Remedies II Overview Course Outline

I. Injuries to persons A Personal injury 1. Economic damages a. Lost income, lost wages. Lost wages are an item of special damages calculated by plaintiff's earnings times work expectancy. Work expectancy is determined by: 1. Mandatory retirement age 2. Plaintiff's pre-injury intentions 3. Work-life expectancy tables prepared by the federal government. b. Loss of earning capacity. Plaintiff's earnings had he survived in good health, times work life expectancy, discounted by present value. If plaintiff owns a business and is the predominate factor in the business then she can recover the business's lost earnings as a measure. If the plaintiff is not the predominate factor, lost earnings is the measure. 1. Age 2. Life expectancy 3. Health 4. Habits 5. Occupation 6. Talent 7. Experience 8. Training 9. Industry There is no requirement that the plaintiff has actually engaged in the field. C. Medical expenses 1. Fair 2. Reasonable 3. Necessary 2. Non-economic damages a. Pain and suffering 1. A plaintiff cannot suggest an amount for pain and suffering. 2. A dollar amount can be put on day-to-day suffering. 3. No pain or suffering if plaintiff is a paraplegic. 4. Monetary award is not discounted for present value. Loss of enjoyment of life, lost pleasure of life, inconvenience, disfigurement, permanent injuries. Restitution is based on unjust enrichment. It is generally not available in personal injury. Collateral source: If a collateral source (i.e., insurance) is wholly independent from the tortfeasor, then it will not offset the award. Avoidable consequences: Must take reasonable steps after the tort has been committed to minimize the damages. B Wrongful life, wrongful birth, wrongful conception 1. Wrongful life is a claim bought on behalf of a child claiming the child should never have been born, for medical and living expenses. Not allowed in the majority. 2. Wrongful birth is bought by the parents for emotional distress and additional costs in raising the child. Extraordinary parental care costs can be bought: a. Made necessary by the child's condition b. Exceed those ordinarily rendered by parents of a normal child c. Reasonably susceptible to valuation. Emotional distress is only recoverable if it results in tangible pecuniary damages (costs of counseling). 3. Wrongful conception arises when there is a botched sterilization. Majority recognizes. Recovery depends on reason for sterilization. If it was for health concerns, recovery may not be possible. If it was because no children were wanted, recovery can be the cost of caring for the child C. Wrongful death and survival 1. Wrongful death - bought by the decedent's heirs. a. Sea-Land formula for measure of damages 1. Loss of support - All the financial contributions the decedent would have made to the family. 2. Loss of services - child suffers loss of training, education, maintenance and guidance. Adult suffers loss of homemaking skills. 3. Loss of society - Love, affection, care, attention, companionship, comfort and protection (but not mental anguish). 4. Funeral expenses. b. Value of non-working spouse 1. Value of services provided 2. What could the spouse earn on the open market. c. Loss of consortium - not available to children 2. Survival action - claims decedent has before death 3. Civil rights actions - no wrongful death action; just survival. a. Medical expenses b. Burial expenses c. Pain and suffering d. Loss of earnings e. Victim's loss of consortium f. Punitive damages Spouse can recover for loss of consortium. D. Injunction 1. Inadequacy of legal remedy (assault, battery, murder). Equity lacks jurisdiction to enjoin a crime. Contract remedies II. Recession A There must be grounds to rescind. Fraud, mistake, unconscionability, duress. 1. Fraud - out of pocket expense. B Prompt notice of recession. 1. Must be within a reasonable time. 2. Time starts when injured party knows of fraud. 3. Will depend on case - pendency of settlement negotiations - whether rescinding party contract C. No affirmation of contract. 1. Express affirmation. 2. Implied affirmation when dominion and control is exercised over the subject matter of the contract. However, a party does not have to walk away and leave a business to waste. Party acts as bailee. Can close business if notice is given to other party. D. Ability to return to status quo. Must restore what was substantially received in substantially the same condition. - Not strictly enforced - Depreciation not calculated 1. Restitution of consideration under contract 2. Consequential damages - must be necessary to afford rescinding party complete relief - must be based on the paries misconduct - fraud, misrepresentation, failure of consideration. 