Center for Contract and Economic Organization
Center for Law and Economic Studies
If A promises to sell to B who, in turn, promises to sell to C and either A or C breaches should B receive the gain it expected had both transactions occurred (lost profits) or the larger market/contract differential? Recent case law and commentary argues for the lost profit remedy. The argument is that there is a conflict between awarding market damages and making the nonbreacher whole. This paper argues that there is no conflict. If B were a broker, and C breached, then A would have an action against C for market damages. If B were party to the two related contracts A should also be liable for market damages. By being a party to the two contracts, B has taken on counterparty risk. This paper criticizes a recent paper by Roy Anderson and provides a detailed critique of the case law.
Victor P. Goldberg,
The Middleman’s Damages Revisited,
Columbia University School of Law, The Center for Law & Economic Studies Working Paper No. 595
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/2324