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University of Western Ontario Law and Economics Lecture 8 Introductory example 1 Introductory example 2 1 Introductory example 3 Contract:

2.Read Security Stove & Mfg. Co. v. American Railway Express Co. 227 Mo. App. 175, 51 S.W.2d 572 (1932) and answer the following questions.
a. Note that the defendant was not satisfied with the legal outcome at the trial court. What would be the ground for the defendant’s appeal?
b. Which measure of damages (expectation, reliance, or restitution measure) did the court use and why?

1 Law and Economics Lecture 8 University of Western Ontario Introductory example 1 Introductory example 2
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2 Introductory example 3 Contract: introduction • What is a contract? – enforceable promise • Why people make a contract? – Cooperation – Commitment Contract: main issues 1) What promises are enforceable? 2) What should be a remedy if a contract is breached?
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1 Law and Economics Lecture 9 University of Western Ontario Remedies stipulated by parties stipulated damages a remedial process arbitration Court-provided remedies money damages: To compensate the promisee for the injury caused by the promisor. specific performance: the court orders the breaching party to perform.
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2 Alternative damages • Damages for breach of contract compensate the promisee for the injury caused by the promisor. Expectation damages • The promisee is worse off than if the contract had been performed. The promisee expects to gain from "performance." The common law tradition refers to damages based upon the value of expected performance as "expectation damages.“ • Expectation damages leave potential victims indifferent between performance and breach. Example 1 • O ticket agency offers opera tickets at the price p o . K ticket agency offers equivalent tickets at the lower price p K . Consumer orders x K tickets from K at the price p K and promises to pay when he picks up the tickets on the day of performance. • Close to the day of the performance, K announces that it will breach and not deliver the tickets to Consumer. In the meantime, the show has succeeded and the price of tickets has risen, so Consumer pays the higher price, p S , for substitute tickets purchased from a third ticket agency.
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2. Security Stove & Mfg. Co. v. American Railway Express Co. 227 Mo.App. 175, 51 S.W.2d 572 (1932) BLAND, J. This is an action for damages for the failure of defendant to transport, from Kansas City to Atlantic City, New Jersey, within a reasonable time, a furnace equipped with a combination of oil and gas burner. The cause was tried before the court without the aid of a jury, resulting in a judgment in favor of plaintiff in the sum of $801.50 and interest, or in a total sum of $1,000.00. Defendant has appealed. The facts show that plaintiff manufactured a furnace equipped with a special combination oil and gas burner it desired to exhibit at the American Gas Association Convention held in Atlantic City in October, 1926. The president of plaintiff testified that plaintiff engaged space for the exhibit for the reason “that the Henry L. Dougherty Company was very much interested in putting out a combination oil and gas burner; we had just developed one, after we got through, better than anything on the market and we thought this show would be the psychological time to get in contact with the Dougherty Company”; that “the thing wasn’t sent there for sale but primarily to show”; that at the time the space was engaged it was too late to ship the furnace by freight so plaintiff decided to ship it by express, and, on September 18th, 1926, wrote the office of the defendant in Kansas City, stating that it had engaged a booth for exhibition purposes at Atlantic City, New Jersey, from the American Gas Association, for the week beginning October 11th; that its exhibit consisted of an oil burning furnace, together with two oil burners which weighed at least 1,500 pounds; that, “In order to get this exhibit in place on time it should be in Atlantic City not later than October the 8th. What we want you to do is to tell us how much time you will require to assure the delivery of the exhibit on time?” . .. On October 1st, plaintiff wrote the defendant at Kansas City, referring to its letter of September 18th, concerning the fact that the furnace must be in Atlantic City not later than October 8th, and [stating]: “Now Mr. Bangs [the American Railway Express Company agent], we want to make doubly sure that this shipment is in Atlantic City not later than October 8th and the purpose of this letter is to tell you that you can have your truck call for the shipment between 12 and 1 o’clock on Saturday, October 2nd for this.” (Italics plaintiff's.) On October 2d, plaintiff called the office of the express company in Kansas City and told it that the shipment was ready. Defendant came for the shipment on the last mentioned day, received it and delivered the express receipt to plaintiff. The shipment contained 21 packages. Each package was marked with stickers backed with glue and covered with silica of soda, to prevent the stickers being torn off in shipping. Each package was given a number. They ran from 1 to 21. Plaintiff’s president made arrangements to go to Atlantic City to attend the convention and install the exhibit, arriving there about October 11th. When he reached Atlantic City, he found the shipment had been placed in the booth that had been assigned to plaintiff. The exhibit was set up, but it was found that one of the packages shipped was not there. This missing package contained the gas manifold, or that part of the oil and gas burner that controlled the flow of gas in the burner. This was the most important