Kelsey CoxContract Notes Pgs.

865-878; 899-905; 910-919

SUPERVENING EVENTS
Has the duty to perform been excused? Unforeseen events.
Gil made a contract with Gill to drive lumber Johnstown flood hit so Gill could not
drive lumber any money.
o Johnstown might still have a claim of breach.
o Gills duty to perform has been excused.
Parties will be afraid to enter into contracts if they think they will be held liable for
supervening clause.
DEATH of Susan jones portraityou want Susan.
Could have been addressed specifically in the contract
Taylor v. Caldwell (1863)Kings Bench
Parties: P, taylor was going to use the D location for concert and is suing for breach of
contract (loss in advertising).
Contract
1. D agreed to let P use the Surrey Gardens and Music hall on Jun 15, Jun 17, Aug 5
and Aug 19 for the purpose of giving a series of 4 grand concerts.
2. P agreed to use the location of those days and pay 100 pounds for each day.
3. D agreed to furnish a band and certain other amusement
4. P lost money for printing advertisement and in advertising the concert
5. Gardens and Music Hall were accidently destroyed by fire on June 11 1861.
PP: 1)Lower Ct for the P 2) Kings Benchwhere the case is now; reversed for D.
Rationale:
Because there was not an express stipulation in contract about what to do under
these circumstances.look to general rules.
That in all contracts of loan of chattels or bailments if the performance of the
promise of the borrower or bailee to return the things lent or bailed becomes
impossible because it has perished..the impossibility ( if not arising form the
fault of the borrower or bailee from some risk when he has taken upon him self)
excuses the borrower or bailee from the performance of his promise to
redeliver.
Parties contracted on the basis of the continued existence of the music
hall at the time when the concerts were given that being essential to their
performance (condition)
o Excuse is implied by lawparties contracted on the basis of the continued
existence.
Music hall ceased to exist without the fault of either party both parties are
excused
o P excused from taking the gardens and paying the moneyD excused from
perfom promise to give the use of Hall and gardens.
o

When there is a positive contract to do a thing the contractor must perform it or pay
damages, although in consequence of unforeseen accidents, the performance of his
contract has become unexpectedly burdensome or even impossible. But this rule is

Kelsey CoxContract Notes Pgs. 865-878; 899-905; 910-919

only applicable when the contract is positive and absolute and not subject to any
condition either express or implied

Judgment: Verdict for the Defendants

Owner not at fault with respect to the fire absence of expressed warranty.

IMPOSSIBILITY AND IMPRACTICABILITY OF PERFORMANCE

UNDER ARTICLE 2
TRANSATLANTIC FINANCING CORP V. USUS CT OF APPEALS (1966)
Parties: P, a shipping co, is trying to recover damages for additional costs they incurred
quantum merit- as their original contract with the US was impossible. Service Contract.
Contract
1. P contracted to deliver a full cargo of wheat from US gulf port to Iran.
2. The voyage was to be performed by the usual and customary route via the Suez
Canalbut the Suez canal was closed.
a. P argued that it was impossible to perform that contract.
b. Delivered cargo by going around Cape of Good Hope.claim to have
conferred a benefit upon the us for which it should be paid in quantum
meruit.
P ARG want additional compensation for the voyage around good hope
PP: 1) DC: dismissed a libel filed by P for costs attributable to the ships diversion from
the normal sea route caused by the closing of the Suez Canal. 2) US Ct of Appeals
where the case is now; affirms decision.
Rationale:
Court looks at three steps when their asked to construct a condition of performance
based on the changed circumstances.
o 1) A contingencysomething un expected must have occurred
This was metparties expected performance by the usual customary
route at the time of contract UCC 2-614. Closure of the canal made
impossible the expected method performance.
o

2) risk of the unexpected occurrence must not have been allocated either by
agreement of customs can be expressed of implied from the contract
Contract in this case does not expressly condition performance on the
availability of the Suez rulenor specify an alternative route.
Cannot apply from other provision that continued availability of the
Suez was a condition of performance.

Kelsey CoxContract Notes Pgs. 865-878; 899-905; 910-919

Doctrine of deviation supports assumption that parties normally expect

performance by the usual and customary route but adds nothing
beyond this that is probative of an allocation of risk.
Even though foreseeability that canal might become a dangerous
areasurrounding circumstances indicate willingness by P to assume
the abnormal risks.

