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Forming a Contract - Write: in order to have an enforceable contract, there must be an offer, acceptance, consideration & no valid defenses. Where transaction is for sale of goods, you operate under U.C.C Art. 2; when a transaction if for a sale of service, you operate under common law Formation of a Contract A. Offer: An invitation to enter into a contract. I.D. Facts that constitute offer B. Acceptance: a manifestation of intent to enter into an agreement. - May be accepted by a manifestation of assent to the terms of an offer communicated directly to the offeror OR by the offerees performance of an act or other consideration stipulated in the offer. I.D. Facts. Option Contract: in order to form an option contract there needs to be consideration under common law principles and under the UCC there needs to be a writing by the seller stating contract will be kept open for a certain time period, but doesnt require consideration. C. Consideration: a bargain for exchange. FL follows the minority rule that consideration is a benefit or detriment to one party. - May either incur detriment or promise to perform in the future. [promise creates future liability to preform, is also a detriment.] - Under the notion of pre-existing duties, if either the promisor or the promisee already had a legal obligation to render such payment it cant be seen as consideration in the legal sense. D. Defenses a. The elements of a contract arent satisfied. E.g., illusory K; a condition precedent hasnt been satisfied. 1. An illusory agreement is where there either is no true consideration, or the contract (by its terms) are not binding on at least one of the parties. i.e., a loan which is so lenient in repayment terms that the borrowing party could avoid paying it back at all does not have true consideration, and is illusory (gift disguised as loan). - If one or both of the parties have the right to cancel the contract at will and without cause, then it is illusory. Its simply an expression of intent to do something, not a binding agreement. - An at-will employment contract wouldnt be illusory because of tradition of 2-week notice because then both parties are bound for some period. But without that 2-week period you can still argue contract isnt illusory: we would argue that its a unilateral contract, formed by performance, so an obligation to pay occurs as the work is being done. Essentially, the employee accepts the offer each day he shows up to work. b. Statute of Frauds: A contract for the sale of land must be signed by the party to be charged. So should contracts for the sale of goods involving a purchase price of $500 or more. Also there must be a signed writing for contracts that cannot be performed within one year. [however, contracts of indefinite duration dont fall under statutes of fraud regardless of how long performance takes]. - Also, contract should be in writing, contain a legal description of the land, value to be paid, identify the parties & some conveyances require signatures of both parties as well as 2 attesting witnesses. - For the sale of goods: to be sufficient under the U.C.C statute of Frauds, a document must contain three elements: (i) quantity; (ii) the signature of the party to be charged and (iii) sufficient indication that a contract was formed. - However, if the contract is an output contract, the lack of a specific quantity term will not be a bar to finding a sufficient writing. Quantity of an output contract is capable of being

ascertained by reference to extrinsic facts. Courts assume that the parties will act in good faith to determine reasonable quantity requirements. c. Incapacity to contract: age, intoxication, mental capacity, etc. d. Impossibility: nonoccurrence of underlying assumption of the contract that makes performance of contract literally impossible. e. Impracticability: still physically possible, but would be highly burdensome. f. Mistake of fact: if mutual mistake, then no enforceable contract. If unilateral mistake, contract will be enforced unless unconscionable or the other party knew or shouldve known of the mistake. g. Misrepresentation of material fact: recession of the contract h. Duress or undue influence Material v. Minor breach: if a party fails to perform a promise and the breach is material and no cure is forth coming, the aggrieved party may: cancel the contract & sue for all damages under the contract; or continue the contract and sue for partial damages Factors relevant to determine whether breach is material: i. The extent to which the aggrieved party will be deprived of the benefit he reasonably expected; ii. The extent to which the aggrieved party can be adequately compensated for the benefit of which he will be deprived; iii. The extent to which the breaching party will suffer forfeiture; iv. The likelihood that the breaching party will cure his failure, taking into account all the circumstances, including any reasonable assurances; v. The extent to which the breaching party has acted according to standards of good faith & fair dealing - Determination by the trier of fact that a party has negotiated or performed a contract in bad faith is considered a material breach. - A minor breach is substantial performance of contract and may entitle the non-breaching party to legal or equitable remedies. Rule of Divisibility: The court might analyze a contract by applying the rule of divisibility. The question of divisibility is one of contract interpretation and is designed to achieve equity between the parties, avoiding unnecessary hardship to one party or the other. A contract is divisible if: 1. The performance of each party is divided into 2 or more parts; 2. The number of parts required of each party is the same, and 3. The performance of each part by one party is the agreed upon equivalent of the corresponding obligation of the party. However, if the contract explicitly says its indivisible, court will not construe it as otherwise. - Ask yourself: can the contract allocate a portion of the total price to individual tasks? As such, court could award payment for each task satisfactorily performed. Parol Evidence Rule: Operates in situations where there is an embodiment of the contract or some of its terms. The rule governs whether parties may introduce evidence of extrinsic agreements to prove the existence of additional or modified terms. Consider: 1. Finality of writing 2. Writing as integration Remedies and deciding when and which to use a. Duty to Mitigate : The use of reasonable care and diligence in an effort to minimize or avoid injury. i. Under the mitigation of damages doctrine, a person who has suffered an injury or loss should take reasonable action, where possible, to avoid additional injury or loss. The failure of a plaintiff to take protective steps after suffering an injury or loss can reduce the amount of the plaintiff's recovery. The mitigation of damages

doctrine is sometimes called minimization of damages or the doctrine of Avoidable Consequences. ii. In contract law the non-breaching party should mitigate damages or risk a reduction in recovery for the breach. For example, assume that a property owner and home builder contract for the construction of a home in exchange for payment of $50,000. Assume further that the builder begins constructing the home but that the owner wrongfully cancels the contract before the builder has finished construction. If the builder sues to recover the unpaid portion of the contract price, a court may reduce the amount of money that the builder recovers if the builder does not try to avoid additional loss (i.e., sell the materials already purchased for the job.) iii. In Tort Law mitigation of damages refers to conduct by the plaintiff that, although not constituting a civil wrong itself, may reduce the plaintiff's recovery. For example, if the victim of an assault used provocative words prior to the assault, the words may mitigate the plaintiff's damages. Most states limit mitigation of damages for provocative words to a possible reduction in Punitive Damages, as opposed to Compensatory Damages. A tort victim also should act to mitigate damages subsequent to the wrongful acts of another. ] b. Specific performance: rarely available to enforce a service contract or a contract for the sale of goods because in each case, money damages would be an adequate remedy. SP is only granted if item is unique, otherwise go to substitution damages. c. Expectation Damages: if there is an enforceable contract, the measure of damages would be the difference between offerors offer and what it would cost offeree to mitigate the damage; the theory is to place the non-breaching party in as good a position as if the breaching party instead performed his promise.
i. ii. Where breach minorMust pay K price less cost of repairs/reconstruction Where breach majorNot pay K price and will be entitle to damages, less value if any

d. Reliance Damages: If however liability isnt based on enforceable contract, but instead based on promissory estoppel, meaning there was a promise made that induced performance, that non-breaching party reasonably relied on and suffered detriment due to reliance, the measure of damages is that sum which is necessary to relieve the injustice. e. Restitution Damages: Where Defendant was unjustly enriched (law doesnt recognize transfer in ownership in this situation). Damages are based on only what D was unjustly enriched by, plus any interest (beginning from date D had notice of unjust enrichment).
Reliance and restitution are equitable remedies. Aside from expectation damages, there are other compensatory that may be available to plaintiff. When there is a material breach: actual damages plus consequential damages (loss profits). Must be able to prove consequentials and cant be too speculative



