Remedies

Question 1

Contracts: Available Legal Remedies

Contracts - High

Answer 1

• The following legal remedies are available for contract breaches: (1) expectation damages (compensatory damages); (2) reliance damages; (3) consequential damages; (4) incidental damages; and (5) restitution damages.
• Punitive damages are generally NOT available in a breach of contract action, but may be awarded in a contract action involving corresponding tort claims that allow such damages.

Question 2

Expectation Damages

Contracts - High

Answer 2

• The general measure of damages for a breach of contract are expectation damages. Expectation damages arise directly from the breach, and are an attempt to put the non-breaching party in the same position it would have been in but for the breach. To recover, the damages must be: (1) caused by the defendant (actual cause); (2) foreseeable (proximate cause); (3) certain (damages cannot be speculative); AND (4) unavoidable (the plaintiff must take reasonable steps to mitigate his losses). An award of damages must account and deduct for any costs the injured party avoided because of the breach.

Question 3

Reliance Damages

Contracts - High

Answer 3

• Reliance damages are generally the expenditures made by a party in reliance of a contract, and are an attempt to put the non-breaching party in the position it would have been if the contract never existed.
• Reliance damages are available when: (1) a plaintiff acted in reliance on the defendant’s agreement to perform under a contract; AND (2) the plaintiff’s reliance was foreseeable. If expectation damages are too speculative, the court may award reliance damages instead.

Question 4

Consequential Damages

Contracts - High

Answer 4

• Consequential damages arise indirectly from the breach, and are awarded because of the injured party’s special circumstances (e.g. lost profits).
• To recover, the damages MUST be: (1) reasonably foreseeable at the time of contract formation; (2) arise from the plaintiff’s special circumstances that the defendant knew or had reason to know of; AND (3) reasonably certain (the damages cannot be speculative).
• An award of damages must account for and deduct for any costs the injured party avoided because of the breach.
• Consequential damages MAY be limited or excluded by agreement unless the limitation/exclusion is unconscionable.

Question 5

Incidental Damages

Contracts - High

Answer 5

• Incidental damages are the reasonable costs incurred as a result of a breach of contract (i.e. costs of returning nonconforming goods or caring/storing non-conforming goods).

Question 6

Restitution Damages

Contracts - High

Answer 6

• Restitution (also referred to as unjust enrichment or quantum meruit) is awarded to prevent unjust enrichment, and is available when one party confers a benefit onto another party (even if there is no enforceable contract). Damages will be awarded based on the value of the benefit conferred upon the defendant. A party CANNOT recover both expectation and restitution damages.

Question 7

Liquidated Damages

Contracts - Low

Answer 7

• Liquidated damages will be enforced if: (1) the amount of damages is difficult to estimate at the time the contract was formed; AND (2) the amount is reasonable to the actual damages suffered.
• If the liquidated damages clause is valid, then only that amount is valid. If invalid, then actual damages are available.

Question 8

Employment Contracts

Contracts

Answer 8

Compensatory
Reliance
Mitigation
Specific Performance
Recission and Restitution
Injunction

Question 9

Personal Property Contracts

Contracts

Answer 9

Compensatory
Reliance
Injunction
Specific Performance
Replevin
Restitution

Question 10

Land Contracts

Contracts

Answer 10

Compensatory
Specific Performance
Recission and Restitution
Reformation
Injunction

Question 11

Financial Harm

Contracts

Answer 11

Compensatory
Punitive
Reformation
Recission
Replevin
Restitution
Constructive Trust/Equitable Lien

Question 12

UCC Buyer’s Remedies & Damages

Contracts - High

Answer 12

• Under the UCC, a buyer who (a) never received the goods – the seller repudiates or fails to make delivery, (b) rightfully rejected non-conforming goods, OR (c) justifiably revoked acceptance of the goods MAY: (1) cancel the contract; (2) recover any amount paid (a refund) – even if buyer doesn’t cancel the contract; (3) recover either Cover Damages or Market Damages; AND (4) recover Incidental and Consequential damages.
• If the buyer keeps the non-conforming goods, then the buyer is entitled to Loss in-Value Damages – measured by the difference between the value as promised and the value of the non-conforming goods.
• Cover Damages are the difference between the contract price and the price of substitute goods. This is used as the measure of damages if the buyer covered in good faith.
• Market Damages are used if the buyer did not cover in good faith or did not cover at all, and are the difference between the market price (at the time when buyer learned of the breach) and the contract price. Market price is determined as of (a) the place for tender, or (b) the place of arrival in cases of rejection after arrival or revocation of acceptance.

