Reliance when promisee changed its position to its

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Chapter 9 / Exercise 125
Business English
Guffey/Seefer
Expert Verified
Reliance : When promisee changed its position to its own detriment in reliance on the promise which was broken (does not take lost profit into account as expectation damages do). Basic principle of awarding reliance is waste . The expense of loss must cause prejudice to the P in that something of value has been wasted and cannot be salvaged. Puts promisee back in the position before the K had been made. Example : I pay $3 for photocopies of my notes for you in anticipation of you giving me your text book in exchange, if you breach (i.e., don’t give me your textbook), then my damages are $3. Damages = putting promisee back in the position he would have been in had the promise never been made. Generally less generous than expectation interest, because reliance only gets promisee back to square one. Reliance interest is only greater than expectation interest when the promisee has entered into a losing contract (see Nurse v. Barnes and Mistletoe ). 2 Rest.2d. §349 . Party is entitled to get back what it spent in reliance of K (including any expenditures made in preparation for performance or in performance) – minus any costs it saved as a result of the breach . ( You can not get full reliance if doing so would put you in a better position than you would have been had the contract been performed. ) Does not take into account lost profit
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Chapter 9 / Exercise 125
Business English
Guffey/Seefer
Expert Verified
3 Burden of proof is on D to prove P would have lost $$ on K. Restitution : Puts the promisor back in the position of pre-promise (taking away any perks he would’ve gotten from making the promise in the first place). This is the only damage award that you can get without ever having any kind of a K. Two types of restitution interest : a) On the contract : used when you can’t get expectation or reliance. b) Off the contract : used to prevent unjust enrichment of D. Elements of claim based on unjust enrichment: (From Tongish v. Thomas ) Benefit conferred upon D by P D knows of benefit conferred D accepts or retains benefit under circumstances that makes it inequitable for D to retain benefit without payment of its value. 1) Hawkins v. McGee : The case of the “hairy hand.” P contracted with D to remove scar tissue, and promised “a hundred percent perfect hand.” NH Sup Ct sent it back to trial, since all that was promised was the perfect hand— pain and suffering shouldn’t have been taken into account . That’s because he expected the pain and suffering (also the price of the operation)—even if the hand came out 100% good, he’d still have to pay doctors bill and go through the pain and suffering. Can only get pain and suffering if you have an additional surgery made necessary because of malpractice. Damages should have been the difference between the value of a perfect hand, and the value of the plaintiff’s hand in its present condition , plus any incidentals within contemplation of the parties when they made their contract, minus expenses saved— i.e., the expectation interest —NOT reliance interest which was what the lower court awarded.

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