The Specific-Performance Principle
The Specific-Performance Principle
Actual and Virtual Specific Performance
Abstract and Keywords
Chapter 24 considers the most prominent alternative to expectation damages—specific performance. Specific performance is a judicial decree that orders a promisor to render the performance she agreed to render, on pain of a penalty for contempt of court if she does not. The principle that should govern specific-performance—the Specific-Performance Principle—is as follows: actual specific performance should be awarded unless a special moral, policy, or experiential reason suggests otherwise in a given class of cases or the promisee can achieve virtual specific performance by acquiring goods or services in the market that are equivalent to the contracted-for goods or services. Under this principle specific performance should be liberally but not routinely granted.
GIVEN THE LIMITS ON EXPECTATION DAMAGES, A PROMISEE MAY SEEK an alternative form of relief. The most prominent alternative is specific performance—a judicial decree that orders the promisor to render the contracted-for performance, on pain of a penalty for contempt of court. Under traditional contract doctrine, specific performance is an exceptional remedy, to be granted only if damages would not be adequate. This basic doctrine is elaborated by three important rules: (1) damages are not considered adequate when the subject-matter of the contract is unique, (2) real property is normally deemed to be unique, and (3) even if damages would not be adequate, specific performance will not be awarded in the case of contracts for personal services or if specific performance would require undue judicial supervision.1
The commentators generally agree that the adequacy test that lies at the center of traditional doctrine is an unsatisfactory instrument for determining when specific performance should be granted, and the test therefore has lost much of its power. As Dan Dobbs and Caprice Roberts put it:
The adequacy rule, as a rule that simply bars the gate, is virtually dead and probably should be. Laycock’s immense scholarship and biting analysis will make it difficult to return to that simple shibboleth as a means for exercising discretion, even if we would like to do so. Unqualified support for a general adequacy rule is hard to find. The rule today seems to be one of those rules judges grab off the rack without really trying it on; it doesn’t fit, but it is easy to state with citations.2
(p.296) The commentators also generally agree that specific performance is granted more freely today than traditional doctrine suggests.3 Beyond this point of agreement, however, what principles should govern specific performance has been the subject of intense dispute among warring contracts scholars. Some scholars have enlisted in the Specific Performance Army, which defends the position that specific performance should be routinely granted.4 Others have enlisted in the Damages Army, which defends the position that specific performance should be awarded only with great restraint.5 Both positions have been illuminating, but none of the scholars has convinced members of the opposing Army to defect, and even within each Army most scholars have operated as independent units, largely out of contact with their comrades. This chapter sets up its flag in the admittedly dangerous zone between the two Armies. The principle developed in this chapter is as follows: A court should award actual specific performance unless (1) a special moral, policy, or experiential reason suggests otherwise in a given class of cases; or (2) the promisee can achieve virtual specific performance, that is, he can find in the market a commodity that he could not in good faith reject as an equivalent of the breached performance, given his demonstrable preferences. This principle will be referred to as the Specific Performance Principle.
Section I of this chapter discusses three reasons that favor a regime of routine specific performance: the Indifference Principle, the bargain principle, and informational effects. Section II then shows that although these reasons are weighty enough to put a thumb on the scale in favor of specific performance, they are not sufficiently weighty to justify a regime of routine specific performance, because there are a number of countervailing reasons against such a regime, including the nature of the enforcement process and problems of mitigation, opportunism, and jury trial. Section III further develops the Specific-Performance Principle and compares it to traditional doctrine. Section IV considers the application of the Specific Performance Principle to contracts for the sale of goods, real estate, and services.
I. Three Reasons in Favor of a Regime of Routine Specific Performance
A. The Indifference Principle
A major goal of remedies for breach of a bargain contract should be to satisfy the Indifference Principle—that is, to make the promisee indifferent in subjective terms between (1) a state of the world in which the promisor breaches and then is required to remedy the breach, and (2) a state (p.297) of the world in which the promisor performs. The Indifference Principle is well grounded in both policy and fairness.6 However, expectation damages fall far short of satisfying the Principle, partly because in the case of market-price damages the judicially constructed market price often fails to account for the buyer’s subjective value, but more importantly because a buyer’s lost profit is often cut off by the principle of Hadley v. Baxendale, the certainty principle, or other damage-limiting rules. Specific performance comes closer than expectation damages to satisfying the Indifference Principle because it potentially gives the promisee the very performance he bargained for. Accordingly, one reason to favor a regime of routine specific performance is that this regime better effectuates the Indifference Principle than does expectation damages.
B. The Bargain Principle
It is a fundamental premise of contract law that voluntary and well-informed actors are the best judges of how to maximize their own utility. Accordingly, contracts should normally be enforced according to their terms, absent defenses such as fraud, mistake, or unconscionability. An expectation-damages regime does not enforce contracts according to their terms: it offers a monetary equivalent of performance rather than performance itself. The terms of a contract normally require performance, not performance or its monetary equivalent. If A promises to sell her home to B, that is what A promises to do—not to either sell B her home or pay B damages.7 It is one thing to monetize injuries caused by a tort. In that case there is no alternative to monetization because the law cannot restore life or limb. In a breach-of-contract case, however, the law frequently can give a promisee just what he would have had if the promisor had acted properly by ordering the promisor to perform. Why shouldn’t the law do so?
C. Informational Effects
Often, both parties to a contract could be made better off by termination of the contract than by performance. However, there is an important difference between mutual termination and unilateral breach. There is little or no reason to suppose that a promisor will always or even typically know the value the promisee places on the contracted-for performance at the time the promisor makes a perform-or-breach decision. In contrast, a regime of routine specific performance would ensure that a promisor normally could not terminate a contract without the (p.298) promisee’s consent. Such a regime would therefore drive to the surface, before a termination decision is made, information concerning the value that the promisee places on the contracted-for performance.
II. Reasons against a Regime of Routine Specific Performance
The reasons in favor of a regime of routine specific performance are weighty enough to justify abandoning the traditional doctrine that specific performance is an exceptional remedy, to be awarded only if damages are inadequate. However, these reasons are not sufficiently weighty to justify a regime of routine specific performance, because reasons of policy, morality, and experience often weigh against specific performance. Some of these reasons are general in nature; others apply only to certain categories of cases. The general reasons concern the enforcement process, jury trial, mitigation, opportunism, and suits by sellers. These reasons are discussed in this Section.
A. The Enforcement Process
The process by which an award of specific performance is enforced differs radically from the process by which an award of damages is enforced. An award of damages is embodied in a judgment that states that the defendant is liable to the plaintiff for a designated amount of money. In the ordinary case if a judgment is neither paid nor settled the court issues a writ of execution to a sheriff in a county in which the defendant has property or income. The sheriff then seizes and sells the property or levies on the defendant’s income to pay the judgment.8 In contrast, an award of specific performance is embodied in a decree that orders a promisor to perform. Violation of such a decree constitutes contempt of court and is punishable by jail, a civil fine, or both.9 Against that background, at the remedy stage specific performance raises problems concerning social norms and the risk of error.
