1. 1 George Mason School of Law Contracts II Remedies II: Expectation Interest 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. Efficiency Pre-breach 2  Prior to breach or performance, the risks and duties to be assigned to the party best able to bear them

3. Efficiency Post-breach 3  Subsequent to breach, the parties might still usefully be given cost- reducing incentives

4. Efficiency Post-breach 4  Subsequent to breach, the parties still are given cost-reducing incentives  Mitigation  Anticipatory Repudiation  Remedies

5. What if the remedy is specified in the contract?  Globe Refining at 94 5 Oliver Wendell Holmes 1841-1935

6. What if the remedy is specified in the contract?  Globe Refining  “The parties themselves, expressly or by implication, may fix the rule by which the damages are to be measured” 6

7. What happens when the contract is silent about the remedy, per Holmes? 7

8. What happens when the contract is silent about the remedy? 8 Give them what they “probably would have said if they had spoken about the matter.”

9. Globe Refining p. 94  What damages did the Π seek? 9

10. Globe Refining  What damages did the Π seek? The difference between the contract price and the market price of cotton oil at the time of breach, and… The cost of sending the tank cars from Louisville to Texas 10

11. Globe Refining  What did Holmes award? 11

12. Globe Refining  What did Holmes award? The difference between the contract price and the market price at the time of breach The cost of sending the tank cars to Texas  Only the former—and why was that? 12

13. Globe Refining  Let’s say the plaintiff paid 100 for goods he expected to sell for 150: a profit of 50. But he had to spend 10 to make this profit. So he expected to make (150 – 100) – 10 = 40. 13

14. Globe Refining  Let’s say the plaintiff paid 100 for goods he expected to sell for 150: a profit of 50. But he had to spend 10 to make this profit. So he expected to make (150 – 100) – 10 = 40.  Let’s say the breach occurred after the expenses were incurred  Damages should be 50 14

15. Globe Refining  Let’s say the plaintiff paid 100 for goods he expected to sell for 150: a profit of 50. But he had to spend 10 to make this profit. So he expected to make (150 – 100) – 10 = 40.  What damages should not be is 50 plus 10 15

16. Globe Refining  Had the contract been performed, Globe would have spend the money to send the tank cars to Louisville to make the profit associated with the difference between the contract price and the market price at the time of breach Giving Globe both would give it more in breach than on performance 16

17. The purpose of damages in contract law 17

18. Damages are compensatory They are meant to put the innocent party in the position he would have been in had the wrong not been committed. 18

19. Compensation as Substitutional Justice  The assumption that money damages can cure all ills Presumptively no specific performance 19

20. How does one compensate?  When the wrong is a tort, one puts the injured party in his pre-tort position 20

21. How does one compensate?  When the wrong is a breach of contract, one makes the injured party whole by putting in the position he would be in had the contract been performed  The wrong was the breach 21

22. The measure of damages at common law 22

23. The measure of damages at common law?  § 2-713(1) The measure of damages for non- delivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages provided in this Article (Section 2-715), but less expenses saved in consequence of the seller's breach. 23

24. Why the price of oil at breach?  Why was the measure of damages the difference between the contract price and (1) the price of oil at breach, rather than (2) the prince of oil at the time stipulated for performance? 24

25. Why the price of oil at breach?  § 2-713(1) The measure of damages for non- delivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages provided in this Article (Section 2-715), but less expenses saved in consequence of the seller's breach. 25

26. What is the normal measure of damages at common law?  Why was the measure of damages the difference between the contract price and (1) the price of oil at breach, rather than (2) the prince of oil at the time stipulated for performance?  What’s the innocent party supposed to do on breach? 26

27. Damages in Freund at 96  What was the contract? 27

28. Freund at 96  What damages remedies did Freund seek? 28

29. Freund  What damages remedies did Freund seek? Damages for delay of promotion Lost royalties Potential cost of vanity publication 29

