Remedies and Third-Party Rights (Contracts) by Quinton Lucas

Remedies: The Final Edition When a breach of K is established, the issue becomes one of the proper remedy.

In order of increasing severity: 1.

Promisee’s reliance loss »  (costs incurred in reasonable reliance on promisor’s performing K); 2.  Expectation loss §  (loss of the anticipated profit of the K); A.  Liquidated Damages A.  (damages actually specified in the K as a money remedy for the breach); B.  Consequential Damages A.  (ripple effects on promisees’ business as result of breach); C.  Incidental Damages A.  (costs incurred in a reasonable effort to avoid or mitigate damages caused by breach of another). D.  Specific performance (Injunction) •  (ordering the promisor to perform on penalty of being found in contempt); 3.  Restitution »  (to the promisee of the promisor’s profits from the breach); 4.  A money penalty specified in K or punitive damages. 2

Expectation Damages Standard measure of damages for breach; [Goal] Put non-breaching party in financial position it would have been had K been performed [Modifications/Exceptions] 1. Non-breaching party may collect damages for costs incurred in arranging substitute performance (so-called, â&#x20AC;&#x153;incidental damagesâ&#x20AC;?)

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Definitions “Cover” Any reasonable purchase of or contract to purchase goods in substitution for those due from the seller. See UCC 2-712.

“Incidental Damages” Costs incurred in a reasonable effort to avoid or mitigate damages caused by breach of another.

“Consequential Damages” Reasonably foreseeable injuries to a person, business, or property caused by the breaching party’s failure to fully and properly perform.

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On April 1, Tina and Jon agreed that Tina would pay Jon $100 each for two tickets to the New York premiere return of the musical, Cats, on Broadway. They also agreed Jon would deliver the tickets to Tina no later than April 15. On April 2, Jon purchased two tickets for Cats: The Funniest YouTube Compilation Ever, a documentary production showing at the AMC Theater on West 14th St. in New York. Jon attempted to deliver the tickets to Tina’s home on April 15, but because she was not home, slipped them through a mail slot and wrote a note stating, “Here you go! Pay me when I return.” In preparation for attendance at the musical, Tina bought a $5,000 dress and booked a limousine for the night for $350. Tina had planned to schmooze at Cats a TV executive interviewing talent to replace an aging late-night legend. When she returned home, she saw Jon had purchased the wrong Cats tickets. She was unable to find tickets to the musical. That evening, she also learned the TV exec had hired someone else for the late night program. Tina sued Jon for failing to provide her with musical tickets. countersued because Tina failed to pay.

Jon5

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Blair, Dorota, and the Agency Blair enters into a contract with a placement agency to hire the services of a maid for a five-year term. The agency sends Dorota, a strong-willed and diligent maid to work with Blair and her family. Four years into the agreement, the placement agency finds itself with significant cash flow troubles due to embezzlement by CEO Belvedere, starts to reassign staff, and removes Dorota from Blairâ&#x20AC;&#x2122;s home. It does not reassign a new maid to Blair. Blair has grown quite close to Dorota. Can she compel the agency to return Dorota? No! What is the best available remedy for Blair? Specific performance. See Rest. (2d) Sec. 360(c). Note that not all service contracts are personal service contracts (for which specific performance is not appropriate). If K requires specific individual to perform, then it involves personal services. But many services are provided by someone or an entity that can send any individual to perform. 11/20/18

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Mary J Blige: In Demand In July 2016, Blige, a singer, agrees to perform on Thanksgiving Night 2016 at Barclays Center, an arena venue in Brooklyn, New York. In October 2016, Blige received significant attention for an award-winning interview with a presidential candidate. On Monday, November 21, 2016, Blige breaks her contract with the Barclays Center and instead accepts a contract to perform at Madison Square Garden, also in New York, for double the Barclays Center compensation. Barclays Center calls you today (two days before Thanksgiving!) to ask about the best remedies for it to seek. What do you say?

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Mary J Blige: In Demand In July 2016, Blige, a singer, agrees to perform on Thanksgiving Night 2016 at Barclays Center, an arena venue in Brooklyn, New York. In October 2016, Blige received significant attention for an award-winning interview with a presidential candidate. Now suppose Blige broke her contract not on Monday, November 21, 2016, but instead on October 15, 2016 shortly after the interview, and instead accepts a contract to perform at Madison Square Garden, also in New York, for double the Barclays Center compensation. Barclays Center calls you today (two days before Thanksgiving!) to ask about the best remedies for it to seek. Are there any defenses available for Blige to Barclays Centerâ&#x20AC;&#x2122;s claim for injunctive relief?

