A Unified Theory of Contract Damages

Contract damages are one of the hardest things for law students to understand.  Not coincidentally, they are one of the hardest things for their professors to teach.  This is due in part to the fact that there is little agreement over even fundamental questions, such as whether reliance and expectation remedies are cumulative or exclusive.

Two scholars whose work has focused recently on developing a coherent way of teaching damages, are Seton Hall’s David Barnes (left) and CUNY’s Deborah Zalesne.  We’ve mentioned their work before in some detail.  They’ve now moved on to offer A Unifying Theory of Contract Damages, forthcoming in the Syracuse Law Review, in which they propose a new approach to damage calculations, based on their “surplus-based” concept.  It’s a thoughtful and challenging approach, and sure to spark some discussion.  Here’s the abstract:

This article justifies a reformulation of modern contract damage rules articulated in a new restatement of contract damages, see Barnes and Zalesne, The Shadow Code, 56 South Carolina L. Rev. 93 (2004).  The unifying principles of the surplus-based approach offered here lies in the shadows of contract remedies as articulated in Article 2 of the Uniform Commercial Code (U.C.C.), the Restatement (Second) of Contracts.  The Shadow Code presented in this Article combines these principles and formulas into a new image of legal remedies for contract breach. This reconceptualization is based on the foundational principle that parties injured by contract breach are entitled to any surplus of benefits over costs those parties would have realized had the breaching parties performed. The Shadow Code reflects the modern understanding that damages are intended to ensure that the injured party is as well off as if the other party had performed as promised.

[Frank Snyder]