Expectation; Foreseeability Contracts – Prof Merges 4.12.2011.

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Transcript of Expectation; Foreseeability Contracts – Prof Merges 4.12.2011.

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Expectation; Foreseeability Contracts Prof Merges 4.12.2011 Slide 2 Groves v. John Wunder Co. Slide 3 Slide 4 Slide 5 Slide 6 Facts Procedural History Slide 7 Groves v. John Wunder Co. Facts Procedural History Why the award below for $15,000? Slide 8 Groves According to Groves, what is the proper measure of damages here? Slide 9 Groves According to Groves, what is the proper measure of damages here? Why? Slide 10 Value of land at end of performance Market value of land if K properly performed Difference in value: dimunition in value measure Slide 11 Cost to put land in condition reqd by K = $60,000 Dim. In value Slide 12 Why did Minn. Supreme Ct. come out as it did? Slide 13 Does not want to favor the faithless contractor Why did trial court award do this? Slide 14 What was Groves lost expectation? Slide 15 Did Courts award exceed this amount? Slide 16 Should the nature of the breach matter? Willful versus innocent Slide 17 What about efficient breach story? Isnt that a willful breach? Should it really matter? Slide 18 Oliver Wendell Holmes Jr. Slide 19 Damn foolish business, this willfulness... Globe Refining, n. 1 p. 517 Slide 20 What price estimate did the parties put on grading when the K was signed? $60,000 or $12,000? Slide 21 What price estimate did the parties put on grading when the K was signed? $60,000 or $12,000? If $12,000, K price of $105,000 + $12,000 if Groves agreed to do the grading Slide 22 What if they did estimate cost at 12,000; why was it more? 1.Wunder made a (big) mistake 2.Rise in labor costs 3.Wunder waited until the end, instead of grading as he went Slide 23 What if they knew grading was going to be $60,000? K would have been for $165,000 if Groves had to do grading himself Slide 24 What if they knew grading was going to be $60,000? K would have been for $165,000 if Groves had to do grading himself Why did grading turn out to be worth only $12,000? Slide 25 3 possibilities Great Depression drove down land prices Groves overesitmated value of graded land Groves had a special value for graded land Slide 26 Peevyhouse v. Garland Slide 27 Slide 28 Slide 29 A Mountain Top Removal Mine, using a Dragline to remove overburden and mine coal. This particular mine took a very steep mountain, sliced the top off, creating a flat area, where after mining a school was built on the site, and is still being utilized. This was one school located in mountainous East Kentucky that did not ever have to worry about flooding! Slide 30 Peevyhouse v. Garland Facts History Slide 31 Do you agree with holding? Why or why not? Slide 32 Is this a good way to remedy land use problems? No requirement that owner use the damage award to remedy the problem See notes after Groves... Slide 33 Rest. 2d. 348(2) (2) If a breach results in defective or unfinished construction and the loss in value to the injured party is not proved with sufficient certainty, he may recover damages based on. (a) the diminution in the market price of the property caused by the breach, or (b) the reasonable cost of completing performance or of remedying the defects if that cost is not clearly disproportionate to the probable loss in value to him. Slide 34 Rest. - comment Damages based on the cost to remedy the defects would then give the injured party a recovery greatly in excess of the loss in value to him and result in a substantial windfall. Such an award will not be made. It is sometimes said that the award would involve economic waste, but this is a misleading expression since an injured party will not, even if awarded an excessive amount of damages, usually pay to have the defects remedied if to do so will cost him more than the resulting increase in value to him. Slide 35 Hadley v. Baxendale Slide 36 Gloucester Mills Today Slide 37 Slide 38 Slide 39 Modern mill shaft Slide 40 Hadley v. Baxendale Facts History Slide 41 What is the holding in Hadley? Slide 42 Is it that the s damages must be limited to those of an average or normal person in his or her position? Slide 43 What is the holding in Hadley? Is it that the s damages must be limited to those of an average or normal person in his or her position? No; then why were the higher damages denied here? Slide 44 Holding New trial Damages: 2, 4 s; 25; 300? Slide 45 Alderson opinion K damages fall into two categories... Slide 46 Alderson opinion K damages fall into two categories... 1.Naturally arising damages 2.In contemplation of both parties at time K was formed Slide 47 Why lower damages here? 1.Naturally arising? Slide 48 Why lower damages here? 1.Naturally arising? 2.In contemplation of both parties? Slide 49 351. Unforeseeability And Related Limitations On Damages (1) Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made. (2) Loss may be foreseeable as a probable result of a breach because it follows from the breach (a) in the ordinary course of events, or (b) as a result of special circumstances, beyond the ordinary course of events, that the party in breach had reason to know. Slide 50 A and B make a written contract under which A is to recondition by a stated date a used machine owned by B so that it will be suitable for sale by B to C. A knows when they make the contract that B has contracted to sell the machine to C but knows nothing of the terms of B's contract with C. Because A delays in returning the machine to B, B is unable to sell it to C and loses the profit that he would have made on that sale. B's loss of reasonable profit was foreseeable by A as a probable result of the breach at the time the contract was made. Slide 51 The profit that B would have made under his contract with A was extraordinarily large because C promised to pay an exceptionally high price as a result of a special need for the machine of which A was unaware. A is not liable for B's loss of profit to the extent that it exceeds what would ordinarily result from such a contract. To that extent the loss was not foreseeable by A as a probable result of the breach at the time the contract was made. Slide 52 Delchi Carrier v. Rotorex Slide 53 Slide 54 Slide 55 Slide 56 Slide 57 Facts History Slide 58 CISG In effect; self-executing Slide 59 Holding Award of damages for lost sales Plus incidental costs Slide 60 Kenford v. Erie Slide 61 Buffalo Bills Stadium Slide 62 Slide 63 Slide 64 Slide 65 Kenford v. Erie Facts History Holding Slide 66 No damages for lost appreciation in land close to planned stadium site not in contemplation of the parties Slide 67 Tacit agreement test Discredited Do you see why? Slide 68 R2 351(3) (3) A court may limit damages for foreseeable loss by excluding recovery for loss of profits, by allowing recovery only for loss incurred in reliance, or otherwise if it concludes that in the circumstances justice so requires in order to avoid disproportionate compensation