Three measures of recovery
Remedies & Third Parties · Apr 19
Floor. ~40 min: R2d § 359. The doctrine the next class assumes you have covered.
Target. ~75 min: Floor + R2d § 349 + synthesis.
(1) Specific performance or an injunction will not be ordered if damages would be adequate to protect the expectation interest of the injured party.
(2) The adequacy of the damage remedy for failure to render one part of the performance due does not preclude specific performance or injunction as to the contract as a whole.
(3) Specific performance or an injunction will not be refused merely because there is a remedy for breach other than damages, but such a remedy may be considered in exercising discretion under the rule stated in § 357.
Money damages are the default. Specific performance is the exception, available only when damages would not adequately protect the injured party's expectation (R2d § 359).
Why is money usually enough — and usually preferred?
(1) Specific performance may be decreed where the goods are unique or in other proper circumstances.
(2) The decree for specific performance may include such terms and conditions as to payment of the price, damages, or other relief as the court may deem just.
(3) The buyer has a right of replevin for goods identified to the contract if after reasonable effort he is unable to effect cover for such goods or the circumstances reasonably indicate that such effort will be unavailing or if the goods have been shipped under reservation and satisfaction of the security interest in them has been made or tendered. In the case of goods bought for personal, family, or household purposes, the buyer’s right of replevin vests upon acquisition of a special property, even if the seller had not then repudiated or failed to deliver.
67 N.Y.2d 186 (1986)
New York Court of Appeals
Rule. Specific performance is not compelled merely because the subject matter is physically unique. A court denies it when monetary damages can compensate the injured party with reasonable certainty and when compelling performance would impose a disproportionate burden on the breaching party. The operative question is whether the injured party can be adequately compensated in money.
As an alternative to the measure of damages stated in § 347, the injured party has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance, less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed.
A party is entitled to restitution under the rules stated in this Restatement only to the extent that he has conferred a benefit on the other party by way of part performance or reliance.
Subject to the rule stated in subsection (2), on a breach by non-performance that gives rise to a claim for damages for total breach or on a repudiation, the injured party is entitled to restitution for any benefit that he has conferred on the other party by way of part performance or reliance. The injured party has no right to restitution if he has performed all of his duties under the contract and no performance by the other party remains due other than payment of a definite sum of money for that performance.
Two non-expectation money measures, often confused:
Facts. Pigment Producers contracts Okinawa Chemical for MX and diketene — chemicals used in yellow ink production, increasingly scarce because of a Chinese factory explosion and pollution crackdown. Okinawa walks to sell at a higher price elsewhere. Pigment cannot find substitute suppliers.
Question. Specific performance under UCC § 2-716?
Analysis. UCC § 2-716(1): specific performance available where goods are unique OR "in other proper circumstances." MX and diketene are not unique — they are fungible chemicals. But the global supply shortage means Pigment cannot cover at any reasonable price. That is the "other proper circumstances" branch.
The official comment to § 2-716 names "inability to cover" as the paradigm "other proper circumstance." Pigment wins specific performance.
Contrast with Van Wagner. Billboard space at a unique location, but advertising substitutes existed and damages could be computed. Court denied specific performance. The lesson: uniqueness is necessary but not sufficient. Inability to cover, not physical uniqueness, is the operative test.
Variation. Pigment cannot get specific performance — Okinawa already sold its entire production to a competitor and the chemicals are gone. Pigment is a new entrant; it cannot prove lost profits with reasonable certainty (R2d § 352). Reliance damages under R2d § 349?
Pigment had spent $200,000 retrofitting equipment for MX and diketene processing. Those expenditures, made in reliance on the contract, are recoverable under § 349 even though expectation damages fail at the certainty filter.
Cap: reliance damages cannot exceed the contract price (R2d § 349 cmt. a; L. Albert & Son v. Armstrong Rubber).
Facts. Jasper pays Luxe $100,000 non-refundable deposit for a custom vacation home. Luxe completes foundation and framing (cost $50,000), then abandons. Jasper hires another builder for $200,000.
Question. Restitution?
Answer. R2d § 374: a breaching party who has partly performed may recover the reasonable value of the benefit conferred, less damages. Luxe spent $50,000 on materials and labor — Jasper got that benefit (foundation and framing remain useful to the next contractor). Luxe may retain $50,000.
Jasper recovers $50,000 of the deposit, plus additional damages for any cost overrun ($200,000 + $50,000 retained − original contract price). The math depends on what the original Luxe price was.
Punchline. Restitution prevents unjust enrichment in both directions: Luxe cannot keep what it did not earn; Jasper cannot get back what Luxe genuinely delivered.
Rules. R2d § 359 (adequacy of damages); § 349 (reliance); §§ 370, 373 (restitution); UCC § 2-716 (specific performance for goods).
Cases. Van Wagner Advertising v. S & M Enterprises (uniqueness insufficient when damages computable).
Punchline. Damages first. Reliance when profits are too speculative. Restitution when one party would be unjustly enriched. Specific performance when no monetary measure works.
Open question. All four remedies presume the plaintiff is a party to the contract. What about someone who is NOT a party but was supposed to benefit? Next class: third-party beneficiaries.
Next class: Third-Party Beneficiaries
_Remedies & Third Parties_ · Apr 20
Read Lawrence v. Fox and Sovereign Bank v. BJ's. Holly owed Lawrence money. Holly lent Fox the same amount on Fox's promise to pay Lawrence directly. Lawrence sued Fox, having given Fox nothing. If you were not party to the contract, on what theory do you sue on it? Come ready to answer. You may be called.