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69 Cards in this Set
- Front
- Back
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What are compensatory damages?
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Compensatory damages are an award of money to compensate p for loss or injury.
General dx compensate forseeable losses (pain and suffering)(special dx compensate losses not necessarily foreseeable (wage losses) must be specifically plead. Dx must be causal, forseeable, certain and unavoidable to be recoverable. Foreseeablity is tested by proximate cause. The avoidable consequences doctrine limits dx to those to which could not have reasonably been avoided. |
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How about nominal dx?
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Often recoverable when no actual injury sustained. .actual injury is a required element of certain claims (fraud) so nominal dx cannot be recovered in such cases.
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How about punitive dx?
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Awareded to punish D. for willful, wanton, or malicious conduct. Punitive dx are generally limited to intentional torts, but can be recovered for rx conduct some courts require a rx relationship between pun and comp dx
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What about the Due process limitation on punitive dx?
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"grossly excessive" (unrx high to vindicate interest in pusnishment) invalid under DP clause of the 5th and 14th amendments . Key issue is whether D had notice of the possible magnitude of the pun dx.... considering:
reprehensibility of D's conduct Disparity between actual or potential harm suffered and award.. difference between pun dx and the criminal or civil penalities associated with the conduct. - rule of thumb...no more than 10x comp. dx. - Injury to nonparties evidence of reprehensibility but not used in calc. of dx. |
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What is the rule on recovering Interest and Atty's fees?
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Prejudgment intrest gen. statutory. Atty's fees generally not recoverable absent an appliciable statute or contract. (except for prevailng plaintiff in shareholders' derivative suit)
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Whats the deal with restitutionary remedies?
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Restitutionary remedies can be legal or equitable and are an alternative to compensatory dx where the defendant has obtained a benefit, retiention of which amounds to unjust enrichment...the objective is to restore D's unjust gain to P.
Restitutionary dx are a remedy that obligates D to pay P the rx value of a benefit unjustly obtained. The benefit can be conferred as a result of mistake, duress, tort, or breach of K, Restitutionary dx are available in tort situations only where the tort results in a benefit to D. |
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Whats the deal with Replevin?
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Legal remedy allowing P to get, before trial, possession of a spec. chattel wrongfully taken or detained. A hearing is gen. required to make prejudgment seizure valid. `
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Whats the Deal with Ejectment?
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Legal remedy to restore possession of real property from which p was wrongfully ousted.
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What's a constructive trust?
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Equitable restitutionary remedy, creates a trust to compel D to reconvey title to property unjustly retained..
P must show that D has title to propwerty and d's acquistion can be traced to property that D wrongfully acquired. D's retention of property would result in unjust enrichment and p has no remedy at law... P becomes secured creditor...and gets the benefit of enhanced value to the property... equitable defenses apply (laches, unclean hands, transfer of legal title to BFP) |
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What's an equitable lien?
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Lien imposed on D's property to secure payment of debt owed to P.
-can be imposed on property to which D holds title and to which the wrongfully obtained propery can be traced... gives P priority in the chain of creditors... can be imposed on property that was merely improved with the plaintiff's property or the proceeds thereof.... If P's property was not used to aqcuire title, only equitable lien is available... the equitable lien can be enforced only up to the amt. of p's claim...the enhanced val of the property cannot be recoverd. However, the P may seek a deficiency judgment after imposition of an equitable lien; an action for a deficiency J is not allowed after imposition of a constructive trust. Note that an equitable lien is cut off by transfer to BFP. |
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How is an equitable lien different from a constructive trust?
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If P's property is not used to acquire title, only an equitable lien is abilable the lien can be enforced only upto the amount of plaintiff's claim; the enhacned value of the property cannot be recovered. However, teh plaintiff may seek a deficiency judgment after imposition of an equitable lien; an action for a deficiency judgemnt isnot allowed after imposition of a constructive trust. Note that equitable lien is cut off by transfer to a BFP.
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What is an injunction?
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An injunction may be available where the legal remedy is inadequate, it results in an equitable restitutionary remedy when the court orders D to make specific restitution.
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When is injunctive relief available in tort?
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Where damages or restitution are inadequte to remedy a tort, P may be able to get an injunction (decree ordering D to perform (mandatory) or refraining from performing (prohibitory), if the following requirements are met:
1. Inadequacy of legal remedy 2. Property/protectable right involved. 3. Feasibly to enforce the equitable decree (consisder mandatory v. negative injunction and jurisdiction over the d, etc.) 4. Is the hardship to the d considerably greater than the benefit to the P. 5. Are there any defenses (unclean hands, laches, etc.). |
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Inadequacy of legal remedy requirment: What are reasons a legal remedy may be inadequate?
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1. $ dx inadequate: usually $ will afford relief, but if not injunctive relief available.
2. Dx highly speculative: if dx are hard to assess then the legal remedy is inadequate. 3. What is the rule on multiplicity of suits: Where the wrong is continuous or has been threatened on numerous occasions, p would have to bring many suits to recover all dx, thus legal remedy is inadequate. 4. irreperal dx. damages cannot compensate p for loss of unique property (land, family heirloom), thus legal remedy is inadequate. 5. Prospective tort: where a wrong has not yet been committed, no legal remedy for dx exists. 6. Inadequacy of replevin: Replevin sometimes is an inadequate remedy for recovery of unique chattels because of the hearing requirement, because d can recover teh chattel by posting a bond, and becasue of the difficulty in executing the writ. |
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What is the "property right requirement"
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Traditionally, equity protected only property rights. Few courts follow this rule; some stretch the concept of property to cover everything. Others reject the requirement altogether.