1. Social Norms
In our society there is a general preference for market solutions over intrusive state action. Specific performance is a very intrusive remedy: the state orders an actor to perform a designated and often complex action. Furthermore, specific performance is a highly coercive remedy. Not only does the court order an actor to take a designated action, it threatens to treat her as a (p.299) kind of criminal if she does not do so, by jailing or fining her. The prospect of jailing or fining one person to enhance another’s private gain is inharmonious with social norms concerning the appropriate use of the state’s monopoly on force. It is also inharmonious with the moral idea that there should be proportionality between wrongs and sanctions. Although breach of contract is a wrong it is a low-intensity wrong as compared with, for example, injuries to the person, fraud, or breach of trust.10
2. The Risk of Error
The legal system may make errors at two stages of a contracts case: the liability stage and the enforcement stage. At the liability stage the likelihood and consequence of errors are unlikely to differ greatly between damages and specific performance. At the enforcement stage, however, there may be significant differences. The risk of error in determining whether a money judgment has been satisfied is very small; in contrast, the risk of error in determining whether a defendant has properly performed under a decree of specific performance may be significant. Contracts often leave much room for interpretation concerning exactly what performance must be rendered, and a decree that requires performance will leave the same room. Accordingly, where specific performance is awarded either the promisor may interpret the contract incorrectly, and therefore mistakenly violate the decree, or the court may interpret the contract incorrectly, and therefore mistakenly conclude that the promisor has violated the decree.
Furthermore, the consequences of an error at the enforcement stage are much more severe in specific-performance cases than in damages cases. In the case of an error concerning whether a judgment for damages has been satisfied the defendant may be required to pay either more or less than she really owes. In contrast, in the case of an error concerning whether a decree of specific performance has been complied with the defendant may improperly be fined or sent to jail. There are ways to ameliorate this problem. For example, in a contempt hearing the court might either give the promisor the benefit of the doubt or give her a second bite at the apple. Nevertheless, the threat of jail or a fine always lies behind a decree of specific performance and these consequences provide another reason why specific performance should not be routinely awarded.
B. The Problem of Jury Trial
For constitutional and historical reasons a contracting party is normally entitled to a jury trial in a suit for damages but not in a suit for specific performance.11 However, a promisee who has a right to sue for specific performance does not for that reason lose his right to sue for damages. (p.300) Therefore, in most cases where a promisee has a right to sue for specific performance that right is effectively an option to sue for damages or specific performance—an option the promisor does not have. Accordingly, a routine right to specific performance would undesirably vest in promisees an option to deny promisors the right to a jury trial simply by suing for specific performance.
C. The Problem of Mitigation
The arguments in favor of routinely granting specific performance often seem to implicitly assume that specific performance is awarded instantaneously, but in reality litigation takes time. It is true that specific performance, especially in the form of temporary injunctive relief, can sometimes be awarded very quickly. Often or even typically, however, a suit for specific performance is not finally resolved until a significant time after the breach.12 In the context of specific performance the element of delay can give rise to problems concerning the mitigation of damages. It is a general principle of contract law that an aggrieved party should take reasonable steps to mitigate his loss and therefore the promisor’s damages.13 The duty to mitigate is desirable as a matter of policy because it reduces social costs. It is also desirable as a matter of morality. If, in a contractual setting, a promisor is at risk of incurring a significant loss, and the promisee could prevent that loss by taking an action that would not require forgoing a significant bargaining advantage, undertaking a significant risk, or incurring some other significant cost, then as a matter of fairness the promisee should be under a duty to take that action.14 A regime of routine specific performance would conflict with the principle of mitigation because under such a regime a promisee could get specific performance even if he had not mitigated.
The problem can be illustrated by the following paradigm case: B, a buyer, has contracted to purchase from S, a seller, a commodity that takes time to produce. B instructs S to stop performance because B determines that the value to her of the completed commodity would be less than the contract price. In cases that fall within this paradigm specific performance would involve significant private and social costs, because by continuing performance the seller drives up both the buyer’s costs and social costs without significantly benefiting herself. The problems raised by this paradigm case are well illustrated by Rockingham County v. Luten Bridge Co.15 Rockingham County and Luten Bridge had entered into a contract under which Luten would construct a bridge for the County. After Luten had begun to build the bridge the County decided that it didn’t want a bridge and instructed Luten to stop work. Separately the County cancelled construction of a road that was to lead to the bridge. Luten disregarded the instruction, completed the bridge, and sued for the contract price. Because the County didn’t want (p.301) the bridge, and indeed in the absence of the road had no possible use for the bridge, the cost of completing the bridge would have been a social loss.16
Moreover, the social loss in the paradigm case is not offset by a private benefit to the seller. In cases that fall within the paradigm, the seller’s damages are typically measured by the contract price minus the variable costs remaining to be incurred by the sellor at the time of breach.17 Under this formula if the buyer countermands, the service-provider recovers its lost profit whether or not it continues to perform. Continuing to perform therefore drives up the buyer’s damages but not the seller’s gain. For example, assume that in Rockingham County the contract price was $100,000, the variable costs of building the bridge were $80,000, and the County countermanded when Luten had incurred $40,000 of the projected variable costs. In that case if Luten stopped work when the County countermanded, Luten’s damages would have been $60,000—the $100,000 contract price minus the $40,000 variable costs remaining to be incurred. However, Luten’s gain from the damages would have been only $20,000, because $40,000 of the $60,000 damages would merely reimburse Luten for the variable costs it had incurred before breach. Now suppose that instead of stopping performance Luten completed performance (as in fact it did). If that were permissible Luten’s damages would simply be the contract price, $100,000. (There would be no deduction for variable costs remaining to be incurred because no such costs would remain.) However, Luten’s gain would still be only $20,000, because $80,000 of the $100,000 damages would merely reimburse Luten for its variable costs incurred. Accordingly, Luten’s continuation of performance after the County’s countermand would increase the County’s loss from $60,000 to $100,000 without making Luten any better off. In such cases, the service-provider should not be entitled to specific performance.
Another facet of the conflict between the mitigation principle and a regime of routine specific performance is illustrated by Weathersby v. Gore.18 On March 6, Gore, a farmer, agreed to sell Weathersby the cotton that Gore produced on 500 acres of land during the year, at a price of 30¢ per pound. On May 3, Gore gave Weathersby notice that he was canceling the contract. Weathersby could have covered by buying cotton from another vendor, but he did not. Soon after May 3, cotton was selling for around 35¢. On September 28, Weathersby sued for specific performance. By that date cotton had soared to 80¢. Awarding specific performance to Weathersby would have conflicted with the strong policy reasons in favor of the duty to mitigate, and the court properly held that Weathersby was not entitled to specific performance because he could have covered. As the court said:
Weathersby was adequately protected from any damages occasioned by Gore’s breach of the contract, if any occurred. He could have acquired additional cotton on the open market when Gore informed him he would no longer perform under the contract. He did not do so and thus, if (p.302) entitled to damages at all, must settle for the difference between the contract and the market price at the time Gore cancelled.19
In short, a regime of routine specific performance would sometimes or often conflict with the principle that a victim of breach has a duty to take reasonable actions to mitigate his damages.
