise that P seeks to enforce
13. Mattei v Hopper
- seller promises to transfer his land, buyer promises to pay $, subject to leases
satisfactory to the buyer
- seller breaches the contract - saying that there was no consideration for the
promise to sell
- says the clause about the satisfactory leases negates the consideration
since the buyer wasn’t necessarily going to buy
- court rejects this argument because the promisor’s duty to act in good faith was
consideration
- the promisee - the buyer - has made a return promise that is subject to a
condition - but the promise is still good enough to be a something - and therefore,
the argument of illusory and non-mutuality isn’t good
14. Ricketts v Scothorn
- Grandpa promised that he would give Katherine $2000 and then she wouldn’t
have to work
- is quitting her job consideration - no - it is hard to say that she does it as a form
of paying a price or making a trade for the promise
- court enforces the promise - relying on the doctrine of equitable estoppel
Chapter 3 - Remedies
- there is a statute in this case that says this - and the court relies on this
3. Rock Island Improvement Co v Helmerich & Payne
- another mining case - where D didn’t reclaim the land
- court concludes that the correct measure of damages is the cost of completion
- because statutes have been enacted
- the statute (and this case) overturn Peevyhouse - but only because the statutes
have been enacted
- the statute doesn’t specifically talk about cost of completion damages for breach
of contract - but the court says that the statute changes everything - because it
articulates an underlying policy of the state that didn’t exist when Peevyhouse
was decided
- criticism - interpretation of the statute didn’t give the parties notice - since
Peevyhouse was still on the books up until this case
- in Groves, Peecyhouse, and Rock Island -
- in each of these cases, the court assumes that remedy should be money
- could order specific performance - this would be good since the injured party
will get what they contracted for - and this would prevent P from using the money
for something other than completion
- could order restitution damages - but this might not come close to putting the
person in the position that they would have been in without the contract
- what would be wrong with juries deciding these cases?
- inconsistency in the application of the law involving disputes
- can discourage people from entering into contracts in the first place
- juries don’t understand technical issues
3. Radford v De Froberville
- before giving cost of completion - see if the owner is really going to complete
4. Freund case
- author wants the cost of manufacturing the books that didn’t get made since the
D broke the contract
- court rules that he can only get royalties - and since these weren’t adequately
specified, he doesn’t get these
5. Thorne v White
- involved a breach of a building contract - by the builder
- the owner then contracts with someone else to build the roof - and then sues for
the difference in costs
- court finds that there is a difference between the work asked of the breaching
builder and the work from the new builder - the new builder did more things
- if we award the difference - we are going to put the owner in a better position
than if the contract had been fully performed
- if the work was the same in both contracts - than he would get the difference in
costs
6. Warner v McLay
- the owner of the property breaches the building contract
- the builder has a right to recover lost profits - from not being able to complete
the contract
- why didn’t the builder win? The two parties don’t have the real figures
- the builder isn’t seeking the actual profit, but a reasonable profit - and this would
not necessarily put the builder in the position that he would have been in if the
contract had been fully performed
- you have to take into account the net profit, the total amount of expenditures
thus far, and the gain that the builder has retained
- ways to measure damages:
- full contract price minus the amount saved by the builder cause by the
breach
- to recoup costs incurred plus the net profit the builder would have
realized had the builder been able to finish the project and get the full
contract price
- full contract price = D
- costs avoided = C
- costs incurred = A
- net profit = B
- so A+B+C=D
- then subtract C from both sides of the equation
- A+B=D-C
- so you can measure the builder’s damages in both ways and they make
sense
7. Handicapped Children’s Ed Bd of Sheboygan County v Lukaszewski
- Luk took a job with the school, but then breaches when she finds job with more
money - the school then has to hire someone - who is more experienced and costs
more
- the school is suing saying that Luk should pay them the difference between her
salary and the new person’s salary
- she says that the new person is better than she was, so the replacement isn’t the
same as the original - but this doesn’t matter, since this new person was the
school’s only option
- this is a case of efficient breach - the extra money that she would make at her
new job would be more than the damages that she would have to pay the school -
so she would come out with more money anyway
8. Concept of Efficient Breach
- should people be encouraged to efficiently breach a contract?
