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					                                       Remedies Handout #1

Chapter 2.     Modern Damages

A.     The Nature Of Legal Damages

Gavcus (16)

Cause of action: Trespass to realty and conversion (Section 968.20 = replevin action)

Remedy: damages
     -nominal damages ok for trespass to realty
     -no punitives without compensatory damages
     -no physical injury to realty: ways of measuring damages to realty = zero
             -cost to repair = zero
             -diminution in value = zero
             -cannot recover cost of locks and burglar alarm
     -consequentials recoverable so long as proximately caused by trespass
             -physical injury = mental distress damages recoverable
                      -failure of proof re: emotional distress (cost of treatment)
     -attorneys fees recoverable if both
             -prior litigation (the Section 968.20 action) was between P and a third party and
             -prior litigation was the proximate result of D’s wrongful act

1.     Proof of the Existence of Damages

Youst (19)

Cause of action: negligent or intentional interference with prospective economic advantage
                       -harness driver (D) interfered with P’s horse during a race, preventing P
                       from the chance of winning a cash prize
                       -issue: is interference with the chance of winning a contest too uncertain
                       upon which to base tort liability? Yes
                       -causation issue: is it reasonably probable that the lost economic
                       advantage would have been realized but for D’s interference? No
                       -Restatement 2d of Torts addresses the speculative nature of the outcome
                       of a horse race: requires a substantial certainty or at least a high probability
                       of success; certain contests may have a higher probability of ultimate
                       success than others; too speculative here;

Remedy: compensatory damages + punitives ($250,000)
     -the difference in prize money between Bat Champ’s actual finish and the finish which
     would have occurred but for D’s interference:
     -3 alternative amounts: for either 1st, 2d or 3d place
Pollock (21)

Cause of action: personal injury = negligence (never mentioned in case)

Remedy: damages
     -issue: existence of injury: without injury, P has not proved prima facie case for
     negligence, fraud or trespass to chattels
     -possibility (43%) v. probability = reasonable certainty = more probable than not

2.     Proving the Amount of Damages
       a.    Lost Business Profits

Atkin Wright (28)

Cause of action: negligence in the operation of the intercept
               Interference with prospective business relationships

Remedy: damages
     -fact of damages (existence) = reasonable probability: needs more proof: P’s burden
     -amount of damages: not so exacting: must be more than speculative
     -here, no proof of lost net income: 3 months decline in revenues = speculative
     -no punitives without compensatory damages

       b.      Lost Capacity to Earn

Washington (31)

Cause of action: personal injury (negligence stemming from car crash)’ liability not at issue

Remedy: damages: non-economic: = general damages lost earning capacity
            -injury disabled P from pursuing the wrestling sport (D claims this item is based
            upon speculation and conjecture)
            P compiled an outstanding record as an intercollegiate wrestler (103 wins and 4
            losses); P was prime candidate for the 1972 US Olympic team;
            -P offered no evidence of his earnings at the time of the injury;
            -settled law in Nebraska that loss of earning capacity is a separate element of
            damages;
            -distinguish between: loss of past earnings = special damage v. impairment of
            earning capacity = item of general damages
            -recovery for loss or diminution of the power to earn in the future is based upon
            such factors as P’s age, life span, health, habits, occupation, talents, skill,
            experience, training, and industry;
            -ruling: ample evidence to sustain jury’s award for loss of earning capacity;
            -D can’t complain about the sufficiency of the evidence since D convinced the
            court to exclude P’s evidence of what a wrestling coach earns;
Childs (33)

Cause of action: wrongful death (under the Federal Tort Claims Act and Georgia’s wrongful
       death statute
               -negligence action against the US government under the Federal Tort Claims Act
               -US vicariously liable for the negligent act of USPS truck driver
               -P = Debra’s mother, Rosa Reese who is also the administrator of General
               Gordon’s estate

Remedy: damages
            -funeral and medical expenses not at issue
            -economic value of the loss associated with decedents’ (Debra and General)
            deaths based upon their lost future income, fringe benefits and household services;
            Issue: how to measure future economic damages; these amounts must be
            discounted;
            -Georgia’s wrongful death statute provides for the recovery of the full value of
            decedent’s life; two categories of damages:
                    (1) those items having a proven monetary value, such as lost potential
                    lifetime earnings, income, or services, reduced to present cash value and
                    (2) lost intangible items whose value cannot be precisely quantified, such
                    as a parent’s society, advice, example and counsel;
            -conclusion; the court may consider the economic losses as well as any non-
            economic, intangible losses

       c.      Pain and Suffering
               6.    Jury Instructions

McDougald (51)

Cause of action: negligence (personal injury action)

Remedy: damages
        -non-economic/non-pecuniary/general damages
               -is P’s awareness relevant in calculating damages for loss of enjoyment of life?
               Yes (but see dissent)
               -is loss of enjoyment of life a separate item of damages from pain and suffering?
               No (but see dissent: loss of enjoyment = objective v. pain and suffering =
subjective)

B.     The Divergence Between Tort and Contract in Limiting Damages

Evra (68)

Cause of action: negligence
Remedy: damages: compares and contrasts consequential damages in contract and tort law
     -consequential damages in tort are all those proximately caused by tort
     -consequential damages in contract are limited by foreseeability (Hadley v. Baxendale) =
     whatever is in the contemplation of the parties at the time the contract is formed
            -contract liability is strict
     -compare and contrast:
            -avoidable consequences
            -contributory negligence

3.     Where Do Tort Damages End?

Stern (73)

Cause of action: negligence

Remedy: damages
     -what kind of damages? Economic damages: when recoverable? Absent contract or injury
     to person or property, P may not recover in negligence for economic loss
     -economic loss is recoverable if tort is intentional

J’Aire (77)

Cause of action: negligence; interference with prospective economic advantage
        -construction work or restaurant stalled, causing loss of business profits
        -clearly foreseeable that delay would injure P’s business
        -focus on the foreseeability of the injury and the nexus between D’s conduct and P’s
injury;

Remedy: damages (economic losses)

Rule: P’s interest in prospective economic advantage may be protected against injury
      occasioned by negligent as well as intentional conduct (minority rule)
              -don’t need privity of contract between P and D;
              - criticism: fears of excessive liability; fraudulent or collusive claims; liability
              imposed for remote consequences

Rardin (79)

Cause of action: tortuous conduct in contractual setting Hadley v. Baxendale
                       -press damages; the contract indemnified Rardin against physical damage
                       to the press caused by the negligence of Whitacre’s contractor, T&D;
                       -court ruled that Illinois law does not provide a tort remedy in this kind of
                       case;
                       -the issue is not causation; it is duty: D could not estimate the
                       consequences of his carelessness; P could have protected itself from the
                        consequences of a delay or P could have negotiated for a liquidated-
                        damages clause in his contract with Whitacre that would have
                        compensated him for delay in putting the press into working condition
                        after it arrived;
                        -Illinois haw does not permit a tort suit for profits lost as the result of the
                        failure to complete a commercial undertaking

Remedy: damages: consequentials (not recoverable here)
            -the damages Rardin seeks from T&D are the profits that he lost as a result of the
            delay in putting the press into operation in his business

C.         Limitations on Damages Recovery
           1.    Avoidable Consequences

Bright (86)

Cause of action: personal injury (based on negligence): liability not contested

Remedy: damages
            Issue: Robbins’ alleged failure to mitigate damages due to her religious beliefs as
            a Jehovah’s Witness
            -rule: no recovery for damages that could have been avoided by using means
            which a reasonably prudent person would have used to cure the injury;
            -did P’s religious beliefs relieve her of duty to mitigate?
            -court opts for objective test: in considering whether P acted as a reasonably
            prudent person, jury may consider P’s testimony that she is a believer in the
            Jehovah’s Witness Faith, keeping in mind that the overriding test is whether P
            acted as a reasonably prudent person
            -judgment reversed and remanded for a new trial on damages alone

Dissent:         P’s duty to mitigate damages, though neutral on its face, is discriminatory as
                 applied to a practicing Jehovah’s Witness whose religion forbids the acceptance
                 of blood transfusions;
                 -the sincerity and good faith of P’s beliefs were not contested at trial
                 -the trial court’s jury charge was an appropriate accommodation of P’s religious
beliefs;

           2.    Collateral Source Rule

Helfend (97)

Cause of action: personal injury (negligence)

Remedy: damages
     -collateral source rule (aids P, not D) If an injured party receives compensation for his
       injuries from a source wholly independent of D, such payment should not be deducted
       from the damages which P would otherwise collect from D.

D.     Enhancement and Adjustment of Compensatory Damages
       2.   Punitive Damages

Tuttle(104)

Cause of action: personal injury

Remedy: damages
     -punitive damages: far more likely to be found in tort than in contract cases where malice
     is proved by clear and convincing evidence.

Gore(114)

Cause of action: fraud in the inducement of a contract
                       -BMW failed to disclose to buyer that the car had been repainted
                       -BMW argued that it was under no obligation to disclose repairs of minor
                       damage to new cars;

Remedy: compensatory and punitive damages, and costs
            -jury found BMW liable for compensatory damages of $4,000 + $4 million in
            punitive damages, based on the finding that the nondisclosure policy constituted
            “gross, oppressive or malicious” fraud

Issue: whether award of punitive damages was excessive;
       -Supreme Court: only when an award is “grossly excessive” is it arbitrary in violation of
       the Due Process Clause of the 14th Amendment;
       -here, no aggravating factors; no bad faith; no deliberate false statements
       -court draws no bright line: remands for further proceedings

Dissent:       J. Scalia does not regard the 14th Am’s due process clause as a secret repository of
               substantive guarantees against “unfairness”
               J. Ginsburg thinks the majority unwisely ventures into territory reserved for the
               states

       3.      Attorney Fees

Sala (131)
Cause of action: personal injury (negligence)

Remedy: damages
     -attorney fees: American rule: each party pays own attorney fees
             -exceptions:
                       -statutory (e.g., civil rights statutes)
                       -judicial doctrines: fee sharing/shifting?
                               -“common fund” doctrine (this case): analogous to an action in
                               quantum meruit
                                        -reasonable percentage standard (e.g., 1/3 of recovery)
                                        -lodestar method (hours worked times hourly rate)
                               -bad faith litigation
                               -when D’s breach of contract or tort leads P into litigation with a
                               third party (e.g., failed claim in Gavcus v. Potts)
                       -contracts may stipulate that breaching party pays nonbreaching party’s
                       attorney fees

E.     Tort Reform

Best (142)

Cause of action: personal injury (product liability action)

Remedy:        damages + declaratory and injunctive relief (to strike the statute that puts a
               $5000,000 cap on compensatory damages for non-economic injuries)
               -non-economic damages in a personal injury action include paid and suffering,
               disability, disfigurement, loss of consortium and loss of society;
               -P challenges the cap on following grounds:
                        (1) it violates the special legislation clause of the Illinois Constitution
                        (2) it contains 3 arbitrary classifications that have no reasonable
                        connection to the stated legislative goals;
               -court rules that the statutory cap on compensatory damages for non-economic
               losses is arbitrary; moreover, the cap violates the constitutional prohibition
               against special legislation and also violates the separation of powers clause of the
               Illinois Constitution
               -dissent: there is rational basis for the cap: under rational basis review, we ask
               only whether the means chosen by the legislature are rationally related to the
               purposes of the law; disagrees with the majority’s conclusion that the cap on non-
               economic damages improperly intrudes on the judicial power of remittitur
Chapter 3      Equitable Remedies - The Injunction

A.     Traditional Maxims Assist and Limit Injunctions
       1.     Equity Acts in Personam

Tabor (161)

Cause of action: breach of contract action brought in Wisconsin by breaching party (seller)
                      -non-breaching buyer sues first in Illinois; then, breaching seller sues in
                      Wisconsin

Remedy: injunction to stop seller from bringing the breach of contract action in Wisconsin
             -seller ignores injunction so buyer asks Illinois court to hold seller in contempt

Issue: When may a court in one state enjoin a foreign (i.e., in another state) court proceeding?
       Rarely; only if the foreign proceeding will be likely to result in fraud or oppression

Note 2(c), page 163, discusses 1998 Supreme Court ruling in this area

Matarese (168)

Cause of action: fraud in the inducement of a contract
                       -D bought realty in his own name, using P’s money

Remedy: constructive trust
             -the Rhode Island court ordered D to convey the land to P, reserving for D a fee
             simple interest in the top floor of the building
             -if D refused, p could apply for the appointment of a commissioner to make the
             conveyance in D’s name;

Issue: whether the court had jurisdiction to compel an action relating to real property by a
       person no longer in the state? The court had jurisdiction over D; therefore, the court had
       power to order a conveyance even though the land was located abroad.

