Remedies
Reading Assignment
For class on 11/19, read pp. 539-51 and skim pp. 551-64. This is more on restitution. Keep in
mind the following:
Disgorging Profits for Opportunistic Breach of Contract
1. What was the basis for the restitution award in Snepp? Did Snepp wrongfully deprive the
CIA of anything – the book? The right to review the book? What is the value of the right
to review the book? Is this just Olwell in the breach of contract situation? Is there
something else that causes the court to come down so hard on Snepp?
2. What is the basis for disgorgement of profits in May? Is there anything other than breach
of contract here? Does the subject of the contract matter?
3. If there is a “tendency to assume that [disgorgement] is generally unavailable in breach of
contract” why did the May and Snepp courts award it?
4. Note how the Restatement (3rd) (p. 685 n.7) tries to codify a general rule regarding
disgorgement of profits from breach of contract.
Rescission of Contracts
1. When is rescission available? How does rescission work? What grounds justify
rescission?
2. Why would the plaintiffs in Mobil Oil want the rescission remedy over the damages
remedy? There is a very clear reason in this case.
3. When a plaintiff elects rescission, they are said to have “disaffirmed” the contract – i.e.,
the court treats the contract as though it never existed. If plaintiff elects rescission, does
that eliminate plaintiff’s ability to recover consequential damages that result from
defendant’s actions? Consider the following:
B (a resident of Missouri) buys a house from S located in New York state. B
moves to NY only to find that S lied about the house’s habitability – it’s haunted
and nobody has been able to spend the night in the house without going crazy. B
is forced to stay in a motel for 2 weeks until he can find another house to
purchase.
i. If B seeks to rescind the contract due to S’s misrepresentation, can
he also recover his motel expenses?
ii. Given that B is suing for rescission of the contract based on S’s
tortious behavior, can B try to recover punitive damages?
4. How is rescission different from the other restitution remedies we have seen? In other
situations, D simply had to pay P a certain amount of money based on D’s unjust
enrichment – although the measurement of the unjust enrichment was the subject of some
argument in several cases (ANW Seed, Olwell) Consider the following in rescission:
The Bs (couple) buy a house from S. After contract is executed, the Bs move in
and immediately build an addition. After living in the house for six months, the
Bs discover that the house is haunted – a fact that S fraudulently concealed from
them. Upon rescission, what do B & S have to return to each other?
Restitution and the Return of Specific Property
I know this is a lot of material (551-64). It involves using a constructive trust to get return of
specific property. We won’t discuss it in great depth. Read it so that you understand the basics of
when a court will impose a constructive trust and order the return of property and why the courts
in the cases involved did/did not impose such a trust. These questions can help focus your
reading:
1. The two core requirements of getting a constructive trust for purposes of return of
specific property are (1) conscious wrongdoing (e.g., fraud/theft/breach of fiduciary duty)
and sometimes mistake, and (2) an identifiable asset.
a. Why do the plaintiffs in Paolini satisfy those requirements?
b. Why doesn’t the plaintiff in Ruffin?
c. What is an identifiable asset?
2. What does defendant’s potential bankruptcy do to plaintiff’s ability to impose a
constructive trust on property in defendant’s hands? In re Leitner provides a good
explanation. Note that being able to characterize oneself as the true owner versus an
unsecured creditor makes all the difference in the world to a plaintiff when the defendant
is bankrupt.