1 george mason school of law contracts ii reliance/restitution/punitives this file may be downloaded...

*George Mason School of Law

Contracts II

Reliance/Restitution/Punitives

This file may be downloaded only by registered students in my class, and may not be shared by them

F.H. [email protected]

The measure of damagesIf damages are meant to compensate for a wrong, just what is the wrong?Failure to perform: Expectation damagesInviting detrimental reliance: reliance damages*

The interplay of the measures of damages

When might reliance damages exceed expectation damages?When might damages be limited to the reliance measure?*

Could reliance damages exceed the expectation measure?

When would a want more than expectation damages?*


When would a want more than expectation damages?Restrictions on the expectation measureUncertaintyForseeability*


When would a want more than expectation damages?What about bad bargains?*

Freund at 95

Semble reliance damages not to exceed the expectation interest on a bad bargain, or else a windfall*

When should the be limited to reliance damages?*

When should the be limited to reliance damages?

Contracts with PhysiciansHawkins v. McGee at 868*


Hawkins v. McGee Was the doctor negligent?*


Hawkins v. McGee Was the doctor negligent?Had he been negligent, what would the damages have been?*


Hawkins v. McGeeWas the doctor negligent?Had he been negligent, what would the damages have been?What would we need to do to put the patient in the pre-tort position?*


Hawkins v. McGee Was the doctor negligent?Had he been negligent, what would the damages have been?Return of doctors feePain and suffering from the operationDifference between the before-and-after hand*


Hawkins v. McGeeWas the doctor negligent?In short, reliance damagesReturn of doctors feePain and suffering from the operationDifference between the before-and-after hand*


Hawkins v. McGeeWhat did the court award?*


Hawkins v. McGeeWhat did the court award?The difference between the hand as promised and the hand after the operation less the doctors fee*


Hawkins v. McGeeWhat did the court award?The difference between the hand as promised and the hand after the operation less the doctors feeI.e., The expectation interest*

Why a different result in Sullivan v. OConnor at 866?*

Why a different result in Sullivan v. OConnor

Was the doctor negligent?*


Was the doctor negligent?

On what theory was there a breach of contract without negligence?*


What did the judge instruct the jury?*


What did the judge instruct the jury?Out of pocket expenses incident to the operationDamages for the way in which the nose was made worsePain and suffering for the third operationLoss of earnings too uncertain*


What did the judge instruct the jury?In short, reliance damages*


What did the judge instruct the jury?What are doctors taken to have promised before a procedure?*


What did the judge instruct the jury?What are doctors taken to have promised before a procedure?A duty to take care, not to guarantee successAn obligation of means and not of results*


What did the judge instruct the jury?What are doctors taken to have promised before a procedure?A duty to take care, not to guarantee successAre the reliance damages inconsistent with a finding of no negligence?*


What were the policy reasons against expectation damages (guaranteed success)?*


What did the judge instruct the jury?What are doctors taken to have promised before a procedure?A duty to take care, not to guarantee successWhat would restitutionary relief look like?*

The measure of damages

Kizas v. Webster at 871

*Robert Stack as Eliot Ness

Louis Oberdorfer*


Kizas v. WebsterThe FBI invited college graduates to work as clerical staff with a possibility of receiving preferential consideration as special agents

*


Kizas v. WebsterThe FBI invited college graduates to work as clerical staff with a possibility of receiving preferential consideration as special agentsThe FBI stopped the program in 1977 because (1) they werent getting qualified people, and (2) the FBI wanted to institute an affirmative action program.

*


Kizas v. WebsterSo what do you think of the takings argument?