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What is the rule on the feasiblity of enforcing the decree?
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Court will not issue a decree that would be difficult to supervise.
- Methods: court can imprison d for contempt until he complies with the decree. However, a prohibition against imprisonment for debt preclused enforcing a money decree in this way. Only parties and privies are bound by the court's decree; others cannot be held in contempt for disobedience. 2. Mandatory v. Negative injunctions: Negative (prohibitory) decrees order d to stop doing an act. These are not difficult to enforce becasue of the court's contempt power. Mandatory injuctions order a defendant ot do an affirmative act. SUch decrees pose enforcement problems because of difficulty in supervising D. Where this is a problem, courts will often frame the decree negatively. 3. Decrees requiring acts in other states: Today, a court has power to issue injunctions requiring acts in other states, but relief is granted only if the decree is feasible to enforce. PRoblems are 1. supervision (often overcome by framing decree negatively) and 2. punishing d should he leave the jurisdiction and not return (often overcome by sequestering d's local property). |
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What is the rule on balancing of hardships?
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In balancing th equities, the court will make sure that the hardship to the defendant, where relevant, does not greatly outweigh the benefit that the plaintiff might get from the relief sought.
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When are equities balanced?
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In some state's the court's willingness to balance the hardships may depend on the injunction sought and stage of the proceeding.
a. TRO: TRO is a shor-term decree to maintain the status quo pending issuance of a preliminary injunction. A TRO can be issued ex parte. Hardships are not usually balanced at this stage. b. Preliminary injunction is issued only after notice and a hearing. Its purpose is to maintain a status quo pending trial. Hardships are balanced at this stage. c. Permanent injunction: A permanent injunction is issued only after a trial on the merits. Hardships are balanced at this stage for encroachment or nuisance cases. |
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What are the 2 approaches to balancing?
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Minority (strict): Minority refuses to balance hardships, holding that if plaintiff otherwise satisfies the requirements, an injunction should be granted as a matter of course, except some minority courts might balance hardships in nuisance cases at the preliminary injunction stage- which may have the effect of postponing relief until after trial.
Majority (liberal): Majority says where hardships balance in D's favor the court will deny the injunction and limit P to damages. However, courts will not balance the hardships if D's conduct was intentional. |
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What Defenses must be overcome?
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1. Laches (unrx delay by P in initiating his equitable clam that results in prejudice to D. The effect is the key. Must not be longer than SOL. Begins upon P's knowlege that a right has been infringed.
2. Unclean Hands: The party seeking equitable relief must not be guilty of any "unfair dealing" with respect to the transaction sued upon. EXAM TIP Be careful in using unclean hands. It is available only if the conduct is related to the case at ahnd. Unrelated unfair conduct is irrelevant. Thus, the fact that the P has committed fraud in the sale of other parcels in a subdivision will not help the D if there was no fraud in sale to him. 3. Freedom of speech: prohibits an injunction against personal defamations. 4. No injunction will be sought in criminal prosecution unless "irreperable injury" will result. 5. Injunction against crimes: equity does not usually have jurisdiction to enjoin crimes or enforce criminal penalties. a. Constitutional problems: Constitutional problems are raised because the equitable remedy would deprive D's of procedural due process. b. Public Nuisance Exception: Equity will act if the crime is also a public nuisance and criminal prosecution is an inadequate remedy. Public nuisance is defined as the use of property so as to endanger public health and welfare, some courts have expanded it to include many crimes. AG usually brings suit; however, private person can bring suit to abate a public nuisance where he suffers injury "special in kind" or is authorized to do so by statute. 6. Injunction to protect political or civil rights: Traditionally, equitable relief is not granted to protect becasue the decree would be difficult to enforce and nonjudicible political question. Modern trend is contra in certain cases (reapportionment). |
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SPECIFIC TORTS
(misappropriation of money) |
Dx.: Award of dx in suit for conversion requires P to show that IDENTIFIABLE money was taken.
Restitutionary remedies: a. Quasi-Contract: Available where P shows D was unjustly enriched by conversion. b. Constructive Trust: will be available for misappropriated money if P can specifically identify and trace stolen money to D. However, if funds are used only to pay off debts, etc. the majority says that no constructive trust will lie against D's remaining assets because there is no trust res. c. Equitable lien: appropriate where the misappropriated funds were not used to obtain title to the property they can be traced to. The remedy is also appropriate where D commingles the funds. In cases of commingling, the lien can be placed on both remaining funds and property traced from the account. (However, the lien is limited to the lowest intermediate balacne where funds were dissipated and the balance sinks below P's cliam). An optional constructive trust remedy (on a pro rata basis) is available if D is a conscious wrongdoer. |
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Spec torts con't
(Injuries to personal property) |
1. Destruction of Chattels: If chattels are tortiously destroyed, damages are measured by the value of the chattel at the time it was destroyed, less salvage, plus interest (but generally not loss of use unless the chattel is not easily replaceable). Loss of use generally is not recoverable unless the chattel destroyed was income-producing.
