(2) Remedies: Contracts Equitable Remedies

Question 1

Definition & Rule

Reformation

Answer 1

Definition: Reformation allows a contract to be changed to conform to the parties original intent.

Rule: Reformation is available if (1) a valid contract exists AND (2) there was a misrepresentation or mutual mistake of material fact (the mistake can be a unilateral mistake if the non-mistaken party had reason to know of the mistake).
*A contract will not be reformed if a valid equitable defense applies (i.e., unclean hands, laches).
*Parol evidence is admissible to prove misrepresentation or mistake.
*A parties negligence to avoid the mistake does not preclude them from seeking reformation.

Question 2

Definition & Rule:

Rescission

Answer 2

Definition: Recission treats the original contract as cancelled and is available if there was a problem with formation (i.e., formation defense, fraud, mistake, misrepresentation).
*A P may sue for rescission and damages at the same time.

Rule: A P must give notice of the rescission to the D and return or tender any benefits conferred.

Question 3

A contract will not be rescinded if?

Answer 3

A contract will NOT be rescinded if: (1) a valid equitable defense applies (i.e., unclean hands, laches); OR (b) the P sued for damages under the contract in a prior action.

Question 4

Definition & Rule:

Specific Performance

Answer 4

Definition: Specific performance is when a party to a contract is compelled by court order to render the promised performance or a substitute. Generally only available if there is a breach of contract by nonperformance or repudiation.

Rule: Specific performance is available when: (1) a valid contract exists with clear and definite terms; (2) the P has performed under the contract or is ready, willing and able to perform; (3) legal remedies are inadequate (i.e., rare/unique item, contracts involving the sale of land); (4) enforcement is feasible for the court (it isn’t feasible if it burdens the court – ex. Enforcing personal service contracts or where the land/person is outside of the courts jurisdiction); AND (5) no valid equitable or contractual defenses exist.

Question 5

Common Law and Modern Trend:

Doctrine of Mutuality

Specific Performance

Answer 5

Common Law: The doctrine of mutuality, both parties must have been able to request specific performance.

Modern Trend: Many jurisdictions requirement for mutuality is met is one party can sufficiently assure performance.