1/3/23 11:37 PM

Remedies Outline
Clancy Outlaws/Best Rules are boxed.

Tenzer and Bishop notes in Times New Roman

Fleming material in italics.

The three BIG ideas: Damages, Restitution, Equitable Relief

Don’t just discuss the best remedy. Discuss ALL remedies that make sense from the fact
pattern.

Most tested: Injunctions, restitution, specific performance.

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Table of Contents
Introduction 6

THE LAW-EQUITY DISTINCTION IN REMEDIES 7

TORT REMEDIES 11

Tort Review 11

Tort Damages: Money Damages 13

$pecial Damages 14

General Damages 14

Punitive Damages 15

Nominal Damages 15

Avoidable Consequences Rule 16

Collateral Source Rule 17

Restitution 17

Legal (at law) Restitution: Property 18

Legal Restitution in Tort: Money Damages 19

Equitable Restitution in Tort: Constructive Trust and Equitable Lien 21

Constructive Trust 23

Equitable Lien 24

Equitable Remedies in Tort 29

Injunction 29

Writing Tort Injunctions on an Essay 33

Equitable Defenses 35

Remedies for Specific Torts 37

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CONTRACTS REMEDIES-Money Damages 51

Contracts Review 51

Contract Formation Review 52

Expectation Damages 56

Consequential Damages 58

Incidental Damages 59

Liquidated Damages 59

Lost Volume Seller 60

Reliance Damages 60

Avoidable Consequences Rule 61

Recission, Restitution, and Reformation 61

Recission-Contract Cancellation 62

Restitution 63

Quantum Meruit/Quasi Contract 64

Reformation 65

Fraud and Mistake 65

Duress, Undue Influence, Unconscionability (in a Contracts setting) 68

Equitable Remedies 69

Specific Performance in Contract 69

Injunctions in Contracts 75

Remedies for Breach of Specific Types of Contracts 76

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Remedies Outline

Introduction

Remedies Require a Wrong

 Remedies do not exist in a vacuum. There is no such thing as a pure remedies question.
 You need to find a wrong/harm/injury to hang them on. Establish the prima facie case.
 These include:
o Tort
o Breach of Contract
o Real Property dispute

In addition to applying legal and equitable remedies, be sure to apply all of the defenses which
exist in the cause of action. For instance, you might apply assumption of the risk in torts or
impossibility in contracts.

Legal Remedies: Money (damages)

Equitable Remedies: Asking court to order something be done (or not done) Injunction.
Restitution can be legal or, generally, equitable.
Disgorge unjust enrichment.
In contract: recission or reformation. (Reformation REFORMS the
writing to that originally understood and agreed to.)
Key is FAIRNESS

The Remedies course introduces students to the major remedies available to litigants in civil
cases. From the client’s perspective, remedies is a key subject, as it determines what the client
will gain or lose as the result of a lawsuit.

We will cover three major types of remedies in today’s lecture. Please keep in mind that I will
mainly emphasize majority positions on these remedies, not those followed in any particular
state. The first remedy is a suit for damages, whereby the plaintiff seeks an award of money for
losses resulting from a tort or a breach of contract. The damages remedy originated in the
common law courts in England.

The second type of remedy is an equitable remedy. The most common equitable remedies are
the injunction (mainly in tort cases) and specific performance (in contract cases). As we shall
see, these remedies were created by the equity courts in England. They force or coerce a
defendant to do or refrain from doing something.

The third type of remedy is a restitution remedy. In a restitution case, the defendant has been
unjustly enriched at plaintiff’s expense. The goal of the restitution remedies is to take away or
“disgorge” the unjust enrichment by taking it from the defendant and giving it to the plaintiff.
As we shall see, the common law courts and the equity courts each created remedies to solve the
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problem of unjust enrichment. Restitution remedies may be available in tort and contract cases.

We will also cover two remedies that only apply in contract cases. These are rescission and
reformation.

Here is a simple tort example illustrating how these may remedies apply.

Plaintiff owns real property covered with a pine forest. Defendant entered plaintiff’s land
without permission and logged a substantial number of trees. Defendant sold the trees to a saw
mill for $5,000. Plaintiff discovered defendant’s activity and demanded that defendant refrain
from further logging, but defendant says he plans to return and cut more trees.

You should easily identify the tort raised by the facts: trespass to land. From a remedial
perspective, plaintiff has different options.

Damages: For the trees that have already been cut, plaintiff can seek money damages to
compensate for his losses. The damages can be measured in different ways, including the
diminished value of the land caused by the logging or by treating the trees as a chattel and suing
for their market value.

Injunction: Because defendant plans to continue trespassing, plaintiff will want the court to
enjoin the defendant from entering the land in the future.

Restitution: Defendant sold the “stolen” trees to the saw mill and will be unjustly enriched if he
keeps the $5,000. Plaintiff can seek restitution of this money.

Here are some things to keep in mind. Sometimes, a plaintiff can have more than one remedy.
In the example, whether plaintiff seeks damages or restitution, he will also be entitled to an
injunction to prevent future trespasses. In other situations, if plaintiff elects one remedy, he is
foreclosed from pursing another. In the example, if plaintiff chooses to sue for damages, he
cannot also have restitution because if he were able to have both remedies, he would be
overcompensated.

Because remedies issues typically arise in cases involving torts and breach of contract, we cover
tort and contract remedies separately in this outline. But before we encounter this division, we
need to cover some important background material.

THE LAW-EQUITY DISTINCTION IN REMEDIES

A. Law and Equity: Distinctive Characteristics:

1. The “law” remedies were created by the common law courts and are much older than
the “equitable” remedies. The most typical common law remedy is money damages.
Equitable remedies, on the other hand, generally are directed against the person of D.
D is ordered to do or refrain from doing some act.
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 2. Enforcements of remedies: P can enforce a money judgment for damages by
proceeding against D's property. Typical common law enforcement mechanisms are
execution and garnishment. The sheriff seizes and sells D's property to satisfy the
money judgment. Equitable decrees are enforced against D's person through civil
contempt. See below.

3. Modernly, equity and law courts are merged. At one time, the law and equity courts
were separate and one court could not apply the other’s remedies. An exception was
the "Clean Up" Doctrine whereby an equity court could award damages when it had
jurisdiction to apply an equitable remedy. Now that law and equity courts have
merged, the court of general jurisdiction can give law and equity remedies in the same
case.

4. Equity acts in personam (acts against the person of the defendant): This means an
equity court must have personal jurisdiction over the subject matter and person.

a. Order of preference:
1) P, D and Res before the court
2) P and D before the court
3) Res before the court
4) Long Arm

b. Full faith and credit: Discretionary: If court grants equitable remedy where no
equitable jurisdiction exists, decree not void for lack of jurisdiction but may be
subject to reversal on appeal.

c. Decrees affecting land in another State: A court has no power to order a

conveyance without personal jurisdiction over seller. Court may act in
personam to land outside state but if D (seller) fails to execute conveyance and
departs jurisdiction, decree is ineffective.

d. Decrees affecting acts outside of State: If court has personal jurisdiction, it can
grant injunctive relief but has no enforcement power.

5. Enforcement of equitable orders:

a. Civil contempt: P can use civil contempt to force D to comply with equity
court's order. Contempt is directed against D's person. Court can jail D or fine
D until D complies with equitable order. Once D complies, contempt sanctions
cease. This is often called “coercive” contempt.

b. Procedure for civil contempt: D is entitled to notice and hearing before court
can impose sanction of civil contempt.

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 c. Effect of reversal of underlying order on civil contempt: If underlying
equitable order is reversed on appeal, civil contempt sanction must also be
vacated as P is not entitled to enforce order that has been reversed.

d. Criminal contempt distinguished: Criminal contempt is sanction for D's

affront to the dignity of the court. Criminal contempt sanction is not vacated
even if underlying equitable order is reversed on appeal. D in criminal
contempt is entitled to constitutional criminal procedure protections, e.g., right
to counsel, right against self-incrimination, etc.

e. Writ of sequestration: Deprives D of property by sequestering property and

therefrom. Property is held by court until D complies.

6. Equitable remedies are only available if the law remedies are inadequate. Here are
some reasons why law remedies may be inadequate: (Lively Cats Find Mice Damn Nice)
*a. Land is unique
*b. Chattel is unique
c. Fiduciary relationship (breach)
*d. Multiplicity of Suits (continuing or repeated tort)
e. Damages are too speculative
f. Remedy not available at Law - e.g., Bill of accounting (too complex for jury)

You can not go to equity if there is an adequate legal remedy.

7. Judge has discretion to deny equitable remedy.

*DENOTES COMMON CASES WHERE LAW REMEDY IS INADEQUATE

In order to obtain equitable remedies, must show that legal remedies are inadequate. You
can’t go to equity if legal remedies are available.

Occasionally, legal and equitable damages can be combined.

Land is unique. Therefore equitable remedy are available.

So far in law school, remedies are considered last. In real life, they are considered first. What is
the goal? Then you determine how to get there. Level set expectations with your client.

Exams will most always include Crossovers.

At Law vs. In Equity…Justice v. Fairness.

 Restitution can exist in both Law and Equity

Common Law—“at law”: Courts (judge, precedent)

Equity—“in equity”: Chancery court (chancellor, natural law)
 The Chancellor acts as the “King’s conscience.”

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Other popular sources of law
 Statutes (legislature)
 Executive Orders (president/governors)
 Administrative Law (delegated to agencies for promulgation)

Modernly, these courts are merged. But note…equitable remedies are considered in a bench trial.
Legal remedies are considered in either a bench or a jury trial.

Before you have a remedy, you must have a cause of action:

 Tort
 Contract breach
 Real property dispute
 Other

Essay Step One Always: Establish the Cause of Action. This may be an abbreviated version
of a One L breakdown. Dean Schofield says this should take about one IRAC. Establish Tort or
Contract cause and move on. Get to the fucking remedy fast.

Maxims of Equity

Want the court to fix your problem. Civil remedies come out of torts and breach of contract.

Interesting Note about Tort and Contract Damages:

Tort Damages Look Backward: Where would the plaintiff be if the tort had never occurred?

Contract Damages Look Forward: Where would the plaintiff if the contract had been
performed?

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TORT REMEDIES

Tort Review

First Step: Establish the Tort

“Recover a right or obtain redress for a wrong.” Tort damages provide an orderly method for
society to resolve its disputes.

Introduction to Writing Remedies

Depending on the situation, different remedies may apply.

 Sometimes, more than one remedy may be available.
 Generally, you must choose only one remedy, but the goal in law school is to discuss all
reasonable potential remedies.

Generally, you can only select ONE remedy. You can select the most lucrative. However, on an
essay, you must discuss ALL remedies available. Certain torts get tested far more than others.
Conversion and trespass to land are very popular.

A tort is committed…how do you make people whole? Remedies are the backbone of the civil
legal system.

Tort Refresher:

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Conversion and trespass to chattel are interference with property rights. Look for rental value as
well.

Often tested
 Conversion
 Trespass to chattel
 Strict liability in tort (Bishop says unlikely)
 Nuisance (especially) definition…substantial and unreasonable.
o Injunction (must know how to write up an injunction)

Use separate IRAC’s for every single issue. Use sub IRACs when necessary.

Proximate Cause in Tort: Reasonably foreseeable and natural consequence of act.

 Must connect cause of action and remedy.

Remember Tenzer’s Teachings: Foreseeable plaintiff?, Foreseeable injury?, Intervening act?, Is

intervening act a superseding act?

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The Three Available Tort Remedies
Consider each.

1. Damages
 General damages (flow from a particular tort.)
 Special damages (proven with reasonable certainty)
 Punitive (occasionally)
 Nominal (rarely)

2. Restitution
 At law
 In equity

3. Injunction
 Specific Performance

This is a continuum. Discuss all remedies that might apply.

On an essay, discuss ALL possible available remedies, even if there is obviously only one best
remedy.

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Tort Damages: Money Damages

Tort damages include general damages foreseeable from the injury, consequential damages, and
special damages that could not have been foreseen from the mere occurrence of the wrong.
These special damages must be specially pleaded in the Complaint.

Similar to contract damages, tort compensatory damages must be causal (“but for”), foreseeable
(as of the time of formation), certain, and unavoidable.

In addition, punitive damages may be awarded for willful and wanton conduct (intentional torts)
amounting to fraud, oppression, or malice. Fraud means an intentional misrepresentation, deceit,
or concealment of a material fact known to the defendant with the intention on the part of the
defendant of thereby depriving a person of property or legal rights or otherwise causing injury.

Oppression means despicable conduct that subjects a person to cruel and unjust hardship in
conscious disregard of that person’s rights. Malice means conduct which is intended by the
defendant to cause injury to the plaintiff or despicable conduct which is carried on by the
defendant with a willful and conscious disregard of the rights or safety of others.

In all cases except one, the purpose of tort damages is to compensate the plaintiff for the
defendant’s tort. Damages is an award of money to an aggrieved party to compensate for any
loss or injury. In tort cases the objective is to make the plaintiff whole by awarding sufficient
money to indemnify him for his loss.

Compensatory Damages: Compensatory damages is money for the actual loss suffered and
nothing more. In a torts situation, compensatory damages puts the injured person in the same
position he was in before the tort occurred.

In a contracts situation, the purpose of compensatory damages is to compensate the plaintiff for
an actual loss or injury which was a result of the defendant's acts.

Compensatory damages fall into the category of general or special damages.

Overall…

Economic Loss Rule: In a negligence action, the plaintiff may not recover damages unless he
first proves that he suffered personal injury or property damage.

Negligent Infliction of Emotional Distress requires physical injury for recovery.

Remember: There are no punitive damages in negligence.

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$pecial Damages

Special damages are those which are unique to the plaintiff.

Economic damages. Specialized to the individual. Nuanced.

Example—Damaged Car: Normally, cost of damages. But a limo driver would have lost
income/profits as well. Normally: fixing of car and loss of use. Limo driver: Fixing of car, loss of
use AND lost profits.

Can’t be speculative (must be able to calculate) and limited by proximate cause. Special damages
must be specifically pleaded and proved. “Calculable.”

 Examples are lost wages, lost profits, medical expenses, replacement of damages
property, and other “out of pocket” losses.
 May be market value of lost, converted, damaged or destroyed property.

Think specific as in “can I calculate the specific amount of damages for each item of specific
damages that I want to list in my complaint?” Can’t be speculative. Must be proven with
reasonable certainty.

Limits of special damages? Those proximately caused by the tort.

Special damages: These damages are unique to P. In fairness to D, they must be specially
pleaded so that D can prepare a defense
a. Example: Lost profits in tort.
b. Requirements:
1. Reasonable certainty of money amount. Damages cannot be speculative
2. Limits of special damages: Proximate cause in tort cases.

General Damages

General Damages: General damages are non-pecuniary in nature and are presumed by the law
to naturally flow from the tort committed.

Meaning?
 Battery…broken nose
 Trespass to land…trampled flowers
 Trespass to chattel…lost use of and/or damage to the chattel
 Conversion…fair market value of converted item at the time of conversion

General damages need not be specifically claimed and proved. General damages are past,
present, and future pain and suffering.

Examples are pain, suffering, inconvenience, disfigurement, impairment, loss of enjoyment of

life, loss of consortium, mental anguish (most courts also want a physical injury), etc.
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Think general as in that you can’t calculate a specific amount or cost, but some amount of
money WOULD be justified. Also, future earning capacity is general damages-Schofield.

Punitive Damages
Only awarded for intentional torts. Not available in negligence. Regulates behavior.

Punitive (or Exemplary) Damages: Punitive damages, also called exemplary damages, are
awarded to the plaintiff for the purpose of punishing the defendant for malicious or reckless
conduct.

Punitive damages are intended to punish a defendant liable for malicious and willful misconduct
causing the plaintiff injury. Don’t use it unless facts show malicious and willful.

 Mostly available for intentional torts, gross negligence, but rarely-never in contracts.

 The intent is to set an example that such behavior is not to be condoned by society.
Accidents can happen (normal (vs. gross) negligence, but bad actors need to know they
can’t be doing this moving forward. In some ways, this is the civil equivalent of criminal
penalties.

 Often, the issue on an exam will be whether or not the judgment is reasonable. There are
various rules of thumb…3x, 10x, etc. Single digit will likely satisfy due process.

(Distinguish this 10X rule from losses considered commercially impracticable in

Contract law.)

 Often, a jury will find for the plaintiff and award extremely high penalties. However, the
award is often reduced by the judge, or on appeal.

Not heavily tested. Public policy…sets an example and metes out punishment.

Primarily intentional torts. Possibly gross negligence. Virtually, never in contracts, except in
occasional insurance claims.

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Jurisdictions and courts vary in what is a reasonable amount of damages, but often punitive
damages are between 3 and 10 times the amount of compensatory damages. Courts do not like
double digit multiplier in punitive damages.

The intent is to make an “example” of the defendant's conduct so that such conduct will not be
repeated.

Nominal Damages
Nominal damages exist to provide the plaintiff a means to legally declare their rights.

