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CORNELL ECON 4040 - Transatlantic

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Econ 4040 1st Edition Lecture 16Outline of Last Lecture I. WalkerII. FiegeOutline of Current Lecture I. TransatlanticII. Shirley MaclaineTransatlantic Brief Fact Summary. The Plaintiff, Transatlantic Financing Corporation (Plaintiff), sued the Defendant, the United States (Defendant), in quantum meruit after it was forced to take the longer route from Texas to Iran around the Cape of Good Hope rather than the shorter route through the Suez Canal.Synopsis of Rule of Law. A legal impossibility, which renders a contract voidable, is defined as a thing thatis not practicable or in other words, only done at an excessive and unreasonable cost.Facts. The Plaintiff contracted with the Defendant to ship wheat from Texas to Iran. The contract specified the destination, but not the route. The ordinary route would take the Plaintiff through the Suez Canal. However, due to armed conflict, the Suez Canal had been blocked by Egypt. The Plaintiff thereforeproceeded along the route around the Cape of Good Hope. The Plaintiff then sued to recover the additional costs of taking the longer route.Issue. Were the Plaintiff’s duties impossible to perform, thereby permitting rescission of the agreement?Held. No. The D.C. Circuit Court of Appeals sets forth a three-part test for impossibility: (1) something unexpected must have occurred; (2) the risk of the unexpected occurrence must not have been allocatedby contract or custom and (3) the unexpected occurrence must have rendered performance commercially impracticable. Here, the first requirement is met. The usual route from Texas to Iran would be through the Suez Canal and its closure would be unexpected. Second, the risk does not appear to have been allocated in the agreement or by custom to one party over the other. Finally, the performancewas not rendered commercially impracticable. While the cost of going around the Cape of Good Hope was greater than going through the Suez Canal, there was no increased risk to the crew or goods. It is not always the case that cost alone may never constitute impracticability, but here, the added expense is These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.not significant. The Plaintiff is also in a better position to purchase insurance for this contingency as a commercial shipper.Discussion. Performance is impossible if commercially impracticable.Shirley Maclaine v 20 Century FoxBrief Fact Summary. Plaintiff Parker, better known as actress Shirley MacLaine, contracted with Defendant, Twentieth Century-Fox Film Corp., to play the female lead in the film “Bloomer Girl.” Defendant thereafter repudiated the agreement by not producing the picture and instead offered Plaintiff the lead female role in another picture entitled “Big Country, Big Man.” Plaintiff declined, and initiated this action to recover $750,000, the amount she was to be paid under the contract.Synopsis of Rule of Law. The measure of damages owed to a wrongfully discharged employee is the amount of salary agreed upon for the period of employment reduced by the amount the employer proves the employee has earned or with reasonable effort may have earned from other employment.Facts. Plaintiff contracted with Defendant to play the female lead in the movie “Bloomer Girl” for a salaryof $750,000. However, Defendant decided not to produce the film and offered instead for Plaintiff to playthe lead in another film, “Big Country, Big Man.” Unlike “Bloomer Girl,” which was to be a musical filmed in California, “Big Country, Big Man” was to be a dramatic western filmed in Australia. Also, the contract for “Big Country, Big Man” did not grant Plaintiff the same control over the choice of directors and screenplay that her “Bloomer Girl” contract did. Plaintiff declined to act in “Big Country, Big Man” and sued to recover her guaranteed salary.Issue. Should Plaintiff’s recovery be limited by her failure to accept substitute work in mitigation of damages?Held. No. A wrongfully discharged employee’s recovery of her full salary must be reduced by the amountthe breaching employer can prove she earned or with reasonable effort might have earned. Importantly, the employer must show that the other employment was comparable or substantially similar to that employment of which the employee was deprived. The employee’s rejection of or failure to seek a different or inferior kind of employment may not be considered. For the factual differences stated above,acting in “Big Country, Big Man” constituted inferior employment. Thus, Plaintiff’s refusal to accept the female lead in “Big Country, Big Man” will not reduce her recovery.Dissent. The majority incorrectly distinguishes between two films, but in fact, the female lead in any movie should qualify as substitute performance.Discussion. A wrongfully discharged employee is entitled to his lost salary, but he must mitigate damagesby seeking alternative employment. However, he does not need to accept different or inferior


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