DOCSLIB.ORG

Promissory Estoppel Damages Mary E

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Promissory Estoppel Damages Mary E Hofstra Law Review Volume 16 | Issue 1 Article 6 1987 Promissory Estoppel Damages Mary E. Becker Follow this and additional works at: http://scholarlycommons.law.hofstra.edu/hlr Part of the Law Commons Recommended Citation Becker, Mary E. (1987) "Promissory Estoppel Damages," Hofstra Law Review: Vol. 16: Iss. 1, Article 6. Available at: http://scholarlycommons.law.hofstra.edu/hlr/vol16/iss1/6 This document is brought to you for free and open access by Scholarly Commons at Hofstra Law. It has been accepted for inclusion in Hofstra Law Review by an authorized administrator of Scholarly Commons at Hofstra Law. For more information, please contact [email protected]. Becker: Promissory Estoppel Damages ARTICLE PROMISSORY ESTOPPEL DAMAGES Mary E. Becker* INTRODUCTION The proper measure of damages in promissory estoppel cases is a traditional subject of controversy.1 During the drafting of section 90 of the Restatement of Contracts,2 Professor Williston maintained that once a promise was enforced because a promisee had reasonably relied upon it, expectation damages should be awarded, as in other contract actions.3 Although the original section seemed to reflect this * Professor of Law, The University of Chicago. Research support was provided by a F. Leroy Hill Fellowship from the Institute for Humane Studies and by the Russell Baker Schol- ars Fund, the Bernard F. Sang Faculty Fund and the John M. Olin Fund of the University of Chicago. I thank Albert Alschuler, Walter Blum, Gerhard Casper, Frank Easterbrook, Rich- ard Epstein, Daniel Fischel, Richard Helmholtz, Geoffery Miller, Bernard Meltzer, and Rich- ard Posner for helpful comments on an early version of this article. I especially thank Douglas Baird, Geoffery Stone, and Cass Sunstein for reading multiple drafts. 1. Courts and commentators have generally taken three approaches to measuring dam- ages in promissory estoppel cases: the reliance measure, the expectancy measure, and a flexible or discretionary approach. For cases awarding reliance damages, see Goodman v. Dicker, 169 F.2d 684 (D.C. Cir. 1948); Grouse v. Group Health Plan, Inc., 306 N.W.2d 114 (Minn. 1981); Wheeler v. White, 398 S.W.2d 93 (Tex. 1965); Hoffman v. Red Owl Stores, 26 Wis. 2d 683, 133 N.W.2d 267 (1965). For cases granting expectation damages, see Walters v. Mar- athon Oil Co., 642 F.2d 1098 (7th Cir. 1981); Signal Hill Aviation Co. v. Stroppe, 96 Cal. App. 3d 627, 158 Cal. Rptr. 178 (1979); Chrysler Corp. v. Quimby, 51 Del. 264, 144 A.2d 123 (1958). For courts recognizing a flexible approach, see Farm Crop Energy, Inc. v. Old Nat'l Bank, 38 Wash. App. 50, 685 P.2d 1097 (1984) (awarding lost profits). See also infra notes 5-11 and accompanying text (the approaches taken by commentators). 2. RESTATEMENT (FIRsT) OF CONTRACTS § 90 (1932), which in pertinent part states: A promise which the promisor should reasonably expect to induce action or forbear- ance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. 3. 4 A.L.I. PROCEEDINGS App. 97-106 (1926). Published by Scholarly Commons at Hofstra Law, 1987 1 Hofstra Law Review, Vol. 16, Iss. 1 [1987], Art. 6 HOFSTRA LAW REVIEW [Vol. 16:131 view, 4 other commentators disagreed, arguing that when a non-bar- gain promise is enforced because of the promisee's reliance, liability should be limited to the promisee's reliance loss.' Promissory estoppel was initially limited to donative, non-com- mercial, situations.6 With the expansion of promissory estoppel to commercial settings, some commentators argue that expectation damages are, or should be, generally available in commercial cases. 7 Other commentators note that a flexibile approach to damage awards has evolved in promissory estoppel cases." According to these commentators, there are two sets of cases with different measures of damages: expectation damages in commercial settings and reliance damages in donative settings.9 The Restatement (Second) of Con- tracts adopts a discretionary approach: "[t]he remedy granted for breach may be limited as justice requires." 10 Nonetheless most com- 4. The first § 90 provided that the "promise" was "binding," presumably by its terms, once reasonably and forseeably relied upon. RESTATEMENT (FIRST) OF CONTRACTS § 90 (1932); see Comment, Once More into the Breach: Promissory Estoppel and Traditional Damage Doctrine, 37 U. CHI. L. REv. 559, 562-63 (1970). 