Typically used for something like trespass when the plaintiff may suffer NO monetary harm.
Defamation is a possibility. Often intentional tort. It represents a declaration of the plaintiff’s
rights.

Does include a judgement. (Nominal damages are rarely tested.)

Interest:
1. Prejudgment: From the time the cause of action arose to the date of judgment
(compensation for withholding money). Courts do not favor unless the amount of
damages is liquidated.
2. Post-judgment: After judgment entered until judgment paid.

Attorney Fees: Usually not recovered (American System) unless provided in statute or in
parties' contract. Would be a reciprocal provision in a contract.

Loss of Consortium: Loss of consortium means a loss of the benefits that one spouse is entitled
to receive from the other spouse, including companionship, cooperation, aid, affection, and
sexual relations.

Consortium damages are different from compensatory damages in that they are the damages
suffered by a spouse or family member of a person who has been injured or killed due to the
negligence of another person. Loss of consortium damages typically falls into one of the
following categories:

 Loss of services. This includes the reasonable value of chores and anything else the
victim did around the house.

 Loss of support. This includes all support that the victim would have provided had they
not been injured or killed. This includes companionship, affection, comfort, and society.

 Loss of quality in a relationship. This includes a loss of sexual relations, affection, and
emotional support provided to a spouse or partner.

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In a minority of jurisdictions, loss of consortium is also available related to the loss of a child.
Loss of Consortium is considered separately from compensatory damages. It is a non-economic
damage.

Avoidable Consequences Rule

Avoidable Consequences Rule: Under the Avoidable Consequences Rule, a plaintiff must take
reasonable steps to mitigate losses.

Avoidable damages. A defense.

Avoidable Consequences Rule: The Avoidable Consequences Rule will deny recovery for any
item of special damages which could have been avoided by reasonable acts. The rule can be
stated in the negative (cannot collect for losses which could have reasonably been avoided) or
the affirmative (can collect for any amount reasonably spent to try and avoid the consequences of
the defendant's conduct).

If the plaintiff fails to act reasonably to minimize his loss or injury, the amount of damages he or
she recovers may be reduced.

May also apply to Contracts cases.

Collateral Source Rule

Collateral Source Rule: If plaintiff is compensated for losses by a source independent of

defendant (such as insurance), defendant’s liability is NOT reduced by this amount.

Under the Collateral Source Rule, if a third party provides benefits or reimbursement to the
plaintiff for losses caused by the defendant, no evidence of the money or benefits from the
collateral source may be introduced by the defendant to try to diminish the amount of damages
he owes to the plaintiff.

Collateral Source Rule: The Collateral Source Rule says if the plaintiff receives a benefit from
someone other than the defendant, i.e., a third party, the defendant is not allowed to introduce
into evidence money or benefits received by the plaintiff from a collateral source. If the benefit
conferred is from the defendant himself, then the rule will not apply.

Special Considerations in Tort Damages

Bar exam requires a far more extensive discussion of remedies than 1L.

Pre judgement interest: Clock starts ticking at the moment of the tort.
Post judgement interest: Clock starts ticking at moment judgement entered (after judgement).
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About Future Damages

Future damages may be reduced to present value. Return on investment and prevailing interest
rates are important.

 A defendant wants a low interest rate and a high return on investment.

 A plaintiff wants a high interest rate and a low return on investment.

Subrogation is likely when collateral source rule comes into play.

Restitution

Introduction:

In every restitution case, defendant has been unjustly enriched at the plaintiff’s expense. If there
is no unjust enrichment, restitution is not applicable.

In a tort case, determine if defendant has had a benefit or gain as a result of his tortious activity.
If yes, consider which restitution remedy may apply.

The goal is disgorgement of defendant’s unjust gain.

Restitution: Restitution is an alternative remedy to compensatory damages.

Restitution is a remedy used to recover a benefit a defendant has wrongfully obtained, which, if
he were allowed to keep, would result in his unjust enrichment.

Restitution is used when the defendant has wrongfully obtained a benefit which, if he were
allowed to keep, would result in unjust enrichment, and thus may be compelled to give it up.

Restitutionary remedies may be legal or equitable.

Restitutions at Law

Restitution is not about getting repaid what you lost. That’s what damages are for.

What is Restitution?

Restitution is all about restoring the status quo.

Restitution is different from $ damages (when a defendant is unjustly enriched.) Restitution is

required when the defendant has incurred a gain unjustly (unjust enrichment) at plaintiff’s
expense. (Ill-gotten gains.)

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A redwood fence is built at the wrong location. If owners of location don’t want it torn down
(which is their right), can the owners be forced to pay for it? Theoritically, yes.

Restitution vs Damages

Legal restitution here needs to be divided into two cases: property and money.

Legal (at law) Restitution: Property

Common Law Property Writs

1) Ejectment (possession of land is unjust enrichment)

2) Detinue (personal property which D acquired lawfully, but refuses to return; i.e., a
bailee refuses to return goods which is unjust enrichment)
3) Replevin (personal property which D acquired illegally and refuses to return; i.e., a
thief. Chattel is unjust enrichment)

Ejectment: Ejectment is a legal restitutionary remedy. Where the defendant is wrongfully in

possession of the plaintiff's real property, the plaintiff brings this action to have possession
restored to him.

Ejectment is the return of real property. Synonymous with eviction.

Ejectment: An action to recover rightful possession of land wrongfully withheld. *

Elements:
 Wrongfully taken
 Right to possession

Ejectment is the name given to the legal remedy to have possession restored to a plaintiff against
a defendant wrongfully in possession of real property. If an ejectment action is not brought
timely, the possessor can prevail in an adverse possession action.

 Ejectment: Use writ of ejectment to get someone in wrongful possession off your
property.
o Prove right of possession (vs. ownership. Like a tenant)
o Prove land wrongfully withheld.

Replevin: Replevin allows the recovery of specific chattels wrongfully taken or detained from a
plaintiff who has a right to possession.

Elements:
 Wrongfully taken
 Right to possession

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Replevin is the return of personal property (in advance of a trial). Sheriff will seize the property
and return it to the plaintiff.

Replevin is a legal restitutionary remedy, not an equitable one. Its purpose is the recovery of
personal property wrongfully taken or detained.

With replevin, it is possible to recover prejudgment possession of the personal property, in a

proceeding called “claim and delivery.” This is quite common when defendants lease an
automobile and fail to make the lease payments. It is a statutory action to obtain temporary
possession of property held by another until title to the property is determined by final judgment
of the court.

Note: If defendant prevails, he will be entitled to damages for the deprivation of the chattel
during the time the litigation was pending.

Replevin requires that the defendant have possession of the property.

Personal property (chattels)

 Replevin: Writ of replevin can be used to have property returned to you. Return of
specific property unlawfully obtained (or detained) by another. Equitable replevin—
requires a mandatory injunction. (Damages here would be inadequate. Think of an
heirloom. Remedies casebook page 1181)

 Detinue: Writ of detinue used for return of property lawfully obtained by another.
(Perhaps a bailment…dry cleaner, parking lot, car rental held over, etc.)
o Detention damages available. Counterpart to mesne damages.

Plaintiff can also recover damages from loss of use

1) Ejectment - mesne profits (rental value of land)
2) Detinue and replevin - detention damages (rental value of chattel)

Due process is required for all. File suit, post bond. Defendant must have notice and hearing
prior to seizure.

Essay answer:

Modernly, a defendant is afforded a due process right to notice and a hearing prior to any seizure
of their property.

Legal Restitution in Tort: Money Damages

Restitution where a defendant’s unjust enrichment can be measured in dollars.

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Example: Person has taken your property and sold it. Now they have money. We are trying
now to recover this money.

Waiver of Tort and Suit in Assumpsit

Suit in Assumpsit: Suing for unjust enrichment that can be measured in dollars. It’s a quasi-
contract theory.

“Waiver of tort and suit in assumpsit” is used when a quasi-contract remedy is sought as an
alternative to compensatory damages in tort cases. Before this remedy can be used, the tort must
result in a benefit to the defendant.

Waiver of Tort and Suit in Assumpsit: When a defendant receives money because of a tort, the
plaintiff may waive the tort and sue in assumpsit for money had and received to prevent unjust
enrichment to the defendant.

Might be used if defendant made a GAIN with your money or property. Used for ill-gotten
monetary gains. Misappropriation of money may be the best theory…at common law, money
cannot be converted.

Plaintiff may waive the tort and sue in assumpsit under the proper common count (below),
seeking a money judgement representing defendant’s unjust enrichment.
 Buzzword: Plaintiff is seeking to disgorge the defendant’s unjust gain.

Assumpsit suits are suits at law for restitution, that can be measured in money.

Common Counts: There are six common counts, but really need money had and received. (Will
also use the common counts of Quantum Meruit and Quantum Valebant in contract remedies)

1. Quantum Meruit
2. Quantum Valebant
3. Money had and received
4. Land occupied and used*
5. Goods sold and used*
6. Money paid to defendant for his use*
* Never tested.

Mnemonic: Mickey Mouse Uses Good Queens Quickly

Mickey - Money paid to D for his use

Mouse - Money had and received
a) Example: D steals P's car and sells it for $1,000 P can recover $1,000 by suing for money
had and received
Uses - Land occupied and used (rental value of land)
Good - Goods sold and delivered (fair market value at time and place
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of taking)
Queens - Quantum Meruit (reasonable value of services)
Quickly - Quantum Valebant (reasonable value of goods)

Quantum Meruit (kwon-tem mer-oo-it): Quantum Meruit refers to the reasonable value
deserved for one's labor, and is awarded in a quasi-contract claim.

Quantum Valebant (kwon-tem val-ee-bant): Quantum Valebant refers to reasonable value that
is deserved as payment for goods, and is awarded in a quasi-contract claim.

Plaintiff can also recover the value of the lost use of the property while it was taken. (Note: the
value of the defendant’s use of the property after it was taken is also unjust enrichment.)

 Property: Rent value of the property is mesne profits. (mesne [pronounced main]
profits).
 Chattel: Rent/use value of the property (detention damages).

Replevy, a verb, is the act of performing replevin.

In example, plaintiff is owed $10k for ring and $15k for unjust enrichment. Can waive the tort
(of conversion) and sue in assumpsit, under the common count of money had and received, to
disgorge the defendant’s unjust enrichment of $25,000.

Suit in assumpsit makes the most sense because the defendant gained more than the value of the
converted item.

(Typically on an exam, essays will lean toward conversion. Just more remedies. Contrast with
Battery, which would just have remedies of general, special, and punitive damages.)
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Restitution where D’s unjust enrichment can be computed in dollars
a. Suit in assumpsit - P has the option of not pursuing damages (P's losses), but getting a
money judgment for D's gains.
Example: D steals P's watch with a fair market value of $100. He sells it for $150. P
can waive the tort of conversion to totally disgorge D's unjust gains.
1) Assumpsit stems from the famous case MOSES v. MACFERLAN.
2) Terms "quasi contract" and "implied in law contract" mean the same as
assumpsit.

b. The common counts - these are specific types of assumpsit claims. All are aimed at
getting P a money judgment as restitution.
1) Mickey Mouse Uses Good Queens Quickly
Mickey - Money paid to D for his use.
Mouse - Money had and received
a) Example: D steals P's car and sells it for $1,000 P can
recover $1,000 by suing for money had and received.
Uses - Land occupied and used (rental value of land)
Good - Goods sold and delivered (fair market value at time and place of taking)
Queens - Quantum Meruit (reasonable value of services)
Quickly - Quantum Valebant (reasonable value of goods)

2) Of the common counts, most commonly tested are money had and received,
goods sold and delivered, and quantum meruit (contract cases)

c. When answering an exam question that raises assumpsit, state: "P can waive the tort
and sue in assumpsit under the proper common count to get a money judgment for the
unjust enrichment of D." This means P is electing the restitution remedy over damages
because it produces a better outcome. A successful P becomes a judgment creditor of
D.

Equitable Restitution in Tort: Constructive Trust and Equitable Lien

What’s the difference? Ownership interest (constructive trust) versus a secured creditor interest
(equitable lien).

In the real world (versus “exam world”), money damages are preferable. Also in the real world,
the defendant doesn’t have a lot of cash sitting around. Therefore, to achieve any remedy, you
would then consider these secondary remedies. (If the cash is available, why go after a lien?)

Once ill-gotten money goes into an account, you now need constructive trust or equitable lien
to recover. These are equitable remedies.

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Equitable restitution is only available when the remedy at law, money damages, are inadequate.
The goal of any equitable remedy is to prevent unjust enrichment.

Introduction

a. The constructive trust and the equitable lien are remedies similar to assumpsit in
that they are devices for recovering the unjust gains of the defendant.

b. These equitable restitutionary remedies are often preferable to assumpsit since they
give the plaintiff a special claim on an item of property of defendant.

c. It is essential to remember that a plaintiff can only assert a constructive trust or an

equitable lien on an item of defendant's property if he can trace his property to the
res in question.

Example: A steals $500 from B and purchases a car. Because B can "trace" his money to the
car, he can have a constructive trust or equitable lien on the car.

Equity ALWAYS acts “in personam,” meaning against a person or entity, but NOT against
property. Contrasts with “in rem,” meaning against property.

Equity applies only when there is inadequate legal remedy available.

Legal “fictions”:
 Assumpsit/quasi-contract (quantum meruit)
 Assumpsit/Money had and received
 Constructive trust
 Equitable lien

Tracing—where did the money go? Demonstrating where the money went is critical to your
ability to recover it. Tracing is required for equitable lien and constructive trust.

Creditor status and PRIORITY…the down side of suing in assumpsit.

 Judgement and assumpsit creditors have to wait in line.
 Property owners and lien holders have superior claims to judgement creditors.

Equitable remedies are: Constructive Trust and Equitable Lien.

What’s the difference?...

Equitable lien or constructive trust is used when the nature of the ill-gotten gains has been
changed by the defendant. Examples: misappropriated funds used to gamble, or buy property, or
buy cocaine, etc.

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If the defendant has used your money to buy property that has gone UP in value, (appreciating
asset) you want a constructive trust because you will want the value of whatever more valuable
property the defendant turned it in to.

If the defendant has used your money to buy property that has gone DOWN in value,
(depreciating asset…the defendant used your money to buy cocaine and it’s now up his nose, for
example), you will want an equitable lien on their property to recover the value of what he stole.

You can then obtain a deficiency judgement for balance of what would be owed to you.

To remember: Depreciating-equitable lien. Appreciating-constructive trust.

Constructive Trust

The sole trust obligation of the constructive trustee (the defendant) is to convey the property to
the plaintiff. Imposition of the trust actually transfers both title and possession to the beneficiary.

Plaintiff has a special interest in a particular asset of the defendant. Must be able to trace an
asset of the plaintiff to an asset of the defendant.

Example: A steals $500 from B and purchases a car. Because B can "trace" his money to the car,
he can have a constructive trust or equitable lien on the car

To impose a constructive trust, the court must find that retention of property by the defendant-
wrongdoer would constitute an unjust enrichment.

A constructive trust may only be imposed on a defendant who uses proceeds of the plaintiff’s
with which the defendant has been unjustly enriched to purchase property.

But, where property was improved with plaintiff’s money or property or the proceeds thereof, an
equitable lien in favor of plaintiff to the extent of the value of the improvement can be
imposed.

In other words: If someone takes your property and improves it, you are entitled to the return of
both the property AND the improvement.

Then, the property can be sold to pay the lien. (Tenzer notes.)

Constructive Trust: A constructive trust is an equitable remedy used to compel a defendant to

restore title to unjustly retained personal property, traceable to the plaintiff.

Elements
 Legal remedy is inadequate
 Compel defendant to restore title
 Unjustly retained personal property
 Property must be traceable in current form to the plaintiff
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Constructive Trust = Plaintiff would have an ownership interest in “something,” (perhaps money
in a bank account)
 Convert ring, sell for $10,000, buy Tesla stock
 Plaintiff is the constructive owner of that stock
 Can be a partial/prorated interest
 If the asset increases in value, plaintiff takes the gain
 If it decreases, an equitable lien is still available.

Constructive trust
a. If defendant used plaintiff's property to get ownership of another item of property,
plaintiff can have a constructive trust on the newly acquired property.

b. Requirements:
1) Identify res as belonging to P.
2) Trace the res (property) from P to D and what he bought with the res.

Res: An object, a subject matter, or a status against which legal proceedings have been instituted.

c. Advantages of the constructive trust

1) Plaintiff is entitled to any appreciation in value in the newly acquired
property. Plaintiff is now owner of the new assets.

Example: D embezzles $1,000 of P's money and purchases a painting. The

painting has appreciated to a value of $1,500. Through the remedy of
constructive trust, P can become owner of the painting and can enjoy
the appreciation in value.

2) A judgment of constructive trust means that the property in question belongs to

plaintiff. It’s removed from the defendant’s assets. Other creditors of
defendant have no claim to it. (Especially important when dealing with an
insolvent defendant.)

3) It is effective on the date that the equity court renders its judgment.
a) Constructive trust is enforced by contempt power of the court.

4) The constructive trustee's (defendant’s) sole duty is to transfer title a

possession of the property to the beneficiary (plaintiff).