*


Kizas v. WebsterSo what do you think of the takings argument?Reversed on appeal

*


Kizas v. WebsterSo what do you think of the takings argument?If it would succeed, what kind of damages?*


Kizas v. WebsterSo what do you think of the takings argument?If it would succeed, what kind of damages?What was Theory A? Theory B?*


Kizas v. WebsterSo what do you think of the takings argument?If it would succeed, what kind of damages?What are the problems with expectation damages here?*


Kizas v. WebsterSo 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*


Kizas v. WebsterSo what do you think of the takings argument?If it would succeed, what kind of damages?What are the problems with expectation damages here?Are reliance damages the default in such cases?*


Kizas v. WebsterSo 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?*


Kizas v. WebsterSo 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 872*


Kizas v. WebsterDo expectation damages place a ceiling on reliance damages?Albert v. Armstrong 876What is Oberdorfers response to this?*


Kizas v. WebsterDo expectation damages place a ceiling on reliance damages?No proof that the opportunity was valueless and onus was on the FBI*


Kizas v. WebsterSo what are the reliance damages?*


Kizas v. WebsterSo 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*


Restatement 349. As an alternative to the measure of damages stated in 347 [expectation damages], the injured party has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance, less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed.*

*George Mason School of Law

Contracts II

Restitution/Punitives

This file may be downloaded only by registered students in my class, and may not be shared by them

F.H. [email protected]

The expectation interest as the primary remedy

Restatement 347. Subject to the limitations stated in 350-53, the injured party has a right to damages based on his expectation interest as measured by (a) the loss in the value to him of the other party's performance caused by its failure or deficiency, plus (b) any other loss, including incidental or consequential loss, caused by the breach, less (c) any cost or other loss that he has avoided by not having to perform.*

But a right to reliance damages in some cases

Restatement 349. As an alternative to the measure of damages stated in 347 [expectation damages], the injured party has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance, less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed.*

Similarly restitutiton*

Restatement 373(1). On a breach by non-performance that gives rise to a claim for damages for total breach the injured party is entitled to restitution for any benefit he has conferred on the other party

RestitutionWhat are the elements of restitution?Can a restitutionary award exceed the expectation interest?Measure of recoveryWhen is restitution wholly collateral to contract, so that problem 2 doesnt arise?Can the party in breach seek a restitutionary remedy?*

1.What are the elements of Restitution?

A general principle of restitution out of Quasi Contract, Money had and received, breach of fiduciary duty, Unjust Enrichment

*

Bailey v. West*

When is quasi-contractual liability imposed?

Bailey v. West*

When is quasi-contractual liability imposed?Benefit conferred on defendant by plaintiffAppreciation by defendant of the benefitIt would be inequitable to permit the defendant to retain the benefit

Restitution

Bailey v. West No recovery for officious intermeddlerBut that problem doesnt arise when restitution is sought as a remedy in contract, since the benefit was solicited

*

Restitution in special cases

Would it be available when expectation damages are uncertain, on the analogy of Kizas v. Webster?*


When the remedy in contract is barred by the Statute of Frauds: Restatement 375*


When the remedy in contract is barred by impracticability, frustration, non-occurrence of a condition: Restatement 377*

2.Can a restitutionary award exceed the expectation interest?*

Zara Contracting at 878*Tri-cities Airport, Endicott NY

Zara Contracting*Zara contracts with US govt to build an airportZara subcontracts the entire job to Two months after begins work, Zara wrongfully fires it and finishes the job itself.

Zara Contracting*Zara contracts with US govt to build an airportZara subcontracts the entire job to Two months after begins work, Zara wrongfully fires it and finishes the job itself.How does the Miller Act work?

Zara Contracting*Two months after begins work, Zara wrongfully fires it and finishes the job itself.Could the subcontractor have recovered on a claim for expectation damages for the value of the extra work done?

Zara Contracting*Two months after begins work, Zara wrongfully fires it and finishes the job itself.Could the subcontractor have recovered on a claim for expectation damages for the value of the extra work done?No: Clause 5

Zara Contracting*Two months after begins work, Zara wrongfully fires it and finishes the job itself.So a restitutionary recovery would necessarily give the more than the expectation award. And what is the basis for such a claim?

Zara Contracting*

Why was this a compelling case, on the equities?

Zara Contracting*

Why was this a compelling case, on the equities?Should restitutionary recovery which exceeds the expectation interest be restricted to special facts such as these?

