George Mason School of Law

George Mason School of Law Contracts II Reliance/Restitution/Punitives F.H. Buckley fbuckley@gmu.edu

Next (last) day • Finish Remedies chapter • Scott 1001-36

The measure of damages • If damages are meant to compensate the innocent party for the wrong done him, what is the wrong when the other party breaches? • Failure to perform: Expectation damages • Inviting detrimental reliance: reliance damages

The measure of damages • When would the Π prefer reliance damages?

The measure of damages • When would the Π prefer reliance damages? • Whenever these exceed the expectation award

The measure of damages • When would the Π prefer reliance damages? • Whenever these exceed the expectation award • Limits on expectation damages • Uncertainty • Foreseeability • Or bad bargains?

The measure of damages • When would the Π prefer reliance damages? • Whenever these exceed the expectation award • Should the Π have the option in such cases?

Freund • What are the three kinds of damages that are considered? • The Expectation Interest • The Reliance Interest • Semble not to exceed the expectation interest, or else a windfall

The measure of damages • When should the Π be limited to reliance damages?

The measure of damages • When should the Π be limited to reliance damages? • Contracts with Physicians • Hawkins v. McGee 892

The measure of damages • When should the Π be limited to reliance damages? • Contracts with Physicians • Hawkins v. McGee

The measure of damages • When should the Π be limited to reliance damages? • Contracts with Physicians • Why a different result in Sullivan v. O’Connor?

The measure of damages • When should the Π be limited to reliance damages? • Contracts with Physicians • Hawkins v. McGee • Why a different result in Sullivan v. O’Connor? • What would the two measures give? • What difference in pain and suffering claims?

The measure of damages • When should the Π be limited to reliance damages? • Contracts with Physicians • Hawkins v. McGee • Why a different result in Sullivan v. O’Connor? • What would the two measures give? • What would restitution give?

The measure of damages • Kizas v. Webster 896 Robert Stack as Eliot Ness

The measure of damages • Kizas v. Webster • The FBI attracted college graduate 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.

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

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

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

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?

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? • Uncertainty • FBI’s right to terminate

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?

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.

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? • So what they get is 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

Anglia v. Reed 902 Robert Reed, The Brady Bunch

Anglia v. Reed • What was the problem with expectation damages?

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

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

Restitution • The forms of action: • Trespass • Action on the case • Negligence • Assumpsit • Quasi Contract • Money had and received

Restitution or Unjust Enrichment • A general principle of restitution out of Quasi Contract, Money had and received, breach of fiduciary duty • Based on Δ’s unjust retention of a benefit as against Π, and not on Π’s reliance losses.

Restitution: General Principles • Suppose that, without asking you permission, I put orange aluminum siding on your house. Can I recover the cost of doing do from you?

Restitution • Bailey v. West p. 5 • What should the Πs have done with the horse?

Restitution • Bailey v. West p. 5 • What should the Πs have done with the horse? • Restitutionary remedies are available in spite of or in the absence of consent—but not if the Π is an officious intermeddler

Restitution • Bailey v. West p. 5 • What should the Πs have done with the horse? • Restitutionary remedies are available in spite or the absence of consent—but not if the Π is an officious intermeddler • If not, see Leebow at p. 911

Restitution • Bailey v. West p. 5 • What should the Πs have done with the horse? • Restitutionary remedies are available in spite or the absence of consent—but not if the Π is an officious intermeddler • But that problem doesn’t arise when restitution is sought as a remedy in contract

Zara Contracting 903 Tri-cities Airport, Endicott NY

Zara Contracting • 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 • Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. • What can Π recover? • Value of work done at contract rate?

Zara Contracting • Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. • What can Π recover? • Value of work done at contract rate? • Quantum meruitfor value of work done (more than contract rate as the work was harder than expected)?

Zara Contracting • Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. • What can Π recover? • What was the benefit unjustly retained by Zara? • Is it unjust if the plaintiff is simply paid at the contract rate?

Zara Contracting • Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. • What can Π recover? • Does it matter that the defendant was in breach? • Cf Restatement 373 • Palmer Construction 909

Zara Contracting • Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. • What can Π recover? • Does it matter that the defendant was in breach? • Cf gloss added by Farash at 910

Zara Contracting • The measure of recovery: • Extent to which defendant’s wealth is increased? • Amount defendant would have paid a third party for the work? • Zara’s recovery from the government of $17,115 for the extra work?

Zara Contracting • The court thought that Restatement 347, comment c was triggered. Was it?

Briton v. Turner 906 • Is there some reason why the no-breach rule should be waived here?

Can restitution damages exceed expectation damages? • Britton v. Turner • Aliter a temptation to strategic behavior by the employer?

Can restitution damages exceed expectation damages? • Britton v. Turner • Can the employer bargain around this?

Do damages undercompensate? • The American rule of costs chills meritorious actions (and encourages frivolous ones) • Small dollar claims might not be brought

Do damages undercompensate? • The American rule of costs chills meritorious actions (and encourages frivolous ones) • But class actions remedy this • And then some?

Do damages undercompensate? • If they do, an argument for punitive damages?

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