Contracts Case Briefs - Lecture Notes Part 4

owner’s failure of payment. 2. Issue/Holding General contractor is bound to pay subcontractor regardless of the owner’s payment. 3. Reasoning Alleged Condition Both written subcontracts provided that Peacock would make final payment to the subcontractors, “within 30 days after the completion of the work included in this sub-contract, written acceptance by the Architect and full payment therefor by the Owner.” Two Interpretations Nature of transaction (GC-SC) lends itself to judicial interpretation.  Setting a condition precedent Court: not this one Intent of the parties: small subcontractors, who must have payment for their work in order to remain in business, will not ordinarily assume the risk of the owner’s failure to pay the general contractor.  Fixing a reasonable time for payment (absolute promise) 4. Comments Not your conventional interpretation process. Gibson v. Cranage (Mich. 1878) (p. 770 of [FW]) 1. Facts  P agrees to make an enlarged portrait of D’s deceased daughter and if D is dissatisfied, he need not take the portrait or pay for it.  D was dissatisfied with the picture but could not point out the defects or objections with clearness or certainty.  D refused to take the picture and countermanded the order. 2. Issue/Holding If D is dissatisfied with the picture, even if he ought to be satisfied with it, need not take or pay for the picture. 3. Reasoning Condition “if it was not perfectly satisfactory to me, I need not take it or pay for it” Court: an express condition to pay Comments D was the only person who had the right to decide on his satisfaction with the picture. D need not point out his objections with clearness or certainty, 4. Comments D. Substantial Performance and Perfect Tender Jacob v. Kent (App. NY. 1921) (p. 797 of [FW]) 1. Procedural History & Disposition  P sued D for XXX. 2. Facts  Different brand, same in quality, in appearance, in market value and in cost pipe  Architect failed to notice the difference upon the arrival of the pipe.  D moved into the dwelling in June 1914, didn’t notice until March 1915.  D refused to pay the remainder. 3. Issue/Holding The defect is immaterial. P is entitled to full payment. 4. Reasoning Substantial Performance We must weigh the purpose to be served, the desire to be gratified, the excuse for deviation from the letter, the cruelty of enforced adherence. The transgressor whose default is unintentional and trivial may hope for mercy if he will offer atonement for his wrong Comments Substantial Performance Different but same pipes Diminution in value and Cost of Completion The owner is entitled to the money which will permit him to complete, unless the cost of completion (CC) is grossly and unfairly out of proportion to the good to be attained. When that is true, the measure is the difference in value. 5. Comments Bartus v. Riccardi (NY. City Ct. 1967) (p. 788 of [FW]) 1. Procedural History & Disposition  P sued D for XXX. 2. Facts  D ordered model A-660 hearing but received on Feb 2, Comments UCC 1966 A-665 customized to him , a modified and improved model.  D complained about noise but was assured by P that he would get used to it.  On Feb 8, 1966, D returned to P’s office, returned A665.  P offered to get A-660 for D. D neither accepted nor rejected.  On Feb 14, 1966, P wrote to D offering a replacement of either A-660 or A-665.  P refused. 3. Issue/Holding Can P XXX? 4. Reasoning Plaintiff: UCC §§ 2-601, 2-602(2)(c), 2-608(1)(b) Defendant: New York Case Law This permits a seller to cure a non-conforming delivery before the expiration of the contract time by notifying the buyer of his intention to so cure and by making a delivery within the contract period UCC § 2-508(2) the seller may “substitute a conforming tender” if he had “reasonable grounds to believe” that the nonconforming tender would be accepted, and “if he seasonably notifies the buyer” of his intention “to substitute a conforming tender.” 5. Comments Britton v. Turner (New Hampshire 1834) (p. 825 of [FW]) 1. Procedural History & Disposition  P sued D for XXX. 2. Facts  the defendant was to pay P for said year’s labor the sum of $120  P left service after 9.5 months without D’s consent and without a good cause.  Jury awarded P $95. 