Remedies Flashcards
Specific Performance: why are money damages preferred?
Main reason = money damages encourage efficient breaches (which we want).
Specific performance does not, and can result in inefficiency.
(also money damages seem less intrusive on liberty)
What is an efficient breach?
An efficient breach is when a party voluntarily breaches a K bc it would be more economically beneficial to them to breach and pay damages than fulfill the contract.
If it costs a part less to breach and pay damages than it would to fulfill the contract, then they should breach.
This includes situations when a new contract opportunity would make the breaching party more than their original K’s profit + damages.
Specific Performance: Restatement approach — general rule
359(1)
Specific performance or an injunction will not be ordered if damages would be adequate to protect the expectation interests of the injured party.
Specific performance: restatement approach — when are money damages inadequate?
- Defendant is involved
- Unique good/service
- Difficult to prove damages with adequate certainty
Specific performances: restatement approach — practical problems with granting SP even when money damages are inadequate and what to do if there are practical problems
- Monitoring/oversight is difficult
- Personal service contracts (involuntary servitude issues)
If practical problems ^ court may grant negative injunction (thou shall not)
BUT even negative injunction won’t be enforced if it would
- force someone to perform with a sour relationship, or
- prevent someone from reasonably making a living.
Specific performance: restatement approach — fairness reasons court would deny SP
- K is one sided in favor of party seeking SP
- When the performance at issue undermines public policy
- If SP is likely to have an adverse effect on third parties
- “Unclean hands” — When a party seeking SP has done something unequitable
Specific Performance: modern approach — general
Modern trend is to apply these injunctive relief’s more liberally, not necessarily requiring inadequacy of monetary damages. Instead, views all strong preference stuff from the common law and restatement, and turns it into a tie breaker.
Specific Performance: Judge Posner’s Approach (modern) from Walgreens v. Sarah Creek
Ultimate goal = judges should weigh the costs and benefits of each option (damage v. SP) and determine which is more effective in deriving the ends of justice.
If the balance is even, go with money damages.
We used to prefer damages over SP because we were worried about ordering inefficient performances, but the lesson from the Coast Theorem is that even if a court enforces an inefficient outcome, as long as the parties are allowed to bargain around the injunction, the parties will bargain for an efficient outcome (ASSUMING zero/LOW TRANSACTIONAL COSTS).
Coast Theorem
Any time there is a dispute between parties over a valuable legal entitlement, it does not matter to whom the law allocates that entitlement if the parties can bargain costlessly with each other.
Specific Performance: Judge Posner’s benefits of injunctions > damages
- Reduced fact-finding costs
- greater accuracy (shifts burden of determining cost from court to parties. Prices more accurately determined by market).
Specific performance: judge posner’s benefits of damages > injunctions
- Avoids enforcement costs (court supervision)
- Avoids transactional costs of reaching a mutually agreeable outcome (bilateral monopoly, high transactions costs).
- Avoids third party harms.
Calculating expectancy damages
§ 347
LVP + IL + CL - CA - LA = Expectancy Damages LVP (loss value of performance) What was the value of the performance you thought you would get vs the value of the performance you actually got? This is the MARKET PRICE. Not necessarily what you paid. IL (incidental loss) Any loss the victim incurs trying to get a substitute transaction/performance. Ex: had to cancel a client that would have paid me x in order to find replacement CL (consequential loss) Losses that aren't a party of the promised performance, but were still consequential (proximate) of the breach. **still have to prove with reasonable certainty** CA (cost avoided) Costs that the victim would have incurred performing the contract that they avoid due to the breach. LA (loss avoided) Money that the victim was able to make that they wouldn’t have been able to had the contract been performed.
Defective/Incomplete Performance: LVP calculation methods
- Diminution in Value = the difference between the value of what we were promised and what we got.
- Cost of Performance (cost of completion) = the amount of money it would take to finish the job/get the performance as it was contracted.
Defective/Incomplete Performance: How do you decide which LVP damage calculation to use?
348
- If the damage values are close using either method, the breach victim gets to pick.
- If there is a big difference (usually COP much bigger) then the court will award the smaller measure (usually DIV)
Defective/Incomplete performance: What we do if we are a contracting party with idiosyncratic values?
- Breach victim can sue for specific performance (but not often available…)
- Specify IN THE CONTRACT “in case of breach, the measure of damages will be cost of performance”