D. Suits by a Seller
A regime of routine specific performance would also normally be inappropriate in suits by sellers. In case of breach by a seller a buyer’s market-price damages often fall far short of satisfying the Indifference Principle, partly because the constructed market price of a differentiated commodity often fails to account for the buyer’s subjective value and partly because a buyer’s lost profit is often cut off by the principle of Hadley v. Baxendale, the certainty principle, or other damage-limiting rules. In contrast, normally the only obligation of a buyer is to pay money. Accordingly, breach by a buyer normally does not involve the problem of measuring the promisee’s subjective valuation, because no given dollar has a different subjective value from any other given dollar. Similarly, breach by a buyer seldom involves problems under the principle of Hadley v. Baxendale because a seller normally will not forgo profitable opportunities simply because a given buyer has not made a payment. Ordinarily, therefore, a seller would be indifferent between damages for the nonpayment of money and a decree ordering the buyer to pay the money, except insofar as the seller sets an emotional value on the draconian sanctions that may be imposed for noncompliance with a decree. Accordingly, in the case of breach by a buyer a seller’s suit for damages for the nonpayment of money is equivalent to a suit for virtual specific performance, and the availability of such a suit should preclude a suit for actual specific performance. A right to routine specific performance against buyers would also be inappropriate because it would deny buyers a right to a jury trial and subject them to the threat of imprisonment for debt, for no sufficient reason.
E. The Problem of Opportunism
Alan Schwartz has made the following argument in favor of a regime of routine specific performance: (1) Specific performance is often an unsatisfactory remedy because a promisor whose performance is coerced is likely to render a defective performance. (2) Therefore, a promisee will sue for specific performance only if damages would be inadequate to put the promisee where he would have been if the contract had been performed. (3) That being so, if a promisee sues for specific performance we know that damages are inadequate. (4) Accordingly, specific performance should be routinely granted.20
This argument is defective because the second premise is incorrect. It is not the case that a promisee will sue for specific performance only if damages would be inadequate. Instead, in the (p.303) case of a contract of sale a promisee may sue for specific performance opportunistically, because specific performance offers the potential for a kind of extortion.
Take, for example, Weathersby v. Gore, the sale-of-cotton case. Cotton of a given grade is normally fungible, and nothing in the case indicated that there was anything special about Gore’s cotton. Accordingly, Gore, the farmer, presumably could have satisfied a decree of specific performance either by delivering his own cotton or by purchasing an equivalent amount of cotton of the same grade on the market and then delivering the purchased cotton. With one major caveat, therefore, an award of specific performance against Gore would have been indistinguishable from a suit for expectation damages measured by the difference between the contract price and the market price. Here is the caveat: a promisee who has a right to specific performance also has a right to sue for damages in lieu of specific performance. If the promisee sues for damages, his damages will be measured by the market price at the time of the breach. In contrast, if the promisee sues for specific performance, he can effectively force the seller to purchase the commodity, for redelivery to the buyer, at the market price at the time of the decree. In such cases, therefore, under a regime of routine specific performance an opportunistic buyer will initially bring suit for both specific performance and damages. If the price of the commodity rises after the breach the buyer will drop his suit for damages and make the seller purchase the commodity for the buyer at the market price at the time of the decree, or, more likely, make the seller settle for an amount approaching the difference between the market price at that time and the contract price. If, on the other hand, the price of the commodity falls after the breach, the buyer will drop his suit for specific performance and collect damages based on the market price at the time of breach. But where the buyer could have covered at the time of breach the law should not allow him to opportunistically put the seller in this fork.21
A regime of routine specific performance would also create a potential for opportunism where a seller breaches and the difference between the seller’s cost of performance and the value of the performance to the buyer is so great it is clear that the buyer does not really want specific performance. Instead, the buyer only wants a decree that he can opportunistically use as a lever to capture a portion of the difference between the seller’s cost and the buyer’s value. For example, in Eastern Steamship Lines, Inc. v. United States22 the Government requisitioned Eastern’s vessel, Acadia, for use in World War II. The Government agreed that before it redelivered the Acadia it would either restore the vessel to the condition the vessel it was in when it was delivered to the Government or pay Eastern the amount required to restore the vessel to that condition. The Government did neither, and Eastern brought suit for the projected cost of restoration. The cost of restoring the vessel would have been $4 million, but the value of the Acadia as restored would have been only $2 million. The court properly held that Eastern was not entitled to the cost of restoration. Now suppose Eastern sued for specific performance. Since the Government was in breach, under a regime of routine specific performance that remedy would be granted. But since Eastern would not really want specific performance, it would not have enforced the decree. Instead it would have opportunistically bargained with the Government to surrender its right to specific performance in exchange for a payment of some amount between $2 million and $4 million.
(p.304) Similarly, in Jacob & Youngs, Inc. v. Kent,23 Jacob & Youngs contracted to build a country house for Kent. The contract required the use of cast-iron plumbing pipe manufactured by Reading. After the house had been completed, Kent learned that Jacob & Youngs had installed cast-iron pipe manufactured by Cohoes. Cohoes pipe was equal in quality, appearance, market value, and cost to Reading pipe—“indeed, the same thing, though manufactured in another place.”24 Because the pipe was largely encased within the walls of the completed house, installation of Reading pipe in place of the Cohoes pipe would have required a large expenditure to demolish and then reconstruct substantial parts of the house. If a court ordered Jacob & Youngs to specifically perform, clearly Kent would not have enforced the decree. Instead, he would have opportunistically bargained with Jacob & Youngs to surrender his right to specific performance in exchange for an amount between (1) the value to him of the difference between the Cohoes pipe and the Reading pipe, and (2) the cost of demolishing and reconstructing the house. Cases such as Eastern Steamship and Jacob & Youngs further illustrate that just because a promisee sues for specific performance doesn’t mean he wants it.
III. The Specific Performance Principle
The Specific Performance Principle—that actual specific performance should be awarded unless a special moral, policy, or experiential reason suggests otherwise in a given class of cases or the promisee can achieve virtual specific performance—balances the considerations for and against routine specific performance. The Principle requires actual specific performance to be awarded unless a special moral, policy, or experiential reason suggests otherwise in a given class of cases or the promisee can achieve virtual specific performance. Under this Principle, specific performance should be liberally but not routinely granted.
Often, the result under the Specific Performance Principle would be the same as the result under traditional doctrine. There are, however, three major differences between the Principle and traditional doctrine.
