So far we've been talking about expectation interests, with
the understanding that we sometimes want conflicting things
(e.g., consequential damages, specific performance). Now
we're going to to talk about Reliance and Restitution (Fuller
& Perdue). Fuller was just a research assistant at the time, but even
he got pretty famous, so at least it accomplished that.
Unfortunately, there are overlaps between these three interests.
And that can mess you up if you are not careful. The goal of
expectation interests is a hypothetical goal (we would not be
even talking about this, had the contract been performed).
Reliance damages are more like tort things: putting you back
into an actual state that you were in before you thought you
had a contract. Restitution interest is sort of a special case
of the reliance interest: not only have I lost money, but the
contract breacher has gotten it. In a reliance loss, the money
could have gone anyplace. In restitution it went specifically
to the breaching seller. Restitution is giving back for unjust
enrichment (fraud, etc.). There must be some REASON why the
seller has no right to the buyer's property.
We're just defining ideas now. We'll worry about assessing
degrees later.
Normally, in a contracts action, they'd have had to show what profits they'd have made by selling this furnace at the trade show. That's expectation interest. That would have been a long shot, though, because of the new business rule-- very hard to prove how many you'd sell of something you've never sold before.
Just getting their freight charge back would be restitution interest. That's well-known. If that were all that was involved, we never would have read this case.
So they seek railroad fares, booth rental (paid before contract), hotel, etc. The court awards recovery of all these items, stressing negligence on the part of the shipper. Most cases with this kind of deal are tried under a tort theory.
Here, there's no intention to sell the goods, but there's also no showing that the promotional efforts are worthless.
Note that had there been no breach, they'd have spent the money anyhow. We do not know that, but for the breach, they EVER would have recovered the money they spent to get to the trade show. Compare with Adams Express v. Egbert: the plans were losers, incompetently drawn. If the defendant could show that the plaintiff's business idea was lame, the damages might not be awarded. [Note that by the time the decision was written, Security Stoves multi- fuel furnace was a well established product line]. How much more does the University Book Store sell for each free calendar they give out?
Note that the court applied the Hadley v. Baxendale rule here, but finds it satisfied.
Armstrong Rubber thinks there was a conspiracy of the major rubber companies (Firestone, etc.) to keep these machines out of their hands, and Albert went along with it. They can't prove the big anti-trust issue. Oh, and maybe Krupp and DuPont had a secret agreement that the US would not develop synthetic rubber (deep conspiracy theory); we stopped worrying about German patents once we were at war, of course. Of course, what we believe and what we can prove are different.
This suit has a lot of "i haet yoo!" in it. Some clients you don't want. The crazier they are, the more you are going to have problems with them.
Trial court says this wasn't an installment plan (there was a "unity value" to getting all four machines). So the delay really did keep the company from running their reclamation department. But we can't tell that the breach caused the shut-down of the reclamation department: synthetic rubber was developed, Brazilian rubber started getting more available, and perhaps they got substitute machines from elsewhere anyway. Basically, the market for that good crashed.
But the cost of the foundations is said to be different. How did the buyer know about the foundation and how to build it, etc.? Probably the seller gave them the specs. So the seller can't disclaim knowledge here: they created this reliance. The "Hand Corrollary" to reliance damages: we don't want to over- compensate.
But for the breach, would Armstrong Rubber ever have made enough to cover the costs of the machines? We can't be sure. The Hand Corrollary is trying to cover this. The breaching party can reduce the recovery of the aggreived party by the amount that the breaching party can show the aggrieved party would have lost if performance took place. So if Albert can show that Armstrong would never have been able to cover the costs of the foundations, there's no recovery.
The person who has the burden of proof loses when there is uncertainty. So here the burden is on the breacher. That is the burden of proof: if you don't carry it, you lose. In most cases we don't worry about overcompensating because the breacher can't prove much. All we're saying is that we won't knowingly overcompensate.
Different flavor of reliance loss: needs to "unlock the value" of the contract. I think I have a contract to lease a store from you. So I go and buy a whole inventory to stock the store with. Can I recover, when you screw me over on the lease? Recovering of unlocking expenses is murky.
Note the form of Hand's opinion: figures out where he wants to go, then makes the cases go there. Other folks will assume they are wrong, and then knock down the arguments showing they are wrong.
Another point about the reliance interest: isn't it pretty much an academic interest? When will it be enough money to be worth suing about (Albert v Armstrong is about principle, and rage, not money). Usually reliance damages don't add up to very much money. More and more, going to court is getting priced out of ordinary peoples' abilities.
Essentially this game is like Monopoly, only with insanely complex rules. One problem with capitalism: you have to have a product that people like.
Essentially, they dream up a story to use the law. Interesting negotiating points: where do the negotiations take place? How do we dress?
Was the law irrelevant? No, it put some characters on the scene to play the negotiating game. Note that the problem they had wasn't really a legal problem, it's a business problem. At some point, the game could be so badly made that nobody would buy it, but have we reached that point? In the end, they meet sort of in the middle.