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Mary J Blige: In Demand In July 2016, Blige, a singer, agrees to perform on Thanksgiving Night 2016 at Barclays Center, an arena venue in Brooklyn, New York. In October 2016, Blige received significant attention for an award-winning interview with a presidential candidate. Now suppose Blige broke her contract not on Monday, November 21, 2016, but instead on October 15, 2016 shortly after the interview, and instead accepts a contract to perform at Madison Square Garden, also in New York, for double the Barclays Center compensation. Barclays Center calls you today (two days before Thanksgiving!) to ask about the best remedies for it to seek. Are there any defenses available for Blige to a Barclays Centerâ&#x20AC;&#x2122;s eleventh hour claim for injunctive relief on the day of the performance?

Yes! Laches. Laches arises when the other party suffers prejudice because of a partyâ&#x20AC;&#x2122;s undue delay in filing a claim.

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Mary J Blige: In Demand In July 2016, Blige, a singer, agrees to perform on Thanksgiving Night 2016 at Barclays Center, an arena venue in Brooklyn, New York. Barclays Center had had a long fraught relationship, which included an unfounded threat by Barclays in June 2016 to distribute false information that Blige had plagiarized her 2001 smash hit, â&#x20AC;&#x153;Family Affair.â&#x20AC;? In October 2016, Blige received significant attention for an award-winning interview with a presidential candidate. On Monday, November 21, 2016, Blige breaks her contract with the Barclays Center and instead accepts a contract to perform at Madison Square Garden, also in New York, for double the Barclays Center compensation. Barclays Center calls you today (two days before Thanksgiving!) to ask about the best remedies for it to seek. What, if any, equitable defenses are available to Blige to avoid an injunction? 11/20/18

Duress will be raised as a defense to enforcement of the contract. An equitable defense also will be the doctrine of unclean hands. Unclean hands denies relief if the person seeking relief has behaved inequitably in relation to the transaction at issue. She who seeks equity must do equity. 11/20/18 13

Mary J Blige: In Demand As part of her performance, Ms. Blige intended to use 15 background dancers who would be dressed in shark costumes. All back-up dancers also entered into agreements with Barclays Center to perform on Thanksgiving night. Upon Ms. Blige’s breach, the backup dancers also breached their agreements with Barclays and signed agreements to perform at Madison Square Garden. Barclays Center calls you because they are concerned the strong cast of back-up dancers for Ms. Blige will hurt profits at its substitute “Barry Manilow and the Copacabana Dancers” show. Is injunctive relief available?

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Mary J Blige: In Demand As part of her performance, Ms. Blige intended to use 15 background dancers who would be dressed in shark costumes. All back-up dancers also entered into agreements with Barclays Center to perform on Thanksgiving night. Upon Ms. Blige’s breach, the back-up dancers also breached their agreements with Barclays and signed agreements to perform at Madison Square Garden. Barclays Center calls you because they are concerned the strong cast of back-up dancers for Ms. Blige will hurt profits at its substitute “Barry Manilow and the Copacabana Dancers” show. Is injunctive relief available?

No! Negative injunction is appropriate only where the services of the employee(s) are unique and extraordinary.

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Reliance and Restitutionary Damages [Goal]: Reliance and restitution offer measures of recovery that focus on the situation that would have existed had K never been made. »  Neither permits plaintiff benefit of the bargain. »  (1) Reliance •  Prevents plaintiff from being any worse off than if the bargain had been made

»  (2) Restitution •  Prevents defendant from being any better off than if the bargain had not been made

Reliance Damages (1)  Recovery of any costs incurred in reliance on the promise; and (2)  Recovery of any opportunities foregone in reliance on the promise [Limits] 1.  Recoverable expenses are limited to net reliance; 2.  Reliance damages cannot exceed expectation damages

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Denver Intâ&#x20AC;&#x2122;l Airport (DIA) agrees to lease space to In-N-Out Burger, a popular restaurant chain in the western U.S. Upon signing the agreement, In-N-Out hired an architect, Colorado-based restaurant manager, and a PR firm to market what would be its first airport location, and halted negotiations with other airports. DIA repudiated the lease. Lacking other available locations, In-N-Out terminated its contracts with the architect, manager, and PR firm, and paid $150,000 for its breaches. Expenditures were specific to the DIA space and this project. What damages, if any, should be recoverable?

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Reliance recovery. Profits for the new In-N-Out Burger are difficult to project, but the restaurant can recover reliance losses of $150,000 spent on preparations made useless by the breach. Note the expenditures were specific to the space.

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Restitution Damages (1)  Amount needed to obtain the benefit from another person in claimant’s position; or (2)  Amount by which defendant’s interests improved as a result of the benefit bestowed Limits (i.e., when restitution is appropriate) 1.  A contract is unenforceable; 2.  A breaching party seeks compensation for partial performance; 3.  Non-breaching party seeks restitution instead of expectation damages

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In Pari Delicto (In equal wrong)

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Contractor is promised ÂŁ1m to build new campus building at Oxford. Contractor quits without excuse and owner has to spend ÂŁ900,000 to complete building. Is contractor entitled to any recovery on the project?

