Study Guide for REMEDIES
Table of Contents
TABLE OF CONTENTS ....................................................................................................................................... - 1 -
1. JURISDICTIONAL BASIS FOR EQUITABLE REMEDIES ................................................................... - 3 -
1.1 NO ADEQUATE REMEDY AVAILABLE AT LAW .......................................................................................... - 3 -
1.2 TYPES OF INJUNCTIONS ............................................................................................................................. - 3 -
1.3 TIMING OF INJUNCTIONS ............................................................................................................................ - 3 -
2. THREE REQUIREMENTS FOR INJUNCTIVE RELIEF ........................................................................ - 4 -
2.1 INADEQUACY OF LEGAL REMEDY ............................................................................................................. - 4 -
2.2 ENFORCEABILITY OF INJUNCTION .............................................................................................................. - 4 -
2.3 BALANCING: DOES BENEFIT TO OUTWEIGH HARM TO ∆?...................................................................... - 4 -
3. PROPERTY INTERESTS PROTECTIBLE IN EQUITY ......................................................................... - 4 -
3.1 PERSONAL PROPERTY ................................................................................................................................ - 4 -
3.2 REAL PROPERTY ........................................................................................................................................ - 5 -
3.3 REAL PROPERTY ACTIONS WHERE INJUNCTION WILL NOT LIE ................................................................ - 5 -
3.4 INTANGIBLE PROPERTY INTERESTS – INJUNCTIONS POSSIBLE BUT RARE.................................................. - 6 -
4. PROTECTION OF NON-PROPRIETARY (PERSONAL) RIGHTS ....................................................... - 7 -
4.1 PERSONAL RIGHTS NOT GIVING RISE TO EQUITABLE RELIEF .................................................................. - 7 -
5. EQUITABLE RELIEF IN CONTRACTUAL RELATIONS: SPECIFIC PERFORMANCE ............... - 7 -
5.1 SPECIFIC PERFORMANCE IN GENERAL ....................................................................................................... - 7 -
5.2 LAND SALE CONTRACTS ........................................................................................................................... - 7 -
5.3 CONTRACTS NOT TO COMPETE ................................................................................................................. - 8 -
5.4 CONTRACTS FOR WHICH SPECIFIC PERFORMANCE IS NORMALLY GRANTED ............................................ - 9 -
5.5 CONTRACTS FOR WHICH SPECIFIC PERFORMANCE IS NOT NORMALLY GRANTED ................................... - 9 -
6. EQUITABLE RELIEF IN CONTRACTUAL RELATIONS: RESCISSION OF CONTRACTS ......... - 9 -
6.1 REQUIREMENTS FOR EQUITABLE RESCISSION OF A CONTRACT ................................................................. - 9 -
6.2 MISREPRESENTATION .............................................................................................................................. - 10 -
6.3 MISTAKE ................................................................................................................................................. - 10 -
6.4 RESTITUTION (RESTORE STATUS QUO ANTE).......................................................................................... - 10 -
6.5 RESCISSION WILL BE DENIED WHERE LACHES OR UNCLEAN HANDS APPLY ..................................... - 10 -
7. REFORMATION ......................................................................................................................................... - 10 -
7.1 3 REQUIRED ELEMENTS FOR REFORMATION ........................................................................................... - 10 -
7.2 DISTINGUISHING REFORMATION FROM RESCISSION ................................................................................ - 11 -
7.3 GROUNDS FOR REFORMATION ................................................................................................................. - 11 -
7.4 GROUNDS INSUFFICIENT FOR REFORMATION........................................................................................... - 11 -
8. SPECIAL EQUITABLE DEFENSES ......................................................................................................... - 11 -
8.1 CLEAN HANDS ......................................................................................................................................... - 11 -
8.2 LACHES ................................................................................................................................................... - 12 -
8.3 UNDUE HARDSHIP ................................................................................................................................... - 12 -
8.4 SUIT TO QUIET TITLE............................................................................................................................... - 12 -
8.5 CONSTRUCTIVE TRUSTS .......................................................................................................................... - 13 -
8.6 EQUITABLE LIENS.................................................................................................................................... - 13 -
8.7 SUBROGATION ......................................................................................................................................... - 13 -
9. RESTITUTIONARY REMEDIES .............................................................................................................. - 13 -
9.1 REPLEVIN ................................................................................................................................................ - 13 -
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Study Guide for REMEDIES
9.2 EJECTMENT ............................................................................................................................................. - 14 -
9.3 QUASI-CONTRACT ................................................................................................................................... - 14 -
9.4 IMPLIED-IN-FACT CONTRACT .................................................................................................................. - 14 -
10. MONEY DAMAGES (LEGAL REMEDIES) ........................................................................................ - 15 -
10.1 COMPENSATORY DAMAGES LYING IN TORT............................................................................................ - 15 -
10.2 COMPENSATORY DAMAGES LYING IN CONTRACT................................................................................... - 15 -
10.3 COMPENSATORY DAMAGES RULES FOR TORT AND CONTRACT............................................................... - 15 -
10.4 NOMINAL DAMAGES ............................................................................................................................... - 16 -
10.5 PUNITIVE DAMAGES ................................................................................................................................ - 16 -
10.6 INTEREST ................................................................................................................................................. - 16 -
10.7 ATTORNEY’S FEES ................................................................................................................................... - 16 -
10.8 LIQUIDATED DAMAGES ........................................................................................................................... - 16 -
11. SUMMARY ............................................................................................................................................... - 17 -
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Study Guide for REMEDIES
1. JURISDICTIONAL BASIS FOR EQUITABLE REMEDIES
Remedies is the single most important topic on the Bar exam. Covers all areas of contracts, property,
constitutional law, and torts. CD’s cover the most important topics in Law School and on the Bar. Any Court of
general jurisdiction may grant equitable relief. For actions in personem, the Court must have subject matter and
personal jurisdiction. For actions in rem or quasi in rem, the Court must have jurisdiction over subject matter and
the res. Equitable relief is usually granted on one of two broad grounds: (1) No adequate remedy at law; or (2)
Remedy is traditionally rooted in equity.
