George Mason School of Law Contracts II Reliance Restitution Punitives

George Mason School of Law Contracts II Reliance/Restitution/Punitives F. H. Buckley fbuckley@gmu. edu 1

Next (last) day o Finish Remedies chapter o Scott 1001 -36 2

The measure of damages o If damages are meant to compensate the innocent party for the wrong done him, what is the wrong when the other party breaches? n Failure to perform: Expectation damages n Inviting detrimental reliance: reliance damages 3

The measure of damages o When would the Π prefer reliance damages? 4

The measure of damages o When would the Π prefer reliance damages? n Whenever these exceed the expectation award 5

The measure of damages o When would the Π prefer reliance damages? n Whenever these exceed the expectation award o Limits on expectation damages n Uncertainty n Foreseeability n Or bad bargains? 6

The measure of damages o When would the Π prefer reliance damages? n Whenever these exceed the expectation award o Should the Π have the option in such cases? 7

Freund o What are three kinds of damages that are considered? n The Expectation Interest n The Reliance Interest o Semble not to exceed the expectation interest, or else a windfall 8

The measure of damages o When should the Π be limited to reliance damages? 9

The measure of damages o When should the Π be limited to reliance damages? n Contracts with Physicians o Hawkins v. Mc. Gee 892 10

The measure of damages o When should the Π be limited to reliance damages? n Contracts with Physicians o Hawkins v. Mc. Gee 11

The measure of damages o When should the Π be limited to reliance damages? n Contracts with Physicians o Why a different result in Sullivan v. O’Connor? 12

The measure of damages o When should the Π be limited to reliance damages? n Contracts with Physicians o Hawkins v. Mc. Gee o Why a different result in Sullivan v. O’Connor? n What would the two measures give? § What difference in pain and suffering claims? 13

The measure of damages o When should the Π be limited to reliance damages? n Contracts with Physicians o Hawkins v. Mc. Gee o Why a different result in Sullivan v. O’Connor? n What would the two measures give? n What would restitution give? 14

The measure of damages o Kizas v. Webster 896 Robert Stack as Eliot Ness 15

The measure of damages o Kizas v. Webster n The FBI attracted college graduate to work as clerical staff because of the possibility of receiving preferential consideration as special agents n 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. 16

The measure of damages o Kizas v. Webster n So what do you think of the takings argument? 17

The measure of damages o Kizas v. Webster n So what do you think of the takings argument? o Reversed on appeal 18

The measure of damages o Kizas v. Webster n So what do you think of the takings argument? o If it would succeed, what kind of damages? 19

The measure of damages o Kizas v. Webster n So what do you think of the takings argument? o If it would succeed, what kind of damages? n What are the problems with expectation damages? 20

The measure of damages o Kizas v. Webster n So what do you think of the takings argument? o If it would succeed, what kind of damages? n What are the problems with expectation damages? § Uncertainty § FBI’s right to terminate 21

The measure of damages o Kizas v. Webster n So what do you think of the takings argument? o If it would succeed, what kind of damages? n Do expectation damages place a ceiling on reliance damages? 22

The measure of damages o Kizas v. Webster n So what do you think of the takings argument? o If it would succeed, what kind of damages? n Do expectation damages place a ceiling on reliance damages? § Yes—but no proof that a bad bargain. 23

The measure of damages o Kizas v. Webster n So what do you think of the takings argument? o If it would succeed, what kind of damages? n 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 24

Anglia v. Reed 902 Robert Reed, The Brady Bunch 25

Anglia v. Reed o What was the problem with expectation damages? 26

Anglia v. Reed o What was the problem with expectation damages? o If expectation damages are speculative, could any reliance damages be awarded? 27

Anglia v. Reed o What was the problem with expectation damages? o If expectation damages are speculative, could any reliance damages be awarded? n Both pre- and post-contract reliance damages awarded 28

Restitution o The forms of action: n Trespass n Action on the case o Negligence o Assumpsit o Quasi Contract n Money had and received 29

Restitution or Unjust Enrichment o A general principle of restitution out of Quasi Contract, Money had and received, breach of fiduciary duty o Based on Δ’s unjust retention of a benefit as against Π, and not on Π’s reliance losses. 30

Restitution: General Principles o 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 o Bailey v. West p. 5 n What should the Πs have done with the horse? 32

Restitution o Bailey v. West p. 5 n What should the Πs have done with the horse? n Restitutionary remedies are available in spite of or in the absence of consent—but not if the Π is an officious intermeddler 33

