Remedies [Highly Tested Rules]

Question 1

What are compensatory damages?

Answer 1

Compensatory damages are an award of money to compensate the plaintiff for loss and/or injury, and they seek to put the injured party in the position they would have been in had the injury not occurred
* General damages compensate foreseeable losses (e.g., pain and suffering)
* Special damages compensate losses not necessarily foreseeable (e.g., lost future earnings), and, unlike general damages, must be specifically pleaded

Question 2

What are the requirements for compensatory damages to be recoverable

Answer 2

There are four requirements for compensatory damages to be recoverable:
1. Causation: The tortious act must have been the actual cause of the plaintiff’s injury (the “but for” test)
2. Foreseeability: The injury must have been foreseeable at the time of the tortious act (proximate cause)
3. Certainty: The damages cannot be too speculative
4. Unavoidability: The plaintiff must take reasonable steps to mitigate the damages

Question 3

What are the requirements for recovering punitive damages?

Answer 3

Punitive damages are recoverable only if:
1. the plaintiff has first been awarded compensatory or nominal damages (although punitive damages can also be attached to restitutionary damages);
2. the defendant’s fault is greater than negligence; AND
3. the punitive damages are awarded in an amount relatively proportionate to actual damages (except for particularly egregious conduct, punitive damages should not exceed 10 times the compensatory damages)

Question 4

What is the due process limitation on punitive damages?

Answer 4

Punitive damages that are “grossly excessive,” meaning those that are unreasonably high to vindicate the state’s interest in punishment, are invalid under the Due Process Clauses of the Fifth and Fourteenth Amendments

In assessing whether an award of punitive damages violates due process, the key issue is whether the defendant had fair notice of the possible magnitude of the punitive damages, considering criteria such as:
1. the reprehensibility of the defendant’s conduct;
2. the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; AND
3. the difference between the punitive damages award and the criminal or civil penalties authorized for comparable misconduct

Question 5

What is replevin?

Answer 5

Replevin is a legal restitutionary remedy that permits the plaintiff to recover, before trial, possession of specific chattel wrongfully taken or detained if the plaintiff establishes that (1) the plaintiff has a right to possession and (2) there is a wrongful withholding by the defendant
* A judicial hearing is generally required to make a prejudgment seizure valid
* The plaintiff will also need to post a bond when the chattel is returned to them

Question 6

How can a defendant defeat an immediate recovery of chattel by replevin?

Answer 6

The defendant can defeat an immediate recovery by posting a redelivery bond, which allows the defendant to retain the chattel until a trial has been held

Question 7

What is ejectment?

Answer 7

Ejectment is a legal restitutionary remedy that permits the plaintiff to regain possession of real property from which the plaintiff has been wrongfully excluded or ousted if the plaintiff establishes that:
1. the plaintiff has a right to possession;
2. the defendant is in possession of the property; AND
3. there is a wrongful withholding by the defendant

Question 8

What is a constructive trust?

Answer 8

A constructive trust is an equitable restitutionary remedy that is imposed on improperly acquired property to which the defendant has title to prevent unjust enrichment
* Equity treats the property as if it were held by the defendant in trust for the plaintiff, with the sole trust obligation being to convey the property to the plaintiff

Question 9

What are the requirements for a constructive trust?

Answer 9

To obtain a constructive trust on the defendant’s property, the plaintiff must show:
1. the defendant has title to the property, and the defendant’s acquisition of title can be traced to the property wrongfully acquired from the plaintiff;
2. the defendant’s retention of the property would result in unjust enrichment; AND
3. the plaintiff has no adequate remedy at law (the defendant’s insolvency or uniqueness of the property suffices)

Question 10

What are limitations of a constructive trust?

Answer 10

A constructive trust CANNOT be imposed on property that was merely improved with the plaintiff’s property or proceeds of the plaintiff’s property
* Note, however, that an equitable lien CAN be imposed in such cases

Question 11

What are the advantages of a constructive trust over damages?

