YS

Class 24 - Specific Performance and UCC

Recap of Class 23

  • Shifted the focus to non-monetary relief, specifically specific performance.
  • Oliver v. Ball: Specific performance involves surrendering the unique item itself because it cannot be duplicated.
    • Specific performance is granted if:
      • Plaintiff is clearly entitled to such relief.
      • There is no adequate remedy at law.
      • The court believes justice requires the decree.
    • Specific performance is often available for a seller's breach of a land sale contract because land is unique.
      • Damages are insufficient as no two parcels are identical.
      • Buyers do not have to prove the lack of an adequate remedy at law in realty agreements breached by the seller.
  • Reed Foundation v. FDR for Freedom's Park: Specific performance is suitable if money damages cannot adequately meet the injured party's expectations, especially when the contract's subject matter is unique and lacks an established market value.
    • Specific performance is appropriate in breach of contract cases when the uniqueness of the matter makes calculating money damages too difficult or uncertain.
    • The court noted that New York courts have previously granted specific performance in situations involving unique projects and momentous events where valuation is clearly uncertain
    • There were agreed-upon remedies provision indicating money damages would not suffice and specific relief was necessary.

CMA CGM v. Waterfront Container Leasing

  • Deals with specific performance under the UCC.
  • UCC 2-716: Buyer's right to specific performance or replevin.
    • (1) Specific performance may be decreed where the goods are unique or in other proper circumstances.
    • (2) A decree for specific performance may include terms and conditions as to payment of price, damages, or other relief the court deems just.

Case Details:

  • Waterfront leased 7,271 shipping containers to CMA for five years.
  • CMA had the option to purchase all containers at the end of the lease at a set price.
    • Purchase option granted if the equipment remained continuously under lease for a minimum of five years.
    • The sale had to be for all units under lease at the conclusion of the agreed lease period.
    • Purchase price varied between 750 and 1300 depending on the shipping container size.
  • CMA sent Waterfront a notice on January 30 to exercise its purchase option.
  • Waterfront refused in May, demanding the return of all containers.
  • CMA began returning containers in July, three months before filing a lawsuit.
  • At the time of the lawsuit, approximately half of the containers had been returned.
  • CMA sought specific performance, requesting the right to keep the remaining containers by paying the buyout fee.

Court's Analysis:

  • The court referenced UCC 2-716, stating that specific performance may be decreed where the goods are unique or in other proper circumstances.
  • CMA did not argue that the shipping containers were unique, acknowledging they are fungible.
  • CMA argued for specific relief under the "other proper circumstances" clause of UCC 2-716.
  • CMA contended it would be wasteful to ship back the 3,000+ containers only to purchase others and seek damages from Waterfront.
  • The court agreed, noting that specific performance would prevent the unnecessary global shipping of containers.
  • The court noted the weakness that CMA couldn’t point to another case where the court has awarded specific performance based on similar factual circumstances
  • Waterfront argued against specific performance, stating CMA could cover its damages by obtaining replacement containers.
    • Waterfront asserted CMA could obtain replacement containers and then seek damages from Waterfront (the difference between the purchase price and the covered containers).
  • The court rejected Waterfront's argument.
    • The official comments to section 2-716 do not limit "other proper circumstances" to situations where a buyer cannot cover.
    • The inability to cover is strong evidence for proper circumstances, but the ability to cover does not automatically disqualify a party from specific performance.
  • The court noted that replacement would require additional wasteful movements of containers and specific performance would hasten resolution of the litigation.
  • Court highlights that forcing CMA to ship the containers back to Waterfront, buy new ones from a third party, and then sue Waterfront for damages is inefficient.

Court's Conclusion:

  • The court found that the circumstances warranted specific performance, despite the goods not being unique, because it was the most efficient solution.
  • It shows that the court has leeway in determining what proper circumstances are.
  • The court determined that justice required specific enforcement of the agreement.
  • CMA can keep the containers it has and does not need to seek cover.