Stephanie Burke

Remedies OutlineProfessor Sanchez

MODERN LAW OF DAMAGESo Damages are legalo Substitutionary reliefo Are always awarded in the form of moneyo Measured by Plaintiff’s loss (as opposed to restitution which is measured by

Defendant’s unjust enrichment – NEVER award damages for unjust enrichment)

Overview of Kinds of Tort Damages:

1. Compensatory : is an amount to make the P whole by compensating him for actual losses where a tort is involved or for his lost expectancies if the relationship was a consensual one. o In tort cases, the injury must be the proximate cause of the damages and the

P is entitled to all compensatory damages proximately caused by the tort. It is an amount which will restore the P to the pre-tort status (backward looking)

o In contract law, compensatory damages is an amount that will put the parties in the position they would have been in had the K been performed. A term that encompasses both general and special (consequential) damages, but excludes punitives. The P is entitled to all compensatory damages foreseeable at the time the K was entered into.o General damages: (non-economic) – these do not have to be specially

pled. They naturally arise from the tort or breach of K – includes such elements as pain and suffering, loss of enjoyment of life and lost earning capacity, disability and disfigurement.

o Special (consequential) damages: must be specially plead to be recoverable; include such damages as loss of earnings (wages) and medical costs. Special damages are synonymous with consequential damages or indirect damages (while general damages are direct)

To be recovered, special damages:1. cannot be too remote from the injury2. there must be a causal relationship (But for) between the

injury and the damages3. they must be proven with a reasonable degree of certainty

o Tort: restore P to pre-tort status (backward looking). P is entitled to all damages proximately caused by the tort.

o Contract: amount to put the parties in the position they would have been in had the K been performed. P is entitled to all damages foreseeable at the time the K was entered into.

o Economic = measured by pre-tort life expectancyo Non-economic = Post-tort life expectancy

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2. Nominal damages : These are awarded in certain cases where there is no specific harm and only the establishment of a right is involved. Usually, the P does not seek only nominals, but the court after finding no compensatory damages awards these. A token amount awarded for some torts (trespass to realty and conversion) and for some breaches of contract.o Certain causes of action require proof of actual damages, so nominals cannot

be awarded. Thus, not awarded for fraud, negligence, or trespass to chattels because injury is part of the prima facie tort (i.e., without the injury, there is no tort).

3. Punitive Damages (exemplary) : are considered non-compensatory damages. Are imposed to punish or deter and are awarded bc the D has acted in a manner which exceeds the normal standards of decent conduct between the individuals. o Showing of actual malicious and wanton conduct required – i.e., must show

that the D acted with malice or reckless disregard. o An award over and above compensatory damages. o In many states, the case for punitive damages must be proven by clear and

convincing evidence. o Without compensatory damages, there can be no punitive award. No

punitives if only nominals are awarded. o Most likely get them for intentional torts (not in K, unless and with the

exception of bad faith). o Can get it under damages or restitution.o Emotional Distress Damages : usually awarded in intentional torts, mostly

nuisance

4. Liquidated Damages : an amount agreed upon by the parties to a K, contained in the contract and is awarded in lieu of actual damages. Disfavored in the law; if a liquidated damages clause is struck down as a penalty, the P must prove actual damages.o A valid liquidated damages clause reflects:

o 1. That at the time the K was entered into, it was next to impossible to estimate what damages would be in the event of breach; and

o 2. The amount agreed upon is the best estimate of what those damages would be and is reasonable

o Not awarded in tort actiono First look or second look (the amount in the clause must be reasonable at the

time of the contract formation and the time of breach)

5. Interest : usually governed by statute. Not granted on any amount of bodily harm, emotional distress, or for injury to reputation.o Pre-judgment: is measured from the time the claim was due until judgment

entered. Need to be certain as to amount owed for breach of K, not in tort, because the sum is more likely known (i.e., the sum is liquidated/certain in

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amount) amount owed between date cause arises and date judgment is entered by the court (amount owed must be liquidated – definite and certain) Not entitled to pre-judgment interest in PI suits because the amount is not known. Most common in K cases. Discounting decreases plaintiff’s recovery

6. Attorney Fees : not available unless provided by statute or K. There is no blanket authority for the recovery of attorney fees. American Rule provides that each side pays for their attorney fees. Exceptions: class action suits.

7. Rules affecting recovery of Damages :a. Avoidable consequences rule – (mitigation of damages – steps the

injured party can take to reduce or eliminate damages – way of reducing P’s recovery) says P cannot recover any special damages which he could have avoided by reasonable acts expenditure. The theory behind this rule is that of economic waste and the D has the burden of proving that the P should have minimized. It applies to both torts and K.

b. Collateral Source Rule – (only invoked by P) unlike the above, it may work to the detriment of the P, it may work to his benefit provided that the P receives benefits from a source collateral (insurance) to the D in either tort or K. D cannot use this source to reduce his liability for damages, unless the collateral source came from the D himself. (to increase P’s recovery)

c. Liquidated damages – contracting parties can agree on a method for determining damages in the event of a breach of K. This is usually done where the damages are very difficult to determine and the amount agreed upon is a reasonable forecast of just what the damages will be. There are valid unless the court decides them to be a penalty. Penalty would be where the amount agreed to is unreasonable and grossly disproportionate to the actual losses.

d. Economic Loss Rule – absent contract or injury to person or property, P may not recover in negligence for economic loss. This is a policy argument; limits liability and based upon the level of culpability (i.e., negligence is a low level of culpability)

e. Proximate Cause Limitation in Tort Cases – an injured person is entitled to be compensated for all injuries proximately caused even if those injuries could not have been foreseen by the wrongdoer and even though the injury is increased by plaintiff’s particular condition. Proximate cause relates only to the issue of liability, i.e., it does not act as a limit on damages.

f. Consequential Damages Limitation – The rule of Haley v. Baxendale: the rule limits special damages in breach of K cases to those arising naturally from the breach or within the reasonable contemplation of the parties at the time the K was made.

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WAYS OF MEASURING DAMAGES:1. Cost to repair (most often associate with torts)2. Diminution of value (most often associate with torts) – this is the difference

between the pre-tort and post-tort value of the property1. If both cost to repair and diminution of value both yield zero then the P is

entitled to nominal damages2. Quasi contract

3. Rental value (can be a measure of damages or quasi-K)4. Lost business profits (often challenged as too speculative (means you lose) unless

such damages can be established with reasonable certainty like mediation.) 5. Contract damages: aims at putting the parties in the position they would have been

in had the K been performed.a. out of pocket damages:b. benefit of the bargain: diff btw KP and the FMV of Property at the time of the

breach (majority rule for breach of K)6. Fraud damages – (often measured in either of two ways)

a. Out of Pocket: difference btw K price and FMV of goodsb. Benefit of the Bargain: diff btw FMV and the Value property would have had the

representation been true7. Conversion damages: (also known as forced sale) are almost always measured by

the fair market value of the property at the time and place of the conversion. When the judgment is paid, title vests retroactively in the D, court splits over whether P is entitled to pre-judgment interest

o Restitution and damages are mutually exclusive – cannot get both restitution and expectation damages

o For rescission, have to show a material breacho For specific performance, have to show an inadequate remedy at law (usually

uniqueness – land Ks)o The law of K recognizes three interests:

1. Restitution /rescission – D’s unjust enrichment. You get back what you paid

2. Reliance (out of pocket and consequentials) – loss from relying on duty of other, not related to the other party

3. Expectations (damages or specific performance) – P’s loss. What did they expect from the deal

Existence v. amount of damages: Existence goes to the COA (causation); Amount goes to the remedy

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THE NATURE OF LEGAL DAMAGES:

GAVCUS V. POTTS (17): COA: trespass to realty and conversion (stepdaughter came into the house and took valuable coins). Remedy: Damages. No physical injury to property proven so no direct damages.

Trespass to land is the unauthorized physical entry into the land of another: actual damages not required. Indirect and direct need to be proven. Nominal damages allowed.

Conversion of chattels -- intentional, substantial and unreasonable interference with the personal property of another. Do not have to show actual damages. P’s option is of forced sale or return of property.

o Common law rule American Rule with regard to attorney’s fees – each party pays their own attorneys fees

o Indirect damages of mental distress not proven.

o No punitives w/o compensatory damages, i.e., must prove actual/compensatory damages to obtain punitives.

o Exception to American Rule: Attorney fees recoverable if prior litigation was between P and a 3rd party and prior litigation was the proximate result of Ds wrongful act.

o Could also recover consequential damages which are the natural and proximate result of the trespass (need proof/evidence of mental distress by either a physical or mental manifestation)

o injunction is always a remedy you associate with a trespass to chattels (injunction prevents future harm)

o Emotional distress is available as special damages in a trespass to realty case

o Two traditional measures of tort damages - Cost to repair and diminution of value

5 Remedies Associated with Conversion1. Replevin – legal restitution 2. Damages3. Quasi contract4. Constructive trust

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5. Equitable Lien

PROOF OF THE EXISTENCE OF DAMAGES

DURA PHARMACEUTICALS Inc v. BROUDO (20)COA: Securities Fraud: intentional (with wrongful state of mind) material misrepresentation in connection w/ sale of security, w/ reliance. Is claim sufficient? Plaintiff purchased stocks; D omitted known facts in sale, and P relied. Economic loss and loss causation sufficient to send to trial.

o Damages are a substantive element of the COA. No actual damages, no award of damages. Damages go to COA. Amount of damages goes to the remedy. Once you prove the existence, law makes it easy to decide amount.

o Whenever unjust enrichment is the COA, some sort of restitution will be the remedy

o Damages are measured by P’s loss

o Prima Facie Case of Fraud 1. Scienter

Affirmative lie Active concealment Silence (where there is a duty to speak)

2. A Material misrepresentation of a material fact 3. Reasonable Reliance4. Causation 5. Injury

YOUST v. LONGO (25) - Horse Race Case.

COA: Intentional Interference with Prospective Economic Advantage must prove “reasonable probability” but for the Ds conduct. “Proof that it is reasonably probable that the lost economic advantage would have been realized but for the Ds interference.”

Prima Facie Case for Intentional Interference with Prospective Economic Advantage:

2 Parts to an Injury1. The existence → goes to the COA2. The amount → this goes to the damages

Compensatory and punitive damages were sought (because sought punitive also this is an intentional tort). Substantial certainty or high probability of success. Causation was the issue in this case as opposed to the amount of the remedy.

o Plaintiff has the burden of proof by preponderance of the evidence standard; this is the most often cause of p’s losing.

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o Courts are stricter in what is required to prove COA; but more lenient where it comes to the amount of damages.

Thus, there must be proof sufficient to establish a probability of loss although it is usually not necessary to prove the amount of damages with mathematical certainly. The certainty requirement is most often controversial in loss of profits cases. A claim for future damages requires proof that there is a better than 50-50 change that such damages will occur.

Levels of Culpability 1. Intentional2. Reckless, willful and wanton3. Gross Negligence4. Negligence5. Strict Liability

HENRY v. DOW CHEMICAL COMPANY (30)Client negligently released Dioxin, can result in horrible illness, death. P is class that lives & works there. Can take years after exposure to show illness. No member of the class is presently ill. Is fear of future illness itself an illness? Have to have a physical illness for case to proceed.

COA: personal injury (negligence) (needed to prove “more likely than not you will get illness)

Negligence can occur in 3 ways → negligence resulting in injury to:1. People –

a. Personal injuryb. Wrongful deathc. Survival actions

- The only remedy is some form of damages2. Personal property3. Real Property

Prima Facie Case for Negligence → Duty, breach, causation, injury (damages)

REMEDY: Damages, Medical monitoring (equitable remedy – like an injunction which is to prevent future harm, medical monitoring is also in place to prevent future harm) ISSUE:

o Injuries are in prima facie case (negligence) – no nominal, no punitive

o The injury was too speculative, therefore no recovery. Must be able to show that risk is more probable that not (>50%). No nominal’s in negligence w/o actual injury.

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o Once a Dr determines that a member of the class is in early stages of the illness, it’s equitable because it prevents further injury – then remedy is medical monitoring

o Tort damages are backward looking – they put the plaintiff in the position they were in before the tort occurred

o Contract damages are forward looking – to put the parties in the position that they would have been in had the contract been performed

o Dissent: Injury is emotional distress. Policy reason for imposing limitations on Dow’s liability: level of culpability

PROVING THE AMOUNT OF DAMAGES

LOST BUSINESS PROFITS: proof required for these damages

ATKIN WRIGHT: Telephone number problem – COA: negligent interference with prospective business relationships; remedy sought was general and punitive damages. P did not prove lost income was caused by D’s intercept. Here, it was all too speculative, there was no proof of 3 months of lost net income

o Negligence is a sort of midlevel culpability o Must prove injuryo Nominal damages not available

Requirement of Certainty: means that in order to recover damages, there must be sufficient proof to show that P actually suffered some damages.

Uncertainty of Amount: is not fatal. Courts have held where the fact of damage is certain, the exact amount therefore need not be.

LOST CAPACITY TO EARN .

WASHINGTON v. AMERICAN COMMUNITY (48): COA: personal injury (negligence stemming from a car crash); liability is not an issue.

Remedy: damages (divided into special and general): economic: lost earning capacity is special as is medical bills while pain and suffering and loss of enjoyment of life fall under general. Was a wrestler with an outstanding record. There was sufficient evidence to award lost earning capacity.

GENERAL DAMAGES (non-economic)Loss of earning capacity is distinct from loss of wages, salary or earnings, is a separate element of general damages. Impairment of earning capacity is an item of general damages and proof may be had under general allegations of injury and

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damage. Proof of an actual loss of earnings or wages is not essential to recovery for loss of earning capacity. Recovery for loss or diminution of the power to earn in the future is based upon such factors as the plaintiff’s age, life expectancy, health, habits, occupation, talents, skill, experience, training, and industry. What if the forced circumstances result in greater future earnings, does it cancel out recovery?

SPECIAL DAMAGES (economic) – They must be specifically plead 1. Medical Bills2. Loss of past earnings is an item of special damages and must be specifically

plead and proved.o Lost earnings refers to actual track record of worko Special must be plead specificallyo General do not have to be pleado What facts give rise to a lost earning capacity in a hypo: students for instance

Can you recover for loss of earnings and lost earning capacity? o you may be able to recover under both

General Damages Special Damages Pain and suffering Medical bills Lost earning capacity Lost earningsLoss of enjoyment of life

CHILDS v. U.S.COA: wrongful death under the Federal Tort Claims Act and Georgia’s Wrongful death statute. Remedy: damages (funeral and medical expenses are not at issue)

o economic value on the loss associated with decedents’ deaths based upon their lost future income, fringe benefits and household services; these amounts must be discounted because can be invested. Court held that it may consider the economic losses as well as any non-economic intangible losses.

3 Causes of Action1. Personal injury2. Wrongful death (by statute)

o the plaintiffs in a wrongful death claim are the dependents of the decedent3. Survival action (by statute)

o the plaintiff is the estate of the decedent and will recover whatever the decedent would have recovered had he or she not died

Damages Available in a Wrongful Death Case1. Support – lost earnings2. Services – care of the home: cooking, other household chores3. Society – companionship

In valuing the decedent’s lost future income, all experts used the following four elements in making their calculations:

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(1) Base-year or entry level income – the decedents initial actual or projected before-tax income

(2) Income growth rate – the income growth rate reflects the fact that the base-year income will grow over time as a result of inflation, productivity gains and progression in one’s career

(3) Work life expectancy – the probable length of time a person would have remained in the workforce, taking into account periods of voluntary and involuntary employment

(4) Discount rate – because income earned in the future is less valuable than income earned today, the discount rate is used to calculate the present value of a decedent’s future income loss.

In addition to these elements, the doctor’s appraisals included two other elements: personal tax offset and personal expense/consumption offset. These elements simply reflect the fact that some portion of the decedent’s income would be lost to the decedent’s personal consumption and to income taxes.

Discounting: Future economic damages are discounted to present value (not non-economic) (past damages because they have already accrued are not subject to discounting) (typically, discount rate is 6%). Some courts exercise total offset rule – interest rate cancels out inflation. District Court retains discretion.

