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George Mason School of Law
Contracts II
Reliance/Restitution/PunitivesThis file may be downloaded only by registered students in my class,
and may not be shared by them
F.H. Buckleyfbuckley@gmu.edu
Next day
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This week
Reliance Restitution Punitives Lost-volume seller
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The measure of damages If damages are meant to compensate
for a wrong, just what is the wrong? Failure to perform: Expectation damages Inviting detrimental reliance: reliance
damages
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The interplay of the measures of damages
1. When might reliance damages exceed expectation damages?
2. When might damages be limited to the reliance measure?
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Could reliance damages exceed the expectation measure?
When would a Π want more than expectation damages?
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Could reliance damages exceed the expectation measure?
When would a Π want more than expectation damages? Bad bargains
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Could reliance damages exceed the expectation measure?
When would a Π want more than expectation damages? Bad bargains Restrictions on the expectation measure
Uncertainty Forseeability
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The measure of damages
When would the Π prefer reliance damages? Should the Π have the option in such
cases?
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Freund at 95
Semble reliance damages not to exceed the expectation interest, or else a windfall
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When should the Π be limited to reliance damages?
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When should the Π be limited to reliance damages?
Contracts with Physicians Hawkins v. McGee at 892
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When should the Π be limited to reliance damages?
Hawkins v. McGee at 892 Was the doctor negligent?
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When should the Π be limited to reliance damages?
Hawkins v. McGee at 892 Was the doctor negligent?
Had he been negligent, what would the damages have been?
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When should the Π be limited to reliance damages?
Hawkins v. McGee at 892 Was the doctor negligent?
Had he been negligent, what would the damages have been? Return of doctor’s fee Pain and suffering from the operation Difference between the before-and-after hand
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When should the Π be limited to reliance damages?
Hawkins v. McGee at 892 Was the doctor negligent?
In short, reliance damages Return of doctor’s fee Pain and suffering from the operation Difference between the before-and-after hand
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When should the Π be limited to reliance damages?
Hawkins v. McGee at 892 What did the court award?
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When should the Π be limited to reliance damages?
Hawkins v. McGee at 892 What did the court award? The difference between the hand as
promised and the hand after the operation less the doctor’s fee
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When should the Π be limited to reliance damages?
Hawkins v. McGee at 892 What did the court award? The difference between the hand as
promised and the hand after the operation less the doctor’s fee
I.e., The expectation interest
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Why a different result in Sullivan v. O’Connor at 890?
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Why a different result in Sullivan v. O’Connor at 890?
What did the judge instruct the jury?
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Why a different result in Sullivan v. O’Connor at 890?
What did the judge instruct the jury? Out of pocket expenses incident to the
operation Damages for the way in which the nose
was made worse Pain and suffering for the third operation Loss of earnings too uncertain
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Why a different result in Sullivan v. O’Connor at 890?
What didn’t the Π ask for the difference between the nose as promised and delivered?
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Why a different result in Sullivan v. O’Connor at 890?
What didn’t the Π ask for the difference between the nose as promised and delivered? Was this really a case which denied the
expectation measure?
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Why a different result in Sullivan v. O’Connor at 890?
What didn’t the Π ask for the difference between the nose as promised and delivered? Can one generalize this to all non-
commercial cases, as Fuller and Perdue argue at 894?
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Why a different result in Sullivan v. O’Connor at 890?
What didn’t the Π ask for the difference between the nose as promised and delivered? Can one generalize this to all non-
commercial cases, as Fuller and Perdue argue at 894? What is the link between Pond v. Harris and
Smith v. Sherman in n. 6?
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Why a different result in Sullivan v. O’Connor at 890?
What didn’t the Π ask for the difference between the nose as promised and delivered? Could a court award damages for pain and
suffering and emotional distress in contract?
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The measure of damages
Kizas v. Webster
28Robert Stack as Eliot Ness
The measure of damages
Kizas v. Webster The FBI invited college graduates to work
as clerical staff because of the possibility of receiving preferential consideration as special agents
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The measure of damages
Kizas v. Webster The FBI invited college graduates to work as
clerical staff because of the possibility of receiving preferential consideration as special agents
The FBI stopped the program in 1977 because (1) they weren’t getting qualified people, and (2) the FBI wanted to institute an affirmative action program.
