Q & A Remedies 351 - 404

351. Is the contract price an artificial ceiling on the recovery for a contract that is unenforceable because of the Statute of Frauds?

There is no ceiling on the restitutionary recovery. If the unjust enrichment is over the amount that was orally agreed to, the court will award that recovery if it is proved.

352. If there is no unjust enrichment, is there a possibility of recovery for a contract that is not enforceable because of the Statute of Frauds?

There is no recovery if there is no unjust enrichment.

353. Are consequential damages recoverable if there is no unjust enrichment in a contract that is unenforceable because of the Statue of Frauds?

Generally, there is no recovery for consequential damages for such a problem. There is some authority that is contra and allows recovery of consequential damages of there is no unjust enrichment.

354. What is the 'part performance' doctrine?

Because of the harsh results reached under restitution for Statute of Frauds problems, the doctrine of part performance was developed. This is a doctrine in equity. A buyer can compel conveyance of land if the buyer pays part of the purchase price, takes possession of the property, and makes improvements.

355. What type of acts constitute part performance under the part performance doctrine?

Payment of the purchase price or taking possession alone are not sufficient. If payment is made and possession is obtained, these are sufficient. Improvements to the property alone are considered to be sufficient.

356. What is the rationale for the part performance doctrine?

The rationales put forward are that the limited performance is evidence of the oral contract and that the part performance justifies enforcement because of detrimental reliance.

357. How is the part performance doctrine given effect under the UCC?

Oral contracts for the sale of goods are enforceable with respect to the goods for which payment has been made and accepted, or for those which have been received and accepted. In addition, if a party admits in pleading, testimony, or otherwise in court that a contract of sale was made it will be enforced. See UCC 2-201.

358. Is estoppel an effective defense to a Statute of Frauds problem?

Estoppel is an effective defense to a Statute of Frauds problem. Evidence of any acts by the plaintiff in reliance on the defendant's promise are admissible. In effect, the defendant cannot assert the Statute of Frauds as a defense. The plaintiff may recover damages as well as sue for specific performance.

359. What is the Restatement of Contracts 2nd position regarding estoppel as a defense to the Statute of Frauds?

Restatement of Contracts 2nd Section 139: a promise made with the reasonable expectation of inducing action by the plaintiff, and which does so, is enforceable notwithstanding the Statute of Frauds if injustice is otherwise unavoidable. Damages are limited to reliance damages. Specific performance is allowed under Section 129.

360. What are the remedies dependent on for an agreement to devise realty in exchange for services?

This situation is found in the contract to devise Blackacre to A if A takes care of B for the rest of B's life. B dies and leaves no will. The remedies available to A are equitable and the key elements are the nature of the services and usually how long someone lives. Quasi-contract is the best recovery for ordinary services and a short life by B. Specific performance is best if the services are unique and B lives long. If estoppel is recognized A could sue in damages and get the benefit-of-the-bargain.

361. What is the effect of impossibility or frustration on a contract?

If one of the parties' full performance is expressly made a condition precedent to recovery on a contract or one party assumes the risk of loss, impossibility results in a breach of contract. However, if the above conditions are not met, impossibility or frustration of purpose excuse both parties from further performance. Restitution is the only remedy possible.

362. What is 'frustration of purpose'?

Performance of the contract is possible, but its commercial value has been destroyed by unforeseen events.

363. What are the general theories for restitution under impossibility or frustration of purpose?

English: Leaves the parties where the court found them.

American: Neither party can be compelled to pay for the other's disappointment, and neither party can be allowed to profit from the situation. The measure of recovery is the detriment to the plaintiff.

364. Must a minor who disaffirms a contract restore whatever was received?

Some courts hold that the minor must make restoration if possible. Other courts require the minor to restore or pay the value of anything obtained in exchange for benefits received. Some permit the minor to disaffirm without the requirement of restitution of the purchased items.

365. Can a minor be estopped to disaffirm if he lies about his age and the lie is reasonably relied upon?

Some courts allow the estoppel and others do not.