3. Issue/Holding Can P XXX? Comments 4. Reasoning Contract must be fully performed in order to sustain a recovery of any part of the compensation. Unfair: o Party that breaches: party who attempts performance might be worse off than the party who disregards his duty o Other party: benefit received from service might be more than the injury sustained from breach Labor and goods are not to be treated differently. The party who contracts for labor merely, for a certain period, does so with full knowledge that he must, from the nature of the case, be accepting part performance from day to day, if the other party commences the performance, and with knowledge also that the other may eventually fail of completing the entire term. 5. Comments E. Good Faith Dalton v. ETS (App. NY. 1995) (p. 672 of [FW]) 1. Procedural History & Disposition  . 2. Facts  Term on SAT registration bulletin: “the right to cancel any test score if ETS believes that there is reason to question the score’s validity” and if “the validity of a test score is questioned because it may have been obtained unfairly, ETS [will] notif[y] the test taker of the reasons for questioning the score” and offer the test-taker five options: (1) the opportunity to provided additional information […]  P May and November scores 410 point increase.  ETS found disparate handwriting and notified P of its preliminary decision to cancel Nov score and handwriting disparity in a letter.  P provided additional evidence:  1. Verification of mononucleosis at May exam  2. Diagnostic test results from a prep course consistent with his Nov performance (no prep course prior to May). Comments 3. Statementsfrom an ETS proctor and two students who remembered his presence during the Nov test.  4. Report from a document examiner confirming handwriting consistent.  ETS submitted the handwriting exemplars to a second document examiner who concluded that the handwritings are inconsistent. 3. Issue/Holding By failing to consider relevant evidence furnished by P, ETS breached its promise of good faith. 4. Reasoning Additional Evidence Relevant to the question of impersonation Statement proving that it was P who took the test Evidence explaining P’s poor May performance and showing his improvement Relief good-faith consideration of the material he submitted to ETS 5. Comments  MSA v. Frey (7th Cir. 1991) (p. 686 of [FW]) 1. Procedural History & Disposition  P sued D for specific performance 2. Facts  Paragraph 34 if the average annual appreciation in the property exceeded 6 percent, a breakdown in the negotiations over the financing of improvements would entitle Penney to buy back the property for less than its market value.  20 years later 3. Issue/Holding Can P XXX? 4. Reasoning If you take deliberate advantage of an oversight by your contract partner concerning his rights under the contract, you breach your duty of good faith. 5. Comments Comments Bloor v. Falstaff (2nd Cir. 1979) (p. 689 of [FW]) 1. Procedural History & Disposition  P sued D for XXX. 2. Facts Comments    Royalty of ¢50 per barrel for 6 years 8(a) use best efforts to promote and maintain a high volume of sale 2(a)(v) if [D] liquidated damage clause substantially discontinues the distribution…, [D will pay P] a cash cum. 3. Issue/Holding Can P XXX? 4. Reasoning D did not use best efforts Royalty per barrel is essential part of purchase price. -> Volume of sale important D’s emphasis on profit over volume D did not care about volume 5. Comments V. Remedies A. Specific Performance Campbell Soup v. Wentz (3rd Cir.1948) (p. 886 of [FW]) 1. Procedural History & Disposition  P sued D for. 2. Facts  Contract price $ 30 / ton.  “for delivery by the Wentzes to Campbell of all the Chantenay red cored carrots to be grown on fifteen acres of the Wentz farm during the 1947 season.”  Market price at least $ 90 / ton  “virtually impossible to obtain Chantenay carrots in the open market” 3. Issue/Holding Can P XXX? 4. Reasoning Specific Performance Adequacy SP if monetary remedy is inadequate. - Carrot not obtainable in open market - Preservation of unity of appearance important to the brand’s reputation - Contracted long ahead. 5. Comments Comments Comments Morris v. Sparrow (Arkansas 1956) (p. 27 of [FW]) 1. Procedural History & Disposition  SP granted. 2. Facts  D promised to give D upon D’s satisfactory performance.  P trained an unbroken pony into a roping horse. 3. Issue/Holding Can P XXX? 4. Reasoning Horse has peculiar and unique value. 5. Comments Comments Laclede v. Amoco (8th Cir. 1975) (p. 886 of [FW]) 1. Procedural History & Disposition  P sued D for. 2. Facts  . 