5) Real or personal property can be the subject of a constructive trust.

Note from Gilberts: A constructive trust is inappropriate if the misappropriated funds are
traced to property already owned by the wrongdoer (since title to that property was not acquired
with the stolen money).

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However, an equitable lien may be imposed on property already owned by the wrongdoer in
certain cases to avoid unjust enrichment of the wrongdoer.

Equitable Lien

In addition, an equitable lien is the appropriate remedy where the wrongdoer commingles her
own funds with the funds she misappropriated from the victim, and then uses the funds to
purchase property.

A plaintiff’s asset is traced to the asset of a defendant.

Use only against someone who cannot pay money damages. The holder has a “special interest”
in the asset of the defendant, up to the amount of the indebtedness.

An equitable lien then lies on both the funds remaining in the account and any property
purchased with funds taken from the account.

However, where the wrongdoer dissipates funds from the account, and later adds more funds, the
victim can only impose an equitable lien on the lowest intermediate balance.

If the wrongdoer is a conscious wrongdoer, the victim may also choose a constructive trust
remedy, allowing him to share in the value of his pro rata portion in the purchased assets. (from
Tenzer notes.)

Typically a property that has been improved through ill-gotten gains. (Can be real or personal
property.) Used to secure your loss.

Equitable Lien: An equitable lien gives a plaintiff a security interest in traceable property
wrongfully held by a defendant, where the property acts as collateral for the money owed and the
lien can be foreclosed to satisfy the claim.

Elements
 Security interest
 In traceable property
 Wrongfully held
 Property acts as collateral for the money

An equitable lien is an equitable restitutionary remedy. This lien is an equitable charge on

property, imposed by law to prevent unjust enrichment. Its effect is to secure a debt owed to the
plaintiff.

The lien can be foreclosed and the property sold to satisfy the plaintiff's claim.

Fleming on Equitable Lien:

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a. If a defendant uses the property of plaintiff to improve property which defendant already
owns, plaintiff may have an equitable lien on defendant's property.

Example: D steals $1,000 of P's money and uses it to buy a new roof for his house. P can
have an equitable lien on the house in the amount of $1,000.

b. Requirements:
1) Debt owed by D to P
2) Identify res
3) Trace res

c. Like typical statutory liens, the equitable lien gives the plaintiff a preferred status
(secured creditor) over other general creditors of the defendant. Not an ownership
interest. Doesn’t share in any appreciation.

d. Unlike the constructive trust, however, the holder of the equitable lien has no interest in the
appreciation of the property of defendant.

e. Real or personal property can be subject to an equitable lien.

Factors to consider as when each remedy should be applied.

a. If facts indicate D used P's money to get title (Even partial title. title=ownership), P can have
a constructive trust or proportional constructive trust in property.

b. If facts indicate D used P's money to improve D's property, P can only get an equitable lien
in D's property.

c. If P qualifies for a constructive trust, he has the option of merely taking an equitable lien. This
would be advantageous where the property has fallen in value.

Example: D embezzles $10,000 of P's money and buys land worth $10,000. The land
falls in value to $7,000. If P gets a constructive trust, he only gets the land now valued at
$7,000. If he gets an equitable lien of $10,000, he can foreclose on the property, recover
its $7,000 value at foreclosure sale, and still have deficiency judgment of $3,000.

Therefore, if asset has fallen in value, an equitable lien is a superior remedy.

A Note About Deficiency Judgement:

Unlike a constructive trust, an equitable lienholder can also obtain a deficiency judgement for
any shortfall. Thus, an equitable lien is the preferred remedy when the property has decreased in
value because of the passage of time or a change in the property’s form.

Writing Equitable Lien and Constructive Trust

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Typically, on an exam, you will write both constructive trust and equitable lien.

Writing Constructive Trust

 Wrongful act has resulted in unjust enrichment.
 Inadequate legal (money) remedy is available.
 Property must be traceable solely to its current form and not commingled (embezzled funds
to bank account in the same amount).
 Lowest intermediate balance rule applies to commingled funds.

Writing Equitable Lien

 Wrongful act has resulted in unjust enrichment.
 Inadequate legal (money) remedy is available.
 Property, appreciation, or improvement can be traced. Needn’t be traced to its current form
(can be traced to different property, improvement of property, even if commingled).
 Lowest intermediate balance rule applies to commingled funds.
 Deficiency judgement is available.

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Commingled Bank Accounts

Commingled Funds: Commingled funds is where the wrongdoer commingles his own funds and
misappropriated funds and then uses these mixed funds to purchase something else.

The plaintiff may claim both the funds and trace what was purchased with the funds.

The Special Case of Commingled Money

a. The problem: If the plaintiff can trace his money to an account in which it has been
commingled with monies of the defendant, can plaintiff get a constructive trust or an
equitable lien on the balance or on property purchased with accounts from the fund?

Example: Defendant embezzles $100 from P and puts it into an account. Defendant adds
$100 of his own money, for a total of $200. Defendant then withdraws $100 and
dissipates it (can’t trace it). Can plaintiff get a constructive trust or an equitable lien on
the remainder?

b. The commingling rules: The only time you would ever discuss these rules is if:
i) P is able to trace his money to the account
ii) There has been a commingling of money in the account
iii) D then makes withdrawals from the account

Tracing: Tracing is an equitable doctrine which allows the plaintiff to trace misappropriated
money to a specific asset in the defendant’s estate, in instances where a constructive trust or
equitable lien is sought.

When property has been wrongfully taken, you may trace the conversion of that property into
other assets.

 If through tracing, the final asset traced is an actual asset, that asset can be recovered to
make the plaintiff whole.
 If through tracing, the final asset is a debt instrument (mortgage, for example), then
tracing will place the plaintiff in the position of the mortgage that was paid off with the
wrongfully attained funds.

Tracing Rules:

Four options, per Tenzer (12-24-20 recorded lecture). Goes to the intent of the misappropriator.
1. Clayton (FIFO Wrongdoer spends your money first.)
2. Hallett (LIFO Wrongdoer spends his own money first, leaving yours alone )
3. Conscious wrongdoer/Option Rule (prorated constructive trust)
4. Lowest intermediate balance (supersedes all others)

Clayton’s Case
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The rule in Clayton’s Case: FIFO
o The defendant always spends your (plaintiff’s) money first. Plaintiff’s money is
gone.
 Has the effect of protecting the defendant.

The rule in Clayton's Case: A legal fiction which presumes that the first money in the account is
the first used (FIFO). In the above example, P cannot have a constructive trust or an equitable
lien on the remaining $100 since his $100 was dissipated. (Not really used by courts anymore.)

Clayton’s Case: A wrongdoer always withdraws a plaintiff’s money from his account first.

Hallett’s Case

The Rule in Hallett’s Case: LIFO

o The defendant always spends his own money first. Plaintiff’s money is still there.
 Has the effect of protecting the plaintiff.

The rule in Hallett's Case: A legal fiction which presumes that the defendant uses his money
first. In the above example, P has a constructive trust or an equitable lien on the $100 remaining
in the account.

Hallett’s Case: A wrongdoer always withdraws his own money from his account first.

Presumes the crook acts honestly!

Option Rule

The Option rule (modernly)

o The plaintiff gets to decide what (Clayton or Hallett) works best for him. (See
below.???)
o Conscious wrongdoer?: prorated constructive trust available
o Innocent wrongdoer?: only equitable lien

The Option Rule allows plaintiff a constructive trust or an equitable lien.

a) Conscious Wrongdoer: Permits a constructive trust remedy but limited to a pro rata
share of the fund and property traceable from funds.

Example: D embezzles $100 from P and puts it into an account. D then adds
$100 of his own money for a total of $200. D withdraws $100 and purchases a
share of stock which rises in value to $300. P can have a proportionate
constructive trust and becomes a one-half owner of the stock and a one-half
owner of the money remaining in the account.

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 b) Innocent Wrongdoer: Remedy limited to an equitable lien on account or property
purchased with account funds but only up to dollar amount of claim.

Option Rule: The Option Rule allows plaintiff a constructive trust or an equitable lien.

And the most important…

The Lowest Intermediate Balance Rule

I find this rule pretty counter-intuitive. Seems unfair.

Rule applies to equitable lien and constructive trust—What amount does the lien-trust attach to?

Lowest Intermediate Balance Rule: A plaintiff can only make claims against the lowest
balance in defendant’s bank account after the plaintiff’s money is deposited.

 Clock starts ticking when plaintiff’s money is deposited.

 Can be difficult to determine.

Lowest intermediate balance rule: Plaintiff's constructive trust or equitable lien is limited to the
lowest intermediate balance in the account. This is the only money he has a special claim
against.

However, if the defendant intends to replenish the funds with his own money, plaintiff would
have a special claim to those funds.

Example: D puts $1,000 of P's money in an account, which he commingles with $1,500
of his own. D then spends the full $2,500. D then embezzles $1,000 from C and puts it in
the account. Since the lowest intermediate balance dropped to zero, P has no
constructive trust or equitable lien since he can show no special claim (via tracing) to
the fund.

You will always be capped at the lowest intermediate balance of the commingled funds between
the time of the comingling and the time of the court’s action.

Note: If you have an equitable lien or a constructive trust, you have a creditor preference above
a judgement creditor.

Subrogation

Where one person non-officiously discharges an obligation for which another is primarily liable
and which the latter ought to pay. Does not apply to a volunteer.

Example: D owes P $500 with C as surety for D on debt. C pays P $500 – Debt discharged. C is
subrogated to all of P's rights against D

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 a. It is a remedy for unjust enrichment resulting from use of C's property to discharge a
debt or lien.

b. Requirements: Tracing of C's property to extinguish debt.

Accounting for Profits

 Plaintiff can discover amount of defendant’s gain (accounting) and use the appropriate
restitution remedy to disgorge it.

Equitable Replevin

If Defendant has converted a unique chattel from Plaintiff, Plaintiff can go to equity court to
recover possession.

 Requires entire injunction analysis. (Thomas A. Edison Is Pouring Himself The Drink)

Defenses To Restitution

All available in law as well as equity. Unclean hands and laches may apply in equity.

1. Changed position: Restitution denied if circumstances have changed in good faith after one
receives a benefit and that change makes it inequitable to require restitution

Example: P mistakenly makes a gift of money to D. D, not realizing the mistake, spends
the money on a trip to Europe. P cannot have restitution.

2. Bona Fide Purchaser for Value: (aka an innocent purchaser). Commonly tested. Without
notice and for value – A BFP for value cuts off constructive trust and equitable lien
remedies. Very important defense. Does not apply to donees.

But does not cut off purchaser’s tort liability for conversion and trespass to chattels. Argue
these. This is innocent conversion. Bona fide purchaser would be a defense.

a. Example: Thief embezzles $5,000 from P and uses money to buy a painting. Thief sells
painting to D for $5,000. D did not know painting was purchased with stolen money. P
cannot have restitution, as D is a BFP for value.

b. Money: When you pass money, you pass title. Thus BFP does get title.
Rationale: Flow of commerce.

Bona Fide Purchaser for Value Without Notice: A bona fide purchaser for value without
notice is an innocent party who purchases, for value, real or personal property without
knowledge of any other party’s claim to that property.

3. Discharge for value

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 Example: A mistakenly pays money to B but owes nothing. B passes money to C for claim
which C had against B. C releases B from debt. Discharge for value which C can use
against any claim made by A to restore money. A still has an action against B, but no
restitution remedy against C.

4. Volunteer: Deemed a gift with no expectation of payment.

a. Exceptions:
1) Mistake on volunteer's part
2) Doctors/Nurses: Services given without contract. Recipient must pay
reasonable value of services (quantum meruit).
3) Fraud, duress, undue influence.

5. Officious Intermeddler: Unjust enrichment.

Payment of another's debt without reason. Watch for implied in fact contracts through
conduct of parties. Must be given an opportunity to reject the benefit in order to reach
the gain. No restitution available.

Equitable Remedies in Tort

Injunction

A court orders you do DO something or NOT DO something.

The primary equitable relief in tort is an injunctive remedy: a TRO or preliminary or

permanent injunction. You must clearly identify the tort, because the type of tort controls
whether there is an adequate legal remedy.

To obtain an injunction, plaintiff must show: (1) an inadequate legal remedy, (2) feasibility of
enforcing the injunction, (3) balancing of the hardships, and, (4) in the case of a TRO or
Preliminary Injunction, a reasonable likelihood of success on the merits. In addition, there is a
special showing on a TRO of immediate and irreparable harm if the TRO is not granted right
away. Most applications for a TRO require short notice, or a declaration showing why the giving
of notice would render the TRO useless.

In Some Situations, Damages Cannot Provide Adequate Relief: Thus, plaintiff may be able to
ask the equity court to order defendant to do (mandatory) or not to do (prohibitory) a certain
thing.

Injunctions and specific performance (specific performance IS a type of injunction) are very
highly tested. Lots of elements.

Court orders someone (remember, equity acts in personam) to do (affirmative) or not do

(negative) something.

36
Enforcement through contempt. May be fines for imprisonment.

Injunctions are an equitable remedy. Also a contracts and administrative law remedy.

Injunction: An injunction is an equitable remedy in which a court issues an order commanding

an action (mandatory or affirmative injunction) or preventing an action (mandatory or
prohibitory injunction). Since it is an equitable remedy, it must be proven that the legal remedy
is inadequate.

Mnemonic: Thomas A. Edison is pouring himself the drink.

First step: IRAC the tort, if necessary. Must establish your cause of action. Need a solid basis.
No tort? No injunction.

Adequacy of Remedy:

Adequacy Requirement: The adequacy requirement is that the legal remedy for the substantive
wrong claimed must be inadequate before an equitable remedy is given.

Enforceability: Does the court have jurisdiction? (3L subject)

Injunction: Prohibitory or Mandatory?

Mandatory Injunction: A mandatory injunction concerns the form of the injunction. An

injunction is mandatory when it requires an affirmative act.

AKA: affirmative injunction. No need to write it on an essay. Also negative, infra.

Prohibitory Injunction: A prohibitory injunction concerns the form of the injunction. An

injunction is prohibitory when it forbids certain conduct.

AKA: negative injunction.

Irreparable Harm: If injunction is NOT issued, it will not be possible to make the plaintiff
whole later.

Personal Property Interests: You must have a personal property interest in order to get an
injunction.

Balancing of Hardships: Argue both sides. Won’t force an encroaching structure to be torn
down, for instance, because of level of hardship involved. Look for bad faith…was defendant
warned, “Hey, you are hanging over my side?”

(Irreparable harm and balancing of hardships are very fertile for argument.) Intentional
wrongdoer/bad faith actor gets to consideration in balancing of hardships…only innocent
wrongdoer.
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Types of Injunctions

Temporary Restraining Order: A temporary restraining order is an injunction to preserve the

status quo until a preliminary injunction hearing.

Strong balance in favor of irreparable harm. Bond may be required. (Discuss it. If you lose, other
person should not be harmed.) Short term; 14 days.

Requires an emergency situation and threat of irreparable harm.

Temporary Restraining Order

 A very limited emergency order because of threat of irreparable harm.
 Effective until a hearing to “show cause.”
 Bond may be required.
 May be an ex parte hearing (Can be issued without notice to, or presence of a defendant.)
 Typically 10-14 day limitation, with potential renewal.

Mary Basick’s Five Elements to Prove (and Write) for TRO:

1. Irreparable injury
2. Inadequacy of money damages
3. Feasible enforcement
4. Status quo preservation
5. Likelihood of success in a preliminary injunction

Temporary restraining order – TRO

Can be issued without notice to D. Maintain status quo (things the way they were before dispute
arose) pending issuance of a preliminary injunction.
1) Requirements:
a) Emergency - Threat of irreparable harm from delay if hearing required
b) Irreparable harm - serious harm
c) Plaintiff must post bond - A TRO may be issued ex parte on affidavits of the
complainant without affording defendant the notice and opportunity to be
heard. Thus, since only one party is present, a due process violation may exist.
If TRO wrongfully issued, then defendant can sue for damages against bond.
D not bound until he has notice of TRO
d) 14-day time limitation. Can be extended additional 14 days for good cause or
with defendant’s consent.
e) Ex parte hearing.

Preliminary Injunction: A preliminary injunction is an injunction issued pending a full trial on

the merits to preserve the status quo.

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Both parties are present. Judge will decide whether to terminate or continue the TRO. Will go to
an evidentiary hearing.

Bond IS required. Due process is required. There will be a hearing, both parties will be there, not
ex parte. Plaintiff now must show it is likely he will succeed if it goes to trial.

Bond explained: Required for both preliminary and permanent injunction.

The bond is an amount equal to the amount of harm a defendant would be caused if an injunction
is not granted. Therefore, a plaintiff is liable for all harm caused by the injunction if an
injunction should not have been granted in the first place.

Status quo is being maintained.

Mary Basick’s Six Elements to Prove (and Write) for Preliminary Injunction:
1. Irreparable injury
2. Inadequacy of money damages
3. Balance of hardships
4. Feasible enforcement
5. Status quo preservation
6. Likelihood of success on the merits

A permanent injunction settles the rights and duties of the parties and continues in effect unless
dissolved by further court order.