5. See IA A. CORBIN, CORBIN ON CONTRACTS § 205 (1963); Boyer, Promissory Estop- pel: Requirements and Limitations of the Doctrine, 98 U. PA. L. REV. 459, 490-91 (1950); Fuller & Perdue, The Reliance Interest in Contract Damages: 1, 46 YALE L. J. 52, 63-65 (1936)[hereinafter Contract Damages: 1];Fuller & Perdue, The Reliance Interest in Contract Damages: 2, 46 YALE L.J. 373, 401-06 (1937)[hereinafter Contract Damages: 2]; Shattuck, Gratuitous Promises-A New Writ?, 35 MICH. L. REV. 908, 942-43 (1937); Note, An Inquiry Into the Principles of the Law of Contracts, 46 HARV. L. REV. 1, 22-23 (1932). 6. See, e.g., Robert Gordon, Inc. v. Ingersoll-Rand Co., 117 F.2d 654 (7th Cir. 1941); James Baird Co. v. Gimbel Bros., 64 F.2d 344, 346 (2d Cir. 1933). For a comprehensive analysis of the case law, see I S. WILLISTON, A TREATISE ON THE LAW OF CONTRACTS §§ 139, 140 (3d ed. 1936); Boyer, supra note 5, at 461-70; Henderson, Promissory Estoppel and Traditional Contract Doctrine, 78 YALE L.J. 343, 344 (1969); Note, Promissory Estoppel- Measure Of Damages, 13 VAND. L. REV. 705, 706 (1960); Comment, supra note 4, at 561. 7. Farber & Matheson, Beyond Promissory Estoppel: Contract Law and the "Invisible Handshake," 52 U. CHI. L. REV. 902, 945 (1985); Note, Farm Crop Energy v. Old National Bank: A Meaningful Test For Damages Under Promissory Estoppel?, 10 U. PUGET SOUND L. REV. 277, 294 (1987); Note, supra note 6, at 709; Comment, supra note 4, at 561, 568. 8. J.CALAMARI & J.PERILLO. THE LAW OF CONTRACTS §§ 6-12, at 291 (3d ed. 1987); A. CORIN, supra note 5, § 205, at 249; Contract Damages: 2, supra note 5, at 401-06; Com- ment, supra note 4, at 564. 9. Contract Damages: 2, supra note 5, at 401-06; Metzger & Phillips, The Emergence of Promissory Estoppel as an Independent Theory of Recovery, 35 RUTGERS L. REV. 472, 545 (1983); Comment, supra note 4, at 560-65. For an analysis of damages in donative settings, see Infra notes 29-51 and accompanying text. For an analysis of damages in commercial set- tings, see infra notes 51-82 and accompanying text. 10. RESTATEMENT (SECOND) OF CONTRACTS § 90 (1979), Comment d provides that "The same factors which bear on whether any relief should be granted also bear on the char- acter and extent of the remedy." See J. CALAMARI & J. PERILLO, supra note 8, §§ 6-12, at 273; Henderson, supra note 6, at 378-87. http://scholarlycommons.law.hofstra.edu/hlr/vol16/iss1/6 2 Becker: Promissory Estoppel Damages 1987] PROMISSORY ESTOPPEL DAMAGES mentators continue to view reliance damages as appropriate in many donative settings.11 Views on damages in promissory estoppel cases are linked to a more basic issue: Is the basis of liability in promissory estoppel cases contract or tort? Commentators who view promissory estoppel as more tort than contract consider reliance the appropriate measure of damages,1 2 though in many commercial settings expectation dam- ages may be the best measure of full reliance loss.' 3 In contrast, those commentators who view promissory estoppel as more contract than tort view expectation damages as generally appropriate, at least 4 in commercial settings.' This article attempts to describe and explain damages in prom- issory estoppel cases. In doing so, I rely on an earlier article, which explained why liability is imposed in promissory estoppel cases. 15 That article suggested that in most promissory estoppel cases liabil- ity can be understood as contractual in the broad sense that the promisor intended to be legally bound under an objective standard, even though some traditional formal limit on contract liability-such as consideration or the Statute of Frauds - would bar enforce- ment." There are a few promissory estoppel cases, however, in which liability can be understood only on the basis of tort notions.1 In 11. Henderson, supra note 6, at 379; Metzger & Phillips, supra note 9, at 545; Eisen- berg, Donative Promises, 47 U. CI. L. REV. 1 (1979); Comment, supra note 4, at 563, 565, 568. But see I S. WILLISTON, A TREATISE ON THE LAW OF CONTRACTS § 140 (3d ed. 1936)(advocating expectation damages in donative settings); Posner, Gratuitous Promises in Economics and Law, 6 J. LEGAL STUDIES 413 (1977)(advocating expectation in donative settings). 