Expectancy and Rightful Position  In breach of contract cases courts prefer to award damages that implement the notion of “expectancy” – i.e., damages that put P in the position she would have been in if the contract had been performed

Chatlos and Excessive (?) Expectancies  What measure of damages gives the Chatlos P its expectancy?  Why does the court use this measure to implement P’s expectancy instead of the difference between the value of the thing delivered and the bargained-for contract price?

Has Chatlos P recovered too much – can there be an excessive expectancy?  Wouldn’t P have had to pay $208K to get the computer D promised regardless of D’s misrepresentations? Why shouldn’t P recover the difference between the value of the computer delivered ($6K) and the contract price ($46K)? ◦ Should P’s be limited to reasonable expectancies or are there reasons to award expectancy even when it’s huge?  What could D have done to lower P’s damage award in this case?

Bolles and Expectancy Damages  Like Chatlos, P wants difference between the value of the stock as described ($10/share X 4,000 shares) and value as delivered ($0) = $40,000  P gets the difference between his actual expenditure for the stock ($1.50/share x 4,000 shares) and value as delivered ($0) = $6,000  Why doesn’t court give P the expected benefit of his bargain?  Does it make sense to treat the Bolles & Chatlos P’s differently? When would you ever sue in tort as a result?

Changes to the Common Law Rule Against Expectancy Awards in Tort Cases:  Some states allow P to elect between reliance & expectancy losses in all fraud cases (e.g. Texas)  Restatement 2d Torts § 549(2): Allows recovery of damages equivalent to benefit of the bargain in cases involving fraud in business transactions if damages proved w/ reasonable certainty.  Majority of states apparently allow such recoveries  UCC §2-721: All remedies for “non-fraudulent breach” are also available for material misrepresentation or fraud cases involving the sale of goods.  Federal courts still tend to take approach similar to Bolles

Consequential Damages – Buck v. Morrow  Two years into 5-year lease of pasture to Buck, Morrow (lessor) breached.  What is the measure of Buck’s contract damages?  What are Buck’s other damages?  Terminology:  General Damages: Refers to the value of what plaintiff lost from the original impact of defendant’s acts.  Consequential Damages: Refers to those damages that can (but do not have to) occur as a consequence of the initial loss.

Standards for Consequential Damages – Common Law  Tort: Plaintiff can recover only those damages for which she can show D’s actions are the proximate cause.  Contract: Plaintiff can only recover those losses which are reasonably within the contemplation of the parties as a probable result of the breach.  What facts support Buck’s award of consequentials under this standard?

When does the distinction between general and consequential damages still matter?  Historic hostility to consequentials - thought to be more speculative and more avoidable than general damages.  But it’s unclear that market value measures are really easier to prove/value than consequential damages.  Furthermore, the standards plaintiffs must meet in order to obtain consequential damages take care of some of the above concerns  Why, then, is there any reason to distinguish between consequential and general damages – especially if they are necessary to put P in rightful position?  Special pleading requirements in FRCP and state analogs  Bargained-for remedies/limitations clauses/damage disclaimers

Consequential Damages Under the UCC  UCC 1-305(a) expresses an ambivalence to consequential (or incidental) damages similar to the common law. UCC 1-305(a) allows recovery only if such damages are specifically provided for by UCC or other rule of law  BUT every section we discussed last week provides for such damages  Buyer’s Remedies – UCC  Buyer gets incidentals under 2-715(1) and consequentials under 2-715(2)  What is the difference between the two and why are they treated differently?  Seller’s Remedies – UCC  Seller get’s incidental damages but not consequentials – why?

Meinrath – Consequential Damages Stemming from Failure to Pay Money  P & D entered “Purchase and Sale Agreement.” D breached agreement by failing to pay certain “bonus compensation”  P seeks $300,000 in bonus compensation (general damages)  P seeks $770,000 in losses of invested capital and decline in the net worth of the businesses as a result of failure to pay the bonus compensation (consequential damages)  What does the court award instead of consequential damages?

Meinrath, cont’d  Why do courts refuse to give consequentials for failure to pay money?  Are such damages really more remote and speculative? Were they here?  Erosion of the Meinrath rule:  Contracts to loan money  Insurers – bad faith refusal to settle  Majority rule in both instances is that P’s can get consequential damages from initial breach (even though they involve a failure to pay money)