Remedies: Applications to Specific Contracts

Sale of Personal Property: Damages

Damages are usually an adequate remedy for contracts to buy or sell personal property

Personal Property: Specific Performance

Will be available if the chattel is unique or if damages are highly speculative, such as output contracts

Personal Property Other Remedies

Restitution, rescission, and reformation are all available

Sale of Real Property: Damages

When the seller breaches, the buyer gets either their out-of-pocket loss or the benefit of the bargain, depending on Jx. Where the buyer breaches, the seller recovers the difference between market value and the contract price, plus consequential damages

Real Property Sale: Restitution

Where there is fraud or material breach of a contract, the plaintiff (buyer or seller) can rescind and get restitution of the benefits conferred. Recovery by the buyer is offset by the value of the use of the land. and recovery by the seller is condition on restoring part payments. A defaulting buyer can recover payments made in excess of the seller’s damages

Sale of Real Property: Specific Performance

Damages are inadequate for the buyer of realty because land is unique. Damages are inadequate for the seller because the seller wished to be rid of the land and would have to bear the burden of finding a new buyer

Land Sale Specific Performance: Feasibility

In a suit by the seller, contempt for failure to pay is not available, but the decree is enforceable by levy of execution or foreclosure of the seller’s or grantor’s lien. If the buyer is not subject to PJ of the court, the decree is void. In a suit by the buyer, the court can effect conveyance itself if the land is within the Jx. The court cannot directly effect title to out of Jx land, so contempt or suing on the decree at the situs of the land are the only enforcement mechanisms

Land Sale Specific PErformance: Satisfaction of Conditions

The seller must be able to show marketable title (one reasonably free from doubt) to get specific performance. If a contract is wholly executory, a late plaintiff cannot get specific performance in a “time is of the essence” contract. Where time is not of the essence, relief will be granted if tender is made within a reasonable time and the defendant is compensated for the delay.

Land Sale Specific Performance: Time is of the Essence Partial Performance

If the contract is partly executory, equity may grant a defaulting buyer specific performance if: (1) payment is forthcoming in a reasonable time; (2) the seller’s loss is slight; (3) full compensation is tendered for the delay; and (4) enforcing a time condition is unconscionable.

Land Sale: Tender of Note by Buyer’s Assignee

Tender of a note secured by a purchase-money mortgage in a state prohibiting deficiency judgments is sufficient to provide access to specific performance

Land Sale: Partial Performance with Abatement

The doctrine of partial payment with an abatement in price arises where the seller cannot fully perform. Where the seller sues, specific performance is only granted if the defect in the seller’s performance is immaterial and the buyer can be compensated for the deficiency. Where the buyer sues, specific performance with an abatement in purchase price will be granted even if the defect is material, unless the deficiency is so large that the court would be making a new contract. The buyer is allowed specific performance but no abatement where the selling price is based on income generated from land and income is unaffected by the defect.

Problems of Equitable Conversion: Death of a Party

If the seller dies, title goes to the person entitled to the seller’s real property, while right in price goes to the person entitled to the seller’s personal property. The buyer must join the seller’s administrator and heir in the suit. Where the buyer died, their interest in the land goes to the person entitled to their real property, and the seller must join the buyer’s administrator and heir. Where both die, both party’s administrators and heirs must be joined

Equitable Conversion: Option to Buy Land

Under the majority rule, equitable conversion does not occur until an option is exercised.

Equitable Conversion: Destruction of or Damage to Property

The majority view holds the buyer liable for the purchase price. The minority view and the modern trend is to shift risk of loss to the buyer only when the has possession or legal title

Construction Contract: Damages if Owner Breaches

The builder can recover lost profits if the contract is wholly executory. They recover the contract price if the contract is completed, or the contract price less cost of completion if the contract is partially performed

Construction Contract Damages: Builder Breach

Where the builder breaches but substantially performed, the owner recovers the cost of restoration unless this would produce economic waste, in which case recovery is limited to diminution in value. If the builder is in material breach, the owner gets the cost of completion less payments due, plus compensation for delay

Construction Restitution

If owner breaches, builder can rescind and recover the value of the work already completed. If the builder breaches, the owner is usually not entitled to restitution. Today, a breaching builder can generally get restitution of the benefits conferred in excess of the owner’s damages

Construction Contracts: Specific Performance

traditionally precluded

Personal Services Contract: Damages

If employee breaches, employer recovers the costs of obtaining a replacement. If the employer breaches, the employee gets wages due or promised, less avoidable damages. In a tortious wrongful dismissal, the employee may recover lost wages, emotional distress, and punitive damages

Employment Contract: Restitution

If ER breaches, EE is entitled to the reasonable value of the services rendered, even in excess of contract rate. If EE breaches, ER can get restitution of paid but unearned wages. Breaching EE can recover the value of services rendered up to the contract rate

Employment Contracts Specific Performance

Usually limited to negative covenant cases

Negative Covenants During Term of Employment Contract

The court may specifically enforce an EE’s promise not to work for another. Existence of a negative covenant will be implied by modern courts if the EE promised full-time or exclusive services. Inadequacy of damages can be shown if the service is unique. Independent significance of covenant is required by some courts (breach would cause ER harm beyond normal breach). Conditions to the EE’s performance must be satisfied. Defenses include those available against specific performance.

Negative Covenants After Termination of Employment: (Covenants Not to Compete)

Damages are an adequate remedy where EE services are ordinary, but not where the services are unique or where trade secrets or goodwill are involved. Injunctive relief is appropriate where damages are inadequate and the restriction is reasonable as to time and place. Blue pencil rule is applied by some courts, allowing an overbroad covenant to be enforced to the extent reasonable. Courts are less flexible in finding reasonableness where the covenant bars an EE from competing after termination of employment.