Liquidated Damages: enforceable if damages were difficult to ascertain at the time of contracting and damages that are fixed in the contract are reasonable prediction of what it will take to compensate the injured - No recovery if there are no actual damages - Theyre enforceable also if the injured party suffered actual damages at the time of injury Classifying Remedies 1. Compensatory Remedies: designed to compensate plaintiffs for harm they have suffered - Most important: sum of money designed to make plaintiff as well off as he wouldve been if he never had been wronged - Reliance, expectation, consequential, incidental, special, restitution 2. Preventative remedies: designed to prevent harm before it happens, so that the issue of compensation never arises. Comes in two forms: i. Coercive:

a. Injunction- personal command from a court to litigants, ordering them to do or to refrain from doing some specific thing. b. Specific performance decree: ordering defendants to perform their contract (specialized for of injunction) c. Writ of mandamus: issued by a superior to compel a lower court or government officer to perform mandatory or purely ministerial duties correctly d. Writ of prohibition: a writ directing a subordinate to stop doing something the law prohibits e. Habeas corpus: a writ, or legal action, through which a prisoner can be released from unlawful detention (one lacking sufficient cause or evidence). ii. Declaratory Remedies: authoritatively resolve disputes about the parties rights, but they do not end in a personal command to defendant. In general, declaratory remedies prevent harm to the litigants by resolving uncertainty about their rights before either side has been harmed by erroneously relying on its own view of the matter. 3. Restitutionary remedies: designed to restore to plaintiff all that defendant has gained at plaintiffs expense. Look for unjust enrichment 4. Punitive remedies: designed to punish wrongdoers; often awarded where compensatory damages are deemed an inadequate remedy. Generally a matter of state law. General rule is that punitives cant be awarded in breach of contract, but if an independent tort is committed in a contractual setting, they can be awarded for a tort- usually reserved for when the defendant has displayed actual intent to cause harm, rather than in cases of mere negligence. 5. Ancillary remedies: designed in aid of other remedies. Costs and attorneys fees. Punishment for contempt is ancillary to coercive remedies. Also receivership when its necessary for court to manage assets pending litigation. III. Paying for Harm: Compensatory Damages- basic principle- restore P to rightful position Rightful position: compensatory damages should restore the P to the position hed have been in but for the particular wrong just suffered. - Focus on the particular wrong- dont award damages for other wrongs, such as previous injuries against the Navajos (due process) - Compensatories substitute money for what plaintiff lost. Works best for fungible goods that are easily replaced. Rationales for the rightful position: a. Corrective justice: correct wrong by undoing its effects. Wont allow D to escape with benefits or P to escape with windfall. Seeks to minimize violations b. Economic Incentives: focuses on giving D the right incentives to obtain an efficient number of violations. Thus, its okay to harm others as long as you take into account the harm inflicted. Damages should equal harm inflicted as closely as possible to ensure incentives are accurate so that society experiences a net gain. - The more precision a court requires for proving rightful position, the greater likelihood that P will not be able to prove damages and will thus go under-compensated Value as the measure of the rightful position Market value of the property, where ascertainable, is used as measure of Ps rightful position. Not replacement cost, nor repair costs in excess of value/ an objective standard assuming voluntary transaction in a liquid market. Fundamental principle: P is entitled to be made whole, but D is entitled to have P made whole in the least expensive way. Options are: fair market value, cost of repair, or replacement costs, whichever is less.

Measure market value at the time of loss: if markets work well, assumption is that FMV will equal the replacement cost - If damage has been done presently, the fact that repairs wont be done till sometime in the future doesnt compel court to award damages at reduced to present value because an injured party isnt required to perform repairs in order to recover for diminution in market value of its property. Exception from value as rightful measure 1. Where P has a unique use of the property that isnt valued in the market, P can get replacement cost, if P can show the unique value is real and not fabricated. - Sometimes theres value to owner thats not recoverable. Subjective value isnt relevant, FMV declines through depreciation much faster than worth to owner. - Value to owner may be less than FMV: for instance, a manufacturer of goods gets FMV, not its cost to manufacturer, in these cases the owner does better than expected, rather than worse. 2. When replacement cost allowed for component parts: if lost property can be characterized as an essential part of something bigger that cant be abandoned, then P can get replacement costs instead of just FMV. 3. Rule for special purpose property: where there is no ascertainable market value, such as for special use property, use reasonable cost of repair/replacement as measure of damages. Test is one of reasonableness. 4. Property that fluctuates in value: general rule is that you get value of property at the time of loss. But for crops, it is value at time of harvest - Note: you cant recover for profits you thought youd make from speculation. 5. Securities: fluctuating values problems arise- there are three main approaches: 1) A few states value loss at the time of wrong, but these decisions are old 2) A larger number of states resolve doubts against D by awarding the highest value between the time of the wrong and the time of trial, filing suit, or some similar date. 3) Fed Cts & NY: some other states give P the highest value between time of discovering the loss and a reasonable time thereafter to replace the securities. A. Expectancy & Reliance as measures of the rightful position: compensatories can be measured in three ways: 1) expectation; 2) reliance; 3) restitution. Which measure is appropriate depends on the situation, but the general rule is to award expectation damages. - P can elect between those 3, but reliance recoveries are usually in cases where neither side could prove expectancy. Reason: if K was profitable and P could prove expectancy, P would get costs (reliance) plus expected profit. If K was a loser and D could prove Ps expected loss, P would get costs less expected loss. P with a losing K can also opt for restitution of benefit conferred on D.
Three damages approaches: 1. What P would have had if K had never been made Reliance 2. What P would have had if K had been completed- Expectancy ($ in lost profits) i. Lost profits: attempts to calculate the stream of lost profits over time. Any time they are uncertain, argue its because of Ds own wrongdoing. 3. Restore D to position D occupied before K- Restitution

Expectation damages are preferred: D should only breach when doing so is efficient, in order to be efficient, D must put P in his rightful position, and still make an extra profit to justify the breach. Reliance damages encourage inefficient breaches, while expectancy encourages efficient breaches. Note: businesses often opt for reliance damages even though theyre less where valued customers are involved, to avoid alienating the customer a. Expectation damages Gross expectancy = profit + incidental & consequential damages- expenses saved

Net expectancy = profit Must be provable (not too speculative) & reliance on expectancy must be reasonable (if P knows its too good to be true, he cant hold D to bargain). Exceptions to compensating expectancies General K rule: P is entitled to the benefit of the bargain, though it may result in excessive expectancies. The larger the money and the benefit, the more suspicious courts are and more pressure there is to get around it Reasons for awarding excessive expectancies: prevents D from promising far more than they can actually deliver; shouldnt have to litigate whether you deserve expectation b. Torts: damages for torts are reliance not expectancy Smith v. Bolles: P was fraudulently induced into buying a security in a worthless mine that was promised to produce gold. Damages are limited to reliance because suit was for fraud (a tort), not breach of K. Distinction between torts and contract: - Many states respond to this by allowing recovery of expectancy in both fraud and warranty - UCC 2-721 allows UCC remedies for fraud. 2nd restatement of torts allows as fraud damages reliance plus benefit of the bargain of a business transaction (if proven with reasonable certainty) - Federal Courts adhere to Smith rule in securities fraud cases but have allowed expectancy in a few cases. The distinction is said to lie in the ability to determine expectancy w/ certainty. - In Tort, lost wages and lost profits are recoverable. This is different from contract expectancy because contract expectancy is itself a product of Ds promise. In tort cases, Ps expectancy is typically not derived from D - Can distinguish tort and contract in that they identify different parts of the transaction as wrongful. Contract law identifies the breach as the wrong. Tort/fraud law I.D.s the misrepresentation as the wrong (Where would P be but for the misrepresentation?) B. Consequential Damages General Damages [direct] are often characterized as those that flow directly and necessarily from a wrong, or that are a natural result Special damages are secondary or derivative losses arising from circumstances that are particular to the parties (i.e., consequential damages) - Alt. definition: special damages are ones that are reduced to a sum certain before trial- ex: medical expenses, lost wages (while P & S are general damages) - Rule: consequentials are allowed if they were foreseeable to D at the time of contract - They are everything that happens to P as a consequence of the initial loss. j. Incidentals: a subset of consequentials used by the UCC to refer to damages that naturally and unavoidably result from general damages, that no foresight is needed. a. Limits on consequentials: courts were traditionally hostile to consequentials because they were seen as speculative, uncertain, remote and avoidable by a diligent P. so the following rules limit them: 1. Duty to mitigate- P cant recover for damage that could reasonably have been avoided 2. Offsetting benefit rules: expenses saved are deducted from damage award. 3. Proximate cause: P cant recover for consequences that werent foreseeable by D at time of K - Note: D liable for unusual consequences if he had actual notice that his breach would cause them.

