remedies Flashcards
when may a non breaching party seek specific performance
GENERAL RULE:when legal remedy [money] is inadequate and specific performance is not too difficult to enforce [like it is for services]
(1) land and rare or unique goods [art, antiques, custom goods]
(2) noncompete contracts if the services to be performed are unique and the covenant is reasonable
do liquidated damages clauses make legal remedies inadequate
no
when are noncompete agreements reasonable [to get specific performance]
[a] The covenant must be reasonably necessary to protect a legitimate interest of the person benefited by the covenant (that is, an employer or the purchaser of the covenantor’s business).
[b] The covenant must be reasonable as to its geographic scope and duration (meaning, it cannot be broader than the benefited person’s customer base and typically cannot be longer than one or two years).
AND
[c] The covenant must not harm the public.
what are rare or unique goods
rare or unique at the time performance is due (for example, rare paint- ings, gasoline in short supply because of oil embargoes, etc.)
what do courts give as an alternate remedy to failure to comply with unique services?
NO specific performance
[ex: cannot force someone to comport with service K for employment]
alternate remedy: injunction
A court may enjoin a breaching employee from working for a competitor throughout the duration of the contract
What defenses are used against a claim to specific performance?
EQUITABLE DEFENSES
Laches—a claim that the plaintiff has delayed bringing the action and that the delay has prejudiced the defendant
Unclean hands—a claim that the party seeking specific performance is guilty of wrongdoing in the transaction being sued upon
Sale to a bona fide purchaser—a claim that the subject matter has been sold to a person who purchased for value and in good faith
What are a buyer’s non monetary remedies under UCC
(1) cancellation
(2) right to replevy identify goods
(3) specific performance
seller’s non monetary remedies under UCC
(1) seller’s right to withhold goods upon buyer’s failure to make payment on or before delivery, or when seller discovers that buyer is insolvent after having bought the goods on credit
**if buyer tenders cash after paying on credit, seller must deliver goods
(2) seller’s right to recover goods
(3) seller’s right to demand assurances
when does buyer get to replevy the goods under UCC [nonmonetary remedy]
(1) when buyer partially pays and seller has not delivered, buyer may replevy in TWO situations:
[a] The seller becomes insolvent within 10 days after receiving the buyer’s first payment,
OR
[b] The goods were purchased for personal, family, or house- hold purposes.
[buyer must pay up the rest of the purchase price tho]
.
.
.
(2) when buyer is unable to “cover” or get adequate substitute goods after reasonable effort, she can replevy
when does buyer get specific performance under UCC [nonmonetary remedy]
“where the goods are unique or in other proper circumstances.”
The court may order specific perfor- mance even where the goods have not yet been identified to the contract by the seller.
what is a seller’s right to demand assurances
If there are reasonable grounds for insecurity with respect to a party’s performance, the other party may demand in writing assurances that the performance will be forthcoming at the proper time. …. suspecting party cannot simply repudiate without seeking assurances
Until they receive adequate assur- ances, the party may suspend their own performance.
If the proper assurances are not given within a reasonable time (that is, within 30 days after a justified demand for assurances), they may then treat the contract as repudiated.
when may seller recover goods under UCC [nonmonetary remedy]
(1) when buyer is insolvent and paid on credit [buyer must be insolvent when she received the goods]
seller may reclaim goods upon demand made within 10 days after buyer’s receipt of the goods
BUT, if buyer made misrepresentation of solvency within 3 months before delivery in writing, there is no 10 day limitation on reclamation of goods
**Note – if buyer doesn’t have goods anymore, seller can only sue for breach
(2) when buyer is insolvent and the goods are already shipped to bailee
(3) when buyer breaches and the goods are in possession of bailee
seller may stop delivery of the goods [ex: carload of goods] if buyer breaches or seller has right to withhold performance pending receipt of assurances
to what extent can seller force goods on a buyer
limited to an action for price when the seller is unable to resell the goods to others at a reasonable price.
anticipatory repudiation vs. assurances
Anticipatory repudiation requires much more than nervousness or insecurity, there must be a clear indication that the other party is unwilling or unable to perform.
“I’m not going to perform” is an anticipatory repudiation
“I’m not sure if I can perform” most likely is only a reason to demand assurances.
what is the usual damages remedy for breach of contract?
