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Law 2101 - Mar. 27.docx

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Law 2101

Law 2101 Thursday March 27 Contract Law: Breach of Contract and Remedies Two Kinds of Remedies for Breach of Contract: 1. Specific Performance 2. Damages 1) Specific Performance • An order of the court compelling the party in breach to perform his or her part of the contract o If they don’t perform their part of the contract, they will have to go to jail • Awarded only in exceptional cases where damages are an inadequate remedy o eg. a contract for the sale of real estate where the real estate is unique in some way (you can’t buy an identical house with identical land if you are given money) • Even in “unique” cases, it is not always given o Case: Warner Brothers v. Nelson (1937)  Bette Davis signed a contract with Warner Bros. before she became famous (she didn’t get very much money)  When she became a famous actress, she fled the United States and went to work in England  Warner Bros. asked the court to order Bette Davis to work for Warner Bros.  Are her damages special enough that damages wouldn’t be an adequate substitute? • The court said no amount of damages would be able to replace her acting talents.  Can we order specific performance? • The court said that when you’re dealing with a contract of personal service or close contact between the parties, they will not order specific performance. • But, they did order her not to work for anybody else as an actress (the court said there are other jobs that she could do so she wouldn’t starve to death)  Black Letter Law: • The courts will not order specific performance in a contract for personal service • The courts will order the breaching party not to work for anyone else in the chosen field provided the breaching party would be able to support themselves in another occupation. • What if the person is so unskilled that they couldn’t find another job? (Detroit Lions v. Dublinski) o Dublinksi didn’t like the Detroit Lions coach, so he fled to play in the CFL o The court said they couldn’t order him to play for the Lions, and he was so unintelligent that he couldn’t do anything else but play football (so they didn’t apply the Bette Davis rule) 2) Damages a) Restitution/Reliance Damages • Restitution: Deposit/prepayment and a total failure of performance o eg. if you make a deposit for a futon and they don’t have it anymore, you can get your deposit back • Reliance: o This happens when you have a contract where you can’t prove what the value of it is o Case: Commonwealth Disposals  A salvager salvages ships in the ocean. They contacted Commonwealth Disposals, who told him that they have a wreck in the reef. The salvager buys the wreck and finds out there is no reef, and there never was a ship there. He sued for breach of contract, but the Commonwealth Disposal said that he couldn’t prove what gain he would have made. The court said he could sue for all of the losses he suffered (crew and gasoline expenses taking his ship there). b) Expectation Damages • The most common remedy • Where a party to a contract suffers loss as a result of a breach by the other party, he or she will be entitled to an award of damages • Expectation damages are meant to put the plaintiff in as good a position they would have been in had the contract been performed • It protects your expectations about the contract • Example 1: o A and B have a contract. A will pay $5000 to B for some toys. Before A pays, B discovers that he could sell his toys to someone else for $10,000. A sues B for breach of contract. What are the damages?  Expectation damages = expected benefits under the contract ($10,000) - expected costs under the contract ($5000) = $5000 (A’s damages) • Example 2: o C and D have a contract for the sale of a diamond ring for $5000. D refuses to sell the ring because he gets a better offer from someone else for $7500. o Expectation damages = expected benefits ($7500) – expected costs ($5000) = $2500 • Your losses can never be less than $0 (you wouldn’t pay someone more than your gains) • Case: Peevyhouse v. Garland Coal and Mining Company o The coal company wanted to get the coal from under the Peevyhouse family farm, and they promised that they wouldn’t do any damage to the property. The coal company took all the coal and left big pits in the middle of the farm. o Was this breach of contract?  Yes, the Peevyhouses sued the coal company.  The cost of filling the pits was $30,000, and the land was only worth $300 less with the open pits.  The property of the pits filled in was $3500. o How much should damages be?  Decision 1: He only gets $300 because no rational property owner would spend $30,000 to make $300 in profit. (It would be like punishing the company for a breach in contract.)  Decision 2: He should get $30,000 because the court should only be concerned with what the parties agreed to do under the contract. o Which decision is correct?  Generally people would only get $300, unless there was some special reason that the family wanted to stay on that farm. (Decision 1) c) Gain-based Damages • Until recently, lawyers would have told you that one could never get contract damages based upon the breaching side’s gain (this is known as disgorgement), but… • Case: A.G. v. Blake o Sometimes, you can get the breaching side’s gain o The plaintiff was a former spy for the UK o In 1944 he signed an undertaking not to divulge any official information gained through his employment o Between 1951 and 1970 he was a double agent, exposing valuable information to the Soviet Union (led to several deaths) o In 1961 he was convicted of spying and sentenced to 42 years in prison o In 1966, the Soviet Union helped him escape o He decided to write a book. The British government couldn’t get an injunction because the book was already published, but they tried to get some of his profits. o The House of Lords said the plaintiff could get dis
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