First, the tests under traditional doctrine are court-centered; that is, the tests depend on whether, in the view of the court, damages are adequate, or readily measurable, or the contracted-for commodity is unique. This is true even for the most elegant version of traditional doctrine, developed by Anthony Kronman, which conflates the issues of measurability and uniqueness:
Although it is true in a certain sense . . . that every good has substitutes—this is an empty truth. What matters, in measuring money damages, is the volume, refinement, and reliability of the available information about substitutes for the subject matter of the breached contract. When the relevant information is thin and unreliable, there is a substantial risk that an award of money damages will either exceed or fall short of the promisee’s actual loss. Of course this risk can always be reduced—but only at great cost when reliable information is difficult to obtain. Conversely, when there is a great deal of consumer behavior generating abundant and highly dependable (p.305) information about substitutes, the risk of error in measuring the promisee’s loss may be reduced at much smaller cost. In asserting that the subject matter of a particular contract is unique and has no established market value, a court is really saying that it cannot obtain, at reasonable cost, enough information about substitutes to permit it to calculate an award of money damages without imposing an unacceptably high risk of undercompensation on the injured promisee.25
In contrast to traditional doctrine, the Specific Performance Principle is promisee-centered. The question under this Principle is whether at the time of breach a commodity that the promisee could not in good faith reject as an equivalent of the breached commodity, given the promisee’s demonstrable preferences, was readily available in the market. Accordingly, as Tom Ulen states:
[S]ubjective valuation rather than uniqueness . . . makes specific performance attractive. Clearly, there is a relationship between uniqueness and subjective valuation: someone is more likely to attach a value greater than market value to a rare, one-of-a-kind item than to a highly fungible item. However, the class of things to which someone attaches a subjective valuation is greater than the class of unique items.26
A second difference between the Specific Performance Principle and traditional doctrine is that often the Principle will lead easily to the conclusion that specific performance should be granted in cases where a court applying traditional doctrine could reach that conclusion only with difficulty, if at all. For example, in Allegheny Energy, Inc. v. DQE, Inc.,27 the issue was whether Allegheny, a large publicly held utility, could specifically enforce a merger contract with another large publicly held utility, DQE. Applying traditional doctrine, the district court denied specific performance on the ground that damages were adequate. The Court of Appeal also applied traditional doctrine, but reversed and granted specific performance on the basis of a long analysis exploring in great detail why damages were inadequate because they were difficult to measure. In contrast, under the Specific Performance Principle no detailed analysis would have been required. There were no special policy, moral, or experiential reasons not to grant specific performance, and it would strain credulity to believe that Allegheny could have achieved virtual specific performance by finding an alternative merger partner that had the business and financial characteristics of DQE and was willing to merge on the same terms and conditions as was DQE.
A third difference between the Specific Performance Principle and traditional doctrine is that the Principle provides a relatively clear standard while traditional doctrine does not. As Dobbs points out, adequacy of damages has become transformed from a test to a factor. Once that transformation occurred, traditional doctrine ceased to provide a standard to govern when specific performance should be awarded. In effect, the rules of traditional doctrine became a mere checklist with highly uncertain application. In contrast, the Specific Performance Principle is both a better explanation of the cases and a better predictor of results.
This Section will elaborate the Specific Performance Principle by illustrating its application to contracts for the sale of goods, real estate, and services.
A. Contracts for the Sale of Goods
Whether specific performance of a contract for the sale of goods should be awarded under the Specific Performance Principle depends on four variables: whether the buyer or the seller breached the contract, the degree of the goods’ differentiation, the nature of the market, and the purpose of the contract.
1. Seller’s Breach of a Contract for the Sale of Goods
For purposes of considering whether specific performance should be ordered in contracts for the sale of goods, goods can be divided into three categories: undifferentiated or fungible—that is, homogeneous goods; highly differentiated goods; and moderately differentiated goods.
a. Homogeneous Goods to be Delivered in the Near Future
The concept of homogeneous goods typically conjures up basic commodities, such as wheat, coal, or steel. For purposes of specific performance, however, new manufactured goods may also be homogeneous. So, for example, new 2016 Toyota Camry LEs with a given set of factory-installed options are homogeneous, and so are new Timken roller bearings of given specifications. However, neither new cars as a class nor new roller bearings as a class are homogeneous.
The normal case. In the normal case homogeneous goods are sold on a relatively thick market for delivery in the relatively near future. In such a case specific performance should not be granted for breach by the seller, because the buyer can accomplish virtual specific performance by purchasing an identical substitute on the market and suing for the difference between the cover price and the contract price. The result will not produce a shortfall as compared to actual specific performance. Because the commodity is homogeneous, subjective valuation is not an issue. Because a covering buyer normally will not incur a lost profit as a result of the breach, neither the principle of Hadley v. Baxendale nor the certainty principle should present problems. For example, assume that Seller agrees to sell 1,000 bushels of No. 2 wheat to Buyer at $4.00/bushel, with delivery on September 1. Buyer plans to use the wheat to fill a contract he has made to sell No. 2 wheat to T at $4.50/bushel. On September 1, Seller breaches. At the time of breach, the market price of No. 2 wheat is $4.25/bushel. If Buyer were instantaneously awarded specific performance he would obtain the wheat from Seller at $4.00/bushel, deliver the wheat to T, and earn a profit of 50¢/bushel. If specific performance is not an available remedy, Buyer will cover (p.307) at $4.25/bushel, deliver the wheat to T, and sue Seller for cover damages. Buyer will again earn 50¢/bushel—a profit of 25¢/bushel on his sale to T, and damages of 25¢/bushel against seller—and therefore will have accomplished virtual specific performance. A similar analysis applies if Buyer purchases the wheat for use rather than resale—for example, if Buyer is a baker who plans to use the wheat to make bread to sell to supermarkets.
Of course, Buyer will not be as well off with virtual specific performance as he would have been if the contract had been performed, because to accomplish virtual specific performance the buyer must pay the costs of dispute-resolution and may not be adequately compensated by prejudgment interest. However, those shortfalls will also occur if the buyer seeks actual specific performance. Accordingly, even though the buyer is not as well off with virtual specific performance as he would have been if the contract had been performed, he is as well off as he would have been with actual specific performance.
Alan Schwartz has argued that specific performance should be routinely available even in the case of homogeneous goods. A lynchpin of his argument is that a seller can cover just as effectively as a buyer and can then specifically perform by transferring the replacement goods to the buyer.28 This is not self-evident. Sellers are experts in knowing the best channels through which to sell, but cover involves a purchase, and buyers are experts in knowing the best channels through which to buy. Furthermore, even if a seller can cover as easily as a buyer that would not provide a sufficient reason to grant actual specific performance when the buyer can easily accomplish virtual specific performance. Why use a highly intrusive and coercive remedy, and deny the seller the right to a jury trial, when a market transaction will put the buyer in exactly the same position? Moreover, in the normal case of a contract for the sale of homogeneous goods specific performance is not only unnecessary but inappropriate, because it would conflict with the principle of mitigation, as illustrated by Weathersby v. Gore, the cotton case.
b. Long-Term Supply Contracts
Suppose that a contract for the sale of homogeneous goods is a long-term supply contract rather than a contract to deliver goods in the near future. In that case specific performance should be required because of two related respects in which long-term contracts for the sale of homogeneous goods differ from the normal case.
First, buyers who enter into a long-term contract for the supply of homogeneous goods often do so because they place an especially high premium on the reliability of supply. Usually, only actual specific performance will provide the buyer with the high degree of reliability for which he bargained.
