Lucy v. Zehmer Case Brief and Expectation Damages

Case Brief: Lucy v. Zehmer

Introduction

The case Lucy v. Zehmer addresses critical issues in contract law, particularly regarding the existence of a contract and how damages are calculated upon a breach.

Context of the Case

The main case discussed is Lucy v. Zehmer, which revolves around the enforceability of a contract and the methods of assessing breach and damages. The analysis follows a specific structure, focusing on two primary inquiries:

  1. Is there a breach of the contract?

  2. If so, how are damages arising from the breach calculated?

Hawkins v. McGee: Expectation Damages

Analysis Framework

The analysis of expectation damages originates from the guidelines set out in Hawkins v. McGee. The foundational purpose of law, as defined, is to restore the plaintiff to the position he would have occupied had the defendant fulfilled his contractual obligations.

  1. The key legal citation referenced is:

    • "The purpose of the law is 'to put the plaintiff in as good a position as would have been in had the defendant kept his contract.’"

    • Citation: 3 Williston Co 1338.

  2. The measure of recovery articulated in this context emphasizes that it relies on what the defendant was obligated to provide to the plaintiff, contrasting it with what the plaintiff has offered the defendant or otherwise invested.

    • Reference: 3 Williston Cont. § 1341.

Measure of Damages

In Hawkins v. McGee, the specifics of the damage calculation are crucial.

  • The court concludes that the genuine measure of the plaintiff’s damages is:

    • The difference between the value of the promised outcome (in this case, a perfect hand) as established by the jury and

    • The value of the performance as it stands (the current condition of the hand).

    • Additionally, any incidental consequences which were reasonably contemplatable by both parties at the time of the contract are included in this evaluation.

General Rule of Contracts

Contracts typically are not enforced through physical compulsion. Instead, they are enforced by compensating the injured party with a financial sum that adequately places them in the position they would have enjoyed had the contract been executed fully.

Concept of Expectation Damages

Expectation damages refer to the damages aimed at covering the loss of a non-breaching party's expected benefits from a contract. The legal principle asserts:

  • The injured party should receive, in monetary terms, what they would have obtained had the contract been performed entirely.

Practical Example: Expectation Damages Problem

To illustrate expectation damages in a practical scenario:

  1. A buyer and seller agree to a contract to sell 1,000 barrels of oil, explicitly described concerning quality and grade, at the price of $50 per barrel.

  2. The terms require payment and delivery to occur in 90 days.

  3. On the designated payment/delivery date, the market price of oil has dropped to $44 per barrel, and the buyer refuses to complete the transaction.

Calculation of Damages

In this case, the seller, as the injured party, seeks to recover damages for breach:

  • The expected profit per barrel would have been the contracted price of $50 minus the market price of $44.

  • Thus, the seller anticipates a recovery based on the lost profit from the sale of the 1,000 barrels.

    • The total potential recovery for the seller would be calculated as:
      ext{Total Recovery} = 1,000 ext{ barrels} imes ( ext{contracted price} - ext{market price}) = 1,000 imes (50 - 44) = 1,000 imes 6 = 6,000

  • The seller could then seek $6,000 as compensation for the breach of contract.