NON-ECONOMIC LOSS: an injured party may recover for past, present, & future non-economic losses. These losses are generally referred to as general damages, whereas economic losses are referred to as special damages.

Physical Pain: P is entitled to recover for pain and discomfort caused by injury. No guidelines. The jury must merely determine what is adequate compensation.

Loss of Enjoyment of Life: Many cases say it is not a separate claim from pain and suffering. Modern trend is to allow this as a separate element of damages in addition to whatever other pain and suffering is proven. Important: loss of enjoyment of life is not a separate item of damages from pain and suffering; it is one element for calculating pain and suffering – for exam

PAIN AND SUFFERING

What is included in pain and suffering? (components)(1) the victim’s anguish and terror felt in the face of impending injury and death(2) the victim’s tangible physiological pain at the time of injury and during

recuperation(3) the victim’s enduring loss of enjoyment of life as one who is denied the pleasures

of normal personal and social activities because of his permanent physical impairment

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(4) the ALI report also classifies as pain and suffering what others call the derivative damages category of consortium, “the immediate emotional distress and long-term loss of love and companionship resulting from the injury or death of a close family member”

LOTH: COA negligence (personal injury action)Remedy: damages (general, P&S)

o Issue – Is loss of enjoyment of life to be considered a factor in calculating P&S or is itself a separate element of recovery? It is merely one factor that can be taken into consideration in calculating pain and suffering. One of the main reasons behind this is to prohibit double recovery.

Golden Rule Argument – (inadmissible) – if you had the plaintiffs injuries how much would you like to be compensated?Per Diem Argument -

McDOUGALD: COA: negligence (personal injury action)o Remedy: damages. -non-economic/non-pecuniary/general damages - P’s

awareness is relevant in calculating damages for loss of enjoyment of life – Plaintiff was in a persistent vegetative state. Experts differed as to whether she was aware of her pain and suffering

- Non-pecuniary damages should be considered together.

o Cognitive awareness is a prerequisite to recovery for recovery for loss of enjoyment of life (equally with pain and suffering - if you can’t feel it, you can’t recover for it)

o Need some level of awareness to recover for pain and suffering – if you cannot feel pain then you cannot recover

o The majority says that loss of enjoyment of life is recoverable as an element for pain and suffering

THE DIVERGENCE BETWEEN TORT AND CONTRACT IN LIMITING DAMAGES

Foreseeability limits contract damages; foreseeability is measured when K is formed (Hadley v. Baxendale)

Proximate cause limits tort damages

EVRA: COA: negligence; Remedy: damagesThis case deals with consequential damages (special, indirect, etc.)The rule of Hadley is that consequential damages will not be awarded unless the D was pit on notice of the special circumstances. This case is not the majority rule bc Posner is trying to use “foreseeability” in a tort case (as opposed to proximate cause) to limit/deny damagesPosner puts the burden on the party who is in the best position to limit liability (i.e., avoidable consequences) (like saying the P was contributory negligent)

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o Contract liability is strict

Doctrine of Avoidable consequences: cannot recover damages for things he was in the best position to know and to limit the loss; reasonable steps injured party can take to lower/limit damages (e.g., that party can insure against the loss, can inform the other party of the importance, etc.)

WHERE DO TORT DAMAGES END – ECONOMIC LOSS RULE

STERN – MAJORITY RULECOA: negligence & strict liability; Remedy: damages; Here, Ps lost because the court invoked the economic loss rule P’s were employed at a hotel that burned down. They brought class action against those involved in the design and construction of the hotel to recover lost salary and employment benefits for the period Ps were unemployed due to the fire. Ct held that a defendant will not be liable for economic consequences of an unintentional negligent act.

Economic Loss Rule: absent contract or injury to person or property, P may not recover in negligence for economic loss. This is a policy argument; limits liability and based upon the level of culpability (i.e., negligence is a low level of culpability)

Economic losses are recoverable in negligence and in intentional torts

J’AIRE CORP – MINORITY RULECOA: Negligence -- interference with prospective economic advantage.Remedy: damages (economic losses)Here, clearly foreseeable that delay in construction would injure Ps businessRULE: Ps interest in prospective economic advantage may be protected against injury occasioned by negligent as well as intentional conduct (minority rule)Thus, economic losses may be recoverable in some situations where the harm is foreseeable by a reasonable defendant

RARDIN - COA: tortious conduct in contractual setting; Case for lost profits. Court didn’t allow saying that the buyer, here, could have protected himself; that the machine repair people did not have a duty to the buyer (there was no privity of K), and there was no foreseeability.

BRIGHT- COA: negligence – personal injuryRemedy: damagesThis case raises avoidable consequences doctrineRULE: no recovery for damages that could have been avoided by using means which a reasonably prudent person would have used to cure the injury

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Doctrine of Avoidable Consequences: Duty that is imposed upon the injured party to take reasonable steps to limit their injuries, i.e., a duty to mitigate.

o If successfully invoked then it decreases the amount of recovery

Eggshell Skull Doctrine – take your plaintiff as you find him (doesn’t apply to religion) the scope is only to physical injuries Majority rule is to use the reasonable person test (not the reasonable Jehovah’s witness)

o The court may ask about the sincerity of your religious beliefs

Collateral Source Rule: (i.e., separate from the D) States if an injured party receives some compensation for his injuries from a source wholly independent of the tortfeasor, such payment should not be deducted from the damages which the plaintiff would otherwise collect from the tortfeasor

o if successfully invoked then it increases the plaintiffs recovery

Collateral Source Rule ( for exam) : Aids the plaintiffIf successfully invoked, it doesn’t reduce Ds liability (and may result in double recovery) (but, it is not really double recovery because the P must pay his attorney and be subject to subrogation clause, where insurance gets reimbursed from what you collect in damages)

Medical Malpractice Claims can be brought in 2 COA’s(1) Negligence(2) Breach of Contract

PUNITIVE DAMAGES: These are damages above and beyond compensatory ones. They are non-compensatory damages intended to deter or punish must prove by clear and convincing evidence that D acted with express or implied malice.

Contract Cases: Punitive damages are not awarded in breach of K cases, no matter how willful the conduct, unless an independent tort is also present

Standards for punitive damages Malice – defined as ill-will (implied = outrageous) Both express and implied constitute actual malice

TYPES OF MALICE1. Express: ill will2. Implied: where deliberate conduct by D, although motivated by something other

than ill will, is so outrageous that malice toward a person injured as a result of the conduct can be implied

3. Actual:

o Punitive damages are taxable

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o Punishment is for past actso Deter is for future acts

Can you insure against punitive damages? Majority rule is that you cannot

Arguments for/against punitive damages:PRO: deter behavior, no double jeopardy, CON: criminal law punishes, not tort law, double punishment, windfall to P, invites abuse, no objective standard.

TUTTLE: P was seriously injured when D’s vehicle struck hers after running a red light at an excessive rate of speed. The ct held that it will recognize punitive damages. The doctrine survives b/c it continues to serve the useful purpose of expressing society’s disapproval of intolerable conduct. Mere negligence is not enough, must show wanton, malicious, reckless, or grossly negligent conduct.

The court used two different standard’s of proof – clear and convincing v. preponderance. What level of culpability is sufficient to award punitive damages? This court says that the plaintiff must show actual malice by clear and convincing evidence.

1. Malice2. Intent3. Wanton/Willful4. Reckless5. Gross Negligence6. Negligence7. Strict Liability

BMW: fraud in the inducement. One of 3 torts for which you need to prove injury to prove tort. This rules out nominal damages. BMW failed to disclose to consumer of new car that it had been damaged and repainted before being sold. Ct held that punitive damages may be properly imposed to further a state’s legitimate interest in punishing unlawful conduct and deterring its repetition. SCT also held that only when an award is grossly excessive is it arbitrary and in violation of the due process clause.

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FRAUD IN THE INDUCEMENT OF A CONTRACT requires1. Scienter – means knowledge of falsity (knowledge that what you are saying is

false) (either non-disclosure (which can be active or passive) or affirmative misstatement)

2. Material misrepresentation of a material fact3. Reasonable reliance4. Injury (requires injury to prove the tort and therefore nominal damages are not

available)

What Standard does the Court set for determining when an award of damages violates due process?Factors to determine whether an award of damages violates due process

1. Reprehensibility of the injury2. Ratio of 10 to 1 means punitive to compensatory (if punitive damages are less

than 10 times the compensatory it is a rebuttable presumption that the amount is constitutional)

3. Compare the punitive damages to the comparable civil penalties

o What is the standard courts use to determine whether to overrule a jury award for punitive damages? whether it shocks the conscience of the court – passion, prejudice, partiality

o Compare the civil penalties with the criminal penalties as a way to determine whether they are excessive

What is the difference between tuttle and bmw? Tuttle is the common law limitations on punitive damages and this BMW represents constitutional limitations on punitive damages

MATHIAS Recklessness/willfulness/wantonGross negligence

o Compare the compensatory damages to the punitive damages to determine whether they are excessive – if they are greater than 10 to 1 then they are considered presumptively violative of due process

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ATTORNEY FEES

NILSEN v. York Co. American Rule: Each party bears its own attorney fees

Exceptions are:1. Statutory fee shifting – left to courts discretion and supervision,

most commonly found in civil rights statutes2. Judicial doctrines – common law – ct decides attorney’s fees

(typically the higher the fees, the lower %)a. Bad faith litigationb. Common fund doctrine – left to courts discretion and

supervision. A reasonable fee based upon a percentage of the fund bestowed upon the class.1. Percentage of the Fund: (Majority Approach) -- reasonable

percentage standard (under statutes) reflects the amount of attorney time reasonably expended on the litigation. Courts have used between 19% - 45%.

2. Lodestar method: hours worked x reasonably hourly rate and court adjusts that figure to reflect the contingent nature of the litigation

3. Contracts which stipulate for fees to non-breaching party

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TORT REFORM

BEST v. TAYLOR: Legislature wanted to limit non-economic damages (pain and suffering/lost earning capacity, etc.). This is a form of “Legislative remittitur” – and it encroaches on the judiciary because it is a judicial duty to cap or reduce excessive verdicts. that the court said the law is arbitrary is evidence that the court is using rational basis analysis

INTRODUCTION TO EQUITABLE REMEDIES As opposed to the legal remedy of damages, equitable remedies are:1. Specific and direct orders to D to perform or to remedy the harm2. Preventive3. Discretionary4. Flexible and fair because they are adapted to the particular case; and5. Enforced by coercive measures directed against the person, rather than by judgment

agent the person’s property6. No jury when court issues equity

3 types of Injunctions1. Temporary Restraining Order – this one can be issued ex parte meaning that it

can be issued with only one part present in court o in most states the TRO expires in 5 days

2. Preliminary Injunction (unless he says otherwise discuss the requirements for a preliminary injunction)

a- Plaintiff must prove by preponderance of the evidence the likelihood of success on the merits

b- A showing of irreparable harm – meaning that the legal remedy of damages is inadequate

c- The balancing of the hardships d- Issuance of the injunction will not disturb the public interest

3. Permanent Injunction

Equitable Remedies (just a few)1. Reformation2. Injunction3. Specific performance4. Rescission

Tort Remedies: injunctionsRestitution/Unjust Enrichment: Constructive trust, equitable lien, subrogationContract Remedies: specific performance, rescission (quasi-contract), reformation

Jurisdiction v. Equity Jurisdiction

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Subject Matter Jurisdiction- local action rule

Personal Jurisdiction

- The Power

- The propriety

- inadequate legal remedy

An injunction issued by a court that lacked jurisdiction is void.

The Local Action Rule → A court in state A lacks subject matter jurisdiction to determine issues of title or trespass to real property located in another state (state B). Equitable Jurisdiction: distinguished from power. Even if the court has equity power, the court must have primary jurisdiction over the subject matter and the parties or res. Furthermore, to grant equitable relief, the court must find that the legal remedies are inadequate and generally, that the equitable remedy sought is the effective and enforceable.

Equitable Jurisdictiono no adequate remedy at law (if you can show irreparable harm then you have

proved that there is no adequate remedy at law)o no jurisdiction to enjoin a criminal prosecution (see below)o Most important use is to protect civil liberties

Conditions of Equitable Relief: There must be no adequate legal remedy and certain other conditions must be satisfied.

Inadequate Remedy at Law: Some examples of cases where courts found an inadequate remedy at law are when D threatened with multiple prosecutions under a clearly unconstitutional statute, insolvency of the defendant, if the item is unique, are ways of showing that there is no adequate remedy at law.

Tort Cases: Before an injunction, a court will balance the equities and consider the feasibility of enforcement of the injunction.

INJUNCTIONS

In Rem = over the subject matterIn Personam = court has jurisdiction over the parties

Law acts in rem Equity acts in personam

o If D does not do what equity requires, then it can be enforced by contempt

Important: Equity courts issue decrees v. Law courts issue judgments – this is important because the FFC only applies to judgments

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Local Action Rule: deals with real property and says a court in state A cannot award damages with regard to a trespass or a title issue regarding land in state B (if a court does, then its judgment is void) v. transitory

TABOR – Decree prohibiting foreign lawsuits: Two cases in two different states over the same subject matter. When may a court in one state enjoin a foreign court proceeding? Rule: rarely and only if the foreign proceeding will be likely to result in fraud or oppression. “It is only where it clearly appears that the prosecution of an action in a foreign state will result in a fraud, gross wrong or oppression, that a court of equity will interfere with the general right of a party to press his action in any jurisdiction in which he may see fit and in as many of them as he chooses and restrain him from the prosecution of such a suit.”

Note the difference between Full faith and Credit and Comity Full faith and Credit – the law demands that state B enforce the action of State AComity – state A will issue an injunction that has force and effect in state B. State B can but does not have to enforce the injunction. It will enforce the injunction of State A if it wants State A to enforce injunctions from state B.

MATARESE – foreign real estateThe case involved land located in Italy. And the issue is whether the court could enjoin and enforce a decree where land is located in another state? When the subject matter of a suit in a court of equity is within another state or country, but the parties within the jurisdiction of the court, the suit may be maintained and remedies granted which may directly affect and operate upon the person and not upon the subject matter, although the subject matter is referred to in the decree, and the D is ordered to do or refrain from certain acts toward it, and it is thus ultimately but indirectly affected by the relief granted.This case involved constructive trust as a remedy.

McNULTY – foreign bank accountsThis case is about a court’s contempt powers because the court ordered the D to return funds to the U.S. and when D didn’t (i.e., when he violated the injunction), the court put him in prison. Injunctions are dependent upon a court’s power to enforce them. Injunctions cannot reach out to another country, etc.

EQUITY LACKS JURISDICTION TO ENJOIN A CRIMINAL PROSECUTIONProsecution under a valid statute is generally not enjoinable. Prosecutions under unconstitutional or inapplicable statutes may be enjoined if irreparable injury may result.

NORCISA: As a general rule, criminal prosecutions are not to be enjoined with the exception of restraining prosecutions under unconstitutional or void statutes or local ordinances.

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GENERAL RULE → Equity cannot quash a criminal case

A court will enter an injunction to enjoin a criminal proceeding when:1. A substantial right will be materially impaired (irreparable harm)2. Remedy at law is inadequate (unconstitutional or void statutes)3. Injunctive relief can be applied w/ practical success & w/o impossible

burden on the court

ACUNA – equity lacks jurisdiction to enjoin a crimeCase is a pubic nuisance case brought by the city for an injunction.

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NUISANCE

Nuisance/ \

Private PublicP = individual p = state or individual

Per se v. in fact remediesDamagesInjunction

Nuisance – substantial unreasonable intentional interference with the use and enjoyment of Ps real property.

