Page 179 - Encyclopedia of Business and Finance

eobf_C 7/5/06 2:57 PM Page 156

Cooperative

party’s expectancy, or what the parties should have reason-
ably foreseen as flowing from the breach. Expectancy
damages are often described as conferring the benefit of
the bargain upon the nonbreaching party. Where
expectancy damages are difficult to determine or other-
wise impractical, a party may receive reliance damages,
which are intended to compensate for the losses incurred
in relying on the breaching party’s fulfillment of the con-
tract. A third alternative for compensation is restitution,
where the breaching party must compensate the victim for
the benefit conferred upon the breaching party.
Liquidated damages are a method used by contract-
ing parties to estimate the damages that will result in the
event of a breach. Liquidated damages may not serve as a
penalty against the breaching party, but so long as they are
a reasonable estimate of the damages that would be suf-
fered by the nonbreaching party, they will be enforced. A
clause in an apartment rental contract that requires a
IGA Cooperative in Ste Foy, Quebec, 2005. PHOTOGRAPH BY
breaching party to pay two months rent is a common
MIRANDA H. FERRARA. THE GALE GROUP.
form of liquidated damages.
Punitive damages are those intended to punish the
breaching party. Punitive damages are available only in
very rare cases; they generally are not awarded in contract their product and/or service to customers who are not co-
disputes. op members.
Finally, equitable relief is available to nonbreaching Cooperatives can take many forms. For example, a
parties where none of the above remedies would be suffi- group of single parents may decide to band together to
cient. Under the concept of equity, a court may take cor- provide a child-care facility so they will have reliable day
rective action other than by awarding money. In rare care for their children. Each parent contributes a certain
circumstances where none of the above described com- amount of money and/or time, and in exchange they all
pensatory damages would be sufficient, a court may order have a safe place to leave their children. A credit union is
specific performance. That is, the court will order the par- also a type of cooperative. The purpose of a credit union
ties to fulfill their obligations under the contract. This is not to make a profit for itself, but to help each member
method is not favored because of the practical difficulty of be more financially secure. By creating their own financial
enforcement, but in some cases, such as the purchase of institution, members can receive a higher interest rate on
real estate, art, and the like, it is the only remedy that is the money they have placed in savings and receive a lower
sufficient. Also available is an injunction, which is a court interest rate on loans. Retailers have also started establish-
order preventing a party from taking further action, such ing co-ops. Ace Hardware, for example, is a co-op of inde-
as a continued breach of a contract. pendent hardware store owners. By banding together, the
SEE ALSO Law in Business hardware owners can share advertising costs and receive
discounts for bulk ordering of materials and supplies.
Sharing costs and discounts allows small hardware stores
Keith A. Bice to compete with large chain hardware stores.
While cooperatives can be found in many different
areas of the economy, they are most commonly found in
the agricultural area. A group of farmers may band
COOPERATIVE together to allow themselves to be more competitive and
A cooperative (also referred to as a co-op) is a form of to achieve more economic power. Agricultural coopera-
business ownership that consists of a group of people who tives allow members to save money on materials needed to
have joined together to perform a business function more produce and market their product, which means a larger
efficiently than each individual could do alone. The pur- profit margin for all members. Ocean Spray Cranberries,
pose of a cooperative is not to make a profit for itself, but Inc., for example, is a cooperative of several hundred cran-
to improve each member’s situation. However, members berry and citrus growers from all over the country. Other
of certain types of cooperatives do make a profit by selling well known cooperatives include Blue Diamond, Sunkist,

156 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION