Contracts
Class Notes
So
far, we’ve been talking about money damages, which we call a legal
remedy, or a remedy at law. Now
we will think about specific performance. This is done at equity, and we call it
an equitable remedy.
In
Anglo-American law, we used to have two separate court systems. We had common law courts where we had actions
at law for money. We also had
chancery courts that were run by the Chancellor. These were courts of equity. Down through the ages, the courts of law did
most of the work, but once in a while the courts of equity would step in.
The
Chancellors and their underlings used to be clerics: bishops, archbishops,
cardinals and so on. The kind of law
they did was “churchy”, “preachy” and “religiousitocious”.
There
were procedural differences between suits in equity and actions at
law. There were no juries in courts of
equity. In courts of law, you have the
right to a trial by jury.
The
remedies are different. When the plaintiff wins in
the cases we’ve considered so far, that plaintiff gets the big dough. But let’s say you’ve entered a money judgment
and the defendant gives up, or appeals and loses. Then you have a money judgment that is
totally final. How do you turn that judgment
into actual, factual money?
The
judgment is not a court order. The judge
has not ordered the defendant to pay a certain amount of money to the plaintiff. The judge just enters something into the
record that says there’s such and such an order. The trial judge moves on to the next case.
So
how do you turn the judgment into money?
Generally, the defendant will just ante up and pay, especially if they
have enough cash to just pay. But what
if the defendant doesn’t have enough money to pay the judgment, or try to hide
the money they do have?
So
you get the court clerk to issue a writ of execution so that the sheriff can go
out and take the debtor’s stuff for auction so that your judgment might be
satisfied. (Sorta like Pennoyer.) Actually, first some money from the sale of
the defendant’s stuff goes to pay the costs of the sale and court costs. Then the rest will go towards satisfying your
judgment.
If
you’re a human being that doesn’t have enough stuff to pay a judgment, you’re
colloquially called a “turnip” because you can get neither blood nor money from
such a vegetable (or legume?).
Sanctions
in equity are totally different from those at law. If a judge orders the defendant to do
something and the defendant disobeys, the defendant will be found in contempt. The judge’s prestige is on the line. So the judge can fine the defendant or put
him in jail until he does what you tell him to do.
If
you have no money and no prospect of ever getting any, you can shrug off a
money judgment. However, if you’re given
an order in equity, you may risk getting thrown in jail if you don’t do what
you’re told.
The
standard remedy in cases at law is a money judgment.
A
purchaser of land has an absolute right to specific performance. You may also have a money judgment. However, in other cases, specific performance
may be tough.
If
a money judgment is adequate to do the plaintiff’s work, you’re not going to
get specific performance.
Why
are we so stingy in the Anglo-American system with equitable relief? In other systems of justice, specific
performance is much more common. Part of
the answer is merely historical.
For
a long time, people have argued that you should be able to choose either specific
performance or money damages. We haven’t
listened, though. What’s wrong with
giving the plaintiff a choice?
One
reason is that court orders are more expensive to enforce than money judgments. The country that does the most with specific
performance in the world is
Another
argument that is made is economic efficiency.
We think that sometimes it is efficient to let people break their
promises. Take, for example, Groves v. Wunder.
Some
economists are big on money damages, although a few think there are at least
some cases where specific performance is economically efficient.
The
courts of equity and courts of law are now unified, but we still have two
separate bodies of doctrine.
Generally
speaking, we are reluctant to move from money damages to specific performance
when the former will fulfill the Golden Rule[2].
Van Wagner Advertising Corp.
v. S & M Enterprises
There’s
a building in midtown
Van
Wagner leases space on buildings and set up lighted signs that they lease in
turn to their customers.
There
are some contract interpretation problems, but once the court interprets the contract,
it finds that there indeed was a contract and that the landlord was in breach.
Van
Wagner will definitely get damages, but the question is what kind of damages
Van Wagner is entitled to.
The
trial court denied specific performance, and we find in the higher court
opinion that whether to grant or deny equitable relief is “a decision that
rests in the sound discretion of the trial court”. The appellate court will only reverse such a
decision when there is an abuse of that discretion.
In
this case, the appeals court decides that the trial judge did not abuse his
discretion, and they will affirm the trial judge’s decision not to grant specific
performance. How come? It is posited that Van Wagner can get an
adequate remedy through money. S & M
was turning around and leasing the billboard space to someone else, so you can
evaluate what it would have been worth to Van Wagner.
Van
Wagner is in the business of leasing billboard space. They want money. This case would take on a whole different
character if, for example, a church had leased the space in order to keep the
space free of advertisements that they found offensive. That church wouldn’t want money; they really
want to control that space. But Van
Wagner is in it for the big bucks, and if we can figure out the right amount of
money for Van Wagner, it will satisfy our Golden Rule.
If
the contract in question involves, for example, a family heirloom, and what you’re
after is the thing and not money, specific performance is more
likely to be granted.
Do
we have something in Van Wagner that we can value, or is it so difficult
to value Van Wagner’s loss that they need specific performance? The court says that it’s not hard to get it
right, and therefore, money damages should be awarded.
One
reason for this is that there is an established
Notice
that the court allows S & M to break their promise. The court argues that there would be harm to
S & M that would be disproportionate compared to the benefit to Van
Wagner.
If
you are a purchaser in a land case, specific performance is available as a
remedy “off the rack” (except in
UCC
§ 2-716
“Specific
performance may be decreed where the goods are unique or in other proper
circumstances.”
The
stated goal of this provision is to liberalize the court’s use of specific
performance.
There
are few reported cases of buyers seeking specific performance. One reason for this is that the issue never
comes up unless the plaintiff seeks it, and in many circumstances, you’re not
going to seek it.
For
example, if you contract to have someone build a house and they repudiate, you
don’t want to have the court force them to build your house. In other words, you’re going to be a bit
nervous about having people do stuff for you under court order.
In
all likelihood, you want nothing more to do with the evil contract breaker, and
you really just want to get some money out of them. On the other hand, you could sue for specific
performance as sort of an arm twister in order to get more money. You can get the order and then negotiate to
settle.
Why
is specific performance asked for here?
There is a contract for the sale of tomatoes. Why are money damages not an adequate
remedy? How would you measure money damages? You would take the difference between the market
price and the contract price and Curtice Bros. could just buy the tomatoes
elsewhere.
Here,
there’s sort of a collective action problem.
If Catts is allowed to break his promise, it sort of means that all the
tomato growers who supply Curtice Bros. could get out of performance.
But
why couldn’t Curtice Bros. prove their lost profits if their production is
curtailed? Sure. That would be a lot of money. But Catts wouldn’t be good for that much
money.
Note
that the court need not affirmatively order Catts to sell his tomatoes to
Curtice. The court only needs to
negatively order Catts not to sell his tomatoes to anyone else.
When
we decide between equitable damages and money damages, we want to choose the
one that does the best job of guaranteeing the aggrieved party’s expectation
interest.
Only
when the remedy of equity is clearly superior to the remedy of law will we
impose equity.