Private nuisances: doesn’t have to affect everyonePublic Nuisances: does have to affect everyone; city has standing; Injurious to health, offensive to the senses

Nuisance per se: imminent threat to health, safety welfare of the community; to everyone – easier to get an injunction if you can prove this – if a nuisance per se, court must issue the injunctionNuisance in fact – not always a nuisance and therefore there will be a balancing of hardships

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RIGHT TO A JURY TRIAL :

Test under the 7 th Amendment 1. Look at the COA and the remedy (they can be either legal or equitable)2. If both legal, the have a right to jury3. If both equitable, then no right to jury trial4. If it is a case of mixed law and equity: refer to coa and look back in time to

when the amendment was adopted to see if an analogue existed. If not …

RIGHT TO JURY TRIAL – 7th amendment only applicable in Federal Court – however with respect to State Courts:

-Majority follows federal rule-Minority-equitable cleanup doctrine

Feltner v. Wood: TEST ON RIGHT TO JURY TRIAL: Right to JT: first look at statute, if no right stated go to 7th A: look at cause of action and the remedy, if both are equitable then no JT, if both are legal then yes. When Ct does not know, looks to common law analogues – i.e., back in 1790 when the 7th amendment became law, was this COA equitable or legal.

TEST: Look at both the cause of action and the remedy – if both are legal then that Δ is entitled to a jury trial

Note: Damages and injunction are only available together if damages compensate for past harm, not future.

THREE TYPES OF INJUNCTIVE RELIEF1. Temporary Restraining Order (TRO): to preserve the status quo. Short duration,

usually 10 days. Can be granted ex-parte, but not always. Need reasonable attempt to give notice to D.

2. Preliminary Injunction: if granted can last from one month to a year.Four Requirements for Preliminary Injunction1) A substantial likelihood of success on the merits;2) A substantial threat of irreparable harm; (legal remedy – usually damages

- is inadequate)3) Balancing of the hardships (if the ct issues the injunction will it do the P

more good than it will harm the D (preponderance of the evidence);  4) Injunction will not disserve public interest*Standard: Preponderance of Evidence

3. Permanent Injunction: Factors: (IPFBD)1. Are the legal remedies Inadequate? Land, irreparable harm (cutting tree

down, u want shade; if repeats don’t want to have to sue over and over again.

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2. Is there a property right involved? Old common law, not used today. Injunctions are used to protect property rights.

3. Is the injunctive decree feasible? Look to see if negative injunction or affirmative injunction; how much supervision is required. Negative more feasible. Affirmative is harder because you must decide what D has to do and requires supervision.

4. Balance the hardships in encroachments and nuisance cases5. Any defenses (see below)

DEFENSES AGAINST INJUNCTION:1. Laches – has the P’s inaction allowed the D to act to his detriment. Laches is an

unreasonable delay in bringing an equity action, during which time the D has changed his situation to the extent that an additional and unnecessary detriment would result if suit were allowed. Even if there is a SOL, laches may bar suit before the expiration. Laches does not bar a legal claim.

2. Unclean hands – that the P must have acted honorably with respect to this transaction. The unclean hands defense is usually confined to P’s inequitable (unethical or immoral) conduct directly related to the subject of the litigation. Unrelated inequitable conduct does not bar suit unless such conduct constituties a public fraud. Unclean hands does not bar recovery at law, and application is discretionary.

3. Freedom of speech – for certain kinds of injunctions the 1st Amendment prohibits prior restrain and prevents injunctions sometimes. Can’t prevent printing a defamation in newspaper, but can sue them afterwards.

4. Criminal act – enquity will not enjoin a crime. Exceptions – public and private nuisance

Injunctions prevent future harm (damages are for past, present and future) Typically, Injunctions are associated with torts; specific performance with K cases

TRO v. Preliminary Injunction – what the difference? TRO is most immediate, decided with very little evidence, early on, and temporary, can be ex-parte. Following the TRO, must proceed for a preliminary injunction otherwise the TRO will dissolve.

PROMISSORY ESTOPPEL1. Representation (promise)2. Reasonable reliance3. Injury will result unless one party is bound by their original representation

Promissory Estoppel: is a doctrine which if successful is a substitute for consideration to make a promise binding

Equitable Cleanup (Substituted legal relief) (Ziebarth v. Kalenze)Substituted Legal Relief = Equitable Cleanup Doctrine – a court of equity, if it had original jurisdiction when suit is filed, then it may also award a legal remedy (i.e., damages) in lieu of equity w/o a jury trial.

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Gist of minority position is that legal relief should be granted where equity jurisdiction fails. But, In order for the doctrine to be applied in a particular case, however, P must first establish his right to equitable relief, to which damages might then be incidental or subsidiary.

o A court of equity that has J when suit is filed, may award damages in lieu of equity w/o a jury trial

A legal remedy should be granted where equity fails.o Minority opinion - It is a way of limiting or reducing the option of a JT.o Majority - Trend is to enlarge the right to jury trial.

THE MODERN INJUNCTION: DISCRETION AND FLEXIBILITY

THE CHANCELLOR’S DISCRETION Navajo Academy – “Equitable remedies are distinguished by their flexibility, their unlimited variety, their adaptability to circumstances, and the natural rules which govern their use. There is in fact no limit to their variety and application; the court of equity has the power of devising its remedy and shaping it so as to fit the changing circumstances of every case and the complex relations of the parties”

COA: Forcible Entry & Detainer = Eviction (for renters – i.e., landlord tenant relationships)(statutory cause of action (like wrongful death & survival actions – i.e., not known at common law)

o Statutoryo constructive long-term lease

TEMPORARY V. PERMANENT HARM

PRELIMINARY INJUNCTIONWhen may a court order issue an injunction ordering a party to specifically perform a K?Breach of K

Specific Performance 4 Requirements for when SP in a BoK is appropriate:

1. K is valid2. P has substantially performed under the K and is willing

and able to perform its remaining obligations (mutuality of remedies)

3. D is able to perform its obligations4. P has no adequate remedy at law

LASTS UNTIL HEARING ON THE MERITS – then dissolved or made permanent

Employment K cannot be SP – 13th Amend. – o Cannot force someone to work for someoneo Same as slavery – Indentured Servitude

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EQUITABLE DEFENSES -- TWO MAXIMS OF EQUITY: CLEAN HANDS AND LACHES

CLEAN HANDS – (Green v. Higgins)The clean hands doctrine in substance provides that no person can obtain affirmative relief in equity with respect to a transaction in which he has himself been guilty of inequitable conduct.

To make out a claim for unclean hands, must show that the conduct was1. Willful conduct which is fraudulent, illegal, or unconscionable; and2. The objectionable misconduct must bear an immediate relation (as

opposed to a collateral matter)to the subject matter of the suit and in some measure affect the equitable relations subsisting between the parties to the litigation and arising out of the transaction

o Conduct which the court regards as inequitable. o Not a binding rule, but is to be applied in the sound discretion of the court.o Willful conduct which is fraudulent, illegal or unconscionable renders

hands unclean in court of equity.o The misconduct must be RELATED misconduct rather than

COLLATERAL misconduct arising outside the specific transaction which is the subject matter of the litigation.

o The doctrine has a shapeless, amorphous, and open ended quality which leads courts to state the following principles of confinement:

o Misconduct cited as unclean hands must have been related to the dispute plaintiff sues on or the relief the plaintiff seeks.

o Unclean hands is discretionary with the trial judge. o Court on its own motion can assert unclean handso Public policy may override the unclean hands defense. o D may raise unclean hands when P seeks an injunction, specific

performance, a constructive trust, or any other equitable remedy – substantive areas and types of claims where unclean hands comes up include violation of a constitutional right, covenant not to compete, quiet title, cancellation, partition, and copyright or trademark infringement.

o Unclean hands only bars equitable relief (not legal remedies)

LACHES (Stone v. Williams (Stone I))

Laches is an equity defense. To invoke it you need a- Unreasonable delayb- Prejudice to Defendant

o In contrast to SOL that provides a time bar within which suit must be instituted,

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o Test: Laches is an equitable defense which asks whether the plaintiff in asserting her rights was guilty of unreasonable delay that prejudiced defendants.

o Unreasonable delay – fact based analysiso Prejudice - Decreased ability of defendants to vindicate themselves that results

from the death of witnesses or on account of fading memories or stale evidence. Another type operates on the principle that it would be inequitable in light of some change in D’s position to permit P’s claim to be enforced.

o More flexible than SOL and requires an assessment of the facts of each case. It is the reasonableness of the delay rather than the number of years that elapse which is the focus of inquiry.

o “Where P has not slept on her rights, but has been prevented from asserting them based, for example on justified ignorance of the facts constituting a coa, personal disability, or bc of ongoing settlement negotiations, the delay is reasonable and the equitable defense of laches will not bar an action”

o FRAUD TRUMP LACHES – i.e., if you were defrauded to not bring a claim

Various types of remedies, claims and issues trigger laches defenses: 1. Breach of trust2. Constructive trust3. Equitable lien4. Tracing5. Equitable redemption from mortgage foreclosure6. Adverse possession7. Action to quiet title8. Reformation of a deed9. A restrictive covenant10.An option to repurchase real property11.Specific Performance 12.Public employee contracts13.Claims that a contract is illusory and void14.Unconscionable or lacking mutuality

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ENFORCEMENT AND EFFECT OF EQUITABLE DECREES: CONTEMPTDue process requires that equity decrees be sufficiently specific so as to adequately inform the enjoined party of the requirements of the order.

How does a court of equity enforce its decrees? W/o injunction cannot hold a party in contempt

CONTEMPTCIVIL CRIMINAL

Compensatory CoerciveFines (fines go to Plaintiff not to the court or the state)

Fines and/or jail time (these sanctions are indeterminate in length or amount)- These are also

forward looking- At some point if

the court is convinced that the defendant will never comply then it turns into criminal contempt

- Proof must be clear and convincing evidence that the defendant violated the injunction

Fines and/or jail (they are fixed in amount and duration)

- proof is beyond a reasonable doubt

Civil Contempt – It is the violation of a decree ordering D to take action (affirmative decree) or prohibiting D from committing certain acts (negative decree) and may result in civil contempt. Confining D until he complies with the terms of the decree. You may not be imprisoned for nonpayment of debts.1. Compensatory /remedial (money damages for past acts of disobedience)2. Coercive -- $ or prison -- jail per day or fixed in time. D holds the keys to the jail

cell. Looks to the future; indeterminate period of time. May levy fine of specified amount for past refusal conditioned on D’s continued failure to obey and/or fined a certain amount for each day of non-compliance.

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Criminal – A violation of a negative decree may also result in criminal contempt – designed to punish D for violating the court order – vindicate the authority of the court. Punishment for past acts. Absolute fine of specific amount paid to the US. If fine is more than $500 or jail time more than 6 months, then entitled to jury trial. Punishment for criminal contempt must comply with general requirements for criminal proceedings (right to counsel, burden of proof, jury trial, 5th amendment, cross-examination, etc.) jail, fines; fixed past disobedience (Defenses that D can raise: court lacked subject matter jurisdiction (voidable injunction must be obeyed and argued on appeal –

Void and Erroneous orders: violation of erroneous but jurisdictionally valid orders may result in criminal contempt. However, where an order is void due to lack of subject matter jurisdiction, it cannot generally be enforced by civil or criminal contempt (voidable is where the court lacked equitable jurisdiction)

Persons Bound: only parties and their privies with knowledge of the court decree are bound. Nonparties acting independently are free to ignore the injunction

Civil into Criminal – when does jail time pass from coercive to punitive? When you know that D is not going to comply. The criminal contempt then kicks in and needs a determinate term.

Standards for Contempt: criminal is cce; civil is pe

To hold a person in civil contempt need:1. A clear and unambiguous order (valid court order)2. Clear and convincing proof of non-compliance (knowledge of order)3. Party hasn’t reasonably attempted to comply in reasonable manner (non-compliance

with order)

Penalties for violating a contempt proceeding: Fine, jail term, or both

To tell what type of Civil contempt -- If fines go to P, then that is evidence that it is compensatory, fines fixed in amount, no jail. If the fines go to state, that is evidence that it is criminal.

Trend is to focus on remedy; just bc money is awarded doesn’t mean that the remedy is legal; err on side of a jury trial

Direct contempt: recalcitrant or unseemly conduct that occurs in the courtroom. Indirect contempt: consists of defendants’ disobedience of injunctions outside the courtroom.

Criminal contempt: to punish and deter. (past acts of disobedience)1. Fines: determinate2. Jail: determinate3. Procedural protections

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Jury trial Beyond reasonable doubt Right to counsel

Civil ContemptCompensatory: pay plaintiff for any loss caused by the violation.

Fines: determinate: go to plaintiff. Coercive: to secure plaintiff the benefits awarded by the injunction.

Indeterminate: $1000 per day which can add up over time. FinesJail - D holds the keys. (Indeterminate jail time)

Retrospective v. prospective: o Retrospective contempt confesses failure. D breached the injunction

and the judge no longer can secure for plaintiff the conduct to which he is entitled.

o Prospective (coercive) Devised by the judge to compel defendant’s future conduct.

What Orders Support Contempt? For the court to use its civil contempt powers, a defendant must disobey an operative command capable of enforcement. Therefore, an injunction must describe in reasonable detail and not by reference the acts sought to be restrained – must set forth in specific detail an unequivocal command. For example, language of decree did not use language which turned a contractual duty into an obligation to obey an operative command When it merely incorporated by reference the settlement agreement, the order ignored the rule require that Due Process limits the scope of an injunction (there are exceptions related to public nuisances (in rem injunctions on the property – i.e., drug houses, house of ill repute)

What is a Violation? : A contempt order is warranted only where the moving party establishes by clear and convincing evidence that the alleged contemnor violated the district court’s edict

The purpose of holding a party in civil contempt is to enforce compliance with an order of the court or to compensate for losses or damages.

1. Is there a clear and unambiguous court order2. Is there a clear and convincing proof of non-compliance3. Has D attempted to comply in a reasonably diligent manner

The Puzzle of Criminal Contempt: Coercive Contempt (UMW of America V. Bagwell)For serious criminal contempt involving imprisonment of more than 6 months, constitutional protections include the right to jury trial, proof beyond a reasonable doubt, etc.

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- Whether a contempt is civil or criminal turns on the character and purpose of the sanction involved.

- A fixed sentence of imprisonment is punitive and criminal if it is imposed retrospectively for a completed act of disobedience.

- A flat, unconditional fine is criminal if the contemnor has no subsequent opportunity to reduce of avoid the fine through compliance

o Criminal contempt - is a crime in the ordinary sense and criminal penalties may not be imposed on someone who has not been afforded the protections that the Constitution requires of such criminal proceedings.

o Serious criminal contempt - involving imprisonment of more than 6 months include protection of right to Jury Trial.

o Civil contempt sanctions - or those penalties designed to compel future compliance with a court order, are considered to be coercive and avoidable through obedience, and thus may be imposed in an ordinary civil proceeding upon notice and an opportunity to be heard. Neither a jury trial nor proof beyond a reasonable doubt is required.

o Paradigmatic coercive civil contempt: confining a contemnor until he complies with an affirmative command. Can purge, carries the key.

o Criminal looks to the past/coercive civil deters future violations. o If court is not sure what type of contempt it is, err on the side of criminal,

procedural protection. Odd, this gives a JT to an equitable issue. o Distinguish compensatory civil from criminal - Who gets the money?

o If to plaintiff, civil,o If to government, criminal.

Confinement, Contempt, and Cash Money: Ability to Comply (Moss v. Superior Court, Ortiz Real Property)

o Willful failure to comply is no defense - There is no constitutional impediment to imposition of contempt sanctions on a parent for violation of a judicial child support order when the parent’s financial inability to comply with the order is the result of the parent’s willful failure to seek and accept available employment that is commensurate with his or her skills and ability.

o It’s not involuntary servitude: A court order that a parent support a child, compliance with which may require that the parent seek and accept employment does not bind the parent to any particular employer or form of employment or otherwise affect the freedom of the parent.

o Inability to comply with a child support order is an affirmative defense. The alleged contemnor must prove inability to comply by PE.

The Collateral Bar Rule: an injunction issued by a court with jurisdiction must be obeyed by the parties until it is reversed by orderly proceedings even though the order may be unconstitutionally defective or invalid (i.e., obey then appeal). Exception: where compliance would cause irreparable injury.

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Ex Parte Purviso Labor strike, an injunction is issued on request of employer to force

employees back to work, public employer, the injunction is violated (continued to picket and violence).

o What is the collateral bar rule? - When the injunction was issued, and D was not in agreement, could obey and modify or appeal. To raise the unconstitutional argument in the contempt proceeding should have been raised in the injunction proceeding that makes it collateral.

o Exception to the collateral bar rule - Can be raised when the injunction is transparently unconstitutional – void upon its face.

o What’s the 1st Amendment argument? - Speech v. conduct. This is more about conduct, so the presumption is that it is not transparently unconstitutional. The state has a legitimate concern in preventing public disorder and violence and promoting the free passage of traffic.