3) Occurrence of the contingency must have rendered performance

commercially impracticable 1) In determining impractibilityadded costs in
the context of the contract and its commercial settings. 2)courts tend to look
at doctrines as all or nothingmore likely to grant rescission than Reforming
the Contract.
goods shipped were not subject to harm from the longer route
vessel and crew were fit to proceed around cape
P was in a better position than D to insure against the hazards of war.
Added expenses $43,972.00 over the contract price of $305, 842.92
10,000 mi to 13,000 mi <willingly assumed abnormal risks. >
o Need more variationP could have accepted some abnormal
risk
Promise under the contract. Contract didnt say transportation by the
canal. When we look at the scope of the obligation.the contract did
not say. Because it takes longer and costs more money.

If the contract was null P theory of relief should have been quantum merit for the
entire trip, rather than for only the extra expense.
No basis of relief for P.
Judgment: Affirms decision.
Trans atlantic: when Egypt blocked the Suez canal it rendered performance impracticable
because they only way to perform was to go around the cape of good hope. Claimed that
it was impracticable.its duty to perform was discharged so they cannot rely on the
contract.
When transatlantic performed they conferred a benefit of themand thinks they should
recover in quasi contract. P claim is in quasi contract. P has to show that its duty to
perform was discharged by the crisis.
Wagematic promised the government a revolutionary computer systema break through.
It found it impossible to performand should excuse. And the purpose of this was to
assume the impossibility.
Transatlantic contract is silent on the route. If Specified than it would of allocated the
risk to the government. The actual sinking of the ships shocked the world and was not
allocated by the contract.

Very FACT specific, no magic formula.

Never provides shield for something who is supposed to pay.
(Bankruptcy)

Kelsey CoxContract Notes Pgs. 865-878; 899-905; 910-919

FORESEEABILITY
SECTION 4.

FRUSTRATION OF PURPOSE

Parties duties to pay is discharged by superseding events.

KRELL V. HENRY COURT OF APPEAL (1903)
Parties: P who has a flat is trying to enforce his lease contract with the D to recover the
unpaid balance.
Contract in writing 2 letters

1. D agreed to hire from P a flat in Pall Mon London for June 26 and June 27
2. On those days it had been announced that the coronation processions of Edward VII
would take place.
3. Contract contained no express reference to the coronation processes or any other
purpose for which the flat was to be used
4. D paid a deposit king had serious illness and the processions did not take place on
those daysD declined to pay the balance of the rent.
PP: 1) TC ruled for henry 2) ct of appeals where the case is now; affirmed
Rationale:

A contracts purpose may be inferred from surrounding circumstances.

Ct found that it could be assumed from the evidence that event of the
coronation was the foundation of the contract (ie: affidavit that P had
advertised windows from his building can be leased during the day to view the
coronationand the D saw the ads and inquired about flats)
o the event of the king getting sick--- which causes the impossibility-- is of such
that it cannot reasonably be supposed to have been in the
contemplation of the contracting parties when the contract was made.
o The purpose for the high rent of the room on those particular dates during
the daytime was to view the coronation.
o The court held that without the coronation, there was no purpose to this
contract.

Judgment: Appeal dismissed.

Impossible or practicableit is still possible that henry can have the rooms and use on
those two days.
Purpose of the contract was not to use the roomsrather to use the room to view the
coronation.
Purpose frustrated by appendicitis. Duty is discharged.
Modern Section 265 of the RST: after a contract is made the principal basic assumption
of which the contract is made and remaining perform is discharged.

Kelsey CoxContract Notes Pgs. 865-878; 899-905; 910-919

HYPO P doesnt care just wants money, where as in
P the dress maker is in a poor position to shoulder the risk that the wedding does not go
off. Dress maker probably didnt.
ALOCATION OF RISK purpose of one party but not of the other.
All the surrounding hoopla is called offthe hotels Hotels.are in the business are
selling room not facilitating your attendance.
Krell purpose of the contract was to sell viewing space.
SWIFT CANADIAN V. BANET US CT OF APPEALS 3RD CIRCUIT (1955)
Parties: P, the seller of goods is trying to recover money from the D for a breach of
contract.
Contract
1. P seller (located in Canada) agreed to sell the D who does business with Keystone
Wool pullers in Philadelphia lamb pelts at a stipulated price. Lamb pelts to be
delivered in toronotobuyer imports into the US to be imported in the US.
2. Part of the quantity was delivered on board railroad cars at Toronto and was shipped
to Keystone
3. Provisions
a. 1) neither part is to be liable for orders or acts of any government/
governmental agency
b. 2)when pelts are sold Fob sellers plant title and risk of loss shall pass to the
buyer when the product is loaded on cars at the sellers plant.
4. March 12 P advised d of its readiness to deliver the remaining pelts
a. On or about this day gvt issued stricter regulations for the importation of
lamb peltsand prevented the importation of the pelts.
PP: 1) DC Ruled for the D 2) Ct of Appeals where the case is now; reverses for P.
Importation of pelts into the US was not the purpose of the contract just the delivery of the
contract.the buyer controls what it to happen thereafter. Rest of the world was free to
the buyer as free to the shipment.
RISK is on the buyer
Rationale:
Where a contract specifies F.O.B. sellers plant title, title and risk of loss pass to
the buyer upon the sellers delivery of the goods to a common carrier at the place of
shipment.
o This is to be contrasted with F.O.B. destination. Then seller would not have
fulfilled its obligations.
o Under these circumstances, risk of loss and title remain with the seller after
delivering the goods to a common carrier and up to the time the carrier has
delivered the goods to the buyer at the agreed-upon destination.
The contract specified F.O.B. Toronto, which was the place of shipment.