3. Issue/Holding Can P XXX? 4. Reasoning (1) there is no mutuality of remedy in the contract; Not required by law (2) the remedy of specific performance would be difficult for the court to administer without constant and long-continued supervision; A reasonable price can be determined by court (3) the contract is indefinite and uncertain; and The last will be converted into natural gas in 10 to 15 yeas. (4) the remedy at law available to Laclede is adequate. a remedy at law adequate to defeat the grant of specific performance “must be as certain, prompt, complete, and efficient to attain the ends of justice as a decree of specific performance. Long-term contract. No assurance P can procure propane elsewhere after his other short-term K terminate Expense and trouble incommensurable in advance 5. Comments Walgreen v. Sara Creek (7th Cir.1992) (p. 886 of [FW]) 1. Procedural History & Disposition  P seeks an injunction enjoining D from leasing a nearby space to its competitor.  Granted and affirmed. 2. Facts  P (Walgreen) operated a pharmacy in D’s (Sara Creek Property) mall.  The lease contract contained provision in which D promised “not to lease space in the mall to anyone else who wants to operate a pharmacy or a store containing a pharmacy.”  D informed P of intention to lease space to a deepdiscount chain Phar-Mor. 3. Issue/Holding Since the determination of Walgreen’s damages would have been costly in forensic resources and inescapably inaccurate, injunction rather than money damages should be given. 4. Reasoning Posner Injunction over money damages: Pros - Shift the burden of determining the cost of D’s conduct from court to parties - Prices and costs are more accurately determined by market than by government Cons - Continuing court supervision is costly - Might impose cost on third parties - Bilateral monopoly that creates a bargaining range and increase negotiation cost or the negotiation might break down Comments If the balance is even, injunction should be withheld. 5. Comments B. Expectation Damages Laredo Hides v. H&H (C.C.App. Texas 1974) (p. 913 of [FW]) Comments 1. Procedural History & Disposition Expectation interest  Buyer sued Seller for breach of K. Cover price 2. Facts Market price  B agrees to by S’s entire hide production from Mar through Dec 1972. B contracted with a third party to sell the goods he would buy from S on Mar 2, 1972.  [After two deliveries, a check sent by B for the second shipment was delayed in mail.  S gave an ultimatum demanding payment within a few hours. Check did not arrive on time.]  S repudiates/breaches K on Mar 30, 1972.  B arranged substitute transactions. 3. Issue/Holding Can P XXX? 4. Reasoning UCC § 2-712 - Cover price – contract price - making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller  UCC § 2-713 - market price (when B learned of the breach) – contract price UCC § 2- 715 - consequential damages 5. Comments Plante v. Jacobs (Wisconsin 1960) (p. 919 of [FW]) 1. Facts  Plante contracted with the Jacobs to build a house for them.  The Jacobs paid Plante $20K during the course of construction, but as disputes arose, they discontinued payments and Plante didn’t complete the house.  Plante sued, and the Jacobs responded with allegations of defective and incomplete work, including the misplacing of the wall between the living room and kitchen. 2. Issue/Holding Can P XXX? 3. Reasoning Cost of Completion the cost of completing the house in strict compliance with the plans and specifications would amount to 25 or 30 per cent of the contract price. Comments CC vs DV The cost of tearing down this wall and rebuilding it would be approximately $4,000. Diminution of Market Value Real estate experts testified that the smaller width of the living room would not affect the market price of the house. Recovery under Substantial but Incomplete Performance depends upon the nature and magnitude of the defect. Diminished value rule: misplacing the living-room wall (the wall should remain where it is) Cost of completion rule: (no unreasonable economic waste) the cost of repairing the plaster cracks in the ceilings, the cost of mud jacking and repairing the patio floor, and the cost of reconstructing the non-weight-bearing and nonstructural patio wall. 4. Comments Groves v. John Wunder (Minnesota 1939) (p. 923 of [FW]) 1. Procedural History & Disposition  P sued D for breach of K. 2. Facts  Wunder had a K with Groves to lease a tract for 7 years and remove the sand and gravel, leaving the property at uniform grade, for $105K.  Wunder failed deliberately to leave it at a uniform grade and this lawsuit followed.  CC = 60K  DV = 12K 3. Issue/Holding Can P XXX? 4. Reasoning CC >> DV But still applies here 1. willful breach 2. distinguish improvement of land from trespass to real estate 3. narrow read on “economic waste” Application to the facts Comments Willful Breach so award CC