Who Must Obey? (Ex Parte Davis)Can a non-party to the original injunction proceeding act in active concert or participation with [the original party that was enjoined], when the non-party subsequently becomes the grantee to the original party’s grantor? “While a person not named as a party is not ordinarily bound by the terms of injunction decree and therefore cannot be punished for violating its terms, he is in active concert or participation with the name party if he participated in the original proceeding and was a real party in interest when the decree is rendered.” This is so that “defendants may not nullify a decree by carrying out prohibited acts through aiders and abettors, although they were not parties to the original proceeding.”

Structural Injunctions: aimed at the government; the gov. is the D. A judicial mandate that protects a person’s constitutional rights. Usually aimed at controlling institutions.

o Structural Injunction: injunction over a bureaucracy, to cure a constitutional violation.

Injunction Reform (Taylor v. United States)o Any prospective relief must be ended unless there are findings of continuing

violations of federal law. o Issue: When can Congress change the law? o Sources of law: constitutional, statutory, common law. Congress cannot

change constitutional law.

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CHAPTER IV: UNJUST ENRICHMENT – RESTITUTION

The substantive basis of restitution is unjust enrichment. D must have a benefit that it is unjust for him to retain. That means, it is always measured by D’s unjust enrichment.

o There is no recovery for benefits voluntarily conferred upon another.o The purpose of restitution is to return the status quo by compelling D to return

specific property or by awarding the injured party a sum of money equivalent to the value of D’s benefit.

o Unjust Enrichment is the COA—when cannot find a tort or K. Usually no relationship bw the P and the D. and may be found even when both parties are innocent.

Unjust Enrichment/Restitution

Legal Equitable - constructive trust - equitable lien

Substitutionary (always money) In specie - subrogation- quasi k - replevin (personal) - accounting for profit

- ejectment (real)

quantum counts common counts- Quantum meruit - money had and received (personal prop.) $$$$$ - money- Quantum valebat - goods sold and delivered (personal prop.) prop not $$

- use and occupation (realty)

Unjust Enrichment Rule: One party should not be entitled to benefit at the expense of another b/c of an innocent mistake or unintentional error. D must have received a benefit—which may be regarded by the D as neutral or even detrimental, and must be unjust.

Volunteer/ Donor (Good Samaritan or Gift) - P loses b/c D's enrichment is not considered unjust. Usually cannot recover if a volunteer/donor, but there are a few circumstances where D’s enrichment is considered unjust. I.e., the burden may be on the D to either deny or pay—silence won’t save him. Also, when the D clearly opposes the action leading to the “enrichment”, but the P does it anyway. D does not voluntarily accept a benefit which it would be inequitable for him to retain. Instead, P “volunteered” (officious intermeddler) to do so and cannot collect.

Restitution at law – Quasi-Contract: the legal remedy of restitution in money arose from the common law action of assumpsit. The assumpsit action was a proper remedy

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for implied in fact K, as well as implied in law K that are not Ks at all (i.e., as no promises or agreements) but rather instances of unjust enrichment, where the law imposes an obligation.

Quantum Meruit (legal, substitutionary): “As much as he deserves or as much as services are worth”. Two classic types of contracts to discuss quantum meruit are employment contracts and service/contract out contracts.Quantum Meruit is a bit ambiguous b/c it can be either an implied in law (fiction created by the court) or implied in fact (real contract, determined by conduct of the parties) contract. RE: if measured by P’s loss then implied in fact; if measured by D’s unjust enrichment then implied in law.

How to Measure Damages:1. Reasonable FMV—objective measure of either/both P & D’s loss/benefit2. Reasonable value of benefit to D (implied in law).

Reasonable value of services rendered: P may recover for those expenditures made in reliance on D’s representations and that the P otherwise would not have made (even if D got no benefit). If D is wrongdoer, P should at least be placed in as good as a position as he originally was in, even though D must pay more than he benefited. Courts have often implied an obligation to pay based upon the theory that performance at another’s request may itself constitute a benefit. (This is very similar to measuring promissory estoppel—measuring the D’s unjust enrichment by assessing the P’s cost of reliance.)

Restitution in Equity:a. Constructive trust: a constructive trust imposes a duty on D to transfer

property to P. It is imposed by law without regard to intentions of the parties and unlike an express trust:

1. D has legal title to the property;2. Retention would result in unjust enrichment; and3. Remedy at law is inadequate

*P may benefit from a constructive trust in that it permits P to claim specific property, giving P priority over other creditors of D.*Effect of sale to bona fide purchaser: transfer of property to a BFP cuts off P’s right to a constructive trust over the property, but does not cut off P’s rights to proceeds arising from the transfer – cuts off equity.

Constructive trust (equitable)- The original property is gone. When property is acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee and the court orders the D to convey title. (If the still has the property, then apply replevin. If the property increases in value, the is entitled to the proceeds.)

Highest priority in the law (higher then homestead) Doesn’t have to be misconduct by the . If one party pays consideration and the other doesn’t, the paying

party trumps

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o The bona fide purchaser of property would take free of the constructive trust, but the gratuitous donee does not (even if totally innocent)

o Some courts are more lenient re tracing.

b. Equitable lien: an equitable lien is a charge on property to secure a debt or other obligations, and gives the holder of the lien the right to sell the property to satisfy the debt.Requirement: an equitable lien may be imposed where there is an unjust benefit traceable to property owned by D.Compare—Constructive trust: P often has the option of a constructive trust or equitable lien remedy. However, where money is misappropriated to improve land already owned by D, and equitable lien is the only available remedy.Lien enforcement: a lien is enforced by foreclosure and sale, but a lien is cut off by prior sale to a BFP.

c. Subrogation: subrogation applies when one person non-officially discharges an obligation for which another is primarily liable and which the latter out to pay. Result: P is subrogated to the position of the creditor and is entitled to any security interest or priority the creditor may have had.

d. Accounting for Profits: Equitable restitution is based on disgorgement of ill-gotten gains and thus may result in an accounting for profits that P in good conscience should have received. It is measured by the defendants unjust enrichment

Kistler v. Stoddard: The doctrine of UE is an equitable one, providing that one party should not be allowed to benefit at the expense of another because of an innocent mistake or unintentional error.

o Before being held liable for restitution, D must have received a benefit. o D’s enrichment by itself will not trigger restitution. It must be unjust. o Quasi Contract: Like damages, always $. But hard to tell the difference. Just

because it’s money doesn’t mean it’s QC, because equitable remedies can be $ also.

Kossian v. American National Insurance CompanyPro tanto: up to the contract price. o Is QM limited by the K price? Not limited if Plaintiff is a non-breaching partyo Is Limited if Plaintiff is the breaching party. Quasi contract implied in law does

not suppose any intent between the parties but imposes an obligation upon a party who has received a benefit. Look at D’s UE and determine what D owes P.

Knaus v. Dennlero An implied Contract is one which reason and justice dictate, and is founded

on the equitable doctrine of Unjust Enrichment.

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o Recovery under an Unjust Enrichment theory requires a showing that the defendant has voluntarily accepted a benefit which it would be inequitable for him to retain without payment since the law implies a promise to pay compensation when value of services are knowingly accepted.

o Voluntary acceptance only – If a benefit is conferred in the face of opposition and disinterest, it falls in the category of a gratuitously conferred benefit for which quasi-contractual relief is not available.” Important: has to be a voluntary acceptance!

o A person who officiously confers a benefit upon another is not entitled to restitution therefore.

o Volunteer/officious intermeddler: = loser.

What could the P have done here? An injunction because of an impending nuisance; an easement by necessity;

Two Kinds of Implied Contracts: (must differentiate between these two on the exam)1. Implied-in-law (Quasi-K is a synonym) – a fiction created by the court to prevent

unjust enrichment2. Implied-in-fact – based upon conduct of parties

*Quantum Merit can be either an implied in law or implied in fact K

Measuring the Defendant’s Benefit: Services

Campbell v Tennessee Valley Authority: Is the measure of recovery to be determined by the amount of money that would be necessary to acquire on the open market the goods or services from which the benefit is derived, or is the measure of recovery how much the benefit has been worth to the person upon whom it was conferred? Normally arises in construction and person service cases. – i.e., services performed – (that is what quantum merit is)

o Implied in fact: damages are measured by using the K agreed upon for recovery

o Implied in law: damages are measured by using either:1. Reasonable/fair market value of services performed* 2. reasonable value of the benefit to D3. “upper limit” – amount agreed upon by the parties in the unenforceable K

(this is the one that is preferable)

Farash v. Sykes Datatronics, Inc)o plaintiff may recover for those expenditures he made in reliance on D’s

representations that he otherwise would not have made (i.e., he may recover his reliance interest) – while this is odd, this is a way of measuring damages for unjust enrichment

o The basic aim of restitution is to place the P in the same economic position as he enjoyed prior to contracting

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o The P recovers the reasonable value of his performance whether or not the D in any economic sense benefited from the performance (here, D had no benefit that is why that is important)

o If what the P has done is part of the agreed exchange, it is deemed to be received by the D

Earhart v. William Low Co. Can a party who expends funds and performs services at the request of another, under the reasonable belief that the requesting party will compensate him for such services, recover in QM although the expenditures and services do not directly benefit property owned by the requesting party.

o Sometimes D’s UE can be measured by P’s reliance interest – i.e., here they used the promissory estoppel remedy.

o But it’s just another fiction, it’s a better argument to say that D should recover under promissory estoppel.

What you must show for promissory estoppel:1. Representation2. Reasonable reliance on the representation3. injury

Three interest in a K1. Expectation 2. Reliance3. Resitutionary interests

Damages – expectation interestsSpecific performance – expectation interestsRecission – consistent with restitution (put party in pre-K)

Reliance Interest – In preparation to perform – out of pocket expenses incurred by the P not directly benefiting the other party

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EQUITABLE RESTITUTIONThe Constructive Trust (Simonds v. Simonds)When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee.” A constructive trust arises when a person holding title to property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if her were permitted to retain it. (COA unjust enrichment – remedy: constructive trust.o A fiction created by the court to prevent unjust enrichment and is measured

by D’s unjust enrichment.o Important: A D must have obtained title over property which the P is seeking.o also need tracing (i.e. trace the P’s property into the new propertyo if D still has P’s property then remedy is adequate then don’t need a

constructive trust if D has sold the P’s property to a third person, P cannot get property back from a bonafide purchaser.

o Don’t need a breach of a fiduciary duty; don’t need wrongdoing of D (can be imposed over an innocent party)

o Giving consideration trumps gratuitous donees (i.e., here there was a divorce settlement requiring the H to maintain life insurance for the first wife; by failing to do so and then having the 2d wife be the only named beneficiary, the 2d wife is a gratuitous donee

o Cannot impose a constructive trust against a BFP

TracingConstructive Trust v. Equitable Lien

Constructive trust originated in trust law, i.e., breach of a fiduciary duty. Three types of K’s/trusts:

1. Express Contract - Express trust 2. Implied in fact K - Resulting trust 3. Implied in law K - Constructive trust

No breach of fiduciary duty is required today to impose a constructive trust. Equitable Lien is limited by amount taken from P and doesn’t require that

the new property be acquired by the P’s property If property appreciates in value, use constructive trust; if it depreciates use

equitable lien Constructive Trust is one of the highest priorities under the law, even over

homestead exemption. o Tracing: Requires P show that P’s property came into the hands of D and D

took the property and exchanged it for other property. o Equitable lien: any time you can impose a constructive trust in the alternative

you can impose an equitable lien, but the reverse is not true. o D embezzles 50 M buys blackacre with $ today blackacre worth $100,000.

Can P ask for ConstructiveTrust, Equitable Lien, and for how much? CT for

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$100,000, EL for $50,000 – as long as you can trace the money into the new property, no matter how much the property is worth, you get it.

o If the property appreciates, use a constructive trust. If it depreciates, use an equitable lien.

o Possible exam Q: Rate the remedies: which is the best, 2d best, etc. Are remedies cumulative or in the alternative?

Remedies for ConversionLegal Equitable

Damages Replevin quasi k Constr. Trust equitable lien

=forced sale -in specie -waive tort -BFP cuts off equity-fmv at time & +detention damages & sueplace of conversion (for loss of use) in assumpsit -tracing (D has exchanged+ pre-judgment or sold property and no(loss of use) longer has itinterest + consequentials+ possibly punitives

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Definition of Conversion: Intentional substantial unreasonable interference with the property rights of another. (Nominal damages are possible/tort version of threat/trespass is the smaller version of tort)

Essentially supports five remedies (these are all “or” – that is you choose which remedy:

1. Damages- forced sale (see above for measure of damages)2. Quasi contract- either 1. Common courts or 2. Quantum meruit waiving

tort + sue in assumpsit3. Replevin - + detention damages (getting the personal property back)4. Constructive Trust – D exchanged P’s property for new property5. Equitable Lien

o The first three are used when the person still has the property.o The last two are not available to BFPs because they have equitable title and

that cuts off the possibility of equitable remedies. o Constructive trust is one of the highest priorities in the law and is most

secured (in terms of actually seeing your money) discuss this if have to rank remedies

Damages: Generally measured at the value of the property at the time and place of the conversion. However, the court may take into account subsequent fluctuations in the value of the converted goods (i.e., measure value at time of judgment). When Stocks are in a fact pattern, consider exception to general rule.NOTE: If multiple D’s, once judgment is paid, title vests retroactively in defendant who pays judgment. Therefore, forced sale (judgment for damage payments) by one converter relieves the other defendants of tort liability.

Replevin: (Legal, in specie, restitutionary relief for COA of conversion) D takes P’s property and so changes it that it no longer resembles the P’s original property. May recover the specific personal property that has been wrongfully taken/detained and detention damages (detention for loss of use)

- Replevin is not available when the original converter doesn’t have the property

- When you waive the tort and sue in assumpsit, you sue for the appreciation and replevin to get the appreciated goods in specie.

- Must provide a person w/ notice and opportunity to be heard before (pre seizure of the property) statutory replevin may be enacted.

Detention Damages: (loss of use) 1. Rental value – often measured by this2. Pro-rated portion of a lease3. Lost revenue from not using4. Overtime wages from not having the property5. Cost of using a spare thing

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Ascession- Defense to replevin. If properly invoked, cuts off P’s right to replevin—property is so different in form that P not entitled to it anymore & value has appreciated. (However, other remedies are still available) Only innocent converter can invoke ascession.

Equitable replevin → not much difference between equitable and legal replevin. Only available where damages would be inadequate (unique)

Similar to injunction (no legal remedy and unique property) No jury trial Ejectment does to real property as replevin does to chattels.

Ejectment- (legal, in specie, restitutionary relief) does to real property what replevin does chattels.

Ejectment + mesne profits v. Forcible Entry & Detainer (seeking re-possession; claiming one is in lawful possession). Repossession.

Conversion vs. Trespass- Conversion = major interference- Trespass = minor interference

Usually choose between trespass and conversion. Don’t have to show injury for conversion, unlike trespass to chattel Only the legal remedies of conversion are available when the still has the property. When the pays the judgment, the title vest retroactively and good title passes to the subsequent purchaser. Court may allow the property back and the money made. When the property is changed too much, the BFP is still liable for the FMV of the property when received, but doesn't have to give it back.

Equitable Lien- The maximum recoverable is the value when it was taken. Therefore, if the property appreciates, use constructive trust, and use equitable lien when it depreciates. Rarely do the courts make you prove the legal remedy is inadequate for these two remedies. RE: constructive trust as a slight advantage bc a secured creditor.

Rental value- Can either be the 's loss (damages) or 's unjust enrichment (quasi k). Has to be continuous use and occupation.