12. See Contract Damages: 2, supra note 5, at 406-10; Posner, supra note 11, at 416. 13. See Contract Damages: 1, supra note 5, at 60 (observing that full reliance in a commercial setting is often best measured by expectation damages). See also Metzger & Phil- lips, supra note 9, at 545 (noting that expectation damages may be best remedy for full reli- ance since lost profits from forgone opportunities are not always included in reliance); Com- ment, supra note 4, at 566-70 (noting that within the commercial setting, the goal of proper compensation for gains prevented as well as opportunity costs may best be achieved by apply- ing contract damage principles: expectation damages and mitigation rules). 14. See, e.g., Farber & Matheson, supra note 7, at 945; Metzger & Phillips, supra note 9, at 545; Note, supra note 6, at 709. 15. Barnett & Becker, PromissoryEstoppel, Contract Formalities,and Misrepresenta- tion, 15 HOFSTRA L.
Load more

Recommended publications
  • Expectation, Reliance, and the Two Contractual Wrongs
    Expectation, Reliance, and the Two Contractual Wrongs CHRISTOPHER T. WONNELL* TABLE OF CONTENTS L INTRODUCTION: THE PLACE OF EXPECTATION AND RELIANCE IN CONTRACTUAL DECISION MAKING ............................................. 54 A. Two ContractualDecisions in Need of Moral Assessment ................54 B. Six Motivesfor Making and Then Breaking a Particular Contract................................................................................................. 60 1. Taking Advantage of NonsimultaneousPerformances ................... 60 2. Making a Threat to Breach in the Face of Situational Monopoly Credible....................................................................... 62 3. Refusing to Carry Through on an Agreed-upon Allocation of Risk ......................................................................... 63 4. Seeking to AppropriateInformation Productively Brought to Bearon the Transactionby the Promisee..................... 66 5. Seeking to Avoid the Contract Because of a Mistake That Makes the ContractMore Burdensome to the PromisorThan Anticipated and Correspondingly More Profitableto the Promisee.................................................. 72 6. Seeking to Avoid the Contract Because of a Mistake That Makes the ContractMore Burdensome to the PromisorThan Anticipated Without Becoming CorrespondinglyMore Profitableto the Promisee........................ 75 * Professor of Law, University of San Diego School of Law. J.D. 1982, University of Michigan; B.A. 1979, Northwestern University. This Article was selected by
    [Show full text]
  • 1. the Issue Is Whether the Trial Court Erred in Awarding the Rancher, An
    STUDENT ANSWER 1: 1. The issue is whether the trial court erred in awarding the Rancher, an aggrieved party in a breach of contract claim, a $500,000 award for restoration of the Ranch when the breaching party showed by expert testimony a diminution of value of only $20,000 in the Ranch’s current condition? The trial court had already determined that an enforceable contract existed between the Rancher and Gasco, and that the contract was breached by Gasco when it failed to restore the Ranch to its pre-exploration condition by March 31. The sole issue here is the issue of damages. Specifically, whether the award of $500,000 to restore the ranch was grossly and unfairly out of proportion to the benefit to be achieved? Remedies for breach of contract seek to compensate an aggrieved party for profits that were prevented and losses sustained due to the breach of contract. Typically, three (3) types of damages are available to an aggrieved party under Common Law contract law (UCC Article 2 does not apply here since the contract does not involve the sale of good but rather a lease for real property): (1) restitution damages, (2) reliance damages, and (3) expectation damages. The first two types of damages help an aggrieved party recover the benefit bestowed upon a breaching party to prevent its unjust enrichment, which includes the recovery of out-of-pocket expenses, if foreseeable and ascertainable at the time of the breach, that were wasted by the aggrieved party in getting ready to perform. The third type of damages, expectation damages, aims to place an aggrieved party in the same financial position as if the contract had been fully performed and not breached.