There are not really separate injunctions or separate actions, but points on a continuum:
TRO—Preliminary Injunction—Permanent Injunction

Occurs after a full trial or hearing. Theoretically, can take years.

Preliminary Injunction
 Due process required (defendant gets notice and right to a hearing).
 Bond required
 Plaintiff likely to succeed on the merits of the case. Add this to Thomas Alva Edison Is
Pouring Himself The Drink.
 “Maintain the status quo” (think about cutting down trees). Keep things as they are. Stays
“on the books” until the upcoming trial decides case on its merits, or dismisses it.
 Effective until final judgement.

Preliminary injunction

Issued only after notice and right to hearing. Purpose is to retain status quo. Remains in force
pending trial on the merits after which it will be dissolved or made permanent. Used where no
emergency present.

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 1) Procedural requirements:
a) Both parties present
b) Bond: If TRO granted, then no new bond necessary. If not, then bond required
c) Irreparable harm: If no TRO then need to establish.

2) Effect: A limited injunction usually granted to minimize or eliminate problem.

Mandatory not usually granted if it would change status quo unless exceptional
circumstances exist.

3) Substantive requirements (see Mary Basick, supra):

a) Irreparable damage threatened to P
b) Balance of hardships favors P
c) Likelihood of P's succeeding on the merits
d) Injunction in the public interest
e) Needed to maintain the status quo

Permanent Injunction: A permanent injunction settles the rights and duties of the parties and
continues in effect unless dissolved by further court order.

Permanent Injunction: A permanent injunction is where a court orders one to perform an act
or stop performing an act after holding a full trial on the merits.

Virtually identical to a preliminary injunction, except there is no “expiration date.” It is a remedy

awarded after you have won your case. It settles the rights and duties of the parties.

Permanent Injunction
 Full trial-hearing

Granted or denied after full hearing. Still must balance hardships.

Mary Basick’s Four Elements to Prove (and Write) for Permanent Injunction:
1. Irreparable injury
2. Inadequacy of money damages
3. Balance of hardships
4. Feasible enforcement

Normally, you will discuss ALL on an essay.

and…

Injunctions And Damages: Note that injunctions and damages are not mutually exclusive
remedies. Often plaintiff can qualify for both. “This is NOT a double dip.”

40
Example: Defendant trespasses on plaintiff's land and mines minerals. Plaintiff can get an
injunction to enjoin the mining. He can also recover damages for losses he has already
sustained.

And just because Tenzer brought it up…

No Injunction against Criminal Prosecution

No injunction against a criminal prosecution by the District Attorney can be granted without a
strong showing of irreparable injury. No Injunction Against Crimes Injunctions against crimes
do not fall within equity jurisdiction, unless the crime is also a public nuisance. Thus, an
injunction will lie to enjoin operation of an illegal brothel or illegal dumping of toxic substances,
both of which constitute crimes as well as public nuisances. A public nuisance is one that
endangers the public health and welfare.

Writing Tort Injunctions on an Essay

(Start Here!)

Mnemonic: Thomas Alva Edison Is Pouring Himself The Drink

Establish the TORT

No ADEQUATE remedy at law
Must be ENFORCEABLE by the court.
IRREPRABLE harm
PROPERTY or PERSONAL right affected
Balance of HARDSHIPS
TYPES of injunctions
DEFENSES

Establish the TORT

Before there is a remedy, there has to be a wrong. Must be a cause of action. Establish the wrong.
IRAC as tort or contract as necessary. However, it’s not the featured part of the essay. Keep it
simple. Must have an underlying tort.

You are establishing the underlying cause of action. Then, you are “building the
injunction.” Although commonly tort, remember, it may be contract or even real property.

No ADEQUATE remedy at law

The major reasons why the legal remedy may be inadequate are: money damages are inadequate,
damages are too speculative, the potential of a multiplicity of suits (this works well in repeated
trespass or nuisance cases), irreparable injury (because, for example, land is unique), and threat of
a prospective tort.

41
Must show the court that there is no other reasonable solution. The best way to solve this problem
is not just simply writing a check. Problem won’t be solved by cash.

(Also: Legal restitution is different than damages. Disgorgement is not same as writing a check.)

Nuisance is most common cause of action.

Multiplicity of suits is a term to describe when more than one lawsuit exists regarding the same
transaction or occurrence.

Must be ENFORCEABLE by the court

Generally, it is more feasible to enforce a negative or prohibitory injunction than a mandatory

injunction. This is because courts need to supervise their decrees, and supervising a mandatory
decree requires a court to sometimes continue to fashion remedies, or have continual involvement,
unless the act was easy to supervise—an order to execute a deed, for example.

Must be in the court’s jurisdiction. Court has to be able to get to the parties. Generally, the
writing is perfunctory.

IRREPRABLE harm

Don’t confuse this with no adequate remedy. Must be serious.

PROPERTY or PERSONAL right affected

Personal or Property Right Affected: At common law, only a property right warranted an
injunction. Modernly, any interest can be protected through injunction.

At common law, equity courts used injunctive relief to protect property rights only. Modernly,
they use injunctions to protect personal rights as well.

or

Under the common law, only property interests were available for the remedy of injunction.
Modernly, personal interests are also available. (Write this quick.)

Personal/Property Right of Plaintiff

a. Common law: Had to be property interest
b. Modern law: Personal interest will suffice

Balance of HARDSHIPS

Balancing of Hardships: In consideration of an injunction, a court will weigh the hardship to the
plaintiff if denied versus the hardship to the defendant if granted.

42
Hardships are always balanced at the TRO and preliminary injunction stage. Hardships are
balanced at the permanent injunction stage only in encroachment and nuisance cases. Generally,
for a court to even consider a hardship to the defendant, the defendant’s conduct should be
inadvertent, and not intentional. (Bad faith will negate the balancing of the hardships.) In
analyzing the hardships, marshal the facts on each side and come to a reasoned conclusion. The
process is more important than the result.

This is most important. Often nuisance. Based on fairness.

a. Hardship to plaintiff if injunction denied v. hardship to defendant if injunction granted.

b. Examples where relief will be denied:
1) Hardship to defendant is great (encroachment cases)
2) Title to land is in issue.
3) Nuisance is involved but it contributes to economy.

TYPES of injunctions

TRO, Preliminary Injunction, Permanent Injunction (Have “canned” and ready-to-go.)

a. Temporary restraining order (TRO)

b. Preliminary injunction
c. Permanent injunction

A. TEMPORARY RESTRAINING ORDER – TRO

Can be issued without notice to D. Maintain status quo (things the way they were before dispute
arose) pending issuance of a preliminary injunction

1) Requirements:
a) Emergency - Threat of irreparable harm from delay if hearing required
b) Irreparable harm - serious harm
c) P must post bond - A TRO may be issued ex parte on affidavits of the complainant
without affording D the notice and opportunity to be heard. Thus, since only one party
is present, a due process violation may exist. If TRO wrongfully issued, then D can sue
for damages against bond. D not bound until he has notice of TRO
d) 14-day time limitation. Can be extended additional 14 days for good cause or with D’s
consent.
e) Ex parte hearing

B. PRELIMINARY INJUNCTION

Issued only after notice and right to hearing. Purpose is to retain status quo. Remains in force
pending trial on the merits after which it will be dissolved or made permanent. Used where no
emergency present

1) Procedural requirements:
a) Both parties present
43
 b) Bond: If TRO granted, then no new bond necessary. If not, then bond required
c) Irreparable harm: If no TRO then need to establish

2) Effect: A limited injunction usually granted to minimize or eliminate problem. Mandatory not
usually granted if it would change status quo unless exceptional circumstances exist

3) Substantive requirements:
a) Irreparable damage threatened to P
b) Balance of hardships favors P
c) Likelihood of P's succeeding on the merits
d) Injunction in the public interest
e) Needed to maintain the status quo

C. PERMANENT INJUNCTION

Granted or denied after full hearing. Still must balance hardships.

Writing TYPES of Injunctions:

Example from Fleming Property Book II, question #3:

“Xavier will assert that the anticipated competition from the building of the service station will
create an emergency marketing situation for its department store tenants. If immediate relief is
not granted, great financial loss could result before a hearing is held.

It appears that the court would grant a TRO. After a trial, the court may grant a preliminary and
then a permanent injunction preventing the building of the service station.”

Equitable Defenses
(Can knock out an injunction. Most tested are underlined)

 Unclean hands
o Equity is about fairness. You can’t come to court seeking equity if you are not
being fair. (Unethical or illegal conduct by a plaintiff.)
o Defendant can be a crook, but OK if his hands are clean in the matter being
discussed.

 Laches (waiting too long. “Sleeping” on your rights.)

o No set time…just an “unreasonable” amount of time before seeking relief.
o Example: Watching a neighbor build an encroachment on your land and not
saying anything.
o Must have a prejudicial impact on the defendant.

44
  Bona Fide Purchaser for Value (a third party who purchased stolen item innocently)
o Property acquired without notice of the facts and for value
o Title acquired is superior to all except true owner
o Does not protect the original wrongdoer
o Eliminates possibilities for constructive trust or equitable lien against the
property.

Laches: Laches is an unreasonably delay in pursuing remedy, and the delay has resulted in
prejudice to the other party.

Elements:
 Unreasonable delay
 Because of unreasonable delay, the other party changed position. Has resulted in harm.
 Other party has incurred a detriment (resulted in prejudice)

Laches is the equitable equivalent to a statute of limitations. It requires both an unreasonable

delay, and that the delay has resulted in harm to the other party. The period of laches may be
shorter than the legal statute of limitations, but it cannot be longer. Laches runs from when a
plaintiff has knowledge that a right has been infringed. (Analogy…Think windshield example.
Crack spreads and spreads. Fix it fast.)

There is no specified time period. Argue it. Has nothing to do with statute of limitations.

Only attacks the equitable remedy being sought, because it is an equitable defense. Legal
remedies still available to plaintiff. Applies to unclean hands as well, infra.

Laches: Passage of an unreasonable period of time before suing plus resulting prejudicial
impact on the D.

1) Even if statute of limitations has not run, laches may still bar P's suit. Burden is on D
to establish defense.

2) If no statute of limitations, the unreasonableness may be determined by reference to

statute analogous to legal action.

3) Effect of statute of limitations on laches defense: While running of statute of

limitations does not bar equity court from granting injunction, it is an important factor
that court will consider in determining whether delay is unreasonable.

Unclean Hands: “Unclean hands” is a doctrine which says a person seeking equitable relief
must not himself be guilty of any inequitable or illegal (wrongful) conduct with respect to the
transaction or subject matter of the present suit.

On an essay, consider ALWAYS using unclean hand and laches. If no facts, get in and get out.

45
From my fucked up midterm: Unclean Hands can also refer to unethical or unfair conduct, or a
situation where one in a superior bargaining position took advantage of a less sophisticated party.

Often used when you see a basic unfairness. Inequity must be related to the cause of action.
Typically applied to the plaintiff.

The party seeking equitable relief must not be guilty of inequitable or wrongful conduct with
respect to the subject matter of the present suit. The essence is unfair dealing or conduct, not
whether plaintiff has committed an actual tort.

Unclean hands: Conduct of person seeking injunction may foreclose relief.

1) Inequitable, unethical conduct by plaintiff directly related to the subject of litigation.

Even though plaintiff has not injured anyone and defendant participated in the
misconduct, the court will refuse to aid either party in such a transaction.

2) Burden on defendant to establish.

Bona Fide Purchaser: “Bona fide purchaser” is a defense to the imposition of a constructive
trust. A bona fide purchaser is one who pays value without notice of the facts giving rise to the
constructive trust. Equitable rights are cut off by the transfer of legal title to a bona fide
purchaser.

Bona fide purchaser for value is a purchaser in good faith. Must pay reasonable value.

Practical effect: If you have a bona fide purchaser for value, it eliminates your opportunity to go
after the property with equitable lien or constructive trust.

Write on ALL of these, but some should be really quick.

Remedies for Specific Torts

BB note about this section: A great deal of this section is overkill. I may delete some categories,
or just save them for future reference. Focus on plain text here.

A. Approach:

1. Look to the defendant's wrongful conduct

a. Identify and IRAC the tort
b. Look to the extent of damage: partial, total, permanent, reparable, continuing
c. Analyze the defendant's state of mind: innocent, conscious, malicious
d. Look to the defendant's relationship with plaintiff: arm's length bargaining,
strangers, fiduciary, trust and confidence

46
 2. Consider the remedies that may apply
a. Damages: How are general damages measured? Are there special damages?
Punitive damages?
b. Injunction: Is their continuing tortuous or repeated conduct?
c. Restitution: Has defendant been unjustly enriched by his tort?

B. Injuries To Personal Property:

1. As a general rule, injuries to personal property have remedies at law which are
adequate unless chattel is unique.

2. Tort will probably be trespass to chattels, conversion, or negligence.

3. Destruction of personal property

a. General damages:
1) Fair market value at time and place of destruction, less salvage, plus
prejudgment interest computed from time of destruction.

2) Determining fair market value:

a) If P is consumer: retail market value
b) If P is retailer: wholesale price
c) If P is manufacturer: selling price

b. Injunction: Usually not a remedy unless multiple torts

c. Restitution: Not an issue as the D has not realized a benefit.

4. Damage to personal property

a. General damages:
1) Diminished value of chattel (difference between value of chattel
before and after injury) or reasonable cost of repair, whichever is less.
2) If chattel has rental value, P also gets rental value of substitute for
reasonable repair period.

b. Special damages rules for personal property

1) Destroyed clothing/household furnishings: Measure of general
damages: value to the owner. Courts look to cost when bought, length
of time used, and current market value of substitute
2) Sentimental value: rarely awarded for personal property

c. Injunction: Usually not a remedy unless multiple torts

d. Restitution: Not an issue as the D has not realized a benefit.

5. Conversion: Intentional wrongful exercise of dominion and control over chattel of

another.
a. General damages
1) Fair market value at time and place of conversion, plus prejudgment
47
 interest from that date. Punitive damages may be available.
a) No duty to mitigate by P
b) Once D satisfies judgment, he becomes owner of chattel under
“forced sale” doctrine

2) Special conversion damages rules:

a) Conversion of fluctuating value chattels, such as stocks and
commodities. Three approaches
(1) Usual measure, above
(2) Highest value between date of conversion and trial
(3) New York Rule (majority): Highest value between
date P learned of conversion and reasonable
replacement time

b) Conversion of money
(1) Damages: Not available at common law unless
specifically identifiable (i.e., rare coins) or from
specific fund (i.e., money in escrow account)
(2) Use restitution to recover money.

b. Restitution remedies
1) Restitution at law
a) Replevin to regain possession
b) Waive tort of conversion and sue in assumpsit to recover D’s
benefit

2) Restitution in equity
a) Equitable replevin if goods are unique
b) Constructive trust or equitable lien if proceeds from converted
goods can be traced to other assets.
C. Injuries To Real Property:

1. Tort will usually be trespass to land, nuisance, waste, negligence, or strict liability
a. The measure of general damage will depend on how the property is injured.
b. Where there is a continuing or repeated activity, the injunction may be used
in conjunction with damages.

CAVEAT: Restitution Remedies Generally Are Not Available In Trespass To Land Cases.
The Exception Is Where D Has Severed Something Of Value From The Land
And P Treats D’s Activity As Conversion Of A Chattel.

a. Example: D trespasses and cut trees on P's property. Trees have value of
$1,000. D sells trees for $2,000
1) P can treat trees as chattels, waive the tort and sue in assumpsit, and
get D's gains
2) If D is a conscious wrongdoer, P can recover improved value to
48
 chattel resulting from D's work

b. Replevin is available remedy if D still has lumber

c. Constructive trust “CT” and equitable lien "EL" may apply if proceeds from
sale of chattel can be traced to other property
d. If P has the option of treating severed property as chattel, be sure to consider
the following alternatives:
1) Damages to land for trespass (diminished value, cost of restoration);
2) Damages when treating severed property as converted chattel (fair
market value at time of conversion);
3) Restitutionary remedies (replevin, assumpsit, constructive trust,
equitable lien)

2. Simple Trespass
a. The only damages may be nominal.
b. Injunction becomes important remedy to stop continuing trespass and avoid
prescriptive easement/adverse possession claims.
c. Restitution not available.

3. Trespass causing permanent damage to land

a. Examples are flooding, pollution of land.
b. General damages are the diminished value of the land or the reasonable cost
of restoration whichever is less.
c. Injunction for continuing activity.
d. Restitution not available.

4. Destruction or damage to buildings

a. General damages
1) Building destroyed: Fair market value at time of destruction
2) Building damaged: Repair cost (may not exceed diminished value of
building) plus compensation for loss of use.
b. Injunction for continuing activity.
c. Restitution not available.

5. Severance of minerals
a. General damages:
1) Bad faith: P is awarded fair market value of mineral after extraction.
No deduction for expense in extracting it
2) Good faith:
a) Where P is unable to exploit the minerals himself, recovery is
limited to a royalty payment, which is the price paid for the
right to mine
b) Where the landowner could extract the minerals, the measure
of damages is the market value of the product after it is mined,
less the reasonable cost of mining (in-ground value)
b. Injunction for continuing activity.
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 c. Restitution remedies available if D derives benefit from sale.