2. Injury to Chattels: For injury to chattels, damages may be measured by either diminution in value or cost of repair (limited to market value) plus loss of use. 3. Dispossession of Chattels: a. Conversion dx for major dispossession: Standard measure of damages for conversion is the market value at the time of conversion, plus interest and expenditures in pursuit of property. 1. Exceptions: If the chattel's value fluctuates, the usual measure for damages is the highest value between the time of the wrong and a rx time to cover. If the chattel is retained by D, value is measured at the time of seizure, demand, or disposition (p's opinion). If the chattel is improved and conversion is willful, the increased value is recoverable. 2. No duty to mitigate by accepting chattel: P is not required to mitigate dx by accepting the chattel; he may force the converter to purchase. However, if he does accept the chattel, damages are reduced by the chattel's value at the time of return. 3. Successive Converters: Successive converters are liable for the value of the chattel on the date they acquired it, except to the extent of improvements made by a previous innocent converter. 4. Punitive Damages: a possible result if there was malicious conduct. b. Trespass to Chattel for Minor Dispossession: The standard measure of dx is nominal dx or dx for loss of use if a minor dispossession. c. Restitutionary Remedies: These include self-help (reasonable forces to recapure), replevin, quasi-contract, constructive trust (only if title obtained-i.e. where theif sells the property, trust can be imposed on proceds), equitable lien, and mandatory injunction (only if chattel "unique" so money damages and replevin are inadequate) |
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What is the rule on Injuries to Real Property?
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1. Trespass to Land: Nominal damages are recoverable for simple trespass where there is no actual injury. Restitution for the value of D's land was denied at common law, but some modern cases allow such damages. Injunction also is appropriate (to avoid multiplicity of suits) and a court may grant restitutionary relief as well.
b. Tresspass Causing Severance: Where there is a severance from realty (timber, minerals), the measure of damages is the diminution in value of the land, or plaintiff can elect a conversion measure. Also available: replevin, resitutionary damages (value of severed property, unless D acted willfully, in which case the value of property as improves), and injunction (because land is "unique")/ c. Tresspass causing other injury: Dx. for injury (debris dumped) measured by the cost of removing obstruction or rental value of land. Mandatory injunction is available if dx are inadequate (e.g. where plaintiff has the burden of moving the debris). d. Tresspass effecting ouster: Ejectment is available where P proves the right to possession and wrongful withholding by D- P recoveres property and mesne dx. Improvements by an innocent trespasser can be set off against mesne damages or can be compesated for under modern "betterment statutes." Injunctive relief is not available. |
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What is the rule on encroachments?
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Encroachments result where D's structure invades P's land.
a. Dx. If classified as a continuing trespass, dx are measured by the rental value of occupied land; if a permanent trespass, the measure is the market value of the occupied land. b. Restitutionary remedy: Ejectment is available but very difficult to enforce (and as a practical matter is not used) c. Injunction if:1 1. Legal remedies are inadequate. Land is unique and dx cannot compensate for loss thereof, and ejectment is impracticable.; 2. Balancing of Hardships: Most courts refuse to balance hardships where D acted willfully. If the encroachment was inadvertent, a majority of courts will weigh relative hardships but deny injunction only if d's hardship greatly outweighs P's. Laches and public interest also enter into the balancing process. |
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What is the rule on destruction of or injury to realty?
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The usual measure of dx for injury to realty is the dimunition in the value of the land. If a building is destroyed, P can recover its value at the time of destruction. If a building is damaged, compensation equals the cost of repari plus oss of use. Where trees or crops are destroyed, damages are either dimunition in value of the land or the value of the crops and trees. Dx to underlying real estate usually is measured by the dimunition in value of the real estate.
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What is the rule on destruction of or interference with easements?
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1. Dx: If an easement is destroyed, P recovers the dimuntion in value of the land; if the easement is merely interfered with, the cost of restoration plus loss of use, etc., is the measure.
b. Injunctive relief: Injunctive relief is possible ("unique" property, multiplicity of suits), provided the easement is recognized at law. Courts will balance hardships here. |
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What is the rule on waste damages?
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Waste refers to injury in realty by one in rightful possession against the interest of one entitled to future possession.
a. Voluntary waste: Voluntary waste consists of deliberate destructive acts. Dx are masured by the dimunition in value of the land or the cost of repair. Injunction is also appropriate. b. Permissive waste: occurs where the premises are allowed to fall into disrepair. P can cover the cost of repair, but courts are reluctant to grant injunctive relief. c. Ameliorative waste: Ameliorative waste involves alteratoins to the realty that increase its value. Generally, damages are not available (because there is no loss in value); usually, injunction is available only if D is a short-term tenant. d. Equitable Waste: occurs when those not chargeable with legal waste effect material changes to the premises. There is no legal remedy, but an injunction will be granted (e.g. to prevent mortgagor from impairing security of mortgagee). |
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What is the rule on Nuisance damages?