Second, and more important, in a long-term contract for the supply of homogeneous goods the subject-matter of the contract is not just the goods. What the buyer contracts for is not a certain number of goods at a given price, but a certain number of goods at a given price over a given period of time. Accordingly, the issue is not whether the goods are homogeneous, but whether contracts to supply such goods over the same period of time are homogeneous. Where the buyer has contracted for a long-term supply of goods the fact that goods of the same kind are readily available on the market does not mean that the buyer can cover. Rather, the buyer can cover only if contracts for the sale of such goods over the same period of time are readily available on the (p.308) market. Normally that will be unlikely. As a result, actual specific performance should normally be granted in such cases.
These points are nicely illustrated by Laclede Gas Co. v. Amoco Oil Co.29 In 1970, Amoco and Laclede (more accurately, their predecessors in interest) entered into a master contract. This contract was designed to allow Laclede to provide local propane-gas-distribution systems to residential developments in Missouri until natural-gas mains were extended to a given development. The master contract contemplated that a developer would apply to Laclede for a local propane-distribution system. Laclede could then request Amoco to supply propane to Laclede for the development. Laclede would make such a request in a letter agreement whose form was prescribed by the master agreement. If Amoco decided to supply propane to the development it would bind itself to do so by signing the letter agreement. Laclede, for its part, agreed to pay for the propane it bought from Amoco at Amoco’s posted price for propane plus 4¢ per gallon.
Since Laclede agreed to pay an ever-changing price that was geared to the market, clearly the primary purpose of the contract was to ensure reliability of supply, not reliability of price. In breach of the letter agreements it had made, Amoco stopped supplying propane to Laclede. At the time of the breach, propane was readily available on the open market. The court nevertheless properly ordered specific performance, because even though propane was readily available on the market there was uncontradicted expert testimony “that Laclede probably could not find another supplier of propane willing to enter into a long-term contract such as the Amoco agreement, given the uncertain future of worldwide energy supplies.”30
c. Goods Not Readily Available in the Market
Specific performance of a contract for the sale of homogeneous goods should also be granted if the goods are not readily available in the market. This would be the case, for example, where the seller is a monopolist and there is no well-developed aftermarket for its goods, or where the relevant kind of goods have come into critically short supply—perhaps because of a shock such as war—and obtaining the goods on the market would be very difficult. For example, in Kaiser Trading Co. v. Associated Metals & Minerals Corp.31 Associated agreed to supply Kaiser with 4,000 tons of cryolite, a chemical compound indispensable to the production of aluminum, for use in Kaiser’s aluminum plants, but had only supplied 500 tons at the time of Kaiser’s suit.32 At the time of Kaiser’s suit only a few hundred tons of cryolite were available on the open market. The court properly ordered specific performance. Similarly, in Eastern Air Lines, Inc. v. Gulf Oil Corp.,33 Gulf contracted to supply Eastern with its requirements of aviation fuel in certain cities. Gulf renounced the contract during the energy crisis caused by the OPEC oil boycott in the 1970s. The court found that if Gulf ceased to supply Eastern with fuel “the result will be chaos,” and ordered specific performance.34
If a good is highly differentiated—one of a kind—then by hypothesis virtual specific performance is not available, and actual specific performance normally should and will be granted. The high degree of differentiation may be either objective or subjective. As both an objective and subjective matter, an Old Master painting is highly differentiated from any other painting. So is any other nontrivial work of art, or a controlling block of shares in a closely held corporation. Even a dollar bill can be highly differentiated as a subjective matter if it is the first dollar that a business earned.
3. Moderately Differentiated Goods
Suppose a contract for the sale of goods involves goods that are moderately differentiated. An example is a good that is similar, but not identical, to other used goods of the same kind. For example, suppose Timken Roller Bearings Company agrees to sell Buyer 20,000 400-millimeter spherical roller bearings. The bearings are substantially but not completely identical to 400-millimeter spherical roller bearings made by other manufacturers. Timken breaches. There is no significant aftermarket for Timken roller bearings. Under the Specific- Performance Principle the issue should not be whether other manufacturers’ 400-millimeter spherical roller bearings are objectively close substitutes for Timken’s. Instead, it should be whether the buyer can in good faith decline to accept other manufacturers’ roller bearings as replacements on the basis of its demonstrable preferences—because, for example, a certain aspect of Timken roller bearings is especially useful for its purposes, or because it wants all of its machines to have the same roller bearings, or because Timken roller bearings have a special reputation for reliability. In any of these cases the buyer cannot achieve virtual specific performance by a market transaction, and therefore should be entitled to actual specific performance. This approach is reflected in an illustration in Restatement Second:
A contracts to sell to B the racing sloop “Columbia,” this sloop being one of a class of similar boats manufactured by a particular builder. Although other boats of this class are easily obtainable, their racing characteristics differ considerably and B has selected the “Columbia” because she is regarded as a witch in light airs and, therefore, superior to most of the others. A repudiates the contract and B sues for specific performance. Specific performance may properly be granted.35
In the normal case a seller of goods should not be awarded specific performance for a breach by a buyer: Because a buyer normally only agrees to pay money, a seller ordinarily can achieve virtual specific performance by reselling the contracted-for commodity on the market and then bringing a damages action for the difference between the resale price and the contract price plus the cost of making the second sale. This is just the position taken in the Uniform Commercial Code. Article 2 of the Code contemplates actions for specific performance, in appropriate cases, by buyers or goods, but not by sellers.36 Suppose that the seller is unable, after reasonable effort, to resell the goods at a reasonable price or the circumstances indicate that such an effort will be unavailing. UCC Section 2–709 provides that if the seller has identified the contracted-for goods to the contract—that is, earmarked the goods for delivery to the buyer—he can bring an action against the buyer for the price of the goods. This action has sometimes been characterized as one for specific performance,37 probably because it requires the buyer to do exactly what he promised to do—that is, to pay the purchase price. In fact, however, the action is at law for damages and therefore constitutes virtual, not actual, specific performance. Because the action is at law the buyer is entitled to a jury trial and the judgment is enforceable by a levy on the buyer’s property or income, not by contempt.
B. Contracts for the Sale of Real Property
1. Breach by the Seller
Where a seller breaches a contract to sell real property the traditional rule is that specific performance will be awarded. This rule is rested on the ground that all real property is unique.38 That proposition is inaccurate. Real property may be either highly differentiated, such as a Frank Lloyd Wright home or a landmark commercial building; moderately differentiated, such as most homes and commercial properties; or homogeneous, such as much tract housing and raw land. A few cases recognize this reality and criticize the traditional rule. For example, in Semelhago v. Paramadevan,39 decided by the Canadian Supreme Court, the seller breached a contract to sell a home. Although the case did not involve a decree of specific performance, the court forcefully pointed out that not all real estate is unique:
While at one time the common law regarded every piece of real estate to be unique, with the progress of modern real estate development this is no longer the case. Residential, business and industrial properties are mass produced much in the same way as other consumer products. If a deal falls through for one property, another is frequently, though not always, readily available. (p.311)
It is no longer appropriate, therefore, to maintain a distinction in the approach to specific performance as between realty and personality. It cannot be assumed that damages for breach of contract for the purchase and sale of real estate will be an inadequate remedy in all cases. . . .40
In Watkins v. Paul,41 decided by the Idaho Supreme Court, the court refused, on comparable grounds, to order specific performance of an option to purchase a tract of land:
The evidence fails to show that the plaintiffs need the land in question for any particular, unique purpose, which is one of the main reasons for granting specific performance; on the contrary, the plaintiffs’ own evidence shows that they seek to obtain the land only so that they may resell it for profit. Under these circumstances, specific performance would bring the plaintiffs no greater relief than would damages in the amount of their lost profit.42
Semelhago and Watkins represent a minority view. Although they are correct in stating that some real property is homogeneous, there are two related reasons why contracts to sell real property nevertheless should be specifically enforceable by the buyer in all cases.
