1. 1 George Mason School of Law Contracts II Uncertainty/Forseeability F.H. Buckley fbuckley@gmu.edu

2. To be covered 1.Uncertainty 2.Foreseeability 3.Emotional Distress 4.Mitigation 5.Liquidated and Punitive Damages 2

3. Uncertainty: Freund at 95  Royalties too uncertain to provide a basis for expectation damages 3

4. Uncertainty Is Drews at 952 any different? 4

5. Uncertainty Drews  How to calculate lost profits? Gross profits less cost of obtaining them 5

6. Uncertainty Drews  How to calculate lost profits? Gross profits less cost of obtaining them Suppose the business is an existing one. Can we assume that the future will resemble the past? 6

7. Uncertainty Drews  How to calculate lost profits? Gross profits less cost of obtaining them Is there a “new business rule” of non- recovery? 7

8. Uncertainty Drews  How to calculate lost profits? Gross profits less cost of obtaining them Is there a “new business rule” of non- recovery?  An evidentiary rule, not an absolute bar 8

9. Uncertainty Drews  How to calculate lost profits? Gross profits less cost of obtaining them Is there a “new business rule” of non- recovery?  What was the evidence here? 9

10. Uncertainty Drews  How to calculate lost profits? Gross profits less cost of obtaining them Is there a “new business rule” of non- recovery?  How would you satisfy the “establish with reasonable certainty” standard for a resto? Would a marketing forecast help? 10

11. Uncertainty Smith v. Penbridge 955 11 It’s an acquired taste…

12. Uncertainty Gilroy v. ABC 956  How is this different from Freund? 12

13. Uncertainty Gilroy v. ABC 956 13

14. Uncertainty Redgrave v. BSO 956 14

15. Uncertainty Redgrave v. BSO  What was the basis for the claim? 15

16. Uncertainty Redgrave v. BSO  At a Los Angeles movie theater, in 1978, there was a bombing and protests. The furor was sparked by a documentary called "The Palestinian," a film produced and bankrolled by Vanessa Redgrave. "Many people were outraged. You remember what your reaction was?" Wallace asks. "I didn't know why people were outraged to see a film about the Palestinians," she replies. Perhaps it was a scene where she danced, wielding a Kalashnikov rifle. 60 Minutes 16

17. Foreseeability 17

18. Foreseeability Hadley v. Baxendale at 113 18 The Hadley Mill, Gloucester UK

19. Hadley v. Baxendale Gloucester to Greenwich 19 2.5 hrs, according to Mapquest

20. Foreseeability Hadley v. Baxendale 20 Tel: 011-44-203-188-2100

21. Foreseeability Hadley v. Baxendale 21  Just what was the Δ told? Cf Victoria Laundry at 115

22. Foreseeability Hadley v. Baxendale 22  Just what was the Δs told?  What if the headnote had been correct?

23. Foreseeability Hadley v. Baxendale 23  Just what was the Δs told?  What if the headnote had been correct?  Why might this be a rule of efficiency?

24. Foreseeability Hadley v. Baxendale 24  Why might this NOT be a rule of efficiency?

25. Foreseeability Hadley v. Baxendale 25  Why might this NOT be a rule of efficiency?  How would you expect carriers to react?

26. Foreseeability Spang Industries at 957 26 Battenkill Brudge

27. Foreseeability Spang Industries at 957  Fort Pitt breached by delivering late, with the result that Torrington incurred extra damages in pouring cement in cold weather Torrington could recover if this was on the cards 27

28. Foreseeability Spang Industries at 957  Could Torrington recover for these expenses? 28

29. Foreseeability Spang Industries at 957  Could Torrington recover for these expenses? Yes, since the alternative of waiting another 8 months would have increased the damages even more 29

30. Foreseeability: Increased labor costs Cricket Alley 962 30

31. Foreseeability: Increased labor costs Cricket Alley  What was the promise? 31

32. Foreseeability: Increased labor costs Cricket Alley  What was the promise?  And what expenses did Cricket Alley incur as a consequence of the breach? 32

33. Foreseeability: Increased labor costs Cricket Alley  If increased labor costs are foreseeable, why not lost profits? Same diff… Cook v. Woornick 965 More liberal than Drews? 33

34. Foreseeability: Lost Profits 34  Where the damages are astronomical, are you sure who the least cost risk avoider is? Qu. Western Industries at 966

35. Foreseeability: Lost Profits 35  Where the damages are astronomical, are you sure who the least cost risk avoider is? Qu. Milgard Tempering at 117

36. Emotional Distress  Valentine at 967 Is it foreseeable that one might suffer emotional distress on being fired? 36

37. Emotional Distress  Valentine at 967 Is it foreseeable that one might suffer emotional distress on being fired? So why no recovery?  Can you think of a justification for Restatement § 353 37

38. Emotional Distress  Is Allen v. Jones consistent with Valentine? 38 Jules et Jim

39. Mitigation: Luten Bridge at 968 Building bridges to nowhere 39

40. Mitigation: Luten Bridge at 968 Building bridges to nowhere 40

41. Mitigation Shirley MacLaine 41

42. Mitigation: Shirley MacLaine  Which film was the biggest turkey? 42

43. Mitigation: Shirley MacLaine  Which film was the biggest turkey?  What if she had been offered a role as a nun in a western? 43