6. Severance of timber: (mainly a statutory claim) Tort usually trespass/conversion

a. General damages (treating trees as converted chattel):
1) Bad faith: Enhanced value after trees are logged
2) Good faith: Stumpage value (what is left when branches and roots
are cut off)
3) Some states allow double and triple damages by statute.

b. Injunction for continuing activity.

c. Restitution remedies available if D derives benefit from sale.

7. Severance of crops
a. General damages:
1) Damages will depend on whether crops are near maturity. Since
growing crops have no market value, courts award market value
measure at maturity, less cost of harvesting and marketing. For new
crops, damages may be cost of reseeding.

b. Injunction for continuing activity.

c. Restitution remedies available if D derives benefit from sale.

8. Sand/gravel/dirt removal
a. General damages:
1) Bad faith – Fair market value after removal
2) Good faith – In-ground fair market value or royalty rate.

b. Injunction for continuing activity.

c. Restitution remedies available if D derives benefit from sale.

9. Encroachment: Structure built on P’s land: Continuing trespass

a. General damages:
1) Fair rental value of occupied property or diminished market value of
P’s land due to encroachment.

b. Injunction to force D to remove encroachment.

1) Good faith – Equity court will balance hardships
2) Bad faith – No balance of hardships. D must remove.

c. Restitution remedies not available.

10. Interference with easement

a. General damages:

50
 l) Destruction: Diminution in value of P's property to which easement is
attached
2) Interference: Cost of removal of obstruction

b. Injunction to force D to stop interference

1) Good faith – Equity court will balance hardships
2) Bad faith – No balancing of hardships

c. Restitution remedies not available.

11. Trespass causing loss of possession

a. Ejectment is a legal restitution remedy whereby sheriff will evict D.
b. P can recover mesne profits, the fair rental value of land while in D's
possession
c. Where trespasser is not claiming title, unlawful detainer action is expedited
legal remedy (i.e., tenant holding over)
d. Injunction not available, as ejectment is an adequate remedy at law.

12. Waste - One rightfully in possession of realty who injures the land (life tenant in life
estate or tenant in landlord-tenant relationship)
a. Types:
1) Voluntary: Deliberate destruction
a) General damages: Diminished value of land or restoration cost
(whichever is less)
b) Injunction also available during term of tenancy to prevent
depletion of P's interest
c. Restitution remedies not available.

2) Permissive: Tenant neglects to keep property in good condition

a) Measure of damages: Both measures, as above. No injunction
during tenancy.
b) Restitution not available.
3) Ameliorating: Increase in value of property
a) Majority: Tenant should be liable for increase in taxes
resulting from improvements.

4) Equitable: Material changes in the premises by one not in lawful

possession

13. Nuisance

Private Nuisance: Unreasonable and substantial interference with one's use and enjoyment of
land

a. Private: Unreasonable substantial interference with one's use and enjoyment

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 of land
1) General damages if nuisance is not enjoined (abated):
a) Permanent: Permanent diminution in value of land
b) Special damages may include discomfort and illness of
possessor’s family members.

2) General damages if nuisance is enjoined (abated):

a) Past damages, often measured by diminished rental value,
clean-up costs.
b) Special damages may include discomfort and illness of
possessor’s family members.

3) Injunction. A prohibitory injunction is usually granted in limited

form to abate nuisance
a) Good faith - Courts will balance hardships:
(1) Did people come to the nuisance: General rule: No
defense
(2) Will it create an economic burden on community?
(3) How bad is the nuisance?
(4) Can it be abated?

b) Bad faith: Nuisance will be shut down

4) Restitution remedies not available.

b. Public: One that affects the public as a whole. Additional question is who
has standing to sue
1) Usually a state official must sue
2) But private P who shows special injury has standing

c. Remedies: Same as for private nuisance.

D. Unfair Competition Torts – Major Torts

1. Trademark Violation:
Based upon the parties' right to be protected in the goodwill of a trade or business.
State courts have jurisdiction

a. Palming off: Individual getting "free ride" from somebody else's product.
Generic products do not fall under this protection.

Example: Bread. (non-distinctive design)

b. Elements:
1) Trademark is effective from time of first use - no registration required
2) Something must be used by the tradesman that identifies product
52
 coming from him:
a) Look to confusion of public
b) Dilution of advertising impact

c. Remedies:
1) Damages: Federal Statute (Lanham Act) provides for trebling of
actual damages if in bad faith as well as an award of "in lieu of
damages" where P is unable to prove any losses of his own or any
profits of D. Court will award what is just. (No preemption of state
claims.)
2) Punitive Damages: May be awarded but not in federal statute
3) Restitution: P will receive the gains by putting a constructive trust on
gross profit, D has to reduce to net. If in bad faith, no deduction is
allowed by D, if in good faith D has burden to show and can deduct
product/market costs. (Bill of accounting may be required)
4) Injunction: In equity-multiplicity of suits. Must show irreparable loss
(loss of profits) and satisfy all elements of injunction. If granted will
stop the using of the trademark. (limited in form)

2. Trade Name Violation

Similar to trademark. Example: MIRACLE WHIP.
The quality of the product must become associated with manufacturer in the minds
of the public (KRAFT). Burden is on P to establish that the product has acquired
secondary meaning (look to quantity of sales)
a. Remedy: Same as trademark but only limited injunction will be granted to
require that package be changed so as to eliminate confusion

3. Trade Dress/Design:
a. Trade dress: Packaging of product. Must develop secondary meaning
which involves confusion of the public
1) Remedy:
a) Restitution or profit
b) Limited injunction to clarify confusion

b. Trade design: Configuration of package, (contents) Must cause confusion

of public
1) Design must be non-functional (unique). If functional - no protection
of trade design and no secondary meaning attaches
2) On exam if facts talk about configuration must discuss
functional/non- functional and secondary meaning

4. Trade Secrets: (employee sells employer’s secret to competitor)

Usually involved is a negative covenant (promise by employee not to do something)
a. Remedies
1) General damages: Lost profits
2) Restitution: Constructive trust to reach gains (profits) and burden on
53
 D to reduce to net
a) Assumpsit with the common count of “money had and
received”

3) Bill of accounting: Gross profits made by violation

a) Bad faith: No deductions
b) Good faith: Can deduct production/marketing costs,
D has burden
c) Be sure who the party is with the knowledge in order to
establish what type of faith involved

4) Injunction: Against employee to enforce negative covenant and

against competitor.

b. Special situation - if employee is bribed by competitor

1) Remedies:
a) Restitution: Assumpsit with the common count of money had
and received. Employer entitled to bribe paid to employee
b) Constructive trust
c) Bill of accounting: Against employee/competitor
d) Injunction: Enforcing negative covenant against employee
extending to competitor

2) If trade secret is a customer list then injunction will apply

5. Commercial Disparagement: (trade libel)

Remarks defamatory of goods of another rather than the person. P must prove
statement was false
a. Remedies
1) Limited to special damages
a) P must prove loss of customers as a result of disparagement
as well as loss of profits
(1) Common law: Required names of lost customers
(2) Modern law: Preferred but not required. Must
show decline of company profits

2) Prior restraint injunction generally not granted in light of free

speech considerations (Constitutional Law crossover)
3) Uniform Deceptive Trade Practice Act (1966) - Allows for injunction
even with 1st amendment problems but do not mention unless statute
given on exam

6. Inducing Breach Of Contract: Watch for crossover with trade secret. Contract has
to be in existence and usually involves unique talent
a. Remedies
1) Compensatory damages against tortfeasor and employee
54
 a) Measure of damages: No more than employee would pay on
loss of expectancy to employer
b) Punitive damages if bad faith

2) Minority allows for restitution of profits involved by enrichment of

tortfeasor
3) Injunction to enforce negative covenant

7. Interference With Expectancy of Contract: Contract is not yet in existence. Facts

will indicate that the contract is close to being formed. Intent must be to interfere
with expectancy even though tort arises first
a. Remedies
1) Compensatory damages: If losses
2) Restitution: If gains (rare)
3) Injunction: Multiplicity of suits

8. Common Law Copyright: (misappropriation of ideas) Mere ideas not protected at

common law after publication. Common law did recognize common law copyright
which protected ideas and artistic efforts of an individual prior to its publication.
Thus, common law protection came right up to modern copyright protection (act)
a. Requirements for common law copyright.
1) Must be a novel idea
2) Artistic area
3) Idea must be reduced to concrete form rather than abstract.
***Do Not Discuss Copyright Act unless facts mention

b. When idea published by author: Common law copyright protection is lost.

If facts state that author said "I expect to be paid" then author will not
have published and will not be prevented from common law copyright -
Argue both sides

c. Remedies
1) Special damages - Amount of time P spent developing idea, out of
pocket expenses to put idea in concrete form
2) Royalty fee
3) Bill of accounting - Constructive trust on gross. If bad faith no
deduction. If facts say nothing about payment (above) then may
not have bad faith
4) Injunction

9. Copyright Act: Must be given on exam. Exclusive jurisdiction in federal courts

a. Requirements
1) Raw idea said in public not sufficient
2) No protection unless copyright registered
3) Must be tangible form. Protection to author for his life plus 70
years, thus estate can sue
55
 b. Remedies
1) Compensatory damages
a) Measure of damages: Diminished value (property right)
before and after violation or royalties fee or in lieu of
actual damages: If P can not prove damages P can ask:
-If in Good Faith $250-$10,000 and
-If in Bad Faith $250-$50,000
2) Statute authorizes impoundment of all articles, which infringe on
the copyright plus any items, which were used to produce the
articles. All may be confiscated or destroyed
3) Restitution: Provided for in statute. Bill of accounting and
constructive trust against gross. Apportionment allowed if
wrongdoer can show that others produced were not in violation of
act
a) Attorneys fees allowed
b) Interest - Post judgment
c) Punitives allowed in law

4) Injunction: TRO allowed without showing of irreparable harm

10. Patent Infringements: Exclusive federal control. First patent prevails, thus once it is
registered everyone is put on constructive notice. Once issued - 20 years from date
of filing
a. Remedies: Do not discuss unless Patent Act mentioned on exam
1) Damages
a) Measure of damages: Reasonable royalty fee (what
person would have charged to let someone use patent)
(1) Treble damages by statute usually involves bad
faith
(2) Remember copyright act was "in lieu"
(3) Attorneys fees - Not authorized by statute but case
law will allow if in bad faith
(4) Interest - Both pre/post

2) Restitution - Not provided for in statute. If gains then treated as

losses and included in P damages
3) Injunction - in equity because statute provides for injunctive relief.
Must show Irreparable Harm (unlike Copyright)

E. Unfair Competition Torts – Minor Torts

1. Physical Harm To Trade Relations: Owner of business suffers physical injury to

himself or his business. As a result, he suffered loss of profits because of damage to
himself or his business. Wrongdoer usually competitor

56
 a. General Damages: Lost profits. which must be proved through special
damages
1) Requirements:
a) Wrongdoer must have the intent to harm trade relations
b) Wrongdoer must have known P in the capacity of a
tradesman

2) Include any intentional torts, which take place in fact pattern and
watch for punitive damages

2. Interference With Customer's Person (physical harm):

a. Remedy:
1) By victim for intentional torts committed
2) By tradesman for loss of expectancy of profit. Must prove special
damages

b. Requirements:
1) Must be a customer
2) Must show intent of wrongdoer was to deprive tradesman of
customer's business - loss of business expectancy between
customer and tradesman

3. Interference With Access To Customers:

a. Example: Blocking of tradesman sign/picketing
b. Remedy: Loss of expectancy
c. Requirement:
1) Must establish that intent was to interfere with access to customers

4. Interference With Property:

a. Trespass to personal or business property of businessman
b. Example: Loosening nails of horseshoe
c. Remedy: Loss of property/profits

F. Miscellaneous Torts Note: The major remedy applicable to most of the following torts is
damage. Torts for which injunctions and/or restitution are possibilities are noted

1. Personal Injury - Tort is usually negligence

a. Damages
1) General damages – pain and suffering
2) Special damages
a) Lost earnings/ earning capacity. Compensate from date of
injury to time of recovery.
(1) If injury not permanent - Measure of damage
equal to earnings lost while out of work
(2) If permanently injured - Wages projected by
mortality table and reduced to present value
57
 (3) If P not employed look to facts or what work P
plans for the future
(4) If self-employed or significant to business can
seek lost profits. Look to experience factor and
importance to job. If a company is suing on
behalf of employed then look to degree of
impact on company.

b. Medical expenses: Measure is reasonable value of medical services.

c. Lost profits
d. Loss of consortium: Action brought by non-injured spouse

2. Survival Action P’s estate can recover damages suffered from date of accident until
death.
a. Common law: Did not recognize as action died with victim

b. Modern law: Allows decedent's estate to maintain a cause of action the

decedent himself could have maintained had he survived. Estate permitted to
sue for whatever personal injury damages had accrued to victim up to the
time of death.

c. Issue: Whether victim died instantly or whether he suffered some pain, which
can be proven by medical testimony

d. Measure of damage: Equal to amount the estate can recover for medical
expenses and loss of earnings during lifetime, together with an allowance for
pain and suffering up until his time of death. Specific measure loss of person
to the estate i.e., amount victim would have saved had he lived. Reduced to
present value

e. A release by victim: While alive, will preclude an action by survivors

3. Wrongful Death: Action brought by survivors of decedent

a. Common law: Did not recognize. Modernly, established by Lord Campbell's
Act
b. Two types of statutes:
1) Minority type is the loss to the estate (amount which decedent
would have accumulated during his lifetime "but for" the wrongful
death. Discounted to present value)
2) Majority type is the loss to the survivors (combined claims of
decedent's survivors who have suffered provable losses because of
his death)
c. Measure of damages: Equal to loss to survivors
d. Earning capacity: Projected out and reduced to present value
e. Special damages available: Loss of companionship, consortium
f. Majority: Does not allow punitive damages
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 4. Wrongful Birth:
a. General damages: Not recoverable
b. Special damages: Recoverable. Usually medical and care expense,
discounted to present value.

5. Dignitary Torts: Involves intentional torts to person

a. Measure of damages jury's discretion (medical expenses/pain/suffering)
b. Look for punitives and emotional distress

6. Defamation: Involves tort law of libel/slander

a. Compensatory damages: To P's reputation
1) General damages presumed
2) Specials not required if slander per se
3) Punitive damages if malice involved

b. Jury will consider following to determine award:

1) Is statement vague or specific?
2) Libel v. slander
3) P's reputation in the community
4) Effect of retraction: mitigates punitive damages

c. Injunction: Court reluctant to grant prior restraint injunction in light of

First Amendment. Exceptions: If defamatory statement is part of other
enjoinable conduct (conspiracy), national security is involved, if
combined with declaratory relief.

7. Invasion Of Privacy: Involves four types of invasions: intrusion upon seclusion,

public disclosure of private facts, false light, and appropriation of image. The gist of
tort is "one's right to be left alone"
a. Cause of action: Usually does not survive P's death. There may be an
exception in appropriation of image cases.
b. Compensatory damages: Loss of reputation and anguish, dependent upon
jury discretion. Punitive damages are available
c. Restitution: If commercial purposes involved and profit made on
unauthorized use. Accounting of profits is possible
d. Injunction: Where continuing and privacy is threatened in the future,
injunction may be granted, but prior restraint injunctions are rarely granted
in light of the First Amendment

8. Statutory Torts: (Never Tested)

a. Familial torts
1) Courts find it difficult to find property right
2) Injunction granted where third person interferes between husband
and wife
b. Associations: (private in nature)
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 1) Injunction will not be granted to enforce the right to join
2) If expulsion of member involved, then court will look to
organization's rules, and possible due process violations. (state
action involved)
c. Religious status
1) Problems with separation of church and state
2) If contract/property rights at issue court will get involved
d. Political status (rare)
1) Too many problems with enforceability
e. Academic status
1) If strictly academic, then no court involvement
2) Non-academic (disciplinary) then treated like private organization

Contract Remedies
Introduction by Fleming

In contract cases, a number of remedies may come into play. The most common remedies are
presented when one party to an agreement breaches the contract. P may elect to affirm the
contract and sue to protect plaintiff’s’ expectancy.

There are two remedies that protect plaintiff’s expectancy. The first is a suit for money damages.
The second, in a case where damages is an inadequate remedy, is the equitable remedy of
specific performance whereby the court will order the breaching party to perform.

If the parties to a contract have a meeting of the minds but the written agreement does not
accurately reflect their agreement, the court may use the equitable remedy of reformation to
reform the contract to read the way the parties intended. Once reformation is accomplished, the
contract may be enforced through damages or, in an appropriate case, through specific
performance.

In other cases, a party may wish to disaffirm and cancel a contract, usually where there is a
serious formation problem, like fraud or mistake. The remedy of rescission accomplishes this
purpose.

A prohibitory injunction is a remedy that can be used to enforce a negative covenant in an

employment contract or a covenant not to compete in certain business transactions.

