Restitution Damages & Specific Performance (CL)

Restitution Damages:

• What are they?:

  • Restitution Damages are damages that are awarded to one party when the other party has been unjustly enriched at the plaintiff’s expense.

  • They may be available for a BOC claim or an unjust enrichment claim.

  • What is the goal of Restitution Damages?: Prevent unjust enrichment by compensating one party for any benefit conferred on and retained by the other party. Trying to get the consideration restored that may have been exchanged restored.

• When are they available?: 4 Situation Checklist

  • When they are sought as an alternative to expectation damages.This means that restitution contracts are available for breach of K.

    • Rule: Restitution for the non-breaching party can seek restitution as an alternative to expectation damages for a total breach or upon a repudiation, the injured party is entitled to restitution for any benefit that he as conferred by way of part of the breach.

    • Rationale for electing restitution instead of expectation damages: When the K is a losing one because:

      • The injured party can’t recover expectation damages for a losing K and

      • The injured party’s recovery of reliance damages can be reduced by the amount of losses the breaching party can prove reasonable certainty.

  • When aren’t they available

    • What are the limits on the ability of the party to recover restitution damages?

      • Rule: The injured party may seek restitution damages only if there has been a total breach or repudiation by the other party.

        • Not for substantial performance.

      • The injured party has no right to restitution if 1) he has performed all of his duties under the K and 2) has no performance by teh other party remains due other than payment of a definite sum of money for that performance. This is not in dispute and K law take restitution damages off of the table. The only thing that the breaching party needs to do is to pay.

  • Where the K is void but is needed to restore the consideration. (Connect this with defenses)

  • When the restitution is available for the breaching party.: This is a question that is framed as a question of law and restitution should be given to a breaching party. It is VERY limited

  • When there are unjust enrichment actions

• How do you measure Restitution Damage?:

  • (Context): The measure of recovery is the monetary value of the benefit that the defendant has received. “A party who is liable in restitution for a sum of money must pay an amount equal to teh benefit that has been conferred upon him.”

  • Rule: Restitution damages are measured either by:

    • Market price of a substitute transaction (what it would have cost D to obtain it from someone else) OR

    • The amount by which D’s property has increased in value from the benefit.

    • Choice between the two measures is subject to the court’s discretion.

  • Case Illustration: Coastal Steel v. Algernon Blair:

    • Illustrates 1) restitution as a remedy for breach and 2) the market value restitution measure of damages.

• When is Restitution available for the breaching party.

  • The breaching party may seek restitution for any benefit that he has conferred by way of part performance or reliance in excess of the loss that he has caused by his own breach.

  • The breaching party’s restitution recovery

    • Value of benefit conferred- Harm caused by the breach.

    • Benefit conferred HAS to exceed the harm caused in order for the branching party to recover

    • Always use the lesser of the 2 measures to calculate the benefit. (No court discretion in this case)

• Lacellotti: Deals with the right of a breaching party to recover in restitution.

  • What is the traditional rule?: The breaching party cannot recover for the value of its part performance. Reflects policy judgment that a wrongdoer should not profit from his wrong. (This rule is almost a punishment and the nonbreaching party is getting a windfall and the breaching party is getting a forfeiture).

  • What is the modern rule?: Allows a breaching party to recover for the value of any benefit conferred in excess of harm to the other party.

  • The court says that this is fairer to both parties because it balances the interests of both parties better. This avoids the windfall to the nonbreching party.

  • The modern rule does not ignore the interests of the non-breaching party i.e. no forfeiture by breaching party and it accounts for the interests of the non-breaching party because the breaching party’s restitution is reduced by harm caused.

Specific Performance:

• What is Specific Performance?

  • An equitable remedy (not money damages)

  • Ordinarily takes the form of an order compelling a party to perform i.e. an injunction. (this means that there is typically a requirement of a court ordered supervision to ensure that the specific performance)

  • It is giving the injured party the benefit of the bargain. It is LITERALLY the benefit of the bargain.

  • Because the court has to supervise the execution of specific performance then it is up to the courts discretion to impose this.

• Overarching rule for specific performance:

  • Courts may order that a branching party specifically perform the promises of a contract if:

    • Money damages are inadequate to compensate the plaintiff.

      • SP or an injunction will not be ordered if damages would be adequate to protect the expectation interests of the injured party.

      • When are money damages inadequate to compensate the plaintiff? (3 factors that inform your overarching SP rule)

        • The difficulty of proving damages with reasonable certainty.

        • Difficulty in obtaining a suitable substitute performance.

        • Likelihood that the injured party could not collect the damages award.

    • The terms of the K are certain and definite: SP will not be granted unless teh k terms are sufficiently certain to provide a basis for a inappropriate order: If the terms are not sufficiently definite for the court to create a SP order that they are comfortable with then it is not an available remedy. The court WILL NOT place an ambiguous order

    • it is feasible for the court to supervise the performance: A promise will not be specifically enforced if the character and magnitude of the performance would impose disproportionate burdens in enforcement or supervision.

      • In considering whether to order SP the court will assess the extent to which they will actually have to deal with the dispute and whether the parties are performing. It would be a waste of the courts time.

  • City Stores v. Ammerman: Involves specific performance of a lease in connection with a development project.

  • Illustrates willingness of modern courts to grant requests for SP.

  • Analyzes inadequacy of damages and other equitable factors (role of indefiniteness, court supervision and hardship to D).

• Personal Services Ks

  • Rule: A promise to render personal service will not be specifically enforced. Personal services are not specifically enforced.

    • What are the rationales for this rule?: This would be forced or involuntary servitude. The law will not use specific performance to enforce personal services contracts.

  • What qualifies as personal services K: A personal services K retains the services of an individual who possesses skills or talents not easily substituted by someone else.

    • Ex. Actors, singers, and athletes

  • Is a negative prohibitory injunction barring performance for a new employer permitted?:

    • Rule: A promise to render personal services exclusively for one employer will not be enforced by an injunction against serving another if its probably result will be:

      • to compel personal services or

      • To leave the employee without reasonable means of making a living.

  • Reier Broadcasting v. Kramer: Illustrates application of the rule about the use of negative injunction in teh personal services K context. Note that the state law involved MT that has codified a lot of common law contract rules.

  • Why does the court decline to enforce negative injunctions.

    • State statute bars the court from granting an injunction to prevent the breach of a K that cannot be specifically enforced including personal services Ks.

    • And this court thinks that a negative injunction which prohibits Kramer from performing on teh Clear Channel K has the same effect was compelling Kramer’s performance under Reier Kramer K.