3. Adjustment based on unjust enrichment a. Real estate transaction. Buyer must pay reasonable rental value. Seller must pay reasonable value of improvements. Measured by extent to which property increased in value. Seller must pay interest. b. Sale of business. Lesser of reasonable rental value or profits. Seller must pay interest from date buyer money received and reasonable value of improvement. A seller does not agree to a recession by taking over a business the buyer walks from. E. Disaffirmation must be: 1. Binding 2. Unequivocal 3. Accepted Modernly, no distinction between legal and equitable recession. III. Misrepresentation/Deception A material misrepresentation of a material fact. Must have 1) knowledge of the falsity; 2) intent to induce; 3) actual and justified reliance; 4) proximately caused damages. Material misrepresentation is the equivalent of a non-trivial misrepresentation. A material fact: - basis of the bargain. Must relate distinctly and directly to the contract and directly to its essence and substance. - subjective test - the contract would not have been made if not for the misrepresentation - objective - majority. It would induce a reasonable person to manifest his assent or if the maker knows that it would be likely to induce the recipient to do so. A Benefit of the bargain - value of what property was represented as less actual value B Out of pocket - what was paid less what the property was actually worth. C. Consequential. Personal injuries, damage to other property, expenses to which he has been put, provided they are regarded approximate results of misrepresentation. D. Cost to bring the property to the standard represented, if amount is less than damages for out of pocket. E. California - out of pocket, plus reliance, loss of use and enjoyment, and profits (out of pocket plus) F. Recision - no requirement that the party seeking recision based on fraud have suffered any pecuniary loss. Intentional Negligent - occurs when someone asserts a fact with no real basis for the fact, and it is wrong. Innocent - occurs when someone believes a fact is true but it turns out to be false. - recision and restitution - damages - out of pocket, in some jurisdictions. Majority: no damages. Nondisclosure. Nondisclosure of a material fact. 1. Fiduciary or confidential relationship -or- if other statements by the defendant, a duty might be created. 2. Materiality: - the gravity of the harm inflicted by non-disclosure - the fairness of imposing a duty of discovery on the buyer as an alternative to compelling disclosure - impact on the stability of contracts if recision is permitted. 3. Knowledge of the fact and other party's lack of knowledge 4. Intent to induce action 5. Reasonable reliance 6. Proximate damages. Concealment - active measure to hide a fact, when there is a duty to disclose. Damages for nondisclosure 1. Out of pocket - what plaintiff parted with minus what plaintiff received. 2. Benefit of the bargain - value as represented minus value as received. 3. Cost of making the representation true - if the cost is less than the cost of damages under the benefit of the bargain. 4. Consequential: a. Personal injuries b. Damages to property c. Any other expenses to which plaintiff is put. 5. Punitive - both under damages and restitution, for fraud, malice or oppression. Unjust enrichment - did plaintiff receive benefit? Would retention be unjust. Restitution at law. Measure of restitution at law is benefit of what defrauding party received. Restitution at equity. Trace defendant's proceeds from fraud and impose a constructive trust. Recision. Election - restitution, consequential, adjustment IV. Duress. Most jurisdictions use a subjective test for duress - actual inducement of the person. Party doing duress must be unjustly enriched. - a threat not to honor a contract, in and of itself, is not duress - financial difficulty of one party does not constitute duress Duress is any wrongful act of one person that compels a manifestation of apparent assent by another to a transaction without his volition, or any wrongful threat of one person by words or other conduct that induces another to enter a transaction under the influence of such fear as precludes him from exercising free will and judgment if the threat was intended or should reasonably have been expected to operate as inducement. Legal compulsion or threat thereof - a threat that a person or relative of a person will be prosecuted for a crime may constitute duress. This holds true even if a reasonable person would not have felt threatened. Threat of civil litigation is not duress unless there are no grounds for civil litigation. A wrongful act which compels an assent without actual volition or a wrongful threat which induces assent based on such fear as precludes the exercise of free will. A threat not to honor a contract is generally not duress. A Recision and restitution. Notice of recision is not triggered until duress is removed. Can have no affirmation of contract. V. Undue influence A Undue susceptibility 1. Total weakness of mind 2. Lack of capacity to contract 3. Age or physical condition or emotional anguish a lesser weakness of mind produced by age, physical condition, emotional anguish - presumed if parties are in a fiduciary or confidential relationship. B Undue pressure Influence of one mind over another whereby the person can't act on their own judgment. That kind of influence or supremacy of one mind over another by which the other is prevented from acting according to her own wish. 1. Discussion of transaction at an unusual or inappropriate time. 2. Transaction takes place in an unusual location. 3. Extreme emphasis in the untoward consequences in delay. 4. Demand be finished at once. 5. Use of multiple persons 6. No third party advisors to servient party. 7. Statement that there is no time to consult financial advisors or attorney. Traditional definition: 1. One party us under the pr-existing influence of another. 