Answer 11

The constructive trust has two primary advantages over monetary restitution damages (both resulting from the fact that the defendant must return the specific property, rather than its monetary value):
1. Priority Over Unsecured Creditors: When the defendant is insovent, the constructive trust permits the plaintiff to recover the property itself, free from competing unsecured claims
2. Increased Value of Property: If the property has increased in value, the plaintiff will get the benefit of the increased value

Question 12

What are defenses to a constructive trust?

Answer 12

An action to impose a constructive trust is subject to the usual equitable defenses, such as laches and unclean hands, and the right to a constructive trust is cut off by transfer of legal title to a bona fide purchaser

Question 13

What is an equitable lien?

Answer 13

An equitable lien is an equitable restitutionary remedy whereby, to prevent unjust enrichment, a lien is imposed on property to which the defendant holds title and to which the plaintiff’s wrongfully obtained property can be traced
* The property on which the equitable lien was imposed will be subject to an immediate court-directed sale, and the proceeds of the sale are used to satisfy the plaintiff’s claim
* If the proceeds of the sale are less than the fair market value of the plaintiff’s property when it was taken, a deficiency judgment will issue for the difference and can be used against the defendant’s other assets

Question 14

What are the requirements for an equitable lien?

Answer 14

To obtain an equitable lien on the defendant’s property, the plaintiff must show:
1. the defendant has title to the property, and the plaintiff’s wrongfully acquired property can be traced to such property;
2. the defendant’s retention of the property would result in unjust enrichment; AND
3. the plaintiff has no adequate remedy at law (the defendant’s insolvency suffices)

Question 15

When is a constructive trust more advantageous than an equitable lien, and vice versa?

Answer 15

Where a constructive trust and equitable lien are both available remedies:
* A constructive trust is more advantageous if the defendant’s property has increased in value
* An equitable lien is more advantageous if the defendant’s property has decreased in value (because the plaintiff is entitled to a deficiency judgment)
* Also, an equitable lien is the ONLY available remedy where the plaintiff’s wrongfully acquired property was used to merely improve, rather than acquire title to, the defendant’s property

Question 16

What is a preliminary injunction?

Answer 16

A preliminary injunction is used to maintain the status quo between the parties pending the outcome of an action for a permanent injunction to prevent irreparable harm to a party in the interim

Question 17

What are the requirements for a preliminary injunction?

Answer 17

To obtain a preliminary injunction, the movant must show:
1. a likelihood of success on the merits;
2. they will suffer irreparable injury before the outcome of trial on the merits;
3. the balance of the hardship weighs in the movant’s favor (the movant’s injury outweighs any harm to the nonmovant); AND
4. an injunction is in the public interest (if there is a public interest at stake)

ALSO: The defendant must be given notice of the preliminary injunction hearing, and the plaintiff is typically required to post a bond to secure the defendant’s losses in the event the preliminary injunction should not have been issued

Question 18

What is a temporary restraining order (“TRO”)?

Answer 18

In emergency situations, a temporary restraining order (“TRO”) may be sought to maintain the status quo between the parties to prevent immediate and irreparable harm before a preliminary injunction hearing can be held

Question 19

What are the requirements for a TRO?

Answer 19

To obtain a TRO, the movant must show:
1. a likelihood of success on the merits;
2. they will suffer immediate and irreparable injury before a hearing on a preliminary injunction can be held;
3. the balance of the hardship weighs in the movant’s favor (the movant’s injury outweighs any harm to the nonmovant); AND
4. a TRO is in the public interest (if there is a public interest at stake)

ALSO: The defendant typically must be given notice of the request for a TRO (although notice may be less formal due to the emergency nature of a TRO), and the plaintiff is typically required to post a bond to secure the defendant’s losses in the event the preliminary injunction should not have been issued

Question 20

When may a TRO be issued ex parte?