366. Are minors liable for necessities of life?

Yes. This liability is under quasi-contract for the reasonable value of the benefits obtained. The reasonable value cannot exceed the contract price.

367. What are the basic rules for mental incompetents who disaffirm?

Mental incompetents are liable for necessities of life. If they disaffirm a contract, they must make full restitution. There is generally no estoppel against mental incompetents.

368. What is 'Ultra Vires'?

Ultra Vires refers to contracts made by a corporation that are beyond the powers of the corporate entity.

369. Is ultra vires a defense when a corporation deals with private parties?

Ultra vires is not a good defense.

370. What types of remedies are available against a public or municipal corporation that violates administrative regulations in making a contract that it is not permitted to make?

Restitution and estoppel are available, but there is no recovery by a contractor for collusive action.

371. What is an illegal contract?

An illegal contract is one that is criminal, tortious, or against public policy.

372. What is the general rule regarding remedies for illegal contracts?

The law will leave the parties in the same position as they placed themselves. If the illegal provisions can be severed, they will be, and the contract will be enforced.

373. Compare illegality with unclean hands.

Unclean hands bars equitable remedies. Illegality bars all remedies, both legal and equitable.

374. When is the defense of illegality not applied?

Illegality is not applied if the contract fails in its intended illegal purpose, the illegality is collateral or remote, and the defense is not available to third persons.

375. Are there any exceptions to the defense of illegality?

Restitution is permitted if the plaintiff is not in pari delicto or where the plaintiff is a member of a protected class. If the plaintiff is ignorant or mistaken about the illegal aspects of the contract, this justifiable ignorance or mistake will allow restitution. If the plaintiff was coerced or was frauded into the contract, restitution will be allowed.

376. What is 'locus poenitentiae'?

If parties are in pari delicto, restitution will be permitted if the plaintiff backs out of the bargain before the illegal part had been accomplished. Locus poenitentiae is limited to non-serious crimes.

377. Is an agent relieved of duties if a contract turns out to be illegal?

No. The general rule is that an agent who receives proceeds on behalf of the principal must account to the principal.

378. Lawyer fails to file certain disclosures required by state security laws. Plaintiff was not allowed to sell stock to the public. Plaintiff's project fails. Plaintiff's damages are difficult to prove. What damages should plaintiff plead to maximize the award?

The profits are difficult to prove, and the action is basically one for contract damages. The best recovery would be (in contract for) reliance damages. The plaintiff will be able to recover all losses incurred in preparing to go forward with the project with public funding.

379. Defendant negligently fails to make a bank transfer on time and Plaintiff losses a significant sum of money on an option contract for the purchase of oil. Under common law, can Plaintiff recover for these economic losses under a suit in tort?

If the damages in tort are purely economic as in the facts presented, the courts will apply a foreseeability test in limiting consequential damages. With the facts as given, there are no facts presented which would lead Defendant to believe that a failure to make a wire transfer would result in such a severe damage to Plaintiff. Plaintiff will not be able to recover in tort as the damages are not foreseeable.

380. Plaintiff sues in tort for damages based on Contractor's negligence in building an apartment house. Plaintiff's damages are loss of rental income and property damage. Can Plaintiff recover these losses on the current pleadings?

No. Economic losses are not recoverable in a negligence action even if proximately caused. The losses to Plaintiff are purely economic. The proper action is a breach of warranty of habitability.

381. Evidence clearly shows that Defendant has breached a contract, but Plaintiff had kept no separate cost record to establish the amount of the loss. What is the issue and will Plaintiff be able to recover?

The issue is certainty as to the extent of damages. Plaintiff will recover because the existence of damages is certain. The fact that the Plaintiff will have trouble proving the extent of the damages is not a violation of the certainty rule regarding damages.

382. Defendant's net worth is $7,000,000. Plaintiff's award is $200,000 with punitive damages of $2,000,000. Will this award be upheld?