Finally, restitution remedies may also be appropriate to solve the problem of unjust enrichment
in contract settings. In rescission cases, restitution is necessary if any consideration has changed
hands before the contract is cancelled. Restitution is also available if a contract becomes
unenforceable after the parties have exchanged consideration.

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Contracts Review
First, you MUST establish the breach. Then, you move on to the proper remedy.

Two Common Remedies exam mistakes:

1. Ignore establishing the breach.

2. Spend too much time on the breach.

Writing Contract Remedies: Form the Contract and Establish the Breach
Form the contract, unless it is given. You must have a contract to establish breach. You must
have breach to establish remedies.

 Applicable Law
 Goods, services, merchants
 Formation
 Offer, acceptance, consideration
 If necessary: 3rd Parties, assignment, delegation
 If necessary: Performance: covenants/conditions
 If necessary: Discharge of duty

 GET HERE: BREACH (Must have. Focus here.)

Contract Formation Review

Applicable Law
 Goods: UCC; Services: common law, mixed: predominant factor test/gravamen of the
injury.
 Merchants if UCC
 If UCC, write common law, but note where UCC changes the rule.

Offer
 Intent, definite and certain terms, communicated to the offeree.
 Advertising

Acceptance
 Unequivocal assent to the terms of the offer
 Counteroffers
 Mailbox rule
 UCC 2-207 Battle of the Forms\
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Consideration
 Bargained for exchange
 Debts

Valid Contract: A valid contract requires mutual assent, consisting of an offer and acceptance,
plus consideration.

Third Party Issues

 Third Party Beneficiary
 Vesting, type (creditor/intended vs. donee/incidental)

Assignment
 Generally OK.

Delegation
 NO when performance is too personal

Performance
Performance is the things you have to do under the contract.

 Covenants
o Good faith and fair dealing…always.

 Conditions
o Express
o Implied in fact
o Implied in law
o Precedent
o Concurrent
o Subsequent

 Once established, conditions must be satisfied or excused.

o Plaintiff must satisfy all of his conditions under the contract before the defendant
can be held in breach

 Anticipatory Repudiation
o Unequivocal statement by the defendant that he will not perform

Discharge of Defendant’s Duty to Perform

This is how the defendant avoids the breach of contract due to his lack of performance.

Can’t Perform
 Frustration of purpose
 Impossibility
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  Commercial impracticability

Modification
 Common law required consideration. Not under UCC
 Watch for preexisting duty

Accord and Satisfaction

 Accord: Ne agreement
 Satisfaction: requirement to perform or make accord effective.

Breach

Breach occurs through…

 Anticipatory repudiation
 Non-performance
 Nonconforming performance

Minor: Requires continued performance by plaintiff, then plaintiff can sue for the harm suffered.

Major/Material: Excuses the plaintiff’s duty to perform and he can immediately sue for
damages.

Watch for anticipatory repudiation. Occurs at the executory stage, when neither party has
fulfilled their terms of the contract.

About the UCC

Many sections and rules, but here are most critical or highly tested.
 Firm offer
 Missing terms (course of performance, course of dealing, trade usage)
 Modification (no consideration)
 Battle of the forms (UCC 2-207)
 Risk of loss rules (FOB, etc.)
 Non-conforming goods
 Warranties
 Perfect tender rule
 Cure
 Cover

Contract Remedies

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Note…a similar Tenzer chart for Torts does not exist.

Introduction

In contract cases, a number of remedies may come into play. The most common remedies are
presented when one party to an agreement breaches the contract. P may elect to affirm the
contract and sue to protect P’s expectancy. There are two remedies that protect plaintiff’s
expectancy. The first is a suit for money damages. The second, in a case where damages is an
inadequate remedy, is the equitable remedy of specific performance whereby the court will
order the breaching party to perform.

If the parties to a contract have a meeting of the minds but the written agreement does not
accurately reflect their agreement, the court may use the equitable remedy of reformation to
reform the contract to read the way the parties intended. Once reformation is accomplished, the
contract may be enforced through damages or, in an appropriate case, through specific
performance. (Use primarily in mistake and fraud.)

In other cases, a party may wish to disaffirm and cancel a contract, usually where there is a
serious formation problem, like fraud or mistake. The remedy of rescission accomplishes this
purpose.

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A prohibitory injunction is a remedy that can be used to enforce a negative covenant in an
employment contract or a covenant not to compete in certain business transactions.

Finally, restitution remedies may also be appropriate to solve the problem of unjust enrichment
in contract settings. In rescission cases, restitution is necessary if any consideration has changed
hands before the contract is cancelled. Restitution is also available if a contract becomes
unenforceable after the parties have exchanged consideration. (In fact, it’s the principal remedy
for unenforceable contracts.)

Damages in contract law are designed to protect the non-breaching party’s expectation according
to the contract terms.

 Damages
o General
o Special (consequential/incidental)
o Liquidated
o Reliance
o Punitive (virtually never)
 Exceptions: Bad faith breach of insurance contract or employment
contract by employer.
o Avoidable Consequences Rule
o Quasi-Contract/quantum meruit
 Recission (cancellation)
 Restitution
 Reformation (court will correct the contract…typo scrivener’s error)
 Specific performance (almost always tested)
 Injunction
 UCC

MONEY (LEGAL) DAMAGES

A fuck-up from my midterm: Equitable relief is only available if legal remedies are inadequate.
Therefore, if legal damages are available, argue them FIRST.

Standard Rule Of Recovery: The main purpose of damages in a breach of contract case is to
protect plaintiff’s expectancy under the agreement. Damages place plaintiff in the economic
position plaintiff would have been in had the contract not been breached.

Expectation Damages
aka General Damages

General damages are also known as compensatory damages or expectation damages.

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Expectation damages. Expectation damages are THE most important to find. “The Gold
Standard.” Damages are certain and ascertainable. (If not, see reliance damages.) Expectation
damages are the default standard.

In contracts, the general damages rule is expectancy. Protecting the plaintiff’s expectancy is the
overarching goal of money damages.

Expectation damages compensate a plaintiff for the benefit of the bargain expected and place
the plaintiff in the same position if the contract had been performed.

The measure of damages is the market price differential at the time of the breach: The difference
between the contract price and the current market value price at the time the contract is
breached.

Contract Damages: Those damages which the law presumes flow naturally from the contract
breach.

Naturally flow: A disruption of a party’s benefit of the bargain.

General damages are a calculation based on value. (Remedies casebook page 698):

Contract-Market Price Differential is used in contract. Achieves the expectation. Measured

from the day of the breach.

General Damages:

a. General damages are those the law presumes naturally flow from the breach of contract.
They are awarded to protect P’s benefit of the bargain. The contract market price
differential at the time of breach (the difference between the contract price and the fair
market value of the item or service at the time the contract is breached) is the usual
measure of general damages.

b. Example: P and D enter into a contract whereby P is to buy a computer for $1,000. D
breaches the contract. The fair market value of a similar computer at time of breach is
$1,200. P may recover $200 to give him the benefit of his bargain.

Contract/market price differential is the classic method for determining general damages.

Measuring the Expectation Damages

Courts use the following formula to calculate the monetary value available to the plaintiff for
expectation damages:

Expectation Damages = (Loss in Value) + (Other Losses) – (Cost Avoided) - (Loss Avoided)

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Loss in Value = Value the plaintiff should have received under the contract – value plaintiff did
receive under the contract.

Other Losses = Incidental Costs + Consequential Costs (must be foreseeable)

Costs Avoided = Value plaintiff saves by not having to perform any further.

Loss Avoided = Value plaintiff recovers by salvaging resources that would have been used to
perform the contract.

Expectation damages must be able to be calculated with reasonable (but not mathematical)
certainty. Otherwise, they are too remote.

Consequential Damages
Special Damages

aka Consequential damages. The consequences of a breach. Lost profits or additional costs
incurred. Think Hadley v. Baxendale. These are damages incurred by a nonbreaching party
WITHOUT ACTION ON HIS PART because of his breach.

CONSEQUENTIAL =FORESEEABLE

Consequential damages: Limited by the rule in Hadley v. Baxendale, damages are available for
those injuries that, at the time the contract was made, the defendant has reason to foresee as the
probable result of his breach.

The damages must have been within the contemplation (foreseeable) to the parties at the time of
contract formation. See Hadley v. Baxendale.

Watch for claims of lost profits for a new business without a track record. Speculative. Special
damages must be realized (actually occur), proved, and NOT remote.

Special damages: Limited by rule of HADLEY v. BAXENDALE: plaintiff may recover damages
within the contemplation of the parties at the time contract was made:

a. This is the rule of foreseeability in a contract case. (Causation is less important in

Contract as opposed to Tort.)
b. P must prove damages with reasonable certainty. This may be a problem where P is
seeking lost future profits for a new business
c. Avoidable consequences: P must take reasonable steps to mitigate damages

Hadley v. Baxendale Analysis Required on Essay

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CAUSATION: Damages must be caused by the breach.

FORESEEABILITY: Damages must have been foreseeable (aka: within the contemplation of
the parties) at the time the contract was made.

CERTAINTY: Damages must be a definite and certain amount of money.

Incidental Damages
(ARE special damages as well.)

Out of pocket damages.

Under the UCC, these are incidental expenses reasonably incurred in inspection, receipt,
transportation, care, and custody of goods rightfully rejected as well as cover and replacement.

Incidental damages compensate for the costs of keeping any more damages from occurring.

Incidental damages are comprised of elements such as the cost of shipping goods to and from a
buyer who has wrongfully rejected the goods, the costs of storing and insuring goods pending
resale after a buyer wrongfully rejects them, and the cost of going to the market to purchase
substitute goods or of advertising a resale. If the injured party incurs such incidental damages,
they are normally added to the expectation damages to which he is entitled.

Gilberts: Expenses incurred by the non-breaching party in a reasonable effort to mitigate

damages are recoverable as incidental damages whether or not the effort was successful.

Liquidated Damages
If there is a valid liquidated damages clause in a contract, it will be the sole remedy available
upon a breach of the contract.

Liquidated Damages: A liquidated damages clause is valid if damages are difficult to ascertain
and are a reasonable forecast of the anticipated harm caused by the breach as opposed to a
penalty.

Liquidated Damages Clause: A liquidated damages clause is valid if, at the time a contract is
entered into, it appears that if there should be a breach: 1) damages will be extremely difficult to
ascertain, and 2) the contractually stipulated amount is a reasonable forecast of what they will
be.

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Designed to specify ahead of time what the damages will be for a particular breach of a contract.

Must be a fair approximation of the actual damages (harm) and cannot be a penalty.

Used when damages are certain, but difficult to ascertain. (?)

Liquidated damages
a. Damages are a fair approximation of the anticipated harm caused by the breach as
opposed to a penalty
b. Damages are difficult to prove
c. Inconvenience of otherwise obtaining a remedy. If contract defines the clause as the
sole remedy and its validity is established, the court will enforce it as the only remedy
available
d. If court refuses to enforce liquidated damages clause, P must prove actual damages.

Lost Volume Seller

Lost Volume Seller: A seller who has an unlimited inventory and only a number of limited
customers is able to recover lost profits regardless if the seller sold the product to another
customer.

A lost volume seller is a seller who does not recover the profit lost by a buyer’s breach via
reselling the goods because the seller would have made the second sale anyway.

Such a situation occurs when the seller (retailer) has an unlimited or large enough supply of
goods that he or she can make repeated sales.

Is the second contract a substitute performance or an additional performance. If a substitute,

damages may be little or nothing. If additional, the entire expectation interest (profits) can be
recovered.

Lost volume seller - (U.C.C. §2-708): A seller who has an unlimited inventory and only a
number of limited customers is able to recover lost profits regardless if the seller sold the
product to another customer. Think TVs at Best Buy. Recovers lost profits, not lost sales volume.

Remedy is “one unit” of profit. Lost Profits = (Expected profit) + (Costs) – (Payment for resale)

From Adaptibar: Under UCC rules, a lost volume seller can recover the store’s anticipated
profit on the sale to the customer, plus incidental damages, if any, because the store lost the sale.
It does not simply recover the retail price. This assumes the seller can demonstrate that it could
have made the extra sale if the contract had gone forward.

Several formulae are available:

 Lost profits, plus incidental damages.

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Reliance Damages
Reliance Damages: When the expectancy cannot be calculated to a reasonable certainty, then
the court may award damages according to the calculation of what the plaintiff expended in
reliance on the contract.

Reliance damages: Reliance damages put the plaintiff in the position he would have been in had
the contract never been made.

As an alternative, the plaintiff an seek their out of pocket costs in reasonable reliance on the
contract, prior to the breach. Costs reasonably incurred.

Reliance Damages usually consist of nothing more than the expenses that the plaintiff
incurred in reliance on the contract. Generally, a plaintiff seeks reliance damages when
calculating expectation damages is too speculative (e.g., lost profits of an unproven
business venture is often too speculative).

Damages awarded for losses suffered in reasonable reliance on a promise.  Reliance damages are
calculated by asking what it would take to restore the injured party to the economic position
occupied before the party acted in reasonable reliance on the promise. 

Reliance damages may be awarded after a breach of contract or by way of promissory estoppel.
No benefit needs to have been conferred.

Reliance Damages Summary: When an aggrieved party is unable to prove expectation damages
because the standard measure is inapplicable or because consequential damages cannot be
shown with the reasonable certainty, plaintiff can recover as an alternative measure of damages,
the costs incurred by plaintiff in reliance on the contract before notification of defendant’s
breach.

Don’t forget…can obtain expectation or reliance damages, but NOT both. (Expectation damages
will likely be greater.)

Punitive Damages

Rarely if ever awarded in contract. Don’t discuss on an exam.

Courts assume the parties enter into a contract aware of the risks they are taking. Requires
egregious behavior. Example: Insurance companies failing to pay off in breach of covenant of
good faith and fair dealing.

Avoidable Consequences Rule

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After a breach, a plaintiff must make reasonable efforts to mitigate the breach. If the defendant
can prove the plaintiff failed to mitigate their damages, the plaintiff’s recovery can be barred or
reduced. The purpose of the rule is to mitigate damages caused by the defendant’s breach.

Plaintiff’s actions must be reasonable, applying common sense and fair dealing. “Substitute
transaction.”

Doctrine of Avoidable Consequences: Under the Doctrine of Avoidable Consequences, a

plaintiff must act reasonably to mitigate his or her damages.

In employment cases, a plaintiff must use reasonable diligence in finding other suitable
employment. This does not require a plaintiff to go into another line of work, accept a demotion,
or take a demeaning position. Job should be substantially equivalent to the one lost.

Recission, Restitution, and Reformation

These are fairly minor issues. The major issues are injunction, specific performance and
damages.

 Recission is used to get out of a contract.

 Restitution is used to avoid unjust enrichment.
 Reformation used equity to “fix” a contract.

Recission—Contract Cancellation

Rescission: A mutual agreement by the parties to terminate a contract.

Rescission is the undoing of a contract. It is a restitutionary remedy. The plaintiff effects a

cancellation of the contract by prompt notice of the rescission and tender back of the
consideration, or, more commonly, by a lawsuit in which the plaintiff seeks rescission and offers
to tender back the consideration.

The grounds for rescission must have existed at the time of the making of the contract, making it
voidable.

Bar Exam questions tend to focus on two grounds: mistake and misrepresentation.

Recission cancels the contract. It undos the contract because there was never a genuine meeting
of the minds. The grounds for recission exist at the time the contract was made.

Purpose Is To Undo A Contract Because Of A Serious Problem: Usual grounds for rescission
are serious formation problems: fraud in the inducement, undue influence, duress, or mistake.

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Substantial breach by the other party is also grounds. If P affirms the contract expressly or by
conduct rescission is not available.

Rescission: Is usually coupled with restitution of any consideration paid. Otherwise, a party
would be unjustly enriched.

Rescission Coupled With Restitution Equals Restoration: Placing parties back to their
original position, often called restoring the status quo ante.

Legal Rescission: Rescission at law is where the plaintiff effects the cancellation of the contract
by his own actions, e.g., when he gives the defendant notice of the rescission and returns any
consideration received.

Rescission At Law: P must establish the following:

1. P notified D of intent to rescind

2. Goods or consideration must be tendered back to the party originally possessing it. Must be
prompt, good faith, and unequivocal

Equitable Rescission: Equitable rescission is where the rescission is effectuated by a decree of

the court rather than by the action of the injured party. If rescission is granted, restitution is
conditioned on the plaintiff's restoration of any benefits received from the defendant.

Rescission At Equity:

1. Same as above
2. No tender required, however, modernly some jurisdictions still require.

Something went wrong at contract formation. Must prove prima facie case for:

1. Fraud
a. Fraud/misrepresentation (could be a tort as well)
b. Fraud in the inducement

Misrepresentation:
While only fraudulent and negligent misrepresentation allow for damages as
a remedy, any form of misrepresentation—innocent, negligent, or fraudulent
—will be grounds for rescission.