Question 13

UCC Seller’s Remedies & Damages

Contracts - Medium

Answer 13

• Seller’s Remedies: Under Article 2 of the UCC, when a buyer breaches a contract for the sale of goods, the seller has the following remedies: (a) withhold delivery of the goods; (b) cancel; (c) recover cover damages (the difference
  between the resale price and the contract price of the goods), used if the resale was made in good faith and a commercially reasonable manner; (d) recover market damages (the difference between the market price at the time and place for tender); (e) recover lost profits if the seller is a lost volume seller (a seller who regularly engages in the sale of the goods at issue and has unlimited inventory); (f) stop delivery of goods in the possession of a carrier or bailee when he discovers the buyer to be insolvent; (g) stop delivery of carload, truckload, planeload, or larger shipments of goods when the buyer breaches; OR (h) replevy identified goods in certain instances when the buyer is insolvent.
• Incidental Damages: A seller is also entitled to recover incidental damages, which include any commercially reasonable costs incurred resulting from the breach.
• Seller’s Right to Replevy Identified Goods: Under Article 2 of the UCC, an unpaid seller generally has no right to repossess (replevy) goods that he sent to a buyer. However, a seller of goods may repossess the goods he sent to a buyer if: (1) the buyer was insolvent when it received the goods; and (2) the seller makes a demand within 10 days after the buyer received the goods. HOWEVER, if a misrepresentation of solvency had been made to the seller in writing within three months prior to the delivery of the goods, the 10-day limitation to make a demand no longer applies.

Question 14

UCC Contractual Modification or Limitation of Remedy

Contracts - Low

Answer 14

• An agreement between the parties MAY provide for remedies in addition to OR in substitution for those provided under the UCC.
• The additional/substituted remedies MAY limit or alter the measure of damages recoverable, such as limiting a buyer’s remedies to return of the goods, repayment of the purchase price, or to repair and replacement of non-conforming goods/parts.
• Optional If Not Exclusive: A remedy provided under a contract is optional UNLESS the remedy is expressly agreed to be exclusive, in which case it’s the sole remedy.
• Remedy Fails to Achieve its Essential Purpose: If circumstances cause an exclusive/limited remedy to fail of its essential purpose, then a party may pursue any remedies available under the UCC.
• Consequential Damages: Consequential damages MAY be limited or excluded UNLESS the limitation/exclusion is unconscionable. It’s prima facie unconscionable to limit consequential damages for personal injury concerning consumer goods.

Question 15

Unjust Enrichment (Quasi-Contract)

Contracts - High

Answer 15

• A quasi-contract is a contract implied by law, and is used to prevent the unjust enrichment of the defendant. A quasicontract will be created if: (1) the plaintiff confers a benefit upon the defendant; (2) the plaintiff had a reasonable expectation he would be compensated for the benefit; (3) the defendant requested the benefit (express or implied); AND (4) the defendant would be unjustly enriched if not forced to compensate the plaintiff.
• Only restitution or reliance damages may be awarded under a
  quasi-contract.

Question 16

Reformation

Contracts - High

Answer 16

• Reformation allows a contract to be changed to conform to the parties’ original intent. It is available if a valid contract exists, but there was a misrepresentation OR mutual mistake of a material fact (a unilateral mistake is sufficient 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 the misrepresentation or mistake.

Question 17

Recission

Contracts - High

Answer 17

• Rescission treats the original contract as cancelled. It is available if there was a problem with the formation of the contract (i.e. a defense to formation, fraud, misrepresentation). A plaintiff may sue for both damages and rescission at the same time (but an election of remedies may bar rescission if damages are sought first).
• A contract will NOT be rescinded if: (a) a valid equitable defense applies; OR (b) the plaintiff sued for damages under the contract in a prior action.