    [Show full text]
  • Why Expectation Damages for Breach of Contract Must Be the Norm: a Refutation of the Fuller and Perdue "Three Interests&Quo
    Nebraska Law Review Volume 81 | Issue 3 Article 2 2003 Why Expectation Damages for Breach of Contract Must Be the Norm: A Refutation of the Fuller and Perdue "Three Interests" Thesis W. David Slawson University of Southern California Gould School of Law, [email protected] Follow this and additional works at: https://digitalcommons.unl.edu/nlr Recommended Citation W. David Slawson, Why Expectation Damages for Breach of Contract Must Be the Norm: A Refutation of the Fuller and Perdue "Three Interests" Thesis, 81 Neb. L. Rev. (2002) Available at: https://digitalcommons.unl.edu/nlr/vol81/iss3/2 This Article is brought to you for free and open access by the Law, College of at DigitalCommons@University of Nebraska - Lincoln. It has been accepted for inclusion in Nebraska Law Review by an authorized administrator of DigitalCommons@University of Nebraska - Lincoln. W. David Slawson* Why Expectation Damages for Breach of Contract Must Be the Norm: A Refutation of the Fuller and Perdue "Three Interests" Thesis TABLE OF CONTENTS 840 I. Introduction .......................................... Principal Institutions in a Modern Market II. The 843 Economy in Which Contracts Are Used ................ A. The Institution of the Economic Market: Contracts 843 as Bargains ....................................... Institution of Credit and Finance: Contracts as B. The 845 Property .......................................... 846 the Institutions' Needs ....................... III. Meeting 846 A. Providing a Remedy for Every Breach ............. Contracts Enforceable as Soon as They Are B. Making 847 M ade ............................................. Has Compensating the Injured Party for What He C. 848 ost ............................................... L 848 Damages Under the Expectation Measure ...... 1. 849 2. Damages Under the Reliance Measure ......... 849 a.
    [Show full text]
  • Reliance and Contract Breach
    RELIANCE AND CONTRACT BREACH JIM LEITZEL* I INTRODUCTION Actions taken in reliance on a contract, and court protection of such reliance in the event of a breach, have been analyzed from both legal and economic perspectives.' This article compares the legal and economic approaches to contractual reliance and develops a model for examining the protection of expenditures in reasonable reliance. The protection of reasonable reliance potentially involves circular arguments: Courts will protect the amount of reliance in which a reasonable person would engage, but a reasonable person would rely up to the extent that courts will protect.2 This article shows that the protection of reasonable reliance may be well defined, despite the potential circularity. The economic analysis that has been done on contractual reliance has noted that the protection of reliance expenditures, in the event of a breach, may render such expenditures riskless from the viewpoint of the party engaging in the reliance. 3 Since reliance expenditures are inherently risky, 4 their protection may result in overreliance from society's point of view. Overreliance can be avoided if contractual damages are invariant with respect to reliance. 5 Damage "measures can be interpreted as invariant with respect to reliance by limiting recovery on the basis of reliance to costs that are reasonably incurred." 6 This interpretation of damages, however, is subject to the circularity problem inherent in reasonableness standards. This article uses the bilateral contract 7 as the context for the examination of reliance. This article focuses on the different answers provided by the Copyright © 1989 by Law and Contemporary Problems * Visiting Associate Professor of Economics, Duke University.
