Avoidability Flashcards
Rockingham County v. Luten Bridge Co.: rule of law
When a non-breaching party in a contract for services receives notice of another party’s breach, the non-breaching party must treat the contract as broken when notice is received, cease performance, and sue for any losses sustained from the breach as well as profits that would have been realized upon performance.
Rockingham County v. Luten Bridge Co.: facts
On January 7, 1924, the board of commissioners of Rockingham County (the County) (defendant) hired Luten Bridge Co. (Luten) (plaintiff) to construct a bridge. Three commissioners voted to go forward with the bridge project, and two opposed. After the contract was formed, one of the commissioners voting in favor of the bridge project resigned, and was replaced by a new commissioner who opposed the bridge project. On February 21, 1924, the commissioners passed a resolution holding that the bridge contract was not enforceable, and informed Luten that the County would not honor the contract. The County directed Luten to not proceed with building the bridge, and stated that any further work completed by Luten would be done at the company’s own risk and expense. At the time Luten was informed that the County would not proceed, it had performed approximately $1,900 worth of work on the bridge. However, Luten continued construction and finished the bridge project. Luten then brought suit against the County for the contract price. The trial court held for Luten, and the County appealed.
Rockingham County v. Luten Bridge Co.: issue
Whether, after receiving notice of a party’s breach of a contract for services, the non-breaching party may continue to perform the contract to completion and recover the full contract price.
Rockingham County v. Luten Bridge Co.: holding
No. After Luten received notice of the County’s refusal to go forward with the contract, it did not have the right to continue performance and pile up additional damages and then sue to recover for the price of full performance. When a non-breaching party in a contract for services receives notice of another party’s breach, the non-breaching party must treat the contract as broken when notice is received, cease performance, and sue for any losses sustained from the breach as well as profits that would have been realized upon performance. Once Luten received notice of the County’s breach, it had a duty to cease performance and seek only compensatory damages for the labor and materials expended and expense incurred in the part performance of the contract prior to the County’s repudiation, as well as profits that might have been realized from full performance. The decision of the trial court is reversed and remanded.
Parker v. Twentieth Century-Fox Film Corp.: rule of law
The measure of recovery by a wrongfully discharged employee is the amount of salary agreed upon, less the amount which the employee has earned or with reasonable effort might have earned from substantially similar employment.
Parker v. Twentieth Century-Fox Film Corp.: facts
Shirley MacLaine Parker (MacLaine) (plaintiff) entered into a contract with Twentieth Century-Fox Film Corp. (Fox) (defendant) in which MacLaine was to play the female lead in Fox’s musical film Bloomer Girl, guaranteeing her compensation of $750,000. Fox decided not to produce the film and offered MacLaine the female lead in the Western film Big Country, Big Men. MacLaine did not accept the offer and brought suit to recover the guaranteed compensation under the original contract. Fox appealed the grant of summary judgment to MacLaine.
Parker v. Twentieth Century-Fox Film Corp.: issue
Whether an actress must accept a role in a different film to mitigate damages from the film producer’s failure to produce the original film.
Parker v. Twentieth Century-Fox Film Corp.: holding
No. The measure of recovery by a wrongfully discharged employee is the amount of salary agreed upon, less the amount which the employee has earned or with reasonable effort might have earned from other employment. In such cases, the employer must show that the other employment was substantially similar to the other employment, and the employee’s need not seek other available employment of a different or inferior kind to mitigate damages. Fox argues that MacLaine unreasonably refused to mitigate damages by failing to accept the offer of substitute employment. The offer of the lead in Big Country, Big Men is different from and inferior to the lead in Bloomer Girl. The female lead as a dramatic actress in a Western film cannot be considered the equivalent of or substantially similar to the lead in a musical. Moreover, because MacLaine had been offered director and screenplay approval under the Bloomer Girl contract, but not under the Big Country, Big Men offer, the contract for Big Country, Big Men, was inferior. The grant of summary judgment is affirmed.
Neri v. Retail Marine Corp.: rule of law
If a buyer repudiates a contract with a lost-volume seller, the seller is entitled to the profit the seller would have made from full performance by the buyer, plus reasonable incidental damages associated with resale.
Neri v. Retail Marine Corp.: facts
Anthony Neri (plaintiff) contracted to purchase a boat from Retail Marine Corp. (Retail) (defendant) for the price of $12,587.40. Neri paid a deposit of $4,250 in consideration for Retail’s agreement to deliver the boat immediately. Approximately six days after executing the agreement, Neri’s lawyer informed Retail that Neri was facing health problems and would be rescinding the contract. However, the boat had already been ordered, and it was delivered to Retail at roughly the same time Neri’s letter was received. Retail refused to refund Neri’s deposit, and Neri filed an action to recover the $4,250 already paid. Retail counterclaimed seeking damages for its lost profits, incidental damages, and attorney’s fees. At trial, it was determined that Retail sold the boat four months later for the same price for which it had contracted with Neri. The trial court denied damages amounting to lost profits for Retail but awarded Retail $500 based on its counterclaim. The trial court directed $3,750 to be returned to Neri from his deposit. Retail appealed.
Neri v. Retail Marine Corp.: issue
Are the damages due to a lost-volume seller after a buyer’s repudiation of a contract properly measured by the profit the seller would have made from full performance by the buyer, plus reasonable incidental damages associated with resale?
Neri v. Retail Marine Corp.: holding
Yes. Under Uniform Commercial Code (UCC) § 2-708(2), if a buyer repudiates a contract with a lost-volume seller, the seller is entitled to the profit the seller would have made from full performance by the buyer, plus reasonable incidental damages associated with resale. Section 2-708(2) applies uniquely to lost-volume sellers, as traditional measures of restitution damages under the UCC would not put a lost-volume seller in as good as a position as it would have been had a buyer not repudiated its contract with the seller. A lost-volume seller is defined as one who, had there been no breach by the buyer, could and would have had the benefit of both the original contract and the resale contract. Thus, § 2-708(2) was enacted as an additional equitable remedy in response to the fact that lost-volume sellers are not completely made whole simply by reselling the goods from repudiated contracts. In this case, if Neri had not repudiated his contract with Retail, Retail would have likely received the profits both from its original sale to Neri as well as an additional sale to another customer. Additionally, Retail would likely not have incurred additional incidental damages due to the extra storage and maintenance costs associated with the upkeep of the boat ordered for Neri. Retail is thus a lost-volume seller and is entitled to its lost profits plus reasonable incidental damages associated with resale. The incidental damages include amounts for commercially reasonable expenses incurred in caring for and keeping the goods after the breach. Therefore, under UCC § 2-708(2), Neri is entitled to recover its deposit of $4,250 less an offset to Retail amounting to $3,253 ($2,579 in lost profits and $674 in reasonable incidental damages for storage and upkeep costs, finance charges, and insurance). The decision of the appellate court is modified to reflect this new calculation of damages, and as modified is affirmed.
