D is required to perform the K according to its terms

6 part checklist

1. The K is valid

2. K conditions of P must be satisfied

3. Inadequate legal remedy alternative

4. Mutuality of remedy

5. Feasability of Enforcement

6. Defenses

(Cha Cha Is My Favorite Dance)

Contract is valid

- in order to obtain s/p P must be able to show the K terms with more certainty and definiteness than would be the case in an action for money damages at law

1. Deficiencies (quantity of land problem)

2. Time of the essence clause fact pattern

Who is the plaintiff?

Seller as P: Can enforce the K if the defect is minor, but cannot enforce K if the defect is major UNLESS seller can cure the defect before or at closing

Buyer as P: Can enforce the K even if the defect is major (however the court will not enforce is the defect is extraordinarily large)

If you decide that s/p should be granted under the rules above, even though a defect still remains, you MUST include a sentencing noting that the court will lower the purchase price to take into account this defect in consideration  (i.e. abatement in the purchase price)

The Facts:

1. there will be a land sale K with an express time of the essence clause

2. this clause will contain a forfeiture provision if the performance is not timely

3. there will have been partial performance which is now potentially subject to forfeiture (buyer is the one who partially performs by making payments toward the purchase price)

4. buyer will have made a late payment (this triggers the time of the essence clause and its forfeiture provision.  Seller wants to keep both the land and any performance rendered to date)

5. Buyer will bring a lawsuit for s/p

What result?

Equity abhors forfeitures

Factors court can look at to avoid the harsh result of a forfeiture?

1. loss to seller is small

2. tardiness is de minimis

3. waiver (seller has accepted late payments in past)

4. buyer would suffer undue hardship

You should almost always award specific performance

Note: the above fact pattern relates to partially performed contracts.  If the K is wholly executory (i.e. buyer has done nothing yet, the time of the essence clause will be strictly enforced)

too speculative

D insolvent

multiple suits are necessary

**The thing bargained for is unique

Concept: if the property is "unique" then even if P received money damages, he could not simply go out and buy it.  It would not be available. 

Threshold inquiry: Determine whether C was for the sale of real or personal property

Real: Land is unique (no exceptions- but examiners may try to trick you by saying that every parcel will be made to look identical)

Special sellers rule: sellers of land can get s/p even though all they have coming is money (i.e. the purchase price)

Personal property: is not unique and money damages are adequate

Exceptions:

1.) one of a kind or very rare

2.) personal significance to buyer

3.) circumstances make chattel unique (uniqueness is tested at the time of litigation NOT contract formation- if unique now that's all that counts)

A liquidated damages clause does NOT make money damages adequate.  S/p is still available. 

Exception: where the clause provides that this is to be the "only" remedy

mutuality of remedy

Fact pattern will always be one where P lacks capacity- probably b/c a minor

Steps:

1. Determine and discuss that you have a mutuality fact pattern.  This is one where D argues "P should not be able to enforce this K against me b/c I could not enforce it against him"

2. Set out the rule: "Court will reject the mutuality argument if it feels secure that the P can and will perform

3. Grant s/p: in your answer, have the decree provide for simultaneous performance

feasibility of enforcement

personal services contract enforceability

Rule: they are NOT specifically enforceable

Reasons: enforcement problem and involuntary servitude

Defenses:

Equitable defenses

1. unclean hands

2. laches

3. unconscionability

Contract defenses

1. mistake

2. misrepresentation

3. statute of frauds

How to spot the problem?

1. the K must involve land.  it could be either a land sale contract or one to make a testmentary disposition of land

2. this K will have been an oral contract

Rule:

If one has rendered (i) valuable part performance, (ii) in reliance on the contract, this will take the case out of the SOF and s/p will be granted

i. Payment (in whole or part)

ii. Possession

iii. valuable improvements

iv. valuable services (modern trend)

Any 2 of the top 2 taken together equals part performance

1. equitable conversion

2. covenant not to compete/enforceability

Where a valid land sale K is entered into an equitable conversion occurs upon execution

Result: the property interests of the buyer and seller are regarded as switched

Thus:

The buyer will now be regarded as having the real property interest (the "specifically enforceability" right to the land)

AND:

The Seller will not be regarded as having the personal property interest ("specifically enforceability" right to the money")

BAR TIP: they occur between K execution and the closing

Two common fact patterns: death and damage/destruction

Death fact pattern

Who gets what? (assuming equitable conversion)

D enters into a specifically enforceable contract to sell Blackacre.  Before the closing, he dies.  His will gives his real property to Bowater, his personal property to Lulu.  Who gets what?

Bowater: nothing

Lulu: the money from the sale- purchase price

Damage/destruction fact pattern

Risk of loss (assuming equitable conversion)

majority rule: the risk is on the buyer (exception: loss is brought about by the seller's negligence)

modern trend: this risk is on the seller (exception: at the time of the loss the buyer has either legal title or possession)

Covenant not to compete/enforceability

Two part test

Part one:

The covenant must protect a legitimate interest of the person in whose favor it runs.  For this to be the case, the services must be unique. 

Part two:

the covenant must be reasonable in both its geographical and durational scope. 

The original K is considered voidable and rescinded

Rescission

Two step analysis

1. Determine if there are grounds for rescission

2. Determine if there are valid defenses

(Good Dog)

Grounds for rescission

General: mistake, misrepresentation, coercion, undue influence, lack of capacity, failure of consideration, illegality

What is in common? P argues that the contract was not validly formed

Mutual Mistake:

material fact: rescission granted

collateral fact: (going to quality, desirability, or fitness of property for a particular purpose): rescission denied

Unilateral Mistake:

General rule: rescission denied

Exceptions:

The non-mistaken party knows or shoulw know of the mistake

(modern trend: the mistaken party would suffer undue hardship is there is no rescission)

Rescission granted

In order to get rescission based on misrepresentation grounds, the P must show that they have actually relied upon the misrepresentation

1. unclean hands

2. laches

Non-defenses (will not work)

neligence of P is NOT a good defense to rescission

changes written agreement to conform with the parties original understanding

1. valid contract? (that needs to be rewritten for some reason)

2. grounds for reformation

3. defenses

1. mistake

2. misrepresentation

mutual mistake: reformation granted

unilateral mistake: reformation denied

exception: where the non-mistaken party knows of the mistake (actual knowledge) (NOT if the non-mistaken party should have known)

reformation granted

this is available for both innocent and intentional misrepresentations.  rewriting reflects expressed intent of the parties

1. unclean hands

2. laches

Non-defenses:

negligence of P

statute of frauds

parol evidence rule

NOTE: reformation is NOT allowed where it would adversely affect the rights of a subsequent BFP

Imposed on improperly acquired property to which D has TITLE.  Property will be subject to an IMMEDIATE court directed SALE.  The monies receives go to the P.  If the proceeds are less than the fair market value of the property WHEN IT WAS TAKEN, a deficiency judgment will issue for the difference and can be used against D's other assets

1. Inadequate legal remedy alternative

2. tracing is allowed

3. BFP's prevail over P

4. P will prevail over unsecured creditors

The rules for equitable lien and constructive trust 

Inadequate legal remedy

Basic alternative would be money damages

Two reasons why:

*D is insolvent (this is what it will be on the exam)

* For constructive trust, the property is unique

The rules for equitable lien and constructive trust 

tracing is allowed

1. If the property value subsequent to taking goes UP, go with constructive trust

2. If the property value subsequent to taking goes DOWN, go with an equitable lien (P will get what the original property was worth)

3. When D's property cannot be traced solely to P's property, ONLY an EQUITABLE LIEN is available.