McNulty (171)

Cause of action: income tax evasion
                      -debtor won Irish Sweepstakes, but defeated IRS’s claim by depositing his
                      winnings in a secret bank account on the Island of Jersey
                      -D is in federal prison (US)
                      -US won a civil action for collection of taxes ($67,791) owed by D

Remedy: injunction
             -US seeks injunction directing D to repatriate his assets from the Island of Jersey
             and deposit them with the clerk of the court;
             -court issues injunction, given its jurisdiction over D, satisfied that the order
             would not violate the banking laws of the Island of Jersey;

Subsequent Events:   McNulty was found in contempt for failing to obey the order to repatriate
                     (coercive civil contempt); after 5 months, D was discharged without
                     complying
                            -keeping him jailed any longer would constitute criminal contempt
                                      Remedies Handout #2

                                             Damages

-Damages are legal, substitutionary relief;
-damages are always awarded in the form of money
-damages are always measured by plaintiff’s loss (as opposed to restitution which is always
measured by defendant’s unjust enrichment)
-kinds of damages:

       -nominal damages: a token amount awarded for some torts (such as trespass to realty and
       conversion) and for some breaches of contract; not awarded for fraud, negligence, or
       trespass to chattels because injury is part of the prima facie tort: without injury there is no
       tort.

       -liquidated damages: an amount agreed upon by parties to a contract, contained in the
       contract and is awarded in lieu of actual damages. Disfavored in the law; if a liquidated
       damages clause is struck down as a penalty, the plaintiff must prove actual damages. A
       valid liquidated damages clause reflects 1) that at the time the contract was entered into, it
       was next to impossible to estimate what damages would be in the event of breach and 2)
       the amount agreed upon in the best estimate of what those damages would be. Not
       awarded in torts.

       -punitive damages: an amount awarded sometimes in tort actions (next to never in
       contract claims) over and above compensatory damages when the defendant has acted
       with malice or with reckless disregard. In many states, the case for punitive damages
       must be proved by clear and convincing evidence. Without compensatory damages, no
       punitives. No punitives if only nominal damages awarded.

       -compensatory damages: an amount that will make the plaintiff whole. In tort law, an
       amount that will restore the plaintiff to the pre-tort status (background looking). The
       plaintiff is entitled to all compensatory damages proximately caused by the tort. In
       contract law, an amount that will put the parties in the position they would have been in
       had the contract been performed. A term that encompasses both general and special
       (consequential) damages but excludes punitive damages. The plaintiff is entitled to all
       compensatory damages foreseeable at the time the contract was entered into.

       -general versus special damages: terms of art used in pleading: special damages must be
       specially pled to be recoverable. Also terms used in personal injury lawsuits: general
       damages include such elements as pain and suffering, loss of the enjoyment of life and
       lost earning capacity. Special damages include loss of earnings and medical costs.
       Special damages is synonymous with consequential damages or indirect damages while
       general damages are direct damages.

-ways of measuring tort damages:
       -diminution in value: the difference between the pre-tort and post-tort value of the
       property.

       -cost to repair

       -lost business profits (often challenged as too speculative unless such damages can be
       established with reasonable certainty)

       -rental value

-fraud damages are often measured either of two ways:

       -out of pocket: the difference between the fair market value of the property and the
       contract price.
       -benefit of the bargain: the difference between the fair market value of the property and
       the value the property would have had the representation been true.

-conversion damages (also known as a “forced sale”) are almost always measured by the fair
market value of the property at the time and place of the conversion. When the judgment is paid,
title vests retroactively in the defendant; courts split over whether plaintiff is entitled to
prejudgment interest.

-contract damages aim at putting the parties in the position they would have been in had the
contract been performed. The most common measure of breach of contract damages is known as
benefit of the bargain: the difference between the contract price and the fair market value of the
property at the time of the breach. Sometimes breach of contract damages are measured by out of
pocket loss or by lost royalties.

The law of contracts recognizes three interests:

       Restitution                    Reliance                      Expectation
       (Rescission)                   (Out of pocket)               (Damages) or
                                      (Consequentials)              (Specific Performance)
Chapter 3      Equitable Remedies–The Injunction

A.     Traditional Maxims Assist and Limit Injunctions
       1.     Equity Acts in Personam

Tabor (161)

Cause of action: breach of contract action brought in Wisconsin by breaching party (seller)
                      -non-breaching buyer sues first in Illinois; then, breaching seller sues in
                      Wisconsin

Remedy: injunction to stop seller from bringing the breach of contract action in Wisconsin
             -seller ignores injunction so buyer asks Illinois court to hold seller in contempt

Issue: When may a court in one state enjoin a foreign (i.e., in another state) court proceeding?
       Rarely; only if the foreign proceeding will be likely to result in fraud or oppression

Note 2(c), page 163, discusses 1998 Supreme Court ruling in this area

Matarese (168)

Cause of action: fraud in the inducement of a contract
                       -D bought realty in his own name, using P’s money

Remedy: constructive trust
             -the Rhode Island court ordered D to convey the land to P, reserving for D a fee
             simple interest in the top floor of the building
             -if D refused, P could apply for the appointment of a commissioner to make the
             conveyance in D’s name;

Issue: whether the court had jurisdiction to compel an action relating to real property by a
       person no longer in the state? The court had jurisdiction over D’ therefore, the court had
       power to order a conveyance even though the land was located abroad..

McNulty (171)

Cause of action: income tax evasion
                      -debtor won Irish Sweepstakes, but defeated IRS’s claim by depositing his
                      winnings in a secret bank account on the island of Jersey
                      -D is in federal prison (US)
                      -US won a civil action for collection of taxes ($67,791) owed by D


Remedy: injunction
             -US seeks injunction directing D to repatriate his assets from the Island of Jersey
             and deposit them with the clerk of the court;
             -court issues injunction, given its jurisdiction over D, satisfied that the order
would not
             violate the banking laws of the Island of Jersey;

Subsequent Events:   McNulty was found in contempt for failing to obey the order to repatriate
                     (coercive civil contempt); after 5 months, D was discharged without
                     complying
                            -keeping him jailed any longer would constitute criminal contempt
Norcisa (178)

Cause of action: action of quash a criminal prosecution

Remedy: injunction to stop criminal prosecution
     -rare: only if prosecutions are under unconstitutional or void statutes
     -equity courts: incapable of affording complete remedy
     -here, legal remedy is adequate (i.e., raise claim as a defense in the criminal trial)

Acuna(184)

Cause of action: public nuisance (a California statute)
                      -Rocksprings is an urban war zone; people are prisoners in their own
                      homes; harassment, intimidation
                      -a public nuisance “affects at the same time an entire community or
                      neighborhood, or any considerable number of persons.”
                              -the proscribed act may be anything which is injurious to health or
                              is indecent, or offensive to the senses; the result of the act must
                              interfere with the comfortable enjoyment of life or property;
                              -interference must be substantial and unreasonable;

Remedy: injunction
             -Superior Court issued ex parte temporary restraining order enjoining 38 Ds
             -irreparable injury and inadequacy of legal remedy;
             -following a hearing, the court entered a preliminary injunction against 33 Ds who
             had not appeared and continued the matter as to those 5 Ds who opposed
             injunction;
             -11 Ds moved to vacate the injunctions;
             -Court of Appeals: portions of the injunction are void under the 1st and 5th
             Amendments as unconstitutionally vague or overbroad
             -remedies against a public nuisance: indictment or information (criminal); a civil
             action; or abatement (injunction);
             -CA Supreme Court reverses and reinstates the injunctions:
                     -rejects freedom of association challenge; overbreadth challenge;
                     vagueness challenge;
                     -injunctions’ effect on Ds’ protected speech is minimal

       Dissent:
              -evidence insufficient to enjoin Blanca and Gonzalez
              -failed to prove that the group itself possessed unlawful goals and that Ds held a
              specific intent to further those illegal aims;
              (J. Mosk):
              -injunction penalizes much lawful activity without regard to D’s intent and invites
              arbitrary enforcement;
Florida Panthers (202)

Cause of action: breach of a license agreement

Remedy: injunction
             -to prevail on a motion for a preliminary injunction, P must prove:
             (1) there is a substantial likelihood of success on the merits:
             (2) there is a substantial treat of irreparable harm;
             (3) the threatened injury to P outweighs the harm an injunction may cause to D;
             (4) the granting of the injunction would not disserve the public interest;
             -p must prove 4 elements by a preponderance of the evidence;

Feltner (213)

Cause of action: violation of Section 504(c) of the federal Copyright Act
                       -copyright infringement by stations’ unauthorized broadcasting of TV
programs;

Remedy: statutory damages
              -trial court awarded Columbia $8,800,000 in statutory damages

Issue: Does the Seventh Amendment afford the right to a jury trial in this civil action for
statutory damages? Yes
        -District Court denied Feltner’s request for a jury trial
        -9th Circuit affirmed: no jury trial because an award of statutory damages is equitable in
nature;
        -Supreme Court grants right to jury trial in this case under the Seventh Amendment: “[i[
        in suits at common law, where the value in controversy shall exceed twenty dollars, the
        right of trial by jury shall be preserved.”
                 -the 7th Am applies not only to common-law causes of action but also to actions
                 brought to enforce statutory rights that are analogous to common-law claims;
                 -test: examine both the nature of the statutory action and the remedy sought;
                 -at common law, copyright suits for monetary damages were tried in courts of law,
                 and thus before juries;
                 -no evidence that the Copyright Act of 1790 changed the practice of trying
                 copyrights actions for damages in courts of law before juries;
                 -general rule: monetary relief is legal
                 -a monetary remedy is not rendered equitable simply because it is not fixed or
                 readily calculable from a fixed formula: cases involving discretionary monetary
                 relief were tried before juries;
Amber Steel (218)

Cause of action: breach of contract

Remedy: damages

Issue: Under California’s constitution, when does a party in a civil action have a right to a jury
trial?

       -majority: focus on gist of action; here, suit was based on the equitable doctrine of
       promissory estoppel; therefore, no right to jury trial
       -dissent (better view): focus on remedy: if legal, jury trial; if equit, no jury trial
               -here, damages is legal, therefore, right to jury trial

Ziebarth (225)

Cause of action: breach of contract

Remedy: specific performance

Issue: What is the test for the right to a jury trial in state courts not bound by the 7th Am?
       -minority of states recognize the equitable cleanup doctrine: if the court had jurisdiction
       over the case when suit was filed, it may grant legal relief in lieu of equitable relief
       without a jury trial
               -doctrine is a way of reducing the right to a jury trial

Navajo (229)

Cause of action: Mission School brought an action for forcible entry and detainer (eviction)
Academy                   asked another court to enjoin Mission’s eviction action in magistrate
court and sued               Mission for conversion and interference with contractual relations
and breach of an oral               contract

Remedy: Academy asked for a “constructive” long-term lease; damages ($1.8M); declaratory and
       injunctive relief; compensatory and punitive damages;

Court awarded Academy a three year “constructive” lease (affirmed on appeal)

Question: How does this case relate to equity?

Weinberger (233)

Cause of action: violation of the Federal Water Pollution Control Act (similar to a public
nuisance)
Remedy: injunction

Issue: Must the district court enjoin immediately or does it retain discretion to balance the
       hardships?
       -District Court: refused to enjoin, granting the Navy time to apply for a permit
               -based on irreparable harm if injunction is granted and P’s delay
       -First Circuit: reversed, ordering district court to enjoin Navy until it obtained a permit
               -relied on TVA v. Hill where Congress withdrew courts’ equitable discretion
                        -snail darter stopped construction of Tellico Dam
       -Supreme Court: agrees with district court that it retains equitable discretion in deciding
       whether                  to issue an injunction
               -when in doubt, assume courts retain equitable discretion: a major departure from
               long tradition of equity practice should not be lightly implied
               -other ways of ensuring compliance: fines and criminal penalties
                        -in other words, the legal remedy is adequate here
               - a scheme of phased compliance
       -J. Stevens dissent: this is the first time the Court has permitted a statutory violation to
                        continue; wonderful footnote 4 bears reading

Travellers (241)

Cause of action: breach of contract

Remedy: injunction ordering TWA to specifically perform the existing contract

Issue: when may a court issue a permanent injunction ordering a party to specifically perform a
       contract? When (1) the contract is valid; (2) P has substantially performed under the
       contract and is willing and able to perform its remaining obligations; (3) D is able to
       perform its obligations, and (4) P has not adequate remedy at law.
Green (245)

Cause of action: breach of contract
       -the fictitious contract ($40,000), amounting to fraud by P (buyer) and D (seller), not at
issue

       -real contract ($30,000) between P and D was breach by D (Higgins)

Remedy: P sued D for specific performance and D counterclaimed for damages for clouding of
their title and asked the court for quiet title and also raised unclean hands on an affirmative
defense