4. Economic harm rule: P who suffered no physical impact to their person or property generally cannot recover for merely economic losses (in tort, not K). Exception 1: failure to pay - Rule: where breach of contract consists only of failure to pay money, remedy is limited to the principal owed plus interest. i. Sellers breaches: buyer gets difference of costs of cover and contract price plus incidental and consequential damages ii. Buyers breaches: seller recovers difference of contract price and market value or Seller recovers difference between contract price and resale plus incidentals - The U.C.C generally codifies the interest-only rule for banks that fail to execute orders to transfer funds. But, it authorizes consequentials in the extraordinary narrow case of a bank that receives funds, refuses to pay them to the beneficiary of the payment order after beneficiary makes demand and gives notice of the consequential damages and the bank fails to prove that its refusal was based on a reasonable doubt concerning the beneficiaries right to receive funds. - Loan commitments: some cases have also denied consequential damages for breach of a contract to lend money. But the majority rule allows such damages where they are sufficiently foreseeable. (i.e., refusal of bank to close loan after P fully disclosed his financial need to lender in process of loan commitment). This is because of the purpose of loan commitments; if P could borrow elsewhere, he should mitigate damages by doing that. But if he cannot, the inability to borrow is the very risk he tried to avoid by paying for a loan commitment. Exception 2: suits against insurers for bad-faith refusal to settle - The insured has no claim merely for failure to pay or delay in payment. But if the insurer refuses or delays in bad faith, knowing that it is liable, P can sue not only for interest but also for consequential damages, including emotional distress & punitives. Deterring defenses? One argument for rule doesnt appear in Meinrath is that if any delay in paying money triggered liability for consequential damages, the risks of negotiating or litigating disputed claims would increase. Our law therefore encourages litigation. Exception 3: Tortious interference with existing Contract Tortious Interference with Business Relationship Florida Supreme Court a prima facie case of tortious interference with a business relationship must establish four elements: 1. the existence of a business relationship, not necessarily evidenced by an enforceable contract; 2. knowledge of the relationship on the part of the defendant; 3. an intentional and unjustified interference with the relationship by the defendant; an 4. damage to the plaintiff as a result of the breach of the relationship. Plaintiff is entitled to compensatory damages for injuries actually sustained and damages actually suffered, and may request consequential damages in the form of lost profits. May request injunctive relief if damages at law are inadequate or inappropriate. Courts may also award punitive damages upon a showing of wantonness, willfulness, spite, ill will, or malice on the part of the tortfeasor beyond evidence required to establish legal malice. Intent doesnt automatically impose punitive damages liability; awarded in 2 step process: (1) court must decide if theres a legal basis for recovery of punitive damages, then (2) jury must award appropriate damages amount. Defenses: - Absolute Immunity acts occurring during the course of judicial proceedings - Acts Legal in Itself malice/bad motive alone is not sufficient to sustain this COA - Business & Legal Affairs no proof of duty owed by defendant to plaintiff

Contracts Terminable At Will generally, not a COA under this relationship First Amendment constitutional avoidance doctrine Lawful Competition BOP satisfied by defendant that interference was lawful Protection of Contractual Rights freedom to contract, so long as theres no malice Burden of Proof- P must make the prima facie case; D must prove that interference was lawful FABRE DEFENSE IN FLORIDA Following the Florida Supreme Court decision in Fabre v. Marin in 1993, a defendant in a negligence action may assert the fault of a nonparty as an affirmative defense. If the defendant proves the fault of a nonparty at trial, the jury may apportion fault to the nonparty on the jury verdict form. - Additionally, the defendant has the burden of proving by a preponderance of evidence at trial that the nonpartys fault contributed to the accident in order to include the nonpartys name of the verdict form. - Fabre defense enables defendants to escape accountability by pointing the finger at individuals or entities not named in a lawsuit. - Accusations against nonparties deprive those individuals of an opportunity to defending court. - False accusations drive up court costs and thwart judicial economy. IV. Limits on damages - Ex: K excluded consequentials, limited liability to repair/replace of machine, but that limited remedy fails to achieve its essential purpose. - Rule: if warranty fails to fulfill its purpose, validity of exclusion depends on specific circumstances of transaction (i.e., if seller wrongfully repudiates repair warranty) and probable intention of the party. - Policy Reason: ensuring stability of routine business transactions idea that for many sellers immunity from consequential damages may be indispensable from pricing structure a. Basically, consequential damages are something two willing parties can contract out of, but when you do, you cant bargain out of all damages available. You can contract out of consequentials and maybe even incidentals, but we need to have some remedies available to the buyer in order for K not to be considered unconscionable. Courts in these cases emphasize parties equal bargaining power UCC 2-719(3) makes it prima facie unconscionable to exclude liability for personal injuries caused by consumer goods. Tort law also addresses personal injuries and refuses to enforce exculpatory agreements. b. Dangers of allowing limitation of remedy clauses a) Incentive of seller to take care: if the seller is able to limit liability, then theres worry it willing to bear the full costs of its mistakes, decreasing incentive to get it right b) Too easy to exaggerate in every situation to say that the buyer is the one who will have better information thatll allow him to take better care, get insurance, etc. c) Seller gets away with exploitation because of asymmetry of information d) Worry about abuse: unconscionability; where bargaining power is unequal, sophisticated parties, disparities in economic strength Liquidated Damages- damages whose amount the parties designate during the formation of the contract for the injured party to collect upon a specific breach - At common law, an LD clause will not be enforced if its purpose is to punish the wrongdoer/party in breach rather than to compensate the injured party (i.e., penalty -

clause). One reason for this is that the enforcement of the term would in effect require an equitable order of specific performance. However, courts sitting in equity will seek to achieve a fair result and will not enforce a term that will lead to unjust enrichment of the enforcing party. In order for an LD clause to be upheld, two conditions must be met: 1. First, the amount of the damages identified must roughly approximate the damages likely to fall upon the party seeking the benefit of the term. 2. Second, the damages must be sufficiently uncertain at the time the K is made that such a clause will likely save both parties the future difficulty of estimating damages - LD clauses are invalid where over liquidated (unreasonably large) unenforceable on public policy grounds as a penalty. Where its provable that breach caused NO damages, you cant collect anything because actuals would be easy to prove - LD clauses are invalid where inapplicable: damage incurred is not type of damage contemplated by the LD clause (i.e., failure to deliver goods [not governed by the LD] vs. failure of goods to work correctly once installed [governed by LD]. - Bottom line: where courts see bad faith by D, LD clauses are honored. Where courts see good faith by D, the LD clauses are struck down for one reason or another. - Reality: although LD clauses are supposed to limit litigation, courts often require P to prove actuals anyway to police the LD clause, which is exactly what the LD clause is supposed to prevent. When you write in an LD clause you want to insert the language in there that this is the exclusive remedy In over-liquidated damages clauses cases, we ask if the clause is void as a penalty. In the under-liquidated (too low) damage clause cases, DONT ask if the clause is void; presumably P could ask for 13 million even if thats unconscionably low. The question instead is whether the liquidated damage clause is EXCLUSIVE. However, even a remedy expressly agreed to be exclusive is not exclusive if its unconscionable. However, if parties agreed to what compensation should be then the court will likely say lesser amount (actual damages or LDC) is right answer. Avoidable Consequences, Offsetting Benefits & Collateral Sources Rule: the test of proper cover under the UCC is whether at the time and place of breach buyer acted with good faith and in a reasonable manner. Its immaterial if in hindsight it later proves that P didnt pick the cheapest or most effective cover. Summary: D is not liable for the avoidable consequences of his wrongdoing, but D cant scrutinize Ps action at trial as long as they were reasonable even if they turn out not to have been cheapest for D. Damages where value cannot be measured in Dollars 1. Personal injury & death a. Per-diem damages- says how much damage P suffered is worth if you were to calculate it based on how much each day of P&S=$ - Ps prefer per diem arguments because it takes focus away from large theoretical numbers to small real numbers juror can understand - Ds say it detracts from big pic: jury focuses on little numbers rather than big numbers that matter. It allows jurors to rationalize large damages by making the big number seem small - Some JDs allow it with cautionary instructions to jury. Fed. Cir is split on issue and treats it as procedural and applies federal law in diversity cases. A rule of thumb is that P&S is 3 times out of pocket (special damages). b. Golden rule arguments: What would you want if you suffered Ps injuries?