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The measure of damages
Kizas v. Webster So what do you think of the takings
argument?
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The measure of damages
Kizas v. Webster So what do you think of the takings
argument? Reversed on appeal
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The measure of damages
Kizas v. Webster So what do you think of the takings
argument? If it would succeed, what kind of damages?
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The measure of damages
Kizas v. Webster So what do you think of the takings
argument? If it would succeed, what kind of damages?
What are the problems with expectation damages here?
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The measure of damages
Kizas v. Webster So what do you think of the takings
argument? If it would succeed, what kind of damages?
What are the problems with expectation damages here? Uncertainty FBI’s right to terminate
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The measure of damages
Kizas v. Webster So what do you think of the takings
argument? If it would succeed, what kind of damages?
Do expectation damages place a ceiling on reliance damages?
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The measure of damages
Kizas v. Webster So what do you think of the takings
argument? If it would succeed, what kind of damages?
Do expectation damages place a ceiling on reliance damages?
Albert v. Armstrong at 901
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The measure of damages
Kizas v. Webster So what do you think of the takings
argument? If it would succeed, what kind of damages?
Do expectation damages place a ceiling on reliance damages?
Albert v. Armstrong at 901 What might have given Armstrong the option to
sue for reliance damages, and how were they limited?
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The measure of damages
Kizas v. Webster So what do you think of the takings
argument? If it would succeed, what kind of damages?
Do expectation damages place a ceiling on reliance damages? Yes—but no proof that a bad bargain and onus
was on the FBI
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The measure of damages
Kizas v. Webster So what do you think of the takings
argument? If it would succeed, what kind of damages?
So what are the reliance damages?
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The measure of damages
Kizas v. Webster So what do you think of the takings
argument? If it would succeed, what kind of damages?
So what are the reliance damages? The difference between what they received as
FBI employees (and for a year afterwards) and what they would have received in the labor market, plus dislocation
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Reliance damages and uncertainty of the expectation
1. The expectation interest is sizable but uncertain
2. The expectation interest is likely trivial but uncertain
Cf. Restatement 349, Comment a
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Reliance damages and uncertainty of the expectation
Wartzman v. Hightower at 901
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Reliance damages and uncertainty of the expectation
Wartzman v. Hightower at 901
Why a problem with expectation damages?
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Reliance damages and uncertainty of the expectation
Anglia v. Reed 902
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Robert Reed, The Brady Bunch
Anglia v. Reed
What was the problem with expectation damages?
If expectation damages are speculative, could any reliance damages be awarded?
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Anglia v. Reed
What was the problem with expectation damages?
If expectation damages are speculative, could any reliance damages be awarded? Both pre- and post-contract reliance
damages awarded
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Restitution or Unjust Enrichment
A general principle of restitution out of Quasi Contract, Money had and received, breach of fiduciary duty
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Bailey v. West
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When is quasi-contractual liability imposed? Benefit conferred on defendant by
plaintiff Appreciation by defendant of the benefit It would be inequitable to permit the
defendant to retain the benefit
Restitution
Bailey v. West p. 5 What should the Πs have done with the
horse? No recovery for officious intermeddler
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Restitution
Bailey v. West p. 5 What should the Πs have done with the
horse? No recovery for officious intermeddler But that problem doesn’t arise when
restitution is sought as a remedy in contract
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Zara Contracting at 903
52Tri-cities Airport, Endicott NY
Zara Contracting
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Zara contracts with US gov’t to build an airport
Zara subcontracts the entire job to Π Two months after Π begins work, Zara
wrongfully fires it and finishes the job itself.
Zara Contracting
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Zara contracts with US gov’t to build an airport
Zara subcontracts the entire job to Π Two months after Π begins work, Zara
wrongfully fires it and finishes the job itself.
How does the Miller Act work?
Zara Contracting
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Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. Would expectation damages include a
claim for the value of the extra work done?
Zara Contracting
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Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. Would expectation damages include a
claim for the value of the extra work done? No: clause 5 of the agreement
Zara Contracting
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Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. Would expectation damages include a
claim for the value of the extra work done?
So a restitutionary recovery would give the Π more than the expectation award. And what is the basis for such a claim?