Issue: When will unclean hands serve as a defense to the granting of equitable relief?
       -willful, fraudulent, illegal and unconscionable conduct amounts to unclean hands
       -no person can obtain affirmative relief in equity with respect to a transaction in which he
       or she has been guilty of inequitable conduct
       -the misconduct must bear an immediate relation to the subject-matter of the suit and in
       some measure affect the equitable relations between the parties to the litigation and
       arising out of the transaction: must be related misconduct; not collateral misconduct
       -courts can raise on own motion because courts act for their own protection and not as a
       matter of “defense” to D.
       -irrelevant that D did not suffer from P’s unclean hands or that D participated in the
       misconduct
       -court leaves parties where it finds them
                                       Remedies Handout

Stone (251)

Cause of action: declaratory judgment under Copyright Acts; conspiracy to defraud

Remedy: declaratory relief (similar to an injunction) but laches can bar equit. relief
        -share in profits from songs’ renewal rights

Issue: Did laches bar P’s suit? Yes (but later reversed on other grounds)
       -Lillian Williams Stone adopted P and raised her until Lillian’s death in 1955
       -Irene Smith, Hank’s sister, reneged on promise to care for P (Cathy)
       -Cathy is ward of state until 1956 when Deuprees take her in (adopt in ‘59)
       -‘67-‘68: litigation over assignment of Hand Sr’s copyrights to Hank Jr.
                -Drayton Hamilton, guardian ad litem, represented Cathy (14)
       -‘73: Cathy (21) inherits $3800 from Lillian and learns of rumors
       -‘80: phone call from George Deupree (adoptive father); change of heart
       -‘84: meets Keith Adkinson (atty and later Cathy’s husband)
       -‘85: files declaratory judgment
       -laches requires unreasonable delay and prejudice to D from the delay

Stone II (255)

       -upon rehearing the case, the Second Circuit, in light of the intervening decision by the
       Alabama Supreme Court, reversed the decision in Stone I, because defendants conspired
       to conceal from Cathy Stone her potential rights;
       -prejudice to Ds would not have existed but for the failure of the present Ds to reveal the
       facts of which they had knowledge
       -summary judgment dismissing P’s claim on the grounds of laches inappropriate

H.K. Porter Co. (260)

Cause of action: infringement of P’s rights in trade secrets

Remedy: injunction (in the form of a consent decree)

Issue: When can D be held in contempt of a federal consent? Only when the decree complies
       with Fed. Civ. Proc. Rule 65(d)
       -Here, the district court did not go beyond entering a judgment approving the obligations
       incurred under the Settlement Agreement. Its judgment did not use language which
       turned a contractual duty into an obligation to obey an operative command. Analogous to
       declaratory judgment where there is no command.
       Order ignored rule’s mandatory requirement than an injunction describe in reasonable
       detail the acts sough to be restrained. Due process requires that the decree speak clearly,
       explicitly, and specifically.
Playboy Enterprises (263)

Cause of action: trademark infringement

Remedy:         compensatory and coercive civil contempt for violating an injunction (Tattilo
                enjoined from distributing in the US an English language male sophisticate
                magazine under the name “PLAYMEN”)

Issue: Whether D can be held in contempt for violating a 15-year old injunction prohibiting
       certain      traditional publishing activities by his Internet business? Yes
       -A court has the power to hold a party in civil contempt when (1) there is a “clear and
       unambiguous” court order; (2) there is clear and convincing proof of noncompliance; and
       (3) the party has not attempted to comply in a reasonably diligent manner.
       -While D may continue to operate its Internet site, it must refrain from accepting
       subscriptions from customers living in the US (but P’s motion for an order barring D
       from suing English on its Internet site is denied)

Bagwell (268)

Cause of action: illegal strike

Remedy: injunction (to enjoin the union from conducting unlawful strike-related acts)

Issue: Whether contempt fines levied against a union for violations of a labor injunction are
       coercive civil fines or are criminal fines that constitutionally could be imposed only
       through a jury trial? Fines = criminal contempt, so D entitled to jury trial
       -the trial court required that contumacious acts be proved beyond a reasonable doubt, but
       did not afford the union a right to jury trial.
       -while contempt orders were pending, the union and the companies settled the underlying
       labor dispute, agreeing to vacate the contempt fines but the trial court refused to vacate
       fines payable to the public
       -state court of appeals: trial court is without discretion to refuse to vacate such fines
       -Supreme Court of VA: trial court had discretion to refuse to vacate the fines
       US Supreme Court:
       -For “serious” criminal contempts involving imprisonment of more than 6 months,
       constitutional protections include the right to jury trial and proof beyond a reasonable
       doubt.
       -Whether a contempt is civil or criminal turns on the “character and purpose” of the
       sanction involved.
       -In criminal contempt, the sentence is punitive, to vindicate the authority of the court.
       -A fixed sentence of imprisonment is punitive and criminal if it is imposed
       retrospectively for a “completed act of disobedience.”
       -A flat, unconditional fine is criminal if the contemnor has no subsequent opportunity to
       reduce or avoid the fine through compliance.
Williams (224)

Cause of action: color, sex, and national origin discrimination (probably statutory)

Remedy: injunction: test for granting preliminary injunction:
     -(a) a likelihood of success on the merits or
     -(b) sufficiently serious questions going to the merits and a
          balance of hardships tipping in movant’s favor

Dairy Queen (235)

Cause of action: breach of contract (a licensing agreement about a trademark)

Remedy: injunction and an accounting for profits (damages/restitution?)

Issue: when is there a right to a jury trial in a civil action under the 7th Am?
       -if cause of action is legal and remedy is legal, jury trial
       -if cause of action is equit and remedy is equit, no jury trial
       -if cause of action is legal but remedy is equit, no consensus
       -if cause of action is equit but remedy is legal, no consensus
       -Supreme Court characterized this case as a simple breach of contract (legal) seeking
       damages (legal), therefore there was a 7th Am right to a jury trial
4.     Confinement, Contempt, And Cash Money: Ability To Comply

Moss (270)

Cause of action: Violation of a judicial child support order

Remedy: Contempt
            -inability to comply with a child support order is an affirmative defense:
            contemner must prove inability to comply by a preponderance of the evidence

Issue: When may a willfully unemployed, nonsupporting parent be subject to contempt
       sanctions: There is no constitutional impediment (i.e., involuntary servitude or
       imprisonment for debt) to use of the contempt power to punish a parent who, otherwise
       lacking monetary ability to pay child support, willfully fails and refuses to seek and
       accept available employment commensurate with the parent’s skills and abilities.
       -Undertaking employment does not impose on the parent any governmental control over
       the type of employment, the employer for whom the parent’s labor will be performed, or
       any other aspect of the parent’s individual freedom that might be associated with peonage
       or slavery.

5.     The Collateral Bar

Ex Parte Purvis (286)

Cause of action: violation of a temporary restraining order enjoining a public employee strike

Remedy: criminal contempt

Issue: whether Purvis can challenge, by petition for the writ of habeas corpus, the constitutional
       validity of the trial court’s TRO when Purvis failed to try to have the order dissolved or
       modified before violating it? No

The Collateral Bar rule:      An injunction issued by a court with jurisdiction over the subject
                              matter must be obeyed by the parties subject to the order until it is
                              reversed by orderly and proper proceedings even though the order
                              may be constitutionally defective or invalid.
                              -exceptions: where compliance would cause irreparable injury; if
                              an injunction is transparently invalid, or only has a frivolous
                              pretense to validity, its validity may be challenged in a contempt
                              proceeding.
6.     Who Must Obey?

Ex Parte Davis (295)

Cause of action: violation of residential deed restriction

Remedy: contempt proceeding to enforce the injunction

Issue: who is bound by an injunction?

       An injunction is “binding only upon the parties to the action, their officers, agents,
       servants, employees, and attorneys, and upon those persons in active concert or
       participation with them [who receive actual notice of the order by personal service or
       otherwise.]”

F.     Injunction Reform

Taylor (307)

Cause of action: unconstitutional prison conditions

Remedy: injunction (in the form of a consent decree)

Issue: Was a provision of a federal law which aimed at restricting the power of federal courts to
       issue structural injunctions micro-managing state and local prison conditions
       unconstitutional? Yes, Congress violated the separation of powers doctrine.
       -The Act effectively terminates consent decrees which were entered into voluntarily to
       resolve constitutional claims arising from prison conditions.
       -The Act does not effect a change in the “substantive” law that gave rise to the consent
       decrees in this case, i.e., the Constitution. Here, what Congress has done is to define the
       scope and nature of the remedy that it finds appropriate for prisoners who claim
       constitutional violations.
Chapter 4        Unjust Enrichment RESTITUTION

A.     Unjust? Enrichment?

Kristler (313)

Cause of action: unjust enrichment

Remedy: restitution
              -quasi-contract for $5,711.93 = value of fall wheat crop: affirmed on appeal

Issue: Was it unjust enrichment for buyer, aware of Stoddard’s wheat crop at time of purchase,
       to reap the benefit of Stoddard’s labor without having to pay for it? Yes
               -on appeal, buyer argues Stoddard should not recover because he planted wheat
               only a few months before his lease term expired, knowing that the wheat would
               not mature during the lease.
                       -Court ruled Stoddard’s efforts were undertaken in good faith, since he
                       reasonably could have relied on past practices and was unaware of the
                       impending sale to Shannon until well after planting time.
                       -One party should not be entitled to benefit at the expense of another
                       because of an innocent mistake or unintentional error.

Kossian (317)

Cause of action: unjust enrichment/restitution

Remedy: quasi-contract
     -P has no legal relationship with D
     -D received the property after the cleanup was completed by P and
     D received $18,000 for the cleanup from insurer of property

Issue: Can P recover the cost of cleanup from D? Yes, to prevent unjust enrichment

Knaus (32)

Cause of action: unjust enrichment

Remedy: quasi-contract: quantum count: quantum meruit
              -claim defeated because the benefit was conferred in the fact of opposition and
              disinterest; P “officiously” or “gratuitously” conferred a benefit for which quasi-
              contractual relief is not available in Illinois
              -D has not voluntarily accepted a benefit which it would be inequitable for him to
               retain
D’s counterclaim for trespass to realty (cause of action) and damages (remedy) stand
B.     Legal Restitution:    Quasi-Contracts

       1.     Measuring the Defendant’s Benefit-Services

Campbell (329)

Cause of action: unjust enrichment

Remedy: quasi-contract
             -quantum meruiit: implied in law
                    -how to measure it:
                           -reasonable/fair market value
                           -reasonable value of benefit to D
                           -upper limit: amount agreed upon by the parties in the
                                           unenforceable contract
                           -dissent: price agreed upon is wholly inadmissible

Issue: How should court measure how TVA benefitted from the unenforceable contract to
       microfilm technical journals? Majority seems to measure it by P’s loss (implied in fact),
       while dissent would measure it by D’s unjust enrichment (implied in law)
1.     Measuring The Defendant’s Benefit–Services

Farash (337)

Cause of action:       unjust enrichment (P renovated a building and made certain modifications
                       for D who promised to lease the building for 2 years but never signed a
                       contract)
                               -D’s defense: “I didn’t benefit from P’s labors”: Restatement: an
                               injured party who has not conferred a benefit may not obtain
                               restitution

Remedy:         quasi-contract: quantum meruit (P’s recovery is for the reasonable value of
                services rendered)
                -P may recover for those expenditures he made in reliance on D’s representations
                and that he otherwise would not have made = P’s reliance interest recoverable but
                not restitution
                -where D is a wrongdoer, P should at least be placed in as good a position as he
                originally was in, even though D must pay more than he has benefitted.
                -If what P has done is part of the agreed exchange, it is deemed to be ‘received’ by
                D;

Dissent:        Since D did not benefit from P’s efforts, no recovery under quasi contract;
                -The majority is recognizing a cause of action sounding in promissory estoppel (a
                claim never raised by P)
                -Max Farash is a sophisticated businessman who could have easily insued that D
                would pay for the extensive renovation work P performed on his own building.

Earhart (341)

Cause of action: unjust enrichment

Remedy: quasi-contract: quantum meruit
             -trial court awarded recovery against D in quantum meruit for the work done on
             its property. The court denied any recovery for the work done on the Pillow
             property. The court also denied any recovery against D (Low).

Issue: (As framed by the CA Supreme Court): whether P who expends funds and performs
       services at the request of another (D), may recover in quantum meruit although the
       expenditures and services do not directly benefit property owned by D. P is entitled to
       prove D’s liability for the reasonable value of P’s services rendered on both parcels of
       land.

       -relevance of Rotea v. Izuel: court refused to assess liability without first finding receipt
       of a “direct benefit.” Even so, courts have often implied an obligation to pay based upon
       the theory that performance at another’s request may itself constitute a benefit.
       -CJ Traynor urged that we abandon the unconscionable requirement of “benefit” to D and
       allow recovery in quantum meruit whenever a party acts to his detriment in reliance on
       another’s representation that he will give compensation for the detiment suffered.
       -analogy to rule that “part performance” may satisfy the statute of frauds and to
       “promissory estoppel”: §90 of the Restatement of Contracts;
       -we conclude that compensation for a party’s performance should be paid by the person
       whose request induced the performance.

