-Contracts-Remedies For Breach Of Contract-Limitations On Expectancy Damages

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Personal Services Contract

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Plf' does not have to accept any work that is substantially differnt or inferior. Plf' must make reasonable efforts to procure employment that is substantially the same (mitigate).

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Case Description:

Parker v. 20th Century Fox

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Court holds that Shirley MacLaine must try to "cover" by finding a similar role, her turning down the studio's offer to do a western is not "substantially similar" -- common law case, NOT U.C.C

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Case Description:

Rockinghame County v. Luten Bridge

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Once contract has been breached, def' has duty to mitigate damages; no recovery for damages after stop work order

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Case Description:

Kearsarge Computer v. Acme Staple

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Once contract has been breached, plf' can recover variable costs that can't be reduced by breach of contract (the salaries of employees working partly on this project and also on another project)

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Sales of Goods Contract:
Buyer Breaches, Seller Attempts to Cover

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§ 2-703; If buyer repudiates seller has the following rights:
(a) withhold delivery (b) stop delivery by any bailee (c) proceed under next section (d) resell and recover damages (e) recover damages for non-acceptance (f) cancel the contract

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Option 1 - Sales of Goods Contract:

Buyer Breaches, Seller Attempts to Cover: Seller's Resale Including Contract for Resale

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§ 2-706 A seller can resell the goods and recover the difference between the contract price and resale price (and incidental damages, less expenses saved) - seller must give buyer notice of resale

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Option 2 - Sales of Goods Contract:

Buyer Breaches, Seller Attempts to Cover: Seller's Damages for Non-Acceptance or Repudiation

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§ 2-708 A seller can keep the goods and recover the difference between the contract price and market price at the time of breach (and incidental damages, less expenses saved)

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Exception to Option 2 - Sales of Goods Contract:

Buyer Breaches, Seller Attempts to Cover: Seller's Damages for Non-Acceptance or Repudiation

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§ 2-708(2) Lost Volume Seller - if a seller has an "unlimited supply" of the goods in question, and thus a resale or the market price would not equal performance, the seller gets lost profit on the sale, rather than contract price

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Option 3 - Sales of Goods Contract:

Buyer Breaches, Seller Attempts to Cover: Action for Price

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§ 2-709 Specific Performance of Goods - if a seller cannot resell after attempting to do so, the seller can recover the full contract price "action for the price"

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In all cases where the buyer breaches, what must the damages be and what must the seller do?

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Damages must be foreseeable AND reasonable, and a seller must try to mitigate (except for lost volume sellers) damages by finding another buyer.

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Option 4 - Sales of Goods Contract:

Buyer Breaches, Seller Attempts to Cover

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§ 2-716 Specific Performance - if the goods are unique or other proper circumstances

TEST: Is cash an adequate remedy?
USUALLY ONLY FOR CONTACTS TO CONVEY LAND

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Case Description:

Copylease v. Memorex

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Copylease had a contract to buy a minimum quantity of Memorex's toner. When Memorex breraches, Copylease has an action for specific performance b/c Memorex's toner is of a significant higher quality than any other.

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Consequential Damages

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damages that flow from the breach and are reasnably foreseeable to the breaching party

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Incidental Damages

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damages that are incurred wihle effecting to cover the breach

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Can consequential damages be covered in the contract?

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Yes via § 2-719(3)

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Tacit Agreement Test

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common law requires communication of any consequential damages at the time of contract

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Case Description:

Oloffson v. Coomer

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For a sale of goods contract, seller breach may be permissible by covering, buyer recovers cost to cover less contract price § 2-711

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Buyer's Remdies in General; Buyer's Security in Rejected Goods

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§ 2-711
1. Buyer rejects or seller fails to deliver goods, buyer can recover: (a) "cover" (b) damages for non delivery
2. Where seller repudiates (a)goods are identified, reocover (b) SP
3. goods buyer has already received, buyer can resell

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Case Description:

Neri v. Retail Marine Co.

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Buyer breached on the sale of a boat. Buyer wanted his deposit back. Court ruled that on a sale of goods w/buyer breach w/unlimited supply, seller recovers contract price less resale price plus incidental less expenses saved

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Sale of Goods Contract: Seller Breaches, Buyer must attempt to cover

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§ 2-711 then to either:
§ 2-712, § 2-713, § 2-714,
§ 2-716

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Option 1 - Sales of Goods Contract:

Seller Breaches, Buyer Attempts to Cover: "COVER" Buyer's Procurement of Substitute Goods

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§ 2-712 A buyer can cover by buying the goods from another (must be reasonable) and recover the diff. bet. the K price and the cover price (incidental damages, less expenses saved)

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Option 2 - Sales of Goods Contract:

Seller Breaches, Buyer Attempts to Cover: Buyer's Damages for Non Delivery or Repudiations

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§ 2-713 If a buyer chooses not to (or cannot) cover, he can recover the diff. bet. the market price of the goods at the time of breach, and the contract price (and incidental damages, less expenses saved)

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Option 3 - Sales of Goods Contract:

Seller Breaches, Buyer Attempts to Cover: Buyer's Damages for Breach in Regard to Accepted Goods

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§ 2-714 If a buyer has accepted goods that do not conform, he can recover the diff. bet. the value of the goods promised and the value of the nonconforming goods

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Sales of Goods Contract:

Seller Breaches, Buyer Attempts to Cover: Buyer's Incidental & Consequential Damages

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§ 2-715 Incidental Damages are those that are incurred while effecting cover or incident to the breach. Consequential Damages are those that flow from the breach and are reasonably foreseeable to the breaching party.