1.1 NO ADEQUATE REMEDY AVAILABLE AT LAW
No general formula. Common patterns:
1.1.1 Reputational Injury
has been deprived of something to which she is entitled Usually through Tort or Breach of K. Legal
remedy won’t suffice because she needs the thing back.
Example: owns a widget factory. In order to complete an order she needs screws she has ordered from
the ∆. As a result, she can’t make the product, will be in default of K, and will suffer reputational damage. Court
will allow equitable remedy, most likely injunctive relief or specific performance.
1.1.2 One Lawsuit Will Not Relieve the Harm (Multiple Lawsuits)
Usually occurs where ∆ is a repeat offender and therefore the will have to bring a series of lawsuits to
receive full recovery. Multiple lawsuits are considered a hardship.
1.1.3 Is Entitled to $ Damages But ∆ is Insolvent
is entitled to legal or equitable remedy; but the ∆ is unable to satisfy a legal judgment. Because either the
money or performance would provide an adequate remedy and the ∆ is unable to pay $ damages, the Court may
choose to award specific performance.
1.1.4 Is Entitled to $ Damages But the $ Damages Cannot Be Measured
1.1.5 No Right to Equitable Relief
Mere inadequacy alone is not enough. It only allows the to request equitable relief. Courts have wide
discretion. Example: Employment situations. If employee breaches, $ damages may not make the employer whole
because of employee’s unique skills. But, personal performance contracts are not specifically enforceable. No way
for the Court to supervise the decree; and public policy is not to force persons to work in untenable environments.
1.2 TYPES OF INJUNCTIONS
1.2.1 Mandatory Injunctions Require ∆ To Perform An Affirmative Act
Court will order the ∆ to do something; allow to use the health club; or allow the contractor to erect a
structure on the land
1.2.2 Prohibitory Injunction Forbids the ∆ To Do Something
Court could prohibit trespass, or harassment, or sale of defective goods.
1.3 TIMING OF INJUNCTIONS
1.3.1 Temporary Injunctions
Temporary Restraining Orders (TRO) or Preliminary Injunction. Both preserve the status quo while the
judicial proceedings are pending.
Short in duration / Can be granted ex parte / Granted pending a hearing on preliminary injunction.
1.3.1.1 TRO
Imminent Irreparable Harm; cannot even wait for a hearing.
Can be granted ex parte.
Requires super high proof of need.
Usually limited to 10 days.
Not effective until notice given to ∆
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Study Guide for REMEDIES
Upon notice, ∆ may challenge in immediate review
If ∆ requests review of a prohibitory injunction, injunction usually remains in effect until
Court renders decision. (No stay on review of prohibitory injunction)
If ∆ requests review of a mandatory injunction, injunction usually is stayed until Court
renders decision.
1.3.1.2 Preliminary Injunction
Longer in duration than a TRO / Only issued after notice & a hearing
usually must post a bond
1.3.2 Permanent Injunctions
Court intends injunction to be permanent; but may cancel if change in circumstances.
2. THREE REQUIREMENTS FOR INJUNCTIVE RELIEF
2.1 INADEQUACY OF LEGAL REMEDY
must demonstrate inadequacy of legal remedy. Four basic categories:
2.1.1 Multiplicity of Litigation
would need to bring multiple, sequential lawsuits to enjoy the remedy; this is a hardship. Could arise
with continuing trespass or debris being dumped or someone continually blocking an alley.
2.1.2 Inability to Measure Damages
$ damages would be speculative
2.1.3 $ Damages Can Be Calculated But Will Not Be Adequate Relief
Example: ∆ operates a factory which emits toxic fumes. Fumes are destroying crops on ’s farm.
Damages can be calculated but if fumes continue, will not be satisfied. So, Court may enjoin the factory from
emitting toxic fumes or require the factory to cleanse the fumes so they are not toxic or emit them in a different
direction. This is an example of a nuisance. Nuisance actions almost always result in injunctive relief because use
and enjoyment is curtailed.
∆’s conduct will be examined. If conduct is willful or malicious, Court may give her choice of remedies.
Example: invasion of privacy.
2.1.4 $ Damages Can Be Calculated But ∆ Cannot Pay
2.2 ENFORCEABILITY OF INJUNCTION
Can the injunction be enforced? How much effort will the Court expend in supervising enforcement? This
is usually more of a problem with mandatory injunctions. How does the Court ensure that the ∆ is doing something?
But, prohibitory injunctions are easier to enforce via sanctions for failure to comply.
2.3 BALANCING: DOES BENEFIT TO OUTWEIGH HARM TO ∆?
Example: ∆ has been building a vacation home. He has put a lot of time and energy into the home. It is
high quality and very elegant and expensive. After ∆ completes the home, discovers that the home encroaches on
his land by 10’. ∆ did not know he was encroaching on ’s land. moves for a mandatory injunction. ∆ will
prevail and the Court will refuse to order the house removed because removal of the completed home will be a far
greater hardship on ∆ than the benefit inuring to the . However, the will be awarded $ damages.
3. PROPERTY INTERESTS PROTECTIBLE IN EQUITY
3.1 PERSONAL PROPERTY
3.1.1 Unique Chattel
Unique Chattels: (1) Cannot be duplicated – one-of-a-kind; or (2) Sentimental Value
Remedy at law ($ damages) will not adequately compensate for the unlawful conversion of a unique
chattel. Mandatory injunction will lie. Unique chattel means that it cannot be duplicated in the marketplace or it
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Study Guide for REMEDIES
has special sentimental value. Examples: one-of-a-kind photo or autograph or letter; or item of sentimental value
(grandma’s wedding ring).