Kelsey CoxContract Notes Pgs. 865-878; 899-905; 910-919

o

o
o

P satisfied its contractual duties by delivering the goods to the

railroad company in Toronto, notwithstanding the fact that the Defendant
could not take the goods to its desired location.
When shipper made delivery he was to send his bill.
D did not have to ship the goods to the United Statesrest of the world was
free to the buyer.
Seller remained willing and able were entitled to recoverdid not breach.

Judgment: reversed decision of DC; rules for the P for the difference between the
contract price and the price at which the goods were sold.

Chase

In this case, contract with state allowed it to decrease the order and
chase was aware of that. The Supply to the state is the purpose of the contract.
NORTHERN INDIANA PUBLIC SERVICE CO. (NIPSCO) V. CARBON COUNTRY COAL
US CT OF APPEALS (1986)
Parties:
Contract
1. D agreed to sell to P 1.5 million tons of coal every year for 20 years at a price of
$24 a ton subject of various provisions for escalation which by 1985 had driven
price up to $44/ton
2. P rates regulated by Indiana public service commission
3. P requested and received permission to raise its rates to reflect increased fuel
charges
a. Commission directed P in orders in Dec 1983 and Feb 1984(economy
purchase orders) to make a good faith effort to find an and buy from utilites
that would sell electricity at prices lower that its costs of internal generation.
4.
PP: 1) DC verdict for D for breach of contract $181 million P sought a declaration
that it was excused from its obligation under the contract until the economy purchase
order ceased preventing it from passing the cost of the contract to its rate payers. 2) Ct
of Appeals affirms decision.
Rationale:
By signing the contract the P gambled that the fuel costs would risk rather than fall
over the life of the contract
o P took a gamble .a force majure clauseexcuses NIPSCO for any cause
beyond its reasonable control that wholy or partly prevent the utilization of
the coal. is no intended to buffer a party against the normal risks of a
contract. Req that the orderer act as a civil authority to prevent them
from utilizing the coal. Subject to interpretation amigbuity
interpreted against the drafter.
o The normal risk of a fixed price contract is that the market price will change.
.If it rises the buyer gains at the expense of the seller; if it falls AS HERE the
seller gains at the expense of the buyer

Kelsey CoxContract Notes Pgs. 865-878; 899-905; 910-919

Only thing the commission did was to prevent Nipsco from using its monopoly
position to make consumers bear the risk that P assumed when it signed a long
term fixed price fuel control.
P defense of impracticability
o S 2-615 UCC: only type of promisor referred to is a sellerno suggestion
that a buyers performance might be excused by impracticability.
Rarely is it imprac or imposs for the payor to pay.
Defense is more properly frustration= if something happened to make
the performance for which he would be paying worthless to him, an
excuse for not paying.
Just because the cost of generating electricity turned out to be lower than what P
though when it signed contractcannot allow buyer to walk away from contract.
Frustration: Common law doctrineCoal is governed by the UCC S 2 6:15; excuses
performance of a seller because of commercial impartibilityuniformly
NIPSCO can resort to the doctrine but the doctrine is of no help to NIPSCOit was a
hedging contract. e
Judgment: Affirmed
Fact specific nature of the inquiry.enters into a take and pay contract for coal> P buy it
at a specified price every year. Wyoming has good coal. NIPSCO secures a supply for
price for many years of the way around. Parties agree that they are better off with the
exchanges than without.
Market price for electricy so where he can buy it from other suppliers cheaper then
generating it using the coal under Carbon countynot going to let NIPSCO pass on
consumers costs. And extents.
Nipsco claims that they are no longer obligation to buy that.
NIPSCO files a lawsuit seeking a declaratory judgment that they are no longer obligated to
buy coal. Alternative would be to repudiate the contract.
Carbon counter claimed for specific performancenot willing to grant specific
performance. Carbon can be compensated for specific performances. DOES Not do
anything for all the miners who are out of work and whose taxed based has been
shredded.
Litigation strategy Nipsco did not simply repudiated the contract and dare them to
sue it . Nipsco brought a declarity actionthat Nipsco was relieved of its obligation to
perform. Carbon county coal wanted specific performance order decreeing them to take
coal.
Claim for specific performance: premised on the effects of the repudiationnot so
much on the company but on the community. Carbon county in the position that it had
repudiate. The court says no specific perfomace and that money damages are so.