Compensatory damages, specifically expectation damages + incidental damages
COMPENSATORY DAMAGES - put the nonbreaching party in the position they would have been in had the promise been performed
EXPECTATION - sufficient damages for them to buy a substitute performance. This is also known as “benefit of the bargain” damages.
what are reliance damages
Reliance damages award the plaintiff the cost of their performance; that is, they’re designed to put the plaintiff in the position that they would have been in had the contract never been formed.
when are reliance damages given
If the plaintiff’s expectation damages are too speculative to measure (for example, the plaintiff cannot show with sufficient certainty the profits they would’ve made if the defendant had performed the contract),
what are incidental damages
include expenses reasonably incurred by a buyer in inspection, receipt, transpor- tation, care, and custody of goods rightfully rejected and other expenses reasonably incident to the seller’s breach, and by the seller in storing, shipping, returning, and reselling the goods as a result of the buyer’s breach.
ALWAYS recoverable
do NOT have to be foreseeable
what is the certainty rule
The plaintiff must prove that the losses suffered were certain in their nature and not speculative.
when will lost profits be given as damages
modern courts may allow lost profits as damages if they can be made more certain by observing similar businesses in the area or other businesses previously owned by the same party.
what are consequential damages
reflect losses over and above standard expectation damages. They arise because of the nonbreaching party’s particular circum- stances, and most often they consist of lost profits.
when may consequential damages be recovered
the damages need to have been a foreseeable result of breach
the breaching party must have known or had reason to know of the special circumstances giving rise to the damages.
In contracts for the sale of goods, only a buyer may recover consequential damages.
Examples of circumstances breaching party must know of
— buyer’s intent to resell if buyer is in the business of reselling
– when goods are necessary for manufacturing, seller needs to know their breach would cause disruption in leading to loss of profits
when are punitive damages awarded
almost never
when are nominal damages awarded
when there is breach but no actual loss
when are liquidated damages allowed
Liquidated damage clauses will be enforceable if:
a) Damages for contractual breach are difficult to estimate or ascertain at the time the contract is formed;
AND
b) The amount agreed on is a reasonable forecast of compensatory damages in the case of breach.
The test for reasonableness is a comparison between the amount of damages prospectively probable at the time of contract formation and the liquidated damages figure.
If the liquidated damages amount is unrea- sonable, the courts will construe this as a penalty and will not enforce the provision.
note that these are recoverable even if no damages
NO PENALTIES - single lump sum liquidated damages clauses are penalties [if penalty, plaintiff can get expectation damages]
damages for K sale of land
difference between the contract price and the fair market value of the land.
Buyer’s damages under UCC when buyer does not accept
EITHER BENEFIT OF THE BARGAIN OR COVER
PLUS
INCIDENTAL DAMAGES + FORESEEABLE CONSEQUENTIAL DAMAGES - EXPENSES SAVED
Benefit of the bargain = market price [as of time buyer learned of breach and place of tender] - contract price
Cover = cost of reasonable replacement goods - contract price
incidental damages = costs of storing, shipping, etc., due to breach.
seller’s measure of damages when seller does not deliver due to buyer not accepting conforming goods or buyer repudiating the agreement
BENEFIT OF THE BARGAIN OR RESALE OR LOST PROFIT OR ACTION FOR PRICE
PLUS
INCIDENTAL DAMAGES - EXPENSES SAVED
Benefit of the bargain = market price - contract price
Resale = contact price - resale price, assuming she sells goods in good faith
lost profit = contract price - cost of goods
The lost profit measure may be used only if seller has lost sales volume as a result of the breach (e.g., seller could have made additional sale and seller is an unlimited seller of goods that they can obtain, or lost of inventory … so does not apply for unique goods]
action for price = contract price
—- may be maintained only if the goods cannot be sold to others at a reasonable price (or if the buyer has accepted the goods and not paid for them).
buyer is required to do what if choosing to “cover”
the buyer must make a reasonable contract for substitute goods in good faith and without unreasonable delay.
when are buyer’s damages measured from
as of the time the buyer learns of the breach
when are seller’s damages measured from
as of the time for deliver
what are damages when buyer accepts nonconforming goods and what must buyer do
[i.e. buyer’s 3rd option for damages, but this is mostly for warranty damages or “loss in value” damges]
NOTICE - buyer must, within a reasonable time after they discover or should have discovered the defect, notify the seller of the defect
DAMAGES - difference between the value of the goods as delivered and the value they would have had if they had been according to the K [plus incidental and consequential damages]
EXAMPLE
Bridget contracts to buy an antique painting for $4,000. She later discovers it’s not antique, but keeps it anyway. The painting is worth $2,000. Had it been antique, it would be worth $5,000. What are Bridget’s damages? $3,000
buyer’s damages when seller anticipatory breaches
difference between the market price at the time the buyer learned of the breach and the contract price.
