Unformatted text preview: I. Hadley v Baxendale (1854) Implications: a. Expectation Damages are limited to what an agent with reasonable foresight would incur b. Must inform other parties if unusually high potential damages from Breach i. For R R* 1. Set D = V(R) P 2. i.e. usual expectation damages ii. For R>R* 1. Set D = V(R*) P c. Hadley-Baxendale Rule: i. Effect of HB Rule on Buyer Behavior 1. Expected Benefit to buyer from the contract is equal to q(V(R) R P) + (1-q)*(D-R) =qV(R) R + (1-q)*D-q 1. For RR* D = V(R) P so that expected benefit to buyer is: a. qV(R) R (1-q) (V(R) P ) qP b. = V(R) R P 2. For R>R* D = V(R*) P so that expected benefit to buyer is: a. ...
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This note was uploaded on 10/19/2008 for the course ECON 4450 taught by Professor Turnbull during the Spring '08 term at Georgia State.
- Spring '08