Zara Contracting*

Restatement 373(1). On a breach by non-performance that gives rise to a claim for damages for total breach the injured party is entitled to restitution for any benefit he has conferred on the other party

Can a party seek restitutionary recovery after a trivial breach?*

Restatement 373(1). On a breach by non-performance that gives rise to a claim for damages for total breach the injured party is entitled to restitution for any benefit he has conferred on the other partyFarrah v. Sykes at 885

Zara Contracting*

Restatement 373(2). But not if he has performed all of his duties under the contract and no performance by the other party remains due other than payment of a definite sum of money

Zara Contracting*

Restatement 373(2). But not if he has performed all of his duties under the contract and no performance by the other party remains due other than payment of a definite sum of moneyContractor has finished building a house for a promise of $100K. House is worth $200K

Zara Contracting*

Restatement 373(2). But not if he has performed all of his duties under the contract and no performance by the other party remains due other than payment of a definite sum of moneyBut what if were talking about part performance?

Measure of recovery*Restatement 371. MEASURE OF RESTITUTION INTEREST. If a sum of money is awarded to protect a party's restitution interest, it may as justice requires be measured by either (a) the reasonable value to the other party of what he received in terms of what it would have cost him to obtain it from a person in the claimant's position, or (b) the extent to which the other party's property has been increased in value or his other interests advanced.

Measure of recovery*

Restatement 371. Illustration 1Cost to get another carpenter to do the work is $1,800Increased value of house is $1,200


Restatement 371. Illustration 1Cost to get another carpenter to do the work is $1,800Increased value of house is $1,200What if carpenter was in breach?What if owner was in breach?


Restatement 371. Illustration 1But see Illustration 2Surgeon saves a life (worth $1 million) in performing services for which another surgeon would have charged $1800

3.When are restitutionary remedies collateral to contract?

So no problem with an expectation capOr with a trivial breach

*

Ventura v. Titan 885*Gov. Jesse Ventura (Ind. MN)

4.Can the party in breach obtain restitutionary relief?

What if the is the party in breach?Palmer Construction at 884*

Britton v. Turner 906

What would expectation damages amount to here?*

Britton v. Turner

What is the argument for quantum meruit on the equities?*

Britton v. Turner

What is the argument for quantum meruit on the equities?Aliter a temptation to strategic behavior by the employer?*

Britton v. Turner

Can the employer bargain around this?*

Britton v. Turner

What if the party in breach has harmed the other party by his breach?*

Britton v. Turner

Restatement 374(1). On breach of a promissory condition, the party in breach is entitled to restitution for any benefit that he has conferred by way of part performance in excess of the loss that he has caused by his own breach*

Britton v. Turner

Restatement 374(1). Illustration 1:A agrees to sell land to B for $100. B pays $30k but fails to pay the remaining $70K. Owner sells to a third party for $95K.A can recover $30K less $5K*

Punitive Damages*

Miller Brewing at 887*

Miller Brewing at 887

Best Beers a distributor for Miller for 30 yearsA finding of wrongful termination (?)*


Was Miller animated by something other than its business interests?*


What would punitives do to efficient breaches?Thyssen at 893*

Miller Brewing

Is Hibschman Pontiac overturned?The need for an independent common law tort, not a tortlette*

Do damages overdeter?

Imagine the argument to the jury in Miller BrewingTheyre so rich, they wont notice unless you make it hurt*

Do damages overdeter?

Interstate ExploitationSuppose state A was permitted to impose a tax on citizens of state B*

The Pinto Case 892

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 accidentIn doing so, it valued a life as worth $2M*

Maybe that wasnt a good idea*

The Pinto Case 892

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 accidentIn doing so, it valued a life as worth $2MDoes this deserve $125M in punitive damages (reduced to 3.5M)?*

The Backlash

Kozinski in Oki America at 891*

The Backlash

State Farm and presumptive caps at 895*

The Backlash

Cooter at 893 on intentional misbehaviorQu. opportunistic breaches*

**

1 george mason school of law contracts ii reliance/restitution/punitives this file may be downloaded...

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