1. Suppose the court had upheld the Peevyhouses' right to recover the full cost of restoring their farm. From the coal company's point of view, wouldn't an award of this sort be equivalent to an order of specific performance? If the company were ordered to carry out the restorative work (or, what is the same thing, to pay the Peevyhouses an amount equal to the cost of doing so), what would be the likely result? Assume that the Peevyhouses would prefer $15,000 in cash to the restoration of their farm: isn't it likely that the parties will negotiate a mutually advantageous settlement if the company is ordered to perform or to pay the full cost of restoration? (What will happen if the Peevyhouses care more about the restoration of their farm than anything else in the world?) Will there be a similar negotiation if the coal company is ordered to compensate the Peevyhouses only for the diminution in the market value of their farm? At the conclusion of the trial below, the jury awarded the Peevyhouses $5,000, an amount that cannot be rationalized on either of the damage theories at issue in the case. Might the jury's verdict nevertheless be explained, and perhaps even justified, as an effort to approximate the outcome of a settlement negotiated by the parties themselves? But if this is so, wouldn't the results of an actual negotiation have been preferable to the jury's speculative assessment of the parties' interests and expectations?3
2. In both Jacob & Youngs and Peevyhouse, the plaintiffs recovered damages equal to the diminution in the market value of their property (a formula that yielded a small sum in the latter case and nothing in the former). Is this rule equally appropriate in both cases? To be sure, it seems more likely that the farmers in Peevyhouse attached a sentimental or aesthetic value to the appearance of their property — a value not reflected in its market price — than that the owner in Jacob & Youngs assigned a similarly unique or idiosyncratic value to one particular brand of otherwise indistinguishable pipe. But this is, after all, a judgment of taste; more exactly, it is a judgment about the frequency or distribution of certain tastes and hence a judgment about the credibility of the claim that a particular person has a certain taste and therefore values something more highly than the market does. (What, by the way, is the evidence for assuming the existence of such a discrepancy between the market and "personal" or "subjective" value of a thing?) Should the law make judgments of this sort? Can it avoid them? One might say, "No harm is done in making such a judgment, so long as the parties remain free to reverse its effect by placing an appropriately worded provision in their contract." Before you accept this sanguine proposal, recall Judge Cardozo's treatment of the contract in Jacob & Youngs.4
3. Do you find the concept of "economic waste," emphasized by the majority in Peevyhouse, helpful? Suppose, to take a celebrated example, that I make a contract to have a monumental birdbath constructed on my front lawn; once the birdbath is built, let us assume, my home will be worth less than it presently is. Is this contract "economically wasteful"? Is it, from my point of view, a "losing" contract like the one in L. Albert & Son v. Armstrong Rubber Co., infra p. 1197? Suppose the contractor who has promised to build my birdbath subsequently refuses to do so. Can he argue that no compensation is owed me because the contract is economically wasteful? If this argument is disallowed, how should my damages be calculated? It is interesting to note that the expression "economic waste," which appeared in §346 of Restatement First, has been dropped from the corresponding section (§ 348) of Restatement Second. Section 348(2) provides:5
If a breach results in defective or unfinished construction and the loss in value to the injured party is not proved with sufficient certainty, he may recover damages based on
(a) the diminution in the market price of the property caused by the breach, or
(b) the reasonable cost of completing performance or of remedying the defects if that cost is not clearly disproportionate to the probable loss in value to him.
In Comment C to § 348 the restaters observe that the phrase "economic waste" is misleading, "since an injured party will not, even if awarded an excessive amount of damages, usually pay to have the defects remedied if to do so will cost him more than the resulting increase in value to him."7
4. Groves v. John Wunder Co., 205 Minn. 163, 286 N.W. 235 (1939), discussed and distinguished by the majority in Peevyhouse, held that the plaintiff's damages were properly measured by the cost to complete certain levelling and grading work promised by the defendant even though the resulting increase in the market value of the plaintiff's land would be substantially less. The property involved in the Groves case was devoted entirely to commercial use. Do you think Groves was rightly decided? Is the Groves case, on its facts, more like Peevyhouse or Jacob & Youngs?8
June 02, 2014
Kessler, Gilmore & Kronman
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