Basic Remedies Flashcards
On September 1, Bowman and Chance form a contract under which Bowman is to serve as Chance’s public relations consultant for one year at an office five miles from Bowman’s home. Chance is to pay Bowman $45,000 in each of the twelve months September through August, so that for the year Bowman will earn $540,000.
All’s well for September, October, and November. Bowman does his job, and Chance pays him. On December 1, Chance announces that he no longer needs a consultant, fires Bowman, and refuses to pay him any more. With nine months remaining under the contract, Bowman searches diligently for alternative work. He finds one and only one job, as a parking lot attendant fifty miles from his home at $8 per hour, forty hours per week, for all nine months. From that job, over nine months, he would earn $12,000. If Bowman rejects the parking lot job and sues Chance for damages, he is likely to collect
A. nothing, because he failed to mitigate his damages.
B. the amount he would collect from the parking lot employer over nine months.
C. his regular salary from Chance, for so much time as a reasonable person in his position would need to find alternative employment.
D. an amount sufficient to achieve his full expectation interest without reduction for a failure to mitigate.
D. an amount sufficient to achieve his full expectation interest without reduction for a failure to mitigate.
On June 1, Attly and Bartley form a contract under which (1) Attly is to design a dam on or before August 1, and (2) Bartley is to pay her $250,000 when she completes the design.
Attly begins work and during the month of June spends $10,000 in work-related expenses. On July 1, Bartley advises Attly that he no longer needs the dam design and will not pay her, thereby committing an anticipatory repudiation (Chapter 25, section C). Nonetheless, Attly completes the design, spending an additional $20,000. Attly then sues Bartley for breach, claiming damages of $250,000. She asserts that
if Bartley had not breached, she would have received $250,000 and paid $30,000 for a net gain of $220,000;
in light of Bartley’s breach, she has spent $30,000 and received nothing; and
to fulfill her expectation interest, she is entitled to [($220,000 − (−$30,000)] = [($220,000 + ($30,000)] = $250,000.
Attly should recover:
A. $250,000
B. $230,000
C. $220,000
D. $210,000
B. $230,000
Harriet plans to attend a business meeting 2,000 miles from her home. She purchases a refundable airline ticket for $1,000 and makes a cancelable hotel reservation for $1,000. Harriet then forms a contract with Indo, a cab driver, under which Harriet will pay Indo $55. Indo will pick up Harriet on Wednesday at 6:00 A.M. and transport her to the airport. Indo neither knows nor has reason to know why or to where Harriet is traveling.
On Wednesday morning, Indo, running twenty minutes late, reaches Harriet’s home at 6:20 A.M. As a result, Harriet reaches the airport at 7:20 A.M. She pays Indo $55 and dashes from cab to her boarding gate. Nonetheless she misses her plane by two minutes and, for that reason, misses her business meeting, thus losing a business opportunity that would have paid her, provably, $5 million. After canceling her lodging reservation without penalty, Harriet decides to sue Indo.
Harriet calculates her expectation interest as she sees it. If the driver had properly performed, she would have spent $1,000 for airline tickets, $1,000 for lodging, and $55 for Indo’s cab ride, for a total of $2,055. She would have received $5 million. Her position would have been positive $4,997,945. In fact, Harriet spent $1,000 on airfare, but because she did not travel, the airfare was refunded. She paid Indo $55, she canceled the hotel reservation, and she did not, of course, enjoy the $5 million. Her position, therefore, is negative $-55. On this basis, Harriet sues Indo, alleging damages of $4,997,945 (the position she would have occupied if both parties had fulfilled their contract—minus—the position she in fact occupies in light of Indo’s breach:
$00.00→
Harriet’s position before forming contract
- $55→
cab fare
- $1,000→
airfare
+ $1,000 =
airfare refund
- $55→
Harriet’s position in face of breach
Consequently, Harriet contends that she is entitled to recover:
= - $55→
Harriet’s position in face of breach
+ $4,998,000 =
RECOVERY HARRIET DEMANDS (expectation interest as she sees it)
$4,997,945
Harriet’s position if Indo had honoroed the contract
As the law regards her expectation interest, Harriet is most likely entitled to recover
A. $4,998,000, the amount necessary to afford her the benefit of her bargain
B. $55, the amount she paid to Indo
C. $1,000, the amount she spent on the airline ticket
D. $0 because under the rule of Hadley v. Baxendale, none of the damage she alleges is recoverable
D. $0 because under the rule of Hadley v. Baxendale, none of the damage she alleges is recoverable
Orson secures a patent on her new invention. Penn knows of the invention and believes he can, over ten years, earn $500 million manufacturing and marketing it. Consequently, Penn wishes to buy Orson’s patent. Orson becomes serious about selling the patent to Penn and Penn becomes serious about buying it from Orson. Each engages an attorney and Penn pays $10,000 for his attorney’s services. He also spends $12,000 consulting with technical experts as to what would be involved in manufacturing and marketing the device.