3.1.1.1 Capturing Increases in Market Value
When a ∆ fails to comply with an order to perform, the cost of the failure to perform is
recoverable. In a typical breach action, the recovery of increase in property value subsequent to the contract date is
not recoverable. But if the Court orders specific performance and the ∆ refuses to comply and then the property
goes way up in value and the brings an action for contempt, the Court could award the value of the appreciation in
the land. Court will always see if tried to mitigate before allowing this remedy.
3.1.2 Non-Unique Chattel
If the chattel is not unique the remedy will be money damages. Criminal action also possible.
3.2 REAL PROPERTY
3.2.1 Damage to Land
All land is unique and damage thereto is irreparable as a matter of law. $ damages possible as well. Two
basic situations:
(1) Continuous Trespass Or Nuisance; and
Legal remedies would require multiplicity of litigation.
(2) Imminent Injury.
Courts will also enjoin imminent injury which will result in irreparable harm.
Legal relief must be overly burdensome or harm must be imminent in order for injunction to lie.
3.2.2 Non-Possessory Interest in Land
Easements, equitable servitudes, profits are all considered unique. Interference with any of these interests
is considered irreparable and injunctive relief will be granted. Example: has an easement across Blackacre
because her land is landlocked. ∆ erects a large locked gate, preventing access to Blackacre. Court will issue a
mandatory injunction ordering ∆ to stop infringing on ’s right of ingress and egress. Usually no $ damages;
injunction is normally the correct remedy.
3.2.2.1 Requirement of a Legal Right – Negative Easements
Example: lawsuit for fresh air, a view, or sunlight. Normally, negative easements are not
protected rights at law and therefore Courts will not offer equitable relief where no legally protected right is being
infringed. Example: owns beachside property with a harbor view. ∆ builds a giant hotel and blocks most of ’s
view. Court will probably not grant injunctive relief because most jurisdictions do not recognize negative easements
for view.
3.3 REAL PROPERTY ACTIONS WHERE INJUNCTION WILL NOT LIE
3.3.1 Mistaken Encroachment of Real Property – No Injunction
Unintentional encroachment. Action for trespass will lie, but injunction will not lie due to balancing of
hardships. $ damages will likely be granted for damage to the land or economic loss. Compare to:
3.3.1.1 Deliberate Encroachment – Injunction WILL Lie
Balancing of hardships not required where ∆ acts deliberately or with malice.
3.3.2 Trespass Which Causes No Harm – Damages but No Injunction
Example: kid hits baseball onto neighbor’s lawn. Probably just get nominal damages. But, if repetitive and
continuous, injunction will lie. Analysis: How repetitive is the trespass and is the land damaged?
3.3.3 Industrial Nuisance
Injunctions nor normally issued against a useful enterprise due to balancing of hardships.
3.3.4 Public Nuisance – Endangering Public Health or Safety
Equity Courts will no enjoin crimes. If a public nuisance involves criminal activity, the proper remedy will
be a criminal prosecution. In rare cases an injunction might lie.
3.3.4.1 Mitigation
Injunction may lie if ∆ can mitigate the public nuisance (by abating the noise or pollution, etc.)
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Study Guide for REMEDIES
3.3.5 Waste
Equity will restrain waste that causes an unjustifiable diminution in of a future interest in property if the
legal remedy proves inadequate.
3.3.5.1 Voluntary Waste
Deliberate destructive acts done by one who is rightfully in possession of the land. Example: a
tenant who damages the land he possesses. How much damage did he cause? What was the value of the property
before and after the damage? What is the cost of repairs? Generally these are calculable. But if they cannot be
calculated or if the damage is permanent (burned down a forest), then equity will allow relief.
3.3.5.2 Permissive Waste
Inaction results in damage. Example: Perhaps a tenant fails to fix a leaking roof and water damage
results. Usually results in money damages.
3.3.5.3 Ameliorating Waste
Tenant improves the property. No legal remedy is available. No equitable remedy because no
irreparable injury.
3.3.5.4 Equitable Waste
Material changes in the property by someone lawfully in possession; but does not rise to the level
of voluntary legal waste. Usually involves a destructive act such as tearing down a building to put in a swimming
pool. Because no legal remedy is available, the only way those holding future interest in the land (remaindermen,
or those with reversionary interests) is to bring an action for equitable relief.
3.4 INTANGIBLE PROPERTY INTERESTS – INJUNCTIONS POSSIBLE
BUT RARE
Usually involves lost profits. Because it is hard to calculate lost profits, an injunction may lie. Also, ∆’s
wrongful conduct is often recurring and would require multiple lawsuits.
3.4.1 Trade Libel
∆ makes a statement disparaging the ’s business in an attempt to induce customers not to do business with
the . In certain instances, such conduct might be enjoined. But, Courts are hesitant to grant injunctive relief due to
1st Amendment concerns. Usually only get an injunction when some other tort is involved.
3.4.2 Tortious Breach of Contract
Most Courts will impose a tort remedy for all injuries proximately caused by the tort. Rarely do we see
injunctive relief because the wrong has already been completed and an injunction would not offer any relief.
Usually the Court will grant $ damages.
3.4.3 Intellectual Property: Patents, Copyrights, Trademarks Always Unique
Infringement or misuse by a licensee will usually be enjoined. Copyright statute sets forth the damages
calculation (actual damages + profit earned as a result of the infringement).
3.4.4 Trade Names (Unfair Competition / Palming Off)
Injunctive relief will be granted when ∆ tries to unfairly profit from a well established trade name. ∆ must
be palming off his products as the ’s products. Example: California Western School of Law v. California
University Western School of Law.