Courts dont allow these arguments because we dont want juries to lose their objectivity by asking them to empathize with the Ps side - An argument for FR: There is no objective market value for injuries, so jurors must resort to subjectivity. c. FMV argument: what price would market demand? - Generally rejected because compensatory damages may be more than market value because injury is involuntary, while market is voluntary - Dignity: there are some things humans shouldnt be allowed to buy and sell because its inconsistent with human dignity - Compensation arguably is less than market would require because society cant an wont afford full compensation; such compensation would bring society to a halt. Statistical Issues: mean v. median- writers sympathetic to Ps cite median verdicts, while those sympathetic to Ds cite mean verdicts. Medians better reflect the experience of most Ps; half of all Ps get less than the median; means reflect whatever insurers have to pay-possible for insurers to lose money while most Ps recover little, if a minority of very large judgments exhausts the premiums collected. Split among state Supreme Courts. over constitutionality of damage caps i. Open court and jury trial claims have been most successful theories (anti caps) ii. Caps on P&S are far more likely to be upheld than caps on total damages iii. Entire body of law has developed under state constitutions, immune to review by U.S. Sup.Ct. no serious claims that damage caps on state law claims violate federal law. Wrongful Death & Survival Action The basic differences between the claims is that Florida law permits the continuation of a lawsuit via the survival statute, though the party successively dies. The estate then carries forth the suit and damages recovered may include medical expenses, loss of wages (past), and loss of future earnings reduced to present value. Defenses: (1) Good Samaritan- if liability resulted from attempted rescue; however, Florida Law provides that one may be liable for ordinary negligence in carrying out the rescue, not gross negligence. (still discuss when duty was assumed, when it was breached, and the proximate cause of damage). (2) Assumption of risk/contributory negligence. End by saying, unless P is found 100% responsible, which is unlikely, D will still be liable and must pay damages for his negligence. But for his negligence, she wouldnt be injured remains. (3) Superseding/Intervening: whether or not foreseeable- address that in regard to why you would charge someone with survivor statute as opposed to wrongful death. A wrongful death action may be commenced to address a loss of life resulting from tortious conduct. Such is often dependent upon whether the deceased is single or married, a minor (25 and under), has surviving parents or children, in terms of claims and awarded damages. Damages may include loss of consortium for husband and a child, future earnings, medical expenses funeral expenses, etc. Pecuniary loss: wrongful death damages are based on pecuniary loss. Term has evolved from loss of income to later include services, inheritance, love and support, society, etc. Today. Most states consider it to include: recovery of funeral expenses loss of financial support to dependents; loss of services; nurture, training, education, guidance of children, services to spouse A small majority permit loss of society it is limited to positive benefits P wouldve received had P lived. -


2. 3.

This emphasis on pecuniary loss leaves three groups of persons whose deaths cause little recovery: children, retired persons and adults without beneficiaries. - Whether the parents or other relatives of an unmarried adult may recover for loss of society often depends on the details of each states wrongful death act. Loss of inheritance: if decedents earnings are large enough to accumulate a surplus beyond what would be spent on self and dependents, that surplus cannot be recovered as loss of support, but it may be recoverable as loss of inheritance. - States that deny this recovery do so because too speculative. - Can be argues that WD damages are under compensatory because wrongful death fails to compensate for the value decedent placed on his own life. Ps are now trying to use evidence of decedents valuation of own life, often calling it hedonic damages. - Likely not allowed under state wrongful death acts Defenses: (1) Knowledge of [intoxication of doctor]- in response to this talk about heightened standard for doctor in his specialty; (2) Grossly Neg/Intentional tort may remove vicariously liability from employer and get directly to agent The controversy over tort law - The median is almost always lower than the mean and thats because of the outlier. The mean is very much affected by large jury awards and the median tends to be more accurate of what happens to your client because thats where most damage numbers fall. - Often times your recovery is limited because of other sources you may have such as life insurance. The wealthier you tend to be the more likely you are to have life insurance/other types to cover loss of your loved one dying. Other Ds have paid and or settled and that comes in but not to jury 1. Separation of powers: legislators are supposed to pass legislation to set the policy for the state. The executive branch is in charge of carrying out the law s and have certain policy powers under state constitutions that provide for general health welfare and safety of public. They help carry out rules or statutes that are passed and may even promulgate their own rules under the Florida admin act. Its up to judiciary branch to make sure that the rules and laws dont violate state constitution. States can provide more protections to its citizens than guaranteed by the federal constitution. Arbino: regarding cap on noneconomic damages- courts must simply apply the limits as a matter of law to the facts found by jury; they dont alter the findings of facts themselves, thus avoiding constitutional conflicts meanwhile, the dissent rejected the semantic distinction. Three Florida statutes that diminish recovery by P in tort action Statute that requires court to admit evidence of collateral source payments made before trial in action for injury affects amount of money that P receives from any one tortfeasor (to prevent dual recovery) Contributory negligence: P may still recover but the damages shall be diminished by the jury in proportion to the amount of fault attributable to P. Abolishment of Joint & Several Liability: If an amount of fault is apportioned to an unknown D, the other Ds will not be liable for that Ds wrongdoing, and instead will only be liable to P for the amount of negligence that they, themselves, inflicted. Dignitary & Constitutional Harms- in FL, our rules say that when Ps present their case and then D moves for directed verdict, the judge will take facts in light most favorable to the non-moving party and if no reasonable juror could find for the P, the judge will direct the verdict to the D. usually they dont, though. Comparable verdicts: damages are tough to prove with accuracy. Most damage awards depend on how egregious the behavior was and how seriously impacted the P

was- especially physically. (ironic because the higher you place up your injury and the longer youve been sick the more you get. Do we want to encourage this?) - Today, rather than reaching and reviewing verdicts in isolation, courts tend to police verdicts by comparing them - Problem: how do we know that the benchmark cases werent anomalies how similar must the cases be? - Comparative verdict review works best on most extreme cases- catching high and low damages awards. Remittur: when the court finds a verdict to be too high, it can offer P a choice of accepting a lower amount of taking a risk by going to trial again. - Judge is supposed to remit to the highest amount a jury couldve awarded without triggering a remittur. [note: the only remedy for an unreasonably low verdict is a new trial.] Right to recover for emotional distress: what youre really recovering for in dignitary/constitutional torts is emotional distress. Focus on tangible consequences of distress such as inability to work. Generally intentional infliction of emotional distress is recoverable, but negligent inflict of emotional distress isnt recoverable. Exceptions in negligence: physical impact rule, zone of danger, family member - There is no cause of action under Florida law for psychological trauma alone when resulting from simple negligence; the psychological trauma must cause a demonstrable physical injury such as death, paralysis, muscular impairment, or similarly objectively discernible physical impairment. - In essence, the "impact rule" requires that before a plaintiff can recover for emotional distress caused by the negligence of another, the emotional distress suffered must flow from physical injuries the plaintiff sustained in an impact. Proof & Valuation: market value isnt what we want to award. We want the individuals reaction, tested against a reasonable person standard- someone whose not unduly sensitive. - Emotional distress is generally not recoverable in contract, but most courts treat bad faith breach of insurance contract as a tort. Characterization as tort has spread to other contracts too. Carey v. Piphus est. rule: dont recovery for intrinsic value of constitutional right; you have to prove damages. Problem is how to prove emotional distress for loss of opportunity to a hearing. Probably cant do that? Intentional Infliction of Emotional Distress o Cause of action, whereby a plaintiff may recover for mental pain and anguish inflicted in the course of deliberate or reckless conduct of such a nature that malice on the part of the defendant may be imputed as a matter of law. o This tort is reserved for that type of behavior which thought to go beyond all bounds of decency in our society o Mere annoyances or indignities will not suffice. In order to successfully state a cause of action for IIED, you must show: - The intentional or reckless behavior of the wrongdoer. - That the alleged conduct was outrageous. - The conduct alleged caused emotional distress. - The emotional distress caused was severe. Fla. Sup. Ct. recognizes IIED as an independent cause of action and adopts the definition from Restatement 2nd of Torts. Examples of Successful IIED claims:

