Expectated measure of damage, Business Economics

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Mr. M enters into a contract with Mr. R under which R agrees to build a model railroad for $200. The value of the model railroad to M is $300. Expecting that the model railroad will be delivered, M spends $40 remodeling his basement to make room for it. Before R has received any payment from M, another model railroad enthusiast, Ms. J, offers to buy the model railroad from R for $250, which is also the value of the model railroad to J.

If R were to breach his contract with M by selling the model railroad to J, how much would he have to pay M under 1) expectation measure of damages, (b) restitution measure of damages or (c) a reliance measure of damages? In answering this question, explain the objective of each of these alternative measures of damages. Would R breach under any of these damage measures? Would it be efficient for R to breach? Explain why or why not.


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