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.
Contracts | Law | Law and Economics
Center for Contract and Economic Organization
Center for Law and Economic Studies
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