Should the remedy in reliance be equal to the amount the person actually relied?

-- Anonymous, October 07, 1998

Answers

well gosh, that depends

Should the remedy in reliance be equal to the amount the person actually relied? To me, the answer depends on how reasonably the promisee went about his reliance. If nephew takes the Concorde, or if what's-his-name builds the Lufthansa ap[p]artments out of marble, the doctrine cannot reasonably cover the total cost incurred. On the other hand, it seems fair to award a remedy for reliance up to the amount of expenditures reasonably incurred. "But wait," pipes up Prof. Singer from the back row, "what about formal realizability? How on Earth is a court supposed to know when corinthian columns are justified expenses?" Sorry, Mr. Singer, the property rights to that seat may only be claimed by students at Harvard Law School. You'll have to take your objection outside.

-- Anonymous, October 08, 1998

Seems like there are many ways to approach this, including Paul's rule of "reasonably incurred expenses". The Restatement 2nd, particularly in comparing Sect. 90 illus. 8 & 9, appears to do something like "reasonable expenses unless the promise was in bad faith, in which case the remedy is the total foregone gains". This looks a bit vague, but better to me than the implications of illus 11, where the court makes a decision about how far along the negotiations are when deciding what the remedy should be. Overall, seems like a sliding scale from a strict cost accounting to full value of opportunities lost, with reasonability thrown in as well. Looks to me like a big game, weighing "reasonable", good faith, the sophistication of the participants, etc.

I guess that to preserve ex ante incentives to engage in explicit contracting behavior you'd want to minimize the "payoff" to the reliant party. This also preserves the richness of the language people can use - a "good person" could always then choose to honor their promises to their full value, even though the court would only enforce "costs incurred".

-- Anonymous, October 12, 1998