6/28/12 Contract Law Lawrence Siry This Class •  Remedies, aka Damages –  Expecta2on Damages –  Reliance Damages –  Res2tu2on Damages Restatement Sec:on 344 •  PURPOSES OF REMEDIES •  Judicial remedies under the rules stated in this Restatement serve to protect one or more of the following interests of a promisee: •  (a) his "expecta2on interest," which is his interest in having the benefit of his bargain by being put in as good a posi2on as he would have been in had the contract been performed, •  (b) his "reliance interest," which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a posi2on as he would have been in had the contract not been made, or •  (c) his "res2tu2on interest," which is his interest in having restored to him any benefit that he has conferred on the other party. 1 6/28/12 Hawkins v. McGee (NH 1929) •  Hawkins,(P) had scarred hands from electrocu:on. •  McGee (D) was a doctor who promised a 100% good hand. •  D used skin graQ from chest and D grew hair on his palms. •  P sued D. Hawkins v. McGee (NH 1929) •  Writ of Assumupsit-­‐ way of geUng into court-­‐ this sounds more like a tort case then a contract case. •  Why is this not a tort case-­‐ usually these cases are not contract cases-­‐ why is this one different?? •  Carbolic Hawkins v. McGee (NH 1929) •  Issue: what damages flow from breach of contract? 2 6/28/12 Hawkins v. McGee (NH 1929) •  Issue: what damages flow from breach of contract? •  Expecta:on damages? •  Reliance damages? •  Res:tu:on damages? •  Pain and Suffering? •  Puni:ve? •  Nominal? •  Liquidated? Hawkins v. McGee (NH 1929) •  “….the difference between a the value to him of a perfect hand… and the value of his hand in its current condi:on.” •  . •  Pain not included as that was expected under in any surgery. EXPACTATION DAMAGES •  Louise Caroline Nursing Home v. Dix Construc:on (MA 1972) -­‐D contracted to build a nursing home for P. -­‐D breached. -­‐P sued, but it cost less to finish the construc:on than did the contract (P saved Money) How should a court assess damages?? 3 6/28/12 EXPACTATION DAMAGES •  Compensa:on is the value of the performance of the contract-­‐ what the plain:ff would have made had the contract been performed. •  Reasonable costs for comple:ng the contract. In this case Nothing! •  Service contracts cannot put the plain:ff in a be#er posi*on than if the K had not been entered into. EXPACTATION DAMAGES •  Peevyhouse v Garland Coal (OK 1963) (not part of reading) •  Garland D contracted to do strip mining on Peevyhouse’s property for five years. Under the Contract, D was to return the property to its original condi:on aQer the mining.-­‐ they did not. •  Lower court awarded damages equal to the amount that the value of the un-­‐restored property had diminished. •  Peevyhouse wanted the cost of restora:on. 4 6/28/12 EXPACTATION DAMAGES •  Peevyhouse v Garland Coal (OK 1963) (not part of reading) •  Garland D contracted to do strip mining on Peevyhouse’s property for five years. Under the Contract, D was to return the property to its original condi:on aQer the mining.-­‐ they did not. •  Lower court awarded damages equal to the amount that the value of the un-­‐restored property had diminished. •  Peevyhouse wanted the cost of restora:on. EXPACTATION DAMAGES •  Peevyhouse v Garland Coal (OK 1963) •  The Court looked at the primary purpose of the Contract and decided that it was for the mining-­‐ the restora:on was incidental. •  Therefore-­‐ it would amount to economic waste to give damages for the restora:on. •  Yet the court stated that if the contract provision was central, then the cost of performance would be the appropriate damages-­‐ •  Correct? §347. MEASURE OF DAMAGES IN GENERAL •  Subject to the limita2ons stated in §§350-­‐53, the injured party has a right to damages based on his expecta2on interest as measured by •  (a) the loss in the value to him of the other party's performance caused by its failure or deficiency, plus •  (b) any other loss, including incidental or consequen2al loss, caused by the breach, less •  (c) any cost or other loss that he has avoided by not having to perform. 5 6/28/12 Wired Music v. Clark •  D contracted to get music over phone lines for a certain :me period. The contract was un assignable. D moved and tried unsuccessfully to have P accept the new tenant. AQer saying no, the P went and sold the service to the new Tennant at a higher price. •  There is no duty to mi:gate if the subject of the contract is unlimited. Vitex v. Caribtex (1967) •  P and D had contract in which the P would make 30,000. (ten thousand would be overhead) D argued that that amount should be subtracted from the profits thereby reducing the Ps damages. •  Court. No-­‐ overhead is included-­‐ makes sense??? Mi:ga:on of Damages •  Plain:ff has a duty to mi:gate-­‐ or make less damages. •  §350. AVOIDABILITY AS A LIMITATION ON DAMAGES •  (1) Except as stated in Subsec2on (2), damages are not recoverable for loss that the injured party could have avoided without undue risk, burden, or humilia2on. •  (2) The injured party is not precluded from recovery by the rule stated in Subsec2on (1) to the extent that he has made reasonable but unsuccessful efforts to avoid loss. 6 6/28/12 Mi:ga:on of Damages •  Rockingham County v. Luten Bridge (NC 1929) Mi:ga:on of Damages •