C.     Equitable Restitution
       1.    The Constructive Trust

Simonds (346)

Cause of action: unjust enrichment
               -action for breach of contract against the estate is futile as estate is insolvent

Remedy: constructive trust
             -does not require the performance of any wrongful act by the one enriched:
             Innocent parties may frequently be unjustly enriched
             -bona fide purchaser of property upon which a constructive trust would otherwise
             be imposed takes free of the constructive trust, but a gratuitous donee,
             however, innocent, does not.

Issue: As between two innocent parties, wife #1 and wife #2, who is entitled to deceased
       husband’s life insurance policy?
              -wife #1 gave consideration for a promise to be maintained as beneficiary while
              wife #2 has given no consideration
              -inability to trace wife #1's interest after policies lapsed or were canceled not a
              problem: separation agreement provides the nexus

        2.     Tracing

D.      Restitution Reform?
Chapter 5      PROPERTY INTERESTS

A.     Choosing the Remedy

Baram (355)

Cause of action: conversion of a horse

Remedy: damages (forced sale)

Issue: If judgment is rendered against multiple defendants, will payment (of damages, also
       known as a “forced sale”) by one converter relieve the other defendants of tort liability?
       Yes, once judgment is paid, title vests retroactively in defendant who pays judgment.
       Thus, defendant passed good title to subsequent purchasers.

Welch (358)

Cause of action: conversion
                      -valuable antique silver bought by D who knew or should have known that
                      the silver items were stolen goods (D = willful converter)
               Trespass to chattels (for injury to the castors)

Remedy: damages
            -$10,000 for loss of use of the silver during its 8-yr absence;
            -$22,000 for diminution in value of the James II castors (focus of opinion here)
                   -represents the difference between the value of the castors at the time they
                   were returned and the value they would have had the not been altered)
                   -D says P only entitled to $4,500 ($7,500 = value at time and place of
                   conversion minus $3,000 = their value when returned)
            -$5,000 in consequential damages (in part cost of recovery)

Issue: Are conversion damages always measured at the time and place of conversion or may the
       court take into account subsequent fluctuations in the value of the converted goods?
       -P’s damages are not necessarily capped by their value on the date of conversion

Note   opinion’s mention of waiving the tort and suing in assumpsit (for money had and
       received) to recover any appreciation after the conversion and replevin to recover the
       appreciated goods in specie.
Trahan (361)

Cause of action: conversion (of 15,000 shares of stock)

Remedy: damages, measured either:
            -by the value of the stock at the time of conversion ($10 per share); or
            -by the highest value ($64.25) reached by the stock between the date of
            conversion and the date of judgment ($29.50).
                    -trial court awarded stock’s value on the date of judgment and this
                    decision was affirmed on appeal (the unique circumstances of some
                    transactions may call for the value of converted property to be fixed at
                    some time other than the date of conversion).

B.     Calculating Damages
       1.    General Damages: Diminished Value v. Cost To Repair

Hewlett (364)

Cause of action: negligence (injury to personalty: dent in starboard side of barge)

Remedy: damages
     -how to measure tort damages?
             -nominal damages mentioned but not recoverable in negligence
             -depends on whether barge is destroyed or merely damages
             -cost to repair + loss of use: between $2895 and $3000
                     -what if exceeds pre-tort value of barge? Damages limited to pre-tort
                     value
                             -who has burden of proof on this issue? Tortfeasor (D); failed here
                     -admiralty favors cost to repair over diminution in value
             -diminution in value: no such value proved; besides, always dependent on an
             opinion, while repairs are not quite so speculative;
                     -doctrine of economic waste
     -dissent: no diminution in value: $5,616 = pre-an post-tort value
             -repairs would never be attempted; thus, a windfall to P
Orndorff (368)

Cause of action:       injury to realty stemming from defectively compacted soil (strict liability,
                       but could be a negligence case)

Remedy: damages

Issue: How are damages for injury to realty measured?
        -cost to repair + relocation expenses = $243m539.95 (awarded by trial court and affirmed
        on appeal)
        -diminution in value: $171,000 ($67,500 without repairs; $238,500 following repairs)
        -is there a rule governing when cost to repair should be the measure of damages and when
        diminution in value applies? No, some courts say, the lesser of the two; some courts say
        plaintiff can choose; some plaintiff can choose only when the tort is willful; some courts
        say cost to repair is the measure where P has a personal reason to repair (i.e., they intend
        to live in the repaired premises).
        -cost to repair is inappropriate: where the cost to do so far exceeds the value of the home
        or where only slight damage has occurred and the cost of repair is far in excess of the loss
        in value.
       2.      Lost Use

Kuwait (377)

Cause of action: negligence

Remedy: general damages (cost to repair 747 not in issue) + loss of use damages
       5 ways to measure loss of use damages:
            1) if replacement plane were actually rented (rental fee)
            2) if damages plane were leased rather than owned (prorated portion of lease
            payments;
            3) if cancel damaged plane’s flights (lost revenue from canceled flights, less
            operating costs saved by not flying)
            4) if stretch regular fleet (overtime wages or extra wear and tear)
            5) if press reserves into service (estimate lifetime cost of owning and maintaining
            spare plane; calculate percentage of spare plane’s lifetime represented by number
            of days the accident causes the airline to use the spare plane)

       3.      Damages for Dumping

Don (385)

Cause of action: trespass to realty (dumping of dirt on P’s property)

Remedy: damages
            -trial court: nominals of $200 (no diminution in value)
            -appeals court: rental value for 10 months = $5,500
                     -relevant that D’s conduct was willful
                     -irrelevant that P did not presently intend to use land

Note: mention is made of “waiving the tort and suing in assumpsit” suggesting that rental value
      may be both the measure of P’s loss (damages) or D’ unjust enrichment (quasi-contract)

       4.      Nonpecuniary Damages

Bond (391)

Cause of action: negligence?

Remedy: damages for unique personalty having sentimental value
     -two ways of measuring these damages:
            -their actual value ($2,500), awarded by trial court; or
            -the reasonable special value of such articles to their owner taking into account the
            feeling of the owner for such property (awarded by the appeals court)
       5.       Limiting Damages: Economic Loss

In Re Chicago Flood Litigation (396)

Cause of action: negligence

Remedy: damages
            -Ps who suffered physical property damage could recover, and
            -Ps who lost perishable inventory as a result of interrupted electrical service could
            recover; but
            -Ps who suffered only economic loss could not: the rule recognizes that the
            economic consequences of any single accident are virtually limitless; Ds would
            face virtually uninsurable risks far out of proportion to their culpability

When is economic loss recoverable?
      (1) where P sustains personal injury or property damage;
      (2) where P’s damages are proximately caused by D’s intentional tort like fraud;
      (3) where P’s damages are proximately caused by a negligent misrepresentation by D in
the           business of supplying information;
      (4) economic loss resulting from a breach of contract;

C.     Specific Recovery

       1.       Statutory Replevin

Fuentes (402)

Cause of action: conversion

Remedy: replevin

Issue: Whether Florida’s statutory replevin statute violates procedural due process:
       -no pre-seizure notice of opportunity to challenge the repossession (writ issued ex-parte)
       -post-seizure: (1) opportunity for a hearing; and
                      (2) D may reclaim possession within 3 days by posting security bond in
                      double the value;
       -Supreme Court ruled that the Florida prejudgment replevin provisions work a
       deprivation of property without due process of law insofar as they deny the right to a prior
       opportunity to be heard before chattels are taken from their possessor.

      -Dissent: Creditors can easily evade the new rule or the availability of credit may shrink
Fenton (416)

Cause of action: nuisance (the use of the golf course) and trespass (the invasion of golf balls)
Remedy: injunction and damages
             -abatement of the nuisance by injunction is noncontroversial but could the court
             tell D how to abate the nuisance such as ordering D to shift the location of the trap
             to the northeasterly corner of the green?
             -damages:      $38.50 = cost of replacing glass
                            $2,650.00 = P’s distress and discomfort for 14 years
                     But no recovery for the diminution in value owing to continuing trespass.
                     Instead, damages = loan in rental value of the property while injury
continues.
                     D’s erection of the fence on its own property can play no part.

D.     Monetary Recovery Transcending Compensation
       1.   Willfulness

Grays Harbor (423)

Cause of action: conversion (innocent)

Remedy: damages: how measured?
            -by stumpage value (at time and place of original conversion)(measure used by
            state supreme court);
                    -because original conversion was innocent; otherwise, if original
                    conversion was willful
            -by enhanced value (at time and place of D’s conversion)(measured used by trial
            court)?
                    -this punitive measure of damages is recoverable where a trespass or
                    conversion is willful or in bad faith

       2.      Multiple Damages And Punitive Damages

Bullman (425)

Cause of action: trespass + severance of realty (timber) + excavation of a logging road

Remedy: damages

Issue: Can P recover statutory treble damages plus punitive damages? Yes
       -even innocent trespassers who cut down trees are liable for treble damages under the
       statute: the statute is concerned with the cutting, damaging, and taking of trees, not with
       the state of mind of the wrongdoer. The statute’s aim is not to punish. The treble
       damages is really compensatory (i.e., costs of litigation). Statute gives victim an
       incentive to assert her rights. Also, part of punitives was for destroying P’s land.
       3.       Restitution


Olwell (429)

Cause of action: conversion of an egg washing machine (used by D one day a week for 3 years)

Remedy:         Is the remedy awarded replevin or quasi-contract (waive the tort and sue in
                assumpsit) or both?

Issue: Why is this case an example of “negative unjust enrichment”?

Issue: Is quasi-contract limited to the market value of the egg washing machine (arguably
       $600)? No

Schlosser (432)

Cause of action: unjust enrichment

Remedy:         quasi-contract (measured by reasonable rental value)
                       -$549 = amount D would have owed if she had rented the tapes for the two
                       months she kept them. (awarded by trial court)
                       -D’s mere possession of the tapes for her private use proves benefit even if
                       D never played the tapes; but fact that D never played the tapes means D
                       was enriched only to the extent of one day’s rental fee for each tape = $9
                       and P never proved it actually suffered a loss from lost rentals.

                Dissent: whether the tapes were viewed or not is wholly irrelevant;
                              -tapes were unlawfully in D’s possession and available for viewing
                              for 2 months whether viewed in fact or not.
                              -P deprived the lawful owner of their use and potential rental:
                              therein lies the benefit and the detriment.

Mattson (434)

Cause of action: conversion of lumber
                      -P sues the defendant creditor of the original converter (D claimed a
                      security interest in West Coast’s inventory, including the converted lumber
                      and proceeds for its sale)
                              -both trial court and appeals court dismissed P’s suit against D but
                              the state supreme court reinstated the suit;
                      -P won damages for conversion against West Coast (the original
                      converter) but it filed for bankruptcy and is, presumably, judgment proof.

Remedy:         (1) quasi-contract (common count of money had and received)
                      -P sought actual and punitive damages under this count. What is wrong
                      with this characterization of the remedy?
               (2) constructive trust (over proceeds from the sale of the converted lumber)
                      -tracing doctrine operates against innocent transferees who receive no
                      legal title and transferees who are not bona fide purchasers and receive
                      legal but not equitable title. If either type of transferee exchanges the
                      acquired property for other property, or receives income from the acquired
                      property, tracing may apply.
                      -D claims that such tracing is commercially impracticable but UCC
                      permits tracing of proceeds into the hands of 3rd 4th, 5th, etc. party
                      transferees;
                      -but a BFP cuts off P’s tracing rights;
                               -whether D = BFP is a question of material fact which precludes
                               summary judgment

James (438)

Cause of action: unjust enrichment
                      -P sough money for a cistern constructed by mistake on D’s land

Remedy: quasi-contract ($1,800)

Issue: whether a person who, by mistake, make improvements on another’s land can recover
       restitution when the true owner had no notice of the construction. No relief, absent the
       negligence, bad faith or acquiescence of the owner.
                -Restatement of Restitution: one who improves property does so at her own rish
                -the rule induces diligence in the examination of titles, and prevents intrusion
                upon and appropriation of the property of other.
                -exceptions: both are defensive (i.e., allowed as counterclaim or setoff only)
                        (1) occupying claimants act or betterment statute
                        (2) apply principles of equity to mitigate rule’s harshness
                        -most courts and the Restatement, however, allow the improver to
                        maintain an independent action when the owner is guilty of some
                        inequitable conduct (e.g., if owner stands idly by during construction)
Edwards (441)

Cause of action: trespass to reality
                       -part of the cave was under Lee’s land