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_________ Chapter 5 – PROPERTY INTERESTS

Choosing the Remedy

Baram v. FrugiaPayment by one converter (in a multiple D case) relieves the other Ds. Here, it was a forced sale. Title vests retroactively to the date of the conversion therefore P can not sue anymore Ds. What if doc sued in quasi contract? Waive the court and sue in assumpsit. Could have gotten more money – use when D’s UE exceeds P’s loss. Replevin: CT: no because if D still has Ps original property, there can be no constructive trust.

Welch v. KosakyConversion v Trespass to Chattels = Both are intentional torts

o Conversion is a major interference - Under conversion damages is usually in the form of a forced sale. FMV at time and place of conversion, plus loss of use.

o Trespass to chattels is minor interference (therefore, by definition, you get the chattel back/conversion damages, you don’t get the chattel back) – General rule for measuring trespass to chattels damages: diminution of value.

Two ways of measuring diminution of value: 1) value at time and place of conversion – value still left upon return; and 2) ??

o When is it better to use quasi contract? Always money, measured by D’s unjust enrichment; QC is better when D’s UE exceeds P’s loss. Not the case here.

Trahan v. First National Bank of RustonGood faith is no defense to the tort of conversion. Different ways/times to measure damages:

o Date of conversiono Date of judgmento Somewhere between the two – highest value reached between the two

dateso Highest value within a reasonable time after P discovers the conversion

Important: This case involved stock which fluctuates in value if you see stock in an exam, then discuss that the measure of damages could vary as set forth above.

Always look at whether it was a willful or innocent converter – if willful, there is an argument for using the higher amount

CALCULATING DAMAGESMeasured by Ps loss rather than D’s unjust enrichment

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Ways to measureCost to repairRental valueDiminution of valueLost business profits

General Damages: Diminished Value v. Cost to Repair Courts usually think of general damages as damages measured by market value. They usually require a reason to depart from value measure

o Diminished Value - A dominant general damages measure for property is diminished value.

o Cost to Repair - An alternative

Hewlett v. Barge Bertie: Negligent Damage to personal property: Measured by:1. Cost to repair – less speculative than diminished value, limited by pre tort

fair market value. Reasonable cost of repairing plus allowance for deprivation of use so long as the repair expenses do not exceed the ship’s just value at the time of casualty.

2. Diminished value (diminution in value) – subtract post-value from pre-tort value

3. Rental value4. Lost business profits

Important: How do you choose between diminution in value and cost to repair – Depends, however, generally, the party can choose as long as it doesn’t exceed pre-tort value (unless exception below applies) (the party in the best position to minimize loss should be the one with the burden of minimizing it – as a theory to argue in an exam). If Defendant was willful in his conduct, that could be a factor in a court allowing a higher level of damages. Cost to repair is more objective and therefore more reliable and could be argued as a reason for using that measure; Or Give P the option to choose between two as long as it is reasonable; use the higher whenever the D’s conduct is willful

Personal Reason exception (Orndorff v. Christiana Community Builders)o Personal Reason exception: if a building such as homestead is used for a

purpose personal to the owner, the damages ordinarily include an amount for repairs, even though this might be greater than the entire value of the building. This is an exception on the ceiling on cost to repair – i.e., that you can’t get cost to repair if it would exceed the pre-tort value.

o All that is required is some personal use by them and a bona fide desire to repair or restore

o Personal exception justifies higher award of damages - It’s important for owners to have the property in the way that they want it. There are even cases where D’s actions increase the value of P’s property. Courts say this is irrelevant, even if it is economically wasteful to put the property back to its original condition.

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When diminution in value and cost to repair yield nothing, can go for “loss of use”/”opportunity cost”

Rental value can be a measure of damages or a measure of unjust enrichment

Lost Use (Kuwait Airways Corp. v. Ogden Allied Aviation Services)Lost use is a measure of damages (cost to repair = general damages) This case is about consequential damages, however, because the damages that were being awarded were as a consequence of the D’s action but were not actually losses that were suffered.

o Five ways to measure loss of use: “Opportunity cost”1. Rental fee. 2. A portion of the lease, i.e., 6 days. 3. Lost profits minus expenses saved. 4. Increased expenses, wear and tear, overtime, etc. 5. Depreciation: depreciation over 6 days of a 60 year life airplane.

o Whether proof of actual pecuniary loss is required in order to recover for loss of use of a damaged chattel, and whether the reasonable cost of securing a replacement for the damaged chattel may be recovered even if no substitute is actually rented.

o “Opportunity cost” – lost opportunity – i.e., you lose the potential for use -- is the argument used by the court to allow the recovery of consequential damages despite the fact that the airline, here, suffered no real monetary loss.

Damages for Dumping (Don v. Trojan Construction Company)Real Property cause of action – Trespass to realty

The list of possible remedies for someone else’s dumping on land includes: damages, an injunction and restitution or a combination of them.

Apply cost to repair and dimunition of valueRental value is objective measure that straddles the fence of client’s loss or defendant’s unjust enrichment. Measure of damages AND restitution

Rule: the detriment caused by the wrongful occupation of real property (except in certain cases of willful holding over wherein the damages are higher) is deemed to be the value of the use of the property for the time of such occupation (rental value). No exception in cases where the P did not intend to use the land or to rent it out co that the court can do no other than apply that measure, namely, the “value of the use.” That the owners did not intend to make any use of the land themselves does not deprive them of their proper award.

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Rental value is a way of measuring damages (and can also be a measure of quasi-contract because it is an objective measure) (defendant’s savings can also be a measure)

Trespass to realty is an intentional tort because where you are is voluntary even if you didn’t intend to be on someone else’s property.

Remedies: Legal Equitable Ejectment (restitutionary) & mesne profits Quiet title (if in possession) (if not in possession)

Non-pecuniary Damages (Bond v. A.H. Belo Corp)Sentimental value v. actual value of goods. - Goods with primary value in sentiment.If the value the object has is primarily sentimental value, then can use this measure: “the reasonable special value of such articles to their owner taking into consideration the feelings of the owner for such property.” Actual worth or value of the articles to the owner for use in the condition in which they were at the time they were destroyed, excluding any fanciful or sentimental considerations. Such property is not susceptible of supply and reproduction in kind.

Subjective v. objective standards o Objective – court states that it will use the “reasonable” value. o Subjective – special value to the owner of the goodso Courts are reluctant to award damages for sentimental value – too

speculative -- Fraud - Easy to fake Here, the property was destroyed, therefore not repairable and cannot use

diminution in value

Limiting damages: Economic Loss (In Re Chicago Flood Litigation)Economic loss rule - no recovery in negligence cases for economic loss absent privity of contract, or damage to person or property.

o If defendants were held liable for every economic effect of their negligence, they would face virtually uninsurable risks far out of proportion to their culpability, and far greater than is necessary to encourage potential tort defendants to exercise care in their endeavors.

o Moorman exceptions: 1. Where P sustained damage from a sudden or dangerous occurrence;

2. But for damages to be recoverable in tort, the sudden, dangerous, or calamitous occurrence must still result in person injury or property damage.

3. Where P’s damages are proximately caused by D’s intentional, false representation (FRAUD) – i.e., can recover economic loss in fraud cases;

4. Where P’s damages are proximately cause by a negligent misrepresentation by D in business of supplying info for guidance of others in their business transactions.

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Economic Loss is Recoverable then in:1. When there is a K that provides for it2. Intentional torts like fraud3. Injury to person or property4. Where P’s damages are proximately caused by a negligent misrepresentation of a D

in the business of supplying information

Statutory Replevin (Fuentes v. Shevin) FSA 78.01: Any person whose goods or chattels are wrongfully detained by any

other person may have a writ of replevin to recover them. There is no requirement that the applicant make a convincing showing before the

seizure that the goods are, in fact, “wrongfully detained.” Rather, Florida law automatically relies on the bare assertion of the party seeking the writ that he is entitled to one and allows a court clerk to issue the writ summarily. File complaint and a security bond. No pre-seizure hearing.

No Compliance with Due Process - Prejudgment Replevin provisions work a deprivation of property without Due Process of law insofar as they deny the right to a prior opportunity to be heard before chattels are taken from their possessor.

Replevin is an action to recover specific personal property that has been wrongfully taken or detained, with an incidental right to damages caused by reason of such detention.

o Detention damages is also a synonym for loss of useo Self-help is unlawful in landlord tenant - Landlord must follow stats, does not

include changing the locks, it’s a summary proceeding (happens almost immediately, limited in scope).

o Changing of locks => conversion of all her property in the apartment. There can be no detention damages awarded where the D did not prevent the P

from coming and using the property Measuring compensation for loss of use, i.e., detention, can be rental value

Equitable Replevin ( Charles Simkin & Sons v. Massiah) – VERY RAREA court of equity may compel the delivery of a specific chattel wrongfully withheld. Only recoverable where damages would be inadequate (i.e., items are unique and cannot be replaced by purchase on the open market). In exam, we are talking about legal replevin, not equitable.

Recovering And Protecting Real Property

Protecting Real Property (Kruvan v. 12-22 Woodlands Avenue Corp)COA: trespass to realty. Remedy here was damages and was measured by rental value. Trespass to Realty: Physical intrusion, unauthorized, into the property of another. Nominal damages are available.

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Use and Occupancy was also mentioned in this case which is a quasi-K remedy. Think use and occupation for real property (as opposed to goods sold and delivered; money had an received which are used for personalty). Use must be continuous to use this remedy. Always associated with quasi-K and realty. Want to use this remedy when D’s unjust enrichment exceeds P’s loss.

Prescriptive easement: functional equivalent of title after using something for so long in an adverse possession sort of way; interest in real property.

Fenton v. Quabog Country ClubCOA: nuisance and trespass to realty (invasion of golf balls) – this is the golf case where the balls were landing on their property and hitting the house and stuff.Remedy: Injunction (stop the balls) and damagesPrivate Nuisance is a real property tort; use and enjoyment of the D’s property that interferes with the use and enjoyment of P’s property neighbors in a fact pattern raises this on an exam – Important Definition: Intentional and substantial and unreasonable interference with the plaintiff’s use and enjoyment of the property.

What remedies are associated with Trespass to Realty1. Damages – compensation for replacing glass, loss in rental value of the property

while injury is occurring2. Injunction – abate the nuisance is what the court would say3. Quasi-K

*Compensatory damages are available for past injury such as damage to property and mental anguish due to nuisance. Injunction is available to stop continuing nuisance or trespass. Damages are an inadequate remedy for a continuing trespass.

Trespass to Realty: measure of damages1. Dim in value2. Cost to repair3. Rental value4. Lost business profits (maybe)

*also associate injunctions with trespass to realty

Quasi-K can be measured by:1. Market value of D’s unjust enrichment2. Subjective measure of D’s benefit3. Rental value4. Reliance interest

In conversion, fair market value may not be an accurate measure where property fluctuates rapidly in value (stocks)

Forced sale is a synonym for conversion Replevin is in specie because you get the actual return of the property (always think

of replevin + detention damages).

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Doctrine of Accession: Whenever you think of replevin think of doctrine of accession. D converts property and then changes property so substantially that it is virtually a different property (i.e., D takes apart bike, takes it apart and uses the parts to make an invention) invoked by D to cut off right to replevin and it is invoked by D’s being an innocent converter.); generally the changing of form must be an enhancement of value. (contrast, innocent purchaser that cuts of right to equitable remedies)

Damages and Quasi-K are substitutionaryReplevin and Quasi-K are legal restitution

QUASI-K – COMMON COUNTS Money had and received (if the D had sold the P’s property, then use this common

count) Goods sold and delivered (if D still has the P’s property, then use this common

count) Use and occupation (real property)

MONETARY RECOVERY TRANSCENDING COMPENSATION

Willfulness (Grays Harbor County v. Bay City Lumber, Co)COA: conversion (innocent); remedy: damages – measured by:1. If original conversion was innocent, stumpage value (at time and place of

conversion) (stumpage value means trees being in place) doesn’t matter if subsequent converters were in bad faith

2. If original conversion was willful, then by enhanced value (at time and place of D’s conversion) this punitive measure of damages is available where a trespass or conversion is willful or in bad faith.

Treble v. punitive damages: treble damages are those granted that give 3x general damages (or you could say compensatory damages); punitives are to punish and deter. Can recover treble even against an innocent purchaser which tells you that the point of these damages is not to punish and deter, but instead are compensatory.

Restitution (Olwell v. Nye & Nissen Co)Conversion of an egg washing machine. This case is an example of “negative unjust enrichment” negative unjust enrichment is how much the D saved by his conversion and another way to measure quasi-K. (this is similar to a replevin + detention damages) amount D saved by his conduct.

MEASURING UNJUST ENRICHMENT 1. Lost rental value2. Lost business profits – an accounting for profits3. Replevin: return object and sue for detention damages. 4. D’s actual benefit

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5. FMV of P’s services6. Reliance

Constructive Trust - What is the clue to discussing constructive trust: when defendant takes the plaintiff’s property and sells it. Also clue for discussion money had and received.

Schlosser v. Welk -- COA: conversion. Use unjust enrichment when you have neither a tort nor a contract, then that is time to use unjust enrichment. Rightfully taken, wrongfully detained was the basis for this court using unjust enrichment as the coa. Common count was goods sold and delivered. What was the D’s unjust enrichment where she never viewed/used the tapes?

Private Nuisance-Per Se v. In Fact (Pig in the Parlor)Conversion -- Constructive Trust-Tracing against successive transferees

-Good Faith Improvements-Restitution-Ejectment + Mesne Profits

Trespass to Realty-Accounting for Profits = equitable restitution-Waiving the tort + suing in assumsit

When does it matter if the conversion was innocent of wilful1. Stumpage value v. enhancement in value2. Punitive/treble damages3. Doctrine of accession4. P can choose the measure if the conversion was willful

Mattson v. Commercial Credit Business Loans, IncCOA: conversion; the remedy is: Bona Fide Purchaser - If they purchased in good faith without knowledge that the

money they received was proceeds from stolen property, they would be like cuts off tracing and cuts off the rights to a constructive trust

Tracing doctrine operates against innocent transferees who receive no legal title and transferees who are not bona fide purchasers and receive legal but not equitable title. If either type of transferee exchanges the acquired property for other property, or receives income from the acquired property, tracing may apply. Basically, follow the property (or money)

Should always consider tracing with equitable restitution of constructive trust, equitable lien, and accounting for profits.

There is no theoretical limit on the number of transactions or changes in form through which the claimant will be allowed to trace.

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James v. Bailey -- Plaintiff mistakenly improves someone else’s land, D had no notice. Except to the extent that the rule is changed by statute, a person who in the mistaken belief that he or a third person on whose account he acts is the owner, has caused improvements to be made upon the land of another, is not thereby entitled to restitution from the owner for the value of such improvements.

Defendant must sue the Plaintiff to clear the title. Ejectment is remedy, plus mesne profits. “You made money off the improvement you made by mistake to my land.”

Betterment statutes: protect the investment of a person who improves land which he later discovers is not his own.

Mesne profits: Owner of property improved because you have not only improved the property, but also derived benefits from it.

o To the extent that the land has been increased in value whenever: 1 the true owner obtains a judgment in an equitable proceeding 2 the true owner commences an action of trespass or other action for mesne profits.

Tied to ejectment. Mesne profits are attached to ejectment as detention damages are

attached to replevin. Absent negligence, bad faith, or acquiescence by owner, cannot get relief

When you see that someone has mistakenly constructed improvements on someone else’s property -- Always likely to be talking about restitution

Note: Fraud in Inducement If lies are made in inducing another to enter into a contract – that is clue to discuss fraud in inducement of K and this is an intentional tort (can then associate with punitive damages) punitive damages are rarely awarded in a breach of K case. Breach of warranty (under UCC)

Edwards v. Lee’s Adm’r Trespass to Realty – unauthorized physical invasion of another’s land

– trespass to realty was coa; remedy was Unjust enrichment - Steps

1. Are damages an option? 2. What other remedy? Injunction?3. Both can be recovered? Not double unless damages includes future

harm, permanent damages, they are past, present and future. 4. Alternative to damages or injunction: restitution: start with quasi contract:

K implied in law, waive tort and sue in assumpsit. 5. Real property: use and occupation. It requires, strictly speaking, that

use and occupation must be continuous, not intermittent, here it might be seen as intermittent.

