Restitution, Rescission, and Reformation

Question 1

Restitution generally

Answer 1

restitution is not based on contract law, but rather based on preventing unjust enrichment when one has conferred a benefit to another without gratuitous intent.

Generally, the measure of damages is the value of the benefit conferred on the defendant. However, recover may also be based on the detriment to the plaintiff if the benefits are difficult to measure or the benefit would achieve an unfair result.

Question 2

Restitution when a contract is involved

Answer 2

Enforceable contract - when a contract has been breached and the nonbreaching party hasn’t fully performed, they may choose to cancel and sue for restitution

Unenforceable - when a contract is made but is unenforceable, a party may seek restitution when an unjust enrichment would otherwise occur

Question 3

Restitution when no contract is involved

Answer 3

Restitution may also be available when there is no contractual relationship if

1) the plaintiff conferred a benefit on the defendant by rendering services or expending properties

2) the plaintiff conferred that benefit with a reasonable expectation of compensation

3) the defendant knew or had reason to know of the plaintiff’s expectations; and

4) the defendant would be unjustly enriched if they were allowed to retain the benefits without compensating the plaintiff

Question 4

What is rescission

Answer 4

Rescission is a remedy where the original contract is considered voidable and rescinded - the parties are left as though the contract was never made

Question 5

Grounds for rescission

Answer 5

1) mutual mistake of material fact
2) unilateral mistake if the other party knew or should have known of the mistake
3) unilateral mistake if the hardship by the mistaken party is so extreme it outweighs the other party’s expectations under the contract
4) misrepresentation of fact or law by either party as to a material fact in the negotiations that was relied on
5) duress, undue influence, illegality, lack of capacity, failure of consideration

Question 6

What is reformation

Answer 6

reformation is the remedy where the writing between the parties is changed so that it conforms to the original intent of the parties

the grounds for reformation are either mistake or misrepresentation

Question 7

Reformation for Mistake

Answer 7

To reform a contract for mistake, there must be

1) an agreement between the parties;
2) an agreement to put the agreement in writing; and
3) a variance between the original agreement and the writing

This must be established by clear and convincing evidence

Question 8

Reformation for Misrepresentation

Answer 8

If a writing is inaccurate because of a misrepresentation, the plaintiff can choose between reformation and avoidance

to qualify for reformation, the misrepresentation must relate to the content or legal effect of the writing