2. Mistake (Remember mutual and unilateral—other party knew or should have

known. Material…goes to basic assumption of the agreement. Recission for
unilateral mistake is very rare and typically not allowed. Occurs only when the
other party knew of the mistake and takes advantage of it.

Mutual Mistake:
Mutual mistake requires a mutual mistake as to a material fact—one that
72
 goes to the basis of the bargain. Thus, the mistake must be as to the nature
or identity of the subject matter of the contract—not its quality.

Unilateral Mistake:
The established rule is that a unilateral mistake will only be grounds for
rescission is the non-mistaken party knows or should know of the mistake.
The modern trend grants rescission if the mistake is basic and the mistaken
party’s hardship outweighs the detriment to the non-mistaken party’s
expectations under the contract.

3. Duress
4. Undue influence

 Notice from plaintiff to defendant required.

 Consideration must be returned.
 Generally unavailable if the contract is executed (completed), but executory (in progress)
is ok.
 Watch for progression of events…election of remedies:
o Can’t seek recission after you have sought damages. (Seeking damages affirms
the contract.) However, it can work the other way around. You can seek recission,
then damages.
 Will need to present both options, damages AND recission, to potential
clients.

Defenses Available:
1. Laches
2. Unclean hands
3. Affirmance of contract (supra, immediately above)
4. Estoppel by conduct - If, after learning of facts justifying rescission, P continues to
accept benefits under the contract, P is estopped from rescinding.

Restitution
(often combines with Recission)

This is all about unjust enrichment.

 Did the defendant benefit at the plaintiff’s expense?
 Would retention of the benefit by the defendant unjustly enrich him?

Replevin: return of personal property

Ejectment: return of real property
Disgorgement: return of profits

Restitution is a remedy used to recover a wrongfully obtained benefit which, if he were allowed
to keep it, would result in his unjust enrichment.

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Used to put the parties in the position they would have occupied if the contract had never been
formed. Disgorging unjust enrichment at fair market value of the benefit given. No agreement is
necessary. Basically, you are getting your money back, because you conferred a benefit…aka
unjust enrichment.

Restitution is often tested as a benefit inadvertently conferred.

Examples: Landscaper does the wrong house. Piano company delivers piano to wrong address.
Remedy: Fair Market Value.

Restitution: Restitution is an alternative remedy to compensatory damages. Restitution is used

when the defendant has wrongfully obtained a benefit which, if he were allowed to keep, would
result in unjust enrichment, and thus may be compelled to give it up. Restitutionary remedies
may be legal or equitable.

Similar to rescission. It seeks to return parties to their original position before the contract…as if
the contract had never been formed.

Happens when:
 Recission occurs
 Mistake (mutual and unilateral)
 Breach
 Quantum meruit

A party can obtain expectation damages, reliance damages, or restitution, but only ONE of
them. (Pick one.)

Quantum Meruit/Quasi Contract

Quantum is a form of restitution utilized to avoid unjust enrichment.

Quantum Meruit (kwon-tem mer-oo-it): Quantum Meruit refers to the reasonable value
deserved for one's labor, and is awarded in a quasi-contract claim.

Quasi Contract: Quasi contract is an equitable remedy which allows the plaintiff to recover a
benefit that was conferred upon the defendant despite the absence of a contract.

Can obtain damages in the absence of a formal contract. Include reliance damages and
restitution.

Reformation
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(equity only)

Reformation is changing an agreement to reflect the actual intentions of the parties. The goal is
to save the contract.

Reformation: Reformation is an equitable remedy by which a court modifies or alters a written

instrument to make it conform to the parties' previous understanding or agreement.

There must have been a prior valid agreement between the parties, and the writing fails to
conform as a result of mistake or fraud.

The grounds include a mutual mistake of fact regarding whether the instrument conformed to
the parties’ intentions, including scrivener’s errors, unilateral mistake where one party knows
the instrument contains an error but the other party does not, mistake of law as to the legal
meaning of terms, and fraud.

 A means in equity to fix or save (reform, change) a contract to reflect what the parties
actually intended.
o Remember, a key part of formation is mutual assent, a meeting of the minds.
 Cannot be used to add or change the true agreement of the parties when they contracted.
 Can include intentional fraud in drafting or a drafting error, such as scrivener’s error.
(Parol evidence will be required to bring in the original negotiation to show the mistake.)
 Keep equitable remedies in mind
o Watch for laches and ratification after learning of the mistake.

Fraud and Mistake

Fraud refers to the intentional making of a false statement upon which the other party relies
when agreeing to enter the contract.

Misrepresentation: Misrepresentation typically refers to the negligent or innocent making of a

false statement upon which the other party relies in agreeing to the contract.

Best Rule…
Fraudulent Misrepresentation: If a party (1) induces another party to enter into a contract (2)
asserting known untrue information, the contract is (3) voidable by the party who justifiably
relies on the misrepresentation.

Remedy includes recission.

Also…Non-Disclosure (CBX 2-17)

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Non-disclosure of a fact is equivalent to a fraudulent assertion if the maker: (1) knows the
disclosure is necessary to prevent a previous assertion from being fraudulent; (2) knows the
disclosure would correct a mistake of the other party as to a basic assumption on which the other
party was making the contract and non-disclosure amount to a failure to act in good faith and in
accordance with reasonable standards of fair dealing; (3) Knows the disclosure would correct a
mistake as to the contents and effect of a writing; or, in in a relationship of trust and confidence
with the other party.

If the non-disclosure is fraudulent, the contract will be voidable.

A. Fraud - Deceit:

1. Defined: Misrepresentation of a material fact made knowingly with the intent to induce
plaintiff to justifiably rely to his damage
a. Treat fraud as a tort first and apply remedies unless the call of question dictates
otherwise
b. Second treat fraud as the reason for the breach of the contract.

2. Remedies (Tort remedies applied in a contracts setting.)

a. Tort General Damages: Different measures, depending on jurisdiction.

1) Benefit of the bargain - (expectation interest) Difference between the actual

value of what is received and the value it would have had as represented

2) Out of Pocket - Difference between what P paid and the actual value received

b. Special damages: (Example: Lost profits)

1) Reasonable certainty of money amount
2) Proximate cause (versus foreseeable)
3) Damages not too remote

c. Reliance damages

d. Punitive damages

e. Restitution (unjust gains)

1) Assumpsit with proper common count
2) Constructive trust
3) Equitable lien
*4) If misrepresentation is innocent, P is not permitted to recover D's profits
5) Special problem: If B.F.P. takes from the defendant without notice of the fraud
then P is limited to seeking restitution of the consideration given to D by
B.F.P., usually through a constructive trust
a) Donees (creditors are not considered B.F.P.'s)

f. Rescission
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3. Where fraud in the execution of a contract exists: Reflects what was agreed upon.
Reformation is the proper remedy

4. Where fraud in the inducement is involved: P knows exactly what he is doing. However, a
misrepresentation occurs. The remedy is damages or rescission

5. Special problem fraud and securities (no scienter required. See Business Associations outline
as well.

a. Remedies:
1) Compensatory damages - Three measures:
a) Market value at time and place of taking
b) Highest intermediate value between time of taking and trial
c) Highest value between the date P had notice and a reasonable time
thereafter in which stock would have been replaced
2) Statute provides interest and attorney fees
3) Reformation
4) Rescission - Where D fails to perform after P's restoration, look to specific
performance. Means of bringing specific performance in through the back
door

B. Mistake:

Mistake: A material misrepresentation of past or present facts, which goes to the essence of the
contract.

Mutual Mistake: A mutual mistake occurs when both parties to a contract have an erroneous
belief related to the facts or contents of a writing, at the time of its creation.

Unilateral Mistake: A unilateral mistake occurs when only one party to a contract has an
erroneous belief related to the facts or contents of a writing, at the time of its creation.

Mistake is NOT a tort. Remedies are recission and restitution.

1. Defined: A mistake is a belief not in accord with an existing fact, as opposed to an error of
judgment.
a. Example: A and B enter into a contract for the sale of a car. Neither is aware that the
car has been destroyed by a fire. They are both mistaken as to the car's existence. This
is a mistake for remedies purposes.

2. Remedies for mistake are rescission and restitution:

a. Mistake must be one of fact rather than law. Mistake of law generally no remedy.
However, exceptions are made where reliance on attorney/reliance on law of foreign
jurisdiction.

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 b. Mistake must be material and go to a basic assumption underlying agreement.

c. If mutual mistake, either party may sue to rescind.

d. If unilateral mistake: Generally, rescission is not allowed. However, if the other party
knew of the mistake or should have known of the mistake, the following remedies may
be permitted:
1) Rescission
2) Restitution
3) Reformation
4) Specific performance is available to the non-mistaken party in certain
situations:
a) If a subcontractor makes a mistake and the contractor doesn't or
should not know of the mistake, the contractor will use the
subcontractor's bid in deciding whether or not to accept the owner's
offer. In accepting the offer, contractor will expect to make a certain
amount of profit - His Justifiable Expectation Interest
b) Court will balance the hardships (aka Balance the Equities):
Subcontractor's loss if bid is ordered specifically enforced against
contractor's loss of his justifiable expectation interest should specific
performance be denied
(1) If the difference between the contractor's justifiable
expectation interest and the subcontractor's expected losses is
comparatively slight, would the court really be defeating the
interest if it found for the subcontractor?

3. Relief in mistaken bid cases: Generally limited to clerical errors rather than errors in
judgment.

4. Defenses:
a. Unclean hands
b. Laches (i.e. waiting too long to act)
c. Ratification - After learning of mistake
d. Changed positions - Contractor receives a bid from subcontractor and in reliance
upon the bid sets a price for the owner in a binding contract. Contractor has changed
his position and should be allowed specific performance. Restitution is not the proper
remedy

Duress, Undue Influence, Unconscionability (in a Contracts setting)

A. Duress: (not a tort)

1. Defined: Unlawful constraint exercised upon a person to coerce the person to enter
into a contract.
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 2. Duress: Economic coercion:
a. One party to a contract threatens to breach by withholding goods unless the
other party agrees to further demands.
3. Remedy: P is entitled to rescind a contract or conveyance made under duress. The
remedies are rescission and restitution. Duress is also a defense to a breach of
contract suit.

B. Undue Influence: (not a tort)

1. Defined: Coercion of someone in a subordinate position; look to a fiduciary

relationship.
2. Remedy:
a. Restitution - D makes profits from a breach of his fiduciary relationship.
b. Undue influence is a ground for rescission and is also a defense to a breach of
contract suit.

C. Unconscionability: (not a tort)

1. Defined: Conduct which would shock the conscience of the court. Look to extreme
disparity in bargaining positions, harsh terms, or excessive price, which offends the
conscience.
2. Remedy: If a contractual provision is unconscionable, a court usually will not enforce
that provision, but the rest of the agreement is enforceable.

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Equitable Remedies
When monetary damages are inadequate.

Specific Performance in Contract

Used if money does not make you whole. A court order to perform the contract. Can only be
used for land and unique chattel.

Specific performance, in addition to money damages, protect the plaintiff’s EXPECTENCY.

Used in land sales contracts (presumptively unique) and certain contracts under the UCC, where
goods are unique or rare.

A party is entitled to Specific Performance when: (1) there is a valid and enforceable contract,
with definite and certain terms; (2) the party has met all the conditions required; (3) the legal
remedy is inadequate; (4) the remedy is feasible; and (5) there is a mutuality of remedies or,
alternatively, there is security of performance (the court can secure performance of the contract).
However, most courts have abolished the requirement of mutuality of remedies. Focus on the
first four.

Specific Performance: Specific performance is an equitable remedy in the form of a mandatory

injunction which orders a contracting party to perform the contract.

Specific Performance is a mandatory injunction ordering the breaching party, under penalty of
contempt, to perform on the contract.

(This is a mandatory injunction, but don’t call it that.)

It usually arises on an essay where a party refuses to close on a land sale deal or delivery of some
unique chattel.

 They will try selling the land/chattel to someone else for a higher price, or
 They have changed their mind.

Often hinges on “uniqueness.” Arguable. (If not truly unique, just find another one, even if hard
to find or more expensive.)

Specific Performance Elements:

Charles Atlas Earns Much Cash Delivering Elephants

Contract valid?
Adequacy of legal remedy (Lively Cats)

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Enforceability of decree
Mutuality of remedy
Conditions

Defenses
Equitable conversion (land sales contracts only)
Sub-IRAC each. Use these opening statements…. These are model…adjust as necessary.

Valid Contract: To qualify for specific performance, the plaintiff must prove that the parties
have a valid contract.

Adequacy of Legal Remedy: A plaintiff can only have specific performance if the remedy at
law is inadequate. In land sales contracts, the courts have consistently held that the law remedy
of money damages is not adequate because land is unique.

Enforceability: Because equity acts in personam, an equity court will only grant specific
performance if it can enforce the order through contempt. Does court have jurisdiction? Constant
and impractical supervision? Does contract require services of the defendant against his will?

Mutuality of Remedy: Mutuality of remedy is an equity court rule, which states a plaintiff
cannot have specific performance unless the defendant could have had the same remedy had the
plaintiff been the breaching party.

Modernly, courts do not require mutuality of remedy, but rather look to mutuality of
performance. Mutuality of performance only requires that the plaintiff be ready and able to
perform.

Conditions: To qualify for specific performance, the plaintiff must prove that all conditions have
been satisfied or excused.

Defenses (Her Beau Loves MUMUS)

a) hardship -- specific performance would create an unreasonable hardship for the

defendant., usually due to inadequacy of consideration plus marked inequality and unfair
advantage.
b) bona fide purchaser - a third party has paid reasonable value for the goods or property
involved, with no knowledge of the breach of contract, such that it would be unjust to recover the
items from the third party to give them to the plaintiff.
c) laches - the plaintiff has waited an unreasonable time to pursue any remedy, making the time
lapse so long that it would now be unjust to try make the defendant "go back" to now perform.
d) mistake -- can the defendant argue there was a mistake?
e) unclean hands -- if the plaintiff has also been guilty of inequitable or wrongful conduct, then
he cannot recover,
f) misrepresentation - can the defendant argue misrepresentation by the plaintiff?

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g) unconscionable - is there any other reason why making the defendant perform would be
unconscionable? (e.g., involuntary servitude, etc.)
h) statute of frauds -- always a defense if it applies.

Equitable conversion
Under the doctrine of equitable conversion, in executory land sales contracts, the buyer has
equitable title to the property and the seller has a security interest for payment of the purchase
price.

Think of statute of frauds as a defense independent of contract formation when it applies to a

tort action as a defense. (Think of CBX 2-2013 example.)

Elements Expanded:

Establish the contract and the breach. Often, anticipatory repudiation will need to be analyzed
as well.

Breach: A breach is an unjustified failure to perform the contract.

Anticipatory Breach: An anticipatory breach occurs when one party to a contract makes it clear
prior to the time performance is due that he or she will not perform.

In a test situation, must form up the contract, unless given. Use either anticipatory breach or
anticipatory repudiation…they are the same thing.

Anticipatory Repudiation: An anticipatory repudiation is a form of anticipatory breach in

which a party verbally and unequivocally repudiates a contract before performance has become
due.

Keep it short, but the terms of the contract must be sufficiently certain and definite that the court
can determine what it must order each party to do to carry out their agreement.

Show that legal remedies are inadequate. Can’t money damages solve the problem? Is the land
or object truly unique? Note: Land is always unique.

Think “lively cats find mice darn nice.”

Also consider

 Multiplicity of suits (torts only)

 Damages too speculative to calculate.

Will the order be reasonably enforceable? Are the parties before the court? Is jurisdiction
appropriate? Employment contract? Discuss 13th amendment issues/indentured servitude on
personal services contract.
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Is there mutuality of remedies between the parties? Traditionally, both parties had to have
specific performance available.

Modernly, both parties must share performance obligations the court could enforce. Mutuality of
performance and obligations is today sufficient.

On exam, discuss both.

Has the plaintiff satisfied all conditions precedent to the defendant performing?

The plaintiff’s satisfaction of conditions elevates the defendant’s duty to perform. Contract is not
breached unless plaintiff has performed “his side of the bargain.”

Defenses (any could cut off the remedy of specific performance)

a) hardship -- specific performance would create an unreasonable hardship for the

defendant., usually due to inadequacy of consideration plus marked inequality and unfair
advantage.

b) bona fide purchaser - a third party has paid reasonable value for the goods or property
involved, with no knowledge of the breach of contract, such that it would be unjust to
recover the items from the third party to give them to the plaintiff.

c) laches - the plaintiff has waited an unreasonable time to pursue any remedy, making the
time lapse so long that it would now be unjust to try make the defendant "go back" to now
perform.

d) mistake -- can the defendant argue there was a mistake?

e) unclean hands -- if the plaintiff has also been guilty of inequitable or wrongful conduct,
then he cannot recover,

f) misrepresentation -- can the defendant argue misrepresentation by the plaintiff? Must be

material.

g) unconscionable terms -- is there any other reason why making the defendant perform
would be unconscionable? (e.g., involuntary servitude, etc.) Grossly inadequate
consideration.

h) statute of frauds -- always a defense if it applies.