SECTION 5.

HALF MEASURES

Kelsey CoxContract Notes Pgs. 865-878; 899-905; 910-919

If contract is divisible, court may hold that the parties are excused only as to part of
their performances.
Loss occurred in relianceusually restitution is allowed.
RST S 272: if the traditional rules will not avoid injusticethat the court may grant
relief on such terms as justice requires (protection of parties reliance interests)
Common Law Cts 1) if an injured party could not be adapted to one of the
approved causes of action.CL courts would not hear the case. AND the only relief
was moneylitigants started to appeal to the king to intervene.
o King delegated solving these problems to the chancellerynot
bound to the strict common law rules and had the power to do
equityif they ordered you do so something than you had to do something.
o NO right to jury claim if it is a right of equitable relief. Rule chancellery
would get involved in legal remedy was inadequate to make the remedy
whole.
Maxims you must come into court with clean hands
o Bargain for exchange.
o I promise to work for you to 3 years and promise to pay me.
If I breach.enforce breach by making you pay me money damages.
Claim against Malin for the money damages that you suffered. DIF
what would paid plus paid the new employee.
You might be deterred from entering into contract if you would
be thrown in jail if you do. Might facilitate if one breaches than
the other will have recourse
Sell entire widgets for ten cents a widget..reselling widgets and
make 4 cents a widgets. Another party offers to sell. Breaching a
widgets.
If Breach will still come out ahead because damages would b 4
cents a widget.. You might be deterred from entering into
contract if you would be thrown in jail if you do. Might facilitate
if one breaches than the other will have recourse
Some say that that they want to allow it for efficient breach.
If one can make you whole by compensating you
Assuring PartiesFinancial Resources. Make come up short if the
payment of money damages will not make the party whole.

IMPRACTABILITY AND RELIANCE

Before a partys performance became impracticable it has conferred a benefit on

the other party through part performance courts are receptive to restitution.
Restitution when contract is rescinded for mistake.

Kelsey CoxContract Notes Pgs. 865-878; 899-905; 910-919

YOUNG V. CITY OF CHICOPEESUPREME JUDICAL CT OF MASS (1904)

Parties: P, doing construction work for the D, brought suit to recover for work and
materials furnished under their written contract.
Contract
1. P contracted to repair a wooden bridge forming a part of a highway across the
Connet River
2. While the work was in progress the bridge was totally destroyed by fire
(without the fault of either party) contract could not be performed.
a. Work was no to begin until material for of the repairs
b. P compiled the lumber which at the time of the fire had not been used
being distributed all along the bridge.some of the lumber was destroyed by
the fire.
3. P was to receive sum per thousand feet of lumber used on measurements made
after laying and certified by the engineers (# of ft of new materials wrought into the
bridge)
Issue: Whether the D is liable for damage to the lumber that was distributed but not
wrought into the bridge? No.
PP: 1) supreme judicial ct of Mass where the case is now
Rationale:
No part of the lumber brought upon the bridge belonged to the D until it
was worked into the bridge.
P could recover for partial performance.
Liability should be measured by amount of the contract work to be done which at
the time of the destruction of the structure had become so far identified with it as
that.
D should be held liable for the labor and materials actually wrought into
the bridge
o To that extent it insured the Pbut it did not insure the P against the loss of
lumber owned by the P at that time of the fire that had not then come into
such relation with the bridge.
Judgment: for P $584

SECTION 7.