30. Freund  Fuller and Perdue at 97  Expectation  Reliance  Restitution 30

31. Restatement § 344  Judicial remedies under the rules stated in this Restatement serve to protect one or more of the following interests of a promisee: (a) his "expectation interest," which is his interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed, (b) his "reliance interest," which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made, or (c) his "restitution interest," which is his interest in having restored to him any benefit that he has conferred on the other party. 31

32. Freund  What are the three kinds of damages that are considered? The Expectation Interest: Put the Π in the same position he would have been in had the contract been performed  And what’s that here? 32

33. B 100, 100 I 100 I DR 0 50 100 Ebenezer promises to gives 100 but breaches C 100,0 D A 50, 50 50 Time 1 What do we need to give David to make him as well off as he would have been had the contract been performed? 33

34. B 100, 100 I 100 I DR 0 50 100 Ebenezer promises to gives 100 but breaches C 100,0 D A 50, 50 50 Time 1 The Expectation Interest is CB, or $100 34

35. Freund  What are the three kinds of damages that are considered? The Expectation Interest: Put the Π in the same position he would have been in had the contract been performed  And what’s that here? Royalties Reputational gains 35

36. Freund  What are the three kinds of damages that are considered? The Expectation Interest: Put the Π in the same position he would have been in had the contract been performed  The royalties were too speculative to amount to anything  The reputational loss was not quantified (or quantifiable) 36

37. Freund  What are the three kinds of damages that are considered? The Expectation Interest: Put the Π in the same position he would have been in had the contract been performed  What happens when the Π runs into the Uncertainty Barrier? 37

38. Freund  What are the three kinds of damages that are considered?  What happens when the Π runs into the Uncertainty Barrier?  Here nominal (contemptuous) damages 38

39. Uncertainty Limits Damages  Dempsey p. 102 No recovery for expected ticket revenues (lost profits) 39

40. So would you fight Harry Wills?  79-10-4 40

41. Uncertainty Limits Damages  Does the uncertainty barrier undercompensate Π?  And give Δ a temptation to breach? 41

42. Uncertainty Limits Damages  Dempsey p. 102 What recovery was awarded? 42

43. Uncertainty Limits Damages  Dempsey p. 102 What recovery was awarded? Reliance Damages 43

44. Uncertainty Limits Damages  When uncertainty bars recovery for the expectation measure, a court might either bar relief (Freund) or award damages to vindicate the reliance interest (Dempsey) 44

45. Freund  The Reliance Interest in Freund: Reimburse the Π for what he spent in reliance on the contract 45

46. B 100, 100 I 100 I DR 0 50 100 Ebenezer promises to gives 100 but breaches C 100,0 D A 50, 50 50 Time 1 What do we need to give David to make him as well off as he would have been had he not relied? 46

47. B 100, 100 I 100 I DR 0 50 100 Ebenezer promises to gives 100 but breaches C 100,0 D A 50, 50 50 Time 1 The Reliance Interest is CD, or about $25 47

48. Freund  The Reliance Interest: A Tortious measure: Put the Π in his pre- contractual position 48

49. Freund  The Reliance Interest in Freund  For costs actually incurred, not hypothetically incurred as here 49

50. Restitution Interest  What is the harm that is corrected by a restitutionary award? 50

51. Bailey v. West 51  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

52. The interplay of the three measures of damages 52

53. Could reliance damages be less than the expectation interest? 53

54. What about opportunity costs? 54

55. Could reliance damages be less than the expectation interest?  The hypothetical at p. 100 John orders 10,000 bushels of wheat for delivery in two months at $1 per bushel Mary breach on the date of delivery, when the price is $2 per bushel  What is the expectation interest? 55

56. Could reliance damages be less than the expectation interest?  The hypothetical at p. 100 John orders 10,000 bushels of wheat for delivery in two months at $1 per bushel Mary breach on the date of delivery, when the price is $2 per bushel  What is the expectation interest? John has to spend an extra $10,000 for the wheat 56