Probably not. The punitive damages must bear some reasonable relationship both to the amount of compensatory damages and to the net assets of the defendant. The punitives are 10 times the amount of the compensatory award and 29% of net assets. These punitives are probably too excessive and will be overturned.

383. Deft breaches the contract and Plaintiff is awarded contract damages. Deft wants to include Deft's unemployment benefits as mitigation of the award. Plaintiff argues that using these benefits violates the collateral sources rule. Is this correct?

Most states do not include unemployment compensation to mitigate a recovery. Some state do permit these monies to mitigate the damages based on the fact that the employers pay the monies into the unemployment funds.

384. S agrees to sell a home to B for $300,000, 'terms to be agreed upon.' S decides that he wants to sell the house to his mother instead. Can B get a court to award a decree of specific performance?

No. Specific performance is granted only when the terms of the contract are sufficiently certain so that the court can issue a decree for each party to carry out the agreement. The clause of 'terms to be agreed upon' is too indefinite.

385. Deft agrees with P to transfer 20% of any shares in a computer company that he may start in Silicon Valley in exchange for $10,000 and a cancellation of a $50,000 debt. Deft invents the Peach computer. P seeks to enforce the contract by specific performance. Will the decree be granted?

No. Specific performance will not be granted. Plaintiff has a good defense to specific performance by showing that the contract is harsh and inequitable. Had the contract described in detail the company and its product, it would be considered to be an aleatory contract. Aleatory contacts are not considered harsh or unreasonable. Under the facts, the contract called for 20% of any shares in any company.

386. Deft cheats old widows into signing away their homes in return for a quiet life in the Old Folks Home, a swamp near the Mississippi River. Deft sues P for a nuisance problem seeking an injunction regarding a home for which he just cheated a widow. Can P defend using unclean hands?

No. Unclean hands is only a good defense if it relates to the issues before the court. Here, the prior conduct does not relate to the nuisance issue before the court and therefore does not bar Deft's suit for an injunction against the nuisance.

387. Deft has just lost his motion for an injunction because of a copyright violation. Deft sues in damages and P asserts unclean hands as a defense. What is the result?

P will lose. Unclean hands is not a defense or a bar to a recovery at law.

388. D dumps several tons of garbage on P's land. P fails to state in his complaint that the damages were from a bite caused by a stray cat that was attracted to the garbage. Will P recover for the bite from the current state of the pleadings?

No. P will not recover because the damages for the bite must be pleaded as they are special damages. Special damages are those that do not regularly occur in such situations.

389. An injunction is issued against A to stop trespassing on P's land. D knows of the injunction and trespasses on P's land. Is D liable for civil contempt?

No. D is not liable for civil contempt. Only parties and their privies are bound by an equitable decree.

390. Seller lives out-of-state and sells his residence to Buyer in state Z. Judge in state Z orders Seller to convey the land to Buyer in a decree of specific performance. Seller gets the decree but departs Z without conveying the property. Is the decree enforceable in Seller's resident state?

No. The court has no primary jurisdiction to affect title to land in another state. The court may act in personam, but Seller has left the state. Contempt proceedings will not be available to coerce compliance because Seller is beyond the court's reach.

391. P seeks injunctive relief against D to compel D to repair a dam on his property before it breaks and floods P's land. Can P get a mandatory injunction at the preliminary injunction stage?

Mandatory injunctions are disfavored at the preliminary stage unless exceptional circumstances are shown. P will probably get a mandatory injunction because of the exceptional circumstances in not fixing the dam.

392. Deft is subject to claims from H and W to ownership of the widgets in Deft's garage. H claims to own the widgets, and so does W. Both want the widgets. What should Deft do?

Deft should file an interpleader with the court and name H and W as parties to the suit.

393. P provides information to D to successfully design a new type of semiconductor circuit. P wants to recover for the benefits conferred on D and takes suit for restitution of the unjust benefits. What is the result?

P will not recover. P will probably be ruled a volunteer. Any benefits voluntarily conferred by one person upon another may be retained. The only exceptions are for supplying necessaries to infants, medical treatment in emergencies, emergency expenditures to preserve another's property or credit, and performance of a public duty.