Remedy: damages (or an accounting for profits) + injunction to stop future trespasses
            -trial court: P entitled to 1/3 of D’s net proceeds from exhibiting Great Onyx Cave
                 + prejudgment interest (1/3 of the cave was under Lee’s land); affirmed
                     -no basis for arriving at reasonable rental value
            -on appeal, P argues for 1/3 of D’s gross profits since trespass was willful;
            -Court of Appeal: this is not a tort case for damages; instead, it arises in restitution
            and seeks an accounting of profits;
                     -alternatively, this is quasi-contract under the common count of use and
                     occupation (except here no continuous occupation)
                     -upshot: rental value is the usual measure of profit in this kind of case;
                     -analogy to ejectment action + mesne profits (usually measured by rental
                     value)
                     -analogy to protection the law gives a trade-name or trade secret is very
                     close (there may be no tangible loss other than the violation of a right)
                     -common denominator: the measure of recovery must be the benefits, or
                     net profits
                     Chancellor properly excluded profits generated from the operation of the
                     hotel

Raven Red Ash Coal Co. (446)

Cause of action: trespass to realty
                       -illegal use of an easement across P’s land to transport coal

Remedy:        quasi-contract (under the common count of use and occupation/for money had and
               received)
                      -under the common law, P could not waive the tort of trespass and sue in
                      assumpsit if the trespasser simply used the property of another to save
                      himself inconvenience or even expenditure of money.
                      -if P can only sue for tort damages, all she will recover is nominals.
                      -state supreme court allows P to recover in quasi-contract despite the
                      common law rule.
                      -value of D’s benefit was computed at one cent per ton of coal transported.
E.    Balancing The Hardships
Harrison (450)

Cause of action: private nuisance (shredding plant for recycling automobiles)
                       -a hammermill weighs 220 tons and measures 10' x 14' x 9'
                       -vibration, noise and air pollution
                       -complied with all zoning and pollution laws
                       -compare nuisance per se (imminent threat of harm) and nuisance in fact
                       (“a pig in the parlor”)

Remedy: damages and injunction
            -trial court issued permanent injunction (reversed)
            -also awarded damages ($176,956 = compensatory); ($353,912 = punitives)
                     -reversed
            -balancing the equities: factors:
                     -no imminent health threat
                     -no violation of health and safety regulations
                     -site zoned for industrial use (specifically, for shredder use)
                     -D obtained all governmental certificates and permits
                     -D entitled to a reasonable period of time to correct any defects not of
                     imminent or substantial harm
            -damages; measured in private non-permanent nuisances as loss of use (rental
            value) yields no damages here

Boomer (459)

Cause of action: private nuisance

Remedy: injunction and damages
             -common law rule in New York: whenever damages resulting from a nuisance is
             found not “unsubstantial,” viz., $100 a year, an injunction would issue without
             balancing the hardships
                     -defect: large disparity in economic consequences of the nuisance and of
                     the injunction: $185,000 = total of permanent damages to all Ps versus
                     closing the cement plant worth $45 million, employing over 300 people
             -options:       1) grant the injunction but postpone its effect to allow
                             Technological advances to abate the nuisance
                             2) grant the injunction conditioned on the payment of permanent
                             damages (court chooses this option)
      Dissent:       majority licenses a continuing wrong: you may continue to harm your
                     neighbor so long as you pay a fee for it = inverse condemnation (should
                     only be permitted when the public is primarily served)
                             -private property shall not be taken for public use without just
                             compensation
Goulding (465)
Cause of action: trespass to realty
                       -both parties claimed title to only site for new septic system
                       -Land Court granted title to Gouldings, but reserving easement to the
                       Cooks for maintenance of the septic system; appeals court affirmed;
                       -state supreme court: taking of private property for public use requires just
                       compensation; her, we have a taking of private property for private use;
                       -easements of necessity can only be granted in very limited cases; not here;

Remedy: injunction
             -preliminary injunction was denied, so Cooks entered on the land and installed the
             septic system;
             -courts will not enjoin truly minimal encroachments, especially when the burden
             on D would be very great (e.g., hypo re: 25 story bldg encroaching 4 inches)
             -upshot: Cooks must remove the septic system and pay damages;

F:     CERCLA:         Clarity Or Chaos?

Boeing Company (468)

Cause of action:       violation of federal statute (Comprehensive Environmental Response,
                       Compensation, and Liability Act of 1980 (CERCLA)
                       -hazardous waste site

Remedy: damages
            -response costs = costs of removal of hazardous substances from the environment
            and the costs of other remedial work;

Issue: whether “response costs” = damages covered by the insurance policies
       -policyholders seek indemnification for response costs;
       -“damages” is not defined in the policies;
       -insurers position: response costs are like injunction and restitution costs (equitable, not
       legal and so not “damages”);
       -supreme court of Washington: insurer’s definition of damages is overly restrictive;
       -Webster’s 3d defines “damages” as “the estimated reparation in money for detriment or
       injury sustained.”
       -most cases conclude that “damages” include cleanup costs; essentially compensatory
       damages for injury to property;

Dissent:       “Response costs” here are closer to restitution than damages
               -unlike damages, the amount of a restitutionary recovery can greatly exceed the
               value of any property harmed;
Chapter 6      SALES AGREEMENTS

A.     Specific Performance

Centex Homes Corp. (481)

Cause of action: breach of contract
                      -buyer breaches contract to purchase condo after he is transferred by his
                      employer to another city;

Remedy: either specific performance or liquidated damages (10% of purchase price)
              -is the sale of a condo a sale of realty or personalty (like a coop)? Realty (but later
              discussion suggests a condo is akin to personal property);
              -land is deemed unique, therefore legal remedy is by definition inadequate;
              -stronger case for specific performance if buyer seeks it since the buyer wants
              realty, while the seller (as here) merely wants money;
              -traditional rule granting non-breaching seller specific performance is grounded in
              the concept of “mutuality of remedies” which the Restatement of Contracts and
              the supreme court of NJ reject;
              -another theory: buyer’s breach = “equitable conversion”: court rejects;
              -court opts for “mutuality of obligation” theory: the modern view is that the rule
              of mutuality of remedy is satisfied if the decree of specific performance operates
              effectively against both parties and gives to each the benefit of a mutual
              obligation;
              -upshot: specific performance will no longer be automatically available to a seller:
              he/she must prove that the legal remedy is inadequate; here, damages are
              adequate;
              -liquidated damages are limited to moneys seller has (only $525 since buyer
              stopped payment on $6,870 check);

B.     Buyer’s Damages For Seller’s Breach
       1.    Tort v Contract

Selman (490)

Cause of action: fraud (in the inducement of a contract to buy a 160-acre tract of land)
               -Ps wanted a wood lot where they could cut wood and sell it;
               -no merchantable fire wood (4000 cords promised worth 50 cents per cord; only
               200 cords were there); insufficient water to irrigate 10 acres; gravel not available
               as promised;

Remedy: damages
            -trial court: no damages (land was worth the $2,000 Ps paid for it)(court applied
            the “out of pocket” measure of fraud damages: the difference between the contract
            price and the fair market value of the property at the time the contract was made)
               -Supreme Court of Oregon: Ps can recover damages under the “benefit of the
               bargain” measure of fraud damages (the difference in value between that which is
               actual an that which was represented to exist);
               -Because the out-of-pocket-loss rule determines the proximate result from the
               expectations of the fraudulent vendor rather than those of the innocent vendee, the
               vast majority of the jurisdictions have refused to embrace that rule;

       Dissent:
              -unjust to D for P to keep the 160-acre tract for $100; land had rental value of
              $150 per year;
              -supports the out-of-pocket rule in this case: land was worth what Ps paid for it;
              -difficult to understand how anyone, after inspection, could have been deceived
              about logged-off land; 40 acres are tillable land;

       2.      Expectancy Damages v. Rescission-Restitution

Horton (500)

Cause of action: seller breaches land sale contract

Remedy: specific performance (denied), so damages awarded
             -general measure of damages: benefit of the bargain = difference between the
             contract price and the fair market value of the land at the time of breach;
             -minority measure of damages: out of pocket (applied here since no bad faith) =
             restitution and reliance interests + cost of improvements

       3.      Measuring The Buyer’s Expectancy

Wilson(504)

Cause of action: breach of (oral) contract (buyer sues seller over contract re: used bricks)
                      -600,000 used uncleaned bricks sold for 1 cent per brick;
                      -Hayes paid $6000;
                      -Wilson delivered only 400,000 bricks to Hayes;

Remedy: damages?
            -trial court: non-breaching buyer (Hayes) entitled to $10,000 = interest;
            -appeals court: P entitled to recover $2000 (for 200,000 undelivered bricks), +
            damages measured as the difference between the market price (of 200,000 bricks
            = 5 cents per brick = $10,000) and the contract price (= $2000) = $8000 damages
            for non-delivery;
Texpar Energy, Inc. (506)

Cause of action: breach of contract seller breaches
                      -Murphy contracted to sell 15,000 tons of asphalt at $53/ton to TexPar
                      who contracted to sell those 15,000 tons to Starry at $56/ton
                      -Murphy repudiated contract

Remedy: damages
            -benefit of the bargain measure = difference between the market price ($80) and
            the contract price ($53) of the undelivered asphalt (14,310 tons) on the date of
            repudiation (measure applied by the trial court under UCC § 2-713 and affirmed
            on appeal);
            -general measure of damages is the amount needed to place P in as good a
            position as he would have been if the contract had been performed (the
            expectancy or “benefit of the bargain” measure);
            -irrelevant that P’s award, $386,370, far exceeds its out-of-pocket expenses
            ($191,000) and lost profits ($45,000) occasioned by the repudiation;
            -favoring benefit-of-the-bargain over out-of-pocket measure discourages sellers
            from repudiating their contracts and promotes uniformity and predictability;

Wolf (510)     S conveyed late + B lost a chance to resell
               K rejects the subj. for the obj. approach; B recovers open-mkt lost profit, nothing

Cause of action: breach of contract
                      -for the sale of realty for $1 million; buyers contracted to resell the
                      property for $1.8 million but, because of the delay of performance, the
                      prospective purchaser had withdrawn;

Remedy: specific performance + consequentials (damages for the delay in settlement)
             -$800,000 lost profits from the resale (denied to buyers)
             -$1 million = f.m.v. at time of breach
             -$1,445,000 = f.m.v. at time when the sale was finally completed;
             -trial court and appeals court: the measure of damages for breach of a contract of
             sale is the difference between the contract price ($1 million) and the f.m.v. of the
             property;
Hourihan (513)

Cause of Action:     breach by contractors in willfully failing to build the house facing the
                     direction the owners explicitly made clear to them
                             -contractors built house as “mirror image” and so house did not
                             take advantage of prevailing winds and view was worse

Remedy:       Trial court awarded no damages since it would amount to economic waster to tear
              down the existing house and rebuild it the correct way because value of house
              went up
              -court of appeals reversed:
                      -economic waste doctrine applies only to instances for unavoidable harm
                      that the builder had reason to foresee and it applies to commercial
                      buildings rather than residential dwellings.
                      -moreover, the builder’s breach was willful
              -Florida Supreme Court: no distinction between residential and non-residential
              construction;
              -irrelevant that breach was willful;

Oloffson (518)

Cause of action: breach of contract (by seller)
                      -Coomer, a non-merchant agreed to sell Oloffson, a merchant, 40,000
                      bushels of corn; the scheduled delivery dates passed with no corn
                      delivered; buyer (Oloffson) covered by purchasing corn elsewhere;

Remedy: damages
            -trial court calculated damages as the difference between the contract and the
            market prices on June 3, 1970, the day the seller first advised the buyer he would
            not deliver; affirmed on appeal;
                     -under the UCC, the non-breaching buyer was entitled to await
                     performance by the repudiating seller “for a commercially reasonable time:
                     (deemed by the court to be June 3, 1970), or cover (also on June 3, 1970)
                     and seek damages or recover damages for non-delivery; either way, fair
                     market value is determined as of June 3, 1970;
       4.      Buyer’s Special Damages: Lost Business Profits

AM/PM Franchise Association (525)

Cause of action: Ps (franchisees) sue ARCO for breach of warranties about oxinol blend;
                       -franchises were required to sell the oxinol blend in lieu of unleaded gas;
                       -oxinol caused poor engine performance and physical damage;
                       -so Ps suffered a precipitous drop in the volume of their business;

Remedy: damages
            (For lost profits, consequential and incidental damages during a 3 ½ year period
            when they received nonconforming gas)
            -trial court dismissed Ps’ action and they appealed;

