Friday, April 28, 2017

Full Expectation Damages

We are in the middle of the final exam period, so this post will be short.

A friend of mine recently told me about a situation where he had been cheated out of a few thousand dollars. A clear contract was involved, and based on the facts I was told, the other party seems obviously in the wrong.

These situations, even if clear from the legal side, are often not worth pursuing through litigation in our current U.S. system. As most readers surely know, in the U.S. parties generally have to pay their own lawyers regardless of the outcome. In some situations, the lawyers may take the case on contingency, but most lawyers I know will not take a contingency case where the maximum recovery is a few thousand dollars. Maybe small claims court would be appropriate, but the learning and time costs involved may outweigh the potential recovery.

Perhaps this is as it should be. Perhaps we want parties to settle these smaller disputes outside the courts.

But, especially when the party in the wrong is much larger, and especially when the wrong is quite clear, it seems like we might want the courts involved to prevent this type of bad action from going without a remedy. Of course, class actions may be possible in some, though certainly not all, circumstances.

The law could make these situations more worthy of pursuit. Full expectation damages, that would put the harmed party where she would have been if the contract had been properly carried out, should consider not only legal fees but also the time and emotional energy expended to bring the claim.  I do know that courts sometimes shift legal fees in egregious situations, but I think this is pretty rare, and I don't think I have ever heard of a situation where the plaintiff was reimbursed for her time and emotional energy expended in bringing the case. However, isn't that what true expectation damages would require? Without the breach, the plaintiff would not have spent time, energy, and money pursuing the claim. Recovery for this type of damage would also discourage breach, as the defendant would stand to lose significantly more than if he just carried out the contract as agreed.

That said, I do see how this could be abused by overeager attorneys, so I imagine it would have to be used somewhat sparingly and only in clear cases.

Contracts, Haskell Murray, Litigation | Permalink


FWIW, Texas by statute awards attorneys' fees to successful plaintiffs in breach of contract cases.

On the larger issue, we lawyers have done a great job of making the system so complex and expensive that it's useless for most people. Litigation used to be expensive enough that two farmers could litigate over the value of a cow. Perhaps would could start by eliminating discovery unless both parties want it, eliminate most modern motion practice except for a demurrer, and have the two parties and their lawyers and witnesses just show up in court for a one-day trial two weeks after the answer. It used to work fine.

Posted by: Frank Snyder | Apr 28, 2017 9:01:53 AM

Post a comment