3.4.5 Breach of Fiduciary Duty – Trade Secrets
Injunctions will lie where:
3.4.5.1 Secret is Unique
3.4.5.2 Secret is Disclosed in Confidence
Injunction will lie to prevent these parties from benefiting from the confidential information that
they gained as a result of their position of trust in the company. Remember that misappropriation of a trade secret is
a property infringement and the will be allowed to recover compensatory damages for the amount of profit he lost
as a result of the infringement.
3.4.5.3 Trade List Cases
Injunction will lie where customer lists are unlawfully misappropriated, but he injunction will normally be
limited to enjoinment of solicitation of business form the customers, and not from merely accepting business from
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Study Guide for REMEDIES
them. Modernly employers are aware of this problem and typically they will require employees to sign non-
disclosure agreements which are generally legal and generally specifically enforceable contracts.
4. PROTECTION OF NON-PROPRIETARY (PERSONAL) RIGHTS
Traditionally equity did not protect personal rights. But, today most Courts do allow equitable relief in personal
rights cases as long as the usual burden of proving no adequate legal remedy is met. However, without the
threshold property right, certain types of personal rights will not normally give rise to injunctive relief:
4.1 PERSONAL RIGHTS NOT GIVING RISE TO EQUITABLE RELIEF
4.1.1 Threatened Assault or Battery
Criminal action is the appropriate remedy.
4.1.2 Domestic Relations Cases
Too difficult to enforce; very doubtful that the relief will be beneficial.
4.1.3 Right to Privacy
Are $ damages available? Appropriate? Sufficient? What about punitive damages? If ∆’s actions are
malicious or deliberate, punitive damages may be available.
4.1.3.1 Exception for Continuing Invasion of Privacy
Example: Jackie Onassis got an injunction against paparazzi who wouldn’t leave her alone.
4.1.4 Defamation
Courts are always concerned about prior restraint of speech and other First Amendment concerns.
Equity will not enjoin a libel.
5. EQUITABLE RELIEF IN CONTRACTUAL RELATIONS:
SPECIFIC PERFORMANCE
5.1 SPECIFIC PERFORMANCE IN GENERAL
Specific performance is just a mandatory injunction requiring some affirmative conduct by a party to a
contract.
5.1.1 5 Part Test for Specific Performance:
1) Is Remedy At Law Inadequate?
2) Is Contract Definite And Certain?
3) Any Conditions Subsequent Or Precedent That Have Not Been Met?
4) Will Enforcement Be Equitable
5) Will Enforcement Be Feasible?
5.1.2 Mutuality of the Remedy (Minority View)
Now a minority position. Says that if one party gets specific performance, the other party to the contract
must also be granted specific performance.
5.1.3 Mutuality of Performance (Majority View)
Specific performance is denied to the injured party only when he has not performed his part of the bargain
or where his performance cannot be secured by the decree. In other words, a Court of Equity will not require a ∆ to
perform unless it can ensure that he will also perform. must always show that the traditional contract remedy of
$ damages will not be adequate because it will not place him in the position he would have been in had the contract
been performed.
5.2 LAND SALE CONTRACTS
5.2.1 Specific Performance Usually Granted Due To Unique Nature Of The Land
Some Courts do not allow seller to recover specific performance from a buyer. Always have to show that
the legal damages remedy will be inadequate.
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Study Guide for REMEDIES
5.2.2 Equitable Conversion
Where we have a land sale contract that is still executory (the contract is not yet complete), in this time
period the buyer is considered to be the equitable owner of the land and the seller is the equitable owner of the
unpaid balance of the purchase price. In other words, the
Buyer Assumes The Risk Of Loss Of The Land During The Executory Period.
Example: If home burns down before closing, buyer must still pay the purchase price.
5.2.2.1 If the buyer dies,
His Heir Or Devisee Can Specifically Enforce The Purchase Agreement.
5.2.2.2 If the seller dies,
Next Of Kin Or Legatee May Enforce The Sale.
5.2.3 Damages for Buyers When Seller Breaches
In addition to specific performance, the buyer may have an action for damages. How are damages
measured? Several different methods:
5.2.3.1 English Method (Recover of $ Spent)
Buyer’s recovery is limited to recovery of payments already made + reimbursement of expenses
incurred in reliance on the contract. Example: Down Payment, + Title Search Fees, Escrow Fees .
5.2.3.2 Benefit of the Bargain Test (Recovery of Difference Between K Price and Market
Value)
Difference between the contract price and the market value of the land + any partial payments
made.
5.2.3.3 Specific Performance Still Available
Buyer can still seek specific performance; even if there is a liquidated damages clause in the land
sale contract because of the unique nature of land.
5.2.3.4 Contempt of Court For Failure to Comply With Order to Specifically Perform
Capturing Increases in Market Value - When a ∆ fails to comply with an order to perform, the cost
of the failure to perform is recoverable. In a typical breach action, the recovery of increase in property value
subsequent to the contract date is not recoverable. But if the Court orders specific performance and the ∆ refuses to
comply and then the property goes way up in value and the brings an action for contempt, the Court could award
the value of the appreciation in the land. Court will always see if tried to mitigate before allowing this remedy.
5.2.4 Damages for Sellers When Buyer Breaches
5.2.4.1 Specific Performance
Buyer can ask that seller pay full purchase price. Not available in all jurisdictions.
5.2.4.2 $ Damages
Difference between the market value of the land and the contract price + consequential damages.
5.2.4.3 Rescission and Restitution
Seller can rescind the contract, return any partial payments made to the buyer.
5.3 CONTRACTS NOT TO COMPETE
Enforceable as long as covenant is reasonable as to time and place and is no broader than necessary to
protect the employer. Example: Suppose someone has worked for a computer company as an integral employee.
