Manchester Dairy System v. Hayward

Supreme Court of New Hampshire · 1926 · Contracts

132 A. 12 (1926)

Updated July 19, 2026

ContractsSpecific performanceInjunctionsCooperative marketing agreementsLiquidated damagesEquitable jurisdictionequity jurisdictionadequate remedy at law

Facts

The plaintiff was a cooperative dairy marketing association made up exclusively of producers who agreed to sell and deliver all dairy products they produced to the association, while the association agreed to resell those products and distribute proceeds ratably to members after expenses. The contracts were part of a single cooperative arrangement whose success depended on reliable deliveries by members, and the association could not replace shortages by buying milk on the open market. The defendant breached or threatened to breach by not marketing his milk through the association, and the contract also contained a clause for $5 per cow as liquidated damages, a clause authorizing equitable relief, and a clause requiring a breaching member to pay litigation costs and reasonable attorney's fees. The trial court denied dismissal, denied affirmative specific performance and negative injunctive relief, and awarded expenses to the plaintiff.

Issue

Whether the plaintiff cooperative association had an adequate remedy at law so as to preclude equitable relief, and whether the contract's liquidated-damages provision made damages the defendant's exclusive option in place of performance. Also, whether negative injunctive relief and litigation expenses could properly be granted under the circumstances.

Rule

Equitable jurisdiction exists when the plaintiff lacks a plain, adequate, and complete remedy at law, even in contracts concerning personal property, if breach would cause injury not measurable in damages. A stipulated-damages clause does not oust equity unless the contract, read as a whole and in context, shows the parties intended the payment as an alternative that the promisor could elect instead of performance; if performance was the gist of the agreement and the sum was merely security for performance, equitable relief remains available. Whether specific relief should issue rests in equitable discretion guided by all the circumstances, including hardship and practical justice.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

River Valley Orchard Pool is a nonprofit cooperative in Vermont whose members agree to deliver all apples they grow to the pool for resale. The pool cannot buy substitute apples from nonmembers, and its shipping contracts, staffing, and credit arrangements were made in reliance on expected member deliveries. One member, Caleb Morton, begins selling his crop independently in Albany.

If the cooperative seeks equitable relief, what is the strongest basis for a court to exercise equitable jurisdiction?

Explanation. The majority held that contracts involving personal property may fall within equity when the legal remedy is not plain, adequate, and complete. The key inquiry is the whole contract, its purpose, and the effect of an unrestrained breach. Where a cooperative depends on member performance and shortages cannot be practically remedied, damages measured only by the withheld goods fail to capture harms such as destabilization, increased burdens on remaining members, and encouragement of further defections.