Answer 20

A court may issue a TRO ex parte (i.e., without giving the nonmoving party notice or an opportunity to be heard) on affidavits of the moving party, but ONLY IF the moving party makes a strong showing why notice should not be required
* If there is an opportunity to give the nonmoving party notice and an opportunity to be heard, a good faith effort to do so must be made

DURATION:
* In federal court, an ex parte TRO automatically expires after 14 days, subject to extension by the court for good cause or with the adverse party’s consent
* In California, a hearing on the preliminary injunction will be set if the TRO is granted, and such hearing must be no later than 15 days from the date the TRO is issued (or 22 days, if there is good cause)

Question 21

What is a permanent injunction?

Answer 21

A permanent injunction is one where the court orders the enjoined party to do (mandatory) or not do (negative) something, after holding a full trial on the merits

Question 22

What are the requirements for a permanent injunction?

Answer 22

A permanent injunction will be issued only if:
1. the movant has no adequate legal remedy;
2. the injunction is feasible (it cannot be difficult for the court to enforce);
3. the balance of hardships weighs in the movant’s favor; AND
4. there are no valid equitable defenses

Question 23

When might a plaintiff seeking an injunction have no adequate legal remedy?

Answer 23

A plaintiff seeking an injunction may have no adequate legal remedy because:
1. money damages are too speculative to calculate with certainty;
2. money damages may be inadequate to compensate for the potential loss (particularly where there is a health or safety concern);
3. the defendant is insolvent, such that any damages award is worthless;
4. replevin or ejectment is not available;
5. where an ongoing wrong would lead to a multiplicity of suits between the parties over the same issue;
6. where a wrong has not yet been committed but is expected to occur (a prospective tort); OR
7. where damages cannot compensate for the loss of “unique” property (e.g., land, family heirloom)

Question 24

When is an injunction not feasible?

Answer 24

An injunction is not feasible if it would be difficult for the court to enforce
* Negative injunctions are easier to enforce because of the court’s contempt power
* Affirmative injunctions pose enforcement problems because of the difficulty in supervising the defendant (often overcome by framing the injunction negatively)
* An injunction requiring an act of great taste, skill or judgment is difficult to enforce because the inherent subjectivity makes it difficult to determine if the act has been performed
* An injunction requiring a series of acts over a period of time can be more difficult to enforce than one requiring a single act
* Enforcement problems also arise where the court would have to supervise events out of their jurisdiction or assert control over nonparties

Question 25

What does balancing the hardships entail?

Answer 25

In balancing the hardships of an injunction, the court will weigh the hardship to the plaintiff if injunctive relief is not granted against the hardship to the defendant if the injunction is granted
* There must be gross disparity between the defendant’s hardship and the plaintiff’s hardship for the court to deny the injunction
* Even when there is gross disparity, there is no balancing of the hardships where the defendant’s conduct was willful
* Any hardship or benefit to the public will also be considered

Question 26

What are defenses to injunctive relief?

Answer 26

Defenses to injunctive relief include:
1. Laches
2. Unclean Hands
3. Impossibility (the defendant has an affirmative defense if it is impossible for them to comply with the injunction)
4. Freedom of Speech (prohibits an injunction against personal defamations)

Question 27

What is laches?

Answer 27

The equitable defense of laches arises when the plaintiff unreasonable delays in bringing a claim for equitable relief that results in prejudice to the defendant
* Laches begins to run from the time plaintiff has knowledge of the act or event that is the basis for his equitable claim

Question 28

What is the “unclean hands” defense?

Answer 28

The doctrine of “unclean hands” bars a plaintiff’s equitable claim when the plaintiff is guilty of some inequitable or wrongful conduct with respect to the transaction sued upon

Question 29

What is the measure of damages for destruction of chattels?

Answer 29

For tortious destruction of chattels, compensatory damages are measured by the value of the chattel at the time it was destroyed LESS salvage PLUS interest
* Damages for loss of use are generally NOT recoverable unless the chattel destroyed was income-producing

Question 30

What is the measure of damages for injury to chattels?

Answer 30

For tortious injury (damage) to chattels, compensatory damages may be measured by either (1) diminution in value or (2) cost of repair (limited to market value) PLUS loss of use

Question 31

What is the measure of damages for conversion?