Equitable Conversion? Applies only to a breach of a land sales contract. Under the doctrine of
equitable conversion, in executory land sales contracts, the buyer has equitable title to the
property and the seller has a security interest for payment of the purchase price. (Escrow period)

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Fleming on Specific Performance

A. Specific performance is an alternative way of protecting P’s expectancy. The equity court
issues a mandatory injunction ordering D to perform.

B. This remedy usually applies in land sale contracts and chattel sale contracts where the goods
are unique or there are no replacement goods available. In other contract cases, damages is
usually an adequate remedy at law.

C. Specific performance requirements:

“CHARLES ATLAS EARNS MUCH CASH DELIVERING ELEPHANTS”

1. C - Is there a valid contract?

a. Definite/Certain terms
b. Adequacy of consideration
c. Statute of Frauds - Partial performance

2. A - Adequacy of legal remedy (Lively Cats):

*a. Land is unique
*b. Chattel is unique
c. Multiplicity of suits
d. Breach of fiduciary relationship
e. Damages speculative

3. E - Enforceability of decree (feasibility):

a. In personam/quasi-in-rem/in-rem
b. Would enforcement result in great hardship?
c. Personal service contracts may not be specifically enforced

4. M - Mutuality of remedy:
a. Traditional view: Specific performance must be available to both
parties in the event of breach. If not, P could not have specific
performance.
b. Modern view: Mutuality of performance/obligation is sufficient.

5. C - Conditions:
a. Has P complied with all outstanding conditions precedent to D's
obligation to perform?
b. If time of the essence is the condition, specific performance will not be
available unless waived by party.

6. D - Defenses:
a. Laches-Lapse of unreasonable amount of time resulting in prejudice to
the D. If time delay matches applicable statute of limitations then
prejudice need not be shown
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 b. Unclean hands
c. BFP
d. Statute of Frauds
e. Mistake
f. Misrepresentation (material misrepresentation required)
g. Unconscionable terms, e.g., grossly inadequate consideration.

7. E - Equitable Conversion: (applies only to executory land sales contracts)

a. Equitable interests are created in the buyer at the moment of the
execution of a land sales contract, and equitable title vests in the buyer.
Seller retains legal title until full tender of payment and possession (or
the right to possession) is taken by buyer. Seller acquires a contract
right to the purchase price.

b. "Equity considers done what ought to be done"

c. Issue may arise when a party dies before the contract is completed.
Four main situations:
1) Vendor dies:
Vendor's devisee (person to whom the testator devises real
property) holds land in trust for vendee. If vendee desires
specific performance and is entitled to it, vendee will pay money
to vendor's legatee (person to whom testator leaves his personal
property). Vendee must join administrator and heirs.

2) Vendee dies:
Vendee's equitable interest in the real property would pass to
his devisee and his money would go to his administrator.
Administrator would be required to pay the purchase price to
the vendor while the devisee would be required to receive the
property from the vendor. Vendor must join administrator and
heirs receiving real property.

3) Where both vendor/vendee die:

All four parties will be joined in the action for specific
performance as a result of which Vendor's devisee should
transfer title to Vendee's devisee while Vendor administrator
would receive the money paid by vendee's administrator.

4) Where option contract is involved:

Buyer and seller enter into an option contract for sale of land.
Seller will die leaving all real property to X and all personal
property to Y. Buyer exercises option and seeks specific
performance.
Two views:

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 a) Majority rule: Equitable conversion does not take place
until the option is exercised.
(1) Effect: Seller's interest remains an interest in
real property and passes to X. Buyer must sue
for specific performance and X is tendered
purchase price.
b) Minority rule: When the option is exercised, it relates
back to the time when the contract was made (Equitable
Conversion).
(1) Effect: Seller's interest becomes one in the
purchase price, i.e., personal property, as such
passes to Y. Title has been bifurcated, beneficial
(equitable) title vests in Buyer and legal title in
the devisee of the real property.

d. Risk of loss: The issue here is whether the vendor or vendee bears the
risk of loss when property is damaged after the contract was made but
before closing.
1) Majority rule: The risk of loss is on vendee, even if vendor is
still in possession.
2) Minority rule: The risk of loss is on vendor until possession or
title passes to vendee. This is the rule in California.
3) Where a building is damaged or destroyed before closing, who
has the right to insurance proceeds?
a) Under majority rule, proceeds go to vendee. Vendee can
have a constructive trust on proceeds.
b) Under the minority rule, proceeds belong to vendor.

Risk of loss: Let’s say the house is destroyed by earthquake before closing.

Rule split. In California, the seller retains the risk of loss. In other jurisdiction, the buyer retains
risk of loss.

Injunctions in Contracts
Injunctions in Employment Contracts (Lumley v. Wagner)
Used to stop an employee from taking another job after breaching their employment contract.
From my midterm…injunctive relief would NOT exceed the period of the contract.

Typically, limited to:

 Special talents/scarcity of skills
 Courts would typically only require a reasonable distance from location of the original
employer

Indirect Specific Performance—Negative Injunction.

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The court will grant a negative injunction if:
 The person has unique skills or proprietary knowledge
 The contract includes a negative covenant (express or implied), AND
 The separate significance requirement is met. (the harm is something other than a breach
of contract.)
Limitations on indirect specific performance

 Apply the rules for injunction and check that it is reasonable:

 Terms are no greater than is required to protect the employer’s legitimate business
interests
 Does not impose undue hardship on the former employee
 Is not injurious to the public.

Methods of Getting Into Equity (Proving Inadequacy of Legal Remedies)

(Mnemonic: Lively Cats Find Mice Darn Nice)

1. Land is unique
2. Chattel is unique
3. Fiduciary relationship breached
4. Multiplicity of suits (continuing tort)
5. Damages are too speculative
6. No legal remedy available

1. Land is unique: Every piece of property is unique. Thus, if a plaintiff has entered a contract
for the purchase of property from the defendant, money damages would not be adequate to
compensate for the defendant’s breach through a later refusal to sale. (Land is ALWAYS unique.
Even identical apartments or tract homes.)

2. Chattel is unique: If a chattel is unique, then money damages would not be an adequate
remedy for seller’s breach in later refusal to sell or transfer the chattel to the buyer.

3. Breach of Fiduciary responsibility: Where a defendant is in a fiduciary relationship

(requiring him to act in a position of trust, such as an attorney, trustee, financial manager, etc.)
then money damages may not be sufficient to repair the harm caused by the breach. An
injunction may be required.

4. Multiplicity of Suits (continuing tort): Not applicable in contracts. Appropriate where a court
ordered injunction is necessary to modify behavior to prevent a recurring violation. (Example…
paying college neighbors to be quite after 10:00 pm. They don’t.)

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5. Damages are too speculative: If it is impossible to adequately calculate money damages,
then an equitable remedy may be required. (Common in new businesses.) Commonly tested.

6. No legal remedy available: If money damages are unavailable, then an equitable remedy may
be required.

Remedies for Breach of Specific Types of Contracts

(critical to know)

Approach: In each case below, we will examine the remedies available when a party breaches a
valid contract. We will discuss whether damages, specific performance, and rescission and
restitution may apply.

Breaches generally occur during the executory period (the period of time between when the
parties enter into the contract and performance becomes due.)

A. Land Sales Contract:

1. Vendee's (buyer) remedies where vendor breaches:

a. Remedy options
1) General damages – Benefit of the bargain measure. When the vendor
breaches, the vendee is entitled to the difference between the contract
price and the fair market value of the land on the date of breach. Thus,
the market value must be higher than the purchase price for vendee to
have general damages.

Example: D makes contract with P to sell land for $100,000. On closing date, D
breaches. Fair market value of land at time of breach is $125,000. P's general
damages are $25,000
a) In a minority of jurisdictions, if a seller acts in good faith the
vendee is limited to out of pocket expenses plus restitution.

2) Rescission
3) Restitution
4) Reformation
5) Specific performance

b. Damages for good faith title breach—defendant can’t produce marketable title
(minority rule)
1) Compensatory damages - Recovery of any payments made plus any
reliance expenses made as a result of vendee's reliance upon vendor's
representation.
2) Rescission/Restitution - Recover any payments made to vendor.

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 3) Specific performance not granted unless problem with title can be
corrected.

c. Acreage deficiency
1) Facts have to state per acre rather than in gross.
2) Rescission/Restitution - If fraud/mistake involved.
3) Specific performance with an abatement* (reduction) in the purchase
price.
a) Purchase price may be decreased to compensate for the
deficiency.

d. Delay in performing the agreement.

1) Compensatory damages: - Rental value during the period of delay.
2) Restitution

2. Vendor's remedies where vendee breaches:

a. Remedy options
1) General damages – Benefit of the bargain: Vendor is entitled to the
difference between the contract price and the fair market value of the
land on the date of breach. Thus, the market value must be lower than
the contract price for vendor to have general damages.

Example: D makes contract with P to buy land for $100,000. On closing

date, D breaches. Fair market value of land is at time of breach is
$75,000. P has general damages of $25,000.

2) Rescission/Restitution
3) Specific Performance - Vendor can have equity court force vendee to
proceed with sale. Damages are not an adequate remedy for the vendor
as it does not protect his interest in acquiring the purchase price.
(However, if the buyer does not have the money, he can’t be forced to
buy.)

b. Acreage deficiency
1) Rescission/Restitution
2) Specific performance with an abatement* in the purchase price.

Abatement: Abatement is a reduction in the cost of a contract based on what the plaintiff did
NOT receive.

B. Building Contract:

1. Owner's remedies where contractor breaches:

a. Straight breach
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 1) General damages - General damages are computed to give O the
benefit of his bargain. If C breaches before work begins, O recovers
cost of completion beyond contract price.

Example: C and O agree C will build a structure for $100,000. C

breaches before the work begins. O must pay another contractor $125,000
to do job. If this amount is reasonable, O's general damages are $25,000.

2) Special damages - Usually O's delay damages occasioned by C's

breach are within contemplation of parties at time of contracting.

3) Rescission/Restitution an available alternative.

4) Specific performance not available unless:

a) Plans are sufficiently specific for judge to enforce; or
b) Building to be constructed is on C's land.

b. Contractor's failure to complete work.

1) General damages - If C partially performs, O is again entitled to the
benefit of his bargain. O can recover reasonable cost of completion
beyond the contract price.

Measure of damages: Cost of completion by another contractor, (minus

installments not yet paid). Think Adaptabar question from Tenzer
Remedies class. Use the proper measure of damage.

Example: C and O agree that C will build barn for $20,000. O has paid C
$10,000 when C breaches. O must pay another contractor $15,000 to
finish work. O's general damages are $5,000

2) Rules for special damages, rescission/restitution, and specific

performance stated above apply

2. Contractor's remedies where owner breaches:

a. Remedy options

1) General damages - General damages give C his expectancy or profit

(benefit of the bargain) when O breaches
a) If O breaches before work begins, give C his anticipated profit.
b) If O breaches when project is finished, give C the contract
price.
c) If O breaches after C has partially performed, give C contract
price minus C's cost to complete (or, stated another way, C's
actual costs to date plus anticipated profit).
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 2) Special damages - Rare, as usually not within contemplation of parties.

3) Specific performance - Not available to C.

4) Restitution - Since O has substantially repudiated contract by

breaching, C can sue in quantum meruit for the reasonable value of his
services. Since C is suing for restitution, not on the contract, his recovery
is not limited by contract ceiling.

Example: C agrees to build shed for $200. He has completed half the
work and his costs are already $250. O breaches contract. C can recover
$250 under common count of quantum meruit

3. Restitutionary remedy of breaching contractor:

a. At common law, a breaching contractor could not recover under the contract
for work performed before breach.
b. Modernly, C can sue under the common count of quantum meruit for work
completed before breach. This avoids unjust enrichment of O.
c. Note, however, that C's quantum meruit recovery is reduced by any damages O
sustained as result of breach.

Example: C agrees to build home for O for $70,000. C breaches after doing work
with a fair market value of $35,000. O must pay another contractor $40,000 to
complete the job. C gets fair market value of work ($35,000) minus O's damages
($5,000) for quantum meruit recovery of $30,000.

(The owner should never pay more than the original contract price.)

C. Employment Contract:

1. Employee's remedies where employer breaches:

a. Remedy options

1) General damages - Employee receives wages and benefits for contract

term, discounted to present value. Note that avoidable consequences
rule applies.
2) Restitution - Employee can sue in quantum meruit for fair market value
of services to date of breach. Recovery is not limited by contract rate,
as employer has repudiated contract.
3) Generally, specific performance is not permitted.
a) Exception - Government employee

b. Breach of employment contract - Tort: Modern cases have held an employer

liable in tort for the wrongful discharge of "at will" employees when the
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 discharge violates public policy i.e. firing a whistle blower, attending jury
duty, filing a workers comp claim, etc.

1) A covenant of good faith and fair dealing is implied, thus, a breach of

that covenant by discharging an employee in bad faith without
probable cause may give rise to a tort claim which may provide a basis
for punitive damages.
2) Remedies include lost wages, emotional distress, and punitive damages.

2. Employer's remedies where employee breaches:

a. Remedy options

1) General damages - Based on contract/market price differential. If

employer must pay more for new employee than contract price,
employer recovers the difference.

Example: A has written contract for one year to repair cars in B's shop.
Salary is $200/week. A breaches and B must hire replacement for
$250/week. B's general damages for term of contract are $50/week.

2) Special damages: Usually cost of training new employee, employment

agency fees, etc.

3) Restitution: Employer can recover salary advancements.

4) Specific performance not available because of 13th Amendment

prohibition against involuntary servitude.

5) Injunction: Situation where injunction can be used is to enforce a

negative covenant.

Employee can’t work for a competitor. Can be enforced in a reasonable

geography for a reasonable period of time. A prohibitory injunction…
looked on with disfavor by a court.

a) Negative covenant approach:

(1) Expressed/Implied
(a) Restriction of employment
(b) Duration
(c) Scope: Blue pencil (edit) rule. Covenant must
be reasonable in time and scope to protect
employer's legitimate interest and reasonable in
geographical location. Otherwise, court will not
enforce it.
(2) Injunction analysis

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 (3) Does negative covenant have independent significance
- i.e., harm over and above that caused by a simple
breach of an affirmative covenant?

Injunctions will be limited by duration and geography.

D. Chattel Contracts: (covered by the U.C.C.)

1. Buyer’s remedies where the seller breaches:

a. Remedy options
1) General damages
a) Contract price: Market differential at time and place of delivery
b) Cover: Price of buying similar goods on market minus contract
price. B must act reasonably.

2) Incidental and consequential damages. (not called “special damages”

in the UCC. Must be reasonably foreseeable.)

3) Reliance damages: Those incurred in preparing to perform.

4) Rescission and restitution

a) If S has made material breach, B can rescind.
b) Rejection of nonconforming goods. B can refuse to accept
nonconforming goods. (B also can accept and recover
damages).
c) Revocation of acceptance - Where there is substantial
nonconformance, B can reject accepted goods.

5) Specific performance - Only allowed if goods are unique or other

special circumstances are present.

6) Replevin (statutory…not tort remedy replevin) - Under the UCC, where

goods have been “specially identified” under a contract and the buyer
is unable to cover by purchasing other goods, buyer has a right to
replevy the goods in seller’s possession, even though title to those
goods has not yet passed.

Note: Injunction (TRO) may be required to stop seller from selling goods
to another buyer.

2. Seller's remedies where the buyer breaches:

a. Straight breach
1) General damages: Contract price-market price differential.

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 2) Cover: If S resells in reasonable manner, S can recover difference
between contract price and cover price.

3) Recission and Restitution: Available in exceptional circumstances, such

as B's insolvency and fraud.

4) Specific performance: “Action on the price” when there is no market

for refused goods.

E. Unenforceable Contracts:

1. When is a contract unenforceable?

a. Statute of Frauds
b. Supervening illegality
c. Incapacity of the parties
d. Impossibility of performance

2. Specific cases:

a. Statute of Frauds
1) Rely on doctrine of part performance to take contract out of statute. If
successful, contract can be enforced. D is estopped from asserting the
statute.

2) Alternatively, recover consideration under theory of restitution.

b. Illegal contracts
1) General rule is that courts will not aid either party to an illegal
contract by enforcement or restitution.

2) If P can show the parties were not in pari delicto (P was less at fault
that D), P can have restitution of consideration.

3) If P can show he withdrew from illegal contract before improper

purpose achieved, he can have restitution of consideration. This is the
doctrine of locus poenitentiae (point of repentance).

c. Incapacity due to minority.

1) Minor can repudiate contract while a minor or within reasonable time
of attaining majority. Minor can recover back consideration paid upon
returning consideration to other party.

2) A party contracting with a minor cannot recover under contract or in

restitution for consideration given. (There is a strong public policy
against adults entering into contracts with minors.) Exception: One can

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 recover for necessaries furnished to minor. Food, shelter, and clothing
are necessaries.

d. Impossibility of performance.
1) Where contract becomes impossible to perform due to subsequent event
not the fault of either party, contract is unenforceable.

2) One who has partially performed, however, may be entitled to

restitution for services provided before intervening act creating
impossibility.

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