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a

Perhaps the original buyer, the guy who gets screwed, really did value the machine more than the new buyer.  But he didn’t disclose this, obviously, in negotiations for the contract

3

Expect damages are undercompensatory, b/c buyer gen’y loses his litigation costs

4

Posner ignores moral dimension of breaking a promise and concerns people have for their reputation

VI

Theory of efficient termination

A

Like theory of efficient breach, but promisee WILLINGLY ACCEPTS a price to release promisor from his promise

VII

Specific performance

A

When is spec perf ordered?

1

ELTS:

a

Only awarded when damages would be INADEQUATE.  (London Bucket) (Rest. § 359)

2

Factors to consider when evaluating adequacy of money damages:  (Rest. § 360)

a

Difficulty of proving damages

b

Difficulty of procuring substitute perf by means of money awarded as damages

c

Likelihood that award of damages would not be collected

3

Three satellite rules:

a

Spec perf not ordered for pers svcs

b

Spec perf not ordered when undue cy supervision would be nec’y

c

Contract for UNIQUE GOODS usu gets spec perf.  (UCC § 2-716(1))

i

Ex: real estate (w/ rare exception)

ii

But “unique” doesn’t merely mean “especially valuable” — it means w/o economic equivalent (e.g., item w/ emotional attachment)

4

Possibility of cover:

a

Buyer may get spec perf if he is unable to cover after r’ble effort.  (UCC § 2-716(3))

b

Availability of cover gen’y precludes spec perf

i

But not always: there may be large costs in covering (e.g., moving gas lines).  (Laclede)

5

Prof Eisenberg’s ALTERNATIVE test for whether spec perf ordered:

a

TEST = Is there an adequate mkt solution?  That is, can buyer protect himself adequately by covering?

b

Note that this will (almost?) always have the same result as the “are money damages adequate?” test — BUT this test places emphasis on availability of alts, where it should be

c

Prof refers to cover as VIRTUAL SPEC PERF

B

Spec perf v. damages

1

Why usu no spec perf?  Econ efficiency: to allow for efficient breach in most cases

2

Advantages of spec perf over damages:

a

Shift burden of evaluating damages to parties — parties may contract outside of ct to waive spec perf

b

Price of perf more accurately determined by parties than by ct

3

Disadvantages of spec perf

a

Many injunctions require constant ct supervision

b

Some injunctions impose costs on third parties

c

Bilateral monopoly problem — big tx costs b/c each party is locked into deal w/ only the other; holdout problem

d

Could put people in jail if they refuse to perf

Remedies — Expectation Damages

I

Fixed costs IGNORED in calculating exp dams.  Only var costs included in calculation

A

That is, when you’re deducting costs from rev to ascertain profit.  You only deduct costs SAVED BY THE BREACH, which doesn’t include fixed costs

20

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