2. An undue use of that influence to the gain of the person holding it and to the detriment of the other C. Remedies: Recision. Restitution if contract has been executed. VI. Unconscionability A Weakness in bargaining position or an absence of meaningful choice. B Contract terms are unreasonably favorable to the more power party. C. Defense - Laches: 1. Unexcused delay in bringing suit 2. Prejudice to the defendant therefrom D. Damages not available. Traditional remedies: 1. Refuse to enforce 2. May enforce without unconscionable term 3. Limit application of any unconscionable term to avoid unconscionable results VII. Mistake A Mistake - an unconscious ignorance or forgetfulness of a fact past or present, material to the contract. B Material - would a reasonable person have made the deal on the basis of the mistake? C. Goes to the essence of the contract D. Not caused by neglect of a legal duty. Mutual mistake distinguished from innocent misrepresentation: A misrepresentation is an affirmative representation of fact, not an assumption. Materiality has t be shown, but it does not have to go to the heart of the contract. Mistake in acreage Relief can be had for mistake in acreage if sale was per acre, but may be denied if it was in gross. If the sale is by the acre, the deviation is more likely to be material. The sale type is determined by: 1. Negotiations of the parties. 2. Mode of stating the purchase price. 3. Manner of describing the land. 4. Language of the contract. 5. Size of the purchase 6. Whether the price is an equimultiple of the number of acres. 7. Whether the price also includes personal property. Remedies: Abatement if sale by acre Recision if sale in gross Mistake in Personal Injury Releases Even though a party expressly in the contract assumes the risk the courts use a higher level of scrutiny to determine if there was really an intent to release. Unilateral Mistake 1. There must be a mistake. An unconscious ignorance or forgetfulness of a past or present fact. 2. It must be as to a basic assumption. It has to go to the essence of a contract. 3. Mistake must have a material effect on the agreed performances of the parties. 4. The party claiming the mistake cannot have assumed the risk. Risk can be assumed: 1. If the contract assigns the risk 2. If the party acts with conscious ignorance. 3. If the court assigns the risk to the party because it is just to do so under the circumstances. 5. The mistake would make enforcement of the contract unconscionable -or - the other party had reason to know of the mistake or caused it. Mistake in Non-bargaining Situations 1. There must be a mistake. An unconscious ignorance or forgetfulness of a past or present fact. 2. It must be as to a basic assumption. It has to go to the essence of a contract. 3. Mistake must have a material effect on the agreed performances of the parties. 4. The party claiming the mistake cannot have assumed the risk. Risk can be assumed: 1. If the contract assigns the risk 2. If the party acts with conscious ignorance. 3. If the court assigns the risk to the party because it is just to do so under the circumstances. Mistake in integration 1. A contract was made. 2. The writing which was intended to embody the agreement erroneously expresses it. 3. There must be no prejudice to the other party if the writing is reformed. Remedy: Reformation Mistake as to a basic assumption 1. There must be a mistake. An unconscious ignorance or forgetfulness of a past or present fact. 2. It must be as to a basic assumption. It has to go to the essence of a contract. 3. Mistake must have a material effect on the agreed performances of the parties. 4. The party claiming the mistake cannot have assumed the risk. Risk can be assumed: 1. If the contract assigns the risk 2. If the party acts with conscious ignorance. 3. If the court assigns the risk to the party because it is just to do so under the circumstances. Defenses to mistake Negligence is not a defense. Mistake of Law A mistake in opinion, inference or an ignorance as to the legal effect of one's acts. The effect of a mistake of law is no relief. There are exceptions: 1. A mutual mistake as to the legal effect of a contract. 2. A mistake as to one's title or interest in real property. 3. A mistake as to the laws of a country or state other than that which the party is domiciled, unless the party relied on local counsel. Change of Circumstances 1. There must be a change in circumstances. 2. The change does not confer a benefit on the party claiming the change. Discharge for value Discharge in good faith for value Breach of contract Sale of Land 1. Straight sale - buyer's remedies for seller's breach. Majority rule: Benefit of the bargain rule - fair market value at the time of the breach less the contract price. Buyer can also recover purchase money actually paid plus interest; expenses in connection with his own performance of the contract; consequential damages governed by Hadley v. Baxendale. 2. Straight sale - seller's remedies for buyer's breach Majority rule: Benefit of the bargain. Contract price minus fair market value. Also, may get consequential damages such as resale expenses. The benefit of the bargain measure is used if there is bad faith. Absent bad faith, there is money, interest, expenses of investigating title and possibly value of improvements. Basically, this is recision and restitution. Recision + restitution + damages Benefit of the bargain: fair market value minus contract price Liquidated Damages 1. Parties must intend liquidated damages and not penalty. 