REMEDIES FOR BREACH

SECTION 1. SPECIFIC RELIEF

CAMPBELL SOUP V. WENTZUS CT OF APPEALS (1948)

Kelsey CoxContract Notes Pgs. 865-878; 899-905; 910-919

Parties: P who buys carrot is seeking specific performance for breach of contract by the
D.
Contract
1. June 21, 1947 D agreed to sell and deliver all of its Chantenay red cored
carrots to be grown on their 15 acre farm during the 1947 season.
2. Contract provided for delivery to P plant in New Jersey.
a. Contract prices ranged from $23/$30 per ton according to time of deliver
$30 for January
3. D harvested approx100 tons of its carrots and early in Jan told P that they
would not deliver their carrots for that price
a. Market price was at least $90/ton and this type of carrot was
unobtainable.sold 62/tons to the D lojeski
b. Lojeski sold them on the open market.
4. Jan 9 Campbell suspecting that Lojeski was selling its contract carrots refused to
purchase anymore.
5. P wanted specific performance.
PP: 1) DC judgment for D denying equitable relief to the buyer 2) Ct of appeals
where the case is now agrees with result different rationale.
Rationale:
This case is one where specific performance would be appropriatebecause
of the impossibility of obtaining this type of carrot
TC found that
o 1) P failed to establish what proportion of its carrots is used for the production
of the soup stock and what proportion is used as identifiable physical
ingredients
CT held that that information is immaterial.
o 2) P had failed to establish that the carrots judged by objective standards are
unique goods.
Ct thinks that this is either a conclusion of law of mixed fact and
law.bound to exercise independent judgment upon it.test for
specific performance is not necessarily objective.
This would be an appropriate case for specific performance but there are other
factors involved which wont allow P to recover
o Goods of the special type contracted for were unavailable on the open
market,
o P contracted for them long ahead in anticipation of its needs,
o P had built up a reputation for its products uniform appearance was
important.
Judgment: Affirms judgment.

KLEIN V. PEPSI CO INCUS CT OF APPEALS (1988)

10

Kelsey CoxContract Notes Pgs. 865-878; 899-905; 910-919

Parties: P was trying to enforce contract with D to buy their jet and sought specific
performance for breach.
Contract
1. March 1986 P was looking for a corporate jet and Janas who provided him info
about Ds jet
2. March 29 Jet was flown to Arkansas for his personal inspection; Janas also went to
ArkansasP gave Janas $200,000 deposit on the jet and told Janas to offer $4.4
mil for aircraft
3. March 31 Janas telexed the $4.4 million offer subject to a factory inspection
satisfactory to the purchaser and a definitive contract.
4. April 1 D countered for 4.7 million
5. April 3 Janas ended up accepted an offer for 4.6 million by telaxplanned
to sell it to P for 4.75 million. CONTRACT FORMED BY THIS POINT (TC)
a. Janas sent out copies of the Klenin /UJS agreement
6. April 7jet flown to Georgia for the pre-purchase inspectiondiscussed a list
of repairs to be made to the jetmost problems were cured during the inspection
one cosmetic problem needed to be corrected in new york + cracks on the right
engine blade
7. April 8 Sent a bill of sale to the escrow agent handling the deal
8. April 8boroscopic examination revealed 8-11 cracks on the turbine blades$2528,000D agreed to pay for the repair to the engine Worried about liability if
repairs to the cracks didnt hold.
9. April 9 the plane was returned to NY and was sent to retrieve D chairman
of the board for Dulles Airport
10.April 10 chairman called and asked airplane to be taken off the market
might not wanted to sell it.
11.April 11 Janas told P that D refused to give the air craft (on the day it was
supposed to close)
12.April 14 P telexed UJS demanding delivery of the aircraft and expressing
satisfaction with the pre purchase inspection
13.April 15 D refused to negotiate further.
PP: 1) TC found that a contract existed and granted specific performance for P.
Rationale:
Contract Formation : YES
o D ARG #1parties did not intend to be bound until a complete
integration was written in the final formuntil the definitive written
contract existed, PepsiCo maintains that no contract existed
TC found contract existedie 1) UJS confirming telax 2) conduct of
parties 3) d failure to communicate objection to the terms etc INTENT
to memorialize the contract in writing was not necessarily a condition
tot the existence of the contract itself.
o D ARG #2 no contract was formed because its condition of inspection
satisfactory to the buyer had not been met
TC found that D agreed to make the repairs the condition was satisfied;
condition excused by D refusal to tender the aircraft so that P could
express his satisfaction

11

Kelsey CoxContract Notes Pgs. 865-878; 899-905; 910-919

Specific Performance: NO
o Virginia Code S 8.2-716 permits a buyer of goods to seek specific
performance of the contract when goods are 1) unique 2) in other
proper circumstances
o Money damages would make P whole.
o Unique:
P expert testified that there were only 21 other GIIs on the
market 3 which were roughly comparable UJS bought two jets
which they offered to klein after the deal fell through and P made his
on two other G IIs
Was not so unique to order specific performance.
o Other Proper Circumstances
P testified that he didnt purchase another G II because the prices had
started to risedecided to purchase a G III.
Price increases are no reason to order specific performance
Reverse grant on specific peformremand for trial court for damages. Klein was
buying to resell at a profit. Money damages will fully compensate Klein. Kleins
benefit of the bargain is protected by money damagesKlein will not be made
whole.
Allows a party to change mind if they pay for the loss of the other party. BUY YOUR
WAY OUT OF THE CONTRACT. Dont make them perform.
Judgment: Affirmed in part, reversed and remanded in part.