57. Could reliance damages be less than the expectation interest?  The hypothetical at p. 100 John orders 10,000 bushels of wheat for delivery in two months at $1 per bushel Mary breach on the date of delivery, when the price is $2 per bushel  What is the expectation interest? John has to spend an extra $10,000 for the wheat 57

58. Could reliance damages be less than the expectation interest?  The hypothetical at p. 100 John orders 10,000 bushels of wheat for delivery in two months at $1 per bushel Mary breach on the date of delivery, when the price is $2 per bushel  What is the reliance interest? 58

59. Could reliance damages be less than the expectation interest?  The hypothetical at p. 100 John orders 10,000 bushels of wheat for delivery in two months at $1 per bushel Mary breach on the date of delivery, when the price is $2 per bushel  What is the reliance interest? If John had not ordered from Mary he would have ordered from someone else 59

60. Could reliance damages be less than the expectation interest?  Expectation ≈ reliance when opportunity costs are considered in competitive markets 60

61. Could reliance or restitution damages ever exceed expectation damages?  P. 102, problem 7 61

62. Could reliance or restitution damages ever exceed expectation damages?  A agrees to build a house for B for $100k. A estimates that he will incur expenses of 90k in doing so. 62

63. Could reliance or restitution damages ever exceed expectation damages?  A agrees to build a house for B for $100k. A estimates that he will incur expenses of 90k in doing so.  In fact, A unexpectedly and without fault incurs expenses of 120k. Can he recover for 120k? 63

64. Could reliance or restitution damages ever exceed expectation damages?  Reliance damages as an incentive problem if they exceed the expectation interest 64

65. Could a restitutionary award ever exceed the expectation interest?  Montgomery’s Estate at p.101? 65

66. Recall what is needed to support a restitutionary claim 66  Benefit conferred on defendant by plaintiff  Appreciation by defendant of the benefit  It would be inequitable for defendant to retain the benefit

67. The primacy of the expectation interest 67  So the expectation interest places a presumptive limit on reliance and restitutionary awards

68. Expectation and Cover in Globe 68  Suppose that the purchase price of the cotton oil is 100K, that Globe has spent 10k in reliance expenses on the railway cars, and that on breach Globe covers by buying substitute oil for 120k in Louisville What reliance and expectation damages would you award?

69. Expectation and Cover in Globe 69  Cover: UCC § 2-711(1)(a) Where the seller fails to make delivery or repudiates or the buyer rightfully rejects or justifiably revokes acceptance then with respect to any goods involved, and with respect to the whole if the breach goes to the whole contract (Section 2-612), the buyer may cancel and whether or not he has done so may in addition to recovering so much of the price as has been paid (a) "cover" and have damages under the next section as to all the goods affected whether or not they have been identified to the contract;

70. Expectation and Cover in Globe 70  Incidental damages: UCC § 2-713(1)  Subject to the provisions of this Article with respect to proof of market price (Section 2-723), the measure of damages for non-delivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages provided in this Article

71. Expectation and Cover in Globe 71  Suppose that the purchase price of the cotton oil is 100K, that Globe has spent 10k in reliance expenses on the railway cars, and that on breach Globe covers by buying substitute oil for 120k in Texas What reliance damages would you award?

72. Expectation and Cover in Globe 72  Suppose that the purchase price of the cotton oil is 100K, that Globe has spent 10k in reliance expenses on the railway cars, and that on breach Globe covers by buying substitute oil for 120k in Texas Reliance damages = 30k  [120k less 100k] for cover  Plus 10k in consequential damages

73. Expectation and Cover in Globe 73  Suppose that the purchase price of the cotton oil is 100K, that Globe has spent 10k in reliance expenses on the railway cars, and that on breach Globe covers by buying substitute oil for 120k in Texas What expectation damages?