Answer 31

The standard measure of damages for conversion is the fair market value of the chattel at the time of conversion PLUS interest AND expenditures in pursuit of the property
* The plaintiff is NOT required to mitigate damages by accepting the chattel (they may force the converter to purchase), but if they do accept the chattel, their damages will be reduced by the chattel’s value at the time of the return

Question 32

What is the measure of damages for a trespass to chattel?

Answer 32

For a trespass to chattel, the standard measure of damages is (1) nominal damages or (2) damages for loss of use if a minor dispossession

Question 33

What is the measure of damages for a simple trespass to land?

Answer 33

Nominal damages are recoverable for simple trespass where there is no actual injury
* Some modern cases allow restitution damages

Question 34

What is the measure of damages for a trespass to land causing a severance from realty?

Answer 34

Where a trespasser causes a severance from realty (e.g., timber, minerals), the measure of damages is the (1) diminution in the value of the land, or (2) the plaintiff can elect a conversion measure

Question 35

What is the measure of damages for a trespass to land causing other injury?

Answer 35

Damages for injury caused by a trespass to land (e.g., debris dumped on land) is measured by the (1) cost of removing an obstruction or (2) rental value of the land

Question 36

What is the measure of damages for destruction or damage to land and structures?

Answer 36

Realty:
The usual measure of compensatory damages for damage to realty is the diminution in the value of the land
* Where trees or crops are destroyed, damages are equal to EITHER (1) the diminution in the value of the land OR (2) the value of the crops or trees at the time of destruction

Buildings:
* If a building is destroyed, the plaintiff can recover its value at the time of destruction
* If a building is damaged, the plaintiff can recover the cost of repair PLUS loss of use

Question 37

What is the measure of damages for destruction of or interference with an easement?

Answer 37

If an easement is destroyed, the plaintiff recovers the diminution in the value of the land
* If an easement is merely interfered with, the measure of damages is the cost of restoration PLUS loss of use

Question 38

What is the measure of damages for waste?

Answer 38

Voluntary Waste:
For voluntary waste, damages are measured by (1) the diminution in the value of the land or (2) the cost of repair

Permissive Waste:
For permissive waste, the plaintiff can recover the cost of repair

Ameliorative Waste:
For ameliorative waste, damages generally are NOT recoverable (because there is no loss in value)

Question 39

What is the measure of damages for a private nuisance?

Answer 39

The standard measure of compensatory damages for private nuisance includes loss of use and enjoyment, costs of abatement, emotional distress, etc.

Question 40

What is the measure of damages for intentional misrepresentation?

Answer 40

Fraud by the Seller:
If fraud is by the seller, some courts apply a “benefit-of-the-bargain” measure of damages: the difference between contract value and actual value received, but other courts limit damages to “out-of-pocket” loss

Fraud by the Buyer:
If fraud is by the buyer (or is collateral to the sale), the plaintiff recovers damages proximately caused by the fraud

Question 41

What are expectation damages?

Answer 41

Expectation damages (compensatory damages) are recoverable after a breach of contract by the nonbreaching party, and they are designed to put the nonbreaching party in the position they would have been in had the contract never been BREACHED
* A valid liquidated damages clause in a contract will control and provide the only measure of damages for breach of such contract

Question 42

What are the requirements for expectation damages?

Answer 42

As with compensatory damages in tort, an award of expectation damages requires:
1. Causation: The damages must be caused by the contract breach
2. Foreseeability: The damages must be foreseeable to a reasonable person at the time of contract formation
3. Certainty: The damages must be capable of being calculated with certainty and cannot be too speculative
> Past losses are generally easier to calculate with certainty than future losses, particularly for a new business
4. Unavoidability: The plaintiff has a duty to take reasonable steps to mitigate his losses; in a contract context, this usually involves “cover”

Question 43

What are liquidated damages?

Answer 43

Liquidated damages reflect the contract parties’ stipulated amount recoverable in the event of a contract breach, and limits the damages recoverable to the stipulated amount

Question 44

When is a liquidated damages clause enforceable?

