Remedies and Excuses Flashcards
Consequential
SPECIAL Damages (specific to P) foreseeable AT THE TIME of K that breaching party should have expected to cause to P (NOTICE is required)
K Equitable Remedy: Specific Performance
Cha Cha Is My Favorite Dance
- Forces D to perform on valid K
Elements:
1) Contract MUST be valid (not unconscionable) - K Terms MUST be sufficiently definite and certain (more proof than for money damages)
2) Conditions for P are satisfied/performed or excused by NON-breaching party
- If P breaches but partially performs look for Restitutionary remedies
- Minor defect on RealProp: Seller CAN enforce K
- Major defect on RealProp: Seller cannot enforce K unless cured by closing -vs- Buyer CAN enforce K
- Ct MUST lower purchase price to reflect defect
3) Inadequacy of legal remedy (no compensatory: D is insolvent, damages are speculative, etc)
- RealProp (unique) between two parties
BUT if TP BFP not in the K, B cannot recover RP from BFP
- Personal Prop NOT unique
Except: Rare goods or One of a Kind (art, antiques, etc) ID in the K
- If goods are not unique award damages
4) Mutuality of performance: counter-performance
5) Feasibility of enforcement: performance is possible under the K
- NOT personal services
- Covenants not to compete ARE enforceable if a) services are unique AND b) scope is reasonable
5) Defenses overcome: SLUUMM
- Equitable Defenses
a) Laches: clock runs when P learns of injury and P’s right is cut off when relief is Unreasonable AND Prejudicial to D
b) Unclean Hands: P’s wrongful act MUST relate to claim
c) Unconscionability at the time of K formation
- K Defenses
Mistake
Misrepresentation
SoF (RealProp exception: any two is sufficient: payment + possession + valuable improvement OR Estoppel based on Detrimental Reliance)
- If Specific Performance NOT available award look for Restitutionary
- Time is of the Essence Clause: award Specific performance EVEN if clause is valid
- Specific Performance AND Liquidated damages are allowed UNLESS K provides Liquidated is only remedy
K Equitable Remedy: Reformation
- Ct changes written K to conform w/party’s original understanding
- MUST be a valid K (meeting of the minds)
- Grounds for Reformation: MM
1) Misrep of material fact/law: MUST show actual reliance
2) Mutual Mistake of material fact: NOT on collateral fact (e.g. quality, desirability, fitness of prop) - Unilateral mistake NOT rescission
Exception: non-mistaken party KNOWS of the mistake - Defenses:
1) Laches: clock runs when P learns of injury and P’s right is cut off when relief is Unreasonable AND Prejudicial to D
2) Unclean Hands: P’s wrongful act MUST relate to claim - PER NOT a defense to reformation
K Excuses
- Excuse if Duty to perform is absolute: FREE from ALL K obligations BUT may still recover in quasi-K theory
Types: (Death and Destruction are Impractical and Impossible Conditions that Anticipate a Later Perfect Breach)
Anticipatory Repudiation
Conditions (excuse, not a requirement)
Perfect Tender (UCC) and Material Breach (CL)
Later K (rescission, accord and satisfaction, mod)
Impracticability: party encounters extreme and unreasonable difficulty or expense and its nonoccurrence was a basic assumption of the parties
Impossible performance: unanticipated event makes duties objectively impossible to perform
Death AFTER K (services)
Damage/destruction of prop
- Excuses to K Formation: I FILM MUD (all occurred AT THE TIME of K formation)
1) Illegal subject matter, illegal purpose for K
2) Failure of Consideration: 1) promise, 2) bargained-for promise (asked for in exchange), 3) bargained-for legal detriment (requested legal detriment: asking not to do something legally entitled to do IS detriment, OR promise for promise)
Exception: written promise to pay barred debts, or promisory estoppel ARE substitute considerations
3) Impossible performance: unanticipated event makes duties objectively impossible to perform
4) Lack of capacity (mental/minor = even if misrepresented age): mental/minor party can disaffirm K if not performed OR ratify K and enforce it he performs or retains benefit
Except for necessaries: minor/mental party is OBLIGATED to pay for necessities based on quasi-K theory
5) Misrepresentation of MATERIAL fact (MUST show actual reliance): statement of fact (EVEN if hones/innocent) by party in K, that is false OR material AND induces the K
6) Mutual mistake of existing material fact AND party SEEKING avoidance of K did not assume risk (e.g.