2. Damages cause by breach must be difficult to ascertain. 3. The sum stipulated must be reasonable. -------- 1. The damages were difficult to ascertain when the contract was made. 2. Where subsequent circumstances demonstrate that it would be unconscionable to allow the seller to retain liquidated damages: 1. Some indication of seller fraud 2. Some misfortune beyond buyer's control caused the non- performance. 3. Mutual recision 4. Amount shocks conscience Recision & Restitution A Requirements for recision depend on whether contract is executory or executed. 1. If contract is executory, all that has to be shown is failure of consideration. 2. If contract is executed, the breach must be a breach of condition. B Buyer gets restitution for money paid. Buyer gets restitution of any benefit conferred on seller, e.g., interest on money paid. Buyer can get reliance damages if she shows that: 1. Expenditures were reasonably related to contract 2. And would not have been incurred but for the action C. Seller is restored full equitable and legal title to property. Seller can get restitution of reasonable rental value of property if buyer took possession. Specific Performance A Requirements 1. Remedy at law must be inadequate a. for buyer - because land is presumed unique b. for seller - no analysis needed. Just inadequate 2. There must be tender by party seeking specific performance 3. Adequate consideration - fair and reasonable 4. Mutuality of remedies at time enforcement is sought. a. Trend is if court is satisfied that party seeking specific performance has or will perform, the court will ignore the mutuality requirement. 5. The terms must be significantly definite so the court knows what to enforce. B You cannot get damages with specific performance. 1. May get an abatement only for small defects in the title or quantity which do not materially affect the value or enjoyment of property. 2. For tiny defects, you can get specific performance but no abatement. 3. For very large defects, there is neither specific performance nor abatement - only recision. 4. If defect is collateral, i.e., neither title nor quantity, buyer cannot get abatement and possibly no specific performance. C. How to measure abatement 1. The contract price less the value of improvements, i.e., amount of defect taken from amount promised. D. An accounting is always available to relate rents and profits from scheduled date for performance. Seller gets interest. Equitable Conversion A When contract is made seller gets equitable interest in the money and buyer gets equitable interest in the land. B Three factual situations 1. Will made - contract made - testator dies - contract performance. a. If straight sale of land (no option) equitable conversion causes ademption by extinction. 2. Option contract - option exercised after testator's death a. No equitable conversion and no ademption by extinction. 3. Risk of loss, i.e., equitable conversion a. Buyer assumes the risk b. Seller assumes risk until legal title is transferred c. Risk of loss on party in possession d. Uniform vendor and purchaser act: i. before title or possession passes - seller assumes risk ii. after one or other passes - buyer assumes risk 4. Who gets insurance proceed? a. Whoever assumes the risk Remedies to Defaulting Buyer A Traditionally - no remedy B Majority rule - buyer can get restitution or specific performance 1. To get restitution buyer must show: a. Partial performance b. Seller damages are less than what buyer already paid. 2. To get specific performance buyer must show: a. Forfeiture would otherwise result if default not wilful b. Forfeiture would otherwise result and seller would get benefit of bargain if default was wilful Installment Contract A Buyer's remedies are the same as all of the above B Seller's remedies also the same as above plus: 1. Judicial foreclosure 2. Forfeiture is allowed when there is an abandoning/absconding vendee. 2. Installment 3. Buyer's remedies when buyer defaults Restitution to prevent unjust enrichment if: 1. The buyer has partially performed. 2. The breach cannot be wilful 3. The buyer must show unjust enrichment. Buyer must show seller's damages from the breach are less than the money the seller received from the buyer. If a breach is willful, buyer can get specific performance if: 1. Forfeiture would otherwise result 2. Seller will receive benefit of bargain. 3. Other specific performance requirements - laches or unclean hands. Specific performance will be granted if: 1. If the buyer has made substantial payment or improvements on property. 2. Breach is only failure to pay amount due. 3. Buyer tenders full payment plus interest plus any consequential damages due to the seller. Remedy at law must be inadequate. Sale of land Sale of goods Construction contracts Employment contracts Unenforceable contract remedies Statute of frauds Impossibility Lack of capacity Illegality ----- Brought to you by - The 'Lectric Law Library The Net's Finest Legal Resource For Legal Pros & Laypeople Alike. http://www.lectlaw.com