Acme & Wethersby : LUSENET : Lessig's Contracts : One Thread

(This entire post may be obvious. I wrote it as an attempt to try to understand today's class. If anyone has any feedback, or even wants to say they agree, I'd be grateful.)

The court's decision in Acme basically says: We only know of the breach for certain when the defendant fails to deliver wheat on the agreed date. (The court emphasises this by pointing out that "appellee was not required by his contract to deliver to appellant any particular wheat.") At that time the plantiff can buy wheat at the spot price. Therefore, the plantiff is only entitled to damages in the amount that the breach cost him, namely (spot price - K price).

In Weathersby, when the plantiff knew of the breach he could have covered and sued for damages. Johnson could have done the same thing if he knew Acme intended to breach (which isn't clear to me from the case - after all, Acme could merely have been speculating in selling wheat it didn't have, and could have delivered to Johnson wheat that they bought that day for $0.97 / bushel, turning a nice, tidy little profit). If he knew Acme had sold "his wheat" to someone else for $1.16 / bushel, he could have bought wheat at the same price to replace the Acme wheat, and then sued to recover the $0.13 / bushel difference.

I think this is what Lessig was saying today - as long as the market works, there is no such thing as efficient breach. Covering means every participant is always then held to the market price, whether spot or future, at the time of their K. There are no subjective values to guess at, so the only consequence of breach is to incur court costs for recovering the $$$ damages. This would mean we should adopt a rule which encourages/requires covering and then strictly enforces Ks and awards damages.

-- Anonymous, October 21, 1998

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