Would Gruen be decided the same way under Charny's rules?

-- Anonymous, October 05, 1998

Answers

It seems to me that Gruen would have come out the same way under Charny's rules: both parties were rational transactors and the plaintiff (Gruen) could not show that it was worse off than it would have been had the promise been kept.

In Zeman, on the other hand, I think Charny's rules would have led the court to uphold the lower court's summary judgment. Again, both parties were rational transactors (or at least should have been). And while Lufthansa may be a better risk-bearer than Zeman in Charny's view, Zeman could not "demonstrate that he suffered losses because of a remote contingency that would have been too costly to anticipate in a contract term." Moreover, Lufthansa probably would not have been able to reasonably foresee Zeman's reliance on a promise that Lufthansa believed it explicitly did not make.

-- Anonymous, October 06, 1998

In Gruen, I agree with Rosemary. It seems fairly clear.

In Zeman, I think there are grounds in Charney to support the court's decision. Charney says first the plantiff must have substantially miscalculated the probability the commitment would be kept. This seems likely, given the mixed messages in the letters. Second, the parties probably could not have efficiently engaged in formal contracting behavior in this situation. The short time frame and the extensive communication seem to indicate both parties could receive assurances without incurring the costs of a formal contract. (This is definitely the weakest point.) Third, that the plantiff would have acted differently had he realized the true probability of breach seems like a reasonable conclusion. Fourth, Lufthansa was definitely in a better position to assess the probabilities involved, and the burden should be on them to shoulder the costs of the uncertainty. Thus it seems like Charney's four criteria can be satisfied by Zeman.

-- Anonymous, October 07, 1998

Charny's Rules?

Can someone please summarize Charny's rules for me? I didn't understand what they were.

-- Anonymous, October 07, 1998

I agree that Gruen would have been decided the same under Charny's rules.

I agree with Rosemary, however, that you can make a case that Zeman would have come out differently. Charny talks in one section about formality and the function it can play. He mentions, as we have in class, that it is easier for the courts to recognize formal documents, but he adds more. He goes on to state, "the fact that the parties signed a carefully formalized 'memorandum of intent' may argue against enforcing the promise: if the parties were that careful, they likely appreciated the legal consequences of the commitment and decided consciously not to put the promise in legally enforceable form." I would suggest that Lufthansa's letters were fairly formalized memoranda of intent. They clearly did not want to be bound and took steps to avoid it. How could they have done things differently so as to avoid this situation? One last point is that I would argue that Lufthansa was not in a better position "to estimate the expected value of the net loss to the promissee from reliance." Zeman told Lufthansa that "he would build the building in any case before April 1 because he could rent the aparments...very quickly..." As far as Lufthansa was concerned, there was no harm to Zeman because he could sell units anyway.

-- Anonymous, October 07, 1998