Throughout the course, a number of case summaries will be due. These summaries (100-150 words each) will state in your own words the factual issue that led the parties to court, the judge's decision, and the reasoning utilized to reach that decision. The case summaries are as follows:

Case. IMPOSSIBILITY OF PERFORMANCE

Kenyon & Eckhardt, Inc. v. 808 Third Avenue Co.

Appellate Division, First Department 87 A.D.2d 507, 443 N.Y.S.2d 163 (1981)

Plaintiff Kenyon &Eckhardt, Inc. (Kenyon) signed a lease with Defendant 808 Third Avenue Co. (808 Third Avenue) to rent eleven floors of a 34-story building designed but not yet constructed. At least four of the eleven floors leased by Kenyon exceeded the maximum building height permitted by law. At the time it entered the lease with Kenyon, 808 Third Avenue was seeking government approval to build all 34 stories. The lease provided that, in the event such approval was not obtained, the space to be rented to Kenyon would be recalculated "to reflect any such change proportionately."

The approval for the added height was denied. As a result, 808 Third Avenue sought to terminate the lease. Kenyon claims the lease was still valid although the space to be rented would be altered consistent with the terms of the lease. Kenyon sued 808 Third Avenue to enforce the lease. In response, 808 Third Avenue claimed the impossibility of performance.

ISSUE: Where performance under a lease becomes impossible due to foreseeable circumstances and the lease provides an alternative course of performance in the event performance becomes impossible, can the party whose performance has become impossible avoid liability for nonperformance on the basis of the impossibility of performance?

DECISION: No, judgmentfor Kenyon.

REASONING: The lease addresses specifically the circumstances that led to 808 Third Avenue's inability to perform and provides a way to handle the situation without terminating the contract. Since both parties agreed to the lease and since performance of the contract was possible, the contract will be enforced.

Case No. 91

FRUSTRATION OF PURPOSE/RESCISSION

SureFire Transport Corporation v. Garsite Products,Inc.

Supreme Court, Kings County NYLJ, August 21, 1984, p.11, col. 3b

FACTS: On May 10, 1983, Plaintiff Sure Fire Transport Corporation (Sure Fire) entered a contract with Defendant Garsite Products, Inc. (Garsite) in which Garsite agreed to expand a fuel tank owned by SureFire so that it could carry 6500 gallons of fuel rather than 5500 gallons. The contract price for the service was approximately $8,000.00.

Prior to June 22, 1983, Garside had completed half of the expansion job. On or about that date, an explosion of unknown causes occurred at Garsite's placeof business and damaged Sure Fire'sfuel tank. As a result, the tank was rendered unsafe for transporting fuel, a fact that was confirmed by a consulting engineer whose specialty was in petroleum handling and transportation. At the time of the explosion, Garsite had completed about half the work required to expand the tank according to the contract. After the explosion, SureFire instructed Garsite not to do any more work because of the damaged and unsafe condition of the tank. When Sure Fire refused to pay, Garsite filed a lien (security interest) against property of Sure Fire. In response, Sure Fire sought a court order stating that it was not obligated to pay Garsite and cancelling the lien. In return, Garsite sought a court order requiring Sure Fire to pay for Garsite's services.

FIRST ISSUE: Where the benefit anticipated by a party from performance of a contract is no longer possible due to the occurrence of an unforeseeable event, is the party entitled to rescind the contract?

DECISION: Yes.

REASONING: The doctrine of frustration of purpose applies in trus case. Frustration of purpose provides that where, as a result of unforeseeable events, performance would no longer provide the benefit which induced the party to enter the contract, that party can rescind. Here the explosion was an unforeseeable event that damaged the fuel tank rendering it dangerous for transporting fuel. Since Sure Fire would no longer use it for transporting fuel, Sure Fire's purpose in expanding the tank's fuel-carryingcapabilities had been frustrated (eliminated). Sure Fire thus rightly rescinded the contract by directing Garsite to discontinue its performance.

SECOND ISSUE: When a contract is rescinded due to frustration of purpose, is a party who has partly performed prior to the occurrence of the event that caused the frustration entitled to compensation for the services performed?

DECISION: Yes.In this case, Garsite is entitled to $4,000.00, the value of the work done up to the time Garsite was instructed by Sure Fire to discontinue the work.

REASONING: When rescinding a contract, the rescinding party must put the other party in the same position it was in before the contract was made. Sure Fire is thus obligated to pay Garsite for the work completed prior to the rescission. Since half of the manhours required for the job had been performed at the time of the explosion, Garsite is entitled to half the price. However, because Sure Fire rightly rescinded the contract, Garsite was not entitled to payment for the work performed after Sure Fire rescinded.

CaseNo.101

DAMAGES FOR SUBSTANTIAL PERFORMANCE IN A CONSTRUCTION CONTRACT/ECONOMIC WASTE

Jacob & Youna:s, Inc. v. Kent Court of Appeals

230 N.Y. 239, 129 N.E. 889 (1921)

FACTS: Plaintiff Jacob & Youngs, Inc. (Jacob) contracted to build a home for defendant George E. Kent (Kent) for approximately $77,000.00. One of the plumbing specifications in the contract required that the pipe be of the grade known as "standard pipe of Reading manufacture." In March 1915, Kent learned that some of the pipe was not Reading but instead was made by other manufacturers. Kent demanded that the pipe be replaced to conform to contract specifications. Some of the pipe was exposed and accessible in the basement but most of it was encased in the walls and thus not reasonably accessible. Replacement of the pipe would therefore have required demolition of various parts of the structure at considerable expense.

Jacob did not replace the pipe and in this action sought to recover the unpaid balance of the contract price, $3,483.46. Jacob was able to demonstrate that its use of the wrong pipe was neither willful nor fraudulent but rather was the result of an oversight. Additionally Jacob proved that nodifference existed in quality, appearance, and market value between the Reading brand specified in the contract and the brands that were installed.

ISSUE: Where a contractor completes the building of a home but deviates from the contract requirements, albeit in an insignificant way, and the cost to correct the work so that it conforms with the contract would be substantial, is the measure of damages the cost to correct the work so that it conforms with the contract requirements or the difference in value?

DECISION: The difference in value; judgment for Jacob.

REASONING: When a contractor deviates from the required performance yet substantially performs, the contractor is entitled to the contract price less damages forthe improper performance. The usual measure of damages is the cost of completion. If, however, the cost of completion would result in economic waste, that is, the benefit gained would be slight compared to the cost, the proper measure of damages is the difference in value of the building as constructed and the value if the building had been built consistent with contract specifications. In this case Jacob had substantially performed. To require Jacob to demolish substantial parts of the structure in order to replace pipe with new pipe of the same general quality would far exceed the value, if any, added to the structure and thus would constitute economic waste. The amount of damages in this case measured by the difference in value “would be either nominal or nothing.”