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Nuisance is the use by D of his own property in such a way as to cause unreasonable interference iwth the use and enjoyment of P's property. It can also result from interference with incorporeal rights (e.g. easements).
a. Dx: The standard measure for damages includes loss of use and enjoyment, costs of abatement, emotional distress, etc. Most courts deny future damages. Some use the "Permanent nuisance" doctrine (award of permanent dimunition in value of land) to avoid multiplicity of suits, but there is a split of authority as to when doctrine is appropriate. b. Injunction: An injunction against nuisance is usually negative inform. 1. Damages inadequate: Damages are inadequate because of the injury to the land and the possibility of multiplicity of suits. 2. Balancing of hardships: Some courts do not balance the hardships in nuisance cases because nuisance is usually intentional. Courts tha tdo balance generally weigh such factors as relative uses of the land; whether the decree would require D to shut down a costly enterprise; and injury to the public (loss of jobs, loss of useful product, etc.). Modern courtts make use of conditional decrees (e.g., denial of injunction conditioned upon D adopting abatement procedures). If D has eminent domain rights, permanent injunction will be denied if compensation is paid. 3. Coming to the Nuisance: Ordinarily, coming to the nuisance is not a good defense, but may affect recovery of damages where the purchase price reflected the claimed nuisance. |
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What is the rule on Injury to personal interests damages?
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The usual remedy is compensatory dx. (There is no basis for restitution because D receives no benefit; injunction is rare because the harm has already occurred-although relief is available for continuing course of conduct).
a. Economic Losses (special damages): P can recover all economic losses proximately caused (e.g. past and future medical expenses, and past and future loss of earnings and earning capacity). The award must be a lump sum; future losses are discounted to present value. A minority of courts permit the jury to consider inflation. Generally, the award is no subject to income tax. b. Noneconomic losses (general damages): P will also be compensated for noneconomic losses (past and future) (pain and suffering, ed, loss of enjoyment of life, etc.). c. Limitations on Dx: Limitations on dx include the collateral sources rule and the avoidable consequences doctrine- discussed in the torts outline. |
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What is the rule on survival tort actions damages?
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Most jurisdictions have survival statues whereby a decedent's estate can sue for personal injury damages accrued to decedent up to the time of death (torts outline)Wrongful death also discussed in torts.
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What is the rule on defamation damages?
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Damages are usually the remedy for defamation (see torts). Restitution will be denied (usually because there is no benefit to D). Injunctions are rarely granted, on the rationale the decree would amount to an unconstitutional prior restraint on speech. Declaratory relief may be the most effective way to protect reputation.
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What is the remedy for invasion of a right to privacy?
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For invasion of the right to privacy, damages are recoverable for mental anguish. Restitution will be denied (because d is not enriched). Injunction is the most effective remedy for a continuing wrong- damages are inadequate because they are often speculative and because of the likelihood of repetition. The traditional "property right" requirement is no longer a bar to equitable relief.
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What is the remedy for fraud?
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No action for fraud will lie absent proof of actual injury; thereafter, consequential damages are also recoverable, as are punitive damages wher e"malice" is shown. If fraud is by seller, some courts apply a "benefit-of-bargain" measure of damages (difference between contract calue oand actual value received); others limit damages to "out-of-pocket" loss. If fraud is by buyer (or is collateral to sale), plaintiff recovers damages proximately caused. Plaintiff may elect to rescind the contract and seek restitution, or have a constructive trust imposed on the property obtained by fraud.
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What is the remedy for business torts?
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1. Inducing breach of K: the usual remedy is for all losses proximately caused. Restitution and injunctive relief are rare.
2. Interference with prospective advantage: For interference with a prospective advantage, dx are usually only speculative, but flaintiff can seek restitution of the "benefit" D would otherwise not have obtained. 3. Trade Libel: Trade libel is defined as a statement disparaching plaintiff's business, product, etc., for the purpose of inducing the public not to deal with him. No cause of acton will lie absent proof of special damages (pecuniary loss), and most courts require a showing of loss of particular customers. Injunctive relief traditionally is denied on free speech grounds unless the trade libel occurred in conjunction with another enjoinable tort. The modern trend is to grant relief, on teh theory that the harm to P outweighs free speech considerations. |
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CONTRACT REMEDIES
(What is the rule on compensatory damages in contract?) |
Compensatory damages are awards of money to protect a P's expectation interest. As with torts, dx must be causal, forseeable, certain, and unavoidable.
1. Foreseeablity: is tested at the time the contract is entered into (Hadley v. Baxendale) 2. Certainty: future profits of a new business are difficult to recover because they are uncertain. 3. A liquidated damages clause may limit the damages recoverable. Such provisions are valid provided it is shown that, at the time of contracting, acutal damages would have been extremely difficult to ascertain and the amount stipulated was a reasonable forecast of the actual harm. Otherwise, the clause is a penalty and proven actual damages will govern. 4. Unavoidable meand the P cannot recover damages that reasonably could have been mitigated. |
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Are punitive damages available in a K action?
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No.
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What is the rule on interest and attorney's fees in contract disputes?
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Prejudgment interest awards in contract are statutory and usually are granted only as to liquidated sums. Attorney's fees are recoverable if provided for by statute or contract.
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What is the rule on restitutionary remedies (quasi-contract)?
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The law imposes an obligation to pay for unjust gain received pursuant to an unenforcable contract.
