All Stars Flashcards
Cover
If market price has risen, a replacement price, then you should get difference between original K and the value you paid for new mkt price
General Damages
Difference between old K price and rental value of unexpired term
Where P has mitigated, the difference between old K price and new K price
Special/Consequential Damages
(test = breaching party’s knowledge)
Hadley = In addition to general damages, an injured party may also recover consequential damages if these are reasonably foreseeable as a probable consequence of the breach at or before the time of contracting.
Limitation of Remedy Clause
modifies that remedy, and states that buyer is instead only entitled to a 4 “R” remedy: (i) R or R [repair or replace] or (ii) R and R [return and refund].
Limitation of remedy (2-719) clauses are invalid if they fail of their essential purpose whereas
- If fail essential purpose = measure general damages (difference between old K price and new K price; if there is a warranty, the difference between warranted machine and the value of the machine received) and potentially consequential damages like lost profits if disclaimer is unconscionable (if you can prove foreseeability)
Liquidated Damages Clauses
Liquidated damages (2-718) clauses are invalid when they are too high because they act as a penalty AND sometimes when they are too low (if they are exclusive) where (1) the injured party does not have a minimally adequate remedy (which the UCC requires) or (2) if they are unconscionable (Commercial)
Mitigation
General rule of mitigation of damages (i.e., although there is technically no “duty” to mitigate, damages that could have been (but were not) mitigated are not recoverable) and COVER
Exceptions:
- To mitigate, the non-breaching party need only act reasonably (rather than optimally)
- If both parties can mitigate, the breaching party cannot raise as a defense the non-breaching party’s failure to mitigate, especially where their breach was in bad faith (i.e. estoppel)
Certainty Requirement
Damages must generally be proved with reasonable certainty, but this requirement is relaxed where defendant’s wrongful conduct prevents plaintiff from meeting this standard
Although damages may not be “based on speculation or guesswork,” P may recover by providing a “just and reasonable estimate” of damages, so long as it affords “a sufficient basis for the jury’s computation of damage.”
Interference with Business Ability to Earn
The going-concern (or ex ante) method: award the difference between the fair market value (FMV) of an injured business immediately before and immediately after the wrong.
The lost-profits (or ex post) method: award the stream of profits an injured business would have made but for defendant’s wrongful act. There are two main ways to do this:
- The yardstick method: compare the profits an injured business made to the profits a comparable uninjured business made.
- The before-and-after method: compare the profits a business made while it was injured to the profits it made before or after its injury.
Punitive Damages
= exist not only to punish and deter but also, in part,
(1) “to relieve the pressures on an overloaded system of criminal justice by providing a civil alternative to criminal prosecution”, to
(2) “limit[] the defendant’s ability to profit from its [wrong] by escaping detections and … prosecution”, and
(3) to incentivize Ps by helping to finance lawsuits.
Factors for Excessive Punitives
Degree of reprehensibility (of D’s conduct)
Holmes Bad Man → Ford did cost-benefit analysis and knew drivers were in danger of accidents but chose to proceed
Wealth of D
Amount of compensatory damages
Amount needed to achieve adequate deterrence
Court also looked at:
(1) ratio of compensatories to punitives,
(2) other criminal/civil penalties, and
(3) probability of detection, prosecution, etc.
Factors to consider Cessation
Where a party voluntarily ceased engaging in lawful activities, courts should focus on consider:
(1) bona fides of D’s intent to comply (do you believe that the party won’t do it again),
(2) effectiveness of D’s discontinuance (how costly was this for them to cease these activities), and
(3) character of D’s past violations.
If the threat of the wrong goes away, the need for an injunction may also go away (subject to the court’s equitable discretion).
Kinds of Injunctions
Preventive injunctions = prevent a wrongdoer from engaging in an activity that is going to injure the party who is protected by the right;
Reparative injunctions = restore party in kind; restore victim to position he would have occupied had the wrongful harm not occurred
Preliminary injunctions = an injunction that is issued before a final adjudication on the merits; there is no adjudicated wrongdoer
Temporary restraining orders = automatically expires after a 14-day period; another type of preliminary injunction
Replevin
procedure whereby seized goods may be provisionally restored to their owner pending the outcome of an action to determine the rights of the parties concerned.