•
•
•
•
Rockingham County v. Luten Bridge (NC 1929) D had contracted with P to build a bridge. AQer P began D cancelled the contract. P con:nued work and sued for the damages. Court: P is en:tled to damages limited to the amount of damages that he would have been able to recover as of the :me no:ce of cancella:on was given. •  What if the no:ce was equivocal? •  Why is this good or bad? Clear or Unclear? Mi:ga:on of Damages •  Shirley MacLaine Parker v. 20th Century (CA 1970) 7 6/28/12 Mi:ga:on of Damages •  Shirley MacLaine Parker v. 20th Century (CA 1970) •  P, actress, contracted with D. P to star in a musical shot in California-­‐ Bloomer Girl. D cancelled, offered her a role in a western shot in Australia and P declined. At the trial, where P claimed damages for lost salary, D claimed that P did not mi:gate. •  Court: While D must mi:gate-­‐ must not take inferior work-­‐ here no control and different type of film. Shirley wins. •  hop://www.youtube.com/watch?v=YE2u-­‐673ZQk Consequen:al Damages: Foreseeability •  Hadley v. Baxendale (1854 UK) Crank shaQ-­‐ to be delivered in a day-­‐ took five days because of D’s negligence. What are the consequen*al damages? Damages must be foreseeable to the par:es at the :me of the contract. (?) Consequen:al Damages: Foreseeability •  §351. UNFORESEEABILITY AND RELATED LIMITATIONS ON DAMAGES •  (1) Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made. •  (2) Loss may be foreseeable as a probable result of a breach because it follows from the breach •  (a) in the ordinary course of events, or •  (b) as a result of special circumstances, beyond the ordinary course of events, that the party in breach had reason to know. •  (3) A court may limit damages for foreseeable loss by excluding recovery for loss of profits, by allowing recovery only for loss incurred in reliance, or otherwise if it concludes that in the circumstances jus2ce so requires in order to avoid dispropor2onate compensa2on. 8 6/28/12 Consequen:al Damages: Foreseeability •  A, a retail hardware dealer, contracts to sell B an inexpensive ligh:ng aoachment, which, as A knows, B needs in order to use his tractor at night on his farm. A is delayed in obtaining the aoachment and, since no subs:tute is available, B is unable to use the tractor at night during the delay Consequen:al Damages: Foreseeability •  Valen:ne v. General American –  D fired sued for mental distress –  Loss of security •  Issue: Are mental distress damages awardable under contract law? •  All contract breaches are annoying-­‐ get over it. •  What about discrimina:on claims? Consequen:al Damages: Foreseeability •  So….. What damages are recoverable…. 9 6/28/12 Specific Performance •  Equity…. •  What might be awarded and why? Specific Performance •  London Bucket v Stewart (KY 1951) •  Contract to install hea:ng •  D breached, P sued. •  Court ordered Specific Performance. •  Appeals Court-­‐ where ordinary damages suffice-­‐ use them. •  WHY? Specific Performance •  Where is Specific performance preferable? 10 6/28/12 Reasons not to enforce a contract •  Indefiniteness •  Mistake •  Misrepresenta:on, disclosure. Undue influence, duress •  Unconscionability •  Lack of wri:ng (Statute of Fraud) •  Lack of Capacity •  Illegality Reasons not to enforce a contract •  Mistake –  Mutual •  Basic assump:on •  Materially effects the agreement •  Risk not assumed –  Unilateral •  Unconscionable •  No hardship for the non mistaken party Reasons not to enforce a contract •  Misrepresenta:on, disclosure. Undue influence, duress –  Misrepresenta:on: •  material or fraudulent (would induce a reasonable person…) 11 6/28/12 Reasons not to enforce a contract •  Lack of Capacity –  minors can void contracts, and even past the age of majority. –  Mental impairment •  If mental defect is at the :me of the making of the contract, then voidable if the impairment prevented him from –  Understanding the nature and consequences of the transac:on, or –  Ac:ng in a reasonable manner and the other party had reason to understand this –  Yet, if fair terms or performed or equity requires the the ct may enforce the contract WHAT IS A CONTRACT •  An Agreement between two or more par:es which creates rights and obliga:ons between the par:es, with the inten:on of the par:es to create legally binding responsibili:es. 35
Recipe for Contract •
•
•
•
Offer Acceptance Considera:on Par:es wish to be bound 12 6/28/12 Recipe for Contract •  Offer –  Offer v. Invita:on To Treat •  Acceptance –  Uncondi:onal v. Counter Offer •  Considera:on –  Real, detriment, future rather than Past •  Par:es wish to be bound –  Mee:ng of the minds Requirements of Contract •  When must the document be in wri:ng? •  What precision is needed? •  Also…. Interpreta:on of the contract. •  Parole Evidence •  Historical development of Contract law. Vielen Dank lawrence.siry@uni.lu 39 13