The employee signs a contract not to work for any other computer company for 15 years. That would not be
enforceable because it is too long and too restrictive. The company’s rights could be protected with a much less
restrictive contract. However, if the agreement says you won’t solicit customers if you leave, that is probably
enforceable. Reasonable is determined by looking at:
1) The Relationship Between the Parties
a. Employer-Employee; Buyer-Seller; Competitors; Partners
b. Remember, for competitors, a covenant not to compete may violate anti trust laws
2) Reasonableness – can the employee still earn a living?
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Study Guide for REMEDIES
5.4 CONTRACTS FOR WHICH SPECIFIC PERFORMANCE IS NORMALLY
GRANTED
5.4.1 Contract for the Sale of Rare or Unique Chattels
Usually specifically enforceable. Item is unique if no replacement is available in the marketplace
(irreplaceable) or if it has special sentimental value.
5.4.2 Contract for the Sale of Stock in a Closely Held Corp.
Where there is no readily available market for the stock of the closely held corporation, the contract for sale
may be specifically enforced. No readily available market price OR represents the controlling interest in the
corporation.
5.4.3 Indemnity Contracts
Contracts to provide insurance where no other insurance is readily available are normally specifically
enforceable.
5.4.4 contracts Where Damages Cannot Be Calculated
Uncertain Damages – Conjecture Required means no $ damages.
5.5 CONTRACTS FOR WHICH SPECIFIC PERFORMANCE IS NOT
NORMALLY GRANTED
5.5.1 Contracts For Marriage
Against public policy.
5.5.2 Contracts To Continue In A Business Relationship
Against public policy and the 13th Amendment.
5.5.3 Employment Contracts
No way for Court to enforce. Employee may be lazy or unmotivated.
5.5.3.1 Indirect Enforcement Exception for Employees With Exceptional or Unique Skills
But, if we have a person of unique talents such as an athlete or actor, and Equity Court may
indirectly enforce the contract by prohibiting the employee from working anywhere else.
5.5.4 Damages Calculations for Employment Contract Breaches
5.5.4.1 If Employee Breaches
Employer can recover cost of hiring and equivalent employee + consequential damages.
5.5.4.2 If Employer Breaches – Failure to Pay Wages
Failure to pay wages: employee can recover wages.
5.5.4.3 If Employer Breaches – Wrongful Termination
Value of contract for full term of contract, less mitigation. So, full employment contract rate less
amount she earned in another job acquired after the wrongful termination. Most Courts will require a showing by
the that she tried to find employment elsewhere.
5.5.5 Construction Contracts
Normally there is an adequate remedy at law. Also, no way for the Court to enforce. Court cannot make a
contractor perform in a satisfactory manner if he does not wish to do so. Remedy is $ damages.
6. EQUITABLE RELIEF IN CONTRACTUAL RELATIONS:
RESCISSION OF CONTRACTS
Under certain circumstances, the contract may be rescinded (nullified). Parties will receive restitution and
be restored to the position they were in prior to entering into the bargain.
6.1 REQUIREMENTS FOR EQUITABLE RESCISSION OF A CONTRACT
1) Grounds for rescission must arise prior to or contemporaneously with the execution of the
contract. If so, contract is voidable at the option of the non-breaching party. Grounds may be:
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Study Guide for REMEDIES
a. Misrepresentation
b. Mistake
c. Illegality
d. Failure of Consideration
e. Lack of Capacity
f. Impossibility of Performance
g. Duress
h. Undue Influence
6.2 MISREPRESENTATION
6.2.1 Innocent Misrepresentation (Materiality + Reasonable Reliance)
Innocent misrepresentation is not an actionable tort so no $ damages. So, in order to recover equitable
damages, the must show that the misrepresentation was material and that she reasonably relied on it. Example:
loves vintage cars. She contracts to purchase a vintage 1978 VW Beetle from the ∆. It’s red with a black top and
only 22k original miles. Seller honestly believes it’s a 1978 bug; but the expert shows that it’s a 1977. A little
older, maybe more valuable. action for rescission will fail because not a material difference. But, if it turns out
that the bug was a fabrication and not authentic, rescission may be granted.
6.2.2 Fraudulent Misrepresentation (Scienter + Reliance)
$ damages is the normal remedy but rescission may be available at the discretion of the Court.
6.3 MISTAKE
6.3.1 Unilateral Mistake (! Party Mistake about a Material Fact)
Historically, no rescission. Modernly, some Courts will grant rescission in two situations:
6.3.1.1 Mistake Must Be BASIC
6.3.1.2 Mistaken Party Must Suffer EXTREME HARDSHIP by Enforcement of the Contract
Example: is a contractor bidding on a contract to build a vacation home. He makes a mistake
on the math and underbids by a material amount. Historically no rescission. Modernly, rescission if basic mistake
which will cause extreme hardship.
6.3.2 Mutual Mistake
Both parties are mistaken about a term that goes to the heart of the bargain, rescission will be granted
6.4 RESTITUTION (RESTORE STATUS QUO ANTE)
Party tenders back what he has received under the contract.
6.5 RESCISSION WILL BE DENIED WHERE LACHES OR UNCLEAN
HANDS APPLY
7. REFORMATION
3rd type of equitable remedy for contracts. Court re-writes the contract. The Court does this because the
writing does not conform to the actual intent of the parties.
7.1 3 REQUIRED ELEMENTS FOR REFORMATION
7.1.1 Valid Original Contract
Original contract must be free of any other defects which would render it voidable. Equity cannot reform
a voidable contract.
7.1.2 The Agreement Must Be Embodied in a Writing.
Oral Contracts Cannot Be Reformed.
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7.1.3 The writing must fail to adequately express the intent of the parties.
7.2 DISTINGUISHING REFORMATION FROM RESCISSION
Rescission says there was a mistake and the parties did not really have a meeting of the minds.