Students printed and distributed school newsletter in which the threaten to kill a particular teacher as well as rape her and all of her children. Nims v. Harrison - Employers sexual harassment of employee (which included physical molestation, verbally explicit and degrading language, exposing himself to employee, forcing her hand onto his genitalia and locking employee in his office against her will)-Johnson v. Thigpen - Workers compensation carriers delay in payment for lung transplant, where patient had limited life expectancy. Liberty Mut. Ins. Co. v. Steadman Defamation: presumed damages and punitive damages are unconstitutional except with respect to Ds who publish defamatory material with knowledge of its falsity or reckless disregard for truth. Definition: The act of harming the reputation of another by making a false statement to a third person. - If the alleged defamation involves a matter of public concern, the plaintiff is constitutionally required to prove both the statements falsity and the defendants fault. Libel: to defame someone in a permanent medium, especially in writing Slander: a defamatory assertion expressed in a transitory form, especially speech - Although libel and slander are for the most part governed by the same principles, there are two important differences: (1) Libel is not merely an actionable tort, but also a criminal offence, whereas slander is a civil injury only. (2) Libel is in all cases actionable per se; but slander is, save in special cases, actionable only on proof of actual damage. This distinction has been severely criticized as productive of great injustice. - Defamation has the following five elements: (1) publication; (2) falsity; (3) actor must act with knowledge or reckless disregard as to the falsity on a matter concerning a public official, or at least negligently on a matter concerning a private person; (4) actual damages; and (5) the statement must be defamatory. (1) Publication: This element is satisfied only if the statement is published or communicated to a third party. This element merely requires that the statement be exposed to the public to be read or heard, but not necessarily actually read or heard. (2) Falsity: This element may arise from untruthfulness, or This element may arise from truthful statements that imply falsely, as in Defamation by Implication. (3) Freedom of speech is applied different depending on whether the P is a public figure or a private individual Damages for Defamation Per Se: Victim need not plead or prove malice or special damage because malice and damages are both presumed from the nature of the defamation. This Defamation is one which, will necessarily cause injury due to its nature. - Example: a defamatory communication is actionable per se (without a showing of special damage) if it imputes to another a criminal offense amounting to a felony. - Defamation by implication involves many situations that some other states and the Restatement Torts, Second call a false light invasion of privacy, with false light being a separate tort that is not recognized in Florida V. Punitive Damages - Know punitive damage rule in FL: awarded in FL but there are tort reform language with the damage statute - Know that you must not prove negligence, it is a higher standard of gross negligence or intentional conduct - Generally in torts the standard is preponderance of evidence but if you are trying to collect punitives it is clear and convincing evidence which is somewhere between 50% and beyond a reasonable doubt. So by clear and convincing evidence I have to show that the D acted with gross negligence or intentional misconduct

- In FL it is originally capped at 3 times the compensatory damages or $500,000 whichever is greater. This is because it will compensate the plaintiff that must get awarded $1 nominal damages in order to have either (3$ or $500,000) obvi 500k would be more and that would be awarded BMW v. Gore: three punitive guideposts 1. The degree of reprehensibility of the Ds conduct - physical or economical? - indifference or reckless disregard? - repeat or isolated incident? 2. The ratio between the punitive damages award and the harm likely to result from the Ds conduct as well as the harm that actually has occurred - no bright line rule for ratio 3. The civil or criminal penalties that could be imposed for comparable misconduct. - great care must be taken to avoid use of civil process to assess criminal penalties that can be imposed only after the heightened protections of a criminal trial have been observed. Courts have long admitted evidence of the same or similar wrongful conduct in punitive damages trials. Similar conduct on a wide scale shows that what happened to P was deliberate and not a rogue act. Willingness to harm many people shows a greater need for deterrence and a more malicious state of mind than willingness to harm one person. i. The teeth of the State Farm opinion was in its holding that nearly all of state farms other misconduct was irrelevant. The court didnt think that refusing to pay first party claims for property damages had anything to do with refusing to pay liability claims, even if both refusals flowed from the same policy to arbitrarily cap payments. They wanted specific state conduct and worried that same pattern of misconduct used to prove reprehensibility in multiple cases would lead to multiple liability ii. Philip Morris went on to say that evidence of actual harm to nonparties can help to show that the conduct that harmed the P also posed a substantial risk of harm to the general public and so it was particularly reprehensible. However, a jury may not go further than this and use a punitive damages verdict to punish a D directly on account of harms it is alleged to have visited on nonparties. [This goes to divergent purposes for compensatory and punitive damages. Whereas compensatories are intended to redress the concrete loss that the P has suffered by reason of the Ds wrongful conduct, Punitives are aimed at deterrence and retribution.] Be familiar with idea that generally legislature and tort reform doesnt like punitive damages and the courts try to limit them. A. Punitive Damages in Medical Malpractice - A medical malpractice plaintiff may be entitled to punitive damages where a doctor acts with malice, gross negligence or fraud in failing to diagnose and treat a patient's condition. - Punitive damages are capped under FS 768.73. - Punitive damages may not be capped at any amount and are excepted for those claims where intoxication by drugs or alcohol is at issue. - Punitive damages are distinct from non-economic damages. Therefore, non-economic damage caps of FS 766.118 for medical malpractice should not apply to punitive damage awards. - Insurance companies may describe punitive damages as falling under noneconomic damages. This could provide a potential defense if punitive damages are raised. VI. Preventing Harm- The Measure of Injunctive Relief A. The scope of injunctions 1. Preventing wrongful acts

1) The injunction against future violations of law seeks to maintain P in his rightful position - Seeks to prevent harm rather than compensate for harm already suffered. - An injunction is a court order, enforceable by sanctions for contempt of court, directing D to do or refrain from doing something - P must first make a threshold showing that a preventative order is necessary - This is the ripeness rule: before an injunction will issue, the threat of injury must be ripe. (Real danger present that the acts to be enjoined will occur). Marshall court holds that the scope of the past violation determines the scope of the remedy against future violations. Logic of the rule is to tailor injunction to the particular facts, confined to show prospective relief. What must be included in drafting order: if youre a P and you draft too vague, argument on appellate level will be order is too broad and vague. Describe acts in detail so when D does violate acts, you go into court and can argue exactly what they did against which acts. Moreover, you can show they were definitely on notice before they made the violation - Rule 65(d)(1) & obey the law injunctions (1) Contents. Every order granting an injunction and every restraining order must: (A) State reasons why its issued; (B) State its terms specifically; and (C) Describe in reasonable detail and not by referring to the complaint or other document- the act or acts restrained or required - This rule generally precludes injunctions that merely tell D to obey the law or that are written in terms as broad as the underlying legal standard. The larger injunctions do not individuate and so very often, they fail to effectively tell the D what he is supposed to do. Therefore, they typically arent permitted. Mootness: Jurisdictional concept- if theres no remaining case or controversy, the court must dismiss as there is no issue. Cessation: cessation of illegal conduct may make an injunction unnecessary because even though the case isnt jurisdictionally moot, the propensity is gone. In practice, theres no clear difference between these two (mootness=no propensity). Voluntary Cessation of wrongful acts Burden of proof- P has burden of proving propensity at beginning of a case, but D has the burden of proving that an injunction is no longer needed. Voluntary cessation is generally not enough on its own. D must show that subsequent events make it absolutely clear that the allegedly wrongful behavior couldnt reasonably be expect to recur. What happens when the injunction is withheld? In W.T. Grant, the case was dismissed without resolving merits- same effect as if case has been held moot, or unripe. Nothing has been decided and any renewed litigation will get a fresh start A claim for damages is NEVER moot, neither is a claim for restitution of Ds unjust gains. Its always possible to grant monetary relief for past events. 2. Preventing Lawful acts that might have Wrongful Consequences Nicholson v. Connecticut Half-way house, Inc: trial court enjoined as a nuisance before half way house on Ps block went into operation. However, test for nuisance is that the evidence must show that Ds proposed use of property is unreasonable. The present fear cant be based on pure supposition, as it was in this case. Thus it wouldnt be ripe Prophylactic rule: judicially crafted rule that overprotects a constitutional right, and gives more protection than such a right might abstractly seem to require on its fact. An example is the prophylactic rule of Miranda warnings to protect the fifth amendment right against selfincrimination. The exclusionary rule which restricts admissibility of evidence in court is also sometimes considered as one.