    [Show full text]
  • Practice Hypotheticals Contracts
    Practice Hypotheticals Contracts Evaluation Sheet: “Amy and the Convertible” 1. Threshold question: Was there a contract? Need to identify the overriding question of whether enforceable promises were made. Here there was an exchange of promise to wash and wax a car for ten weeks and a promise to pay $600. 2. If so, what kind of contract? Is it a contract for the sale of goods or services? Need to identify the nature of the parties’ agreement to determine the rule of law to apply: whether the UCC or common law. Since the nature of the agreement is one for personal services (washing the car) and not a transaction in goods, the common law is applicable 3. What are Ben’s damages? General rule: Every breach of contract entitles the aggrieved party to sue for damages. The general theory of damages in contract actions is that the injured party should be placed in the same position as if the contract had been properly performed, at least so far as money can do this. Compensatory damages are designed to give the plaintiff the benefit of his bargain. Expectation damages Rule: This interest represents the “benefit of the bargain” and would include all that Ben expected to earn over the course of the contract. It is what the injured party had expected to receive under the contract “but for” the breach, less expenses saved by not having to perform. Application: Here, Ben would have earned $600 over the life of the contract, the amount she promised to pay him. He said he needed to spend $50 for supplies, so $550 was pure profit.
    [Show full text]
  • The Purpose of Compensatory Damages in Tort and Fraudulent Misrepresentation
    LENS FINAL 12/1/2010 5:47:02 PM Honest Confusion: The Purpose of Compensatory Damages in Tort and Fraudulent Misrepresentation Jill Wieber Lens∗ I. INTRODUCTION Suppose that a plaintiff is injured in a rear-end collision car accident. Even though the rear-end collision was not a dramatic accident, the plaintiff incurred extensive medical expenses because of a preexisting medical condition. Through a negligence claim, the plaintiff can recover compensatory damages based on his medical expenses. But is it fair that the defendant should be liable for all of the damages? It is not as if he rear-ended the plaintiff on purpose. Maybe the fact that defendant’s conduct was not reprehensible should reduce the amount of damages that the plaintiff recovers. Any first-year torts student knows that the defendant’s argument will not succeed. The defendant’s conduct does not control the amount of the plaintiff’s compensatory damages. The damages are based on the plaintiff’s injury because, in tort law, the purpose of compensatory damages is to make the plaintiff whole by putting him in the same position as if the tort had not occurred.1 But there are tort claims where the amount of compensatory damages is not always based on the plaintiff’s injury. Suppose that a defendant fraudulently misrepresents that a car for sale is brand-new. The plaintiff then offers to purchase the car for $10,000. Had the car actually been new, it would have been worth $15,000, but the car was instead worth only $10,000. As they have for a very long time, the majority of jurisdictions would award the plaintiff $5000 in compensatory damages 2 based on the plaintiff’s expected benefit of the bargain.
    [Show full text]
  • Chapter 9 Topics in the Economics of Contract Law I. Remedies As
    Chapter 9 Topics in the Economics of Contract Law I. Remedies as incentives A. Alternative remedies Different remedies create different incentives for the parties to a contract. Our focus is how different remedies affect the incentives each party has to act in an economically efficient manner. 1. Expectation damages Perfect expectation damages (PED) are meant to leave the promisee indifferent between performance and nonperformance of the contract. The baseline is value to promisee if contract was performed. Damages then are equal to the difference between the net value of performance of the contract and no contract . 2. Reliance damages In this case, the injury that is caused by breach focuses on the costs the promisee has incurred as a result of relying on the contract. As such, perfect reliance damages (PRD) are meant to leave the promisee indifferent between no contract and breach of the contract. The baseline is no contract. Damages then are equal to the promisee’s net reliance costs. 3. Opportunity cost damages In this case, the injury that is caused by breach focuses on the costs the promisee has incurred as a result of foregoing alternative contracts. As such, perfect opportunity cost damages (POCD) are meant to leave the promisee indifferent between breach of the contract and performance of the next best contract. The baseline is value to promisee of the next best contract. Damages then are equal to difference between the net value of performance of the next best contract and no contract. 4. The typical relationship between PED, POCD and PRD and the problem of subjective value a.
