American Contract Law for a Global Age, 2017a

Unit 23
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REMEDIES
Part One
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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,
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UNIT 23: THE EXPECTATION INTEREST 479