Contracts Pages 31-32

Chapter 2
REMEDIES FOR BREACH OF CONTRACT
We begin with contract remedies, the "so what?" of the subject. Suppose
Williston makes a contract to supply goods to Corbin at an agreed price. Williston
fails to deliver the goods and has no excuse that the law recognizes. What can
Corbin do? He is likely to talk with Williston to try to persuade him to perform. If
that fails, Corbin can buy from someone else and resolve never to deal with Williston
again. Corbin can gossip at a trade show, telling atrocity stories about Williston that
will make it harder for Williston to make contracts with other potential customers.
Corbin might decide to consult a lawyer to see whether it makes sense to seek legal
relief against Wtlliston.
What would the lawyer tell Corbin? He would state facts and opinions about what
the law might offer, what it might cost to get a remedy, and the chances of winning.
Law school courses too seldom stress the costs and risks involved in delivering law
to its consumers, but lawyers and clients must confront these factors. We will
continually remind you that law is not free. Keeping this in mind, what has the legal
system to offer someone when another party has breached his or her contract? In
a famous article, Professor Lon Fuller and William Perdue tell us that the law could
protect the expectation interest, the reliance interest, or the restitution interest, or
some combination of them. 1 While there are problems with Fuller and Perdue's
classification system since the categories overlap, one must master it because these
terms have become part of the vocabulary of the contracts field. 2 This chapter of
Contracts: Law in Action will take up the expectation, the reliance, and the
restitution interests and then turn to some difficult problems drawing on aspects of
all of them.
A. PROTECTING THE EXPECTATION INTEREST

From the middle of the 19th century to today, judges and legal writers have told
us that the primary goal of contract remedies is to protect what Fuller and Perdue
call the "expectation interest." The Uniform Commercial Code announces in
§ 1-305(a):3
1
Lon Fuller & William Perdue, The Relia:nce Interest in Contracts Dam-O{Jes (pts. 1-2), 46 YALE L.J.
52, 373 (1936 & 1937).
2
Hut see Richard Craswell, Against Fuller and Perdue, 67 U. Cm. L. REv. 99 (2000); see also
Symposium: W(h)ither the Reliance Interest?, 38 SAN DrnGo L. REV. 1-230 (2001).
3
In this book, unless otherwise indicated, we cite to Revised Article 1. Revised Article 1 has been
generally adopted, as will be explained later in the text.
31
32 REMEDIES FOR BREACH OF CONTRACT CH. 2
The remedies provided by [the Uniform Commercial Code] must be

liberally administered to the end that the aggrieved party may be put in as
good a position as if the other party had fully performed but . . . penal
damages may [not] be had except as specifically provided in [the Uniform
Commercial Code] or by other rule of law.
While the Code does not apply to all contracts cases, it shares this statement of
goals with all the other bodies of contract law. Thus, the law says that it will attempt
to put aggrieved parties where they expected to be as the result of performance.
The ordinary objective is to approximate a hypothetical state - where the
aggrieved party would have been had the contract been performed - and not to
punish breach or put the aggrieved party in a better position than would have
resulted from performance.
The goal is easy enough to state, but it ought to provoke questions. Why seek this
objective? What function does it serve? And what about the means to the end? We
have no contract police to watch those who enter into contracts. One who threatens
breach or does not perform is not arrested. Such an approach might encourage
performance, but few of us would be willing to pay to have contract police to ensure
performance. We have balanced the ends and costs of alternative ways to respond
to breach and collectively chosen to protect the "expectation interest" - hoping this
will achieve an optimal level of performance at an acceptable cost.
But what do we mean by the phrase "the expectation interest"? What are the
likely actual consequences of the compromises embodied in our contracts damages
norms when they are filtered through the legal system in operation? How far is the
law of contract remedies actually an instrument designed to produce changes in
behavior, and how far is it an exercise in political and cultural symbolism and
ideology? This is the agenda for our first body of material.
1. A Long, But Necessary, Digression: Of Two Codes,

Reading Statutes, and the Application of Article 2 of the
Uniform Commercial Code
We want to begin with some simple examples of how the Uniform Commercial
Code (UCC) attempts to put aggrieved buyers and sellers of goods in as good a
position as they would have been had the contract been performed, and why the
law dealing with sales of goods adopts this as a goal. We will also examine the
assumptions and compromises involved in the techniques that the UCC uses to
protect the expectation interest. Then we can turn to examples of the expectation
interest in areas not covered by the Code.
However, before beginning students can embark on this enterprise, they have to
learn a little about what the Uniform Commercial Code is, techniques of reading
statutes, and, since Article 2 of the Code does not apply to all contracts, when they
can use its provisions. We will also (very briefly) mention another important
codification of commercial law - the United Nations Convention on Contracts for
the International Sale of Goods (CISG). We will refer to its provisions from time to
time in these materials.

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Chapter 2

REMEDIES FOR BREACH OF CONTRACT

A. PROTECTING THE EXPECTATION INTEREST

The remedies provided by [the Uniform Commercial Code] must be

1. A Long, But Necessary, Digression: Of Two Codes,

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