74. Expectation and Cover in Globe 74  Suppose that the purchase price of the cotton oil is 100K, that Globe has spent 10k in reliance expenses on the railway cars, and that on breach Globe covers by buying substitute oil for 120k in Texas Expectation = 30k.  Globe had to spend $130k (120k plus 10k) to be as well off as if the contract had been performed and he had paid 100k

75. See problem 7 at p. 102  What are the three possible kinds of damages here?  Builder to build a house for 100, owner pays deposit of 15, expected costs of 90, repudiation by owner when builder has spent 60 and property has increased in value by 40 75

76. See problem 7 at p. 102  Builder to build a house for 100, owner pays deposit of 15, expected costs of 90, repudiation by owner when builder has spent 60 and property has increased in value by 40  What are the reliance damages? 76

77. See problem 7 at p. 102  Builder to build a house for 100, owner pays deposit of 15, expected costs of 90, repudiation by owner when builder has spent 60 and property has increased in value by 40  Reliance damages = 60 [less deposit] 77

78. See problem 7 at p. 102  Builder to build a house for 100, owner pays deposit of 15, expected costs of 90, repudiation by owner when builder has spent 60 and property has increased in value by 40  What is the restitution interest? 78

79. See problem 7 at p. 102  Builder to build a house for 100, owner pays deposit of 15, expected costs of 90, repudiation by owner when builder has spent 60 and property has increased in value by 40  Restitution interest = 40 [less deposit?] 79

80. See problem 7 at p. 102  Builder to build a house for 100, owner pays deposit of 15, expected costs of 90, repudiation by owner when builder has spent 60 and property has increased in value by 40  What is the expectation interest? 80

81. See problem 7 at p. 102  Builder to build a house for 100, owner pays deposit of 15, expected costs of 90, repudiation by owner when builder has spent 60 and property has increased in value by 40  Suppose first that owner defaults before builder incurs any expenses 81

82. See problem 7 at p. 102  Builder to build a house for 100, owner pays deposit of 15, expected costs of 90, repudiation by owner when builder has spent 60 and property has increased in value by 40  Builder expected profits of 10, and simply keeps the deposit of 15 82

83. See problem 7 at p. 102  Builder to build a house for 100, owner pays deposit of 15, expected costs of 90, repudiation by owner when builder has spent 60 and property has increased in value by 40  What is the builder’s expectation interest after he has spent 60 in expenses? 83

84. See problem 7 at p. 102  Builder to build a house for 100, owner pays deposit of 15, expected costs of 90, repudiation by owner when builder has spent 60 and property has increased in value by 40  What do we need to give him to make him as well off as if the contract had been performed? 84

85. See problem 7 at p. 102  Builder to build a house for 100, owner pays deposit of 15, expected costs of 90, repudiation by owner when builder has spent 60 and property has increased in value by 40  He’ll need the forgone net profits of 10 plus his expenses of 60 less the deposit  = 55 85

86. See problem 7 at p. 102  Builder to build a house for 100, owner pays deposit of 15, expected costs of 90, repudiation by owner when builder has spent 60 and property has increased in value by 40  If we give him less than 55 he is worse off than he would have been had the contract been performed 86

87. Why is the expectation interest the contractual measure of damages?  A contracts to build a custom made machine for B for $100,000 87

88. Why is the expectation interest the contractual measure of damages?  A contracts to build a custom made machine for B for $100,000 We are permitted to infer that, ex ante, the machine was worth at least $100K to B and would cost less than $100K for A to build 88

89. Why is the expectation interest the contractual measure of damages?  A contracts to build a custom made machine for B for $100,000 We are permitted to infer that, ex ante, the machine was worth at least $100K to B and would cost less than $100K for A to build If A breaches, B’s expectation interest is the value of the machine less the $100K purchase price 89

90. Why is the expectation interest the contractual measure of damages?  A contracts to build a custom made machine for B for $100,000 We are permitted to infer that, ex ante, the machine was worth at least $100K to B and would cost less than $100K for A to build If B breaches, A’s expectation interest is $100K less the cost of construction 90

91. Why is the expectation interest the contractual measure of damages?  A contracts to build a custom made machine for B for $100,000 We are permitted to infer that, ex ante, the machine was worth at least $100K to B and would cost less than $100K for A to build If B breaches, A’s expectation interest is $100K less the cost of construction  Let’s assume that that is $60,000 91