Answer 44

A liquidated damages clause is enforceable if, at the time of contract formation:
1. the amount of damages for a contract breach is difficult to estimate; AND
2. the liquidated damages amount was a reasonable forecast of actual damages (determined by comparing the liquidated damages amount with the amount of damages prospectively probable at the time of contract formation)

NOTE: If the liquidated damages amount is unreasonable, it is a penalty and the liquidated damages clause will NOT be enforced

Question 45

What are incidental damages?

Answer 45

Incidental damages are the costs reasonably incurred by a nonbreaching party as a direct result of the other party’s contract breach

Question 46

What are consequential damages?

Answer 46

Consequential damages are special damages that reflect reasonably foreseeable losses over and above standard expectation damages as a result of a contract breach

Question 47

When are consequential damages recoverable?

Answer 47

Consequential damages may be recovered only if, at the time the contract was formed, a reasonable person would have foreseen the damages as a probable result of a breach
* To recover consequential damages, the nonbreaching party must show that the breaching party knew or had reason to know of the special circumstances giving rise to the damages

Question 48

What are reliance damages?

Answer 48

Reliance damages award the plaintiff the cost of their foreseeable expenditures incurred in reasonable reliance on a contract, and they are designed to put the plaintiff in the position they would have been in had the contract never been FORMED
* Reliance damages may be awarded in lieu of expectation damages when expectation damages are too speculative to measure with sufficient certainty

Question 49

What is restitution (quasi-contract)?

Answer 49

Restitution is a legal remedy designed to prevent unjust enrichment when one has conferred a benefit on another without gratuitous intent

Question 50

What is the measure of restitution (quasi-contract)?

Answer 50

Generally, the measure of restitution is the value of the benefit conferred, which is usually based on the benefit received by the defendant
* Recovery may instead be measured by the “detriment” suffered by the plaintiff, if the benefits are difficult to measure or the “benefit” measure would achieve an unfair result

Question 51

What are the situations in which restitution may be available?

Answer 51

Contract Breached–Nonbreaching Party Has Not Fully Performed:
When a contract has been breached and the nonbreaching party has not fully performed, the nonbreaching party may choose to cancel the contract and sue for restitution to prevent unjust enrichment
* If the nonbreaching party has fully performed, he is limited to his damages under the contract

Contract Unenforceable–Quasi-Contract Remedy:
Restitution may be available in a quasi-contract action when a contract was made but is unenforceable, and unjust enrichment would otherwise result

When No Contract Involved–Quasi-Contract Remedy:
Restitution may also be available in a quasi-contract action when there is no contract between the parties if:
1. the plaintiff has conferrred a benefit on the defendant by rendering services or expending property;
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 plaintiff’s expectation; AND
4. the defendant would be unjustly enriched if he were allowed to retain the benefit without compensating the plaintiff

Question 52

What is specific performance?

Answer 52

The equitable remedy of specific performance is a mandatory decree or injunction that orders a party to a contract to perform that which they have promised to perform under the contract

Question 53

What are the requirements for specific performance?

Answer 53

To obtain an order for specific performance, the plaintiff must establish:
1. the existence of a valid contract, with terms sufficiently definite and certain to be enforced (the terms must be more definite and certain than in an action for money damages)
2. the plaintiff has already performed, is ready and able to perform, or is excused from performing all of her obligations under the contract
3. the legal remedy is inadequate
(i) damages are too speculative to calculate with certainty;
(ii) damages are inadequate to compensate for the potential less (particularly where there is a health or safety concern);
(iii) defendant is insolvent;
(iv) replevin or ejectment is unavailable;
(v) multiple suits would be necessary to recover all resulting damages (ongoing wrong); OR
(vi) property is unique so damages are inadequate to compensate for loss
4. it would be feasible for the court to enforce the specific performance decree; AND
5. the defendant has no valid defenses
(i) Laches
(ii) Unclean Hands
(iii) Hardship / Sharp Practices
(iv) Mistake
(v) Misrepresentation
(vi) Statute of Frauds

Question 54

What is the defense of hardship?