Issue: how is breach of warranty treated under the UCC § 2-714?
       -the measure of damages for breach of warranty is the difference at the time and place of
       acceptance between the value of the goods accepted and the value they would have had if
       they had been as warranted, unless special circumstances show proximate damages of a
       different amount;
       -incidental and consequential damages may also be recovered (under 2-715)
       -confusion over what consequential damages actually are and what types of consequential
       damages are available in a breach of warranty case;
       -court: 3 types of lost profit are recoverable as consequential damages in a breach of
       warranty case:
               (1) loss of primary profits (difference between what the buyer would have earned
               from reselling the goods had there been no breach and what was earned after the
               breach occurred);
               -if buyer’s regular customers began to patronize a competitor’s business;
               -but, Pennsylvania disallows good will damages, finding them to be too
speculative
               (i.e., damages were not contemplated by the parties at the time the contract was
made);
               -“reason to know” test: if a seller knows of a buyer’s general or particular
               requirements and needs, that seller is liable for the resulting consequential
               damages whether or not that seller contemplated or agreed to such damages; so P
               need only prove that the damages were reasonably foreseeable at the time the
               agreement was entered into;
               -here, Ps entitled to show that customers did not buy their gas from 1982 through
               1985 because of the reasonable belief that the gas was defective and would harm
               their engines;
               -lost profits are the difference between what Ps actually earned and what they
               would have earned had D not committed the breach;
               (2) loss of secondary profits; and
               (3) a loss of good will damages (or prospective damages); (profits lost on future
               sales rather than on sales of the defective goods themselves)
       5.      The Economic Loss Rule

       6.      Reliance Recovery

Wartzman (542)

Cause of action: breach of contract and negligence
                      malpractice committed by law firm in incorporating a business
                      -violated securities’ law re: disclosures to prospective investors;

Remedy: reliance damages
              -expenditures incurred in reliance on the law firm’s creation of a corporation
              authorized to raise the $250,000 necessary to fund “Woody Hightower.”
              -jury verdict: $170,508.43 awarded to P as reliance damages; affirmed on appeal;
              -court: reliance damages: expenditures induced by reliance on the contract itself
              and rendered worthless by its breach;
              Restatement, 2d, Contracts, Sec. 349: reliance damages includes expenditures
              made in preparation for performance, or in performance, less any loss that the
              breaching party can prove the injured party would have suffered had the contract
              been performed (such proof avoids making D a guarantor of the success of the
              venture); here, Ds were unable to establish that the stunt was doomed to fail;
              -issue: were the reliance damages here foreseeable at contract formation? Yes
              -jury instruction re: mitigation of damages was correct; the party who is in default
              may not mitigate his damages by showing that the other party could have reduced
              those damages by expending large amounts of money or incurring substantial
              obligations; having rejected P’s request to assume the costs of an additional
              attorney, they are estopped from asserting a failure by P to reduce its loss;

C.     Seller’s Remedies
       1.      Damages, Damages

Abrams (547)

Cause of action: buyer breaches land sale contract (negligence in securing financing)
               -$25,000 = contract price of Angelo residence
                        -finally resold 10 months later for $165,000 (not fully furnished)
               -in reliance on the sale of the Angelo residence, the seller purchased the Thrasher
residence

Remedy: specific performance or damages
             -loss of bargain damages: difference between the contract price and the fair
             market value at the time of breach = $35,000 ($205,000-$170,000)
             -interest on loss of bargain damages (akin to prejudgment interest)
                        -if allowed, should run from the date of breach, not date of resale, but not
                        allowed here because amount uncertain (unliquidated)
                -consequential damages (interest on net proceeds): recoverable only when specific
                performance is awarded (denied here)
                -resale expenses occasioned by breach (termite service, broker’s commission)

Jagger Brothers (554)

Cause of action: breach of contract
                      -buyer breached contract for the purchase of yarn (yet to be manufactured)

Remedy: damages: how measure?
            (1) difference between the contract price and the market price at the time of
            breach? This is what the trial court awarded to seller: affirmed on appeal) Or
            (2) the difference between the cost of manufacturing and the contract price? Or
            (3) nominal damages only?

McMillan (555)

Cause of action: breach of contract (to buy a bulldozer)
                      -buyer stopped payment on check (for $9,825) since agreed delivery date
                      was past due;
                      -14 months later, seller sold the bulldozer for $7,230 at a private sale;

Remedy: damages
            -under Section 2-703 (seller’s remedies), seller may recover the difference
            between the resale price and the contract price (+ incidental damages less
            expenses saved)
            -issue: was the resale made at about the time when performance was due?
                    -resale must be as soon as practicable following notice of the buyer’s
                    refusal to accept tender of the goods;
                    -long delay is commercially unreasonable;
                    -here, resale of the bulldozer, 14 months after alleged breach, is of “slight
                    probative value” as an indication of the market price at the time of breach;
                            -in those 14 months, the market of bulldozers declined due to a
                            recession in the construction industry and high fuel prices;

Sprague (558)

Cause of action: breach of contract (for the sale of logs known as Flip Blowdown logs)
                      -buyer breaches; seller mitigates his damages by reselling the timber to 5
                      different purchasers at private sales;

Remedy: damages: how measured?
            -seller sought to recover the difference between the contract price ($197,204) and
               resale price ($144,924) = ($52,280) + incidental damages ($216,498);
               -this measure, applied by the trial court, is inappropriate, according to the appeals
               court, because seller failed to give buyer notice of intent to resell; so proper
               measure, under 2-708, is difference between the market price and the contract
               price; but resale price may be considered as evidence of the market value at time
               of tender under 2-708; so, $52,280, awarded by jury is affirmed on appeal;

Issue #1:
       did seller give the requisite notice of intent to resell goods as required under
       2-706(3)(seller’s remedies in a breach of contract case)?
       -this section makes clear that if the seller acts in good faith and in a commercially
       reasonable manner, she may recover the difference between the resale price and the
       contract price + incidentals, less expenses saved;
       -also, seller must give buyer “reasonable notification of his intention to resell.”
       -seller argues buyer failed to plead lack of notice or that buyer knew or should have
       known that seller was going to resell the logs;
                -court: buyer need not lack of notice; seller must prove he gave notice;

Issue #2:
       How does the UCC distinguish between incidental damages (that are recoverable) and
       consequential damages (which are not recoverable)?
       -incidental damages are expenses such as transporting, storing, or reselling the goods;
       -consequentials do not arise within the scope of the immediate buyer-seller transaction,
       but rather stem from losses incurred by the non-breaching party in its dealings, often with
       third parties, which were a proximate result of the breach, and which were reasonably
       foreseeable by the breaching party at the time of contracting;
               -court: loss of logging time is an inappropriate item of incidental damages
               (essentially a claim for lost profits); court characterizes this loss as consequential
               so reduces seller’s award by $171,200;
       2.      The Puzzle Of Seller’s Profits

R.E. Davis Chemical Corp. (562)

Cause of action:       breach of contract (by buyer) after paying a $300,000 deposit for medical
                       diagnostic equipment;
                       -seller resold the equipment to a third party for the same price;

Remedy:        -rescission (+ restitution)
               -breaching buyer sued for restitution (return of the $300,000 deposit);
               -seller claims offset as a “lost volume seller” (i.e., it sold as much as it produced
               and so lost a profit from the original sale);
               -district court ruled in favor of buyer, rejecting seller’s lost volume seller offset;
                        -$322,656 returned to buyer (deposit + prejudgment interest)
                 th
               -7 Cir: a lost volume seller can recover its lost profits under 2-708(2);

Issue: whether seller’s damages should be measured under 2-706 (contract price less resale
       price); or under 2-708(2)(lost profit): seller entitled to recover under 2=708(2);

       3.      Liquidated Damages

Nohe (568)

Cause of action: breach of contract
                      -for the sale of residential property (purchase price = $651,488.70)
                      between a corporate developer and consumers;
                      -Ps (buyers) concede they are the breaching parties’
                      -Ds (sellers) resale price exceeded Ps’ contract price by $193,995.30;

Remedy: damages (really restitution: return of deposit)
            -liquidated damages clause (permitted seller to retain a deposit of $79,027.40 (=
            10% of purchase + 50% of the extras);
            -Ps (buyers) seek return of their deposit on the ground that the seller suffered no
            damages; sellers contend that the lack of actual damages is irrelevant;
            -both trial court and appeals court return Ps’ deposits;
            -rule: although courts should determine the enforceability of a liquidated damages
            clause as of the time of the making of the contract, the modern trend (e.g., UCC
            and Restatement of Contracts) is towards assessing reasonableness either at the
            time of contract formation or at the time of the breach;
            -conclusion: a seller who has suffered no harm cannot retain a deposit even in the
            face of a liquidated damages clause;
       4.      Seller’s Restitution

Wellston Coal Co. (572)

Cause of action: breach of contract by buyer (D) to take P’s entire supply of coal for one year;
                      -buyer breached on May 13, 1891: D refused to take any more coal from P;
                              -during this period, the price of coal was cheap;

Remedy: seller seeks rescission + restitution (quasi-contract: quantum meruit)
              -trial court awarded nominal damages only;
              -appeals court: quantum meruit in lieu of damages is recoverable;

Issue: is quantum meruit limited by the contract rate when sought by the non-breaching party?
No
        -D received the coal during the season when the market was above the contract price;
        -P entitled to the contract price even though market value declined during the dull season
        when D repudiated the contract; otherwise, D is enriched at the loss and expense of P;

Algernon Blair, Inc. (575)

Cause of action: breach of a construction contract by prime contractor (Blair);
                      -construction of a naval hospital;
                      -Blair contracted with sub (Coastal) to perform steel erection;
                      -Blair materially breached by refusing to make payments for crane rental;
                      -Coastal stopped performance after 28% of its job was completed;

Remedy:        quasi-contract: quantum count of quantum meruit sought by non-breaching
               subcontractor (Coastal);
               -district court denied recovery to Coastal because it would have lost more if it
               were forced to complete the contract;
               -4th Cir: Coastal entitled to recover in quantum meruit despite a losing contract;
               -rule: the measure of recovery for quantum meruit is the reasonable value of the
               performance undiminished by any loss which would have been incurred by
               complete performance;
               -the contract price does not limit recovery in quantum meruit;
               -case remanded to determine reasonable value of labor and equipment furnished;
Dietz (577)

Cause of action: breach of an oral contract
                      -after father’s death, son (D) took charge of mother’s (P’s) assets;
                      -oral agreement: son would support mother for the rest of her life if she
                      would buy a duplex and have title conveyed to son and P as joint tenants;
                      -son denies making this oral agreement;
                      -trouble started when son married Virginia who fought with her mother-in-
                      law; finally, son asked his mother to leave the house;
                      -court ruled that D breached his oral promise to support P;

Remedy: accounting of profits + recovering title to realty - constructive trust
             -took into account: rents collected by Ds, the reasonable value of D’s use of the
             premises, expenditures incurred by D and the reasonable value of D;s services;
             -court awarded P $1,651.48 with interest and awarded her possession and title of
             the premises free of any claim or interest by Ds;
             -on appeal, Ds argue parol evidence cannot be used to establish an express trust,
             create a condition subsequent or otherwise vary the terms of a deed;
             -state supreme court affirms: the parol evidence rule does not apply to
             constructive trusts (i.e., they are exempt from the statute of fraud);
                     -a fiduciary relationship in a strict sense is not a prerequisite for a
                     constructive trust: any relationship giving rise to justifiable reliable or
                     confidence is sufficient (P relied on her son for business advise and
                     counsel);

D.     Specific Performance Revisited

Bander (579)

Cause of action: breach of contract to purchase a rare auto for $40,000 ($5,000 deposit);
                      -dealer unable to obtain the title documents;
                      -jury awarded P (buyer) damages; jury also found that the auto was
                      unique;

Remedy:        damages under § 2-713 (applicable to a buyer who does not cover; the difference
               between the market price when the buyer learned of the breach and the contract
               price); jury awarded buyer $20,000;

Issue: how does the UCC § 2-176(1) handle specific performance of a contract for the same of
       unique goods with a fluctuating price? Specific performance may be decreed where the
       goods are unique or in other proper circumstances;
       -P seeks specific performance in the form of a constructive trust impressed upon the
       proceeds of sale ($185,000 more than the $40,000 contract price) + interest;
                                     Remedies Handout #21

Prima facie case for fraud

Scienter: knowledge of the falsity
        -when can nondisclosure satisfy the scienter requirement?
                 -if facts materially affect the value of the property and D’s knowledge of such
                 facts are unknown or beyond the reach of P
                 -distinguish between active concealment (which is more culpable) and mere non-
                 disclosure
Material misrepresentation of material fact: duty to disclose material facts
        -a fact is material if it substantially affects value
        -materiality is a question of law
Intent to induce reliance
Reasonable reliance
Resulting damages

Injury is part of the prima facie case for fraud. Therefore, nominals not recoverable.
How are fraud damages measured? Either of two ways:
         -out of pocket = difference between the contract price and the fair market value of the
         property;
         -benefit of the bargain = difference between the fair market value and the value the
         property would have had the representation been true
When P is the buyer and not the seller, P should waive the tort and sue in assumpsit
         -quasi-contract (force D to disgorge profits)
Does every element of fraud have to be proved to seek rescission? No, don’t need scienter to
rescind. After all, rescission is available for innocent misrepresentation. The only difference
between fraud and innocent misrepresentation is that fraud requires a showing of scienter. Fraud
is a tort; innocent misrepresentation is not: it is a defense to specific performance of a contract.
If P rescinds based on innocent misrepresentation, no consequentials are recoverable. If P
rescinds based on fraud, consequentials (limited only by proximate cause) are recoverable.

