Transcript Contracts II Reliance/Restitution/Punitives George Mason School of Law

George Mason School of Law
Contracts II
Reliance/Restitution/Punitives
F.H. Buckley
[email protected]
1
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
2
The measure of damages
 When would the Π prefer reliance
damages?
3
The measure of damages
 When would the Π prefer reliance
damages?
 Whenever these exceed the expectation
award
4
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?
5
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?
6
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
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The measure of damages
 When should the Π be limited to
reliance damages?
8
The measure of damages
 When should the Π be limited to
reliance damages?
 Contracts with Physicians
 Hawkins v. McGee
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The measure of damages
 When should the Π be limited to
reliance damages?
 Contracts with Physicians
 Hawkins v. McGee
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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?
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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?
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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?
 Is this available in commercial cases?
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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?
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The measure of damages
 Kizas v. Webster
Robert Stack as Eliot Ness
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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.
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The measure of damages
 Kizas v. Webster
 So what do you think of the takings
argument?
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The measure of damages
 Kizas v. Webster
 So what do you think of the takings
argument?
 Reversed on appeal
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The measure of damages
 Kizas v. Webster
 So what do you think of the takings
argument?
 If it would succeed, what kind of damages?
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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?
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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
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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?
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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.
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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
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Anglia v. Reed 902
Robert Reed, The Brady Bunch
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Anglia v. Reed
 What was the problem with
expectation damages?
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Anglia v. Reed
 What was the problem with
expectation damages?
 If expectation damages are
speculative, could any reliance
damages be awarded?
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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
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Restitution
 The forms of action:
 Trespass
 Action on the case
 Negligence
 Assumpsit
 Quasi Contract
 Money had and received
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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.
30
Restitution
 Suppose that, without asking you
permission, I put orange aluminum
siding on your house. Can I recover
the cost of doing do from you?
31
Restitution
 Bailey v. West p. 5
 What should the Πs have done with the
horse?
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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
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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
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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
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George Mason School of Law
Contracts II
Reliance/Restitution/Punitives
F.H. Buckley
[email protected]
36
Zara Contracting
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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.
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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?
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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 meruit for value of work done
(more than contract rate as the work was
harder than expected)?
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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 meruit for value of work done
(more than contract rate as the work was
harder than expected)?
 What was the benefit unjustly retained by
Zara?
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Zara Contracting
 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
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Zara Contracting
 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
 Britton v. Turner?
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Ventura v. Titan 910
Gov. Jesse Ventura (Ind. MN)
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Ventura v. Titan
 If Ventura had bargained for $X in
royalties, could he recover more than
this in quantum meruit?
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Ventura v. Titan
 If Ventura had bargained for $X in
royalties, could he recover more than
this in quantum meruit?
 Is this consistent with Zara?
46
Can restitution damages exceed
expectation damages?
 Britton v. Turner 906
 What would expectation damages
amount to?
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Can restitution damages exceed
expectation damages?
 Britton v. Turner
 What would expectation damages
amount to?
 Unlike Zara, Π is in breach here
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Can restitution damages exceed
expectation damages?
 Britton v. Turner
 What would quantum meruit give the Π?
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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?
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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?
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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?
 “It is easy, if the parties so choose…”
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Do 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?
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Do damages undercompensate?
 If they do, an argument for punitive
damages?
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Do damages undercompensate?
 If they do, an argument for punitive
damages?
 Of course, this assumes that the U.S.
has it right and the rest of the world
is really very backward…
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Do damages
undercompensate?
 Would compensatory damages
undercompensate in Hibschman
Pontiac?
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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")
Do damages
undercompensate?
 What was the “malice, fraud, gross
negligence and oppressive conduct”?
 As opposed to a simple breach of
contract…
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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 elements of fraud, malice etc mingle
in the controversy
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Do damages
undercompensate?
 The jury awarded punitive damages
assessed at 10 times the
compensatory damages
 When is the “first blush” rule triggered?
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Do damages overdeter?
 Suppose you’re a potential Δ. Are you
made whole by a finding of no
liability?
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Do damages overdeter?
 Suppose you’re a potential Δ. Are you
made whole by a finding of no
liability?
 Imagine the argument to the jury in
Miller Brewing
 They’re so rich, they won’t notice unless
you make it hurt
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Do damages overdeter?
 Interstate Exploitation
 Suppose state A was permitted to
impose a tax on citizens of state B…
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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?
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Miller Brewing
 Best Beers a distributor for Miller for
30 years
 Was the termination wrongful?
 Was Miller animated by something other
than its business interests?
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Miller Brewing
 The court found that Monroe
Beverage’s performance was in some
ways inferior to Best Beers.
 Is this relevant?
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Miller Brewing
 Is Hibschman Pontiac overturned?
 The need for an independent common
law tort.
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The Backlash
 Kozinski in Oki America at 992
 Thyssen v. Taiwan Int’l at 923
 State Farm and interstate exploitation
at 925
 Cooter on business judgment
standards
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George Mason School of Law
Contracts II
Punitive Damages
F.H. Buckley
[email protected]
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