Court Opinion

ID: 9489588
Source: CourtListenerOpinion
Date Created: 2023-08-05 13:19:26.543804+00
Date Added: 2024-06-11T17:53:36.826864
License: Public Domain

CUDAHY, Circuit Judge,
concurring:
I note only one significant area of difference from the majority’s otherwise admirable explication of this elusive subject.
The majority states that
*281if the plaintiff can prove that had it not been for the defendant’s bad faith the parties would have made a final contract, then the loss of the benefit of the contract is a consequence of the defendant’s bad faith, and, provided it is a foreseeable consequence, the defendant is liable for that loss — liable, that is, for the plaintiffs consequential damages.
Maj. Op. at 278. The majority concedes that this theoretical measure of damages may be impossible of proof because of the obvious difficulty of showing what the terms of the eventual contract would have been absent a breach of the obligation of good faith. The majority, however, defends the principle, if not its practicality, by pointing to the “paradox” of allowing consequential damages for an innocent contract breach but not for the deliberate misconduct of bad faith.
By adopting this principle, the majority certainly does create a disincentive for acting in bad faith in contract negotiations; but the adoption of the principle has another effect which is not so salutary. For we cannot lose sight of the fact that a contract is a deliberate agreement of the parties, frequently marked by certain formalities, establishing their own framework of rules to govern their relations. It seems to create a different paradox to foist the peculiar and special consequences of an agreement on parties who have not in fact agreed. In principle, it cannot be reasonably foreseeable that the parties will ever reach agreement — let alone what the terms of an agreement will be. Good faith is a necessary but not a sufficient condition of agreement. There are -piany perfectly legitimate reasons for negotiations to fail, even if good faith prevails.
As a matter of policy, I think it is undesirable to force agreement on parties under threat of a bad faith finding and subsequent imposition of consequential damages, the same sanction as would issue from actual agreement. Freedom not to contract should be protected as stringently as freedom to contract. The present case is an excellent example of how preliminary negotiations may be pyramided into a demand indistinguishable from a claim for breach of contract.
Reliance damages should be an adequate sanction for breach of an agreement to negotiate in good faith. Presumably, punitive damages could be assessed in egregious cases. With those sanctions, a good faith obligation is more likely to be enforced than if the matter could be escalated into what appears to be a breach of contract suit.