Curtice Borthers Co. v. Catts

Case brief: template

Case name:	Curtice Borthers Co. v. Catts
Court:	COURT OF CHANCERY OF NEW JERSEY
Citation; Date:	72 N.J. Eq. 831; 66 A. 935; 1907

PROCEDURAL HISTORY
Trial court:		Appeal court (for appeal cases only):
Plaintiff:	Curtice Bros - tomato canners	Appellant:
Defendant:	Catts - planter	Respondent:

Facts of the case:
Complainant's factory has a capacity of about one million cans of tomatoes. The season for packing lasts about six weeks. The preparations made for this six weeks of active work must be carried out in all features to enable the business to succeed. These preparations are primarily based upon the capacity of the plant. Cans and other necessary equipments, including labor, must be provided and secured in advance with reference to the capacity of the plant during the packing period. With this known capacity and an estimated average yield of tomatoes per acre the acreage of land necessary to supply the plant is calculated. To that end the contract now in question was made, with other like contracts, covering a sufficient acreage to insure the essential pack.

Remedy sought:	Complainant is engaged in the business of canning tomatoes and seeks the specific performance of a contract wherein defendant agreed to sell to complainant the entire product of certain land planted with tomatoes. Defendant contests the power of this court to grant equitable relief.

Court opinion (including key issues and arguments):
The fundamental principles which guide a court of equity in decreeing the specific performance of contracts are essentially the same whether the contracts relate to realty or to personalty. By reason of the fact that damages for the breach of a contract for the sale of personalty are, in most cases, easily ascertainable and recoverable at law, courts of equity in such cases withhold equitable relief. Touching contracts for the sale of land the reverse is the case. But no inherent difference between real estate and personal property controls the exercise of the jurisdiction. Where no adequate remedy at law exists specific performance of a contract touching the sale of personal property will be decreed with the same freedom as in the case of a contract for the sale of land. The condition which occasions the irreparable injury by reason of the breaches of the contracts is the inability to procure at any price at the time needed and of the quality needed the necessary tomatoes to insure the successful operation of the plant. If it should be assumed as a fact that upon the breach of contracts of this nature other tomatoes of like quality and quantity could be procured in the open market without serious interference with the economic arrangements of the plant, a court of equity would hesitate to assume to interfere, but the very existence of such contracts proclaims their necessity to the economic management of the factory.

Disposition of case:
The objection that to specifically perform the contract personal services are required will not divest the court of its powers to preserve the benefits of the contract. Defendant may be restrained from selling the crop to others, and, if necessary, a receiver can be appointed to harvest the crop. A decree may be advised pursuant to the prayer of the bill.

ECONOMIC ANALYSIS OF THE CASE

Efficiency/incentive issues discussed in the court opinion:

Other efficiency/incentive issues relevant to the case:

Assessment of the economic consequences of the court decision:

     1. The Hadley v. Baxendale opinion has had universal acceptance in Anglo-American law as staling an appropriate rule of limitation on damages that would otherwise be recoverable under an unrestricted "expectation" rule. Does the decision itself appear to be sustainable on the facts of the Hadley case? In Victoria Laundry (Windsor) Ltd. v. Newman Industries. Ltd., [1949] 2 K.B. 528, 537 (C.A.), a later English court expressed the opinion that the headnote to Hadley is "definitely misleading in so far as it says that the defendants' clerk, who attended at the office, was told that the mill was stopped and that the shaft must be delivered immediately." If the court in Hadley had actually regarded that as established, it was suggested, then it is "reasonably plain" from Baron Alderson's opinion in Hadley that it would have decided that case "the other way round."
    On the other hand, it has been suggested that the opinion in Hadley can be viewed as consistent with the facts as stated in the headnote if one assumes that the clerk was not told either that the stoppage of the mill was solely due to the shaft's being broken or that no other shaft was available in the meantime. McCormick, The Contemplation Rule as a Limitation upon Damages for Breach of Contract, 19 Minn. L. Rev. 497, 500-501 (1935).
    Professor Richard Danzig concludes that there is evidence both ways on the question of whether the Hadleys indeed "served notice on the . . . clerk of their extreme dependence on the shaft," but suggests that in any event the "rudimentary law of agency" as it then existed might have required notice to be served on Baxendale himself, or at least on some agent more exalted than a mere receiving clerk. Danzig, Hadley v. Baxendale, A Study in the Industrialization of the Law, 4J. Leg. Stud. 249, 262-263 (1975). Professor Danzig's article (subReadings for Thursday, December 13, 2001 Page 4 stantially incorporated also in his book The Capability Problem in Contract Law (1978)) is an unusually interesting exploration of the context in which the Hadley case was decided. Besides the now conventional notion that the Hadley decision was more or less consciously an attempt to protect infant industries in the early stages of the industrial revolution. Professor Danzig sees a number of other factors reflected in that decision: tensions between Parliament and the courts, between different courts, and between judge and jury; differences over the proper extent of liability of common carriers, and about the way in which their activities should be regulated; and the still "rudimentary" state in 1854 of both commercial and agency law.
    2. The two types of damages described by the court in Hadley are frequently characterized as "general" and "special" damages. Professor John Murray has offered the following definitions of those terms: The distinction between general and special damages is often stated as follows: the former arise naturally from the breach and are implied or presumed by the law. The latter do not arise naturally; they are not within the common experience of mankind as arising in the particular situation and, therefore, they are not implied or presumed by the law. Thus, the terms general and special may be used synonymously with the terms natural and unnatural, usual and unusual. Murray goes on to point out that although all injury resulting from breach is literally "consequential," that term is ordinarily used only to refer to "special," or "unusual," damage. J. Murray, Contracts §225 n.48 (1974). Copyright 1974 by The Michie Co.
    3. Although the rule of Hadley v. Baxendale has been viewed traditionally as a rule limiting damages for breach of contract, it has also been applied to tort cases. See, e.g., Evra Corp. v. Swiss Bank Corp., 673 F.2d 951 (7th Cir. 1982) (Posner,J.); see also Kerr S.S. Co. v. Radio Corp. of America, 245 N.Y. 284, 157 N.E. 140 (1927) (Cardozo, C.J.). In the Evra case, the Court of Appeals invoked Hadley as authority for its ruling that the defendant bank was not liable for profits lost as a result of defendant's failure to act with due care in transmitting funds as directed by plaintiff; the delay in transmission caused the plaintiff to lose its right to an advantageous ship-charter contract. (The action was in tort because there was no direct privity between plaintiff and the defendant, which acted on instructions forwarded to it by intermediary banks.) Although justified by the court in terms of the Hadley requirement of foreseeability, the Evra decision has also been analyzed as an application of Judge Posner's economic theories, in effect transmuting the Hadley rule of foreseeability into a rule imposing liability on the party best able to avoid the injurious consequences of breach at the lowest cost, and thus reaching the "efficient" result. Note, An Economic Approach to Hadley v. Baxendale, 62 Neb. L. Rev. 157 (1983). A case with facts similar to Evra, and reaching the same result, is Central Coordinates, Inc. v. Morgan Guaranty Trust Co., 494 N.Y.S.2d 602 (Sup. Ct. 1985) (loss claimed to have resulted from bank's alleged delay in transmitting wire order for transfer of funds; no recovery on contract, negligence, or strict liability).