6. What about ejectment and mesne profits? It’s legal, and it’s in specie (want the same thing back), and it’s restitutionary.

Ejectment for real property v. replevin for personal property.

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Accounting for Profits: B/c D’s trespass was willful P argued that accounting for profits should use the gross profits rather than net profits measure (this is a rental value measure). However, bc D was only unjustly enriched to the extent of net profits, the court uses that measure.

Innocent v. willful - Explain innocent trespass: presumably you intend to be where you, whether willful or not.

Mesne profits: It is well settled that in an action to recover mesne profits, the plaintiff must show in the best way he can what those profits are, and there are two modes of doing so, to either of which he may resort – he may either prove the profits actually received, or the annual rental value of the land. The latter is the mode usually adopted. Where there is occupation of a farm or land used only for agricultural purposes, and the income and profits are of necessity the produce of the soil, the owner may have an account of the proceeds of the crops and other products sold or raised thereon, deducting the expense of cultivation.

Restitution: quasi contract: common counts: only use and occupation can be applied to real property: only applies if continuous: but still apply quasi contract: Once the minerals is severed, it becomes personal property. (conversion) No longer use and occupation.

Quasi contract: Measured by defendant’s unjust enrichment - different ways:

Rental value Fair market value Benefit conferred Subject value in the hands of the D Reliance interest

Assumpsit - An action ex contractu as distinguished from an action ex delicto. Hence, in order to sustain the action, it is necessary for P to establish?

BALANCING THE HARDSHIPS(Harrison v. Indiana Auto Shredders)

Public v. Private Nuisance - Could it be public nuisance? Greater the number of people affected, more likely to be public. In a public nuisance P is typically the government, although could be private.

What distinguishes a public from a private nuisance – According to Sanchez, a lot of people are effect in public (though this can also be in a private nuisance); the government or city typically represents the public in a public nuisance case (a private citizen can represent in a public nuisance case if he can show that his injury is different in kind from the way the public is generally effected by it – otherwise, lack standing to bring a public nuisance. (Remember the gang case where Gangs are a type of public nuisance. Legal remedy inadequate/criminal prosecution in gang case was inadequate.)

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Private Nuisance – an intentional tort, substantial unreasonable use and enjoyment of one’s property that interferes with the use and enjoyment of another one’s property. Think about damages and/or injunction and punitive damages (bc it is an intentional tort) cce + actual malice for punitive damages.

Nuisance: intentional substantial unreasonable use by D of his or her property which interferes with Ps use and enjoyment of his or her property.

o Per se: at all times and under all circumstances, plus threat of imminent harm to neighbors. Imminent and dangerous harm (like an emergency) Imminent threat to public health and safety, says Sanchez. Calling it per se affects the analysis for an injunction i.e., you do not have to balance the hardships and the court must issue the injunction upon a finding of a nuisance per se.

o Effect on remedies: Easier to prove (cause of action); injunction: process: is legal remedy adequate – calling it per se probably gets over this; threat of imminent harm, yes, balancing the hardships: nuisance per se will impact this by saying there is no balancing of the hardships.

o Nuisance in fact: something in the wrong place, isn’t always a nuisance just where it is located makes it a nuisance. Nuisances primarily because of the circumstances or the location and surrounding of the activities, rather than the nature of the activities themselves. Very often this type will present the offensive activities of an otherwise lawful business, activities that are being conducted in such a manner so as to become a nuisance. Pig in the parlor analogy – it is a nuisance because of where it is (i.e., a pig in a barnyard would not be a nuisance)

o Cannot have permanent injunction and permanent damages because it would be double recovery b/c of the future harm element they are correcting and compensating for.

o Proof of imminent harm is evidence that legal remedy is inadequate (damages would be the legal remedy)

o Here, damages awarded in private nonpermanent nuisance as loss of use (rental value) which yields zero in this case. This is not always the case, i.e., rental value, there are more remedies available for private nuisance.

Remedies: Measured by: o Diminution in value of property caused by the nuisance (pre tort v. post

tort)o Lost business profits (not here)o Punitives (think about it with an intentional tort-must show clear and

convincing evidence of actual malice). Injunction: May just say abate the nuisance. o Balance the hardships Environmental vs. Economics

(Boomer v. Atlantic Cement Co.) this is a private nuisance case Where there is NO favorable environmental purpose, just balancing

economic interests.What measure of permanent damages: compensation for total economic loss to property:

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Suppose you are neighbor: you get settlement, then sell, can that party sue? NO. Damages paid are past, present, and future.

Prevent double recovery - You need to separate the dust from other inconveniences.

Emotional Distress - can be taken into account in calculating damages in a nuisance case, which goes to use and enjoyment of property.

Inverse condemnation: not taking the property, but reducing its value. Eminent domain: The Government uses your property for a public use and

compensate you for the fair market value of the property they took.

WAYS TO PROVE LEGAL REMEDY INADEQUATE 1. Irreparable harm Multiplicity of lawsuits Insolvency of defendant

(Goulding v. Cook) Where damages wouldn’t be a good remedy for Plaintiff because he

doesn’t want money InjunctionEjectment plus mesne profits may work.

Easements of necessity can only be granted in very limited circumstances of reasonable or absolute necessity. If a court were to deny an injunction against trespass on the premise that some wider rule of easements of necessity obtains, we would not hesitate to overturn that exercise of discretion.

Good Faith Improver = Someone who by mistakes makes improvements on another’s property. In this case, the guy did it intentionally so this doctrine is not applicable.

CERCLA: Clarity or Chaos (Boeing Company v. Aetna) – violation of federal statute (CERCLA) providing for response costs; this case centered around whether insurance co. had to reimburse business for response costs based upon whether they are considered damages or restitution.

Response Costs: cleanup of waste sites Labels apply to cost of cleanup in the toxic waste area?

o Restitution or o Damages. (They are mutually exclusive).

Ultimately court decides that damages included cost of cleanup so it’s covered by the policies.

If calling restitution equitable and damages legal is not a strong argument to say cost of cleanup is restitution, what is the best argument for calling cost of cleanup restitution?

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Chapter 6 - SALES AGREEMENTS

o The remedies for torts are larger than breach of K o The SOL is longer for contracts then torts.

Recession – put parties in position they were in before K; unravels the contract Specific perform & damages put parties in position as if K had been performed Can get nominal damages for breach of K; no punitives, but can get pre-

judgment interest (so long as damages are liquidated)

Three major breach of K remedies: **If there is a breach of K question on the exam, all three remedies should be discussed.

1. Rescission Not an option unless breach is material Can only get rescission from a fraud in the inducement of a

contract, which is a tort. Goal of rescission: put parties in pre-contract position; relate

restitution: each must get back what they have put into the contract, like getting back a down payment or returning the good.

Consequentials - In addition to rescission, you are also entitled to consequentials, based on the RELIANCE interest: expenses paid in preparation for the K which do not necessarily benefit the other party

Limited by foreseeability, general rule at time K is entered into.2. Specific performance

Equitable remedy Goal of SP: put party in position would have been had K been

performed: plus consequentials such as delay damages, or may be measured as lost profits.

Must prove legal remedy is inadequate3. Damages

Legal (damages are money equiv. of spec. performance) Always in form of money Out of pocket (rare; restitution plus consequential) v. benefit of

bargain (majority; fmv plus contract price plus consequential)

Discuss damages first, and then Specific Performance because you must show legal remedy is inadequate before getting equitable remedy.

Centex Homes v. BoagNote: signing or performing of K specify in exam when saying the parties executed a contract.

Elements of Specific Performance Specific performance Process:

1. Is there an adequate legal remedy?

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Sub-issue: is it personal or real property? Why? Uniqueness is a way or proving that a legal remedy is inadequate.

o Real Property - unique, so Specific Performance. o Personal Property - still have to prove that damages is

inadequate. The buyer wants real property. What does the seller want? The full purchase price – MONEY;

2. Mutuality of remedies? Can both get the same remedy? Old Rule - If NO - Then the rule is not satisfied, so under

Common Law since both cannot get same remedy, it is not available to either one of them.

New Rule - Today it’s based on MUTUALITY OF OBLIGATION: One party can get Specific Performance even if the other cannot.

Must be Discussed – The Old Rule Applies, New rule s a trend, discuss both under specific performance.

Liquidated Damages - Can be seen as punishment if they are in excess of what the actual loss is.

Rule of thumb for acceptable liquidated damages is about 10%.

Equitable Conversion - Once contract for Real Property is signed, title is split into legal and equitable title. The buyer after the signing has equitable title to land and legal title to money, the seller has the opposite; complete title does not transfer until the deal is performed.

NOTE: The uniqueness prerequisite is taken less seriously in Specific Performance for land than for goods. At common law, sale of property was unique and could get specific performance (by

calling the property here quasi-realty, then specific performance was not automatically grantable)

In K cases, always ask: Who is the breaching party? Who is the plaintiff? (at common law, a breaching party cannot sue; now, the trend is it doesn’t matter)

BUYER’S DAMAGES FOR SELLER’S BREACH

Tip: Fraud in inducement – if the issue is around the making, i.e., the misrepresentation takes place before the K is formed, talk about fraud in inducement; if the issue is around a breach of an already existing K, then do breach of K analysis.

FRAUD IN THE INDUCEMENT -- Elements1. Scienter – knowledge of the falsity2. Material misrepresentation (goes to how big of a lie it

was) of a material fact (goes to how important that fact was)

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3. Reasonable reliance 4. Injury (No injury, no tort. But not actual malice, that

related to punitives)

Plaintiff has two options if Defrauded Disaffirmance: Rescission + Restitution + Consequentials (based

on proximate cause) and Possibly punitives. Affirmance: Keep K and get damages: sounds like SP plus

damages. Two ways:

o Use same terms as breach of K, but the ways of measuring are different:

Out of Pocket - difference between K price and fmv; (minority)

Benefit Of the Bargain - difference between fair market value and value if as represented (majority)*cannot recover nominal damages bc need injury

Remedies for fraud in the inducement: o can disaffirm and get recission (Fraud in inducement is only tort for which

recission is a remedy) recission – each must give back what they got in the transaction

o Can affirm and get damages either:1- out of pocket – diff. Btw fmv & K price2- benefit of the bargain (majority rule and will generally yield the higher

amount) – diff btw fmv & value as represented

BREACH OF K -- Remedies1- out of pocket – return down payment2- benefit of the bargain – diff btw fmv & K price at the date of breach

(majority)

o What is the difference between specific performance and damages: one is legal and the other is equitable

Expectancy Damages v. Recission-Restitution(Horton v. O’Rourke) Measuring the cost of improvements:

o Cost o Additional value o Increase rental income possibilities

Remedy: SP; it’s not an option because there is a lien on the property that cannot be removed so, therefore, only damages are available:

Benefit Of The Bargain – Used the minority approach -- when the breach was in bad faith: I.E. they used out-of pocket because the breach was not in bad faith.

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In the absence of bad faith the damages recoverable for breach by the vendor of an executory K to convey title to real estate are the purchase money paid by the purchaser together with interest and the expenses of investigating title.

Doctrine of good faith improver – improve another’s land by mistake (usually arises in boundary line issues, but could have mentioned it here and would get credit on exam for it)

Measuring the Buyer’s Expectancy

Wilson v. Hays breach of oral K after part performance COA: breach of K; remedy is damages. Because the goal is to put the party in the place he would have been in had the K been performed, the court awarded a benefit of the bargain measure.

Texpar Energy v. Murphy Oil, USA, Inc. COA: breach of K; remedy; damages. The measure of damages for non-delivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the K price.

Wolf v. Cohen breach of land sale K. three possible remedies are:1. Specific performance2. Damages3. Rescission

Note: When you see a breach of K case , think of damages, rescission, specific performance as remedies. Damages & Specific Performance put the parties in position had the K been performed/expectation interest (rescission is to restore pre-K status/to unravel the deal)

Doctrine of Economic Waste: applies only to instances of unavoidable harm that the builder had reason to foresee and it applies to commercial buildings, not residential dwellings. Moreover, here the builder’s breach was willful. Willfulness can expand and effect a remedy. Limitations on damages in breach of K.This is wrong. Fla. Supreme Ct – applies equally to both commercial and residential

Oloffson v. Coomer: anticipatory repudiation of a sales K. The non-breaching party can Cover: to provide substitute source for goods. A form of mitigation of damages or can wait performance for a “commercially reasonable time.”

Breach of Warranty

General Damages: difference btw value of goods received and value as warrantedConsequential damages:

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1) primary profits – are the diff btw what the buyer would have earned from reselling the goods in question had there been no breach and what was earned after the breach occured

2) secondary profits – any profits you would have made in addition to the sale of the primary goods (i.e., buyers of mini mart goods not coming in to buy because they no longer are buying their gas in a certain place)

3) loss of good will profits – this is damages recoverable if within the contemplation of the parties when the K was entered into the contract and only relates to future sales.

Reason to know test : which requires that if a seller knows of a buyer’s general or particular requirements and needs, that seller is liable for the resulting consequential damages whether or not that seller contemplated or agreed to such damages. This is the issue of whether the damages were reasonably foreseeable at the time the agreement was entered into.

Measure of damages for breach of warranty: the measure of damages for breach of warranty (similar to fraud in inducement damages and generally, tort damages) is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if that had been as warranted, unless special circumstances show proximate damages of a different amount.

Reliance RecoveryWartzman v. Hightower Productions, Ltd.: Breach of K case and negligence (most malpractice cases are analyzed as negligence cases) Reliance Interest: amounts expended in preparation and performance of a K ( a synonym is out of pocket measure of damages that don’t benefit the other party (as opposed to restitution interest which is like a down payment). Thus, where the breach has prevented an anticipated gain and made proof of loss difficult to ascertain, the injured party has a right to damages based upon his reliance interest, including expenditures made in preparation for performance, or in performance, less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the K been performed.

Important: While ordinarily lost profits due to breach of K are recoverable, when loss business profits are too speculative, that is your hint to think about reliance interest recovery.

Seller’s RemediesDamages, Damages (Abrams v. Motter) the remedies available were specific performance, damages or rescission (Note:to get rescission, have to prove a material breach)Loss of Bargain Damages: The excess of the contract price over the value of the real property to the seller at the date of breach.

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o “Despite the rule that damages are measured by comparing the cash value of the contract to the cash fair market value at the time of the breach, if the land increases in value before trial and the seller resells the property for more than the contract price, the seller no longer has any loss of bargain damages.

Synonyms for Reliance interest out of pocket or consequential damages, restitution

Mitigation - Courts have insisted that the seller “mitigate” damages by diligently and promptly seeking to resell the property.”

o If seller resells the property at a loss, the resale price is evidence of the market value at the time of breach.

Pre-judgment interest - Compensates plaintiff for loss of use of money from date of breach to date of judgment.

o More likely to recover pre-judgment interest in K case. In the case above, however, it was disallowed because the amount owed was not known or liquidated at the time of breach (because if damages are unfixed at the date of breach they are unfixed at the time of suit so PJI cannot be calculated from the date of the breach).

Consequential damages1. Interest on net proceeds is associated with Specific Performance, i.e., only

recoverable when you seek specific performance.2. Resale expenses occasioned by the breach:

Manufacturing cases: how damages are measured:1. Difference btw the K price and market price at time of

the breach (which is a benefit of the bargain measure of breach of K)

2. Difference btw cost of manufacturing and the K price3. Or Nominal damages, only

Manufactured Goods - For a breach of contract for the sale of personal chattels, yet to be manufactured, the vendor is entitled to recover the difference between the selling price and the market value at the time and place of delivery. The court treats the mfr as if retailer, no deduction for expenses saved. Specific Performance argument: no unique product and damages are adequate. Whenever Seller is manufacturer of product - Cost saved if the product is not manufactured. Shouldn’t this be subtracted from the recovery? Seller says no, I want the lost product. Buyer says, but you never even manufactured this. It would be a windfall.

RESALE OF GOODS BY SELLER -- McMillan v. Meuser Material and Equipment Co. – Breach of K; remedies damages this case adds the resale issue (below)

Options are open to the non breaching seller:1. Rescission2. Specific Performance 3. Damages

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RULE: Where the resale is made in good faith and in a commercially reasonable manner the seller may recover the difference between the resale price and the contract price together with any incidental damages allowed under the provisions of article 2-710 but less expenses saved in consequence of buyer’s breach. (the diff btw contract price and the fmv at time of breach was used in this case because the seller did not resell in a commercially reasonable manner)

Reasonable time depends upon the nature of the goods, the conditions of the market and the other circumstances of the case.