44. Mitigation  What if the injured party is a business that gets new clients after the breach? Kersage Computer at 978 44

45. Mitigation  What if the injured party is a business that gets new clients after the breach? Kersage Computer at 978 The analogy to lost volume sellers 45

46. 46 George Mason School of Law Contracts II Uncertainty/Forseeability F.H. Buckley fbuckley@gmu.edu

47. What do they have in common? 1.Uncertainty 2.Foreseeability 3.Emotional Distress 4.Liquidated and Punitive Damages 47

48. A common valuation problem 1.Uncertainty: By the court ex post 48

49. A common valuation problem 1.Uncertainty: By the court ex post 2.Foreseeability: By the parties ex ante 49

50. A common valuation problem 1.Uncertainty: By the court ex post 2.Foreseeability 3.Emotional Distress 1.Both ex post and ex ante 50

51. A common valuation problem 1.Uncertainty: By the court ex post 2.Foreseeability 3.Emotional Distress 1.Both ex post and ex ante 2.Endogenous preferences 51

52. A common valuation problem 1.Endogenous preferences 52 Ron Hunt in 1974: Notice anything unusual about his batting stance?

53. A common valuation problem 1.Uncertainty: By the court ex post 2.Foreseeability 3.Emotional Distress 4.Liquidated and Punitive Damages 1.If we knew what the damages would be, we wouldn’t worry about a liquidated damages clause 53

54. Liquidated damages: When permitted  Restatement § 356 54

55. Liquidated Damages  How to distinguish an effective liquidated damages clause from a penalty? 55

56. Lake River v. Carborundum  Lake River to bag Carborundum’s Ferro Carbo and serve as distribution center  Why did LR insist on a liquidated damages clause? 56

57. Lake River v. Carborundum  And why was this a penalty? 57

58. Lake River v. Carborundum  And why was this a penalty? So what’s wrong with penalties? 58

59. Lake River v. Carborundum  And why was this a penalty? So what’s wrong with penalties?  The efficient breach argument? 59

60. Lake River v. Carborundum  And why was this a penalty? So what’s wrong with penalties?  A suitable case for paternalism? 60

61. Lake River v. Carborundum  And why was this a penalty? So what’s wrong with penalties?  Signalling? 61

62. C and H Sugar at 988 62 MV Moku Pahu

63. C and H Sugar  Sun to pay damages of $17K/day after delivery date of June 30, 1981  Sun completed the barge on March 16, 1982  Halter supplies the catamaran tug boat on July 15, 1982  Sun assembles tug to barge in July ‘82 63

64. C and H Sugar  Sun to pay damages of $17K/day after delivery date of June 30, 1981, or $4.4M  Was this in excess of the damages actually suffered? 64

65. C and H Sugar  Sun to pay damages of $17K/day after delivery date of June 30, 1981  Was this in excess of the damages actually suffered?  How does Restatement § 356 assist? Cf Comment B 65

66. C and H Sugar  Sun to pay damages of $17K/day after delivery date of June 30, 1981  Was this in excess of the damages actually suffered?  How does Restatement § 356 assist? Qu. Illustration 4 66

67. C and H Sugar  Sun to pay damages of $17K/day after delivery date of June 30, 1981  Was this in excess of the damages actually suffered?  How does Restatement § 356 assist? Contrast Massman at 994 67

68. So what’s changed from last summer? 68

69. Recognize this? 69

70. Commentaries 1765 70  Pure and proper slavery does not, nay cannot, subsist in England; such I mean, whereby an absolute and unlimited power is given to the master over the life and fortune of the slave. And indeed it is repugnant to reason, and the principles of natural law, that such a state should subsist anywhere.

71. Commentaries 1765 71  Upon these principles the law of England abhors, and will not endure the existence of, slavery within this nation: so that when an attempt was made to introduce it, by statute 1 Edw. VI. c. 3. which ordained, that all idle vagabonds should be made slaves, and fed upon bread, water, or small drink, and refuse meat; should wear a ring of iron round their necks, arms, or legs; and should be compelled by beating, chaining, or otherwise, to perform the work assigned them, were it never so vile; the spirit of the nation could not brook this condition, even in the most abandoned rogues; and therefore this statute was repealed in two years afterwards. And now it is laid down d, that a slave or negro, the instant he lands in England, becomes a freeman; that is, the law will protect him in the enjoyment of his person, his liberty, and his property.

72. Seven years later… 72 Granville Sharp

73. Seven years later… 73

74. It comes to court: R v Knowles, ex parte Somersett, 20 State Tr. 1 (1772). 74 Wm Murray, Earl Of Mansfield

75. Mansfield’s judgement 75 The state of slavery is of such a nature, that it is incapable of being introduced on any reasons, moral or political, but only by positive law, which preserves its force long after the reasons, occasion, and time itself from whence it was created, is erased from memory. It is so odious, that nothing can be suffered to support it, but positive law. Whatever inconveniences, therefore, may follow from the decision, I cannot say this case is allowed or approved by the law of England; and therefore the black must be discharged.

76. Good luck! 76