Grounds for remedy: D's unjust enrichment most commonly results from mistake, fraud, material breach of contract, or performance of an unenforceable contract. A contract may be unenforcable because: 1. it is illegal; not in writing; discharged by impossiblity or frustration of purpose; or disaffirmed because of incapacity. How is benefit measured? 1. Material breach: nonbreaching party can recover the value of her performance, even in excess of the contract rate (most jurisdictions). The breaching party can recover the value of the benefit conferred in excess of the other party's damages. 2. Contract is unenforcable: recovery depends on the nature of the benefit conferred. Specific restitution is available for recovery of tangible property. Where the benefit takes the form of goods or services, plaintiff is entiteld ot the value thereof, even in excess of the contract rate (except in cases of impossiblity-where the contract rate is the maximum). |
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CONTRACT REMEDIES
(What is the rule on compensatory damages in contract?) |
Compensatory damages are awards of money to protect a P's expectation interest. As with torts, dx must be causal, forseeable, certain, and unavoidable.
1. Foreseeablity: is tested at the time the contract is entered into (Hadley v. Baxendale) 2. Certainty: future profits of a new business are difficult to recover because they are uncertain. 3. A liquidated damages clause may limit the damages recoverable. Such provisions are valid provided it is shown that, at the time of contracting, acutal damages would have been extremely difficult to ascertain and the amount stipulated was a reasonable forecast of the actual harm. Otherwise, the clause is a penalty and proven actual damages will govern. 4. Unavoidable meand the P cannot recover damages that reasonably could have been mitigated. |
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Are punitive damages available in a K action?
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No.
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What is the rule on interest and attorney's fees in contract disputes?
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Prejudgment interest awards in contract are statutory and usually are granted only as to liquidated sums. Attorney's fees are recoverable if provided for by statute or contract.
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What is the rule on restitutionary remedies (quasi-contract)?
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The law imposes an obligation to pay for unjust gain received pursuant to an unenforcable contract.
Grounds for remedy: D's unjust enrichment most commonly results from mistake, fraud, material breach of contract, or performance of an unenforceable contract. A contract may be unenforcable because: 1. it is illegal; not in writing; discharged by impossiblity or frustration of purpose; or disaffirmed because of incapacity. How is benefit measured? 1. Material breach: nonbreaching party can recover the value of her performance, even in excess of the contract rate (most jurisdictions). The breaching party can recover the value of the benefit conferred in excess of the other party's damages. 2. Contract is unenforcable: recovery depends on the nature of the benefit conferred. Specific restitution is available for recovery of tangible property. Where the benefit takes the form of goods or services, plaintiff is entiteld ot the value thereof, even in excess of the contract rate (except in cases of impossiblity-where the contract rate is the maximum). |
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SPECIFIC PERFORMANCE
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Specific performance is a mandatory decree or injunction that orders a contracting party to perform that which he has promised to perform under the contract. The court may order specifc performance if (see next card).
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When will a court order specific performance?
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1. There must be a contract between the parties. For a true option contract to exist, it must be supported by consideration; otherwise, the "option" generally is considered to be a revocable offer. Also, the terms must be more definite and certain tahn in an action for money damages.
2. P must fulfill all her conditions under the contract, except for a few limited exceptions in which specific performance may be compelled upon full compensation being made for the default. -Legal remedy must be inadequate. Reasons vary with the type of contract sought to be enforced. Even a valid liquidated damages clause does not preclude the grant of specific performance-unless construed as a true alternative to performance (i.e. giving the party the option of performing or paying the stipulated amount). However, most liquidated damages clauses are inserted to insure performance, not as an alternative to performance. - Mutuality of remedy is not necessary: traditionally sp was only for d' who could have obtained like relief if p breached. Most states reject this view, requiring mutuality of performance- court must be satisfied tha tit can secure plaintiff's counterperformance under the contract (no problem where p has already performed). - Feasibilty of enforcement- usually only arise in personal service k's, land sale k's (where a party or land is out of state), and construction contracts. Defenses- Must not exist: Laches; Unclean Hands, Hardship (Sharp pracitices (inadeuacy of consideration that is either 1. grossly inadequate or 2. coupled with an unconscionable contract or "sharp practices" is a good defense. Adequacy of consideration is tested at the time of the contract. Subsequent hardship (e.g. discovery of oil after signing of land sale contract) is sufficient in the minority view, 2. Disproportionate Hardship: SP gen. not granted if enforcement of the K will cause hardship to D or public that greatly outweighs the harm that the P would suffer if SP were not granted. In such situations, the court will usually award the P dx in lieu of specific performance. 4. Mistake misrepresentation: Mistake or misrepresentaton of a type that results in hardship or baisis for rescission is a defense. |
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RECSISSION
(What are the procedures for recsission at law and equity?) |
Rescission cancels the contract where it results from mistake, fraud, duress, or wher the contract is materially breached. Rescission is usually accompanied by restitution of benefits conferred. Rescission can be legal (by action of the parties) or equitable (by court decree). Rescission functions to terminate the K and restore P to the consideration given by him to D.
1. Legal rescission: effected by P giving prompt notice and tendering back anything received under the K. Thereafter, P can seek restitutionary remedies of quasi contract or replevin. 2. Equitable Rescission: equitable rescission is appropriate (i.e. legal remedy inadequate) where court intervention is necessary. |
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What are the grounds for rescission?
