George Mason School of Law
Contracts II
Uncertainty/Forseeability
F.H. Buckley
fbuckley@gmu.edu
1
To be covered
1.
2.
3.
4.
5.
2
Uncertainty
Foreseeability
Emotional Distress
Mitigation
Liquidated and Punitive Damages
Uncertainty: Freund at 95
 Royalties too uncertain to provide a
basis for expectation damages
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Uncertainty
Is Drews at 952 any different?
4
Uncertainty
Drews
 How to calculate lost profits?
 Gross profits less cost of obtaining them
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Uncertainty
Drews
 How to calculate lost profits?
 Gross profits less cost of obtaining them
 Suppose the business is an existing one.
Can we assume that the future will
resemble the past?
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Uncertainty
Drews
 How to calculate lost profits?
 Gross profits less cost of obtaining them
 Is there a “new business rule” of nonrecovery?
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Uncertainty
Drews
 How to calculate lost profits?
 Gross profits less cost of obtaining them
 Is there a “new business rule” of nonrecovery?
 An evidentiary rule, not an absolute bar
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Uncertainty
Drews
 How to calculate lost profits?
 Gross profits less cost of obtaining them
 Is there a “new business rule” of nonrecovery?
 What was the evidence here?
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Uncertainty
Drews
 How to calculate lost profits?
 Gross profits less cost of obtaining them
 Is there a “new business rule” of nonrecovery?
 How would you satisfy the “establish with
reasonable certainty” standard for a resto?
 Would a marketing forecast help?
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Uncertainty
Smith v. Penbridge 955
It’s an
acquired
taste…
11
Uncertainty
Gilroy v. ABC 956
 How is this different from Freund?
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Uncertainty
Gilroy v. ABC 956
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Uncertainty
Redgrave v. BSO 956
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Uncertainty
Redgrave v. BSO
 What was the basis for the claim?
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Uncertainty
Redgrave v. BSO
 At a Los Angeles movie theater, in 1978, there was a
bombing and protests. The furor was sparked by a
documentary called "The Palestinian," a film produced
and bankrolled by Vanessa Redgrave.
"Many people were outraged. You remember what your
reaction was?" Wallace asks.
"I didn't know why people were outraged to see a film
about the Palestinians," she replies.
Perhaps it was a scene where she danced, wielding a
Kalashnikov rifle.

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60 Minutes
Foreseeability
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Foreseeability
Hadley v. Baxendale at 113
The Hadley Mill, Gloucester UK
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Hadley v. Baxendale
Gloucester to Greenwich
2.5 hrs, according to Mapquest
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Foreseeability
Hadley v. Baxendale
Tel: 011-44-203-188-2100
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Foreseeability
Hadley v. Baxendale
 Just what was the Δ told?
 Cf Victoria Laundry at 115
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Foreseeability
Hadley v. Baxendale
 Just what was the Δs told?
 What if the headnote had been
correct?
22
Foreseeability
Hadley v. Baxendale
 Just what was the Δs told?
 What if the headnote had been
correct?
 Why might this be a rule of
efficiency?
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Foreseeability
Hadley v. Baxendale
 Why might this NOT be a rule of
efficiency?
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Foreseeability
Hadley v. Baxendale
 Why might this NOT be a rule of
efficiency?
 How would you expect carriers to
react?
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Foreseeability
Spang Industries at 957
Battenkill
Brudge
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Foreseeability
Spang Industries at 957
 Fort Pitt breached by delivering late,
with the result that Torrington
incurred extra damages in pouring
cement in cold weather
 Torrington could recover if this was on
the cards
27
Foreseeability
Spang Industries at 957
 Could Torrington recover for these
expenses?
28
Foreseeability
Spang Industries at 957
 Could Torrington recover for these
expenses?
 Yes, since the alternative of waiting
another 8 months would have increased
the damages even more
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Foreseeability: Increased labor costs
Cricket Alley 962
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Foreseeability: Increased labor costs
Cricket Alley
 What was the promise?
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Foreseeability: Increased labor costs
Cricket Alley
 What was the promise?
 And what expenses did Cricket Alley
incur as a consequence of the
breach?
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Foreseeability: Increased labor costs
Cricket Alley
 If increased labor costs are
foreseeable, why not lost profits?
Same diff…
 Cook v. Woornick 965
 More liberal than Drews?
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Foreseeability: Lost Profits
 Where the damages are astronomical,
are you sure who the least cost risk
avoider is?
 Qu. Western Industries at 966
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Foreseeability: Lost Profits
 Where the damages are astronomical,
are you sure who the least cost risk
avoider is?
 Qu. Milgard Tempering at 117
35
Emotional Distress
 Valentine at 967
 Is it foreseeable that one might suffer
emotional distress on being fired?
36
Emotional Distress
 Valentine at 967
 Is it foreseeable that one might suffer
emotional distress on being fired?
 So why no recovery?
 Can you think of a justification for
Restatement § 353
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Emotional Distress
 Is Allen v. Jones consistent with
Valentine?
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Jules et Jim
Mitigation: Luten Bridge at 968
Building bridges to nowhere
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Mitigation: Luten Bridge at 968
Building bridges to nowhere
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Mitigation
Shirley MacLaine
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Mitigation:
Shirley MacLaine
 Which film was the biggest turkey?