MORRIS V. SPARROW SC OF ARKANSAS (1956)

Parties: Sparrow was trying to enforce the agreement with Morris for specific
performance for the horse KenoMorris appeals.
Contract
1. First made an agreement that they would go to Ps ranch then they would go
to Canada
2. While P went to Canada, D would stay at ranch and do work for 16 weeks in
exchange for $400.
a. D claims that as additional consideration he was to receive a
brown horse named Keno.
b. P claims that he was only to get the horse if his work at the ranch was
satisfactory.
c. During the time D was working, he trained the horse (who before was
practically unbroken) and the horse will now be a first class roping horse.
3. P came back and said that the work was not satisfactory, paid him the $400 but not
the horse Sparrow expectation was that if he perform satisfactory at the period of
the contractat the conclusion of the work he would get. Didnt want to turn around
and sell it on the open market. Wanted it to be a rope horseto Sparrow Keno is not
a commodity it wanted to make a profit on the open market.

12

Kelsey CoxContract Notes Pgs. 865-878; 899-905; 910-919

4. MASTERCARD: somethings are priceless. And you cant compensate with the price
of performance.
PP: Chancery Court found for the D 2) SC of Arkansas affirms decision
Rationale:
Has been held that equity will not ordinarily enforce by specific performance a
contract for the sale of chattels.BUT it will do so where special and peculiar
reasons exist which render it impossible for the injured party to obtain
relief by way of damages.
When one has made a roping horse out of an unbroken pony a horse would
have a peculiar and unique value.
Sparrow is entitled to the horse instead of its market value in dollars and cents. He
cant truly be compensated with money.
Morris has the discretion to determine of powerSparrow had fully performed so
Moris was taking advantage of the fact that he was already doneand just jin up
an excuse.
Maybe we want to deter Morrissense that he was acting in bath faith
taking improper advantage of his leverage.
OBJECTIVE SATISFACTION. Vs. Portrait is totally subjection. IS the source
objectively reasonable.
Judgment: Affirmed.

SPECIFIC PERFORMANCE AND INVESTMENT

LACLEDE GAS CO V. AMOCO OIL COUS CT OF APPEALS (1975) Long term Supply
Contract
Parties: P, distributor of gas seeking specific performance for breach of contract by their
supplier the D.
Contract
1. P was to provide propane gas distribution systems to various residential
developments in Missouriuntil natural gas mains were extended to the areas.
2. Owners or developers would apply to P for the systems through
supplemental form if p determined that the system was appropriate in any
given development and if D agreed to supply the propane then it would
bound itself by singing the supplemental form
a. D would install own maintain and operate storage and vaporization
facilitieswere to be adequate and supply continuous supply of commercial
propane gas.
b. P agreed to install own maintain operate all distribution facilities from a
point of delivery .and promised to pay D the Wood River Area Posted Price
for propane puls 4 cents gallon
3. The contract was originally for one year. It automatically renewed, unless Laclede

13

Kelsey CoxContract Notes Pgs. 865-878; 899-905; 910-919

gave notice of termination 30 days prior to contract renewal.
a. Another Paragraph gave P right to cancel the agreementno provision
which d could cancel agreement
4. Good until winter of 1972-3, D faced a shortage of propane and placed all of is
customers on an 80% allocation basis.P objected and requested D to give 100% of
what the developments needed.
5. April 3 D notified P that Woods River price had been increased by 3 cents/gallon. P
objected
6. May 14 D sent a letter terminating Sept 21 1970-May 31 1973 agreement.
PP: DC: no valid contract existed and did not grant Ps requested injunction ;since
Laclede could arbitrarily cancel the contract, and Amoco did not have a similar right, there
was no mutuality and the contract was void. 2) Ct of Appeals where the case is now;
reverses.
Rationale:
P power to terminate did not make promise illusory and agreement was an
enforceable contract
Ct find should grant injunctive relief
o D args why specific performance hasnt been met 1) no mutuality of
remedy In the contract 2) remedy of specific performance would be difficult
for the court to administer with constant and long-continued supervision 3)
the contract is indefinite and uncertain 4) the remedy at law available to
Laclede is adequate (via monetary damages)

