CHAPTER
McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved
Equity andQuasi-Contract
FOURTEEN
14-2ObjectivesChapter Objectives:• Use vocabulary regarding equitable
remedies properly• Differentiate among the different types of
equitable remedies and explain the basis for their award
• Evaluate the plaintiff’s chances for success in obtaining the different kinds of injunctive relief
• Identify situations where the court will or will not order specific performance
14-3ObjectivesChapter Objectives:• Discuss the doctrine of promissory
estoppel• Determine if/when a defendant has been
“unjustly enriched”• Explain the difference between a valuation
of equitable damages based on quantum meruit and quantum valebant
• Discuss the doctrine of “unclean hands”
14-4 • This chapter will examine WHAT HAPPENS
when contractual remedies are not available to a plaintiff DUE TO a defect in the formation or substance of the agreement, and
• WHY these kinds of damages are made available
Objectives
14-5 Definitions• Equity
– The doctrine of fairness and justice; the process of making things balance or be equal between parties
• Bright line rules– A legal standard resolves issues in a simple,
formulaic manner that is easy in application although it may not always be equitable
• Black letter law– The strict meaning of the law as it is written
without concern or interpretation of the reasoning behind its creation
14-6 “Action” Damages• When a party’s monetary damages are
inadequate to compensate for the harm incurred, the court has the ability to order alternative equitable remedies in the form of either 1. an injunction or2. specific performance
• These are “action” damages because they effectively force the defendant to act in some way to try to remedy the breach
14-7
It bears repeating that the court must find that monetary remedies are insufficient to compensate the plaintiff.
Only after showing that the money will not fix or prevent harm can the plaintiff obtain an injunction or specific performance.
“Action” Damages
14-8 • Injunction
– A court order that requires a party to refrain from acting in a certain way to prevent harm to the requesting party
“Action” Damages
14-9 • Temporary injunction
– A court order that prohibits a party from acting in a certain way for a limited period of time
• Permanent injunction– A court order that prohibits a party
from acting in a certain way for an indefinite and perpetual period of time
“Action” Damages
14-10 • Preliminary hearing
– An appearance by both parties before the court to assess the circumstances and validity of the restraining application
“Action” Damages
14-11 • Specific Performance
– A court order that requires a party to perform a certain act in order to prevent harm to the requesting party
– To obtain an order for specific performance, the contract must be very clear as to the act to be compelled. The standard of proof for specific performance is greater than that of obtaining damages at law
“Action” Damages
14-12 • Declaratory Judgment
– the court’s determination of the rights and responsibilities of a party with respect to the subject matter of the controversy
• The court’s decree settles the matter in its entirety
“Court-Ordered” Solutions
14-13
It is important to note that declaratory judgment is only appropriate where
another legal remedy is not available. The action for declaratory
judgment is limited to situations where there is genuine controversy as to the
rights and status of the parties involved and a declaration of those
rights as determined by the court will resolve the issue between the parties.
“Court-Ordered” Solutions
14-14
• Rescission and restitution– A decision by the court that renders the
contract null and void and requires the parties to return to the wronged party any benefits received under the agreement
“Court-Ordered” Solutions
14-15
• Reformation– An order of the court that “rewrites”
the agreement to reflect the actual performances of the parties where there has been some deviation from the contractual obligations
“Court-Ordered” Solutions
14-16
• Quasi-contract / pseudo-contract / implied-in-law contract– Where no technical contract exists, the
court can create an obligation in the name of justice to promote fairness and afford a remedy to an innocent party and prevent unearned benefits to be conferred on the other party
Quasi-Contracts
14-17
• Promissory estoppel does not require certainty in all the elements of contract
• This theory of relief only arises where there is no valid contract!
• Where a defect in formation would normally render the contract unenforceable under traditional contract principles, the court can look to the precepts of fairness and rely on the doctrine of promissory estoppel
Quasi-Contracts
14-18
• Promissory reliance– A party’s dependence and actions
taken upon another’s representations that he will carry out his promise
• Substantial detriment– The change in a party’s position in
reliance upon another’s representations that, if unanswered, will work a hardship on that party
Quasi-Contracts
14-19
• Prevention of Unjust Enrichment– the doctrine of unjust enrichment
focuses on the unearned benefit received by the promisor
• The court must find that:1. there was a promise made 2. that the promisor intended to induce
the promisee to act in reliance thereon, and
3. the promisee’s actions conferred a benefit on the promisor
Quasi-Contracts
14-20
• Quantum meruit– A Latin term referring to the
determination of the earned value of services provided by a party
– Quantum meruit is the value of services rendered
Quasi-Contracts
14-21
• Quantum valebant– A Latin term referring to the
determination of the market worth assignable to the benefit conferred
– The court may determine that a more just valuation lies in quantum valebant, which is the value of the benefit received
– This is the value to the benefited promisor. It is the amount of money the promisor has gained in taking advantage of the situation
Quasi-Contracts
14-22Doctrine of “Unclean Hands”
None of these equitable remedies will be available to a party seeking
relief if they come to the court with unclean hands. Where the
plaintiff is also guilty of some misconduct, the notions of justice under equitable principles will not allow a guilty party to complain of
unfairness.
14-23Summary• Equitable principles allow a court to grant
a remedy where justice requires but where contract law does not recognize a legal, monetary remedy
• Where money does not adequately compensate an aggrieved party for the damages caused by a breach, a court may order the breaching party to act or refrain from acting in some way that will make up for the loss
14-24Summary• The court also may fashion a remedy in
the form of1. Declaratory judgments: the court
makes a determination of the rights and respon-sibilities of the parties with respect to the subject matter
2. Rescission and restitution: the court declares the contract null and void and gives the plaintiff damages to make him/her whole again
3. Reformation: the court changes the document to reflect the actual understanding of the parties
14-25Summary• The doctrine of promissory estoppel
where1. A promise is relied upon by the
aggrieved party, and2. The promisor knows the promisee will
reasonably rely upon it, and3. The promisee incurs a substantial
detriment as a result of the reliance
14-26Summary• Courts determine the value of the
promise under either promissory estoppel or unjust enrichment doctrines
• A calculation can be made using either quantum meruit or quantum valebant
• None of these equitable principles applies if the aggrieved party comes to the court with unclean hands
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