92. Why is the expectation interest the contractual measure of damages?  A contracts to build a custom made machine for B for $100,000 If B breaches, A’s expectation interest is ($100,000 - $60,000 =) $40,000 92

93. Why is the expectation interest the contractual measure of damages?  A contracts to build a custom made machine for B for $100,000 If B breaches, A’s expectation interest is $40K Suppose that contract law awards A only $20K in damages 93

94. Why is the expectation interest the contractual measure of damages?  A contracts to build a custom made machine for B for $100,000 If B breaches, A’s expectation interest is $40K Suppose that contract law awards A only $20K in damages  How might B exploit this? 94

95. Why is the expectation interest the contractual measure of damages?  A contracts to build a custom made machine for B for $100,000 If B breaches, A’s expectation interest is $40K Suppose that contract law awards A only $20K in damages  “If I breach, you get $20K, so I’ll offer you $90,000 (= cost of construction plus $30k) 95

96. Why is the expectation interest the contractual measure of damages?  A contracts to build a custom made machine for B for $100,000 If B breaches, A’s expectation interest is $40K Suppose that contract law awards A only $20K in damages  This invites opportunistic renegotiation by B when the machine is half built 96

97. Why is the expectation interest the contractual measure of damages?  A contracts to build a custom made machine for B for $100,000 If B breaches, A’s expectation interest is $40K Suppose that contract law awards A $80K in damages 97

98. Why is the expectation interest the contractual measure of damages?  A contracts to build a custom made machine for B for $100,000 If B breaches, A’s expectation interest is $40K Suppose that contract law awards A $80K in damages  Now A has an incentive to declare a breach 98

99. 99 George Mason School of Law Contracts II Remedies II: Expectation Interest 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

100. Calculating the Expectation Interest  How much do we have to give the injured party to make him as well off as if the contract had been performed? Reimbursing for reliance expenses that otherwise would be wasted 100

101. See problem 7 at p. 102  Builder to build a house for 100, owner pays deposit of 15, expected costs of 90, repudiation by owner when builder has spent 60  The expectation interest gives him the forgone net profits of 10 plus his expenses of 60 less the deposit  = 55 101

102. Departures from the Expectation Interest  Departures from the expectation interest invite opportunistic breaches E.g., attempted renegotiation by party in breach after builder has spent 60 102

103. Departures from the Expectation Interest  Departures from the expectation interest invite opportunistic breaches  But what about non-opportunistic breaches? 103

104. Efficient Breach  Holmes’ Path of the Law p. 103, n. 71 The common law is indifferent between the promisor’s choice either to perform or breach and pay damages 104

105. Efficient Breach  Holmes’ Path of the Law p. 103 The common law is indifferent between the promisor’s choice either to perform or breach and pay damages Which is a corollary of the principle that damages fully compensate 105

106. Efficient Breach  The limitation to expectation damages can give one an incentive to breach 106

107. Efficient Breach  Cf. Casebook’s hypothetical at p. 105 A agrees to sell widgets to B for $1,000 They would cost A $500 to make and so he expects a profit of $500 107

108. Efficient Breach  Cf. Casebook’s hypothetical at p. 105 A agrees to sell widgets to B for $1,000 They would cost A $500 to make and so he expects a profit of $500 They are worth $1,500 to B, who would pay $1,000 for them and lose $500 if he can’t get them 108

109. Efficient Breach  Cf. Casebook’s hypothetical at p. 105 A agrees to sell widgets to B for $1,000 They would cost A $500 to make and so he expects a profit of $500 They are worth $1500 to B, who loses $500 if he can’t get them C subsequently asks A to sell widgets to him for $2,000  A can’t sell to both 109

110. Efficient Breach  Cf. Casebook’s hypothetical at p. 105 A agrees to sell widgets to B for $1,000 They would cost A $500 to make and are worth $1500 to B C subsequently asks A to sell widgets to him for $2,000 A can’t sell to both If he sells to A he makes (1,000 – 500 =) 500 110