Question 18

Specific Performance

Contracts - High

Answer 18

• Specific performance is an available remedy when: (1) a valid contract exists with clear and definite terms; (2) the plaintiff 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, as legal remedies are inadequate because land is unique); (4) enforcement is feasible for the court (it is NOT feasible to enforce personal service contracts or where land/person is outside the court’s jurisdiction); AND (5) no valid equitable or contractual defenses exist.
• Under the common law doctrine of mutuality, both parties must have been able to request specific performance. However, in many jurisdictions the requirement for mutuality is met if one party can sufficiently assure performance.

Question 19

Torts: Available Legal Remedies

Torts - High

Answer 19

• The following damages are available in tort actions: (1) compensatory damages; (2) consequential damages; (3) nominal damages; (4) punitive damages; AND (5) restitution damages.

Question 20

Compensatory Damages

Torts - High

Answer 20

• Compensatory damages attempt to put the injured party in the same position it would have been in but for the injury. To recover, the damages must be: (1) caused by the defendant (actual cause); (2) foreseeable (proximate cause); (3) certain (damages cannot be too speculative); AND (4) unavoidable (the plaintiff must take reasonable steps to mitigate his losses).
• Actual cause exists if: “but for” the defendant’s conduct, the plaintiff would not have been injured. Proximate cause exists if the plaintiff’s injury was a foreseeable result of the defendant’s conduct.
• Non-economic losses resulting from a tort (i.e. pain and suffering) are NOT subject to the same certainty rules. Additionally, future earnings are available, and are
  calculated based on the difference in the person’s earning ability before the injury and the earning ability after the injury; it is NOT based on the person’s actual past earnings.

Question 21

Nominal Damages

Torts - High

Answer 21

• Nominal damages are available when the plaintiff has NOT suffered an actual injury, but still wants to establish his rights. Nominal damages are not available where either damages or actual injury is an element to a cause of action.

Question 22

Punitive Damages

Torts - Medium

Answer 22

• Punitive damages are awarded to punish the defendant, and are available if: (1) the plaintiff was awarded actual damages (expectation or nominal damages); (2) the punitive damages are proportional to the actual damages; AND (3) the defendant’s conduct was willful, malicious, or egregious (must be more than just negligent).

Question 23

Restitution Damages

Torts - High

Answer 23

• Restitution (also referred to as unjust enrichment) is awarded to prevent unjust enrichment, and is available when one party confers a benefit onto another party. Damages will be awarded based on the value of the benefit conferred upon the defendant.

Question 24

Temporary Restraining Orders

High

Answer 24

• A Temporary Restraining Order (TRO) is an emergency remedy used to maintain the status quo pending the outcome of a hearing or application (usually a preliminary injunction application), and is only available when the plaintiff will suffer immediate and irreparable harm.
• When deciding to grant a TRO on notice, the court will analyze the same factors as a preliminary injunction.
• A TRO can be issued ex parte (without notice to an adverse party).
• The court may issue an ex parte TRO only if the moving party: (1) provides specific facts in sworn statement that clearly show that immediate and irreparable injury, loss, or damage will result to the movant before the adverse party can be heard in opposition; (2) certifies in writing any efforts made to give notice to the adverse party and why notice should not be required; AND (3) gives security in an amount that the court deems proper (in Fed. Court, the United States, its officers, and its agencies are not required to give security).
• Expiration of Ex-Parte TRO: In Federal Court, an ex parte TRO automatically
  expires after 14 days (unless the court sets a shorter expiration). However, a court can extend the expiration of the TRO: (a) for good cause; OR (b) if the opposing party consents to the extension. An adverse party may move to dissolve or modify an ex parte TRO on two-day’s notice to the moving party.
• In CA, a hearing for the preliminary injunction will be set if the TRO is granted. Such hearing must be no later than 15 days (or 22-days if there’s good cause) from the date the TRO is issued.

Question 25

Preliminary Injunction

High

Answer 25

• A preliminary injunction maintains the status quo pending the outcome of an action in order to protect irreparable harm to a party.
• A court may issue a preliminary injunction ONLY: (1) upon notice to the adverse party; AND (2) if the moving party gives security in an amount the court deems proper (which will be used to reimburse the non-moving party for any injury caused by the injunction if the moving party does not succeed on the merits).
• The party moving for an injunction MUST SHOW: (1) a likelihood of success on the merits; (2) a likely threat of irreparable harm to the movant; (3) balancing of the hardships in favor of the moving party (the harm alleged by the movant outweighs any harm to the non-moving party); (4) an injunction is in the public interest (if there is a public interest at issue).
• If the moving party has an adequate remedy at law (can be compensated by money damages for any potential loss), then a motion for a preliminary injunction should be denied.
• A court has the ability to issue a restraining injunction (preventing a party from doing something) OR a mandatory injunction (compelling a party to do something).