Replevin is NOT an equitable remedy, it is a legal remedy. Thus, you don’t need to satisfy the IIR, and P does not need to demonstrate that goods are unique or irreplaceable to get them back. Instead, P need only show a greater legal right to them than D. Replevin is enforced by sheriff’s seizure of property rather than (as with an injunction) contempt, unless modified by statute.
Undue Hardship Defense
To successfully assert the undue hardship defense (which looks a lot like L&E cost-benefit test), the hardship imposed on Ds must be greatly disproportionate to the benefits gained by the Ps. The defense is always subject to a moral/equitable standard – Ds who behave willfully cannot use this defense because courts worry about Ds (1) acting like Holmes’s bad man by (2) bypassing the market where bargaining was possible and (3) creating a private power of eminent domain (i.e., single-handedly converting property rules into liability rules).
Laches
equitable analog of statute of limitations (principle rather than a hard and fast rule) D might argue P unreasonably delayed bringing cause of action, but here, Hilander provided assurances to P.
May be withheld if (1) P unreasonably delays in pursuing a remedy so that (2) it results in prejudice to D. If you succeed in showing laches, the plaintiff will get a legal remedy instead.
Preliminary Injunction Test
Four-part test for preliminary injunction
- Likely to succeed on the merits (court believes that there is a more than 50% chance that the plaintiff will win in light of all the evidence)
- Likely to suffer irreparable injury (from the moment the complaint is filed to when a final judgment on the merits is reached, will the plaintiff suffer irreparable harm)
- If plaintiff will suffer damages in the future, a permanent injunction can take care of those damages. The only harm we care about here is how much irreparable harm will the plaintiff suffer now.
== Balance of equities favoring P (consider the amount of irreparable harm that the P will suffer if the injunction is denied vs. the amount of irreparable harm the D will suffer if the injunction is granted)
- Advancement of public interest (should not go against the public interest)
Unjust Enrichment
(1) was the D enriched,
(2) was the enrichment unjust (i.e., is the enrichment without an adequate legal basis – if so, not unjust),
(3) how should the D’s benefit be measured
Accounting for Profits
an equitable remedy now used to prevent unjust enrichment. Specifically, this remedy operates as a form of disgorgement, which is typically reserved for conscious wrongdoers. It is designed not only to punish, but to deter and protect.
Case also introduces the idea that P has burden of proving D’s sales and D has burden of proving deductible expenses.
Disentanglement of Elements
When it’s impossible to disentangle the infringing from the non-infringing element due to the wrongdoer’s conduct, the entire profits will be given to P
Apportionment
In disgorgement
jury thought the lyrics contributed 12% to the success of Feelings and thus reduced revenues by this amount.
Where applicable, courts must also consider the contribution of the artist (reputation can contribute to success)
Overhead
First, determine which categories of overhead are implicated in the production of the infringing product) ask yourself whether this particular item of overhead contributed to the sale of the infringing product)
Second, determine a fair, accurate, and practical pro-rata method of allocating the overhead identified in step 1 above. It is D’s burden to suggest an acceptable formula.
*Methods may include the production cost of the infringing product as a percentage of the total production costs, the number of infringing products as a percentage of the total product, or dollar sales from the infringing products as a percentage of the total dollar sales (which of the three makes the most sense)
Rescission
Rescind the K and seek restitution whenever you have a material breach (other grounds may include fraud, mistake, duress, undue influence, and incapacity). This means that the court should completely unwind the K and make sure that each party is put back in their status quo ex-ante position. Rescission and restitution may be available even where P made a losing K.
Constructive Trust
Requirements for obtaining a constructive trust or equitable lien = (1) unjust enrichment, and (2) traceability (i.e., ability to specifically identify the asset)
Pick based on whether asset appreciates or depreciates in value
Unconscionability
To establish unconscionability, party must show (1) procedural (e.g., unequal bargaining power) and (2) substantive (e.g., overly harsh or one-sided terms) unconscionability
- No minimum threshold for substantive or procedural unconscionability (sliding scale: can have one more than the other and still find unconscionability)
Unconscionability can be wielded as a sword and a shield and can be used for equitable and legal remedies
Where unconscionability is found, a judge may
(1) refuse to enforce entire K (typically done where K is permeated by unconscionability),
(2) strike the unconscionable term(s) and enforce the remainder of the K, and
(3) rewrite or otherwise limit the application of the unconscionable term(s) to avoid an unconscionable result