Non-compete clauses: when you sign a non-compete clause it may be enforced against you if its reasonable and in geographic location and in time because of argument that everyone has right to be employed. These are enforceable by means of injunction, generally through writ of prohibition or mandamus that orders D to do something - Pepsi-Cos inevitable disclosure theory (what past employee learned of trade secrets during tenure at company would enable his new company to achieve a substantial advantage by knowing how first company will price, distribute, etc.) Prevents employee from disclosing trade secrets/confidential information - Courts that recognize this generally construe it narrowly and require strong evidence. Some courts reject it altogether. - The source of law that authorizes prophylactic: substantive law creates these rules and thus the court will merely be enforcing the substantive rule the remedies controversy is squarely presented when the substantive e law doesnt create a prophylactic rule but the court issues a prophylactic injunction at the remedial stage, invoking remedial power to prohibit conduct that will not violate any substantive law. When the court enforces a common law rule, its often unclear whether it is enforcing a prophylactic substantive rule or entering a prophylactic remedy. The controversy is greatest when the relevant substantive law was enacted by a legislature or constitutional convention and the courts prophylactic remedy clearly goes beyond whats required by the substantive law. 3. Repairing Consequences of Past Wrongful Conduct In Forster v. Boss, it was possible to undue the consequences of the fraud and breach of K through a reparative injunction: an order to undo or repair the harm of a past violation of law. Prevents some or all of the harmful consequence. The difference between these and preventive is these are still preventive in that they seek to prevent some or all of the harmful consequences of the wrongful act; as opposed to seeking to prevent the act itself - For each element of harm the rightful position requires that court do one or the other but not both - Where it is possible to prevent harm by injunction the court can prevent it or let it happen and compensate for it. Can be no double recovery - For harm thats already happened and for future harm that cant be prevented, damages are only option Temporary and permanent damages: the law of nuisance distinguishes between permanent damages- awarded when the nuisance appears to be permanent and often measured by the value of Ps property before and after the creation of the nuisance from Temporary damages, where the future course of the nuisance is unpredictable and damages are measured by the harm the nuisance has inflicted up until the time of trial (i.e., damages for the delay- for three years without a permit wouldnt have been a double recovery in Forster.) a. Private Nuisance: The court reasons that imposing an injunction would have a disproportionate effect on the local industry and national economy. The public is best served by monetary damages to compensate those affected by the pollution. b. Public Nuisance: Industries in Tennessee are releasing particulate as a byproduct that is carried across state boarders.The court holds that because of the wide spread effect, and in light of state sovereignty, an injunction is warranted. Winston Research Corporation: appropriate injunctive relief period is that which competitors would require after public disclosure to develop a competitive machine (if trade secret was basis of comparable machine), damages wont be awarded if they didnt sell any of its machines because no profit to be disgorged, and if evidence as to future profits deemed highly speculative; two-year injunction here deprived D of any benefit it mightve gained from advantages and shielded P from any potential harm from Ds competition. (court couldve denied injunction and awarded damages instead).

Key is when youre alleging some sort of specific performance (through injunction) you have to show that youre going to suffer irreparable harm and that the legal remedies, for whatever reason, arent adequate. VII. Choosing Remedies A. Substitutionary or Specific Relief Pardee: illustrates & interprets the rule that courts will not grant an equitable remedy if a legal remedy would be adequate. 1. Irreplaceable losses a. Injunctions - What makes a legal remedy inadequate? 1. Equity will act only to prevent injury that is irreparable at law 2. Typical application if money damages would be adequate, then injury is not irreparable. When is legal remedy adequate? 1. Only if it is as complete, practical and efficient as the equitable remedy. Legal remedy almost never meets this standard. - Replaceability rule: damages are adequate expect when the thing lost is irreplaceable. 2. Once definition was in place, IIR didnt embody much preference for legal remedies. 3. Courts dont deny specific relief merely because they judge the legal remedy adequate- IIR almost never bars specific relief because substitutionary measures are almost never adequate. 4. At the stage of permanent relief, any litigant with a plausible need for specific relief can satisfy the IIR. Where the transaction costs of negotiating a voluntary transaction are high, the usual remedy should be damages; where transaction costs are low, the usual remedy should be injunctions - With torts it is impractical to use injunction because harm is either unforeseeable or there is no market that anyone would agree to for their body parts, pain, etc. Replevin: sometimes known as claim and delivery is a legal remedy for a person to recover goods unlawfully withheld from his or her possession by means of a special form of legal process in which a court may require a D to return specific goods to the P at the outset of the action (i.e., before judgment). - In other situations, a party seeking relief may elect to adjudicate the right to possession prior to obtaining immediate relief to obtain the property in question. In such cases, replevin actions are still designed to afford the petitioning party a relatively speed y process for obtaining judgment as compared to typical lawsuits. - The summary remedy afforded by replevin statute can be thwarted by Ds who contest the claimants right to possession, by contesting the Ps complain and instating on traditional litigation involving discovery, and in some cases, trial by jury. - Replevin is a common law legal remedy and isnt subject to IIR. Replevin makes specific relief available in an important set of cases without any showing that the damage remedy is inadequate. Ps right to property through replevin casts doubt on claims that AngloAmerican law reflects a preference for substitutionary relief over specific relief (i.e., giving P $ damages instead of his property) The means of enforcement is one important difference between replevin and injunction a. Injunctions are enforced by the contempt power; replevin was traditionally enforced by the sheriff seizing the property and delivering it to P. A D unwilling to comply with an injunction may be jailed for contempt; a D unable to comply may be jailed if the court doesnt believe him/her. b. The irreparable injury rule has been brought to bear on this choice. If the goods are irreplaceable, P may get an injunction ordering return of the goods; she need not rely on the riskier enforcement mechanisms of replevin. -