part of the exhibit and a like burner could not be obtained in Atlantic City. Wires were sent and it was found that the stray package was at the “over and short bureau” of defendant in St. Louis. Defendant reported that the package would be forwarded to Atlantic City and would be there by Wednesday, the 13th. Plaintiff’s president waited until Thursday, the day the convention closed, but the package had not arrived at the time, so he closed up the exhibit and left. About a week after he arrived in Kansas City, the package was returned by the defendant. Mr. Bangs testified that the reasonable time for a shipment of this kind to reach Atlantic City from Kansas City would be four days; that if the shipment was received on October 4th, it would reach Atlantic City by October 8th; that plaintiff did not ask defendant for any special rate; that the rate charged was the regular one; that plaintiff asked no special advantage in the shipment; that all defendant, under its agreement with plaintiff was required to do was to deliver the shipment at Atlantic City in the ordinary course of events; that the shipment was found in St. Louis about Monday afternoon or Tuesday morning; that is was delivered at Atlantic City at the Ritz Carlton Hotel, on the 16th of the month. . .. Plaintiff asked damages, which the court in its judgment allowed as follows: $147.00 express charges (on the exhibit); $45.12 freight on the exhibit from Atlantic City to Kansas City; $101.39 railroad and Pullman fares to and
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from Atlantic City, expended by plaintiff's president and a workman taken by him to Atlantic City; $48.00 hotel room for the two; $150.00 for the time of the president; $40.00 for wages of plaintiff's other employee and $270.00 for rental of the booth, making a total of $801.51. Defendant contends . .. that the court erred in allowing plaintiff's expenses as damages; that the only damages, if any, that can be recovered in cases of this kind are for loss of profits and that plaintiff's evidence is not sufficient to base any recovery on this ground. . .. We think, under the circumstances in this case, that it was proper to allow plaintiff's expenses as its damages. Ordinarily the measure of damages where the carrier fails to deliver a shipment at destination within a reasonable time is the difference between the market value of the goods at the time of the delivery and the time when they should have been delivered. But where the carrier has notice of peculiar circumstances under which the shipment is made, which will result in an unusual loss by the shipper in case of delay in delivery, the carrier is responsible for the real damage sustained from such delay if the notice given is of such character, and goes to such extent, in informing the carrier of the shipper's situation, that the carrier will be presumed to have contracted with reference thereto. . .. Defendant contends that plaintiff “is endeavoring to achieve a return of the status quo in a suit based on a breach of contract. Instead of seeking to recover what he would have had, had the contract not been broken, plaintiff is trying to recover what he would have had, had there never been any contract of shipment”; that the expenses sued for would have been incurred in any event. ... The case at bar was [not] to recover damages for loss of profits by reason of the failure of the defendant to transport the shipment within a reasonable time, so that it would arrive in Atlantic City for the exhibit. There were no profits contemplated. . .. There was no money loss, except the expenses, that was of such a nature as any court would allow as being sufficiently definite or lacking in pure speculation. Therefore, unless plaintiff is permitted to recover the expenses that it went to, which were a total loss to it by reason of its inability to exhibit the furnace and equipment, it will be deprived of any substantial compensation for its loss. The law does not contemplate any such injustice. It ought to allow plaintiff, as damages, the loss in the way of expenses that it sustained, and which it would not have been put to if it had not been for its reliance upon the defendant to perform its contract. There is not contention that the exhibit would have been entirely valueless and whatever it might have accomplished defendant knew of the circumstances and ought to respond for whatever damages plaintiff suffered. In cases of this kind, the method of estimating the damages should be adopted which is the most definite and certain and which best achieves the fundamental purpose of compensation. . .. While it is true that plaintiff already had incurred some of these expenses, in that it had rented space at the exhibit and this part of plaintiff's damages, in a sense, arose out of a circumstance which transpired before the contract was even entered into, yet, plaintiff arranged for the exhibit knowing that it could call upon defendant to perform its common law duty to accept and transport the shipment with reasonable dispatch. The whole damage, therefore, was suffered in contemplation of defendant performing its contract, which it failed to do, and would not have been sustained except for the reliance by plaintiff upon defendant to perform it. It can, therefore, be fairly said that the damages or loss suffered by plaintiff grew out of the breach of the contract, for had the shipment arrived on time, plaintiff would have had the benefit of the contract, which was contemplated by all parties, defendant being advised of the purpose of the shipment. The judgment is affirmed.
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2.Read Security Stove & Mfg. Co. v. American Railway Express Co. 227 Mo. App. 175, 51
S.W.2d 572 (1932) and answer the following questions.
a. Note that the defendant was not satisfied with the...

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