Answer 54

The defense of hardship requires the defendant to show:
1. gross inadequacy in consideration (measured by factors existing at the time the contract was entered into);
2. marked inequality between the parties; AND
3. unfair advantage exercised by the plaintiff (usually one who has superior knowledge of the facts or superior bargaining power)

NOTE: It is usually no defense to a suit for specific performance that the subject matter of the contract is found to be worth more after entering into the contract, unless mistake is involved

Question 55

What is rescission?

Answer 55

Rescission is an equitable remedy whereby a court issues a decree canceling the contract and restoring to the plaintiff the consideration given to the defendant because there was no true “meeting of the minds”

Question 56

What are grounds for rescission?

Answer 56

Rescission may be based on grounds making the contract voidable at the option of one party, including:
1. Illegality
2. Incapacity
3. Impossibility
4. Mutual Mistake
5. Unilateral Mistake (where the other party knew or should have known of the mistake)
6. Misrepresentation (where the plaintiff actually relies on an intentional or material misrepresentation of fact)

Question 57

What are defenses to rescission?

Answer 57

Defenses to an action for equitable rescission include:
1. Laches
2. Unclean Hands
3. Election of Remedies

Question 58

When is an “election of remedies” required in an action for rescission?

Answer 58

Damages and rescission remedies are inconsistent such that the plaintiff must make an election of remedies
* If the plaintiff seeks damages first, binding election occurs at the commencement of the action, barring a subsequent suit to rescind the contract
* If the plaintiff seeks rescission first, no binding election occurs until entry of judgment

Question 59

What is reformation?

Answer 59

Reformation is an equitable remedy where a valid contract that does not conform to the parties’ agreement is modified to reflect the parties’ true intent

Question 60

What are grounds for reformation?

Answer 60

To obtain reformation, there must be a “meeting of the minds” such that a valid contract exists, but the written contract does not conform to the parties’ original agreement due to:
1. Mutual Mistake: If both parties mistakenly believed the writing conformed to their agreement (“scrivener’s errors”)
2. Unilateral Mistake: If the nonmistaken party actually knows of the mistake
3. Fraud: If a party fraudulently represented that the writing accurately incorporates the terms of the parties’ agreement

Question 61

What are defenses to an action for reformation?

Answer 61

Defenses to an action for reformation include:
1. Laches
2. Unclean Hands
3. Sale to Bona Fide Purchaser: The right to reformation is cut off when the subject matter of the contract to be reformed is sold to a purchaser for value without notice of the right to reformation
4. Statute of Frauds (Real Property)
> Majority View: The Statute of Frauds is NOT a defense to an action for reformation
> Minority View: A minority of courts DENY reformation to enlarge the size of a grant of real property on the rationale that the Statute of Frauds requires any additional transfer of land to be in writing

Question 62

What is the buyer’s measure of damages when the seller breaches a real estate contract?

Answer 62

Where the seller breaches a contract for the sale of real property, the buyer is entitled to recover either (1) their out-of-pocket loss or (2) the difference between the fair market value of the realty at the time of the breach and the contract price

Question 63

What is the seller’s measure of damages when the buyer breaches a real estate contract?

Answer 63

Where the buyer breaches a contract for the sale of real property, the seller may recover the difference between the fair market value of the realty at the time of the breach and the contract price PLUS consequential damages

Question 64

UCC Buyer’s Nonmonetary Remedies:
Cancellation

Answer 64

If a buyer rightfully rejects goods because they do not conform to the contract, the buyer has the option of canceling the contract

Question 65

UCC Buyer’s Nonmonetary Remedies:
Right to Replevy Identified Goods

Answer 65

Buyer Made Prepayment
If a buyer has made at least part payment of the purchase price of goods that have been identified under a contract and the seller has not delivered the goods, the buyer may replevy the goods from the seller in two circumstances:
1. the seller becomes insolvent within 10 days after receiving the buyer’s first payment; OR
2. the goods were purchased for personal, family or household purposes

Buyer Unable to Cover
In addition, the buyer may replevy undelivered, identified goods from the seller if the buyer, after reasonable effort, is unable to secure adequate substitute goods (i.e., the buyer cannot cover)