Reformation says that the parties had an agreement but that the writing failed to express that agreement.
Rescission ≠ valid agreement. Reformation = valid agreement.
7.3 GROUNDS FOR REFORMATION
7.3.1 Fraud (Fraudulent Inducement)
7.3.2 Mutual Mistake
7.3.3 Unilateral Mistake
If either party knows or has reason to know that the written instrument does not reflect the true agreement
then you can get a reformation.
Reformation is only available to correct errors or mistakes occurring in the execution of a contract;
those that occur when we put the agreement into writing. Mistake in the inducement leads to rescission.
7.4 GROUNDS INSUFFICIENT FOR REFORMATION
7.4.1 Laches - took too long to bring the action.
7.4.2 Sale to a Bona Fide Purchaser (BFP) (Purchased for value w/o notice)
7.4.3 Parol Evidence Rule Is No Defense to Reformation
Because otherwise the Court would never find the true intentions of the parties
7.4.3.1 Contra: Statute of Frauds may apply.
Failure to comply with technical requirements of SOF typically means no reformation.
7.4.4 Substantial Part Performance
The Statute of Frauds Will Not Block Reformation When A Party Has Substantially Performed.
7.4.5 Negligence
Example: Seller contracts with buyer to sell that classic 1978 VW bug. And suppose that they agree that
the buyer will pay $7,500 for the bug. But the person typing the contract makes an error and puts the price at $75.
If the seller doesn’t carefully read the contract, he will not be denied reformation because the writing does not
accurately represent the agreement of the parties.
8. SPECIAL EQUITABLE DEFENSES
8.1 CLEAN HANDS
When a is looking for equitable relief, she must be free of any wrongdoing as it relates to the subject
matter of the litigation. She must be innocent if she wants equitable relief. One who comes into equity must come
with clean hands. Requirements for this defense:
8.1.1 ’s Unclean Hands Must Relate To The Transaction At Issue
8.1.2 ’s Unclean Hands Must Prejudice Or Injure The ∆
Prior unrelated wrongdoing will not bar ’s suit. Example: seeks to enjoin the ∆ from some nuisance
such as releasing toxic fumes. The ∆ cannot prevent the Court from issuing an injunction by proving that the
gained title to the property by murdering the previous owner. Example: If brings an action for unfair competition,
∆ may defend by proving that ’s reputation was developed through false advertising. The seeks to protect an ill
gotten gain will not prevail in equity.
8.1.3 Exception For PUBLIC Fraud
Clean hands are not required if ’s unclean hands were not directed at ∆, but they affected the general
public, then the unclean hands doctrine will bar the suit because it is in furtherance of public policy (protecting the
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Study Guide for REMEDIES
general public by enforcing the licensure statute). Example: is a real estate broker or lawyer who is not licensed
to practice and she brings suit against a ∆ for specific performance seeking to enforce a brokerage agreement or
retention agreement. Here the relief will be denied because the real estate broker or lawyer is not properly licensed;
and that constitutes a public fraud ( comes to the action with unclean hands).
8.2 LACHES
has brought an action for equitable relief but has unreasonably delayed in bringing this claim because the
delay prejudices the ∆.
8.2.1 Compare to Statute of Limitations
8.2.1.1 Statute of Limitations Relates to Suit in law or equity
8.2.1.2 Laches Related to Suit in EQUITY only
Cannot use laches to defeat an action for $ damages.
SOL need not have run in order to invoke laches;
Delay may be legal but still unreasonable and therefore in violation of laches.
Laches begins to run as soon a knows that the right has been infringed
Equity Aids The Vigilant
Laches applies to ALL equitable actions
o Specific Performance
o Injunctions
o Rescission
o Reformation
o Constructive Trusts
8.3 UNDUE HARDSHIP
has made out a case for relief, but such relief would result in undue hardship to the ∆. The Equity Court
may deny relief and leave the to his remedy at law ($ damages if available).
8.3.1 Specific Performance Example: Equitable Conversion
During the executory period, the buyer bears the risk of loss or damage to the property. He is required to
pay the purchase price even if the property is destroyed during the executory period. But, an exception is granted
for frustration of purpose. If the buyer’s intended use of the property is no longer possible, than his purpose is
frustrated. Say a forest fire burned the forest so now you can’t build a wildlife refuge or a resort. In such cases, the
Equity Court may deny specific performance in order to avoid undue hardship to the buyer.
8.3.2 Injunction Example: Balancing the Equities
Consider the hardship to each party if the relief were granted or denied. Look at the hardship each party
would experience if the relief were granted or denied. Example: Industrial nuisance case. The Court will not enjoin
operation of a factory if it will put the entire city out of work. This hardship would be much much more severe than
the gain to be recognized by the . Other factors the Court will consider include:
Hardship on the Public
Loss of Jobs
Economic Loss
8.3.3 Injunctions For Encroachment
Undue hardship plays a big part in encroachment cases. Removing buildings is a big hardship.
8.4 SUIT TO QUIET TITLE
seeks to clear title, to vindicate their interest in real property.
8.4.1 Only the holder of legal title may bring suit to quiet title.
Holders of equitable title have not standing to quiet title.
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Study Guide for REMEDIES
8.4.2 Courts Often Restrict This Remedy to Parties In POSSESSION of the Disputed Land
8.4.3 EJECTMENT is an adequate legal remedy for a party out of possession.
8.5 CONSTRUCTIVE TRUSTS
Always look to see if the ∆ is rightfully in possession of the property. If not, constructive trust may apply.