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Contractor is promised £1m to build new campus building. Contractor quits without excuse and owner has to spend £900,000 to complete building. Suppose fair market value for contractor’s labor at the time it was performed was £250,000. What can contractor recover?

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Contractor is promised ÂŁ1m to build new campus building. Contractor quits without excuse and owner has to spend ÂŁ900,000 to complete building. Suppose owner thought all along the K was to be paid out in dollars, rather than pounds. Is there any equitable remedy owner should seek from the court?

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Reformation The court may correct a mistake of integration so that the agreement matches what the parties originally intended. Note that the parol evidence rule does not preclude the admission of extrinsic evidence for the purpose of seeking reformation!

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I am thankful for you! Happy Thanksgiving

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Prisoner Rights to Religious Freedom and Delicious Food! In 1998, the Kansas Department of Corrections (KDOC) entered into a settlement agreement w/ Heise, an inmate, that it would provide a “kosher diet to all Jewish requesting inmates” and the kosher diet would include “prepackaged meals which are certified kosher for noon and evening meals.” In 2012, KDOC’s food service provider quit providing prepackaged kosher meals and began serving a new kosher diet. Now, Clermont, an inmate purporting to be Jewish, brings suit, alleging KDOC breached the Heise settlement agreement. Does Clermont raise a contract theory sufficient to state a claim upon which relief could be granted? What is his likelihood of success?

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Prisoner Rights to Religious Freedom and Delicious Food! In 2002, the Kansas Department of Corrections (KDOC) entered into an agreement w/ CBM, a food service provider. CBM’s contract required services to be provided to the State in a manner that would meet the needs and concerns of the facilities’ resident, inmates, and staff. The contract further provided that the proposed menu was to have between 2700 and 2500 calories per day. In 2010, KDOC’s began providing different meals, which Clermont, an inmate, alleges had 400 fewer calories than the minimum required and did not meet dictates of his religious briefs. Now, Clermont, an inmate purporting to be Jewish, brings suit, alleging breach of contract between CBM and KDOC, undermining his rights. Does Clermont raise a contract theory sufficient to state a claim upon which relief could be granted? What is his likelihood of success? 11/20/18

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The State of New York entered into an agreement w/ Consolidated Edison (ConEd), the local power company, to provide customers with service of a stated quality and to facilitate service to a number of cities within the State, including New York City. In 1977, a blackout in New York City led to massive looting, vandalism, and other claims of property loss. Does the City of New York have a valid claim against ConEd?

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Retired Army General Tom Waverly endeavors to build a Holiday Inn hotel in Vermont that will open by December 24, 1946. General Waverly enters into a contract in June 1946 with Build Co. to construct the hotel. Work begins immediately, but General Waverly, in financial trouble, stops making progress payments in November, after $600,000 of work already had been completed. General Waverly obtains a rescue loan from Captain Bob Wallace, a soldier once under his command. In the agreement between Waverly and Wallace, Captain Wallace would make progress payments directly to Build Co. Captain Wallace took an assignment of the construction agreement, i.e., Wallace was to receive ownership of the hotel upon completion. During negotiations among all parties, Build Co. agreed to subordinate its debt claims against Waverly during the period of performance to any claims of Wallace against Waverly. General Waverly and Captain Wallace also inserted the following language into their agreement: No third party is entitled to rely on any provisions in this agreement.

Wallace stops making payments. Can Build Co. sue Wallace?

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Assignments See Rest. (2d) Section 317. An assignment is an act or manifestation by the owner of a right (assignor) indicating his intent to transfer the right to another person (assignee).

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Victor, a victim of an automobile accident was injured and sought services from Doctor. Unable to pay Doctor, Victor agrees that in consideration of the performance the following: I, Victor, request that payment be made directly from settlement of a claim currently pending for an unrelated incident to Doctor for my current treatment. Victor hires lawyers to litigate the preceding claim, but instructs Lawrence, the lawyer, not to pay Doctor. Lawrence follows instruction. Doctor files suit. Restatement?

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What result is appropriate under the

Ice Cube, an Ohio-based ice supplier, agrees to supply, within a limit, the full requirements of one Vanilla Ice Cream, an ice cream maker in Ohio. Vanilla Ice Cream was required not to buy ice from any other source and could receive up to 250 tons per week from Ice Cube. After the parties enter their agreement, Vanilla Ice Cream assigns its rights and obligations under the agreement to Baskin Robbins, a national ice cream company. Is the assignment of rights and delegation of duties permissible? What result is appropriate?

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Michigan Statute: •  Any person for whose benefit a promise is made by way of contract, as hereinafter defined, has the same right to enforce said promise that he would have had if the said promise had been made directly to him as the promisee. »  (1) A promise shall be construed to have been made for the benefit of a person whenever the promisor of said promise has undertaken to give or to do or refrain from doing something directly to or for said person.

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