NOT excuse if mistake on collateral facts (e.g. quality, desirability, fitness of prop)
- Unilateral mistake: No relief, NO rescission
Exception: non-mistaken party knew or should have known of the mistake
7) UI
8) Duress (bad guy + vulnerable guy)
I: Illusory promise (“I will if I want to” / apparent but not real commitment by promisor e.g. “I agree but reserve right to terminate K at any time w/o notice)
N: Nondisclosure: no duty to disclose BUT if fiduciary duty between parties OR willful concealment then no enforcement of K
U: Unconscionable K: Ct can refuse (never goes to the jury) to enforce part or all of K. Test: K is unfair procedurally (surprise) AND substantive (oppressive terms) AT THE TIME it was made
S: SoF, unless objective evidence (performance, or writing signed by D, NOT testimony) BUT other defenses still apply
A: Ambiguity of MATERIAL terms: material term is open to reasonable double interpretation, parties attach diff meanings, neither party knows or has reason to know the other’s interpretation
Exception: one party knows other’s interpretation
Entrustment (nonmonetary remedy - UCC)
Elements: party voluntarily leaves prop in trust to Def, Def sells prop (conversion) to a BFP, party CANNOT recover prop from BFP
Avoidable damages
CANNOT continue to perform once party breaches
CANNOT turn down comparable opportunity
Modification (K excuse)
K by parties to existing obligation to accept different K instead of original obligation
Mod vs Accord and Satisfaction:
Mod excuses original obligation
Accord and Satisfaction liable on new OR original obligation
Material Breach vs Perfect Tender (K excuses)
[DO NOT apply to UCC]
- Nonbreaching party must show willing and able to perform
- Damages recoverable for ANY breach
- ONLY Material breach (no substantial performance) excuses nonperformance, then nonbreaching party may:
1) Treat K as ended and duty of counterperformance is discharged, AND
2) Immediate right to all remedies of entire K and total damages - If non-Material breach (Substantial performance) then nonbreaching party may:
1) Sue for damages BUT cannot treat K as ended/cancelled
[DO NOT apply to CL]
- EVERY K for sale of goods: Goods and Delivery MUST FULLY comply w/K terms
- Seller sends wrong goods (less than perfect tender) BEFORE B accepts Goods: S has accepted Offer thus a K AND breach (defective performance)
B has option: 1) B can accept all and pay K price, 2) B reject all and sue damages, 3) B accept in-part and reject-in part (B MUST care and not use if rejecting)
S may cure (not always may be allowed) if time for performance has not expired, OR S reasonably believes tender will be acceptable to B (e.g. B prev accepted widget of diff color than ordered) - Seller sends wrong goods AND note of accommodation (explanation): Counteroffer thus NO K and NO breach
K Remedy for Services K
Compensatory
Restitution
Specific Performance (ONLY for covenant not to compete)
Liquidated damages
Elements:
1) Damages for K breach are DIFFICULT to measure AT THE TIME of K formation
and
2) Amount is REASONABLE ESTIMATION of compensatory damages
- If valid: ONLY liquidated and NO actual damages
If invalid: ONLY actual
If Clause provides party can choose either actual or liquidated = invalid clause = Give P actual compensatory damages - Specific Performance AND Liquidated damages are allowed UNLESS K provides Liquidated is only remedy
Tip:
if set amount = NOT reasonable estimation
If formula or range amount = reasonable estimation
K Remedy for Sale of Personal Prop
Compensatory
Restitution
Specific Performance
Rescission
Reformation
K Remedy for Sale of RealProp
Compensatory
Restitution
Specific Performance
Rescission
Reformation
Conditions (K excuse)
Condition is NOT a requirement
Condition limits obligations
Express Condition MUST be strictly satisfied (except for personal satisfaction “if I am satisfied”)
Constructive Conditions: substantial performance to satisfy
Personal Satisfaction: only good faith
Condition precedent to effectiveness of K: Agreement that K is not effective UNTIL condition is met (PER does not apply thus ALL evidence of agreement may be offered), if not met K is not effective
Condition subsequent (precedent to performance): A condition that must be met before an absolute duty of immediate performance arises. If not met, excuses (cuts off) an ALREADY existing duty to perform
K Remedy for Construction K
Compensatory
Restitution
Specific Performance (Only Owner but difficult enforcement because of services)
Destruction of Subject matter (K excuse)
CL: excused ONLY if destruction is AFTER K is formed and affects ABILITY to perform, not mere cost to parties
UCC: Apply Risk of Loss rules (receipt vs tender) first
Types of K remedies (legal and equitable)
Legal Remedies
- Damages: Com/Expect, Consequential, Nom, Liq
1) Compensatory: Direct or Consequential + FACCUV (Foreseeable, Actual Causation, Certainty, Unavoidable, Value: fmv at breach)
2) Nominal
3) Liquidated Damages
Restitutionary Remedies
- Legal Restitutionary: prevent unjust enrichment