c. In most cases, either replevin or injunction will restore the goods; in some cases, the goods are gone forever and neither remedy will restore them. Scope: replevin is of narrower scope than injunctions. Most important for present purposes, replevin lies only to recover goods; it does not lie to prevent a threatened destruction or dispossession Content of IIR: Pardee says damages are inadequate because P cant use money to replace trees. - In civil rights cases injunctions are the standard remedy, despite the IIR - Courts have not accepted the economic view that injunctions should be withheld when transaction costs are high. The rule that damages are inadequate unless P can go to the market and replace the very thing he has lost turns the economic advice upside down. If he cannot replace it, either he has the one only and its about to be destroyed, or defendant will be the only source of supply. Thus, monopoly is the laws most common reason for granting injunctions. b. Specific Performance of Contracts: a specific performance of injunction, an order to D to perform his contract. It typically requires affirmative conduct, but that doesnt make it unusual. Its availability is historically conditioned on a showing that legal remedies would be inadequate In Campbell, carrots are gone, fight is over money. Usually this makes issue moot because the money value of a right to specific performance is expectancy damages. Choice between two ways of giving expectancy (damages or SP) court granted SP and courts often do in Contracts for ordinary goods if SCARCITY, time constraints, or sheer size of K make cover difficult or impossible. Efficient Breach of Contract A voluntary breach of contract and payment of damages by a party who concludes that they would incur greater economic loss by performing under the K This non-tortious breach of K likely should be remedies by punitive damages because thatd discourage efficient breach and therefore efficient behavior which would be undesirable for society as whole. However, proponents of this economic view of law often speak of the need to encourage efficient breach and this suggests hostility to specific performance. Specific Performance where cover is possible: i.e., if replacement is possible but difficult; or if possible with similar goods but different in some way that matters to P. - A majority of cases grant specific relief, but a substantial minority do not. If equitable relief would impose a disproportionate burden on the D, thats a separate issue from whether Money damages are adequate- added consideration - Ds undue hardship must be great- every D will face some hardship- so it MUST be disproportionate to Ps gain in order to defeat SP claim. Essentially a reality check ruledont stop real estate development for a billboard. Van Wagner. Court says in Van Wagner, that physical uniqueness is not enough; measure of damages must be unreliable - Why: physical uniqueness means irreplaceability; usually it also means hard-to-measure damages. Here, damages may be measured by a formula keyed to traffic volume - Where Ps benefit from SP is modest compared to money cost of injunction to D, no injunction issued. Irreparable injury rule & Undue Hardship: the usual rule is that money is never an adequate remedy for loss of real estates or damage to real estate and is also routinely applied to sales and leases and assorted claims about real estate including encroachments to interference with easements to violations of condo restrictions. - Undue hardship to D is an independent reason for denying specific relief In Van Wagner, Ct applies both doctrines: (1) Ps legal remedy is adequate (2) SP would impose undue hardship on D.


Benefit to Defendant as Measure of Relief: RESTITUTION A. Restitution from Innocent Defendants- and Some who are Treated as Innocent 1. Introducing Restitution- Mistake Unjust enrichment: generally describes the benefits that D has received and also the cause of action to recover those benefits Restitution: may mean either the cause of action or the remedy. Its generally based on unjust enrichment, but it also applied to some older K remedies. - Restitution is just a synonym for restoration - Its better to think of it as an alternative measure of monetary recovery entirely distinct from damages. Damages are based on Ps loss, restitution is based on Ds gain. The measure of restitution is the amount of cash that each D receives, presumably with interest. The restatement third says that interest should run against an innocent recipient from the date she had notice of Ps rights. It also says that where a D is enriched by a money payment, the primary measure of restitution is the resulting increase in the Ds net assets. Plaintiff needs a constructive trust when she seeks to recover a specific asset or from a specific fund. [But BlueCross sought no such thing. It sought a simple money judgment in restitution, to be collected from Ds general assets in the same way a damage judgment would be collected. This isnt an equitable remedy, its a judgment in restitution. Unlike a constructive trust.] a. Constructive trust- D holds property that rightfully belongs to P and court implies that D holds the property in trust for P. the trustee, D wont profit only manages it for another. Allows assets to be traced and recovered from third parties and also allows return of specific assets even from insolvent D. - For money paid by mistake, and for most other forms of unjust enrichment, a P could recover a simple Money judgment in the common law courts, in a contractual form of action that became known as quasi contract - Defendants lack of knowledge- more precisely, lack of notice- is an element of a claimed defense of change of position - Notice requires only knowledge of facts sufficient to make it reasonable to conduct a further inquiry that wouldve revealed the truth. - Interpreted very liberally. Principles from Restatement Third of Restitution 1. unjust enrichment: is enrichment that lacks an adequate legal basis; it results from a transfer that the law treats as ineffective to work a conclusive alteration in ownership rights. Thus, a transfer of money or property pursuant to a valid contract, or in payment of a valid obligation or as a valid gift, is justified; a transfer by mistake, or a transfer accomplished by tort, is not justified and the resulting enrichment is unjust. 2. Restitution is generally unavailable to a claimant who should have made a contract with the recipient but failed to do so. - A corollary is that one who does have an enforceable contract is bound by the contracts terms; subject to one controversial exception, she cant sue for restitution of the value of benefits conferred and thus ask the court to predetermine the price or any other terms of the K. 3. Strong presumption against forcing an innocent D to pay for benefits she never requested and might not want. (Becomes problematic when P demands cash payment for a noncash benefit). Rule from Somerville v. Jacobs: when a person in good faith mistakenly improves the property of another, that person is entitled to the value of improvement. (Different from this and BlueCross is that here hed be forced to pay for improvements as opposed to BlueCross D whod just have to give back the property and not be in a worse position.) 2. Measuring Restitution from the Innocent- and More Restitutionary Causes of Action a. Court Orders Later Reversed

1. Another settled ground for restitution: money paid or collected pursuant to the order of a court or admin agency, subsequently vacated or reversed, must be refunded (i.e. A.N.W. Seed: a money judgment later reversed). 2. Judgment creditors sometimes argue that a judgment debtor who paid the judgment pending appeal did so voluntarily, and that restitution is barred by the voluntary payment rule. This argument is largely a function of the mislabeling inherent in using voluntary payment as a catch-all label for payments that, for some functional reason that may or may not be clearly stated, are treated as irreversible and thus beyond recovery in restitution. A judgment debtor who forgoes any appeals and pays the judgment is of course bound by that choice. But when a judgment debtor pays and simultaneously appeals, it is plain that the payment is not intended to be a final resolution of the dispute. 3. The trial court made a mistake in these cases, but that has not been the explanation. The judgment debtor does not pay by mistake; he pays in the face of uncertainty, knowing that he might win the appeal 4. The doctrinal explanation has been that the restitution plaintiff paid under compulsion. Compulsion is obvious in A.N.W. Seed, where the sheriff physically seized the judgment debtors property. But compulsion is also at work when the judgment debtor writes a check. No one would pay a judgment pending appeal apart from the coercive effects of the judgment. The judgment debtor typically wants to prevent the seizure of her property, or sometimes to stop the accrual of interest. Anyone with enough money to pay the judgment could have posted a supersedeas bond instead, and the bond is a safer choice, because the judgment creditor might dissipate the money so that the later judgment in restitution can never be collected. But that reasoning does not make the payment voluntary or bar the claim in restitution. 5. Restitution and damages again. The result is that A.N.W. Seed presents a real choice about how to measure recovery. Ps damages are $57,000. But Ds enrichment is only $16k. if the state had committed a tort, P could recover its damages. But there is no tort; the state was acting completely within its rights. So recovery is limited to the states enrichment. 6. Formulating a general rule. The first Restatements attempt to generalize appears in the courts long quotation form the Introductory Note to the treatment of the measure of recovery. See especially the three sentences beginning with if defendant was tortuous. If the D committed a tort, he is liable in damages, not just in restitution. If he is innocent, he is liable only in restitution, even if Ps damages are much greater. The second sentence in that passage refers to disgorging the profits of conscious wrongdoers, a restituionary remedy. b. Unenforceable Contracts and Quantum Meruit Anderson v. Schwegel : measure of recovery under quasi-contract is not the amount of

enrichment, but the amount of unjust enrichment

Rule: Mistaken improvements = restitution includes enhanced property value Rule: When improvements are assented to = damages include unjust enrichment This case is treated as a quasi-contract case and not a quantum meruit case; its quasi because the services were requested; if they werent requested, then the case would be quantum meruit Liability for market value or agreed price when the recipient requested the goods or servicesdoes not apply when the recipients request has been induced by fraud, or vitiated by mistake or incapacity. Two methods for measuring defendants gains 1. Market value of machine generally produces gains equal to damages. For D who are not conscious wrongdoers 2. Consequential gains or full profits: Everything saved by using the machine -- produces gains greater than damages. For D who are conscious wrongdoers Conscious wrongdoers must disgorge consequential gains Notes on Quasi-Contract:

2 Points: (1) A quasi-Ks (a.k.a. Ks implied in law) are not Ks & have nothing to do w/ enforcing agreements; - Quantum Meruit is a measure of contract damages when there is an enforceable K without a specific price term; it is a measure of restitution when there is no enforceable contract. (2) P is not really waiving tort; if so, would have nothing left to sue for. - Quasi-K includes a group of actions of which the most important were money had & rec'd (recovery of $$ paid), quantum meruit (value of services performed), & quantum valebant (value of goods delivered). Some cases are where D would have agreed to pay if he could (like doctor who treats unconscious patient), but in others the law implies a promise (cases like Neri, cases of benefit conferred by mistake, & cases where benefit conferred pursuant to non-binding K). Farash v. Sykes Datatronics, Inc.: A party may recover for the expenditures made in reliance on the promise of another, even though the promisor received no benefit from such expenditures (similar to the case where a party to an unprofitable contract waits for the other party to breach and then sues in quantum meruit for the benefit to the other party).