So the threat of being able to walk away from a contract when there's material breach can be a valuable negotiating tool, even when we haven't yet determined whether the breach was material. UCC §2-711(1): buyer may cancel (with notice), if the breach is the right kind of breach. So they don't cancel, but they don't pay the full contract price either. A plausible legal argument is a bargaining tool. See Bargaining in the Shadow of the Law: big law and society article, regarding divorce. I show that I'm willing to go to court, and this makes you pay attention, and deal with me. Because after all, it doesn't make sense to run up all those costs, if you can reach some acceptable middle ground.
Lawyers attract lawyers: there is always a response to an argument. The rule looks clear, but if we go to apply it, goodness knows how it's going to come out.
Anyway, what would it have gotten Finn to sue the game professors? They could only get whatever was invested in the corporation. Not much. And then suing them would cost a lot. Pre-trial, motion for summary judgment, trial, appeals. Long and spendy. And then there's the law. "Truth in Lending" is clear and specific. Most laws are not just yes/no questions.
Another good point: §2-601. With the exceptions of installment contracts and otherwise disclaimed liability, the buyer can reject non-conforming goods (the "Perfect Tender" rule). Now you can spend a lot of time debating whether goods conform to the contract: how good do they have to be. §2-601 is subject to §2-508: if you exercise your right to reject non-conforming goods, the seller may effect a cure within the contract time.
If you accept non-conforming goods, §2-608 allows you to reject if the non-conformance substantially impairs their value to you. There are lots of requirements here: timely notice, need to be excused for accepting the goods (couldn't see defect; seller said he'd cure, etc.), the goods have not changed their condition materially (except because of their defect).
§1-103, however, might allow Hadley limitations.
The goods were non-conforming. You can reject them §2-601. If you reject them, the seller has the right to cure (§2-508). If the seller exercises the right to cure, the buyer can't back out of the contract, unless time for performance runs out. Reasonable time can vary (am I buying something for a wedding tomorrow, or to hold for inventory). Also, once you accept a good, you don't have a right to revoke; you can recover damages, though.
So they ordered 5 seel-belted radials, and they got 4. There was a tire strike. Why is the salesperson's wife's surgery relevant? No clue.
Why did they fight this way for so long?
First opinion: 2-1 to reverse the finding for the dealer. Under §2-606, you should get a reasonable chance to inspect the car before acceptance is consummated. Miller had an absolute right to reject, because he didn't get what he ordered. §2-602 says the rejecting buyer has to inform the seller, and that's about it.
Second opinion: one judge switches on the basis that there was acceptance (once the car is titled, its value declines, because it is a used car now). This judge may not have understood the UCC very well... no serious person would stipulate away the right to inspect the goods. So the problem then becomes whether or not one can revoke acceptance. §2-608 says you can't revoke, but you could either walk away or try for restitution. So does the defect substantially reduce its value to him?
So now we are at the supreme court, for decision #3. Dollar bills are going up in flames, and it's now unlikely that the Millers will buy any more Chrysler products. Calling off a bargain is the H-Bomb. It's better to patch things up, except when it isn't. So is it a trivial breach or not?
Chrysler thought this was all just a pretense-- the Millers had found a better deal on a different car. Once we're in the vocabulary of "rights," though, it gets hard to work things out. What the court is trying to do is to reach the right results-- that's what the UCC says to do.
Lots of the things we buy come in forms that make it hard to fully inspect at the time of purchase.
Essential principle: economic efficiency. An architect-designed house would get different treatment, because the standard for "substantial performance" is assumed to be different (i.e., you were contracted to make it the way the artist said). So to avoid this, put in the requirement of an architect's or engineer's certificate at the end of construction. In that case, the builder is assuming the risk-- they agree to measure up to the expert's standards. This increases bid prices, but then the experts have an interest in not being excessively exacting, because then they'd get no business.
If the plaintiff has fully performed the contract, what you get is contract price. Otherwise, you figure based on the fair market value of the work.
Note the concept of the "officious intermeddler:" attempting to thrust a benefit unrequested upon someone.
On the other hand, requesting the services implies a commitment to pay.
Once the contract is breached, the contract vanishes (nice sophistry), and it is as though price has not even been discussed yet. Tricky: we remember that there was a contract when we want to prove that we're not officious intermeddlers, but we forget it when valuing the services.
As an alternative remedy, restitution isn't necessarily good, but it's easy to figure out. On the other hand, if you've finished the work, and the contract price is due, that's even easier to figure out.
Still and all, there is this possibility that you can end up better off than you would have been if the contract had been performed, as long as you haven't completed your side of the work. Seems like there was a little administrative convenience here: declaring the lawyer's work to be done in order to keep from giving him a big payment.
There used to be a "suggested minimum fee schedule" for WI lawyers... until antitrust problems arose. Interesting side note.
So based on the handyman laws (mentioned below), the TX court says we need to decide based on the merits of the case. And they don't find this one too meritorious.