The Expectation Interest

• Author: Franklin G. Snyder, Mark Edwin Burge
• Pages: 479-499

______________________________________________________________________________

UNIT 23: THE EXPECTATION INTEREST 479

Unit 23

__________________________________________________________________

REMEDIES

Part One

__________________________________________________________________

The Expectation Interest

FOCUS OF THIS UNIT

Money Damages. The most common remedy for breach of contract, as we

noted above, is money damages. The court compels the breaching party to pay

something to the non-breaching party. In the early days of the English common law,

the issue of how damages should be computed did not often arise; the question was

one for the jury, and the jury’s determination—however it was calculated—ordinarily

was final. During the 19th century, however, British and American courts began to

reconsider the wisdom of allowing juries to set whatever damages they chose. They

began to develop standards against which damages awards are to be measured.

The key to understanding contract damages is that they are ostensibly

awarded only to correct a private wrong, not to vindicate a public interest. Therefore,

while criminal fines and punitive damages in tort are designed to punish malefactors

and discourage others, contract damages are only supposed to make the victim (the

non-breaching party) whole. Anything more than that is often called a “windfall” by

the courts and will be struck down.

In the materials that follow, in this unit and the next, you will see that the

concept of making the non-breaching party “whole” is easier to state than it is to

apply. Contract law has actually developed three distinct measures of damages for

breach. By far the most prominent is what we call the “expectancy” or “expectation”

measure, and it is the subject of this unit. You will see that the expectancy measure

sounds simple, but actually can be applied in a few different ways to yield different

amounts. In addition to expectancy, courts have also developed two measures called

“restitution” and “reliance” that will be covered in the next unit.

We will let you get right to the cases, but we caution you that damages

calculations actually run backwards.

Ladies and Gentlemen, Sharpen Your Pencils! Be aware that this part of the

course involves math, a subject of which some law students are not especially fond.

The math is not difficult, however, usually sticking to addition, subtraction,

______________________________________________________________________________

480 CHAPTER VIII: REMEDIES

multiplication and (very rarely) division. If you are particularly math-phobic, you

may want to keep a calculator handy during the discussion of remedies. Remember

the overall goal is to make the non-breaching party whole—that number is the

lodestar you will be looking for. If you find yourself doing a calculation and coming

up with a number that is not the amount that will make the party whole, the

calculation—no matter how well you did it—is wrong.

As you read the materials that follow, you may want to review Restatement

(Second) of Contracts §§ 344-348, which provide an introduction to remedies in

general and expectancy damages in particular.

_____________________

Cases and Materials

HAWKINS v. McGEE

Supreme Court of New Hampshire

84 N.H. 114, 146 A. 641 (1929)

BRANCH, J.

[George Hawkins was a young man the palm of whose hand had been badly

burned nine years earlier by an electric wire, and which had a severe quantity of scar

tissue. Defendant McGee was a surgeon who wanted to experiment with skin

grafting, and repeatedly solicited Hawkins and his father to allow him to take skin

off Hawkins’s chest to graft on the palm. Evidence put on by Hawkins showed that

Dr. McGee had said, “I will guarantee to make the hand a hundred per cent perfect

hand” or “a hundred per cent good hand.” The operation did not go well, with the hand

becoming matted with hair and having a restricted range of motion. Hawkins sued,

claiming the hand was not as good as he had been promised. The jury found that the

physician was not professionally negligent, and so Hawkins could not recover in tort.

But the jury found for Hawkins on his claim that McGee had made a warranty and

that the warranty was breached.

1

The court then turned to the issue of damages.]

The substance of the charge to the jury on the question of damages appears in

the following quotation: “If you find the plaintiff entitled to anything, he is entitled

to recover for what pain and suffering he has been made to endure and what injury

he has sustained over and above the injury that he had before.” To this instruction

the defendant seasonably excepted. By it, the jury was permitted to consider two

1

[Note some good lawyering here on behalf of Hawkins. The medical malpractice claim failed

because there was no professional negligence by Dr. McGee —an unsurprising result given that the

skin-grafting surgery was new and experimental at the time. Hawkins’s lawyers, howeve r, managed

to win the case on a breach of contract theory. Even personal injury lawyers can sometimes benefit

from stuff they learn in Contracts class. – Eds.]