October 14 Class - Quiz and Remedies Intro
Friday October 15, 2010
A Summary of Thursday Night's Class (October 14, 2010):
Unfortunately, Thursday night was a night of technological failures for me. Not only was I unable to project on to the classroom screens a copy of the Consideration Quiz as I had planned, but, it turns out, my digital recorder failed to record the class.
So - here are some notes about what went on that I hope will be of some help both to those who were unable to attend class and those who were there but whose recollections of the class could profit from repetition.
I. The Consideration Quiz
First, the Consideration Quiz. Here is a copy of it if you no longer have yours. I believe that the correct answer to Part 1, questions 1-4 is FALSE. The answer to question 5 is TRUE and the answer to question 6 is "5" because the consideration relied upon to make question 5 TRUE has now been rendered ineffective since refraining from an act which is illegal can not be a legal detriment.
I pointed out that questions 1 and 4 were, in fact, identical questions. The reason why in both cases the answer is FALSE is that the facts do not have the Uncle asking for a promise nor does his niece make a promise. This is, as question 5 correctly states, a promise for an act - the Uncle's promise of money, the niece's act in refraining from drinking alcohol.
I am pleased to say that everyone in the class answered question 5 correctly and almost everyone answered question 3 correctly (the niece's benefitting from not drinking is simply not legally relevant - the law of consideration responds to legal detriment and legal benefit and not to whether you are made healthier by the promise). My biggest disappointment came with the number of incorrect answers to questions 1 and 4. Perhaps number 1 confused some class members by its use of the term "bilateral contract." Please remember that a bilateral contract is one which is formed by an exchange of promises.
The most problematic of the questions in Part 1 is 2 - the argument that the Uncle's promise is enforceable based upon foreseeable reliance under a promissory estoppel (or §90) analysis. I doubt that a court would (1) regard the niece's not drinking as detrimental reliance but (2)even if it did, I doubt the Uncle would be held to have expected the not drinking to be in reliance on his promise when, immediately after the promise, the niece told him it would be "easy money" because she hated the taste of alcohol. But if 2 is TRUE, then 2 would have to be added to question 6 as changing if she was below the age at which drinking alcohol is legal. (If either 2 or 4 were true, they would have to be added to 6 as well).
For Part 2, I said that the outline should have gone something like this:
A. Argument for Tabb that there was no consideration because Gutter Press could cancel at any time during the first week. Gutter will argue that they could cancel only by notifying him and that the obligation to notify itself constituted a legal detriment and, therefore, consideration.
B. Argument for Tabb that by retaining the right to reject the manuscript if it was not "satisfactory" made Gutter Press's performance effectively an unconstrained act of will and therefore their promise to publish and pay him royalties was without consideration. Gutter will argue that the law will either require such a decision to be in accordance with industry standards or that they would only be allowed to declare nonsatisfaction in good faith and that either of these meanings of "satisfy" would suffice to be a legal detriment and, therefore, consideration.
C. Argument for Tabb that the absence of any requirement in the supposed contract of quantify of publication or quantity of effort to sell made this contract one with no fixed obligation on the part of Gutter at all. Gutter will argue that the law requires them to make their best efforts to print and sell as many of the books as they reasonably can (like Wood v. Lucy Lady Duff Gordon).
II. Introduction to Contract Remedies
After watching the opening clip of The Paper Chase, we discussed the difference between the trial court and the appellate court about the appropriate remedy for breach of contract of a doctor's promise of a perfect outcome of surgery. We saw that the trial court was seeking a compensatory measure that looked at the deterioration of the plaintiff's hand caused by the surgery. The appellate court, to the contrary, ordered a remedy that sought to compensate the plaintiff for the difference between the value of the perfect hand that he had been promised by the doctor-defendant and the mutilated hand with which he was left by the operation. The trial court's remedial theory we call "reliance damages" and the appellate court's remedy we call "expectation damages." One common way of describing the difference is to say that the goal of expectation damages is to place the plaintiff in the position he would have been in if the contract had been performed whereas the goal of reliance damages is to restore the plaintiff to the situation he was in before he entered the contract.
We had already seen that reliance damages are commonly the remedy where the theory of enforcement of the contract is §90, also known as "promissory estoppel." The appellate court in Hawkins correctly states that the usual remedy for breach of a sales contract in which a machine is delivered that does not satisfy the contractual description of the machine is an expectation remedy. The court analogized the sale of an imperfect and therefore breaching machine with the imperfect outcome of a surgical procedure where the outcome was not consistent with the promised outcome.
The question this difference raises, of course, is which of these two remedial theories is correctly applied on the facts of Hawkins. In the analogous facts of Sullivan v. O'Connor, the Supreme Judicial Court of Massachusetts which is set out, in part, after the Hawkins decision, that court articulates its reasons for approving of a reliance recovery for the plaintiff rather than an expectation remedy. It is not perfectly clear, however, why the court favored reliance over expectation, contrary to the ordinary rules of contracts law. One possibility suggested in the court's language is its concern about the underlying contract - would a doctor be guaranteeing a result of surgery or would the doctor simply say encouraging things to the patient because a positive outlook on the patient's part will aid in her recovery. The trial court had found there was a guarantee and the court feels bound by that determination, but its skepticism about the guarantee of a surgical outcome may have influenced it to order reliance rather than expectation damages. Another possibility, though not articulated by the court, is how speculative it becomes to guess what value the perfect hand (Hawkins) or the perfect nose (Sullivan) would have. On the facts of each of these cases it is certainly more possible to accurately quantify the reliance damages than to quantify the expectation damages.
