1. 1 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. Buckley fbuckley@gmu.edu

2. Next day 2

3. This week  Reliance  Restitution  Punitives  Lost-volume seller 3

4. 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 4

5. 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? 5

6. Could reliance damages exceed the expectation measure?  When would a Π want more than expectation damages? 6

7. Could reliance damages exceed the expectation measure?  When would a Π want more than expectation damages? Bad bargains 7

8. 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 8

9. The measure of damages  When would the Π prefer reliance damages? Should the Π have the option in such cases? 9

10. Freund at 95  Semble reliance damages not to exceed the expectation interest, or else a windfall 10

11. When should the Π be limited to reliance damages? 11

12. When should the Π be limited to reliance damages?  Contracts with Physicians Hawkins v. McGee at 892 12

13. When should the Π be limited to reliance damages?  Hawkins v. McGee at 892 Was the doctor negligent? 13

14. 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? 14

15. 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 15

16. 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 16

17. When should the Π be limited to reliance damages?  Hawkins v. McGee at 892  What did the court award? 17

18. 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 18

19. 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 19

20. Why a different result in Sullivan v. O’Connor at 890? 20

21. Why a different result in Sullivan v. O’Connor at 890?  What did the judge instruct the jury? 21

22. 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 22

23. 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? 23

24. 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? 24

25. 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? 25

26. 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? 26

27. 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? 27

28. The measure of damages  Kizas v. Webster 28 Robert Stack as Eliot Ness

29. 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 29

30. 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. 30

31. The measure of damages  Kizas v. Webster So what do you think of the takings argument? 31

32. The measure of damages  Kizas v. Webster So what do you think of the takings argument?  Reversed on appeal 32

33. The measure of damages  Kizas v. Webster So what do you think of the takings argument?  If it would succeed, what kind of damages? 33

34. 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? 34

35. 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 35

36. 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? 36

37. 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 37

38. 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? 38

39. 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 39

40. 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? 40

41. 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 41

42. 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 42

43. Reliance damages and uncertainty of the expectation  Wartzman v. Hightower at 901 43

44. Reliance damages and uncertainty of the expectation  Wartzman v. Hightower at 901  Why a problem with expectation damages? 44

45. Reliance damages and uncertainty of the expectation  Anglia v. Reed 902 45 Robert Reed, The Brady Bunch

46. Anglia v. Reed  What was the problem with expectation damages?  If expectation damages are speculative, could any reliance damages be awarded? 46

47. 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 47

48. Restitution or Unjust Enrichment  A general principle of restitution out of Quasi Contract, Money had and received, breach of fiduciary duty 48

49. Bailey v. West 49  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

50. Restitution  Bailey v. West p. 5 What should the Πs have done with the horse? No recovery for officious intermeddler 50

51. 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 51

52. Zara Contracting at 903 52 Tri-cities Airport, Endicott NY

53. Zara Contracting 53  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.

54. Zara Contracting 54  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?

55. Zara Contracting 55  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?

56. Zara Contracting 56  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

57. Zara Contracting 57  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?

58. Zara Contracting 58  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)

59. Zara Contracting 59  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.

60. Zara Contracting 60  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

61. Zara Contracting 61  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)

62. Britton v. Turner at 906 62  Who was the party in breach?

63. Can restitution damages exceed expectation damages?  Britton v. Turner 906 What would expectation damages amount to? 63

64. Can restitution damages exceed expectation damages?  Britton v. Turner What is the argument for quantum meruit? 64

65. 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? 65

66. 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? 66

67. 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 67

68. Ventura v. Titan 910 68 Gov. Jesse Ventura (Ind. MN)

69. 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? 69

70. Do compensatory damages undercompensate?  If they do, an argument for punitive damages? 70

71. OMG! We’re not suing enough! Aust.CanadaFranceJapanU.K.U.S. Suits/ 100,0001,5421,4502,4161,7683,6815,806 71

72. Do compensatory damages undercompensate?  Hibschman Pontiac at 912 72

73. What does a Chevy Volt want to be? 73

74. It wants to be a Pontiac GTO!!!! 74

75. Little GTO Little GTO, you're really lookin' fine Three deuces and a four-speed and a 389 Listen to her tachin' up now, listen to her whine C'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")

76. Do damages undercompensate?  What was needed to rebut the presumption against punitive damages in contract? 76

77. Do damages undercompensate?  What was the “malice, fraud, gross negligence and oppressive conduct”? As opposed to a simple breach of contract… 77

78. 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 78

79. Do damages undercompensate?  The jury awarded punitive damages assessed at 10 times the compensatory damages When is the “first blush” rule triggered? 79

80. Do damages overdeter?  Suppose you’re a potential Δ. Are you made whole by a finding of no liability? 80

81. 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? 81

82. Miller Brewing  The court found that Monroe Beverage’s performance was in some ways inferior to Best Beers. Is this relevant? 82

83. Miller Brewing  Is Hibschman Pontiac overturned? The need for an independent common law tort. 83

84. 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 84

85. Do damages overdeter?  Interstate Exploitation Suppose state A was permitted to impose a tax on citizens of state B… 85

86. 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? 86

87. The Backlash  Kozinski in Oki America at 922 87

88. The Backlash  Efficient breaches: Thyssen at 923 88

89. The Backlash  State Farm and presumptive caps at 925 89

90. The Backlash  Cooter at 924 on intentional misbehavior Qu. opportunistic breaches 90