In some contracts cases, the remedy may be a damages award to reimburse the non-breaching party for financial losses. Nonetheless, courts might apply an “equitable remedy” in some cases rather than the typical legal remedy of damages.
These are remedies that involve action (or non-action) on the part of the breaching party to make the other party “whole” after a breach.
Can Both Legal Remedies and Equitable Remedies Be Recovered?
The plaintiff may select either legal damages or an equitable remedy in most cases. Yet, the election of remedies and availability of each will hinge on the facts of each case and state and federal laws.
Suppose both legal and equitable remedies are available for the plaintiff. In that case, the court may permit the plaintiff to both remedies depending on the type of loss the plaintiff suffered and the amount of loss the plaintiff will suffer.
What Are the Main Equitable Remedy Classifications?
There are two primary categories of equitable remedies: injunctions and specific performance.
Injunctions are when the court instructs the defendant to take certain steps to remedy the situation.
For example, these can include orders to:
- Cease a certain activity (such as halting production that causes too much pollution)
- Transfer property to the proper owner
- Repair property that is perilous to visitors
- Change policies or warning signs
Specific performance is where the court instructs the party to perform their duty as it is explicitly listed in a contract. The main point is that the terms of the contract dictate the actions.
These may include:
- Paying for an item that has been obtained
- Shipping goods that were owed to the plaintiff
- Completing an artistic performance or work
Continuing and completing construction work that has stopped
Therefore, equitable remedies tend to be very flexible and depend on the parties’ exact needs. This means that the non-breaching party needs to think critically regarding the kind of remedy they are requesting during a lawsuit. In many circumstances, the assistance of a lawyer may be required. There are other equitable remedies, such as contract reformation.
What Equitable Remedies Are Available in a Breach of Contract Dispute?
Three types of equitable remedies are available in contract disputes:
- Specific performance: This court order requires the breaching party to perform their duty owed in the contract because money damages will not remedy the non-breaching party. This usually is applied when the subject matter of the contract is unique.
- Contract Rescission: When a contract is breached because the parties did not agree to the terms or the essential terms were agreed upon by error, the contract may be canceled.
- Contract Reformation: The contract is rewritten to represent the contracting party’s actual intent. This usually transpires when the terms of the previously agreed contract were made by mistake.
Can I Obtain Both Legal and Equitable Remedies?
As previously mentioned, it is generally required that a party seeks legal remedies (e.g., a compensatory or monetary damage award) before the court will even contemplate granting equitable relief. In other words, if the parties cannot indicate that money will not improve their contract dispute, they will most likely not be qualified for any of the equitable remedies listed above.
On the other hand, there are specific cases where a party to a contract may obtain monetary compensation under the rules of equity. These are known as “restitution damages,” which are a particular and very limited type of damage in a breach of contract case.
Restitution damages are basically to prevent one party from being unjustly enriched for their breach. For instance, if the non-breaching party has already delivered their goods, the other party has not yet paid for them. A judge may order the breaching party to pay restitution damages to stop them from receiving an agreed-upon benefit for free and at the other party’s expense.
What Is the Difference Between Legal Remedies and Equitable Remedies?
Legal remedies are monetary compensation for placing the injured party in the same position before they were injured. Legal remedies always deal with money damages and monetary losses suffered because of injury or a breach of contract. Legal remedies are enforced by a court judgment granting the plaintiff a certain amount of money.
Equitable remedies are related to fairness instead of actual money damages. Equitable remedies are enforced by the court to either compel a person to do a specific act like go through with the acquisition of a house or prevent a person from performing an action that is causing or will cause the plaintiff an injury. A court order usually executes equitable remedies.
What Is a Constructive Trust?
A constructive trust is another type of equitable remedy acting like a trust enforced by the court to benefit a party for whom another person’s wrongdoing has wrongfully denied its rights or profits. This usually transpires when another has breached a fiduciary duty to gain an unfair advantage over the plaintiff using the plaintiff’s property.
The courts will then apply a constructive trust on the defendant’s enriched property to prevent the defendant from being unjustly enriched to the plaintiff’s detriment. The defendant will then hold the property in trust for the plaintiff and will ultimately transfer the property to the rightful owner.
In Which Situations are Constructive Trusts Enforced?
Constructive trusts are most typically found when trustees have abused their fiduciary duty of administering trust assets.
Other circumstances in which a constructive or implied trust may be enforced include:
- Secret trusts: If all or parts of the trust agreement were kept a mystery from other relevant parties, then the court may impose a constructive trust to reestablish the rights of the affected parties.
- Interference: This can occur when a defendant or another party has somehow interfered with trust matters, which led to a negative result.
- Issues with trust formation: A court may issue a constructive trust to cure any defects caused by an improperly formed trust. For instance, a trust may be defective if the documents created contained mistakes or were set up under illegal conditions, such as duress, undue influence, fraud, or coercion.
- Unjust enrichment: Constructive trusts are commonly used when the defendant would receive an unfair advantage if a court does not impose a constructive trust for relief.
In addition, a constructive or implied trust can also be enforced against a plaintiff, but this is a rare event.
For instance, suppose a trustee initiates improvements on trust property. In this case, a court may demand the settlor reimburse the trustee for those improvements so long as they were done reasonably.
Do I Need a Lawyer for Help with Equitable Remedies?
Equitable remedies often require a thorough understanding of the law. You may need a business attorney to seek a remedy through the court system. Your attorney can inform you of your various options and help you pursue the right course. Also, your lawyer can represent you during court hearings and meetings.
Equitable remedies are often tailored to the individual contract and circumstances of the parties. Therefore, it would be best to work with a local commercial attorney if you are facing an issue involving a breach of contract.
An experienced business lawyer will be able to inspect the facts of your case and, from there, decide whether or not an equitable remedy is available or necessary for your situation.
Additionally, you may also want to contact an attorney to help you draft your initial contract so that disputes or errors can be avoided.