Question 26

Permanent Injunction

Medium

Answer 26

• Permanent injunction is issued after a full trial on the merits, and requires the following: (1) inadequate legal remedies (harm cannot be compensated by money damages); (2) a protectable personal or property interest (historically, this could only be a property interest, but now, any personal or property interest is sufficient); (3) feasibility of enforcement (not a concern with negative injunctions, but potentially with mandatory injunctions); (4) a balancing of hardships to both parties (balance the benefit to the plaintiff versus the hardship to the defendant); AND (5) there are no valid equitable defenses.
• A court to issue a restraining injunction (preventing a party from doing something) OR a mandatory injunction (compelling a party to do something).

Question 27

Equitable Lien

Medium

Answer 27

• An equitable lien is available if a defendant: (1) wrongfully acquired title to property; AND (2) would be unjustly enriched if allowed to keep the property. The court will force the sale of the property, and the plaintiff will receive the proceeds.
• The plaintiff is entitled to a deficiency judgment if the proceeds are less than the value of the property at the time it was taken. A plaintiff may trace his property to other forms, but he is NOT entitled to any increase in value of the property. However, a bona fide purchaser (BFP) is NOT subject to an equitable lien.

Question 28

Constructive Trust

High

Answer 28

• A constructive trust is an equitable remedy used to prevent unjust enrichment resulting from wrongful conduct, such as fraud, undue influence, or breach of a fiduciary duty.
• A constructive trust is available if a defendant: (1) wrongfully acquired title to property; AND (2) would be unjustly enriched if allowed to keep the property.
• The court will require the defendant to hold the property as a trustee, and then return it to the plaintiff. A plaintiff may trace his property to other forms and is entitled to any increase/decrease in value to the property. However, a bona fide purchaser (BFP) is NOT subject to a constructive trust. The statute of frauds DOES NOT apply to constructive trusts; thus, oral promises may be used to establish a constructive trust.

Question 29

Replevin

Low

Answer 29

• Replevin allows the recovery of specific personal property, and is available if (1) the defendant is wrongfully withholding personal property, (2) that the plaintiff has a right to possess.
• A plaintiff may recover the property before trial if: (1) there is a preliminary judicial hearing; AND (2) the plaintiff posts bond.

Question 30

Ejectment

Medium

Answer 30

• Ejectment allows the recovery of specific real property, and is available if: (1) the defendant has actual possession of the property; (2) the defendant is wrongfully withholding the property; AND (3) the plaintiff has a right to possess the property.

Question 31

Purchase Money Resulting Trust

Low

Answer 31

• A Purchase Money Resulting Trust (PMRT) arises when one party provides consideration for the purchase of real property, but titles the property to another.
• The party providing the consideration is the beneficiary of the trust (containing the real property), and the person holding title is the trustee.

Question 32

Defenses: Laches

High

Answer 32

• The defense of laches bars a plaintiff’s recovery when: (1) there is an unreasonable delay between when the plaintiff learned of the injury/breach and when the action was brought; AND (2) the defendant is prejudiced by the delay.

Question 33

Unclean Hands

High

Answer 33

• The doctrine of unclean hands bars a plaintiff’s recovery when a plaintiff is guilty of unethical, unlawful, or otherwise improper conduct related to the subject of the lawsuit.

Question 34

Defenses: Mitigation of Damages

High

Answer 34

• A plaintiff CANNOT recover damages as a result of a breach that could have been avoided. Accordingly, a party must take reasonable steps to mitigate his losses. If he fails to do so, the court will reduce the total damages by the amount that could have been avoided.
• Affirmative steps to avoid loss are NOT required if they involve undue risk, burden, or humiliation.
• Suitable Substitute: Whether an available alternative transaction is a suitable substitute depends on all the circumstances, including the similarity of performance.