Resale in general - This rule is based on the principle of avoidable consequences. The defaulting buyer should be credited with the price actually obtained or obtainable for these goods by a new sale.

o The seller is not accountable to the buyer for any profit made on resale.

Sprague v. Sumitoto Forestry Company, Ltd. must give notice of intention to resell under the UCC to give the breach party opportunity to remedy breach this is an element of the seller right to invoke resale remedies

UCC distinguishes incidental damages from consequential damages: know this difference for exam purposes

o Incidental damages are normally incurred when a buyer (or seller) repudiates the K and wrongfully rejects the goods, causing the other to incur such expenses as transporting, storing, or reselling the goods.

o Consequential damages do not arise within the scope of the immediate buyer-seller transaction but rather stem from losses incurred by the non-breaching party in its dealings, often with third parties, which were a proximate result of the breach.

No Consequential Damages for Seller under the U.C.C.

Puzzle of the Seller’s Profits(R.E. Davis Chemical Corporation v. Diasonics) – here, the breaching party is the plaintiff (at common law, couldn’t do this)Lost Volume Seller – sold as much as it produced therefore lost a profit from the original sale i.e., you can sell as much as you can make.

Breaching party is bringing the claim, asking for restitution of its down payment. KP - RP yields 0, no damages, i.e., because the seller sold the goods. If the seller would have made the sale represented by the resale whether or not

the breach occurred, damages measured by the difference between the K price and market price cannot put the lost volume seller in as good a position as it would have been in had the buyer performed

The resale would have been made whether the buyer breached or not, so I should still be allowed to recover my lost profit.

Seller must convince court:1. They are a Lost Volume Seller2. They would have made the sale3. It would have been economically profitable to do so.

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BREACH OF K REVIEW Rescission requires a material breach, e.g., Construction contract – 90% performed

is a material breach – this constitutes substantial performance (rescission is not an option for a buyer after substantial performance by the contractor)

Quantum Meruit is associated with rescission – getting out of a K (limited by K rate/price?)

Losing K – where full performance exceeds the K price

Liquidated Damages Clauses(Nohe v. Roblyn Development Corp.)Liquidated damages: is an amount fixing damages.

For a liquidated damage clause to be valid, it must be the following two requirements: 1) At the time the K is formed, it is virtually impossible to estimate the amount of

damages in the event of breach; and 2) the amount of actual damages bears a reasonable relationship to the amount in the

liquidated damages clause. It must be reasonable o A term fixing unreasonably large liquidated damages is unenforceable on

grounds of public policy as a penalty.” i.e., it vastly exceeds actual damages.

o The law disfavors liquidated damage clauses. The law favors that the breaching party pay exactly the amount of damages that the P suffered

o If the clause is struck from the K (as invalid), then the P must prove actual damages.

o An estimate of damages which was reasonable when made may sometimes turn out to be a gross exaggeration.

o When is validity (reasonableness) of a liquidated K measured? - When Contract is signed, i.e., when the K was entered into. However, the modern rule is toward assessing reasonableness either at the time of K formation or at the time of the breach – the modern trend, may even be the majority rule at this point. Because an estimate of damages which was reasonable when made may sometimes turn out to be a gross exaggeration. More recent cases display a willingness to take this factor into account and to refuse enforcement of the forfeiture if it would result in a large windfall to the vendor in fact.

o Benefits to the seller that are attributable to a rising market subsequent to breach rightfully accrue to the seller.o A seller who has suffered no harm cannot retain a deposit even in the face

of a liquidated damages clause.o Liq. Damages clauses tend to favor seller’s of property

Seller’s Restitution (Wellston Coal v. Franklin Paper Co.)—seller sought rescission and restitution in quantum meruit

Buyer honors K while getting better part of the deal, then breaches when it goes the other way.

Remedy is rescission.

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“When full performance of a K has been prevented by the wrongful act of the D, the P has the right either to sue for damages, or he may disregard the K, and sue as upon a quantum meruit for what he has performed”

The real test in all cases of a P’s right to recover as upon a quantum meruit for part performance of a K, wrongfully terminated by the D, depends upon the consideration whether the D is thereby enriched at the loss and expense of the P.

Rescission is the best remedy in a breach of K when full performance exceeds the K … here, it was not a losing K.

Issue: Is QM limited by the K price when P is the non-breaching party? No. Thus, the court here did not use the K price too limit QM.

U.S. v. Algeron Blair, Inc. General contractor breaches after subcontractor partially performs (20 percent)

and Subcontractor would have lost money had it completed the K. If GC had not breached, and SC fully performed, it would have been a losing contract

Remedy: Rescission -- restitution in the form of QM. “The impact of quantum meruit is to allow a promisee to recover the value of

services he gave to the D irrespective of whether he would have lost money on the K and been unable to recover in a suit on the K. The measure of recovery for QM is the reasonable value of the performance; and recovery is undiminished by any loss which would have been incurred by complete performance. While the K price may be evidence of reasonable value of the services, it does not measure the value of the performance or limit recovery. Rather, the standard for measuring the reasonable value of the services rendered is the amount for which such services could have been purchased from one in the P’s position at the time and place the services were rendered.”

TRUST LAWExpress: can be written and oralImplied: can be in fact (resulting trust) or in law (constructive trust) (also called Quasi-K) A constructive trust can be imposed over money, real property and personal

property (just not people) Because it arises by operation of law, rather than being dependent upon the

intention of the parties, Statute of frauds is not a defense to a constructive trust (only to an express one or one implied in fact)

No longer need to establish a fiduciary relationship

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Specific Performance Revisted (Bander v. Grossman) – breach of K to purchase a rare sports car issue: specific performance of a K for the sale of unique goods with a fluctuating price (similar to stock case, earlier) specific performance may be decreed where the goods are unique or in other proper circumstances P requested Monetary Specific Performance in the form of a judgment approximately

10 times greater than the breach of K damages awarded by the jury. The car was sold prior to the commencement of the litigation for a price $185000 above the $40000 K price, and P requested that he be granted SP in the form of a constructive trust impressed upon the proceeds of the sale, plus interest from the date of the sale.

Strictly speaking not SP case because he’s not getting the car, he’s getting money, so it’s more like damages. .

MEASURE OF DAMAGES: If equitable money damages are to be awarded . . . that award must be based upon value at the time of trial, rather than on an earlier valuation.”

Point is to put the claiming party in the same position he would have been in had the K been performed.

It is specific performance because he has the money to buy that car today (otherwise, this case doesn’t really look like specific performance)

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Chapter 7 – EMPLOYMENT AGREEMENTS (CONTRACTS)

Rescission, damages, specific performance (and damages are the primary remedy) for breach of employment Ks

Can’t force people to work against their will (13th Amendment) General CL rule – employment agreements are AT WILL; therefore, either party can

terminate without legal liability. Not every employment agreement creates a fiduciary duty or an agency relationship. Negative injunctions (orders that say you can’t work for some one else, e.g.) and

covenants not to compete: under SP because in a way it’s the only remedy besides reinstatement that is close to SP.

Nominal damages is a possibility for breach of K. Measure of damages: cost to replace, lost profits, liquidated damages, nominal, etc. No cause needed to fire an at-will employee, Cause is needed if there is a contract Rescission in employment contexts – employees must be paid periodically (by

statute) therefore there is not much to be gained – i.e., rescission does virtually nothing for either party rarely used

Specific Performance – think automatically of the 13th amendment which forbids involuntary servitude; can’t force someone to continue to work

Duty to mitigate damages: for an employer, to hire someone else

FOR EMPLOYMENT CONTRACTS, ASK Who is the breaching party – employer or employee? (remedies are different depending upon who breached) Rare for employer to sue; more common for employee to sue employers who fire them.

Review : For Contracts, damages can be measured by 1. Difference between K rate and fmv at time of breach2. Nominals3. Lost business profits4. Restitution

Employer’s Remedies

Employer’s Damages(Roth v. Speck) What remedies are available to the non-breaching employer? Cost of obtaining

equivalent services in the marketplace How are damages measured? The best way to measure this is by how much the

breaching employee is making elsewhere – this sounds like restitution because it is measured by the D’s unjust enrichment (this is similar to rental value in that the measure being used??)

Specific Performance - is not an option, court will not order employee to go back to work (violates constitution – 13th Amendment involuntary servitude – Black Letter Law).

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Rescission - is an option, although not an attractive one. All you need is a material breach, and this breach is material. Not attractive because employee was paid and served competently, so there is nothing for employer to get out of it.

Damages - What is measure of damages in breach of employment K by employee?o Cost to replace - What did it cost employer to replace breaching employee?o Lost profits – Can be too speculative. o Restitution - Based on how much the defendant profited from his new job. o Unjust Enrichment - The best measure of P’s loss is sometimes D’s unjust

enrichment

Employer’s Restitution(Snepp v. United States)Promised not to divulge classified information and not to publish any information without prepublication clearance. Published without prior approval. The employer is suing the employee for breach of promise not to publish. Breach of K. The SCT upheld use of a constructive trust (even though it appears that the legal remedy would have been adequate here, i.e., punitive damages courts are not so strict with requiring a showing of the inadequacy of legal remedies, unless it is an injunction or specific performance – here, they have maintain the strictness). Remedies:

o Injunction as to future publications (prohibit future publications, but this raises 1st amendment issues around prior restraint)

o Constructive trust on all profits employee earns from the publication no longer need breach of fiduciary relationship to impose a constructive trust

o Nominal and punitive damages;

Employer’s Injunctive Relief(Beverly Glan Music, Inc. v. Warner Communications) When an employee breaches K to take another job can they sue the new employer

for inducing the breach? Plaintiff cannot enjoin prospective employers of the breaching employee from

working for them. This deprives the employee from his/her livelihood Employer sought a negative injunction to keep Baker from working for Warner. In California, by statute, courts cannot enjoin the breach of a personal service K

unless the service is unique in nature and the performer is guaranteed annual compensation of at least $6K.

But, damages are still an option for the employer by suing in tort Warner for interference with a contractual relationship

Employer’s Liquidated Damages(Vanderbilt University v. Dinaro) Liquidated Damages clauses in employment agreements are generally disfavored. But, a liquidated damages clause in an employment agreement will be held valid if

the amount stipulated is reasonable in relation to the amount of damages that could be expected to result from the breach, and that such damages would be indeterminate or difficult to pin down (measured when breach occurred) same as in a sales K. When do you measure reasonableness? Modern view is to measure at either point

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Another issue: when calculating employer’s injuries, could they take into account consequentials? court says yes, even though some may seem to be speculative, how much good will was lost, etc.

In the area of employment, lots of confusion about what form remedies take, are they damages or restitution, they overlap a lot, also quasi contract comes into play.

There are only a few basics to focus on, know what each one does (damages P’s loss, etc.), you can’t go wrong.

Employee’s Remedies

Employees Remedies and Re-instatement(Dixie Glass v. Pollack) Where an employer wrongfully breaches a contract of employment prior to the

time it has been completely performed, a cause of action for damages for breach of contract immediately arises in favor of the employee and he is entitled, if he elects, to recover his damages for the full term for which he was employed and he is not limited to damages proven only to the date of trial where trial is before the expiration of the term of employment.”

POSSIBLE REMEDIES: Damages in breach of employment K setting – measure when employer

breaches: balance of contract wages less wages earned or should have earned in replacement job.

Rescission: not a good option because it would entail restitution, giving back what is given thus far, but this employee has already been paid for time worked, so not much left for restitution although it is also restitution plus consequential damages/reliance interest, did this employee sustain any damage on account of employer’s breach. And

Specific Performance: 13th A will not permit it. Duty to Mitigate: the duty is on the employee to use reasonable diligence to obtain

other employment and thus minimize his damage. Consider facts like

o Ageo Probable life expectancyo Educationo Experienceo Past earning capacityo Probable span of employability.

Employee’s Avoidable Consequences Mitigation of Damages: subtract new job salary from old job salary.

Common Law Claims: 1- wrongful discharge in violation of public policy

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2- breach of implied in-fact contract3- Implied covenant of good faith and fair dealing

Rescission Based On:1- Tort: fraud (consequentials are limited by Prox Cause)2- Contract: failure of consideration (Conseq. limited by foreseeability)3- Neither tort nor K: mistake, innocent misrepresentation (not entitled

to consequentials)

Quantum Meruit: can be implied in fact or implied in law – sometimes limited by K rate, sometimes not. It is limited when the P is the breaching party (otherwise you create incentive for individuals in a losing K to get out of the K and sue).

Thus, QM is limited:When non-breaching party is plaintiff When non-breaching party is an attorney

Parker v. 20th Century Fox – Employee’s avoidable consequencesCOA: breach of K; remedy damages.The General Rule is that the measure of recovery by a wrongfully discharged employee: Is the amount of salary agreed upon for the period of service, less the amount which the employer affirmatively proves the employee has earned or with reasonable effort might have earned from other employment.

Is there a duty to mitigate? No, the employee’s rejection of other available employment of a different or inferior kind may not be resorted to in order to mitigate damages. Thus, the employer must show that the other employment was comparable, or substantially similar to that of which the employee has been deprived. Who has burden of proof on damage mitigation? The employer.

For exam would also want to mention these other possible remedies: Specific Performance: (Remember to go to damages first, because legal remedy

must be inadequate); is it a unique type contract? Rescission: Generally speaking, no restitution, but maybe reliance, if she gave up

other films to do this one. What’s the test for whether this is recoverable? Was it FORESEEABLE.

Damages: general damages.

Contract v. Tort Interlude: Exceptions to the At-Will Doctrine (Foley v. Interactive Data Corporation)Note – When suing for breach as an employee for being fired, essentially, the only remedy is damages, reinstatement is not an option (reinstatement is like specific performance)1. Wrongful discharge in violation of public policy: is it tort or contract? Tort

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What public policy is being argued: This is the banking business, so the public has an interest in knowing if the bank has knowingly employed an embezzler. In this case, the plaintiff lost on this claim because no public interest is implicated.2. Implied in fact contractAn implied in fact contract is based upon conduct of the parties. It’s a contract claim.

o Any implied in fact contract claim is based on the conduct of the parties, based upon representations of job security and termination procedures, e.g., those contained in company handbook.

Employee Handbook - What are legal hurdles of using the employee handbook as the basis of a lawsuit?

o Is it binding, what consideration did the employee give? o When was it shown to the employee? If done at initial hiring,

there was more likelihood that the employee relied on it.

3. Implied covenant of good faith and fair dealing. Tort /contractIn insurance, analyzed as torts. Compare employment K’s to insurance K’s to see if this should be a tort. Doesn’t work. Insurance K’s can be distinguished. Interests of insurer and insured are at odds. Employer and employee are in alignment. E & E have mutual interest in performance on the job. If analyzed as a K, then it limits employer’s liability because there is no possibility for punitives. This case said it was a This coa is a contract when raised in the employment setting and analyzed as a K, not a tort. Further, this claim is not barred by the SOF.

Talk about these three common law claims when an at-will employee has been fired: wrongful discharge in violation of public policy, breach of implied in fact K, and implied covenant of good faith and fair dealing

Employee’s RestitutionChambliss Bahner & Crawford v. Luther Client has the power and the right at any time to discharge his attorney with our

without cause. Such a discharge does not constitute a breach of K for the reason that it is a basic term of the contract, implied by law into it by reason

QM is equivalent of rescission?? Rule of Thumb: when the K is not a profitable one (i.e., the attorney has billed more

hours than the K would allow), it is better to essentially rescind the K and sue in quantum meruit (since billable hours x hourly rate exceeds the K amount). Public policy, however, carves out an exception in the case of a client firing her attorney: QM is limited to the K amount any other rule creates incentives for attorneys to get themselves fired after they have billed more hours than the K allows.

Runyan v. Pacific Air Industries – first case where rescission is the remedy – Rescission’s aim is to put the parties in pre-K position and always associate restitution with rescission (giving back what each party has taken so far). P was also asking for consequential damages.