On January 2, 2017, the parties form a contract under which Penn is to pay Orson $1 million immediately; Orson is to convey the patent to Penn one year hence; and Penn, as he sells the device to buyers, is to pay Orson a royalty of 5 percent on each sale.
Penn makes the $1 million payment as required and, over the next year, begins to prepare for manufacture. Spending 100 hours of his time, he secures a factory and equipment, all at a cost of $3 million. On January 2, 2019, Orson refuses to convey the patent, and Penn sues him for breach.
At trial, Penn produces two expert witnesses who testify about the profit Penn would have earned manufacturing and marketing Orson’s invention. One witness testifies, “It’s very hard to know—maybe a billion dollars, maybe nothing.” The other testifies, “These things are highly speculative. It’s impossible to say.” Both witnesses testify that 100 hours of Penn’s labor has a fair market value of $25,000. After Penn presents all of his evidence, the court rules, (a) as a matter of law, that Penn has not shown with reasonable certainty how much money he stood truly to derive if Orson had honored the contract, and (b) that Penn is entitled to recover his reliance interest. Therefore, the court will award him
A. nothing.
B. $22,000, the combined amount he paid a lawyer and consultants.
C. $4 million, the amount he spent after forming the contract.
D. $4 million plus $25,000, the fair market value of his time and effort.
C. $4 million, the amount he spent after forming the contract.
Harris and Danforth form a contract under which (1) Danforth is to make a market study for Harris, (2) Harris is to pay Danforth $50,000 immediately on formation of the contract, and another $250,000 when Danforth completes the study and delivers his report. Harris pays Danforth the $50,000 on formation of the contract, but Danforth never begins the study and thus breaches the contract. Harris sues Danforth for breach but cannot show what profit or benefit, if any, he would have enjoyed had Danforth completed the study and delivered his report.
If Harris elects to recover for his reliance interest, and not his restitution interest, the court should award him
A. $50,000, because that is the amount of benefit he conferred on Danforth.
B. $50,000, because he spent that amount in reliance on the contract.
C. nothing, because he cannot show that he would have enjoyed any benefit if Danforth had fully performed.
D. nominal damages, because he can show no damage, but Danforth is nonetheless in breach.
B. $50,000, because he spent that amount in reliance on the contract.
Lawrence and Meadows form a contract under which Lawrence is to market Meadows’s patented device for five years, and Meadows is to pay Lawrence a royalty of 8 percent on each unit of product sold. After the parties form their contract, Lawrence begins to prepare for performance. He hires marketing consultants, contracting to pay them nonrefundable fees of $100,000 in total, and he commits to advertisements for a nonrefundable cost of $50,000. After Lawrence makes those $150,000 in expenditures, Meadows commits a total breach. Lawrence cannot show, with any reasonable certainty, how many units he would have sold over the five-year period, and so cannot show what his royalties might have been. By way of remedy and recovery, Lawrence is most likely entitled to
A. nothing, because he conferred no benefit on Meadows.
B. nothing, because he cannot show his full expectation interest.
C. $150,000, as fulfillment of his reliance interest.
D. $150,000, as fulfillment of his restitution interest.
C. $150,000, as fulfillment of his reliance interest.
On November 1, Beller and Gall form a contract under which (a) Beller, by February 1, is to design audio speakers for Gall’s audio speaker business, and (b) Gall is to pay Beller $400,000 when she completes the work. Relying on Beller timely to complete the design, Gall launches an advertising campaign relating to the new, forthcoming speaker and, in so doing, spends $1 million. Beller, however, never even begins her work and thus breaches the contract. Consequently, Gall withholds payment of the $400,000 and brings suit, alleging that sales of the new speaker, over the next many decades, would have afforded him approximately $100 million in profit. He demands damages of $99,600,000 ($100 million less the $400,000 he would have paid Beller on full performance).
At trial Gall calls witnesses who, to his disappointment, testify that the profit one might derive from a new audio speaker is wholly unpredictable. Several add that a newly designed speaker might yield enormous profits but might just as easily fail to capture any market share at all, causing enormous losses for manufacturers such as Gall. When Gall finishes with his prima facie case, the court rules that he has failed to present any meaningful evidence as to the gain he would have derived through sales of the new speakers. The court also rules that Gall has presented indisputable evidence that he spent $1 million on his advertising campaign. It issues a judgment against Beller for that amount. In doing so, the court has fulfilled
that portion of Gall’s expectation interest as to which Gall presented adequate evidence.
Gall’s reliance interest.
A. I only
B. II only
C. I and II
D. Neither I nor II
C. I and II