The first reason concerns administrability. Homogeneous real property is the exception, not the rule. Most real property has special characteristics that would justify a buyer’s good-faith determination that a substitute is not readily available in the market, given the buyer’s demonstrable preferences. Because most real property will have such characteristics it is administratively preferable to adopt a simple rule covering all real property rather than to engage in expensive case-by-case analysis.
The second reason why contracts to sell real property should routinely be specifically enforceable by the buyer is that specific performance against a seller of real property usually does not raise all of the problems that are frequently associated with that remedy. Under modern statutes an action for specific performance of a contract to sell real property normally does not terminate in a decree against the seller enforceable by contempt. Instead, such an action normally terminates in a self-executing decree that has the effect of a deed and can be recorded in the Registry of Deeds.43 Accordingly, the seller’s property is normally transferred without any action on her part, so that specific performance in this context is normally neither highly intrusive nor highly coercive and is not subject to a serious risk of error at the enforcement stage.
2. Breach by the Buyer
In contracts for the sale of real property, specific performance is also usually appropriate against buyers. Almost invariably, the purpose of a decree in such cases is not to require the buyer to pay money but simply to cut off—foreclose—the buyer’s interest in the property so that the seller can resell the property free and clear. Although a foreclosure decree is commonly referred to as specific performance, it is self-executing. Therefore, like a decree against a defaulting seller of (p.312) property, a decree against a defaulting buyer usually does not entail the problems that may be raised by a suit for specific performance.
C. Contracts for the Provision of Services
The application of the Specific-Performance Principle to contracts for the provision of services raises several kinds of problems. This Section begins with contracts for personal services, such as employment contracts,44 and then considers contracts for the provision of services more generally.
1. Contracts for Personal Services
a. Breach by the Employee
Where an employee breaches an employment contract her employer will often be unable to achieve virtual specific performance because he will be unable to find an equivalent employee. Nevertheless, specific performance should not and will not be awarded to an employer because of a special moral problem: a decree ordering an employee to specifically perform an employment contract would seem too much like involuntary servitude or peonage. As Doug Laycock puts it:
The reason for [the rule that employment contracts will not be specifically enforced against employees] is a substantive law commitment to free labor. Despite the vast social distance between chattel slavery and specific performance of contracts with professional athletes and entertainers, similar policies apply to both. . . . An order to work on pain of contempt produces servitude that is involuntary when the services are performed.45
In theory, there is less objection to simply enjoining a breaching employee from working for a competitor of the employer during the remaining duration of the breached contract. Often, however, such an injunction would be tantamount to ordering specific performance because if the employee cannot work for a competitor she might be unable to earn a reasonable living. In that case she may be forced to choose between working for her original employer or not working at all. Accordingly, the rule in such cases should be and largely is that a breaching employee will not be enjoined from working for a competitor if the injunction would effectively force her to go into a different line of work or to work for her former employer.46
The moral prohibition on involuntary servitude does not provide a reason for refusing specific enforcement against a breaching employer. Moreover, an employer is not like an ordinary purchaser of services, who simply pays cash for the performance of work. Instead, an employer also provides the employee with an opportunity to learn skills, to flourish, and to be a member of a workplace community. Accordingly, an employee usually cannot obtain virtual specific performance through a market transaction. However, where an employment relationship involves an important element of trust and confidence—for example, in the case of a management-level employee, a professional, or an agent—specific enforcement against the employer would be undesirable for a different reason: trust and confidence cannot be imposed by judicial decree, and without trust and confidence such a relationship would differ from what the employer bargained for. Requiring an employer to rehire an employee whose employment involves trust and confidence would therefore force the employer to pay for something that he can no longer obtain, albeit due to his own breach.
On the other hand, where the employment relationship does not involve trust and confidence, as is the case with assembly-line workers or many other nonmanagement employees, specific performance should be granted against the employer. That is not the law now, but in some respects it is the practice. Labor arbitrators commonly order reinstatement of improperly discharged employees who are covered by a union agreement.47 Reinstatement is also routinely ordered by the National Labor Relations Board in cases of a discharge in violation of the National Labor Relations Act.48 Other federal statutes also provide for reinstatement of an employee who is discharged for a reason that violates the statute.49
2. Other Contracts for the Provision of Services
Courts often refuse to specifically enforce contracts for the provision of services—particularly construction contracts—even when personal services are not involved, on the ground that specific performance in such cases would require undue judicial supervision. For example, in London Bucket Co. v. Stewart50 London Bucket had agreed “to furnish and install (subletting installation)” a heating system in Stewart’s motel guaranteed to heat the motel to seventy-five degrees in winter and to supervise all work.51 Stewart alleged that London Bucket had installed the system “in an incompleted, unskilled unworkmanlike manner, never finishing same, and (p.314) of such size, type and inferior quality of materials that same does not to a reasonable degree perform the purpose contemplated.”52 Stewart asked that London Bucket be compelled to specifically perform the contract before cold weather set in. The Kentucky Supreme Court declined to award specific performance on the ground that “[i]t is the general rule that contracts for building construction will not be specifically enforced . . . in part, because of the incapacity of the court to superintend the performance.”53
Courts apply the undue-need-for-judicial supervision rule irregularly and inconsistently. In London Bucket itself the lower court had awarded specific performance, relying on two Kentucky cases, Schmidt v. Louisville & N.R. Co.54 and Pennsylvania Railroad Co. v. City of Louisville.55 In Schmidt the defendant was ordered to operate a railroad under the terms of a lease. In Pennsylvania Railroad several railroad companies were ordered to eliminate grade crossings as they had contracted to do. In reversing the lower court in London Bucket, the Kentucky Supreme Court distinguished these cases on very thin grounds. Both cases, the court said, “involve[d] matters of great magnitude and were of public interest and welfare. In each case the court in effect said, ‘Proceed to do what you contracted to do.’ There was no question of partial or incomplete or faulty performance of a building contract.”56 Hmm?
There is a reason why the courts apply the supervision rule irregularly and inconsistently. Denying specific performance of a contract to provide services on the ground that it would entail undue judicial supervision is almost never justified, because normally no more judicial oversight is required for specific performance than for damages. Take London Bucket. If the court had awarded specific performance it would have issued a decree requiring London Bucket to fulfill its obligations under the contract. If thereafter Stewart (the owner of the motel) believed that London Bucket had not fulfilled its obligations under the contract he would bring London Bucket back to court for a contempt hearing. At that hearing Stewart would introduce evidence to show that London Bucket had not fulfilled its obligations under the decree—that is, under the contract. The evidence at such a hearing would be identical to the evidence at a hearing on damages.