Range of remedies for fraud: damages, rescission, quasi-contract (D must disgorge profits),
                             constructive trust or equitable lien over new form of property
                             -so fraud and conversion support the widest range of remedies
Chapter 7             EMPLOYMENT AGREEMENTS

A.     Employer’s Remedies

       1.      Employer’s Damages

Roth (586)

Cause of action: employee breaches a one-year employment contract
               -employee worked for 6 ½ months and was paid for services as a hairdresser
               -employee left for better pay ($100/week = $25/week more)
               -it is rare for an employer to sue a breaching employee for damages

Remedy: how are the employer’s damages to be measured?
            -trial court: nominal damages only (proof is vague and speculative)
            -court of appeals: employer’s damages = cost of obtaining equivalent services in
            the marketplace and the best way to measure this is by how much the breaching
            employee is making elsewhere
                     -criticism: is this damages or restitution or is it that the best measure of
                     damages is the breacher’s unjust enrichment?; if so, call it what it is:
                     restitution

       2.      Employer’s Restitution

Snepp (589)

Cause of Action: breach of contract
                      -Snepp breached his agreement to obtain CIA approval before publishing a
                      book based on his experience with the CIA (whether classified or not);

Remedy: constructive trust on all profits Snepp earned from the publication of his book;
             -district court granted a constructive trust; the appeals court denied it based on
             Snepp’s 1st Am right to publish unclassified information;
             -also, to enjoin future breaches of Snepp’s agreement;
             -Supreme Court: Snepp violated his trust whether his book actually contained
             classified information; vital national interests may be harmed even by unclassified
             information;
             -proof to sustain punitive damages might force the Government to disclose some
             of the very confidences that Snepp promised to protect;
             -constructive trust is the best remedy here for the breach of trust;
             -Dissent: no constructive trust unless Snepp disclosed classified information;
                      -the Government’s censorship authority: limited to the excision of
                      classified information;
                      -punitive damages is better since a constructive trust depends on the
                      concept of unjust enrichment rather than deterrence and punishment;
                      -so, the legal remedy of punitive damages is adequate; no need for the
                      equitable remedy of the constructive trust;
                      -here, constructive trust acts as a species of prior restraint on a citizen’s
                      right to criticize his government;

       3.     Employer’s Injunctive Relief

Beverly Glen (595)

Cause of action:      Anita Baker breaches her employment contract (with Beverly Glen) by
                      leaving to work for Warner for more money

Remedy: Beverly Glen seeks a negative injunction first against Ms. Baker, then against Warner
            -both seek to keep Ms. Baker from working for Warner and both are denied
            -in California courts will not enjoin the breach of a personal service contract
            unless the service is unique in nature and the performer is guaranteed annual
            compensation of at least $6,000;
            -the bad news for Beverly Glen is that no injunction will issue, but the good news
            is that damages are still an option: i.e., the legal remedy is adequate.

       4.     Employer’s Liquidated Damages

Vanderbilt (600)

Cause of action: breach of an employment contract
                      -D was employed as P’s head football coach for 5 years;
                      -contract extended 2 years (to January 5, 1998)
                      -12/12/94: D left to take job as LSU’s head football coach;

Remedy: validity of a liquidated damages clause in the employment contract
             -an amount equal to his base salary (net rather than gross pay), less deductions,
             multiplied by the number of years remaining on the contract;
                       -net salary at breach = $91,781.60/year; total =$281,886.43;
              -it is valid if the amount stipulated is reasonable in relation to the amount of
              damages that could be expected to result from the breach; and that such damages
              would be indeterminate or difficult to pin down;
              -court: the liquidated damage provision is not an unlawful penalty and the
              established damages are reasonable when compared to the potential actual
              damages to be suffered by P on account of D’s breach;
                       -court itemizes damages P sustains in having to suddenly replace a head
                       football coach;
              -court rejects D’s claim that the court should not consider consequential damages
              sustained by P; consequentials are recoverable provided they were contemplated
              by the parties;
B.     Employee’s Remedies

       1.      Employee’s Damages And Reinstatement

Dixie Glass (606)

Cause of action: breach, by employer, of a 5-year employment contract
                      -with an option for 3 additional 5-year terms;

Remedy: damages
            -are damages limited only to the those proven to the date of trial or is the non-
            breaching employee entitled to recover his damages for the full term? Full term;
            -recovery of anticipatory damages in an employment case is akin to recovery for
            diminished earning capacity in a personal injury case;
            -P was 58 years of age at the time of breach: unlikely to find comparable work
            -jury found that P could have earned $78,000 in the interim; subtracted from
            $156,000 leaves $78,000 which must be discounted to present value;

       2.      Employee’s Avoidable Consequences

Parker (613)

Cause of action: breach, by employer, of an employment contract
                      -20th century cancelled”Bloomer Girl” but offered “Big Country” instead
                      at the same salary ($750,000)
                      -differences: song and dance role v straight dramatic role; LA v Australia

Remedy: damages
            -duty to mitigate: was Shirley MacLaine required to take the substitute role in
            order to mitigate her damages? No, the employee’s rejection of other available
            employment of a different or inferior kind may not be resorted to in order to
            mitigate damages; trial court affirmed;
            -Dissent: it has never been the law that the mere existence of differences between
            tow jobs in the same field is sufficient, as a matter of law, to excuse an employee
            wrongfully discharged from one from accepting the other in order to mitigate
            damages; no summary judgment or whether roles were substantially different;
       3.      Contract v. Tort Interlude: Exceptions To The At-Will Doctrine

Foley (617)

Cause of action: the tort of wrongful discharge in violation of public policy
                       -dismissed since P blew the whistle on a superior’s wrongdoing internally;
                       since did not go to outside authorities, no public interest implicated;
               -breach of an implied-in-fact contract:
                       -based on the conduct of the parties: based on representations of job
                       security and termination procedures contained in company handbook;
                       -P entitled to go to trial on this claim;
               -breach of the implied covenant of good faith and fair dealing:
                       -issue: whether breach of this covenant sounds in tort or in contract
                               -sounds in contract: P entitled to go to trial to show bad faith
                               termination;

Remedy: damages
            -case does not address how damages might be measured in a wrongful discharge
            case; reinstatement not an option, though;

       4.      Employee’s restitution

Chambliss (630)

Cause of action:      client wrongfully fires his attorney after attorney has performed substantial
                      work for the client
                      -but client has both the power and the right to fire his attorney

Remedy:        rule of thumb: when the contract is not a profitable on (i.e., the attorney has billed
               more hours than the contract would allow), it is better to essentially rescind the
               contract and sue in quantum meruit (since billable hours x hourly rate exceeds the
               contract amount)
                       -public policy carves out an exception in the case of a client firing her
                       attorney: quantum meruit is limited by the contract amount
                               -any other rule creates incentives for attorneys to get themselves
                               fired after they have billed more hours than the contract allows;
Runyan (633)

Cause of action: failure of consideration (akin to breach of contract); fraud; unjust enrichment

Remedy: rescission of a contract of employment

Issue: How are consequential damages measured when P seeks rescission based in turn on
       fraud; breach of contract or mistake/innocent misrepresentation? Fraud: consequentials
       limited by proximate cause; breach of contract: consequentials limited by foreseeability;
       mistake or innocent misrepresentation: no consequentials. Logic: fraud = high level
       culpability; breach of contract = mid level culpability; mistake or innocent
       misrepresentation: low-level culpability.

Lynn (640)

Cause of action: employee breached an employment contract, yet sues for relief
                      -employee threshed the wheat and oats but refused to thresh the flax (he
                      was lax as to the flax)
                      -loss of grain through exposure (deemed unforeseeable: think,
                      consequentials)

Remedy: at common law, a breaching party could not sue for any relief
             emerging trend (in 1915), that is), even a breaching party is entitled to recover
             restitution which is measured as the excess of benefit conferred over injury caused

       5.      Employee’s Remedies: Recap

Freund (643)

Cause of action: breach of contract

Remedies: damages
             -how measured? Lower court: cost to publish book ($10,000): why is this in
             error?
             -damages are measured by P’s loss; not by what D saved by the breach
             -appeals court: royalties (speculative?)
             -nominal damages are recoverable for breach of contract
             -measure of general damages: benefit of the bargain = difference between the
             contract price and the fair market value of the property at the time of breach;
             -consequentials: those foreseeable at the time the contract was formed
             -3 interests the law protects in contracts:
                     -restitution = return of the manuscript
                     -reliance = preparation to perform contract (none here)
                     -expectation = $2,000 advance 9satisfied); royalties (speculative)
Chapter 8      THE BORDERLAND OF CONTRACT AND RESTITUTION

A.     Disqualifying the Plaintiff For Rescission-Restitution

       1.      Election Of Another Remedy

Gannett Co. (649)

Cause of action: fraud in the inducement of a contract (a tort)

Remedy: rescission (disaffirmance) v. damages (affirmance of the contract)
              -P cannot rescind after electing to affirm the contract despite the fraud

Issue: Can a victim of fraud make an election of remedies (between rescission and damages)
       even before filing suit? Yes, an election may occur by P’s conduct: P undertook major
       changes in the newspaper: going to cold type from hot metal; price increase;
       discontinuation of 16 syndicated features and adding 48 others; shift in editorial policy;
etc.

       2.      Lack of Injury

Earl (659)

Cause of action: fraud in the inducement of a contract (purchase of a mink coat)
              -why did Barbee seek rescission?
                       -because he found out about Saks and Mrs. Earl’s side deal?
                       -or because he found out Mrs. Earl was seeing other men?
              Fraud in the inducement of a gift (from Barbee to Mrs. Earl)
                       -the element of a complete gift was destroyed
              A basic mistake in the making of a gift

Remedy: rescission
              -can a buyer rescind a contract when he/she receives something substantially
              different even if worth more?
                      -majority says yes (both contract and gift were voidable by virtue of fraud)
                      -CJ Traynor in dissent says not (both parties were fur-coat minded)

Harper (664)

Cause of action: fraud in the inducement of a contract
                       -Jere did not tell owner (Tesar) that P offered $7000 for the entire farm (80
                       acres) and Jere did not transmit P’s offer to Tesar;
                       -P paid $6000 for 17 acres and Jere’s son, Adametz, became owner of the
                       other 63 acres for only $500;
                       -Jere also collected a commission of $325 for the sale
                      -bottom line: Jere and Walter, by their fraud, acquired 63 acres for $175;
                      -Jere acted with the intent of making a secret profit for himself
                      -Jere was Tesar’s (seller) agent, not P’s (buyer): Jere violated Tesar’s trust
                      -P sustained no loss, but fraud requires proof of injury, a substantial
precuniary
                      loss: otherwise there is no tort;

Remedy:       for rescission, don’t need pecuniary injury or loss
              -equity will assist the defrauded person by fastening a constructive trust on the
              property;
              -the fact that Tesar has not acted to right the wrong done to him should not bar P
              from having a remedy for the wrong done to him;
              -upshot: when P pays $1000 more, the court will order Walter to convey the 63
              acres to P

Dissent:      D owed no duty to refrain from buying the farm himself or to disclose that he had
              done so, as long as D was not P’s agent
              -neither D’s conduct nor his silence about it = actionable fraud
              -P has failed to establish any pecuniary loss whatsoever

B.     From Defective Negotiations To Plain Overreaching

       1.     Seller’s Failure To Disclose

Reed (668)

Cause of action: fraud in the inducement of a contract
                       -failure to disclose that house was the site of a multiple murder
                       -when is a misrepresentation material? When it materially affects value
                       -fair market value of the house is $65,000 (if buyer knows of murders)
                       -buyer paid $76,000 (not knowing of the murders)
                       -what if fears are unreasonable (e.g., AIDS patient lived there)?