Question 66

UCC Buyer’s Nonmonetary Remedies:
Right to Specific Performance

Answer 66

A right closely related to the buyer’s right to replevy is the right of the buyer to specific performance “where the goods are unique or in other proper circumstances”
* The court may order specific performance even where the goods have not yet been identified to the contract by the seller

Question 67

UCC Seller’s Nonmonetary Remedies:
Right to Withhold Goods

Answer 67

If the buyer fails to make a payment due on or before delivery, the seller may withhold delivery of the goods
* The seller may also withhold goods when they are sold on credit and, before the goods are delivered, the seller discovers that the buyer is insolvent
* BUT: The seller must deliver the goods if the buyer tenders cash for their payment

Question 68

UCC Seller’s Nonmonetary Remedies:
Right to Recover Shipped or Stored Goods from Bailee

Answer 68

Buyer Insolvency
The seller may stop delivery of goods in the possession of a carrier or other bailee if they discover that the buyer is insolvent

Buyer Breach
The seller may stop delivery of carload, truckload, planeload, or larger shipments of goods if:
1. the buyer breaches the contract; OR
2. the seller has a right to withhold performance pending receipt of assurances

Question 69

UCC Seller’s Nonmonetary Remedies:
Right to Recover Goods from Buyer

Answer 69

If a seller learns that a buyer has received delivery of goods on credit while insolvent, the seller may reclaim the goods upon demand made within 10 days after the buyer’s receipt of the goods
* The 10-day limitation does NOT apply if a misrepresentation of solvency has been made in writing to the seller within 3 months before delivery

Question 70

UCC Buyer’s Monetary Remedies:
When Non-Conforming Goods Not Accepted

Answer 70

Under Article 2 of the UCC, a buyer who (a) never received the goods purchased from the buyer, (b) rightfully rejected non-conforming goods, or (c) justifiably revoked acceptance of non-conforming goods may recover:
1. any amount paid (even if the buyer does not cancel the contract);
3. recover either (i) “cover” damages if replacement goods were purchased or (ii) “market” damages if the buyer did not cover in good faith or at all;
4. recover incidental damages; AND
5. recover consequential damages (if the requirements are satisfied)

“Cover” Damages: Equal to the difference between (1) the contract price and (2) the cost of replacement goods

“Market” Damages: Equal to the difference between (1) the contract price and (2) the market price at the time the buyer learned of the seller’s breach

Question 71

UCC Buyer’s Monetary Remedies:
When Non-Conforming Goods Accepted

Answer 71

If a seller breaches a contract for the sale of goods by delivering non-conforming goods that are not an accommodation and the buyer accepts the non-conforming goods, the buyer may recover “loss-in-value” damages equal to the difference between (1) the value of the goods had they conformed to the contract and (2) the value of the non-conforming goods

NOTICE REQUIREMENT:
To recover damages for any defect as to accepted non-conforming goods, the buyer must, within a reasonable time after they discover or should have discovered the defect, notify the seller of the defect

Question 72

UCC Seller’s Monetary Remedies:
When Buyer Repudiates or Refuses to Accept Conforming Goods

Answer 72

When the buyer wrongfully repudiates or refuses to accept conforming goods, the seller can:
* resell the goods and recover the difference between (1) the contract price and (2) the resale price (this is the usual measure of a seller’s damages)
* recover the difference between (1) the market price (measured as of the time and at the place of delivery) and (2) the contract price; OR
* if the above measures are inadequate because the seller is a “lost volume seller” and could have made an additional sale, recover under a “lost profits” measure the difference between (1) the contract price and (2) the cost to the seller

NOTE: The seller can also recover incidental damages–expenses reasonably incurred by the seller in storing, shipping, returning and/or reselling the goods as a result of the buyer’s breach

Question 73

UCC Seller’s Monetary Remedies:
Action for Price

Answer 73

If (1) the buyer has accepted the goods and has not paid or has not accepted the goods, and the seller is unable to resell the goods at any reasonable price, or (2) the goods have been lost or damaged at a time the risk of loss was on the buyer, the seller may maintain an action against the buyer for the full contract price