Not an express trust. Trustor did not expressly intend to create the trust. It is a fraud rectifying trust. We
create it by operation of law to prevent unjust enrichment. It’s like a quasi-contractual form of relief; both are
imposed by law and not based upon the intent of the parties. What it does is to restore unjust gains. In a
constructive trust we retrieve the res from the ∆ and restore it to the . ∆ is required by the Court (mandatory
injunction) to maintain the property in trust for the . Requirements of a Constructive Trust:
8.5.1 ∆ Must Have Legal Title To A Specific Piece Of Property Rightfully Belonging To Claimant
∆ must have legal title to a res legally belonging to claimant.
8.5.2 If The ∆ Were To Keep The Res He Would Be Unjustly Enriched
8.5.3 Remedy At Law Is Inadequate
The $ damages are inadequate. Usually insolvency of the ∆ will satisfy this requirement
8.5.4 Exam Approach
Always look to see if the ∆ is rightfully in possession of the property. If not, then constructive trust may
apply and it would be good to discuss it.
8.6 EQUITABLE LIENS
8.6.1 Definition
A lien is where we have a charge against property that makes the property stand as security for a debt or
obligation owed. In effect, equitable liens are restitutionary remedies imposed by an Equity Court to prevent unjust
enrichment.
8.6.2 Creation
An equitable lien can be created by
8.6.2.1 Agreement of the Parties or by a
8.6.2.2 Judicial Proceeding.
8.6.3 Compare to Constructive Trust
In a constructive trust, the claimant may recover the property (title). But an equitable lien only provides
security for payment of the debt and no title will pass to the claimant.
8.7 SUBROGATION
One party discharges an obligation for which another person is primarily liable and obligated to pay.
Subrogation is allowed when there is an unjust or inequitable benefit conferred on the ∆. Under subrogation we
revive for the benefit of the aggrieved party an obligation similar to the one discharged. The is now subrogated to
the position of the creditor. The interest acquired by the (subrogee) depend upon the nature of the original claim.
9. RESTITUTIONARY REMEDIES
9.1 REPLEVIN
9.1.1 Defined
Replevin is where we have an action at law to recover specific chattels which have been wrongfully taken
or detained. This is a possessory action allowing the to recover immediate possession of the chattel. The chattel
must be tangible personal property. No real property and not intangible property.
9.1.2 Bond Requirement
If the wants immediate recovery before the legal action is concluded, he must post a bond to protect the ∆
in case he loses the legal action. If the ∆ wants to keep the chattel until the end of the proceedings, he may post a
bond. Due Process requires at least a hearing before the chattel is seized.
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9.1.3 Availability of $ Damages
Damages are also available if the deprivation has also harmed the .
9.1.4 3 Ways of Measuring $ Damages
Change in Market Value: Damages are measured at market value at time of deprivation minus the market
value at the time the action is commenced (this would come up if the chattel were held for sale); or it might be the
Value Of Lost Use: Such as rental value or the lost profits.
Fair Value if Not Returned: If the wins and the chattel is not returned, he will get the present value of
the chattel. The present value is determined at trial.
9.1.5 Replevin Not Available in Adverse Possession Cases
Replevin is not always available, such as in cases of adverse possession.
9.2 EJECTMENT
9.2.1 Defined
Ejectment is an action at law to recover possession of real property.
9.2.2 Essential Elements:
9.2.2.1 Proof Of ’S Right To Possession +
9.2.2.2 A Wrongful Withholding By ∆.
9.2.3 Mesne Damages
A successful will recover the property and mesne damages. Mesne damages compensate the for the
loss of use of his land.
9.2.4 Measuring Mesne Damages
9.2.4.1 Measured By Rental Value Of Property Or
9.2.4.2 Benefit Realized By ∆.
9.2.5 Improvements Made by ∆
9.2.5.1 At Common Law
At common law, if the ∆ improved the property, the can recover the property with no
requirement to compensate ∆ for the improvements.
9.2.5.2 Modernly
Modernly, the ∆ may claim
setoff,
unjust enrichment,
compensation for the improvements or
right to remove the improvements,
equitable lien, or
right to buy the property.
9.3 QUASI-CONTRACT
Quasi contracts are implied in law to prevent unjust enrichment. Note that a quasi contract is not an actual
contract, but is a legal fiction created by the court to prevent unjust enrichment. The Court imposes an obligation on
the ∆ for work performed, or goods sold, or money lent, etc.
9.4 IMPLIED-IN-FACT CONTRACT
An implied-in-fact contract is an actual contract created by the conduct of the parties. Example: suppose
that the 1978 VW Bug is going to be sold at auction. If the auctioneer says “Who will give me $7,000 for this car?”
If you raise your hand, the act of raising your hand has caused the formation of a contract between you and the
auction house.
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10. MONEY DAMAGES (LEGAL REMEDIES)
Always the preferred remedy of any Court. Equitable remedies are generally only available when $ damages won’t
suffice; where the legal remedies are inadequate.
10.1 COMPENSATORY DAMAGES LYING IN TORT
The purpose of tort damages is to compensate for injury and to place injured party in the position she would
have been in had the tort not occurred; to compensate her for the injury suffered.
10.1.1 Purpose and Nature of Compensatory Damages
Compensatory damages provide an award of damages to the aggrieved party compensating her for any loss
or injury. In tort actions the objective is to make the whole. Certain torts such as false imprisonment or
intentional infliction of emotional distress have no actual pecuniary harm; but Courts have still awarded
compensatory damages in order to vindicate a legal right that has been wrongfully infringed.