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Rescission may be based on grounds making the contract voidable at the option of one party. Numerous grounds exist (illegality, impossibility of performance, lack of capacity), but mistake and misrepresentation are the most significant for exam purposes.
1. Mistake in formation of K: All courts grant rescission for mutual mistakes affecting the basis of the bargain (e.g. nature of subject matter). No relief for collateral or immaterial mistakes (quantity/quality) is available, although resulting hardship may serve as a defense to specific performance. The traditional rule denied rescission for one party's unilateral mistake unless the other party knew or should have known of the mistake. The modern trend is to grant relief for all unilateral mistakes going to the basis of the bargain where the hardship to the mistaken aprty outweights the detriment to the other party's expectations. And some courts grant rescission even absent a showing of hardship. Exam tip: Unilateral mistake is sometimes tested on the contracts section of the MBE. The examiners require you to know the unilateral mistake exception; although rescission generally is not available for a unilateral mistake, it will be available if the nonmistaken party either knew or should have known of the mistake. The favorite fact pattern contains a contractor's bid that is substantially lower than the other bids; the bid is so low that the other party should know its a mistake. 2. Misrepresentation: P can seek rescissio nupon a showng of actual reliance on a material misrepresentation of fact (see torts outline). |
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What are the defenses to rescission?
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Laches and Unclean Hands
1. Election of remedies: Dx and rescission remedies are inconsistent: Action for dx affirms the contract and, if sought first, bars subsequent suit to rescind. An action to set aside a contract (rescission) does not preclude a legal action (although P must elect one form of relief priro to judgment). Thus, if P first seeks dx, binding electio occurs at the commencement of the action; if P first seeks to rescind, no binding election occurs until entry of judgment. 2. Choice of substantive rights: Rescission is barred on an estoppel theory where P by word or conduct affirms the contract with knowledge of the facts justifying rescission. 3. N on Plaintiff: Normally, negligence is not a good defense for rescission based on mutual mistake. |
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What is the rule on cancellation?
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A written instrument that is voidable may be canceled if there is apprehension that the outstanding instrument may cause injury to a person entitled to void it.
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What is the rule on Reformation?
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Reformation is an equitable remedy for modifying a written instrument to reflect the parties' true agreement.
1. Valid original k: valid prior agreement free from grounds for rescission; reformation is not available if the K is ambiguous or incomplete, or if there is a mutual mistake as to the meaning of words in the contract. Reformation cannot be used to fill in terms required by the SOF- however a deed can be reforemed to conform to a sufficient memorandum. Exam tip: Don't confuse recission with reformation. With rescission, you are arguing that there is no K because there was no true "meeting of the minds." WIth reformation, you are arguin gthat there was a "meeting of the minds" but that the agreement is not accurately reflected in the written K. |
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What are the grounds for reformation?
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The underlying ground for reformation is that the writing does not conform to the parties' valid prior agreement, becaue of mistake or fraud. If the mistake relates to entering into the agreement in the first place, the case must be analyzed under rescission.
1. Mistake of fact: reformation is propoer if both parties mistakenly believed the writing conformed to their agreement ("scrivener's errors"). Similarly, it is approperiate if only one party knows that the writing does not conform. 2. Mistake of law: Reformation is proper to correct a written instrument because of mistake in teh legal meaning of the term used to incorporate the underlying agreement. 3. Fraud: an instrument fraudulently represented as incorporating the prior agreement of the parties may be reformed. |
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What are the defenses to reformation?
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Laches and sale of the subject matter ot a bona fide purchaser.
1. The parol evidence rule is not a defense. 2. The SOF is not a defense under the majority view. The minority view permits reductoin, but not addition, of land conveyed by written instrument. 3. Negligence by the P is (e.g. failure to read the instrument) is not a defense. |
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How do remedies apply to particluar contracts?
(contracts to buy and sell property) |
1. Dx: are usually an adequate remedy for K's to buy or sell personal property.
2. Specific performance: will be available if 1. the chattel is "unique" (because it is one of a kind or its impossible to secure replacement); or 2. damages are highly speculative (e.g. output contracts). |
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How do remedies apply to K's to buy and sell real property?
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DX: Where seller breaches a K to sell real property, buyer gets eitehr out-of-pocket loss or benefit-of-bargain, depending on the jurisdiction. Where buyer breahes, seller recoveres the difference between the market value and the contract price, plus consequential damages.
Restitution: Where there is fraud or material breach of K, P can rescind and get restitution of the benefit conferred. 1. recovery by buyer is offset by the value of the use of the land; recovery by seller is conditioned on restoring part payments (less dx suffered). 2. A defaulting buyer can recover payments made in excess of seller's dx (to avoid forfeiture). |
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What is the rule on specific performance in contracts to buy and sell real property?