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IMPORTANT RULE: How are consequentials measured when P seeks rescission based in turn on

1. Fraud (limited by proximate cause)2. Breach of K (limited by foreseeability)3. Mistake /innocent misrepresentation (no consequentials)

The logic behind this is because fraud has a high level of culpability; breach of K is mid-level; mistake is low-level of culpability

Specific Performance: unlikely in a personal services contract. But this is not clearly one, this is franchisee/franchisor so not technically employment. Would need to ask these questions: would a lot of court supervision be required?

The only tort for which rescission is an option is fraud. Court says this is not a fraud case because the employer had good faith to carry through on its contractual obligations, but could not do so.

Distinguish fraud from breach of K- If you lie before entering K, it’s probably fraud; if you intend everything you say up to the time of the K, it’s just a breach.

Legal v. equitable rescission: The word rescission used alone on exam means equitable rescission; we are not dealing with legal rescission.

Lynn v. Seby -- Here breaching party was the P. The only remedy a breaching party can get is restitution. RULE: Though at common law, a breaching party could not sue for any relief, the emerging trend is that a breaching party is entitled to recover restitution which is measured as the excess to benefit conferred over injuries sustained.

Employee’s Remedies: Recap (Freund v. Washington Square Press) General formula for measuring breach of contract damages. Benefit of the bargain: KP - FMV at the time of the breach:

NOTE: When damages fail for uncertainty, the remedy will be nominal damages.

Void, voidable, unenforceable K and the impact of these on rescission - restitution. Election of remedies Means you can’t get more than one remedy;

o But: Damages and injunction (past / future). But if damages are PERMANENT , its past present and future and no injunction in that case.

o Fraud -, victim has choice: Stick with K and sue for damages, or Disaffirm and seek rescission and everything that goes with it.

o When can an election of R take place? Can’t happen before K is entered into; there must be a signed K and then something goes wrong. Once victim discovers fraud, how long until the election of remedies (affirmance / disaffirmance) is made; can it happen before suit? Yes, it can be manifest by conduct, does not have to be by words, written or oral. Ex. Proceed with transaction versus get out of transaction, but this is after discovery of the fraud.

o Is there always election of remedies? No

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o Can pleading in alternative serve as election of remedies? o ProbaIbly not, even if one count says damages another SP and a third

rescission. Not generally bound by the election in the first count. Latest possible time for election of remedies: submission to the jury. No rule

about when in time election should take place. (Gannett v. Register Publishing) Fraudulent Inducement - One fraudulently induced into a contract may, as a

matter of substantive law, either affirm or disaffirm the agreement. o An election of the substantive right to affirm extinguishes the

substantive right to disaffirm. o And so an attempt to invoke the remedy of rescission after an action on the

contract may fail, not because of election of inconsistent remedies, but because the plaintiff no longer has the substantive right to disaffirm.

o Exercise of acts of ownership over the subject matter of the K will validate the transaction and terminate the power of avoidance, regardless of whether the other party has suffered any prejudice.

o The duty of care of a defrauded party who continues to operate a business for the benefit of the other party after sending a timely rescission notice and tendering the property back is that of a gratuitous bailee.

Measuring fraud damages: o Out of pocket: difference between FMV and KP o Benefit of the bargain: Difference between FMV and value property would

have had had it been as represented. o Possibly punitives o Possibly consequentials - limited by proximate cause.

Earl v. Saks & Co.

Fraud:o Material misrepresentation of a material facto Scientero Inducemento Reasonable relianceo Injury. Issue: does injury for fraud have to be pecuniary? Not necessarily.

Harper v. Adametz A real estate agent failed to disclose an offer from a purchaser for an 83 acre farm.

Broker takes buyer to show him the land. Buyer made $7000 offer for the 83 acres; broker said seller did not accept but in fact broker never made the offer; second lie broker told buyer he could buy 17 acre parcel for $6,000.

Reed v. King Fraud in the inducement and not breach of K after signing

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o Misrepresentations took place before the K was signed. – Difference is important because it affects remedies; options to victim of fraud, rescind or affirm.

o In fraud you must choose between rescission and damages.

Generally speaking, if a K has been fully performed, can’t use any of these things in the box to get out of it

But, these are all defenses to contract performance (specific performance)

Duress Undue Influence Mistake or Unconscionability

--not torts (low level of wrongdoing)--all can be used as a reason to get out of a K (i.e., defenses to specific

performance)

Defenses to specific performance-statute of frauds-minor status

Unconscionability (serves as a defense to specific performance)Three types: (need 2 of these 3 to prevail)1. procedural- (sharp tactics used to procure the k) looks at the kind of tactics applied to induce you to enter into K (e.g., duress, undue influence, etc.)2. substantive (most common) (unfair terms in the K itself)– looks at the terms of the K are they so extreme – one sided – e.g. car on an installment plan where the interest rate is so high it is illegal3. remedial – ways in which the other party to K tries to enforce the K, e.g., the creditor calls your employer after you are behind on payments or trigger garnishment proceedings.General rule is need at least two of the three types of unconscionability to assert it. It is not a tort, but a defense to specific performance; full performance makes this argument unavailable.

- not recission b/c he already sold the property – can’t get out of it

Three options open to court: 1. void the entire K2. excise unconscionable part (enforce the remainder without unconscionable term)3. rewrite the K (limit the application of the unconscionable term to avoid unconscionable results)*rewriting does not reflect the intent of the parties, only to make the K fair. As opposed to reformation which is a rewriting in accord with intent of parties.

(SoF) K has to be in writing when:

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Real propertyK not performed w/in a yrSale of goods worth more than $500

DURESSOdirizzi v. Bloomfield School District – case where teacher resigns after being charged with homosexual activity. He tries to rescind his resignation on the basis of duress, undue influence, mistake and fraud Cases in undue influence occur where there is a K, one party doesn’t perform, non

breaching party sues, breaching party uses it as a defense (along with fraud, mistake, innocent misrepresentation).

Duress – must be an illegal action or threat in duress or menace, consists in unlawful confinement of another’s person, or relatives or property, which causes him to consent to a transaction. A threat to take legal action is not unlawful unless the party making the threat knows of the falsity of his claim.

Mistake – The parties must be laboring under a misapprehension of law or fact (Both parties must have all material facts for a party to claim no mistake).

Undue influence: see below -- Here, used undue influence as a defense to specific performance

Fraud – see elements above o Constructive fraud: Constructive fraud arises on a breach of duty by one in a

confidential or fiduciary relationship to another which induces justifiable reliance by the latter to his prejudice. Here, need the fiduciary relationship.

Undue influence - pushing someone’s buttons when under stress. Disparity in power Taking unfair advantage of someone’s weakness of mind Not a tort, therefore can’t get damages

UNDUE INFLUENCE1- Lessened capacity of the object to make a free contract2- Application of excessive strength by a dominant subject against a

servient object3- Over persuasion (which is generally accompanied by certain

characteristics including:o Discussion of transaction at inappropriate time o Consummation in an unusual placeo Insistent demand to finish at onceo Extreme emphasis on untoward consequences of delayo Use of multiple persuaders by dominant side against a

single party. o Absence of third party advisers to the servient partyo Statements that there is not time to consult an attorney.

1.

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*making of will is a typical, classic example of undue influence (elderly person and someone close to the elderly person who has that confidential relationship with them, and prevails upon them to change their will)

DURESS – BUSINESS COMPULSIONSelmer Co. v. Blakleslee Midwest -- Selmer was subK for Blakeslee. Raising a defense to the performance of the settlement agreement; the defense is “economic duress”

o The mere stress of business conditions will not constitute duress where the D was not responsible for the conditions

o Economic problems of P must be caused by the Defendant

Chapter 8 cases are all attempts to enter into contracts, and then one party does not follow through. Then breaching party raises an affirmative defense or an excuse.

UNCONSCIONABILITY (p. 681) – this is an equitable doctrine

Substantive: terms unconscionable, paying too much for an item, usually not enough by itself to unravel a contract because K law says inadequacy of consideration is not alone a basis for rescission.

Procedural: kinds of tactics employed to induce you to buy, some forms of undue influence, pressure exerted on buyer to enter into K. (But fraud is a bigger wrongdoing, so if fraud forget unconscionability

Remedial: how seller goes about collecting.

o Also, if K is fully performed generally unconscionability is no defense: logical because if the K is completed it is hard to argue that it is an undue burden to perform.

o The more the K is performed, the harder it is to get rescission.

Vockner v. Erickson Theoretically it is possible for a K to be oppressive taken as a whole, even

though there is no weakness in the bargaining process and no single term which is in itself unconscionable.

Unconscionable contract involves other factors as well as an overall imbalance. Unconscionable Contract: The principle is one of the prevention of

oppression and unfair surprise and not of disturbance of allocation of risks because of superior bargaining power.

Factors: o Unrepresented party, o One party has more experience o Inequality of knowledge

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Reformation of Unconscionable Contracts- The unconscionable contract may be reformed to limit the unconscionable clause and then enforced as reformed.

o UCC: o Reject part o Reject all, or o Limit the unconscionable clause. Kill

So how to discuss this on exam: o Cause of action for breach, one party raises unconscionability as a

defense, the other party tries to use laches to overcome the defense. Substantive Unconcionability : bad terms, the payment was too low. Procedural Unconscionability: undue influence, unequal bargaining power. Reformation: radical, court substitutes its sense of justice for the intent of the

parties.

CONTRACT NOT FORMED -- Required Writing Missing (Schweiter v. Halsey) Rule: Vendee under an agreement for the sale and purchase of property which does not satisfy the statute of frauds cannot recover payments made upon the purchase price if the vendor has not repudiated the contract but is ready, willing, and able to perform in accordance therewith, even though the K is not enforceable against the vendee either at law or in equity. (No legal description of the property which is a key term).

o This is another case where the breaching party is the plaintiff (at common law, the only remedy a breaching party could seek was restitution)

o Thus, in accord with the great weight of authority has consistently denied recovery of earnest money paid under a void or unenforceable agreement to convey real estate where the buyer has defaulted and the seller was at all times ready, able and willing to consummate the transaction.

o Court held that “to the degree the K has been performed, it is enforceable”

o Unenforceable – the buyer does not get security deposit backo Void – if K is void, you have no legal basis to keep the security deposito voidable

Lack of Capacity to Contract (Halbman v. Lemke)Contract with minor for vehicle. It threw a rod, taken to be repaired and left there, repairs made, mechanic then “unrepaired” it and took to minor’s home, tried to get seller to pick it up, the car was vandalized, now worthless. It is settled law in this state that a K of a minor for items which are not necessities is void or voidable at the minor’s option. As a general rule a minor who dissafirms a contract is entitled to recover all consideration he has conferred incident to the transaction. In return the minor is expected to restore as much of the consideration as, at the time of disaffirmance, remains in the minor’s possession. The minor’s right to disaffirm is not contingent upon the return of the property, however, as disaffirmance is permitted even where such

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return cannot be made. Where there is misrepresentation by a minor or willful destruction of property, the vendor may be able to recover damages in tort, but absent these factors, as in the present case, we believe that to require a disaffirming minor to make restitution for diminished value is, in effect, to bind the minor to a part of the obligation which by law he is privileged to avoid.

Voidable by minor – if returns as much consideration as he canIf depreciated, is the minor liable for depreciation- Yes, even in case of depreciation, and adult must give back purchase price

Exceptions to minor rule1) lies about age2) necessaries (minor liable for FMV, not KP)

- CLOTHES, FOOD3) Intentional Tort (find a tort, no need for breach)

If for necessaries: you can give back what you got, but liable for FMV of property.

Disaffirmance rather than rescission? Because only has to give back what he has in his possession, even if vastly depreciated.

Unless: misrepresentation of age, fraud: separate tort. If minor had intentionally damaged the property: separate tort.

GROUND FOR RESTITUTION -- DEFICIENT CONSIDERATION(Johnson v. GMC Chevrolet) Bad pickup. Problems from day one. Cause of action: breach of contract. Revocation of acceptance: another was of saying rescission.

Under UCC 2-608: revocation must occur within a reasonable time when buyer discovers grounds for it. Your conduct can show affirmance, then can no longer rescind. This didn’t happen in this case because the conduct of keeping the truck was necessary.

o The truck buyers owed a duty of reasonable care for the truck (as bailees)o Here, the court allowed for rescission of the K and reduced recovery by

reasonable value of the use of the truck. Measure can be either depreciation or usage. Depreciation would yield a larger amount to the truck dealer and mileage/usage lower. The degree of culpability of the parties would argue for a larger or lower measure when innocent, then the lower value (as in this case – usage).

MISTAKERescission based upon mistake. Must be a mutual mistake of fact and failure of consideration. A state of mind not in accord with the facts. More likely get relief if mistake of fact rather than a mistake of law. Cannot get consequential damages because mistake implies freedom from fault two innocent parties.

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Generally, no relief for mistake of law (exception would be the law of another state) i.e., cannot be mistaken when you have evidence that there was a possibility of fraud (truck case for insurance money)

Types of Mistake:1- Quality or value mistake – rescission is not permissible2- Mistake that goes to the essence of a K – bigger than material mistake

– rescission is possible.

*Consider – risk of loss – has one party assumed the risk of loss – “as is” clause suggests one party has.

As is cause – the buyer agree to accept land as is. Accept it as is- can’t disclaim fraud

- if you can prove fraud, get out- covers mistake b/c low level

Mistake in integration: writing does not reflect a meeting of the minds so the writing must be changed. Need a meeting of the minds in order to get reformation – changing the terms to meet the intent of the parties.

If there is a mutual mistake (both parties)Basic mistake – goes to essence of bargain

-supports rescission

Reformation – mistake in integration- Mistake in Integration – parties think they are entering a deed, and want rt of

survivorship, but think tenancy in common will give it. Writing says T in Common. Mtg of Minds, jt. Tenancy

- If writing doesn’t accurately reflect Mtg. Of minds, reformation will change to make it correct

- Must show mtg. Of minds- Doesn’t work if minds are conflicting

Mistake must go to the essence of the bargain; mutual mistake most likely to get reliefIf essential purpose impossible, then …SOFMinor ContractsUnenforceable, voidable and void Ks

ILLEGAL CONTRACTSContracts can be rendered illegal based upon public policy

Bovard v. American Horse Enterprises

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The burden is on the defendant to show that its enforcement would be in violation of the settled public policy of this state or injurious to the morals of its people.

Before labeling a contract as being contrary to public policy, courts must carefully inquire into:

1. the nature of the conduct,2. the extent of public harm which may be involved, and3. the moral quality of the conduct of the parties in light of the prevailing

standards of the community.

If the court finds the K violates public policy, then it is an illegal contract. At that point, the court leaves the parties to an illegal K where it finds them.

“A promise or other term of an agreement is unenforceable on grounds of public policy if legislation provides that it is unenforceable or the interest in its enforcement is clearly outweighed in the circumstances by a public policy against such terms.”

If one party is less at fault and seeks forgiveness, or is a person to be protected by the law, then that party has a greater chance of getting relief, typically in the form of restitution.

What are 4 equitable remedies that are not restitutionary?1- Reformation2- Injunction3- Specific performance4- Rescission

What are sources of Public Policy? - statutes- court opinions (common law)- constitutions (federal and state)- administrative regulations- canons of professional responsibility

Distinction between unenforceable K and void contracts: Unenforceable K – no reason can’t enter into, but something makes it unenforceableVoid is void from the beginning

Note: Illegality is a defense to any legal remedy (can be used whether the remedy is equitable or legal). Unclean hands is a defense to an equitable remedy.

R.R. v. M.H.Surrogacy contracts. Here, the surrogate mother used the defense of violation of public policy to avoid specific performance of the K. Thus, violation of public policy used as a defense to specific performance.

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Why do you have to appeal to public policy if there is a statute that makes baby selling illegal?

In the face of an illegal K, no relief for either party, neither specific performance, rescission or damages, court leaves the parties where it finds them.

In the face of unclean hands the court also leaves the parties where it finds them.

Surrogacy – amt paid for expenses incurred in labor would be ok, if she still had 4 days after pregnancy via statute, and K can’t be for selling babies

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