10.1.2 General Damages Elements (No Foreseeability Requirement)
Based in Tort: General Damages Arise Naturally From The Commission Of A Tort;
No Special Pleading: They Don’t Need To Be Pleaded Specially In A Complaint;
Foreseeability Irrelevant: They Don’t Need To Be Foreseeable; and
Foreseeability Irrelevant: Non-foreseeability is not a bar to recovery
10.1.3 Special Damages Elements (Foreseeability is Required)
Pleading: Must be pleaded specially
Causation: must show that his injury was caused by the ∆
Sole Cause of Harm: must show that all of her injuries stem from the ∆’s wrongful action
Foreseeability: Foreseeability is required
Conclusive Proof: must prove her damages conclusively
Difficult or impossible to meet this burden of proof for certain torts such as:
Pain and Suffering
Emotional Distress
Any tort with difficult to quantify harm
10.1.4 Pain and Suffering
Compensatory damages may be allowed for pain and suffering.
10.2 COMPENSATORY DAMAGES LYING IN CONTRACT
The purpose of compensatory damages lying in contract is to put the non breaching party in the position he
would have been in had the contract been fully performed and to compensate the for his expectancy interest. The
idea is to give the an amount equivalent to that which he would have realized had the contract been fully
performed.
10.2.1 General Damages Elements (No Foreseeability Requirement)
Based in Contract: General Damages Arise Naturally From A Breach;
No Special Pleading: They Don’t Need To Be Pleaded Specially In A Complaint;
10.2.2 Special Damages Elements (Foreseeability is Required)
Foreseeability: Foreseeability is required
Causation: must show that his injury was caused by the ∆
Easier to Quantify Harm: Usually easier than in tort
Exception is lost profits which are hard to quantify and prove
Injury To Real Property: compensate for the harm; cost of repair or diminution in value
Pleading: Must be pleaded specially
10.3 COMPENSATORY DAMAGES RULES FOR TORT AND CONTRACT
10.3.1 Damage to Real Property: (Cost of Repair or Diminution in Value)
Purpose is to compensate for the harm to her real property. may recover either the cost of repair or the
diminution in value.
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10.3.2 Avoidable Consequences Rule ( Required to Mitigate Special Damages)
In both tort and contract, Must mitigate in order to collect special damages.
10.3.3 Collateral Source Rule
If gets a benefit from another source, not the ∆, the ∆ cannot claim these benefits to limit his own
liability. In some cases the may recover twice: once from the ∆ and once from the collateral source. Example:
suffers injuries arising from a tort. He has medical insurance and collects the full cost of his medical treatment.
can still sue the ∆ for his medical expenses, even though he has already been made whole by his insurance company.
But, if brings an action for $20,000 and had no health insurance. If ∆’s insurance pays off, may not collect
again. Collateral source payments may include:
Insurance Benefits
Employment Benefits
Cash Gratuities
Social Legislation Benefits
Veteran’s Benefits
10.4 NOMINAL DAMAGES
Nominal damages are awarded in situations where the ’s rights have been violated but no loss is sustained,
or the extent of injury cannot be measured. Example: Little boy hits ball on neighbor’s lawn. It was a trespass, but
probably only nominal damages would be awarded. Also, nominal damages apply in constitutional law violations
where no actual harm is proven.
10.5 PUNITIVE DAMAGES
Punitive damages are awarded where the Court wishes to punish the ∆ for wanton, willful, or malicious
actions. Punitive damages are designed to deter future wrongful conduct. is never entitled to punitive damages,
they are awarded at the discretion of the Court.
Punitive Damages Are Almost NEVER Available in Contract.
10.6 INTEREST
Pre-judgment or post-judgment interest may be awarded by the Court as compensation for the money that
she would have earned but for the ∆’s wrongful possession of her money. Does not apply in pain and suffering,
emotional distress, or other hard to quantify actions. Interest will only be awarded where the amounts are clearly
quantifiable.
10.7 ATTORNEY’S FEES
Available in four situations:
1. Contract: provision for attorney’s fees included in contract.
2. Bad Faith: ∆ brought an action in bad faith
3. Statutory Right: Statutory right to attorney’s fees (Example: some civil rights statutes)
4. Derivative Suits: Shareholder Derivative Actions
10.8 LIQUIDATED DAMAGES
The damages that are provided for by contract between the parties. These come up when the parties
anticipate that there might be a breach of the underlying contract but that it would be difficult to calculate the
damages if the breach did occur. Liquidate Damages are generally upheld as long as two elements are met:
10.8.1 Required Elements
1. Reasonableness: Prediction of Damages Must Be Reasonable
2. Difficult to Quantify Actual Damages: Calculation Of The Actual Damages Suffered Must Be
Genuinely Difficult To Quantify.
3. Non-Punitive: Liquidate Damages May Not Be Punitive In Nature
4. Actual Damage: Non-Breaching Party Must Actually Be Damaged
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10.8.2 No Bar to Specific Performance
Liquidated damages are NOT a bar to specific performance where that remedy is normally available – as in
cases where money damages will not right the wrong that the has suffered. Liquidated damages will not prevent a
from seeking nor a Court from awarding specific performance where that remedy is normally available.
10.8.2.1 Exception for Contractual Agreement
The parties to a contract may stipulate in the contract that liquidated damages will be the sole
source of recovery for the non-breaching party. The stipulation must be specific and clear.
11. SUMMARY
Court always prefers money damages (legal remedies) over equitable remedies. Sometimes legal remedies will not
compensate a for the harm she has suffered. In these cases, we will move into equity and begin to consider some
of the equitable remedies such as injunctions, specific performance, restitution, and rescission. This is also where
our equitable defenses, like unclean hands and laches, and undue hardship may come up. Remember that the
general theme for equitable remedies is that money damages will not suffice, that the Court will be able to enforce a
remedy that it grants, and that the remedy will not cause the ∆ undue hardship. Equitable remedies may be
available where there would be multiplicity of litigation or where the ∆ is insolvent and where money damages may
suffice but the just isn’t going to succeed in getting any money because of the ∆’s insolvency. Always begin a
remedies essay with a discussion of whether money damages will suffice. A good remedies essay will discuss both
legal and equitable remedies.
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