The Court found that the public interest is in getting fuel delivered to retail
customers, and letting suppliers cancel arbitrarily and suddenly was not in the
public interest.
o Restatement of Contracts 370 it states that "Specific performance will
not be decreed unless the terms of the contract are so expressed that the
court can determine with reasonable certainty what is the duty of each party
and the conditions under which performance is due."
o Believes that all criteria has been satisfied
D is to supply all the propane which is reasonably foreseeably required
while P is to purchase the required propane from D and pay contract
price
Fact that agreement does not have a definite time duration is not fatal
since the subdivision should be converted to natural gas in 10 to 15
years.
Contract involves the long term supply of propane to the subdivisions; P would
probably not be able to find another supplier of propane willing to enter into a long
term contract.
o Even so.would still face expense and troubles which cannot be estimated in
advance of making arrangements for its distribution.
Specific performance is proper remedy.
Judgment: Reversed and Remanded. In Klein in both situations we got a rising market
price of jet is rising considerablyled the trial court to award specific performance.
Shortage of performance. Laclade. Adequate compensation. Expectation was too fold 1)

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get it at a specified price. 2) Expectation of SECURITY OF A LONG TERM SUPPLY
Laclade could not find another long term supply contract. Could not find long term cover.
Laclade could probably not find another supplier willing to enter into a long term
contract

NORTHERN DELAWARE INDUSTRIAL DEVELOPMENT CORP V. E.W BLISS CO.CT

OF CHANCERY DELAWARE (1968)
Parties: P (phoenix) sought an order to have D put 300 more workers on the job as
required by the contract to make up a full second shift during the period that one of
Phoenix mills had to be shut down because of the work
Contract
1. D contracted to modernize the plant of the P steel corporation for $27,500,000.
2. The plant was spread over a 60 acre site.
3. Work did not progress as rapidly as stated in contract.
PP: Ct of Chancery where the case is; denies specific performance.
Rationale:
Ct of equity should not order specific perform of any building contract in a
situation in which it would be impractical to carry out such an order (unless there
are special circumstances or public interest involved Courts of Equity can do what
ever they want. They have discretion. Courts wont issue orders that are extremely
difficult or impossible to enforce. Fear that they will be able to enforce.
If P have sustained a loss as result of actionable building delays they may result to
the law for a fixing of their claimed damages.
Performance of a contract for personal services even of a unique naturewill not
be affirmatively and directly enforced.

Amaco cuts of Lacladethey should resume supplying them with propane.

Chicago Kent could not enjoin.

WALGREEN CO. V. SARA CREEK PROPERTY CO. US CT OF APPEALS (1992)

Parties: Walgreens was seeking an injunction against D so they could not lease out a
store to Phar-Mor their competitor.
Contract
1. P operated a pharmacy in the Southgate Mall in Milwaukee
a. Under lease, D promised not to lease a space in the mall to another store
operating a pharmacy.
2. In 1990, fearful that one of its largest tenant was about to close, it informed the P
that it planned to buy out the store and put Phar-mor in its place

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Kelsey CoxContract Notes Pgs. 865-878; 899-905; 910-919

3. D making more money to buy renting to Phar-mor and paying out Walgreens. Part
of value of the lease is the exclusivity provision. Diminution in rental value.by
having a competitor in the same lease.
a. SC argues what they would pay is less than.
PP: 1) TC: entered a permanent injunction against the D letting the premises to Phar-Mor
until Ps lease expired. Ct held that it would be difficult to calculate damages included
intangibles such as good will. 2) Ct of Appeals where the case is now
Rationale:

Costs and benefits that must be weighed should be done by the judge in
deciding whether to grant an injunction
The determination of P damages would have been costly in forensic resources and
inescapably inaccurate. Walgreens want an order to kick Phar-mor out. A case of
efficient breach.
o the lease had 10 years to runso P would have had to predict its sale
revenue and costs over the next 10 years AND project the impact on those
figures of Phar-mors competition
o Benefits of Substitution Injunctions for Damages:

1) shifts burden of determining the cost of the D conduct from the

court to the parties---effect of upholding the injunction would be to
substitute for the costly processes of forensic fact determination the
less costly processes of private negotiation
2) prices and costs are more accurately determined by the market
then government. ---a battle of experts a less reliable method of
determining the actual cost to P of facing new competition that
negotiation between P and D over the price at which P would feel
adequately compensated.
Cons: costly, require supervision by the cts, impose costs on third
parties

