REMEDIES Flashcards
Contracts–Available Legal Remedies
- 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 (i.e. fraud).
Contracts–Expectation Damages
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.
Contracts–Reliance Damages
- 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.
Contracts–Consequential Damages
- Consequential damages arise indirectly from the breach, and are awarded because of the injured party’s special circumstances. 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) 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
Contracts–Incidental Damages
Incidental damages are the reasonable costs incurred as a result of a breach of contract (i.e. costs of returning non- conforming goods or caring/storing non-conforming goods).
Contracts–Restitution
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.
Contracts–Reformation (Equitable)
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.
Contracts–Rescission (Equitable)
- 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.
Contracts–Specific Performance (equitable)
- 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.
Equitable Remedies–Preliminary Injunction
• A preliminary injunction maintains the status quo pending the outcome of an action in order to protect irreparable harm to a party. 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);
(5) upon notice to the adverse party; AND
(6) if the moving party gives security (post a bond) in an amount the court deems proper.
- 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 to issue a restraining injunction (preventing a party from doing something) OR a mandatory injunction (compelling a party to do something).
Equitable Remedies–Constructive Trust
- 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) the defendant 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 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.
Defenses: Laches
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.
Defenses: Unclean Hands
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.
Defenses: Mitigation of Damages
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.
Defenses: Intentional Misrepresentation
Intentional Misrepresentation: To state a prima facie case for intentional misrepresentation, a plaintiff must show: (1) misrepresentation of a material fact by the defendant; (2) the defendant knew that the statement was false (scienter); (3) intent of the defendant to induce the plaintiff; (4) actual and reasonable reliance by the plaintiff; AND (5) damages.