Restitution o Bailey v. West p. 5 n What should the Πs have done with the horse? n Restitutionary remedies are available in spite or the absence of consent—but not if the Π is an officious intermeddler o If not, see Leebow at p. 911 34

Restitution o Bailey v. West p. 5 n What should the Πs have done with the horse? n Restitutionary remedies are available in spite or the absence of consent—but not if the Π is an officious intermeddler n But that problem doesn’t arise when restitution is sought as a remedy in contract 35

Zara Contracting 903 36 Tri-cities Airport, Endicott NY

Zara Contracting o Zara contracts with US gov’t to build an airport o Zara subcontracts the entire job to Π o Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. 37

Zara Contracting o Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. n What can Π recover? o Value of work done at contract rate? 38

Zara Contracting o Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. n What can Π recover? o Value of work done at contract rate? o Quantum meruit for value of work done (more than contract rate as the work was harder than expected)? 39

Zara Contracting o Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. n What can Π recover? o What was the benefit unjustly retained by Zara? n Is it unjust if the plaintiff is simply paid at the contract rate? 40

Zara Contracting o Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. n What can Π recover? o Does it matter that the defendant was in breach? n Cf Restatement 373 n Palmer Construction 909 41

Zara Contracting o Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. n What can Π recover? o Does it matter that the defendant was in breach? n Cf gloss added by Farash at 910 42

Zara Contracting o The measure of recovery: n Extent to which defendant’s wealth is increased? n Amount defendant would have paid a third party for the work? n Zara’s recovery from the government of $17, 115 for the extra work? 43

Zara Contracting o The court thought that Restatement 347, comment c was triggered. Was it? 44

Briton v. Turner 906 o Is there some reason why the nobreach rule should be waived here? 45

Can restitution damages exceed expectation damages? o Britton v. Turner n Aliter a temptation to strategic behavior by the employer? 46

Can restitution damages exceed expectation damages? o Britton v. Turner n Can the employer bargain around this? 47

Do damages undercompensate? o The American rule of costs chills meritorious actions (and encourages frivolous ones) n Small dollar claims might not be brought 48

Do damages undercompensate? o The American rule of costs chills meritorious actions (and encourages frivolous ones) o But class actions remedy this o And then some? 49

Do damages undercompensate? o If they do, an argument for punitive damages? 50

Do damages undercompensate? o If they do, an argument for punitive damages? o Of course, this assumes that the U. S. has it right and the rest of the world is really very backward… 51

Do damages undercompensate? o Would compensatory damages undercompensate in Hibschman Pontiac? 52

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, (mixed with "Yeah, yeah, little GTO") Wa-wa wa, wa, wa, wa (mixed with "Ahhh, little GTO") 53

Do damages undercompensate? o What was the “malice, fraud, gross negligence and oppressive conduct”? n As opposed to a simple breach of contract… 54

Do damages undercompensate? o What was the “malice, fraud, gross negligence and oppressive conduct”? n As opposed to a simple breach of contract… n Did the Π independently establish a common law tort? 55

Do damages undercompensate? o The jury awarded punitive damages assessed at 10 times the compensatory damages n When is the “first blush” rule triggered? o 5 times is appropriate? 56

BMW v. Gore o $4, 000 in compensatory damages for selling a used car without disclosing it had been repainted o $4, 000 in punitives, later reduced to $2, 000 by the Alabama Supreme Court o After USSC weighs in, punitives reduced to $50, 000 57

Do damages overdeter? o Suppose you’re a potential Δ. Are you made whole by a finding of no liability? 58

Do damages overdeter? o Suppose you’re a potential Δ. Are you made whole by a finding of no liability? 59

Miller Brewing o What was the wrongful behavior? o And what were the damages? 60

Miller Brewing o Best Beers a distributor for Miller for 30 years o Was the termination wrongful? n Was Miller animated by something other than its business interests? 61

Miller Brewing o The court found that Monroe Beverges performance was in some ways inferior to Best Beers. o Is this relevant? 62

Miller Brewing o Is Hibschman Pontiac overturned? n The need for an independent common law tort. 63

The Pinto Case 922 o 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 n In doing so, it valued a life as worth $2 M n Does this deserve punitive damages? 64

The Backlash o Kozinski in Oki America at 992 o Thyssen v. Taiwan Int’l at 923 o State Farm and interstate exploitation at 925 o Cooter on business judgment standards 65