- economist? Yes
- pastor? No - contracts should be honored
- idea behind it is that it increases overall societal welfare
9. Cooper v Clute
- seller contracts to deliver cotton to buyer, seller sells cotton to someone else for
more money
- buyer sues for the difference in price - but gets nothing
- buyer gets nothing - because the market value for the cotton is the original price
that contract was for - so to replace the cotton would have cost the buyer nothing
- the important date is the date that the buyer learned of the breach (per UCC)
10. Neri v Retail Marine Corp
- case where there is a breach by the buyer of a contract to buy a boat and there
has been a purchase price of $12,500
- there is a deposit of $4250 paid to seller, seller orders the boat for a wholesale
price of $10,000, the buyer then breaches
- the seller sells the boat to a 3rd party for the original purchase price - but incurs
$674 in incidental costs and $1250 in attorney’s fees - suit by buyer and
counterclaim by seller
- trial court says that seller only gets to keep $500 in statutory damages - so the
buyer gets back $3750 - per sec 2-718(b) of the UCC
- but the trial judge doesn’t read until the end of the statute - where it says that the
buyer’s right to restitution can be offset by other things
- so the seller should recover his lost profit
- difference between 2-706 and 2-708
- what the trial judge should have done was take the deposit and subtract that from
the lost profit - and then take off the $674 in incidental expenses
- argument that the buyer shouldn’t get back the deposit - it was liquidated
damages - and rules in 2-718(1) prohibit recovering these
- rules in 2-718(2)(b) - situation where there is a deposit - and should get
back either $500 or 20% of deposit, whichever is less - in this case, $500
11. UCC provisions
- 2-708
- sub¶ 1 - focus on can the seller get difference in value damages under
this sub¶ - if the seller resells the goods and makes a good deal - better
than the market price?
- sub¶ 2 - deals with the lost volume seller situation and the situation of
the special manufacturing seller - who doesn’t complete the work
- 2-718
- sub¶ 1 - liquidated damages
- sub¶ 2 and 3 - specialized situation where the buyer makes a deposit and
then the buyer refuses to take delivery and tries to get the deposit back
D. Validity of Clauses Providing for a Specific Monetary Remedy in the Event of Breach or
Repudiation of an Agreement with Consideration
1. HJ McGrath Co v Wisner
- concerns a liquidated damages clause
- traditional test for assessing the validity of a clause:
1. Were the damages not susceptible to accurate estimation
2. The damages must be a reasonable forecast of the non-breaching party’s
actual damages
- if the clause doesn’t meet these requirements, then it is termed a penalty
clause and is unenforceable - why?
- because we should presume there was some sort of bargaining
wrongdoing
- penalties don’t seem to unjustly enrich the non-breaching party
- there is a farmer and a cannery who make a contract that the farmer will deliver
all of the farmer’s tomatoes to the canner - if the grower breaches, he will pay
liquidated damages of $300
- grower does breach - selling to higher amounts, canner seeks $300 in damages
- CA Sup Ct says this clause is unenforceable - because the damages formula here
wasn’t a reasonable forecast of the actual damages
- court said that the damages could have been accurately computed - by
taking the cover price
- if this happened today, UCC 2-718 would govern the case - so the 2-part test
wouldn’t be applied - and the liquidated damages clause would be upheld
- since the amount was reasonable and comparable to the actual harm
2. Better Food Markets v American Dist Telegraph Co
- the burglar alarm use contracts that they will get only $50 liquidated damages if
the company breaches their contract
- court applies 2-part test - although this doesn’t make sense, since it’s the owner
of the store that is saying that the liquidated damages clause isn’t enough to cover
the losses
- in looking at this through the UCC - look to see whether the clause is
unconscionable
- if we characterize the clause as a limitation on damages clause - this changes the
analysis
G. Specific Performance
1. Kitchen v Herring
- proposition: when land is involved in a suit, the court will always use specific
performance to remedy the breach of a conveyance of land contract - a purchase
and sale of land
- broader rule - court will order injunctive relief when monetary damages
won’t be an adequate remedy
- court says that it would be a departure from the settled rule of the court not to
award specific performance in this case
- they don’t want to carve out an exception to this very convenient rule
that triggers the right result in the vast majority of cases
- UCC 2-716 governs sales of unique objects
2. Curtice Brothers v Catts
- court orders specific performance of delivering tomatoes
- the tomatoes don’t have to be unique, under the UCC, there can be other
circumstances
- court says that there is no adequate remedy at law, so specific performance
should be ordered
- although this isn’t really true - since they can calculate lost profit -
although they can’t calculate loss of market share, reputation, etc
- what evidence is there that the buyer can’t cover on the open market - and so
specific performance should be ordered?
- the contract itself
- might be a decision based on pricing rather than supply
3. Defenses to Specific Performance
- providing of personal services limitation
- specific performance can be denied even though the performance might
be unique
- 13th amendment prohibits slavery
- the people might not be performing to their capabilities
- unconscionability
- unfairness
4. LaClede Gas v Amaco Oil
- agreement for D to supply P with propane gas until natural gas mains were put
into the area
- court awards specific performance, applies UCC 2-716
- what is the single best fact for the buyer in demanding specific performance?