111. Efficient Breach  Cf. Casebook’s hypothetical at p. 105 A agrees to sell widgets to B for $1,000 They would cost A $500 to make and are worth $1500 to B C subsequently asks A to sell widgets to him for $2,000 If he sells to C he makes (2,000 – 500 =) 1,500, from which he can pay damages to B of 500 and have a profit of 1,000 111

112. Efficient Breach  Cf. Casebook’s hypothetical at p. 105 If he sells to C he makes (2,000 – 500 =) 1,500, from which he can pay damages to B of 500 and have a profit of 1,000 So he makes $500 if he performs and $1,000 if he breaches and sells to C 112

113. Efficient Breach  Cf. Casebook’s hypothetical at p. 105 So A is net 500 better off if he breaches What assumptions are we making? 113

114. Efficient Breach  Cf. Casebook’s hypothetical at p. 105 What assumptions are we making? How did we know that B’s damages would only be (1,500 – 1,000 =) 500? Where did we get the $1,500 figure from?  Could it have been $3,000? 114

115. Efficient Breach  Cf. Casebook’s hypothetical at p. 105 What assumptions are we making? Can we be sure that C is the most highly valued user? 115

116. Efficient Breach  Cf. Casebook’s hypothetical at p. 105 Can we be sure that C is the most highly valued user? Why not—wouldn’t we expect an auction? 116

117. Efficient Breach  Cf. Casebook’s hypothetical at p. 105 What assumptions are we making? Suppose C is the most highly valued user (after all, he paid more for it). Couldn’t C buy the widgets from B? 117

118. Efficient Breach  Cf. Casebook’s hypothetical at p. 105 Suppose C is the most highly valued user (after all, he paid more for it). Couldn’t C buy the widgets from B? We know that C knew of A. Would C know of B? 118

119. Efficient Breach  Casebook’s hypothetical at p. 105  An efficient breach is thought to move the goods to their most highly- valued user without the need for renegotiation between B and C 119

120. Efficient Breach  Suppose treble damages of $1500 were awarded to B? Will A sell to C? 120

121. Efficient Breach  Suppose treble damages of $1500 were awarded to B. A won’t sell to C  If he does he’ll make an extra $500 on the sale to C but will pay damages of $1500 to B and would not have an incentive to sell to C 121

122. Do we have a good faith problem here?  Would good faith norms require damages that exceed buyer’s lost profits? 122

123. Do we have a good faith problem here?  Would good faith norms require damages that exceed buyer’s lost profits? How much higher (since there is always a theoretical incentive for seller to breach?) 123

124. Just what do the parties expect from performance?  The ambiguity in the expectation interest 124

125. Just what do the parties expect from performance  Where I bargain for an ounce of gold, my claim is unquestionably fungible with $$$ 125

126. Just what do the parties expect from performance  I buy a Picasso print from a gallery for $15,000, which I think would look great in a bare spot in my living room. Before delivery, the gallery decides to sell it to a third party for $20,000 Why is this different? 126

127. Just what do the parties expect from performance  The problem of subjective value 127

128. Peevyhouse 846 128

129. Peevyhouse 846 129

130. Peevyhouse 846 130

131. What was the breach?  Would specific performance be ordered?  If not what is the measure of damages? 131

132. Just what does it mean to provide compensatory damages in contract?  How do we put the Π in the same position he would have been in had the contract been performed? 132

133. Just what does it mean to provide compensatory damages in contract?  How do we put the Π in the same position he would have been in had the contract been performed? Cost of repairs: Give the Π enough $$$ to permit him to make the repairs Diminution of value: Give the Π the diminution of the market value of the property had the contract been performed 133

134. We saw this before  Plante v. Jacobs at 676 134

135. We saw this before  Jacob & Youngs v. Kent How was the cost of repair different from diminution of value, and how did that figure into Cardozo’s judgment? 135

136. Peevyhouse 846  Lease of farm for five years for stripmining Cost of repair is $29,000 Diminution of market value ≈ $300 136