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INADEQUACY OF LEGAL REMED:
Dx inadequate for buyer of realty because land is unique. Dx are inadequte for seller because seller wished to be rid of land and would have to bear the burden of finding a new buyer (EXAM TIP: be wary of questions describing a "generic" parcel of land and telling you that the seller is willing to give the buyer similar or bettwer land next door. All land is considered unique. Thus, simlar or better land is not a sufficient remedy. Grant SP to buyer. FEASIBILTY OF ENFORCING DECREE: 1. Suit by seller: Contempt for failure ot pay is not available in a suit by the seller (because of the prohibition against imprisonment for debt), but the decree is enforceable by levy of execution or foreclosure of seller's or grantor's lien. However, if buyer is not a subject to personal jurisdiction of the court, the decree is void, since it is an in personam order to pay money. 2. Suit by buyer: If the land is within the j, seller need not be-the court can effect conveyance itself. However, the court cannot directly effect title to out-of-state land (decree is then enforceable only by contempt (where d is subject to pj))- or by suing on the decree at the situs of the land (full faith and credit afforded). |
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SP in real property con't...
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Satisfaction of conditions:
1. marketable title: seller must be able to show marketable title (one reasonably free from doubt) to get specific performance. (ET: ON MBE, rembember that the duty to provide marketable title does not arise until closing. Thus, if the closing will result in marketable title (e.g. because the closing funds are used to pay off mortgate), there is no marketable title problem. |
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What is a time is of the essence condition?
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Time is of the essence conditions require performance w/in a specified time period (express/implied)
a. Wholly executory contract: where K wholely executory, a late p cannot get SP. b. Partly executory, equity may grant a defaulting buyer specific performance to provide relief from forfeiture- if payment is forthcoming within a resasonable time, seller's loss is slight, full compensation is tendered for the delay, adn enforceing a time condition is unconscionable. c. where time is not of the essence: where ther eis no time of the essence clause, relief will be granted if tender is made w/in a rx time and d is compensated for the delay. |
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What is the rule on tender of note by the buyer's assignee?
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Normally, tender of a promissory note by buyer's assignee is not fulfillment of the condition precedent (varies credit risk assumed by a seller). However, tender of a note secured by a purchase money mortgage in a state prohibiting deficiency judgments is sufficient- because principal security is land, not the buyer's personal credit.
4. Partial performance with abatemen (the doctrine of partial payment with an abatement in price arises where seller cannot fully perform. 1. seller sues: SP is granted to seller only if the defect in seller's performance is immaterial and buyer can be compensated for the deficiency. The determinative factor is buyer's intended use of the land. 2. Buyer sues: SP will be granted to buyer with abatement in the purchase price even if the defect is material- unless the deficiency is so large that the court would be "making a new contract." Buyer is allowed specific performance but no abatement where the selling price is based on income generated from land and income is unaffected by defect. |
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What are the defenses?
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1. SOF: if a contract for the sale of an interest in land is oral, SP will be denied.
a. Except: Part performance, specific enforcement is available where there is part performance by buyer consisting of possession plus payment or possession plus improvements (in CA, adverse possesion may be sufficient). Some court follow the evidentiary theory (acts are referable to the contract); others follow the hardship rationale- but under the hardship theory, seller cannot rely on buyer's acts of part performance 2. K's not performable within a year: If the K also violates the "one year" provision of the SOF the land section controls. 2. Other defenses: Other defenses to specific performance (e.g. laches, unclean hands, sale to BFP, etc.) apply to land sales contracts as well. |
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What are problems of equitable conversion?
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Problems of equitable conversion arise only ehre the is a specifically enforceable contract for the sale of land.
1. nature of the interests: the ec docrine holds that when a K is entered into, buyer becomes the equitbalbe owner of real property and teh seller becomes the owner of personal property (right to payment of purchase price secured by legal title to land). 2. Death of a party: 1. seller dies: title goes to person entitled to seller's real property, while the right to price goes to the person entitled to seller's personal property. Buyer must join seller's administrator and heir in suit.; 2. Buyer dies: If buyer dies, his interest in the land goes to the perosn entitled to his real property. Seller must join buyer's administrator and heir in suit.; 3. Both die: all fourt parties (adminstrators and heirs) must be joined for specific performance.; 4. Option to buy land: Maj. ECdoes not occur until an option is excerciesed; Min. EC relates back to time option K was executed. |
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What is the rule on destruction of/dx to property- risk of loss?
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If property is accidentally damaged or destroyed, the majority holds buyer liable for purchase price, since buyer is equitable owner from the time the contract is executed. Minority View/Modern Trend (Uniform Vendor and Purchaser Risk Act); Risk of loss shifts to buyer only when buyer has possession of legal title.
4. Rule on Ins. Proceeds: If seller obtains ins. proceeds after the risk of loss passed to buyer, most courts impose a CT on the proceeds for the benefit of the buyer. Parties may contract with regard to disposition of proceeds. |
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What is the rule on tender of note by the buyer's assignee?
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Normally, tender of a promissory note by buyer's assignee is not fulfillment of the condition precedent (varies credit risk assumed by a seller). However, tender of a note secured by a purchase money mortgage in a state prohibiting deficiency judgments is sufficient- because principal security is land, not the buyer's personal credit.
4. Partial performance with abatemen (the doctrine of partial payment with an abatement in price arises where seller cannot fully perform. 1. seller sues: SP is granted to seller only if the defect in seller's performance is immaterial and buyer can be compensated for the deficiency. The determinative factor is buyer's intended use of the land. 2. Buyer sues: SP will be granted to buyer with abatement in the purchase price even if the defect is material- unless the deficiency is so large that the court would be "making a new contract." Buyer is allowed specific performance but no abatement where the selling price is based on income generated from land and income is unaffected by defect. |
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What are the defenses?