    [Show full text]
  • The Phantom Reliance Interest in Tort Damages
    The Phantom Reliance interest in Tort Damages MICHAEL B. KELLY* TABLE OF CONTENTS L INTRODUCTION ................................................................................................... 169 IL THE RELIANCE INTEREST IN MISREPRESENTATION .............................................. 171 III. RELIANCE IN PERSONAL INJURY CASES ............................................................... 176 IV. WHAT DOES IT ALL MEAN? ....................................... ... .... .... .... .... ... ..... ... .... .... .. 189 I. INTRODUCTION The reliance interest has fascinated me for some time.' As a measure of damages for breach of contract,2 it seems theoretically unjustified and flawed in its implementation. In theory, it requires compensation for lost opportunities? In practice, such compensation is rarely provided'- * Professor of Law, University of San Diego School of Law. J.D. 1983, B.G.S. 1975, University of Michigan; M.A. 1980, University of Illinois. 1. Michael B. Kelly, The Phanton Reliance Interest in Contract Damages, 1992 WIS. L. REv. 1755. 2. My focus has been on contracts, full-fledged bargains, rather than promissory estoppel or other instances where the reliance interest might be applied. Much of my criticism of the reliance interest has been limited to this context. This Article will expand somewhat the scope of my criticism. 3. L.L. Fuller & William R. Perdue, Jr., The Reliance Interest in Contract Damages: 1, 46 YALE LJ. 52, 55, 60-61 (1936); Mark Pettit, Jr., PrivateAdvantage and Public Power: Reexamining the Expectation and Reliance Interests in Contract Damages, 38 HASTINGS L.J 417,420-21 (1987). unless one counts the expectation interest as a proxy for opportunities lost in reliance on a promise.5 In theory, it justifies recoveries that may exceed expectation.6 Yet, even its progenitors refused to endorse that implication.7 Why, then, does the reliance interest have continuing appeal? One explanation has emerged from discussions with academics: the reliance interest seems apt to some because it resembles tort remedies.
    [Show full text]
  • In Defense of the Impossibility Defense Gerhard Wagner Georg-August University of Goettingen
    Loyola University Chicago Law Journal Volume 27 Article 4 Issue 1 Fall 1995 1995 In Defense of the Impossibility Defense Gerhard Wagner Georg-August University of Goettingen Follow this and additional works at: http://lawecommons.luc.edu/luclj Part of the Contracts Commons Recommended Citation Gerhard Wagner, In Defense of the Impossibility Defense, 27 Loy. U. Chi. L. J. 55 (1995). Available at: http://lawecommons.luc.edu/luclj/vol27/iss1/4 This Essay is brought to you for free and open access by LAW eCommons. It has been accepted for inclusion in Loyola University Chicago Law Journal by an authorized administrator of LAW eCommons. For more information, please contact [email protected]. Essay In Defense of the Impossibility Defense GerhardWagner* I. INTRODUCTION Generally, the common law follows the rule of pacta sunt servanda' under which contractual obligations are absolutely binding on the parties. 2 The impossibility defense is an exception to this general rule.3 Under the impossibility defense, a promisor may default with- out incurring liability for the promisee's expectation damages.4 * Akademischer Rat (Junior Lecturer) at Georg-August University of Goettingen, Germany; J.D., 1989, University of Goettingen; L.L.M., 1995, University of Chicago. The author is deeply indebted to Richard Craswell of the University of Chicago Law School for many helpful comments on an earlier draft of this Essay. 1. "Pacta sunt servanda" means "agreements (and stipulations) of the parties (to a contract) must be observed." BLACK'S LAW DICTIONARY 1109 (6th ed. 1990). 2. For an erudite discussion of pacta sunt servanda, see generally Richard Hyland, Pacta Sunt Servanda: A Meditation, 34 VA.