Remedy: rescission + consequentials

       2.     Undue Influence

Odorizzi (672)

Cause of action: undue influence in executing resignation agreement



Remedy: rescission
Case is instructive in comparing and contrasting:
        duress: also known as menace; the threat of duress must be unlawful
        fraud: involves conscious misrepresentation or concealment or non-disclosure of material
        fact which induces the innocent party to enter the contract;
                -constructive fraud: entails beach of fiduciary duty
                        -no confidential relationship between this employer and employee
        mistake: the material facts of the transaction were unknown to the parties
        undue influence:
                -persuasion which tends to be coercive in nature; persuasion which overcomes the
                will without convincing the judgment; high pressure; taking an unfair advantage
                of another’s weakness of mind; don’t need a confidential relationship; cases
                usually involve the elderly, sick or senile; mismatch between the parties
                -7 factors set out in case

       3.      Duress–Business Compulsion

Selmer (677)

Cause of action: breach of contract
                      -Selmer (P) = subcontractor; Blakeslee-Midwest (D) = general
                      -under contract, P was to receive $210,000 for erecting concrete materials
                      supplied to it by D; D breached the contract: D was tardy in supplying P
                      with the materials; P still allowed D to complete the work if D would pay
                      P for the extra costs of completion due to D’s defaults; at completion, P
                      demanded $120,000 but accepted $67,0-00 because $67,000 because P
                      was in desperate financial straits;

Remedy: general damages + consequentials + punitives

Issue: whether there is a triable issue as to whether the settlement agreement is invalid because
       procured by “economic duress”: no economic duress here
              -if you exact a promise by means of a threat, the promise is unenforceable;
              -P argues that D said “give up $53.000 of your claim for extras or you will get
              nothing” or “I promise to pay you $67,000 for a release of your claim”
              -a vast number of contract settlements would be subject to being ripped open upon
              an allegation of duress if P’s argument was accepted;
              -the Alaska Packers’ Ass’n case represents a good example, however, of economic
              duress: sailors had employer over a barrel at a time when it was impossible for the
              employer to secure other men in their places;
              -rule: financial difficulty cannot by itself justify setting aside a settlement on
              grounds of duress;
                       exception: when P’s financial distress is due to D’s conduct )does not
                       apply here where P could have simply walked away from the contract

       4.      Unconscionability
Vockner (682)

Cause of action: breach of contract

Remedy: specific performance
             -unconscionability as an affirmative defense to specific performance
             -3 kinds:
                     -procedural: wrongful practices inducing the contract
                     -substantive: harshly unfair contract terms
                             -unavailable if contract already fully performed
                     -remedial: wrongful practices in enforcing the contract
             -court has 3 options when faced with unconscionable contract:
                     -refuse to enforce the contract altogether
                     -omit the unconscionable portion
                     -rewrite the contract to cure unconscionability
                             -most radical since new contract may not correspond to either
                             party’s intent

C.     Contract Not formed

       1.      Required Writing Missing

Schweiter (688)

Cause of action: buyer breaches oral contract for the sale of land
                      -buyer so far has paid $5,000 as a down payment and wants it back
                      -seller, ready, willing and able to perform the contract, seeks to keep the
                      down payment

Remedy:        is breaching buyer entitled to return of down payment because the contract is
               unenforceable under the statute of frauds? Not is the seller has not repudiated the
               contract (in other words, the contract is enforceable to the extent it has been
               performed)
                       -but see dissent: the contract is void for all purposes so would be unjust
                       enrichment were the seller to keep the down payment

       2.      Lack of Capacity to Contract

Halbman (691)

Cause of action:       minor, who entered into contract to purchase a car, seeks to disaffirm
                       (rescind?) contract
                               -contract entered into with a minor is voidable at minor’s option
Remedy:         when a minor disaffirms a contract for the purchase of an item, he need only offer
                to return the property remaining in his hands without making restitution for any
                use or depreciation
                        -disaffirmance is permitted even where such return cannot be made
                        -rule applies to the purchase of items which are not necessities
                                -for necessities, minor liable for fair market value of goods,
                                regardless of the contract price
                        -rule does not apply where the minor has misrepresented his/her age or
                        there is willful destruction of the property (but adult’s remedy is in tort,
                        not contract)

D.     Ground For Restitution

       1.       Deficient Consideration

Johnson (695)

Cause of action: breach of contract
                      -on 10/7/80, buyers (Johnsons) purchased new 1981 Chevrolet Silverado
                      half-ton diesel pickup truck for $11,119.65
                      -car troubles were repaired but problems continued;
                      -on 11/30/80, buyers sought to revoke acceptance; sought refund of
                      purchase price; tender refused by GMC and buyers continued to use the
                      truck after a lawsuit was filed;
                      -trial court ruled revocation was justified and occurred within a reasonable
time;

Remedy: damages
            -damages for a buyer’s use of goods after revocation of acceptance
            -trial court awarded GMC $4,702.94 setoff amount because buyers continued
            using the truck after revocation (14,619 miles after revocation);
            -issue: did trial court err in awarding GMC a setoff?
            -appeals court: after revocation, any depreciation must be borne by seller;
            -buyers exercised none of the options available to them under the UCC;
            -UCC: after rejection, any exercise of ownership is wrongful as against the seller;
            -use of goods after revocation can amount to an acceptance of ownership and
            invalidate a cancellation of a sale; not the case here
            -common law required buyers to elect between rescission and damages;
            -there is much support for awarding a setoff for continued use after revocation;
            -there is no specific provision in UCC for an offset award for wrongful use;
            -after rescission, buyer holds the goods as a bailee for the seller;
            -holding: seller entitled to a setoff for the buyers’ continue use of truck;
            -setoff = restitution for the fair value of any benefit obtained by buyer;
            -court reject’s GMC’s pure depreciation method of fixing the offset;
            -proper setoff is the value of use of the goods received by buyer after revocation;
               -buyers drove the truck 14,619 miles at 10.7 cents per mile after revocation, so
               GMC’s setoff = $1,564.23;
               -to recover prejudgment interest, amount owed must be liquidated (certain);
                       -buyer entitled to prejudgment interest from the date revocation is
                       attempted (from 11/30/80 to date of judgment);
                       -interest to be calculated upon the entire purchase price from date
                       revocation was attempted until date of judgment at rate of 10%;

       2.      Mistake

Renner (702)

Cause of action: breach of contract (but by whom?)
              -Ds acquired leases of unimproved desert land in Arizona;
              -Ps were interested in commercial cultivation of jojoba;
              -Ps entered into contract to buy Ds’ leases for $222,200, with understanding there
              was adequate water to sustain jojoba production; $80,200 = down payment;
              -Ps spent $229,000 developing the land before 5 test wells convinced Ps the
              aquifer was inadequate for commercial development of jojoba;

Remedy: Ps sought rescission while Ds sought specific performance
             -court: Ps entitled to rescission based on mutual mistake of fact and failure of
             consideration;
             -Ds ordered to pay Ps $309,849.84 ($80,200 = down payment + $229,649.48 =
             cost of developing the land) + costs + attorney’s fees;
             -court of appeals affirmed;
             -Arizona Supreme Court: mutual mistake of fact is a legal basis for rescission;
                     -adequate water supplies = basic assumption of contract
                     -contract voidable since mistake materially undermined contract
                     -Ds challenge the $229,649.84 awarded as consequential damages;
                     -mutual mistake implies freedom from fault, so no consequentials
recoverable;
                     -But, P is entitled to restitution for any benefit that he has conferred on the
                     other party by way of part performance or reliance;
                     -issue: proper measure of the restitutionary interest here;
                     -to get restitution, Ps must reimburse Ds for the fair market value of the
                     use of the property while in their possession = reasonable rental value;
                     -then, Ps entitled to sum equal to amount by which Ds’ property has been
                     enhanced in value by Ps’ efforts (the court calls this the reliance interest
                     but isn’t still restitutionary since Ds are directly benefitted by Ps’
                     improvements?)

Terra Nova (706)

Cause of action:       mistake in paying out insurance proceeds (akin to mistake in performance
                       of a contract)
                               -mistake means a state of mind not in accord with the facts

Remedy: rescission

No relief for mistake of law (paying off the claim to avoid charges of bad faith)
Why no mistake of fact? Ps knew they were unsure of Scharbarth’s claim; Ps were conscious of
the fact that Scharbarth’s claim might have been fraudulent and they nevertheless paid him and
an innocent mortgagee. In reliance on the insurance settlement, Associates changed its position
(by giving up any effort to find what was left of the truck).

Messerly (710)

Cause of action: mutual mistake in the purchase of real property
                     -the Messerly’s grantor installed a nonconforming septic system without a
                     permit prior to the transfer of the property to the Messerlys in 1971;
                     -Pickleses (buyers) found raw sewage seeping out of the ground;
                     -Board of Health condemned the property;
                     -trial court: buyers have no cause of action;
                     -court of appeals: the mutual mistake between the buyers and sellers went
                     to a basic, as opposed to a collateral element, of the contract, and that the
                     parties intended to transfer income-producing rental property but, in
                     actuality, the buyers paid $25,500 for an asset without value;
                     -Supreme Court of Michigan: mistake went to the essence, so rescission
                     granted;

Remedy: rescission of the contract
              -seller argues the parties’ mistake relates only to the quality or value of the realty
              and that such mistakes are collateral and do not justify rescission;
              -reviews Sherwood v. Walker, the famous “barren cow” case: difference between
              mistakes affecting the essence of the consideration (rescission granted) from those
              which go to its quality or value (no rescission);
              -here, both parties mistakenly believed that the property would generate income as
              rental property: this mistake affects the very essence of the consideration;
              -rule: the better-reasoned approach is a case-by-case analysis whereby rescission
              is indicated when the mistaken belief relates to a basic assumption of the parties
              upon which the contract is made, and which materially affects the agreed
              performance of the parties;
              -rescission is not available to relieve a party who has assumed the risk of loss in
              connection with the mistake;
              -here, dealing with a mistake by two equally innocent parties, which blameless
              party should assume the loss resulting from the mistake? The risk should be
              borne by buyers;
              -ask whether the parties have agreed to the allocation of the risk between
              themselves; yes, the incorporation of the “as is” clause in the contract;
                -no rescission

Russell (714)

Cause of action: Mistake in the purchase of flight insurance
                      -T-20: in vending machines: covered risks while aboard plane for duration
                      of round trip up to 12 months
                      -T-18: policy actually purchased: covered all risks during life of policy
                      (not sold in machines. Purchased four days worth of insurance: expired 12
                      hours before Mrs. Russell’s death

Remedy: reformation of the contract of insurance (denied)
             -mistake in integration assumes the writing does not reflect the underlying intent
             of the parties: reformation merely corrects the writing to correspond to the
             underlying agreement
                     -trial court “reformed” the contract and awarded $20,000
                     -Mr. Russell appealed, seeking $90,000, the amount recoverable under the
                     T-20
             -here, no meeting of the minds on any policy other than the T-18: no mutual
             mistake; no constructive or equitable fraud because Miss Fletcher owed no duty to
             explain details of all eleven policies offered;

       3.       Illegality–Violation Of Public Policy

Bovard (718)

Cause of action:       contract for the sale of a business rendered unenforceable when a change
                       in the law made the subject matter of the contract illegal
                               -corporation made jewelry and drug paraphernalia (roach clips and
                               bongs used to smoke marijuana and tobacco
                               -the sale of drug paraphernalia was not illegal when the contract
                               was made but such sale was illegal when contract was to enforced
                               (court deems this fact immaterial)
                               -the parties were found to be in pari delicto (both equally guilty)
                                -when does a contract violate public policy (as opposed to a
                                statute)? 3 factors: the nature of the conduct, the extent of public
                                harm and the moral quality of the conduct

Remedy: no relief: the court leaves parties to an illegal contract where it finds them

R.R. (721)

Cause of action: breach of contract
               -validity of a surrogacy parenting agreement between father and mother
               -a child was conceived through artificial insemination after the two had executed
              the agreement; the mother received $10,000 “for services rendered in conceiving,
              carrying and giving birth to the Child.”
              -under the agreement, the father was to have custody of the child but the mother
              would maintain some contact with the child after the birth;
              -mother changed her mind and decided to keep the child;
              -father obtained preliminary order awarding him temporary custody;
              -issue: the enforceability of the surrogacy agreement under the Massachusetts law;
              -agreement stipulated that if mother attempted to obtain custody or visitation
              rights, she’d forfeit her rights under the agreement and must reimburse father;
              -no evidence of undue influence, coercion or duress;
              -is such a contract unconscionable? No
              -Matter of Baby M (best known opinion on subject by NJ Supreme Court):
              invalidated a compensated surrogacy contract because it conflicted with the law
              and public policy of the state;
              -no statute governs the consequences of the artificial insemination of a surrogate
              with the sperm of a fertile husband:
                       -distinguishable from surrogate fatherhood;
              -guidance from adoption statutes: a mother should have time after a child’s birth
              to reflect on her wishes weighs heavily on whether to give effect to a prenatal
              custody agreement;
              -statutory ban on payment for receiving a child through adoption suggests that a
              mother’s agreement to surrender custody in exchange for money should be given
              no effect in deciding the custody of the child;
              -conclusion mother’s consent to custody in the agreement is ineffective;
              –moreover, the payment of money to influence the mother’s custody decision
              makes the agreement as to custody void;

Remedy: specific performance (denied, based on public policy)
             -that mother relinquish physical custody of the child when born;
             -compensated surrogacy arrangements raise the concern that, under financial
             pressure, a women will permit her body to be used and her child to be used and
             her child to be given away;
             -such agreements are legal if no compensation is paid beyond pregnancy-related
             expenses;
             -any custody agreement is subject to a judicial determination of custody based on
             the best interests of the child;
             -a surrogacy agreement judicially approved before conception may be a better
             procedure;

				
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