- it was a long term contract
- specific performance given because the buyer couldn’t find a substitute without
incurring a lot of expenses
3. Pratt Furniture Co v McBee
- chair buyer sues seller for breach of contract - since the seller decided not to
make the chairs, but to make tables at a higher profit
- buyer seeks remedies -
- injunction from keeping the seller from making tables
- specific performance of the chair contract
- or money damages in the amount of both the $90,000 (difference
between the chairs cost under the contract and the market price) and
“restitution” of the seller’s extra profit from the breach
- the $90,000 is undisputed - and going to the P
- but the P also wants the profit to prevent UE to the seller
- court says that he can’t get specific performance - because the chairs aren’t
unique and there isn’t an inability to cover
- also - it frustrates efficient breaches, more difficult for courts to enforce,
policy reasons - things might go badly if we force people to deal with one
another
- P doesn’t recover the $80,000 UE - ill-gotten gains - money
- since this isn’t in the calculation of expectancy damages
- courts shouldn’t penalize people because of the breach
- and courts shouldn’t put parties in a better position because of the breach
D. The Acceptance
1. Ardente v Horan
- case where the P buyer is seeking specific performance of a real estate contract
- buyer bids, seller agrees - and buyer prepares and sends agreement
- judge preceded on the wrong assumption that the delivery of the purchase and
sale agreement to P constituted an offer by Ds to sell property
- wrong because when the seller sent the buyer the document, he didn’t
sign it - so it was more like an invitation than an offer
- if we ignore this problem and go with the assumption, have to decide if there
was acceptance
- question about whether the extra condition about the furniture being
included was a collateral issue (where the acceptance would be good) or
amended to the contract (in which case it would violate the mirror image
rule - and acceptance wouldn’t be good)
2. Eliason v Henshaw
- court finds that there is no contract here - if we accept the facts as the evidence
indicates them to be
- no contract as a matter of law - since there was no acceptance
- this is the acceptance was sent to the wrong place, and got to the Ds after they
had already sold the goods
- there isn’t a contract until the offer has been received and accepted by both
parties
- the mode of transportation isn’t the issue - just so long as it gets there in the time
period allotted by getting to Harper’s Ferry by wagon
3. White v Corlies
- offer by the owner of a building - the builder says the owner accepted, and so he
breached the contract
- owner says he rescinded his offer prior to the builder’s acceptance
- case has to do with whether acceptance can occur by performance of the contract
- or whether it has to be a direct communication
- court finds that as a matter of law, there wasn’t any acceptance
- since the builder never communicated to the owner that he accepted or
that this is what his work was supposed to indicate
- could characterize the builder’s performance in this case as preparation - so it
wouldn’t be commencing performance
E. Duration of Offers
- if you make an offer - this creates the power of acceptance in the other party - and if the
party accepts, then you have to make the contract
1. Akers v JD Sedberry
- the employees met with Sedberry - and make an offer of recision - to call off the
contract; Sedberry doesn’t accept the offer at the meeting - but calls them 3 days
later to accept the offer
- the power of acceptance had gone away
- lapse of time - basic test to determine this - if the offer is in a face to face
conversation, the offer has to be accepted within the conversation
- within a reasonable time - assuming no amount of time has been
specified
- she also rejected the offer - she said that she didn’t accept the resignation
and then talked about what they would do with the business
2. Caldwell v Cline
- there is an offeror who makes an offer to transfer property, there is an acceptance
by the offeree - Caldwell, but offeror says the offer is withdrawn
- problem here - there is ambiguity as to when the power of acceptance goes away
- it all boils down to interpreting the language of the offer - we’ll give you 8 days
to accept or reject the offer
- if we measure 8 days from the sending, the acceptance is too late
- if we measure 8 days from the receipt, the acceptance isn’t too late
- court says that there is a contract as a matter of law
- language of the offer - will give you 8 days - so it should be counted
from time of receipt
- abstract principles of contracts - contracts aren’t formed until the offeree
has heard about the offer - although this doesn’t really have to do with the
reasonable person standard and the offeror could contract around it
- since he didn’t contract around it, the only fixed date that we have to
calculate the 8 days from is the time of receipt
3. Dickinson v Dodd
- we have an offer that specifies a period of time within which the offer can be
accepted - and we also have an attempted acceptance
F. Bargaining at a Distance
- mailbox rule - the rule that when the offeree puts the acceptance into the mail - it is then
that the offer is accepted
- in cases where the offer is made by mail or other additional circumstances where
the offeror envisions acceptance by mail
1. Adams v Lindsell
- stands for the mailbox rule - mail acceptance is effective upon mailing rather
than receipt
- other argument on behalf of offeree - to say that a contract was formed whether
or not the date of the posting the acceptance or the date of receiving the
acceptance is controlling?
- the misdirection of the letter was the fault of the offeror - and the offeree
sent it as soon as it was received
- the offer wasn’t properly revoked - since the offeror didn’t tell the offeree
2. Worms v Burgess
- under ordinary operation of the mailbox rule, there would have been a contract
- but this isn’t an ordinary case - since there is an option contract involved
- the court doesn’t follow the authorities that suggest that the mailbox rule should
be abandoned with an option contract
- why does the court do this?
- statute that says the mailbox rule
- mailbox rule is widely recognized as custom - so why should people
think that it shouldn’t apply to option contracts
- risk of dealing through the mail
- offeror could have dealt with the risk in the contract itself - and since
they didn’t, the mailbox rule should apply
- the other authority didn’t give good reasons for their arguments
- even Corbin said that you need to look at surrounding circumstances
- cases that rely on this authority are only a slight majority
G. Agreements to Agree
1. Joseph Martin Delicatessen v Schumacher
- an agreement to agree later isn’t good - unless it is specified how you are going to agree or the
courts can adequately determine amounts