remedies

Question 1

when may a non breaching party seek specific performance

Answer 1

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

Question 2

do liquidated damages clauses make legal remedies inadequate

Answer 2

no

Question 3

when are noncompete agreements reasonable [to get specific performance]

Answer 3

[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.

Question 4

what are rare or unique goods

Answer 4

rare or unique at the time performance is due (for example, rare paint- ings, gasoline in short supply because of oil embargoes, etc.)

Question 5

what do courts give as an alternate remedy to failure to comply with unique services?

Answer 5

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

Question 6

What defenses are used against a claim to specific performance?

Answer 6

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

Question 7

What are a buyer’s non monetary remedies under UCC

Answer 7

(1) cancellation

(2) right to replevy identify goods

(3) specific performance

Question 8

seller’s non monetary remedies under UCC

Answer 8

(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

Question 9

when does buyer get to replevy the goods under UCC [nonmonetary remedy]

Answer 9

(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

Question 10

when does buyer get specific performance under UCC [nonmonetary remedy]

Answer 10

“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.

Question 11

what is a seller’s right to demand assurances

Answer 11

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.

Question 12

when may seller recover goods under UCC [nonmonetary remedy]

Answer 12

(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

Question 13

to what extent can seller force goods on a buyer

Answer 13

limited to an action for price when the seller is unable to resell the goods to others at a reasonable price.

Question 14

anticipatory repudiation vs. assurances

Answer 14

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.

Question 15

what is the usual damages remedy for breach of contract?

Answer 15

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.

Question 16

what are reliance damages

Answer 16

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.

Question 17

when are reliance damages given

Answer 17

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),

Question 18

what are incidental damages

Answer 18

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

Question 19

what is the certainty rule

Answer 19

The plaintiff must prove that the losses suffered were certain in their nature and not speculative.

Question 20

when will lost profits be given as damages

Answer 20

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.

Question 21

what are consequential damages

Answer 21

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.

Question 22

when may consequential damages be recovered

Answer 22

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

Question 23

when are punitive damages awarded

Answer 23

almost never

Question 24

when are nominal damages awarded

Answer 24

when there is breach but no actual loss

Question 25

when are liquidated damages allowed

Answer 25

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]

Question 26

damages for K sale of land

Answer 26

difference between the contract price and the fair market value of the land.

Question 27

Buyer’s damages under UCC when buyer does not accept

Answer 27

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.

Question 28

seller’s measure of damages when seller does not deliver due to buyer not accepting conforming goods or buyer repudiating the agreement

Answer 28

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).

Question 29

buyer is required to do what if choosing to “cover”

Answer 29

the buyer must make a reasonable contract for substitute goods in good faith and without unreasonable delay.

Question 30

when are buyer’s damages measured from

Answer 30

as of the time the buyer learns of the breach

Question 31

when are seller’s damages measured from

Answer 31

as of the time for deliver

Question 32

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]

Answer 32

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

Question 33

buyer’s damages when seller anticipatory breaches

Answer 33

difference between the market price at the time the buyer learned of the breach and the contract price.

Question 34

explain what damages are in breach of employment contract
- by employer
- by employee
- end of employment at will

Answer 34

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

Question 35

duty to mitigate

Answer 35

non breaching party cannot recover damages that could have been avoided with reasonable effort

parties can recover expenses of mitigation

Question 36

damages for breaches of construction contracts

Answer 36

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

Question 37

who owes a duty to mitigate and who does not

Answer 37

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]

Question 38

what is restitution

Answer 38

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

Question 39

what is measure of restitution

Answer 39

value of benefit conferred or value of detriment suffered by P

Question 40

when is restitution allowed

Answer 40

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

Question 41

when is restitution NOT allowed

Answer 41

when non breaching party has fully performed under K already – that means they are limited to K damages

Question 42

when there is a breaching party attempting to collect on a partially performed K, you should consider:

Answer 42

(1) substantial performance, (2) divisibility, and
(3) restitution

Question 43

what is rescission

Answer 43

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.

Question 44

grounds for rescission

Answer 44

(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

Question 45

defenses to rescission

Answer 45

equitable defenses including laches and unclean hands

NOT P’s negligence

Question 46

what is reformation

Answer 46

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.

Question 47

grounds for reformation

Answer 47

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.

Question 48

other things to know about reformation

Answer 48

(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

Question 49

defenses to reformation

Answer 49

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.

Question 50

statute of limitations for sales contracts

Answer 50

4 years but parties can shorten as long as it is at least 1 year

Question 51

what are buyer’s damages if buyer does not cover in good faith?

Answer 51

market price of similar goods - contract price

Question 52

does buyer have to cover after seller’s breach?

Answer 52

no

Question 53

what does it mean to not resell goods in good faith?

Answer 53

when seller resells at substantially lower price or higher price on purpose

Question 54

sale to a bona fide purchaser as equitable defense

Answer 54

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.

Question 55

do parties get attorneys fees?

Answer 55

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

Question 56

damages for breach of warranty

Answer 56

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)