Difference between Legal vs Equitable Remedies

A remedy is the means by which a court enforces a right, imposes a penalty, or makes another court order to address a breach of legal duty. In the context of contract law, remedies are the various methods courts use to resolve disputes or address contract violations. Remedies can take many forms, such as awarding damages or ordering the breaching party to perform specific actions.

What Is an Equitable Remedy?

Equitable remedies are types of relief that go beyond monetary compensation. They are typically used when a legal remedy (such as monetary damages) is inadequate or impractical.

Equitable remedies include:

Specific Performance

This remedy orders the breaching party to fulfill their obligations under the contract. It’s usually applied in situations where the subject matter of the contract is unique, and monetary damages would be insufficient.

Imagine signing a contract to purchase a rare, unique painting. However, the seller changed their mind and refused to deliver the painting. Because the painting is unique, monetary damages would not be enough to compensate you for the breach. In this situation, a court might order a specific performance, requiring the seller to deliver the painting as agreed.

Contract Rescission

Rescission nullifies the contract, effectively returning both parties to their position before the contract was made. Contract rescission is often used when a mistake, fraud, or undue influence occurs.

Let’s say you enter a contract to purchase a house but then discover that the seller hid significant foundation problems. You can ask a court to rescind the contract, which would cancel the agreement and ideally return you to your position before the contract, including the return of your earnest money deposit.

Contract Reformation

Contract reformation changes the terms of the contract to reflect what the parties originally intended. This remedy is used when the written agreement fails to accurately capture the parties’ understanding due to error or fraud.

Assume you and a business partner agree to split profits 50-50, but the contract incorrectly states a 60-40 split due to a clerical error. If both parties agree that a mistake was made, the court can reform the contract to reflect the original intent.

Injunction

An injunction is a court order that prohibits a party from doing a specific act or obligates a party to perform a specific act. In contract law, an injunction may prevent a party from breaking a contract or continuing a breach of contract.

Consider an example where an employee has a non-compete clause in their contract, but they quit and start working for a competitor. The original employer might seek an injunction to enforce the non-compete clause and prevent the employee from working for the competitor for the non-compete period.

Constructive Trust

A court imposes a constructive trust to benefit a party that has been wrongfully deprived of its rights due to another party’s unjust enrichment or fraud.

Suppose you entrust your friend with money to buy a car on your behalf, but your friend uses the money to buy the car for themselves instead. A court could impose a constructive trust on the car, recognizing you as the rightful owner despite the title being in your friend’s name. This ensures that your funds do not unjustly enrich the friend.

What Is a Legal Remedy?

Legal remedies, also known as “damages,” involve paying money to compensate for a loss or injury.

Legal remedies can take several forms:

Lost Profits

These are damages that a plaintiff can claim if they lost money due to the defendant’s actions. They are designed to put the plaintiff in the position they would have been in if the contract had been performed as agreed.

Suppose a supplier breaches a contract with a retailer by failing to deliver goods on time. As a result, the retailer loses significant sales during the holiday season. The retailer may claim lost profits as damages, calculating the average profits they would have earned from selling those goods.

Punitive Damages

These damages are awarded to punish the defendant for egregious conduct and deter others from engaging in similar behavior. Punitive damages are relatively rare in contract law as they require the demonstration of intentionally harmful or egregiously negligent behavior.

Let’s say a landlord knowingly and intentionally fails to maintain a rental property in safe condition, resulting in a tenant’s severe injury. If the tenant sues and shows that the landlord acted with malice or extreme negligence, the court may award punitive damages to punish the landlord and deter similar behavior. While this example is more common in tort law, it illustrates the concept of punitive damages.

Lost Wages

These are damages awarded to compensate a plaintiff for income lost due to the defendant’s breach of contract.

Imagine an individual signs a contract for a job quits their current job to start the new one, but then the new employer rescinds the job offer in breach of the contract. The individual could sue for lost wages, seeking compensation for the income they would have earned had the contract been fulfilled.

Expectation Damages

These are damages awarded to put the plaintiff in the position they would have been in had the contract been performed as promised. These damages can include lost profits and other losses resulting from the breach.

If a wedding photographer cancels at the last minute, the couple might have to hire a more expensive replacement. Expectation damages could cover the cost difference and any quantifiable disappointment if the replacement photographer’s work was of lower quality.

Restitutionary Damages

These damages aim to prevent the breaching party from being unjustly enriched. Restitution returns to the plaintiff any value conferred on the defendant under the contract.

Consider a case where a homeowner pays a builder in advance to renovate their house, but the builder subsequently breaches the contract and does not do the work. The homeowner could sue for restitutionary damages to get back the money paid to the builder since the builder has been unjustly enriched by keeping the money without doing the work.

Seeking Legal Help

Navigating through complex contract law and understanding the appropriate remedies for a breach of contract can be challenging. You should seek legal assistance to ensure your rights and interests.

A lawyer can draft a contract that clearly outlines each party’s obligations and anticipates potential areas of dispute. They can also review contracts you are about to sign, advising you on any problematic clauses and suggesting amendments to protect your interests.

If your contract dispute escalates to a lawsuit, an attorney can represent you. They can help gather evidence, present your case, and argue on your behalf to seek the most favorable outcome.

If a breach of contract has occurred, an attorney can help determine the most suitable remedy, whether monetary damages or an equitable remedy like specific performance or an injunction. They can then help you pursue this remedy in court.

LegalMatch can connect you with an experienced attorney who can guide your circumstances. Visit LegalMatch today to find the right attorney for you.