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9. If she sues him for monetary relief, what is the probable measure of her recovery?
Assume that the developer has a cause of action against the lender.
A developer obtained a bid of $10,000 to tear down her old building and another bid of $90,000 to replace it with a new structure in which she planned to operate a sporting goods store. Having only limited cash available, the developer asked the lender for a $100,000 loan. After reviewing the plans for the project, the lender in a signed writing promised to lend the developer $100,000 secured by a mortgage on the property and repayable over 10 years in equal monthly installments at 10% annual interest. The developer promptly accepted the demolition bid and the old building was removed, but the lender thereafter refused to make the loan. Despite diligent efforts, the developer was unable to obtain a loan from any other source.
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C is correct. Here, the expectation damages are too speculative, and there is no liquidated damages clause. Although the lender knew that the developer intended to install a sporting goods store in the new building, the earnings of a such a business, and the value of the building after construction (which never occurred), are too speculative to offer expectation damages. The value of the building after construction that has not even begun, and the value of a business in an economy that has not yet occurred, are just too speculative. However, the developer already spent $10,000 to tear down the building. The opportunity to fulfill the contract has been lost. In order to put the developer in the position she would have been in if the contract had not been formed the court will award the $10,000 expense of removing the old building, adjusted by the decrease or increase in the market value of the developer's land immediately thereafter.
A is incorrect. The value of the building that the developer wants to put there is too uncertain and would require a great deal of speculation on behalf of the court to determine those values. When the court finds itself in such a position, it will move from the typical «benefit of the bargain» or expectation damages, to reliance damages. Here, in order to put the developer in the position she would have been in if the contract had not been formed the court will award the $10,000 expense of removing the old building, adjusted by the decrease or increase in the market value of the developer's land immediately thereafter.
B is incorrect. The value of the prospective business that the developer wants to put in the future, unbuilt building, is too uncertain and would require a great deal of speculation on behalf of the court to determine those values. When the court finds itself in such a position, it will move from the typical expectation damages to reliance damages. As explained above, the court will award the $10,000 actually spent to remove the building.
D is incorrect. Here, it is not too speculative to come up with money damages that put the parties in the same position as if the contract had not been formed. The developer's reliance damages can be calculated with relative certainty. This is tricky, though, because literally the building cannot be rebuilt, so putting the parties in the same position as if the contract had never been formed is a legal fiction. Nonetheless, by awarding the $10,000 that the developer already spent, and adjusting the value of the land after the work, either up or down, it is possible to come up with a fair money value that acts as a substitute for the now-destroyed building.