George Mason School of Law

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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,

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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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When would a Π want more than expectation damages? Bad bargains

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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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Contracts with Physicians Hawkins v. McGee at 892

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Hawkins v. McGee at 892 Was the doctor negligent?

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Had he been negligent, what would the damages have been?

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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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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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Hawkins v. McGee at 892 What did the court award?

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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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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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What did the judge instruct the jury?

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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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What didn’t the Π ask for the difference between the nose as promised and delivered?

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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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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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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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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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Kizas v. Webster

28Robert Stack as Eliot Ness


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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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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Kizas v. Webster So what do you think of the takings

argument?

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argument? Reversed on appeal

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argument? If it would succeed, what kind of damages?

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What are the problems with expectation damages here?

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What are the problems with expectation damages here? Uncertainty FBI’s right to terminate

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Do expectation damages place a ceiling on reliance damages?

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Albert v. Armstrong at 901

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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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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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So what are the reliance damages?

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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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Wartzman v. Hightower at 901

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Wartzman v. Hightower at 901

Why a problem with expectation damages?

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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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claim for the value of the extra work done? No: clause 5 of the agreement

Zara Contracting

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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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Britton v. Turner What is the argument for quantum

meruit?

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Britton v. Turner What is the argument for quantum

meruit? Aliter a temptation to strategic behavior

by the employer?

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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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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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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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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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