Rule: if you start performing and no contract materializes, you get your performance back. Contract No Contract Sue on K or sue in restitution Sue in restitution Benefit to D Sue on K Farash - split - court may imply No benefit to D benefit - In the Restatements view, a coherent account of restitution requires that restitution be based on unjust enrichment, and that account necessarily requires that there actually be enrichment. On that view, Farash can only be understood as a recovery of reliance based on promissory estoppel or on the otherwise unenforceable contract. - There has long been a doctrine in equity, applied mostly t oreal estate cases, that part performance takes the case out of the statute of frauds and makes the contract specifically enforceable. - Part performance shows detrimental reliance, but it also serves an evidentiary function: The performance must be unambiguously referable to the contract. To be convincing as evidence, the part performance must fenerally have been accepted by the party invoking the S.o.f. B. Recovering More than Plaintiff Lost 1. Disgorging the Profits of Conscious Wrongdoers o Olwell: Conflicts w/ rightful pos'n in that but for wrong, P would have gained nothing b/c egg washer would have remained gathering dust. o Economic theory would limit recovery in Olwell to compensatory dams. o Where transaction costs are high (as w/ bilateral monopoly), it is harder to explain rest'n. Where they are low, theories of corrective justice & economic efficiency may both be able to explain a wide range of rest'n cases. o Vincent v. Lake Erie Trans. Co.: D left ship tied to P's dock during storm, doing $500 damage. Using Olwell measure, P would recover the value of the ship. Avoiding greater harm is a common ground for creating privileges to do otherwise unlawful harm. o In Olwell, if we assume D would have rented a machine for $10/month ($360) if it hadn't had P's machine, then idea of how much D was unjustly enriched is much less. o One theme is that the measure of rest'n depends on D's culpability. Conscious wrongdoer is likely to be liab. for all profits, including those from D's more profitable use of P's property. A D acting negligently or illegally but in good faith or w/some justification not sufficient to completely exonerate him is likely to be liable only for P's losses.

Rstmt ban on recovery of profits has 2 limitations: (1) Does not apply to profits earned before date used for valuation; (2) Does not apply to claims other than conversion (e.g., where D had poss'n pursuant to a K later rescinded or held ineffective, or D is a dishonest fiduciary). Maier Brewing Co. v. Fleischmann Distilling Corp: Issue: is accounting of profits the appropriate remedy? Under statute, P only has to prove Ds sales, D must prove all elements of cost/deduction claimed. In assessing damages, court has discretion according to circumstances of the case - Two views as to basis for awarding accounting of profits: Majority: accounting of profits by Ds as method of shifting BOP as to damages Minority: more recent trend basis accounting on equitable concepts of restitution and UE These courts have required competition between the parties Court: does not necessarily follow that just because there is no direct competition, an accounting of profits can serve no reasonable end * Legislative intent: making infringement and piracy unprofitable What is loss to P? Reputation Restitution measure as an accounting of ill-gotten gains *Why not just injunction? Not enough of a deterrent, leads to serial infringer Where there is competition: accounting based on rationale of returning diverted profits No competition: accounting based on UE rationale 2. Measuring the Profits Hamil America, Inc v. GFI: This case well articulates the general approach established in Sheldon v. Metro-Goldwyn Pictures Corp, with respect to deducting overhead expenses. The principle established in Sheldon is that [o]verhead which does not assist in the production of the infringement should not be credited to the infringer; that which does, should be; it is a question of fact in all cases. In other words, while overhead items may support both illegitimate and infringing activities, it would be improper to deduct those overhead expenses from the infringers gross revenue if the activity did not contribute to the infringement as that would overstate expense and allow an infringer to retain ill-gotten revenue. The defendant must first establish a reasonable nexus between the category of overhead and the production or sale of the infringing product. The second step is for the defendant to offer a fair and acceptable formula for allocating a given portion of overhead to the particular infringing items in issue. While the reasonableness of the proffered allocation formula is a question of fact in each case, the consequences to the damage award are often such that the trial becomes a battle of experts on the issue of the allocation formula. As outlined in Hamil, some methods of allocating overhead to the infringement proffered have included the production cost of the infringing product as a percentage of the total production costs; the number of infringing products as a percentage of total products; and, although rejected before, some courts have accepted an allocation based upon the dollar sales from the infringing product as a percentage of total dollar sales. In cases where infringement has been found to be willful, courts give extra scrutiny to the categories of overhead expenses claimed by the infringer to ensure that each category is directly and validly connected to the sale and production of the infringing product.

NOTES ON CALCULATING PROFITS 1. Two methods of calculating. The accounting Hamil looks rather different from the Sup.Ct.s apportionment in Sheldon. The play generated few numbers to work with - Pro Rata Method: the Court had to calculate profits at the level of the movie, estimate the relative importance of the play, and apportion profits pro rata based on that estimate. With a





component not sold separately, that is soemtiems the best a court can do. Hamil contemplates apportioning overhead pro rata although based on proportions found in ds books rather than impressionistic judgment. Hamil calculates proftis more directly, considering all revenues and expenses attributable ot the infringing product. - Incremental change method: But it is still necessary to separate profits from that pattern from profits on other patterns and other products. - When sufficient data are available, courts usually try to calculate directly how much profit came from the infringing product. Note too that this choice is either-or. If the court can actually account for an item of income or expense, then it would be double counting to take account of that same item in any further apportionment that is done pro rata - The restatement third distinguishes issues of causation and remoteness, allocation (apportionment), and deductions and credits. No vocab is really standard in cases. Overhead. Courts have partly divided, and partly hedged on overhead. - The restatement third would apparently deny credit for most overhead. Defendant will not be allowed to deduct expenses (such as ordinary overhead) that would have been incurred in any event, if the result would be that defendants wrongful activities- by defraying a portion of overall expenses- yield an increased profit from Ds operations as a whole. Taxes. Income taxes have also generated substantial debate. The federal rule is that conscious wrongdoers cannot deduct the taxes paid on the profits they disgorge. The federal courts of appeals appear to be divided on the treatment of income taxes in calculating the profits of nonwillful infringers. (note 6) Burden of Proof. Recall that defendant has the burden of proving its costs. Should D be liable for gross receipts if it has no records sufficient to support an allocation of expenses? The court said yes in Blackman v. Hustler Magazine, Inc., although there the court plainly suspected that D had lost its records deliberately. - Plaintiff at least has the burden of showing gross receipts from the infringing product, not gross receipts from the whole enterprise. - The restatement third says that P must prove at least a reasonable approximation of the amount of the wrongful gain. Residual risk of uncertainty in calculating net profit is assigned to the D. (note 8) The restatement third despairs of stating precise rules for calculating profits. There is sophisticated analysis in the comments, but the black letter says: [T]he court may apply such tests of causation and remoteness, may make such allocations, may recognize such credits or deductions, and may assign such evidentiary burdens, as reason and fairness dictate, consistent with the object of restitution as specified in subsection (3). Subsection 3 says the object is to recover all net profits without imposing a penalty. -