Calculate what reliance damages and expectation damages

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Reference no: EM132228290

1. In this question we consider the case of poor George Hawkins, of Hawkins vs. McGee fame. Recall hehad a somewhat scarred hand and contracted with McGee to deliver a “perfect hand”, but the doctor instead delivered a deformed, “hairy hand” that was worse than what he started with. To make this more concrete, suppose that Charlie gets utility u from “hand beauty” h and money m according to u=h+m Suppose that a perfect hand has value h= 100 to Charlie, his pre-surgery hand h= 75, and the hairy hand h= 50. Also suppose the doctor charged $20 for his surgery.

(a) Calculate what expectation damages would be in this situation.

(b) Calculate what reliance damages would be in this situation.

Now suppose that before his surgery, a representative from the Acme Hand Modeling Agency had contacted Hawkins. They had learned that Hawkins would have a perfect hand and would pay him $20 to model in advertisements. However, in order for him to arrive on time for his model shoot, he has to buy a $15 train ticket to the studio before the outcome of his surgery is known.

Suppose that before the fact it is known that there is a 50% chance this surgery will end in the hairy hand, and a 50% chance of success (a perfect hand).

(d) Is it efficient for Hawkins to rely on this contract in deciding whether to buy the ticket and contract with Acme? Explain.

(e) If courts award expectation damages, will Hawkins rely on the contract? Explain.

Reference no: EM132228290

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