We will have a great deal more to say in future classes about the choice between reliance and expectation remedy.
Unfortunately, Thursday night was a night of technological failures for me. Not only was I unable to project on to the classroom screens a copy of the Consideration Quiz as I had planned, but, it turns out, my digital recorder failed to record the class.
So - here are some notes about what went on that I hope will be of some help both to those who were unable to attend class and those who were there but whose recollections of the class could profit from repetition.
I. The Consideration Quiz
First, the Consideration Quiz. Here is a copy of it if you no longer have yours. I believe that the correct answer to Part 1, questions 1-4 is FALSE. The answer to question 5 is TRUE and the answer to question 6 is "5" because the consideration relied upon to make question 5 TRUE has now been rendered ineffective since refraining from an act which is illegal can not be a legal detriment.
I pointed out that questions 1 and 4 were, in fact, identical questions. The reason why in both cases the answer is FALSE is that the facts do not have the Uncle asking for a promise nor does his niece make a promise. This is, as question 5 correctly states, a promise for an act - the Uncle's promise of money, the niece's act in refraining from drinking alcohol.
I am pleased to say that everyone in the class answered question 5 correctly and almost everyone answered question 3 correctly (the niece's benefitting from not drinking is simply not legally relevant - the law of consideration responds to legal detriment and legal benefit and not to whether you are made healthier by the promise). My biggest disappointment came with the number of incorrect answers to questions 1 and 4. Perhaps number 1 confused some class members by its use of the term "bilateral contract." Please remember that a bilateral contract is one which is formed by an exchange of promises.
The most problematic of the questions in Part 1 is 2 - the argument that the Uncle's promise is enforceable based upon foreseeable reliance under a promissory estoppel (or §90) analysis. I doubt that a court would (1) regard the niece's not drinking as detrimental reliance but (2)even if it did, I doubt the Uncle would be held to have expected the not drinking to be in reliance on his promise when, immediately after the promise, the niece told him it would be "easy money" because she hated the taste of alcohol. But if 2 is TRUE, then 2 would have to be added to question 6 as changing if she was below the age at which drinking alcohol is legal. (If either 2 or 4 were true, they would have to be added to 6 as well).
For Part 2, I said that the outline should have gone something like this:
A. Argument for Tabb that there was no consideration because Gutter Press could cancel at any time during the first week. Gutter will argue that they could cancel only by notifying him and that the obligation to notify itself constituted a legal detriment and, therefore, consideration.
B. Argument for Tabb that by retaining the right to reject the manuscript if it was not "satisfactory" made Gutter Press's performance effectively an unconstrained act of will and therefore their promise to publish and pay him royalties was without consideration. Gutter will argue that the law will either require such a decision to be in accordance with industry standards or that they would only be allowed to declare nonsatisfaction in good faith and that either of these meanings of "satisfy" would suffice to be a legal detriment and, therefore, consideration.
C. Argument for Tabb that the absence of any requirement in the supposed contract of quantify of publication or quantity of effort to sell made this contract one with no fixed obligation on the part of Gutter at all. Gutter will argue that the law requires them to make their best efforts to print and sell as many of the books as they reasonably can (like Wood v. Lucy Lady Duff Gordon).
II. Introduction to Contract Remedies
After watching the opening clip of The Paper Chase, we discussed the difference between the trial court and the appellate court about the appropriate remedy for breach of contract of a doctor's promise of a perfect outcome of surgery. We saw that the trial court was seeking a compensatory measure that looked at the deterioration of the plaintiff's hand caused by the surgery. The appellate court, to the contrary, ordered a remedy that sought to compensate the plaintiff for the difference between the value of the perfect hand that he had been promised by the doctor-defendant and the mutilated hand with which he was left by the operation. The trial court's remedial theory we call "reliance damages" and the appellate court's remedy we call "expectation damages." One common way of describing the difference is to say that the goal of expectation damages is to place the plaintiff in the position he would have been in if the contract had been performed whereas the goal of reliance damages is to restore the plaintiff to the situation he was in before he entered the contract.
We had already seen that reliance damages are commonly the remedy where the theory of enforcement of the contract is §90, also known as "promissory estoppel." The appellate court in Hawkins correctly states that the usual remedy for breach of a sales contract in which a machine is delivered that does not satisfy the contractual description of the machine is an expectation remedy. The court analogized the sale of an imperfect and therefore breaching machine with the imperfect outcome of a surgical procedure where the outcome was not consistent with the promised outcome.
The question this difference raises, of course, is which of these two remedial theories is correctly applied on the facts of Hawkins. In the analogous facts of Sullivan v. O'Connor, the Supreme Judicial Court of Massachusetts which is set out, in part, after the Hawkins decision, that court articulates its reasons for approving of a reliance recovery for the plaintiff rather than an expectation remedy. It is not perfectly clear, however, why the court favored reliance over expectation, contrary to the ordinary rules of contracts law. One possibility suggested in the court's language is its concern about the underlying contract - would a doctor be guaranteeing a result of surgery or would the doctor simply say encouraging things to the patient because a positive outlook on the patient's part will aid in her recovery. The trial court had found there was a guarantee and the court feels bound by that determination, but its skepticism about the guarantee of a surgical outcome may have influenced it to order reliance rather than expectation damages. Another possibility, though not articulated by the court, is how speculative it becomes to guess what value the perfect hand (Hawkins) or the perfect nose (Sullivan) would have. On the facts of each of these cases it is certainly more possible to accurately quantify the reliance damages than to quantify the expectation damages.
We will have a great deal more to say in future classes about the choice between reliance and expectation remedy.