1) Restitutionary Damages
Equitable Remedies
- Specific Performance: CCIMFD (Contract is valid, Conditions are performed/excused, Inadequate legal remedies, Mutuality of performance, Feasibility of enforcement, Defenses must be overcome LUUUM: laches, Unclean Hands, Undue Hardship, Unconscionability, Mutual mistake)
- Rescission: IFILMMUD (Illegality, Failure of Consideration, Impossible Performance, Lack of capacity, Misrepresentation of material fact or law, Mistake: mutual or uni, UI, Duress)
- Reformation
Reclamation (nonmonetary remedy - UCC)
Elements: B is insolvent AT TIME of receipt of goods, S MUST demand return of goods w/in 10 days FROM receipt of goods
Novation (K excuse)
Parties to a K and BOTH agree to substitute NEW party
Substituted party is excused from obligation
Elements:
- Previous valid K
- Agreement between original parties and new party
- Immediate extinguishment of K duties between original K parties
- Novation vs Delegation
Novation requires agreement of BOTH parties
Delegation no agreement by both and does NOT excuse
K Legal Restitutionary Remedy: Restitutionary Damages
- Apply to Unenfoceable K (mistake, lack of capacity, SoF, etc) and to Breach of K cases
- Non-breaching party can recover for services rendered or recover property
- Breaching party cannot recover money (Modern view: allowed to recover - cost of other party)
K Legal Remedy: Compensatory Damages
Compensatory/Expectation: Put injured party in the position he would have been in had the K not been breached by protecting P’s expectation interest
Elements: FACCU
1) Foreseeability (proximate causation): injury was foreseeable at time of K FORMATION (limits liability)
2) Actual Causation: but-for factual test
3) Certainty: Cannot be speculative
- Direct Damages: flow inherently from the wrong
- Consequential: (natural result + notice) apply in lost reputation case
4) Unavoidable: P took reasonable steps to mitigate injury/loss
Measure:
-Std
Promise - Given + Consequential (natural result + notice) + Indidental - Expenses saved
- S Breach + B keeps defective goods
FMV if no breach - FMV as defective + Indidental - Expenses saved - S Breach + S keeps defective goods:
FMV - K price or (reasonable replacement - K price) + Indidental - Expenses saved - B breach + B Keeps goods:
K price + Indidental - Expenses saved - B breach + S keeps goods
Kprice - resale + Incidental - Expenses saved
-Loss-volume: lost profit (Kprice - Market price) + Indidental - Expenses saved
Incidental
Costs incurred in dealing w/breach (e.g. storing goods)
Death of party (K excuse)
Death of party kills offer
Death of party does NOT excuses K performance
Exception: death of party to K who is “special” to the performance (e.g. actors, etc)
Anticipatory Repudiation (K excuse)
Elements: Unambiguous statement/conduct of nonperformance AND made PRIOR to performance is due
- if minor breach and AP: breach may be treated as major
Unambiguous: P can IMMEDIATELY sue if fully performed OR suspend performance and sue when performance is due OR treat as rescission and sue OR urge performance
Ambiguous, P can in WRITING demand adequate assurance and suspend performance ONLY IF commercially reasonable until assurance is received
D can retract as long as P has not changed position. Once retraction P can temporarily stop performance until D provides adequate assurance
K Equitable Remedy: Rescission (K excuse)
- ONLY if performance remains (cannot rescind once fully performed)
- MUST be mutual w/consideration (effectiveness of consideration is sufficient consideration)
- Grounds for rescission: I FILM MUD (all occurred AT THE TIME of K formation)
1) Illegality after K
2) Failure of consideration
3) Impossible performance: unanticipated event makes duties objectively impossible to perform
4) Lack of capacity
5) Misrep of material fact/law: MUST show actual reliance
6) Mutual Mistake of material fact: NOT on collateral fact (e.g. quality, desirability, fitness of prop) - Unilateral mistake NOT rescission
Exception: non-mistaken party knew or should have known of the mistake
7) UI
8) Duress - Defenses:
1) Laches: clock runs when P learns of injury and P’s right is cut off when relief is Unreasonable AND Prejudicial to D
2) Unclean Hands: P’s wrongful act MUST relate to claim
Accord and Satisfaction (K excuse)
K by parties to existing obligation to accept different performance as replacement of existing obligation on original K (“if….then”)
Requires Consideration OR bona fide dispute and keeps Original performance suspended until new performance is complete
Once new different performance is complete, original obligation is excused. If new performance is NOT complete, P can recover on EITHER performance but NOT both
Mod vs Accord and Satisfaction:
Mod excuses original obligation
Accord and Satisfaction liable on new OR original obligation
Frustration of Purpose (K excuse)
Elements:
- Supevening act or event that completely/alsmost completely destroys the purpose or value of K
AND
- Not reasonably foreseeable AT THE TIME of K was made