394. P helps in abating a nuisance and then sues D for restitution. Can P recover based on the facts as stated?

No. P cannot recover even under the exception to restitution for performance of a public duty. P must show that he intended to charge for his services in abating a nuisance.

395. Tenant wants Landlord to fix the premises prior to signing a lease. The lease never transpires. Under what remedies can Landlord recover for the expenditures in fixing up the premises?

Landlord can sue under promissory estoppel and recover reliance damages. Landlord can also sue for restitution in quantum meruit with the measure of damages being the market value of the services. Note: even though there is no benefit to the defendant, the remedy of restitution in quasi-contract is allowed because the benefit requirement can be deemed to be unconscionable in a contract that is contemplated but not consummated.

396. Robber uses the money he steals to pay his income taxes. Victim sues the IRS for return of the monies. What is the result?

The IRS is a bona fide purchaser of the funds because a tax liability is a valid debt, and the money was received without notice that it was stolen. There can be no recovery against an innocent purchaser of money. The IRS was not unjustly enriched. Because of the innocence of the IRS and the fact that where equities are equal legal title prevails, the plaintiff will not recover the funds.

397. Employee embezzles funds from the bank and purchases a home. What is the best remedy for the bank to pursue?

The best remedy would be to trace the money to the home and place a constructive trust against the house in favor of the bank. The constructive trust is an equitable remedy and if tracing is involved courts usually ignore the requirement that there be no adequate remedy at law to invoke this equitable remedy.

398. D uses money he embezzled from P to improve another house he already owns. What is the best remedy in this situation?

An equitable lien is the best remedy. A constructive trust is inappropriate if the stolen funds are traced to property already owned by the defendant. Unjust enrichment is avoided by the use of an equitable lien, giving P a lien against the property up to the amount of the embezzled funds.

399. D steals money from P, and fixes up one home and buys another. The home he bought is now worth twice what he paid for it while the other home is now worth 10 times its original value. The value of both homes is more than enough to secure repayment of the stolen funds. What is P's best remedy?

P's best remedy would be to place a constructive trust against the purchased home as he can not only recover the stolen funds but also make a nice profit due to the appreciation in the asset. Placing an equitable lien against the preowned house would only net P the monies due from the theft with no appreciation.

400. D steals $50k from P and puts it in his bank account with $30k. After P discovers the missing funds, D has $50k left in his account. What is the best recovery for D?

The problem presented is the identity of the funds remaining and the intent of D in withdrawing funds from the account. The 'first in first out' rule, the presumption that D withdrew his own funds first, or the presumption that is 'most beneficial to the claimant' would give P his entire $50k back. The 'lowest intermediate balance' rule and 'proportional balancing' would not. An equitable lien is best to enforce the three rules that give the $50k back.

401. P's car is tortuously damaged, and it will cost $10k to repair it. The car is worth $5k. The salvage value of the car is $5k. What will P recover?

Nothing. The measure of damages for the tortious destruction of chattels is the value of the property at the time of destruction, less salvage, with interest computed from the time of valuation. $5k -$5k = 0. Additional losses such as costs of procuring a replacement, such as freight and taxes, would be recovered.

402. P's car is damaged in an auto collision, and it is D's fault. P never rents a replacement car but submits a loss of use claim for $2k. Is this proper?

Yes. Loss of use is recoverable even though no substitute is actually procured. It is the right to use that is being compensated and not the actual use.

403. P's truck is damaged, and he seeks to claim lost use of $3k. D makes a counter-argument that P must deduct the cost of oil and depreciation of $1.5k which P would be required to pay if using his own truck. What is the result?

D's position will prevail.

404. V buys a Weenie (Picasso's cousin) in good faith and displays it in her home. At trial, she claims that this display was open and notorious, and because of this, she has acquired title by adverse possession. What is the result?

Possession in one's home is not sufficiently open and notorious to constitute adverse possessi

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