Damage Remedy
Avoids the cost of continuing supervision and 3 rd party effects
Diminished accuracy in the determination of value and parties
expenditures on preparing and presenting evidence of damages and
the time of the court in evaluating the evidence on the other.
the district court made a reasonable determination that a damages remedy for the
remainder of the lease would be highly speculative and costly to determine
Diminished value to the lease. Will not be an easy thing to doeach party will have
their own experts. What Walgreens loss business will be difficult to do.
If Grant injunction (order of specific performance: gives Walgreens the upperhand),
then you leave it to the parties instead of the courts.
1) Cost of Supervision 2) Effect of granting specific performance on 3
parties.consumers will lose the competition benefit.
o Bi lateral monopoly parties have to bargain with each otherand the cost
of negotiating with this range was high.
o SC initates negotiations with walgreenss.SC offer something to walgreens
to get them to agreemaybe to reduce their rent by a certain amount.
o

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SC could breach and force Walgreens to sue.

If Walgreens have other optionsgo somewhere else and sue for
breach

Judgment: Affirmed; Deter parties if they can walk away and pay damages. Damages
allow for efficient breach when the value to the of breaching exceeds cost to P.
Court weighs competing concerns.benefit of injunction out weighs the costand the
costs is really high.

Pricelessmastercard theory KENO.

Law and economic approacheverything has a price.
SPECIFIC PERFORMANCE, EFFICENICY AND THE COASE
THEOREM
Parties will not invest sufficiently unless they expect to receive the full return of
those investments.
Specific Performance can encourage excessive and wasteful investment by leading
parties to disregard the possibility of breach and encouraging them to invest as
though they are certain to receive performance.
Without meaningful remedies parties will not invest adequately in contractual
exchanges.

SECTION 2.

MEASURING EXPECTATION

Vitex Manufacturing Corp v. Caribtex Corp. (1992)

Facts.
Plaintiff engaged in the business of chemically shower-proofing imported cloth so
that it could be imported duty-free into the United States.
Defendant engaged in the business of importing cloth to the Virgin Islands,
securing its processing, and exporting to the United States.
Contract
o P agreed to process 125,000 yards of Caribtex woolen material for
25/26 cents a yard.
o Plaintiff had closed its plant in the Virgin Islands but reopened it after
securing a contract from Defendant. Said contract was found to be legally
binding. Plaintiff therefore expended costs to reopen its plant and order
chemicals
Defendant breached the contract.

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Kelsey CoxContract Notes Pgs. 865-878; 899-905; 910-919

PP: 1) TC found that Plaintiffs gross profits from the sale would have been
$31,250, and its costs would have been $10,136, which left Plaintiff with damages
from lost profits of $21,114.
Defendant argues that Plaintiffs overhead expenses should be added to its costs,
thereby reducing Plaintiffs lost profits recovery.
Rationale
Since overhead is a fixed cost and nonperformance of a particular contract
produces no cost savings, no deduction from profits should result.
In short, overhead expenses do not bear a direct relationship to any single
transaction to be considered a cost in ascertaining lost profits.
Hold the award of overhead expenses as a loss incurred.

Laredo Hides Co v. H&H Meat Productions (1992)

P is seeking damages for the hides they had to buy at market price as a result of the D
breach of contract.

Facts:
H&H Meat produce hides as a byproduct of its meat production business.
Contract Laredo Hides has deal with H&H Meat that they would purchase all hides that
H&H produces between March and December 1972.
Two shipments of hides went through without a problem but the next
shipment went unpaid for because a $9,000 check was delayed in the mail.
H&H then gave an ultimatum demanding payment within several hours,
which was not met. H&H then proceeded to breach the contract by not
delivering hides.
Laredo Hides also had another contract with a tannery in Mexico.
In order to fulfill the contract with this tannery, Laredo Hides had to
secure hides from the market at market price. This price was
substantially higher than the contract price with H&H.
PP: 1) H&H Meet Products (defendant) won at the trial level. APwhere the case is
now; he wins.
Determining the amount of damages that Laredo Hides is due as the result of a breach of
contract between Laredo Hides and H&H Meat Products.
Rule:
UCC 2.712-Section about cover
Rationale
there is no evidence that Laredo Hides, in any manner, endeavored to increase its
damages sustained when H&H refused to deliver any more hides to it They just
covered under UCC 2.712
.Accordingly, the judgment of the trial court is reversed, and judgment is here
rendered for Laredo Hides in the amount of $152,960.04, together with interest
thereon at the rate of 6% per annum. (this is the cost of the difference between the
contract price and the market price for the cover + increased transportation costs

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+ increased handling costs).

R.E. Davis Chemical Corp v. Diasonic Inc (1987)

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