PROFESSOR: The reason is that the dealer lost volume.
Had I kept my bargain, he would have sold two cars and made two profits.
He lost his profit on the car that he sold me.
And he's entitled to recover that from me,
even though he made a profit the next day on another car just like it--
maybe even the same one.
That's the principle.
You're entitled to the amount of money that
would have put you in the same position as if the contract had been kept.
It's a straightforward principle.
It makes the world go round.
You make a bargain.
You can rely on it.
You can take the money to the bank and go on to your next piece of business.
But it isn't always so easy to say what the amount of money
equivalent to the bargain you had made might be.
Let me tell you about a couple of famous cases that illustrate this difficulty.
The first is Groves against John Wunder from Minnesota in 1939,
when the Depression was still weighing on land prices.
Groves owned some industrial land at the edge of town.
He used it to extract sand and gravel and sell it to builders, road builders,
and so on.
John Wunder was in the same business.
And he made a contract with Groves that allowed
him to take sand and gravel from Groves' land over a period of years
for $105,000.
That might be $1,750,000 in 2014 dollars.
But that wasn't the whole deal.
You can imagine what a piece of land you've been taking sand and gravel from
would look like after a period of years.
Groves didn't want that, so he put a clause
in the contract that stated that at the end of the term of years,
and after John Wunder had taken the sand and gravel,
Wunder would leave the property-- and here I'm
quoting from the contract-- at a uniform grade,
substantially at the grade now existing at the roadway.
-- So he would use the soil, the soil he had removed to get the sand and gravel
beneath -- "for the purpose of maintaining and establishing said
grade."
In other words, when Groves got the land back,
it would be level and covered with ordinary soil-- the kind
that presumably you could grow grass on.
And it would look halfway decent.
So now John Wunder did pay the $105,000.
And he did take away a great quantity of sand and gravel.
That was the point, after all.
But he never fixed the land up.
He never replaced the soil or smoothed the land to a uniform grade.
He left it just as it was after digging out the sand and gravel.
He refused to do more.
So Groves sued him.
What did he sue him for?
Remember the principle-- what you're entitled to
is the value of what you have been promised.
What have he been promised, the owner of the land?
Groves had been promised $105,000 by John Wunder
for the privilege of stripping away the sand and gravel.
And he'd been paid that.
But he'd also been promised that at the end of the operation,
at the end of the five years, he'd have a nice, flat, graded, and seeded piece
of land-- industrial land.
And he didn't get that.
The principle seems obvious.
And that's what he's entitled to.
But it isn't simple at all.
Here's why.
All kinds of real estate experts came in.
And there's really no contest about this.
Everybody agrees.
And they say that if Wunder had kept his promise-- had graded and seeded
and put lawn on the land, maybe planted some flowers-- the land would
have been worth $13,000 more than it was worth in its present beat-up condition.
Remember, it's industrial land at the edge of town.
It's still the Depression.
And maybe nobody much cares what it looks like.
But Groves, the owner, says, yeah, but you promised to do this for me.
You promised to grade this land.
And it turns out that would've been an expensive operation.
It would have cost $60,000-- a million dollars
today-- to fix it up and bring it up to grade.
That's what the court found.
So which amount of money does he get?
He gets something.
Does he get $13,000-- the extra amount the land would be worth
if it looked all nice and graded?
Or does he get $60,000, which is the amount that
is necessary to put it in that condition?
What do you think?