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Mitigation:
Shirley MacLaine
 Which film was the biggest turkey?
 What if she had been offered a role as
a nun in a western?
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Mitigation
 What if the injured party is a business
that gets new clients after the
breach?
 Kersage Computer at 978
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Mitigation
 What if the injured party is a business
that gets new clients after the
breach?
 Kersage Computer at 978
 The analogy to lost volume sellers
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George Mason School of Law
Contracts II
Uncertainty/Forseeability
F.H. Buckley
fbuckley@gmu.edu
46
What do they have in common?
1.
2.
3.
4.
47
Uncertainty
Foreseeability
Emotional Distress
Liquidated and Punitive Damages
A common valuation problem
1. Uncertainty: By the court ex post
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A common valuation problem
1. Uncertainty: By the court ex post
2. Foreseeability: By the parties ex ante
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A common valuation problem
1. Uncertainty: By the court ex post
2. Foreseeability
3. Emotional Distress
1. Both ex post and ex ante
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A common valuation problem
1. Uncertainty: By the court ex post
2. Foreseeability
3. Emotional Distress
1. Both ex post and ex ante
2. Endogenous preferences
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A common valuation problem
1. Endogenous preferences
Ron Hunt in 1974:
Notice anything
unusual about his
batting stance?
52
A common valuation problem
1.
2.
3.
4.
Uncertainty: By the court ex post
Foreseeability
Emotional Distress
Liquidated and Punitive Damages
1. If we knew what the damages would be,
we wouldn’t worry about a liquidated
damages clause
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Liquidated damages:
When permitted
 Restatement § 356
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Liquidated Damages
 How to distinguish an effective
liquidated damages clause from a
penalty?
55
Lake River v. Carborundum
 Lake River to bag Carborundum’s
Ferro Carbo and serve as distribution
center
 Why did LR insist on a liquidated
damages clause?
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Lake River v. Carborundum
 And why was this a penalty?
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Lake River v. Carborundum
 And why was this a penalty?
 So what’s wrong with penalties?
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Lake River v. Carborundum
 And why was this a penalty?
 So what’s wrong with penalties?
 The efficient breach argument?
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Lake River v. Carborundum
 And why was this a penalty?
 So what’s wrong with penalties?
 A suitable case for paternalism?
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Lake River v. Carborundum
 And why was this a penalty?
 So what’s wrong with penalties?
 Signalling?
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C and H Sugar at 988
MV Moku Pahu
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C and H Sugar
 Sun to pay damages of $17K/day after
delivery date of June 30, 1981
 Sun completed the barge on March 16,
1982
 Halter supplies the catamaran tug boat
on July 15, 1982
 Sun assembles tug to barge in July ‘82
63
C and H Sugar
 Sun to pay damages of $17K/day after
delivery date of June 30, 1981, or
$4.4M
 Was this in excess of the damages
actually suffered?
64
C and H Sugar
 Sun to pay damages of $17K/day after
delivery date of June 30, 1981
 Was this in excess of the damages
actually suffered?
 How does Restatement § 356 assist?
 Cf Comment B
65
C and H Sugar
 Sun to pay damages of $17K/day after
delivery date of June 30, 1981
 Was this in excess of the damages
actually suffered?
 How does Restatement § 356 assist?
 Qu. Illustration 4
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C and H Sugar
 Sun to pay damages of $17K/day after
delivery date of June 30, 1981
 Was this in excess of the damages
actually suffered?
 How does Restatement § 356 assist?
 Contrast Massman at 994
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So what’s changed from last
summer?
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Recognize this?
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Commentaries 1765
 Pure and proper slavery does not, nay cannot, subsist in
England; such I mean, whereby an absolute and
unlimited power is given to the master over the life and
fortune of the slave. And indeed it is repugnant to
reason, and the principles of natural law, that such a
state should subsist anywhere.
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Commentaries 1765

71
Upon these principles the law of England abhors, and will not
endure the existence of, slavery within this nation: so that
when an attempt was made to introduce it, by statute 1 Edw.
VI. c. 3. which ordained, that all idle vagabonds should be
made slaves, and fed upon bread, water, or small drink, and
refuse meat; should wear a ring of iron round their necks,
arms, or legs; and should be compelled by beating, chaining,
or otherwise, to perform the work assigned them, were it
never so vile; the spirit of the nation could not brook this
condition, even in the most abandoned rogues; and therefore
this statute was repealed in two years afterwards . And now it
is laid downd, that a slave or negro, the instant he lands in
England, becomes a freeman; that is, the law will protect him
in the enjoyment of his person, his liberty, and his property.
Seven years later…
Granville Sharp
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Seven years later…
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It comes to court:
R v Knowles, ex parte Somersett, 20 State Tr. 1 (1772).
Wm Murray, Earl Of Mansfield
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Mansfield’s judgement
The state of slavery is of such a
nature, that it is incapable of being
introduced on any reasons, moral or
political, but only by positive law,
which preserves its force long after
the reasons, occasion, and time itself
from whence it was created, is erased
from memory. It is so odious, that
nothing can be suffered to support it,
but positive law. Whatever
inconveniences, therefore, may follow
from the decision, I cannot say this
case is allowed or approved by the
law of England; and therefore the
black must be discharged.
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Good luck!
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