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Sales of Goods Contract

Buyer Breaches, Seller Attempts to Cover: Seller's Right to Identify Goods to the Contract Notwithstanding Breach of to Salvage Unfinished Goods

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§ 2-704 An aggrieved seller under § 2-703 may identify goods left on contract w/buyer or treat goods as resalebale; if goods are custom; seller may seeks scrap or salvage value

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Sales of Goods Contract

Buyer Breaches, Seller Attempts to Cover: Seller's Stoppage of Delivery in Transit or Otherwise

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§ 2-705 When the seller discover the buyer cant pay, the seller may stop delivery until receipt of goods and seller must notify bailee (UPS) to stop delivery within reasonable time

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Sales of Goods Contract

Buyer Breaches, Seller Attempts to Cover: Seller's Remedies on Discovery of Buyer's Insolvency

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Can require delivery upon COD; if buyer has rec'd goods, can demand back w/in 10 days; seller's right to reclaim under § 2 depends if he's a good faith purchaser

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Sales of Goods Contract

Buyer Breaches, Seller Attempts to Cover: Remedies for a Breach of Collateral Contracts Not Impaired

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§ 2-701 Remedies for breach of any obligatoin or promise callateral or ancillary to a contract are not impaired by these provisions

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Contractual Modificaiton or Limitation of Remedy

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§ 2-719 Liquidation and limitation on damages (a) may be provided by parties in contract; where the remedy in contract fails, the one provided by this act will apply; consequential damages may be limitied or excluded unless such would be unconscionable

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Effect of Cancellation or Recission on Claims for Antecedent Breach

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§ 2-710 Unless contrary to the intention of the party claims for cancellation or rescission will not be effective as to antecedent breach

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Remedies for Fraud

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§ 2-721 Remedies for material misrepresentation or fraud include all remedies available under teh UCC for non-fradulent breach

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Who can Sue thir parties for Injury to Goods?

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§ 2-722 A right of action accrues to either party w/a right in the goods if the goods are completely destroyed

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Liquidation or Limitation of Damages, Deposits

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(1) Damages for breach by either party may be liqudated, but msut be for incalculable costs (2) Where the seller justifiably witholds deliver, buyer is entitled to rest. of 20% of the value of total performace or $500, whichever is smaller (3) buyer's rights are limit to seller right to recover

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Sales of Goods Contracts

Seller breach/ Buyer attempts to Recovery - Deduction of Damges from Price

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§ 2-717 buyer may deduct all or any part of a breach from the contracted price

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Case Description:

Hadley v. Baxendale

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• Hadley v. Baxendale – shaft at mill broke & plf’ sued courier co. b/c they did not send shaft to repair shop fast enough, court SAID NO! Courier did not know that was the only shaft and therefore did not know of potential losses to Hadley. Damages must be foreseeable at time of contract.

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Case Description:

Lamkins v. International Harvester Co. PRE UCC

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Futher illustrates Hadley v. Baxendale - Damages must be foreseen at time of contract. Supplier would not agree to contract if he know of the potential damages!

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Case Description:

Victor Laundry (Windsor) Ltd. v. Newman Industries, Ltd.

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SELLER'S BREACH - Positive application of Hadley v. Baxendale - defs' had to know that the large vats were for a commerical laundrying co. However, plfs' could not recover for very lucrative deal, only "normal" losses.

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Holmes Theory

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Used in Lamkins v. International Harvester Co. - damages out of proportion to contract price raises doubts at whether contract would have been made had parties known of potential damages

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Case Description:

Valentine v. General American Credit Union

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No recovery for uncertain damages OR mental distress. Hadley can be applicable w/emotional distress b/c all breaches are uncomfortable. Can only recover if contract is personal in nature (marriage contract, failure to deliver kid through caesarean)

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Case Description:

Fera v. Village Plaza

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Profits on New Business - Court reluctant to award expectancy damages on new business (only will reward if plf' can prove w/witness etc of potential profits)

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Losses Have to Be Reasonable

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§ 2-715 - REMEMBER!! Consequential Damages have to be reasonable, cannot base damages on publich whim or new business

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Case Descrption:

Chicago Coliseum Club v. Dempsey

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Court awarded reliance damages when Dempsey breached contract b/c expectancy damages were too speculative (based on public turn out)

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Case Description:

Missouri Furnace Co. v. Cochran

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SELLER BREACHES & NO COVER - § 2-713 Def' Coke provider rescinded contract that provide coke on installment. Plf’ wanted price for new contract – Cochran price (plf’ got a bad deal) – COURT SAID NO! market price at each installment.

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Case Description:

Reliance Cooperage Corp. v. Treat

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Plf' contract w/ Treat for staves. Def' early on said he would not be able to make it . Court used market price on the day the staves were due. MJR PT: Anticaptory Breach - used to aid injured party, not repudiator (can't use as defense)

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Case Description:

Freund v. Washington Square Press, Inc.

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Freund wanted cost of completion damages for a making a book; court overturned saying he had not interest in the book building process, just in the book revenues