explain what damages are in breach of employment contract
- by employer
- by employee
- end of employment at will
BREACH BY EMPLOYER
damages = contract price - amount employee made or would have made by taking similar position elsewhere
[employer must prove position is available]
BREACH BY EMPLOYEE
damages = cost of replacing employee - amount owed to employee for work already done
EMPLOYMENT AT WILL —- NOT BREACH
duty to mitigate
non breaching party cannot recover damages that could have been avoided with reasonable effort
parties can recover expenses of mitigation
damages for breaches of construction contracts
BREACH BY OWNER
Before completion:
Expected profit + costs expended
After completion:
Contract price
BREACH BY BUILDER
Cost of completion + damages from delay - quasi contract recovery for benefit conferred by builder
who owes a duty to mitigate and who does not
WHO OWES:
- construction: builder has duty to not continue doing work after owner’s breach unless completion reduces damages
- manufacturer duty to not work after breach unless it decreases damages
– employee has duty to find comparable work if available
DOES NOT OWE
- K for sale of goods
- construction builder does not owe duty to find other work after owner’s breach
- employee does not owe duty to find work of inferior or different kind [only comparable]
what is restitution
based on preventing unjust enrichment when one has conferred a benefit on another without gratuitous intent
can be awarded when K exists and has been breached and when K is unenforceable, or even when there is no K at all
what is measure of restitution
value of benefit conferred or value of detriment suffered by P
when is restitution allowed
When a contract has been breached and the nonbreaching party hasn’t fully performed — may sue for unjust enrichment
When the K is unenforceable, may sue in a quasi-contract action where there would be unjust enrichment
when there is no K at all, may recover in quasi-contract actin IF
(1) The plaintiff has conferred a benefit on the defendant by rendering services or expending properties;
(2) The plaintiff conferred the benefit with the reasonable expectation of being compensated for its value;
(3) The defendant knew or had reason to know of the plain- tiff’s expectation;
AND
(4) the D would be unjustly enriched if they were allowed to retain the benefit without compensating the P
when is restitution NOT allowed
when non breaching party has fully performed under K already – that means they are limited to K damages
when there is a breaching party attempting to collect on a partially performed K, you should consider:
(1) substantial performance, (2) divisibility, and
(3) restitution
what is rescission
Rescission is a remedy whereby the original contract is considered voidable and rescinded. The parties are left as though a contract had never been made. The grounds for rescission must have occurred either before or at the time the contract was formed.
grounds for rescission
(i) Mutual mistake of a material fact
(ii) Unilateral mistake if the other party knew or should have known of the mistake
(iii) Unilateral mistake if hardship by the mistaken party is so extreme it outweighs the other party’s expectations under the contract
(iv) Misrepresentation of fact or law by either party as to a material factor in the negotiations that was relied upon,
(v) Other grounds, such as duress, undue influence, illegality, lack of capacity, and failure of consideration
defenses to rescission
equitable defenses including laches and unclean hands
NOT P’s negligence
what is reformation
Reformation is the remedy whereby the writing setting forth the agreement between the parties is changed so that it conforms to the original intent of the parties.
grounds for reformation
Mistake
there must be: (1) an agree- ment between the parties, (2) an agreement to put the agreement in writing, and (3) a variance between the original agreement and the writing.
misrepresentation
isrepresentation must relate to the content or the legal effect of the record. Misrepresentations as to the subject matter of the agreement aren’t grounds for reformation; rescission and damages are the proper remedy for that.
other things to know about reformation
(1) negligence does not bar reformation
(2) variance between the antecedent agreement and the writing must be established by clear and convincing evidence.
(3) parol evidence not applied and majority rule is that SoF does not apply
defenses to reformation
n addition to the general equitable defenses, the existence of a bona fide purchaser for value is also a defense to reformation. Similarly, reformation isn’t permitted if the rights of third parties will be unfairly affected.
statute of limitations for sales contracts
4 years but parties can shorten as long as it is at least 1 year
what are buyer’s damages if buyer does not cover in good faith?
market price of similar goods - contract price
does buyer have to cover after seller’s breach?
no
what does it mean to not resell goods in good faith?
when seller resells at substantially lower price or higher price on purpose
sale to a bona fide purchaser as equitable defense
if the subject matter of a goods or land contract has already been sold to another who purchased for value and in good faith, the right to specific performance is cut off.
do parties get attorneys fees?
In general, each party is responsible for his own attorney’s fees. thus, attorney’s fees are not recoverable absent a provision in either the K or statue.
UCC does not provide for recovery of attorney’s fees
damages for breach of warranty
damages = any loss resulting in the normal course of events from the breach
= difference between the value of the goods accepted and their value as warranted + incidental and consequential damages (must be foreseeable)