Zara Contracting
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Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. The innocent party’s option
Value of work done at contract rate Or Quantum meruit for value of work done
(more than contract rate as the work was harder than expected)
Zara Contracting
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Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. How to calculate quantum meruit
What would a third party have charged Note the extra claim by Zara against the US.
Zara Contracting
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Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. How to calculate quantum meruit
What would a third party have charged Cf. Restatement 371, illustration 2
Zara Contracting
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Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. Quantum meruit for value of work done
(more than contract rate as the work was harder than expected)? Contrast Palmer Construction at 909
Qu. Breachers vs. non-breachers Restatement 373(1)
Britton v. Turner at 906
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Who was the party in breach?
Can restitution damages exceed expectation damages?
Britton v. Turner 906 What would expectation damages
amount to?
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Can restitution damages exceed expectation damages?
Britton v. Turner What is the argument for quantum
meruit?
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Can restitution damages exceed expectation damages?
Britton v. Turner What is the argument for quantum
meruit? Aliter a temptation to strategic behavior
by the employer?
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Can restitution damages exceed expectation damages?
Britton v. Turner What would quantum meruit give the Π? Aliter a temptation to strategic behavior
by the employer? Can the employer bargain around this?
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Can restitution damages exceed expectation damages?
Britton v. Turner What would quantum meruit give the Π? Aliter a temptation to strategic behavior
by the employer? What if the court had found that Turner
had been enriched by $150? See Restatement 373, comment d
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Ventura v. Titan 910
68Gov. Jesse Ventura (Ind. MN)
Punitives: Do compensatory damages undercompensate?
The American rule of costs chills meritorious actions (and encourages frivolous ones)
Small dollar claims might not be brought But class actions remedy this
And then some?
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Do compensatory damages undercompensate?
If they do, an argument for punitive damages?
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OMG! We’re not suing enough!Aust. Canada France Japan U.K. U.S.
Suits/100,000 1,542 1,450 2,416 1,768 3,681 5,806
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Do compensatory damages undercompensate?
Hibschman Pontiac at 912
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What does a Chevy Volt want to be?
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It wants to be a Pontiac GTO!!!!
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Little GTOLittle GTO, you're really lookin' fine
Three deuces and a four-speed and a 389Listen to her tachin' up now, listen to her whineC'mon and turn it on, wind it up, blow it out GTO
Wa-wa, wa, wa, wa, wa, wa, (mixed with "Yeah, yeah, little GTO")
Wa-wa, wa, wa, wa, wa, wa, (mixed with "Yeah, yeah, little GTO")
Wa-wa wa, wa, wa, wa, wa, wa (mixed with "Ahhh, little GTO")
Do damagesundercompensate?
What was needed to rebut the presumption against punitive damages in contract?
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Do damagesundercompensate?
What was the “malice, fraud, gross negligence and oppressive conduct”? As opposed to a simple breach of
contract…
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Do damages undercompensate?
What was the “malice, fraud, gross negligence and oppressive conduct”? As opposed to a simple breach of
contract… Did the Π independently establish a
common law tort? Or just have elements of fraud, malice
etc mingle in the controversy
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Do damages undercompensate?
The jury awarded punitive damages assessed at 10 times the compensatory damages When is the “first blush” rule triggered?
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Do damages overdeter?
Suppose you’re a potential Δ. Are you made whole by a finding of no liability?
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Miller Brewing at 916
Best Beers a distributor for Miller for 30 years
Was the termination wrongful? Was Miller animated by something other
than its business interests?
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Miller Brewing
The court found that Monroe Beverage’s performance was in some ways inferior to Best Beers. Is this relevant?
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Miller Brewing
Is Hibschman Pontiac overturned? The need for an independent common
law tort.
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Do damages overdeter?
Imagine the argument to the jury in Miller Brewing They’re so rich, they won’t notice unless
you make it hurt
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Do damages overdeter?
Interstate Exploitation Suppose state A was permitted to
impose a tax on citizens of state B…
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The Pinto Case 922
Ford did not make a safety improvement which would have solved the problem because it did not think this cost effective, given the expected value of the accident In doing so, it valued a life as worth $2M Does this deserve punitive damages?
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The Backlash
Kozinski in Oki America at 922
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The Backlash
Efficient breaches: Thyssen at 923
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The Backlash
State Farm and presumptive caps at 925
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The Backlash
Cooter at 924 on intentional misbehavior Qu. opportunistic breaches
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