To put this differently, in contracts cases a decree of specific performance against a service-provider normally will not require the judge either to leave the courtroom or to make a determination that is materially different from the determination that would be required in a suit for damages. There may be some cases, probably rare, in which this would not be true. In such cases the court can properly decline to grant specific performance on the ground that the decree would not be easily administrable. There is no justification, however, for a general rule that treats construction or other service contracts as a special case on the ground that specific performance would require undue judicial supervision.
(p.315) Once the supervision issue is put off the table the question is squarely raised: When should contracts for the provision of nonemployment services be specifically enforceable against the service-provider? Under the Specific-Performance Principle actual specific performance of contracts for the provision of services should be awarded unless a special moral, policy, or experiential reason suggests otherwise in a given class of cases or the promisee can achieve virtual specific performance. As in the case of goods, virtual specific performance of contracts for the provision of services has two advantages over actual specific performance. First, virtual specific performance avoids the problems of intrusiveness, coercion, and opportunism; the potentially drastic effect of error at the enforcement stage; and the denial of a jury trial at the option of the promisee. Second, because promisees can obtain virtual specific performance immediately, while they often cannot obtain actual specific performance for a significant period of time, virtual specific performance normally diminishes the social and private losses that result from delay.
It might be thought that because services usually are differentiated, a purchaser of services ordinarily would not be able to find in the market a commodity that he could not in good faith reject as an equivalent of the breached performance, given his demonstrable preferences. That is not the case. A basic principle of contract law, embodied in Restatement Second Section 318, is that a promisor can delegate her contractual duties to a third person unless the promisee has a “substantial interest in having [the promisor] perform or control the acts promised.”57 The Comment to this section adds, “Delegation of performance is a normal and permissible incident of many types of contract. . . . The principal exceptions relate to contracts for personal services and to contracts for the exercise of personal skill or discretion.”58 The thrust of Section 318 is exemplified by Illustration 3: “A contracts to build a building for B in accordance with specifications, and delegates the plumbing work to C. Performance by C has the effect of performance by A.”59 This reasoning should apply to most contracts for the provision of services, as in Illustration 3. If a promisor who has agreed to provide services could have delegated performance under the contract, the promisee has implicitly agreed that performance by a third person is equivalent to performance by the promisor. Accordingly, in such cases the promisee can often or even usually achieve virtual specific performance by making a replacement contract with an appropriate alternative service-provider. Since the promisee can achieve virtual specific performance by making such a contract and suing the promisor for replacement-price damages, he should not be entitled to actual specific performance. Conversely, if the promisor’s performance could not be delegated because either the contract or the law of assignments prohibits delegation, then a replacement performance usually would not constitute virtual specific performance, and actual specific performance should normally be awarded.
In contrast to expectation damages, specific performance gives the promisee just what he contracted to obtain, at least if we put aside the limits that are endemic to all legal remedies. Accordingly, specific performance comes much closer than conventional expectation damages to satisfying the Indifference Principle and effectuating contracts. A right to specific performance also puts desirable pressure on promisors who wish to terminate a contract to do so efficiently and properly through a mutually negotiated termination based on full information about the value the promisee places on performance, rather than inefficiently and improperly through a unilateral breach based on limited information. However, specific performance has costs as well as benefits. It is highly intrusive and highly coercive. It is backed by draconian penalties that may be out of scale with the end to be achieved. It can give rise to opportunistic exploitation. It effectively gives a promisee a unilateral right to decide whether his case will be tried by a judge or by a jury. It can conflict with the principle of mitigation. Error at the enforcement stage has peculiarly severe consequences.
Motivated by the benefits of specific performance, some argue that specific performance should be routinely awarded. Motivated by the costs, others argue that the remedy should be exceptional. Both kinds of argument are typically based on a single metric, such as the inadequacy of expectation damages, on the one hand, or the theory of efficient breach, on the other. For the reasons discussed in Chapter 24, single-metric arguments will not stand up to scrutiny. Where a choice involves both costs and benefits, as is true of specific performance, there is no escape from the need to craft a principle that, based on prudential judgment, gives appropriate weight to all costs and benefits, rather than a principle based on a single metric that inevitably ignores some of the costs, some of the benefits, or both. The Specific Performance Principle, which puts a thumb on the scale in favor of specific performance—but only a thumb—is based on such a judgment. Under that Principle actual specific performance should be awarded unless either special moral, policy, or experiential reasons suggest otherwise in a given class of cases or the promisee can accomplish virtual specific performance.
(1.) See, e.g., RESTATEMENT (SECOND) OF CONTRACTS §§ 357, 359–60, 366–67 (AM. LAW INST. 1981) [hereinafter RESTATEMENT SECOND]; Lon L. Fuller & Melvin Aron Eisenberg, BASIC CONTRACT LAW 334–35, 338–40 (8th ed. 2006).
(2.) 1 DAN B. DOBBS AND CAPRICE L. ROBERTS, LAW OF REMEDIES § 2.5(3), at 100 (3d ed. 2018) (footnotes omitted); see also ARTHUR LINTON CORBIN, CORBIN ON CONTRACTS § 63.7 (Joseph M. Perillio ed., 2003 ed.) (“Objections on the ground of inadequacy of money damages are less often made than formerly and are given less consideration by the judges.”); Thomas S. Ulen, The Efficiency of Specific Performance: Toward a Unified Theory of Contract Remedies, 83 MICH. L. REV. 341, 374–75 (1984); Walgreen Co. v. Sara Creek Prop. Co., 966 F.2d 273 (7th Cir. 1992) (adequacy is often not mentioned in the cases, and where mentioned is not given much weight); Douglas Laycock, THE DEATH OF THE IRREPARABLE INJURY RULE 253–54 (1991).
(4.) Alan Schwartz, The Case for Specific Performance, 89 YALE L.J. 271, 281 (1979).
(5.) This position is implicit in the theory of efficient breach. See, e.g., Anthony T. Kronman, Specific Performance, 45 U. CHI. L. REV. 351 (19778); Timothy J. Muris, The Costs of Freely Granting Specific Performance, 1982 DUKE L.J. 1053; Edward Yorio, In Defense of Money Damages for Breach of Contract, 82 COLUM. L. REV. 1365 (1982).
(7.) Oliver Wendell Holmes Jr. famously said that “the duty to keep a contract at common law means a prediction that you must pay damages if you do not keep it,—and nothing else.” Oliver W. Holmes, Jr., The Path of the Law, 10 HARV. L. REV. 457, 462 (1897). This aphorism is often interpreted to mean that in Holmes’s view a contract is only a promise to perform or to pay damages. However, Joseph Perillo has shown that taking Holmes’s writings as a whole, this was not Holmes’s view. Joseph M. Perillo, Misreading Oliver Wendell Holmes on Efficient Breach and Tortious Interference, 68 FORDHAM L. REV. 1085 (2000). For example, in a letter to Sir Frederick Pollock, Holmes took issue with “the impression that I say that a man promises either X or to pay damages. I don’t think a man promises to pay damages in contract any more than in tort. He commits an act that makes him liable for them if a certain event does not come to pass, just as his act in tort makes him liable simpliciter.” Letter from Oliver W. Holmes to Sir Frederick Pollock (December 11, 1928), in 2 HOLMES-POLLOCK LETTERS, 223 (Mark D. Howe ed., 2d ed. 1961).
