Date post: | 17-Dec-2015 |
Category: |
Documents |
Upload: | meredith-phillips |
View: | 220 times |
Download: | 0 times |
Contracts
Class 1 – Introduction to “Enforcement”
Enforcement = relief of promisees to redress breach, not punishment to
compel performance
Contract law is commercial law Mostly about facilitating commercial
exchange
Expectations of promisee Contract remedy is to put promisee in
position it would have been in had the promise been performed
U.S. Naval Institute v. Charter U.S. Naval Institute v. Charter Comm. Inc. (2d Cir. 1991)Comm. Inc. (2d Cir. 1991)
Facts
Licence agreement Berkley could sell paperback starting in 10/84 But they breached agreement, shipped and started
selling a month early
Damages =
How much money Berkley made during the month they were in violation of agreement? OR
How much money Naval Press lost during that month, because some people who would have bought hardcover bought paperback instead?
Damages = expectations (usually) Naval Press put in position it would have
been in had Berkley not shipped early
This is NOT the $724,300 Berkley made that month (Red October a HUGE bestseller) selling paperbacks in breach of agreement
It is the $35,380 lower court estimates Naval Press would have made in additional September hardcover sales, if no breach Estimate based on August sales – close enough
When is disgorgements of profits an appropriate
rememdy?
The interesting case of spy memoirs . . .
Frank Snepp, former CIA agent, and George Blake, Soviet Mole inside of British MI-5, each published books in violation of their employment contracts. Should they be able to keep the profits?
Not if their breach of contract was also a breach of fiduciary duty But this disgorgement remedy is really
not a contract remedy.
It’s a equitable remedy to prevent a wrongdoer from profiting from their wrong
Based on concept of unjust enrichment and restitution
Efficient Breach
Influential but controversial theory
Note that even after Berkley pays Naval Press the (apx.) $35K it lost, Berkley still has a net profit of roughly $690,000
It is efficient for Berkley to breach
Naval Press as well off as if contract performed Berkley better off Damage rules should encourage “Pareto-superior”
outcomes
Sullivan v. O’Connor (Mass. 1973)
(above, before and after rhinoplasty pictures of Ashley Tisdale, star of High School Musical)
Facts –Sullivan v. O’Connor
Plaintiff professional entertainer
Before rhinoplasty, her nose was “straight, but long and prominent”
After 3 surgeries, “concave . . . Bulbous; flattened, broadened” and asymmetrical, and not improvable by further surgery
What should her damages be?
Some subtleties . . .
Courts reluctant to treat contracts for medical procedures as normal commercial contracts
Afraid strict enforcement of expectations will lead to underpromising by medical doctors
OTOH too weak enforcement will lead to overpromising by doctors
Ex post enforcement affects ex ante incentives!
Three contractual “interests” -- Introduction Expectation interest – (amount of money
damages necessary to put) promisee is as good a position as it would have been in, had promise been performed
Reliance interest – (amount of money damages necessary to put) promisee is as good a position as it would have been in, had promisor never made promise
Restitution interest – returning to promisee the benefit it conferred upon the promisor
Plaintiff’s expectations in Sullivan = money damages such that plaintiff in
as good a position as she would have been in had she got the nose she was promised
Strictly: indifferent between the money and the nose, ex ante
Problems . . .
Hard to measure that in money
Therefore, expectations work best in commercial settings, fungible goods, liquid markets
Policy concerns – too hard on doctors, might get defensive
Reliance interest in Sullivan Put plaintiff back in position (so far as money
can) she was in before she relied on the promise
Money back – that’s easy
Difference in money (if measurable) between nose she got, and nose she had before
Pain and suffering? possibly
Problem, p. 16 Farnsworth Assume: Doctor’s fee $300 Hospital fee $100/operation P&S $3000/operation Value promised nose $20,000 Loss from disfigurment $10,000
Plaintiff got 3 operations, and suffered disfigurement instead of getting promised nose
What is expectations interest? Reliance interest? Restitution interest?
Plaintiff’s expectation interest
Plaintiff's expected costs Pl's expected benefits
MD's fee $ 300.00
promised nose
$ 20,000.00
hospital fee $ 100.00
P&S $ 3,000.00
total $ 3,400.00 total
$ 20,000.00
Expections (net expected benefit)
$ (3,400.00) $20,000.00
$ 16,600.00
disfigurment
$ 10,000.00
[add $6000 P&S if latter 2 operations P&S to be included]
TOTAL EXPECTATIONS
$10,000.00 + $16,000.00 =
26,600.00
Plaintiff’s Reliance Interest
Plaintiff's costs
MD's fees $ 300.00
$ 300.00
$ 300.00
hospital fee $ 100.00
$ 100.00
$ 100.00
P&S $ 3,000.00
$ 3,000.00
$ 3,000.00
disfigurment* $ 10,000.00
TOTAL RELIANCE $ 20,200.00
Plaintiff’s Restitution InterestPlaintiff's
costs
MD's fees $
300.00
$ 300.00
$ 300.00
hospital fee $
100.00
$ 100.00
$ 100.00
TOTAL REST.
$
1,200.00