Key Takeaways

  • Equitable remedies are non-monetary court-ordered actions used when legal remedies (like money damages) are insufficient.
  • These remedies aim to enforce fairness, requiring parties to act or refrain from acting.
  • Common types include specific performance, injunctions, rescission, reformation, and restitution.
  • Courts use equitable remedies at their discretion and only when legal damages are inadequate.
  • Equitable defenses (like unclean hands or laches) can bar these remedies.

What is an equitable remedy? This is an action the court chooses to address a breach of contract. It is designed to return the aggrieved party to its original position or in the same position as if the breach had not occurred.

Types of Remedies

Parties must enter legal contracts in good faith. If this does not occur, the harmed party is entitled to a legal remedy. For example, if you pay someone $500 in advance to conduct a service, and he or she fails to do so, you are out $500. You can then file a lawsuit for breach of contract, and the court may order the person or the company to refund your money.

Historically, remedies are categorized as either legal or equitable. This is based on the system of English common law, which was divided into courts of law that could award monetary damages and courts of equity of chancery. This could grant equitable remedies if the court remedy was deemed unfair or insufficient.

Today, a single breach or wrong may result in more than one remedy, such as monetary damages along with equitable damages. The latter does not involve a jury, relies on service of justice rather than precedent, and seeks equity where no adequate financial remedy exists.

With equity, the breaching party could be ordered to:

  • Deliver property (specific performance)
  • Return consideration (restitution)
  • Stop doing a specific action (injunction).

Legal remedies include consequential and compensatory damages. These are designed to allow the aggrieved party to recover financial loss resulting from the breach.

Equitable Remedy

Instead of imposing a fine, equitable remedy is when the court orders the defendant to complete a contract as originally agreed. This step is taken when payment alone is not sufficient to make up for damages. Equitable relief can also be offered if legal damages are not available. The court can also modify the contract terms or cancel the contract if it is deemed unfair to one or both parties.

Limitations and Defenses to Equitable Remedies

While equitable remedies are powerful, courts impose limitations to ensure fairness. The following defenses may prevent a party from obtaining equitable relief:

  • Unclean Hands: Relief may be denied if the requesting party has acted unethically in connection with the issue.
  • Laches: Delay in seeking relief can bar equitable claims if the delay prejudices the other party.
  • Impossibility: The remedy is unavailable if it would require ongoing court supervision or if compliance is unfeasible.
  • Undue Hardship: Courts may deny equitable remedies if enforcement would impose disproportionate hardship on the defendant.

These defenses highlight that equitable relief is not a right but a privilege granted at the court's discretion.

Common Types of Equitable Relief

Equitable relief includes several forms of court intervention designed to enforce fairness:

  • Injunction: A court order that requires a party to do or stop doing something. Injunctions may be temporary or permanent.
  • Specific Performance: A directive to perform contractual obligations, typically involving unique goods or real estate.
  • Rescission: Cancels a contract and restores the parties to their pre-contract positions.
  • Reformation: Modifies the contract to correct mistakes or reflect the true intent of the parties.
  • Restitution: Orders the return of benefits unjustly received, to prevent one party from being unjustly enriched.

Each of these forms of relief addresses a different kind of contractual or civil wrong where monetary damages fall short.

When Are Equitable Remedies Used?

Courts grant equitable remedies when legal remedies—typically monetary damages—are inadequate to fully resolve the harm. These remedies are discretionary and based on fairness rather than legal entitlement alone. Courts evaluate several factors before granting equitable relief, including:

  • The uniqueness of the subject matter (e.g., real estate or rare goods)
  • The inadequacy of money damages to make the injured party whole
  • The conduct and good faith of the requesting party
  • Whether enforcement of the remedy is feasible without requiring excessive supervision

Equitable remedies are commonly used in contract disputes, property cases, fiduciary breaches, and unfair competition claims.

Specific Performance

Specific performance is a court order to fulfill a contract as written. This remedy is subject to several legal exceptions. Although this seems like the best remedy for any breach of contract, it only makes sense to use it when the item in question is unique, such as a family heirloom or a parcel of real estate. Items that are not unique can easily be replaced through the award of monetary damages.

However, the burden of proof is on the plaintiff to prove that the item in question is unique. Also, specific performance cannot be used where continuous and varied acts are contractually required. This would require constant judicial supervision.

Examples of When Specific Performance Applies

Specific performance is commonly ordered in transactions involving:

  • Real estate, due to the uniqueness of land
  • Art and antiques, where value and uniqueness are difficult to replicate
  • Closely held shares, which may not have a market substitute
  • One-of-a-kind goods or services essential to the aggrieved party

This remedy is rare in employment contracts or services that require continuous oversight, as courts generally avoid supervising ongoing personal conduct.

Contract Rescission and Reformation

When a breached contract is rescinded or canceled, this is known as contract rescission. A new contract can be written to address each party's needs, which is called contract reformation. A negative covenant is a promise to not do something; one example is a non-compete agreement. If an injunction of this kind is violated, the party in breach could be held for contempt of court.

For reformation to occur, a valid contract must exist. This is usually ordered if a term in the original contract was wrong or misrepresented. This is sometimes called rectification.

Restitution can be applied when a contract was breached because of misrepresentation or incapacity. This requires one party to restore what he or she received from the other party. The non-breaching party should not be enriched beyond his or her losses, and the person who breached the agreement is not punished.

Differences Between Rescission and Reformation

While both rescission and reformation address issues with contractual fairness, they differ in approach:

  • Rescission eliminates the contract altogether, often due to fraud, misrepresentation, or mutual mistake.
  • Reformation corrects the written contract to align with the true intent of the parties, typically in the case of drafting errors.

Rescission aims to return parties to the status quo, while reformation allows the contract to proceed with corrected terms.

Total Nonperformance by Breaching Party

If nonperformance occurs, the party that did not breach the contract is entitled to restitution. If a job is completed and the party does not pay, the restitution amounts to the contract price. If the job is not complete at repudiation, the contractor can sue for the market value or the appreciated value of the project. If the property can be returned, the court usually orders the breaching party to do so.

Calculating the interest on restitution can be a challenge. The court has discretion in this matter. If a doctor performs lifesaving services, for example, the benchmark would be the market value of medical care and not the value of the patient's life.

Legal vs. Equitable Remedies: Key Distinctions

Legal and equitable remedies differ in purpose, form, and procedural treatment:

Feature Legal Remedy Equitable Remedy
Purpose Compensate with money Enforce fairness or prevent harm
Relief Type Monetary damages Court orders (e.g., injunctions)
Right to Jury Often available Generally not available
Discretionary? Usually a matter of right Always at the court’s discretion
Used When Damages are adequate Damages are inadequate

Understanding these differences helps determine which remedy to pursue based on the specifics of the dispute.

Frequently Asked Questions

  1. What is an equitable remedy?
    An equitable remedy is a court-ordered action requiring a party to act or refrain from acting when monetary compensation isn't sufficient.
  2. What are common examples of equitable remedies?
    Examples include injunctions, specific performance, rescission, reformation, and restitution.
  3. When will a court deny equitable relief?
    Courts may deny it if the requesting party has unclean hands, delayed too long, or if enforcing it would be impractical.
  4. How is specific performance different from damages?
    Specific performance compels contract fulfillment, while damages provide monetary compensation for a breach.
  5. Can equitable remedies be combined with legal remedies?
    Yes, courts may grant both if necessary—for instance, awarding damages and ordering an injunction.

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