American Contract Law in a Comparative PerspectiveProfessor Nathan M. Crystal
University of South Carolina
School of Law
American Contract Law in a Comparative Perspective
Professor Nathan M. Crystal
University of South Carolina
School of Law
Alternatives to Expectation Damages
I. Specific Performance
II. Reliance, Restitutionary,
and Contractually Agreed Upon Damages
I. Specific Performance
Leading Case
City Stores Co. v. Ammerman (US District Court, District of Columbia 1967)
Facts
Defendants wanted to construct a shopping mall on a tract of land in Virginia, near Washington, DC.
In order to get a building permit, they had to persuade the county to rezone the property.
Defendants’ situation was difficult because the planning commission had voted against their proposal.
Facts (2)
A strong competitor had proposed another shopping mall close by.
The hearing on the defendants’ application before the zoning board was scheduled for May 31, 1962.
In order to bolster their application, defendants asked for letters of support from several major department stores, including one owned by plaintiff.
Facts (3)
Other stores had been unwilling to express a preference for defendants’ application over its competitor.
Normally, plaintiff would have also been unwilling to express a preference, but plaintiff had a very strong interest in opening stores in the area.
Facts (4)
Plaintiff wrote a letter to the zoning board stating that the site proposed by defendants was preferable to any other in the area and expressing a strong desire to become a major tenant in the center.
The court found that the plaintiff wrote this letter in exchange for and in consideration of defendants’ promise that it would be given the opportunity to become a major tenant in defendants’ center on the same terms granted to other major tenants.
Facts (5)
“You have our assurance that in the event we are successful with our application, that we will give you the opportunity to become one of our contemplated center’s major tenants with rental and terms at least equal to that of any other major department store in the center.”
Facts (6)
Defendants did succeed in obtaining zoning approval.
They entered into leases with two other major department stores for the center, but refused to give plaintiff a lease.
Plaintiff brought suit for specific performance of defendants’ promise.
Decision
In considering plaintiff’s request for specific performance, the court had to analyze the major limitations on the award of specific performance in the US:
Decision (2)
(1) To obtain specific performance, the remedy at law of damages must be inadequate. Restatement (2d) of Contracts §360:
Uniqueness of subject of contract, e.g. land
Lack of substitute on market
Difficulty of proving damages
Difficult of collecting damages
Decision (3)
The court found that damages were inadequate because it would be difficult to prove with any degree of certainty the profits that plaintiff would lose if it did not receive a lease.
Decision (4)
(2) Specific performance must not be impractical.
The contract must be sufficiently definite to be enforced,
performance must not be inherently personal, and
the difficulties of supervision must not outweigh the potential benefits.
Decision (5)
The court found that the parties could be ordered to negotiate a lease and if they failed to reach agreement, the terms of the other leases signed by defendants would provide sufficient definiteness to enforce the contract.
The court noted the modern trend to enforce contracts even when some degree of supervision is required.
Decision (6)
(3) Specific performance is discretionary and can be denied if the contract is unfair or if the party seeking relief has acted inequitably or if it would involve undue hardship to the defendant or third parties. Restatement (2d) of Contracts §364.
Decision (7)
Defendants contended that an award of specific performance would be harsh because defendants would then be unable to enter into a lease with Sears.
They also argued that plaintiff was guilty of laches (delay) in seeking specific performance.
Decision (8)
The court rejected these claims:
Loss of a lease with Sears would only mean that defendants would make less money.
Plaintiff did not unreasonably delay and had informed defendants at every opportunity that they would seek enforcement.
UCC Specific Performance
UCC §2-716
Specific performance may be ordered when the goods are “unique” or in “other proper circumstances”.
The comments state that the goal of the section is to continue traditional rules, with perhaps some liberalization in the award of specific performance.
Under the Code courts are almost certain to deny specific performance when goods are available on the market.
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