The Expectation Interest

AuthorFranklin G. Snyder, Mark Edwin Burge
Unit 23
Part One
The Expectation Interest
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 calculatedordinarily
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,
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 wholethat 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
calculationno matter how well you did itis 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
Supreme Court of New Hampshire
[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.
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
[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.]

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