    [Show full text]
  • Reexamining the Expectation and Reliance Interests in Contract Damages Mark Pettit Jr
    Hastings Law Journal Volume 38 | Issue 3 Article 2 1-1987 Private Advantage and Public Power: Reexamining the Expectation and Reliance Interests in Contract Damages Mark Pettit Jr. Follow this and additional works at: https://repository.uchastings.edu/hastings_law_journal Part of the Law Commons Recommended Citation Mark Pettit Jr., Private Advantage and Public Power: Reexamining the Expectation and Reliance Interests in Contract Damages, 38 Hastings L.J. 417 (1987). Available at: https://repository.uchastings.edu/hastings_law_journal/vol38/iss3/2 This Article is brought to you for free and open access by the Law Journals at UC Hastings Scholarship Repository. It has been accepted for inclusion in Hastings Law Journal by an authorized editor of UC Hastings Scholarship Repository. Article Private Advantage and Public Power: Reexamining the Expectation and Reliance Interests in Contract Damages by MARK PETTIT, JR.* Introduction Fifty years ago Fuller and Perdue asked why it is that in cases of breach of contract courts usually award "expectation" damages rather than "reliance" damages.I The authors defined these damages measures by their purposes.2 The object of the expectation measure "is to put the plaintiff in as good a position as he would have occupied had the defend- ant performed his promise."'3 The object of the reliance measure, on the other hand, is to "undo the harm" caused by reliance on a promise that was later broken, that is, "to put [the plaintif] in as good a position as he was in before the promise was made."'4 Fuller and Perdue concluded * Professor of Law, Boston University. A.B.
    [Show full text]
  • In the Supreme Court of the United States
    No. 04-786 In the Supreme Court of the United States UNITED STATES OF AMERICA, PETITIONER v. GLENDALE FEDERAL BANK, FSB ON CROSS-PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT CONDITIONAL CROSS-PETITION FOR A WRIT OF CERTIORARI PAUL D. CLEMENT Acting Solicitor General Counsel of Record STUART E. SCHIFFER Acting Assistant Attorney General EDWIN S. KNEEDLER Deputy Solicitor General JAMES A. FELDMAN Assistant to the Solicitor General DAVID M. COHEN JEANNE E. DAVIDSON WILLIAM F. RYAN TAREK SAWI Attorneys Department of Justice Washington, D.C. 20530-0001 (202) 514-2217 QUESTIONS PRESENTED 1. Whether otherwise fraudulent conduct consisting of the submission at different times of inconsistent statements in support of a claim against the govern- ment under 28 U.S.C. 2514 is excused because the later, false set of statements were due to “hindsight.” 2. Whether Glendale Federal Bank (Glendale) was entitled to an award of $381 million in damages despite the findings of the courts below that Glendale had not proven a necessary predicate of its claim. 3. Whether Glendale was entitled to a reliance award, which is based on the costs Glendale incurred in reliance on the contract, without an offset for benefits that Glendale admittedly received from the contract. (I) TABLE OF CONTENTS Page Opinions below ............................................................................... 1 Jurisdiction ...................................................................................... 2 Statutory provisions involved ..................................................... 2 Statement ........................................................................................ 2 Reasons for granting the conditional cross-petition ............... 12 A. The courts below erred by reading a “hind- sight” defense into 28 U.S.C. 2514 ............................... 12 B. The lower courts erroneously relieved Glendale of the obligation to present affirmative evidence of it’s alleged “wounded bank” damages ...................
    [Show full text]
  • Loss Splitting in Contract Litigation
    COMMENTS lyzed under either traditional or realistic views of assent.42 The doctrine of busi- ness compulsion, the most modem extension of duress, depends upon proof of very serious pressure, illegal under independent circumstances.43 However, the use of legal pressures to obtain undeserved benefits may be just as reprehensible. The expenses and delay of litigation, for example, make the threat of suit a formidable weapon. 44 If legislative and judicial controls were directed at affording parties a fair opportunity of gauging their own bargain, it is doubtful whether widespread policing for unconscionability would be necessary. The parties, rather than the courts, are still considered to be the best judges of their bargain, and their promises, freely given, should continue to be enforced. However, the language of the code provision would make extensive judicial policing of contracts possible. Early comments indicated that such surveillance was intended; the present draft fails to preclude observance of such a purpose in judicial interpretation. Perhaps the omission of mention of general judicial con- trol in the present comment indicates that the commissioners have experienced a change of heart, but that comment cannot be expected to control development of the provision. If the draftsmen do not wish to enact something similar to "equity's ancient policy" as part of sales law, the statute must be rewritten. It can no longer be couched in broad terms of unconscionability. It must con- centrate on particular problems toward whose solution it is directed. LOSS SPLITTING IN CONTRACT LITIGATION With rare exception Anglo-American legal tradition has regarded financial and economic losses as burdens to be borne completely by either one individual or another.
    [Show full text]