(9.) Judgments are enforceable by a variety of techniques known collectively as supplementary proceedings. Supplementary proceedings may occasionally include orders to the defendant or others to implement the proceedings, and violation of these orders may be treated as contempt, but such orders are out of the ordinary course. See id. § 1.4, at 18.
(10.) See Henrik Lando & Caspar Rose, On the Enforcement of Specific Performance in Civil Law Countries, 24 INT’L REV. L. ECON. 473, 483 (2004). See also Doug Rendleman, The Inadequate Remedy at Law Prerequisite for an Injunction, 33 U. FLA. L. REV. 346, 355–56 (1981).
It is true that technically speaking, a promisor who is held in contempt for failing to render specific performance is punished for disobeying the court, not for breaking a contract. However, this is true only technically speaking, because if the contract is performed there will be no contempt.
(12.) See, e.g., Weathersby v. Gore, 556 F.2d 1247, 1250 (5th Cir. 1977) (contract made in 1973, appeal decided in 1977).
(13.) See generally Charles J. Goetz & Robert E. Scott, The Mitigation Principle: Toward a General Theory of Contractual Obligations, 69 VA. L. REV. 967, 969 (1983).
(15.) 35 F.2d 301 (4th Cir. 1929).
(16.) The court properly held that Luten could not recover the contract price. Id. at 307. This is the American rule, although the English rule may be different. See White & Carter (Councils) Ltd. v. McGregor,  A.C. 413 (HL) 427 (appeal taken from Scot.); Melvin A. Eisenberg, The Duty to Rescue in Contract, 71 FORDHAM L. REV. 647, 656–57 (2007).
(17.) Under an equivalent formula, the seller’s damages are measured by lost profits, based on the contract price minus total variable costs, plus variable costs incurred prior to the breach. Both formulas are subject to an offset for amounts previously paid by the buyer, which can be disregarded for present purposes. Both formulas lead to the same results.
(18.) 556 F.2d 1247 (5th Cir. 1977).
(19.) Id. at 1258–59; see also Duval & Co. v. Malcom, 214 S.E.2d 356, 359 (Ga. 1975).
(22.) 112 F. Supp. 167 (Ct. Cl. 1953).
(23.) 129 N.E. 889 (N.Y. 1921).
(24.) Id. at 890.
(27.) 171 F.3d 153 (3d Cir. 1999).
(29.) 522 F.2d 33, 40 (8th Cir. 1975).
(31.) 321 F. Supp. 923 (N.D. Cal. 1970).
(32.) Id. at 925.
(33.) 415 F. Supp. 429 (S.D. Fla. 1975).
(34.) Id. at 442. See also Texas Co. v. Cent. Fuel Oil Co., 194 F. 1, 10–11, 24 (8th Cir. 1912) (crude oil); Kann v. Wausau Abrasives Co., 129 A. 374, 378–79 (N.H. 1925) (garnets); G.W.S. Serv. Stations, Inc. v. Amoco Oil Co., 346 N.Y.S.2d 132, 143 (N.Y. Sup. Ct. 1973) (gasoline); DeMoss v. Conart Motor Sales, Inc., 72 N.E.2d 158, 160 (Ohio Ct. C.P. 1947), (new autos), aff’d, 78 N.E.2d 675 (Ohio 1948). Furthermore, even if a commodity is generally available, specific performance should and will be granted if the commodity is not available promptly or in the local marketing area. See Bomberger v. McKelvey, 220 P.2d 729, 735–36 (Cal. 1950) (salvaged plate glass and skylights); Cumbest v. Harris, 363 So. 2d 294, 297 (Miss. 1978) (stereo components).
(35.) RESTATEMENT SECOND § 360 cmt. b, illus. 2.
(36.) Compare U.C.C. § 2-703 (AM. LAW INST. & UNIF. LAW COMM’N 2002) (seller’s remedies in general) with U.C.C. § 2-711 (AM. LAW INST. & UNIF. LAW COMM’N 2002) (buyer’s remedies in general).
(38.) RESTATEMENT SECOND § 360 cmt. e.
(39.)  2 S.C.R. 415.
(40.) Id. at 428.
(41.) 511 P.2d 781 (Idaho 1973).
(42.) Id. at 783.
(43.) See, e.g., GA. CODE ANN. § 9-11-70 (2017); See also Silverman v. Alday, 38 S.E.2d 419, 423 (Ga. 1946).
(44.) For ease of exposition, the term employee will be used to mean a person who contracts to provide personal services and the term employer will be used to mean a person who contracts to have personal services rendered. Accordingly, for present purposes, contracts with professionals and agents are treated as employment contracts.
(46.) RESTATEMENT SECOND § 367(2).
(47.) See Martha S. West, The Case against Reinstatement in Wrongful Discharge, 1988 U. ILL. L. REV. 1, 22 (“The universal arbitration remedy for an improper discharge is reinstatement. . . .”).
(48.) 29 U.S.C. § 160(c) (2015); See also Paul Weiler, Promises to Keep: Securing Workers’ Rights to Self-Organization under the NLRA, 96 HARV. L. REV. 1769, 1791 (1983) (explaining that reinstatement is a “standard form of relief” under the NLRA).
(49.) See Civil Rights Act of 1964 § 706(g), 42 U.S.C. § 2000e-5(g)(1) (2015); Americans with Disabilities Act § 107, 42 U.S.C. § 12117 (2015); Age Discrimination in Employment Act § 7(b), 29 U.S.C. § 626(b) (2015).
(50.) 237 S.W.2d 509 (Ky. 1951). See also, e.g., N. Del. Indus. Dev. Corp. v. E.W. Bliss Co., 245 A.2d 431, 432–33 (Del. Ch. 1968).
(51.) London Bucket Co., 237 S.W.2d at 509.
(53.) Id. at 510.
(54.) 41 S.W. 1015 (Ky. 1897).
(55.) 126 S.W.2d 840 (Ky. 1939). See also, e.g., City Stores Co. v. Ammerman, 266 F. Supp. 766 (D.D.C. 1967), aff’d mem., 394 F.2d 950 (D.C. Cir. 1968).
(56.) 237 S.W.2d at 834.
(57.) RESTATEMENT SECOND § 318(2).
(58.) Id. § 318 cmt. c.
(59.) Id. § 318 cmt. a, illus. 3. Indeed, several cases have held that where a contractor knows it will be unable to perform, it is obliged to find a replacement contractor to perform in its place. See Travelers Indem. Co. v. Maho Mach. Tool Corp., 952 F.2d 26, 30–31 (2d Cir. 1991); Shea-S & M Ball v. Massman-Kiewit-Early, 606 F.2d 1245, 1249–50 (D.C. Cir. 1979); S.J. Groves & Sons Co. v. Warner Co., 576 F.2d 524, 529–30 (3d Cir. 1978).