137. Peevyhouse  Lease of farm for five years for stripmining Cost of repair is $29,000 Diminution of value ≈ $300 Jury awarded $5,000, which was more than the market value of the land even if the repair work had been done 137

138. Peevyhouse  Lease of farm for five years for stripmining Cost of repair is $29,000 Diminution of value ≈ $300 Jury awarded $5,000, which was more than the market value of the land even if the repair work had been done And on appeal? 138

139. Just what does it mean to provide compensatory damages in contract?  How do we put the Π in the same position he would have been in had the contract been performed? Cost of repairs: Give the Π enough $$$ to permit him to make the repairs Diminution of value: Give the Π the diminution in the market value of the property had the contract been performed Can you think of a third option? 139

140. Just what does it mean to provide compensatory damages in contract?  How do we put the Π in the same position he would have been in had the contract been performed? Cost of repairs: Give the Π enough $$$ to permit him to make the repairs Diminution of value: Give the Π the diminution in the market value of the property had the contract been performed Diminution of subjective value? 140

141. Just what does it mean to provide compensatory damages in contract?  How do we put the Π in the same position he would have been in had the contract been performed? Cost of repairs: Give the Π enough $$$ to permit him to make the repairs Diminution of value: Give the Π the diminution in the market value of the property had the contract been performed Diminution of subjective value?  Any problems here? 141

142. Peevyhouse  Why do you think Garland agreed to this crazy contract? 142

143. Peevyhouse  Why do you think Garland agreed to this crazy contract? Why didn’t it buy the land? 143

144. Peevyhouse  Why do you think Garland agreed to this crazy contract? Why didn’t it buy the land? Why didn’t it offer a flat amount for the damages to the land?  The contract gave the Πs the option of $3000 versus repairing the hole 144

145. Peevyhouse  Is there a principled way to choose which measure of damages to adopt? 145

146. What happens when the contract is silent about the penalty? 146 Give them what they “probably would have said if they had spoken about the matter.”

147. Peevyhouse  Suppose the facts of the case had been put to the parties at the time of contracting. What do you think they would they have bargained for? 147

148. Peevyhouse  Suppose the facts of the case had been put to the parties at the time of contracting. What do you think they would they have bargained for? Do we know that the Πs wanted more than $3000? 148

149. Peevyhouse  Suppose the facts of the case had been put to the Π at the time of contracting. What would he have bargained for? I can see the possibility of undercompensation. But can you see the possibility of overcompensation? 149

150. Peevyhouse  Suppose the Peeveyhouse’s got the $29,000. What do you expect they would do with it? 150

151. Peevyhouse  The dissent by Irwin: How would he have decided Jacob & Youngs v. Kent? 151

152. Peevyhouse  The dissent by Irwin: Is it helpful to note that Δs breach was willful? 152

153. Willful deviations as Conditions  Cf Grun Roofing at 670 “Contractor must have intended to comply”  Material Movers at 675 Can you justify this on efficiency grounds? 153

154. American Standard 854 154  Why a different result?

155. American Standard 852 155 Tonawanda!!!

156. American Standard  Cost of completion was $110K  Semble diminution of value was around $3K 156

157. American Standard  Cost of completion was $110K  Semble diminution of value was around $3K We sure about that? 157

158. American Standard  Cost of completion was $110K  Semble diminution of value was around $3K  So what did the Π bargain for? Money’s worth or full performance 158

159. American Standard  So what did the Π bargain for? Money’s worth or full performance Disparity in economic benefits is not the equivalent of economic waste in Jacob and Youngs v. Kent 159

160. American Standard  Did the land have idiosyncratic or sentimental value in Peevyhouse? Did subjective value > market value? 160

161. American Standard  Did the land have idiosyncratic or sentimental value in Peevyhouse?  And here? Tonawanda!?!?! 161

162. American Standard  The parties might have (but didn’t) provide that damages were to be paid on a cost of replacement basis. Can one draw an inference from that? 162