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1. SOF: if a contract for the sale of an interest in land is oral, SP will be denied.
a. Except: Part performance, specific enforcement is available where there is part performance by buyer consisting of possession plus payment or possession plus improvements (in CA, adverse possesion may be sufficient). Some court follow the evidentiary theory (acts are referable to the contract); others follow the hardship rationale- but under the hardship theory, seller cannot rely on buyer's acts of part performance 2. K's not performable within a year: If the K also violates the "one year" provision of the SOF the land section controls. 2. Other defenses: Other defenses to specific performance (e.g. laches, unclean hands, sale to BFP, etc.) apply to land sales contracts as well. |
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What are problems of equitable conversion?
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Problems of equitable conversion arise only ehre the is a specifically enforceable contract for the sale of land.
1. nature of the interests: the ec docrine holds that when a K is entered into, buyer becomes the equitbalbe owner of real property and teh seller becomes the owner of personal property (right to payment of purchase price secured by legal title to land). 2. Death of a party: 1. seller dies: title goes to person entitled to seller's real property, while the right to price goes to the person entitled to seller's personal property. Buyer must join seller's administrator and heir in suit.; 2. Buyer dies: If buyer dies, his interest in the land goes to the perosn entitled to his real property. Seller must join buyer's administrator and heir in suit.; 3. Both die: all fourt parties (adminstrators and heirs) must be joined for specific performance.; 4. Option to buy land: Maj. ECdoes not occur until an option is excerciesed; Min. EC relates back to time option K was executed. |
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What is the rule on destruction of/dx to property- risk of loss?
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If property is accidentally damaged or destroyed, the majority holds buyer liable for purchase price, since buyer is equitable owner from the time the contract is executed. Minority View/Modern Trend (Uniform Vendor and Purchaser Risk Act); Risk of loss shifts to buyer only when buyer has possession of legal title.
4. Rule on Ins. Proceeds: If seller obtains ins. proceeds after the risk of loss passed to buyer, most courts impose a CT on the proceeds for the benefit of the buyer. Parties may contract with regard to disposition of proceeds. |
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What is the rule on Construction contracts?
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Dx:
1. Owner Breach: When the owner breaches a construction contract, the builder recovers lost profits if the contract is wholly executory; he recovers the contract price if the contract is completed or the contract price less cost of completio if the contract is partially performed. 2. Builder Breach: Where the builder breaches but ahs substantially performed, the owner recovers the cost of restoratin unless this would produce economic waste- in which case recovery is limited to dimiunition in value. If the builder is sin material breach, the owner gets the cost of completion less payments due, plus compensation for delay. 2. Restitution: If the owner breaches, the builder can rescnd and recover the value of the benefit conferred not entiteld to restitution (no payment made in excess of benefit received). Today, a breaching builder can generally get restitution of benefits conferred in excess of the owner's damages (limited to K rate). 3. SP: supervision problems traditionally precluded SP. Today, courts are more willing to overlook feasibility problems. |
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What is the rule on Personal Service Contracts?
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!. Dx: If an employee breaches, the employer recovers the costs of obtaining a replacement. If the employer breaches, the employee gets wages due or promies, less avoidable damages. Recent cases find wrongful dismissal of an employee be tortious, so the employee may recover lost wages, emotional distress and punitive dx.
2. Restitution: If the employer breaches, the employee is entitled to the reasonable value of the services rendered (even in excess of the contract rate). If the employee breaches, the employer can get restitution of paid but unearned wages. The breaching employee can recover the value of services rendered up to the contract rate (but if breach is willful, deduction is made for employer's damages). |
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Personal services contracts continued...
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SP: Dx are inadequat eonly if services are unique. Feasibility problems generally preclude specific performance, because there is no way to compell "best efforts," and the decree would amount to "involuntary servitude." However, the K may be enforced indirectly in negative covenant caes.
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What is the rule on Negative Covenants during term of employment contract?
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The court may specifically enforce an employee's promise not to work for another.
1. Existence of negative covenant will be implied by modern courts if the employee promised full-time or exclusive services. 2. Inadequacy of damages must be shon (dx must be unique) 3. Feasibility is not a problem since the court merely enjoins the employee from accepting other employment 5. Conditions: to the employee's performance must be satisfied- i.e. employer must furnish proper place to work and pay promised wages. 6. Defenses: Include those available against SP. Injunction will be dissolved if employer is not ready, willing and able to accept D's performance. |
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What is the rule on Negative Covenants after Termination of Employment (covenants not to compete)
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These are defined as promises in employment contracts (or contracts for sale of business) that restrict the employee from competing during or for a certain period following employment.
a. Dx. are an adequate remedy whre the employee's services are ordinary, but not where the services are unique or where trade secrets or goodwill are involved. 2. Injunctive relief is appropriate where damages are inadequate and restriction is reasonable as to time and place and no broader than necessary to protect the employer. Liquidated damages do not preclude injunctive relief. Blue pencil rule is applied by some courts; allows an overbroad covenant to be enforced to the extent reasonable. Other courts hold such covenants void as illegal restraints of trade. Courts are less flexible in finding reasonableness where the covenant bars an employee from competing after termination of employment. |
