Every party who files a lawsuit seeks a remedy. As defined in Black’s Law Dictionary, a remedy is “the means by which a right is enforced or the violation of a right is prevented, redressed, or compensated.” The word “remedy” in a legal context has virtually the same meaning in a medical context, namely, to cure. In a legal context, a remedy cures the violation of a legal right.
In the common law system, there are two types of remedies, legal remedies and equitable remedies.These will be discussed in turn.
A few words about the development of law and equity
As is well-known, England and most of her former colonies operate under a common law system. Very briefly, this means that in the absence of a statute or other legislation or regulation, judges have the authority to decide what the law is on a particular issue. Subsequent courts addressing the same issue are then bound by the previous court’s decision, which is known as a precedent. In order for this system to develop in an organised fashion, precedent was rigidly applied; if the facts of the case were more or less the same as a precedent, the precedent governed the case before the court. Fairly early on (in the Middle Ages) cracks began to develop in the system—what if the facts were close enough to precedent to dictate the application of precedent, but the application of precedent would result in a clearly unfair result? A separate system, known as equity, began to develop parallel to the common law system (and continued to develop over the course of several hundred years). The two separate court systems that resulted were empowered to award different types of remedies. Courts of law could award damages, i.e. money, to compensate a person for the loss he or she had suffered. The Chancery Court, which was the court of equity, could award remedies that would restore equilibrium and lead to a just and fair result between the parties.In order to eliminate problems that arose from these differences, the separate courts were, for all practical purposes, merged in the 19th century. However, the classification of rules and remedies as legal or equitable survives. This is so because the system of precedents that characterises the common law system requires that decisions and remedies be based on earlier cases, and so judges and lawyers still need to make these distinctions in the argumentation and decision processes.
As mentioned above, courts of law were empowered to award damages. Damages are the legal remedy. Damage is what happens to you (as lawyers say, what you “suffer”) and damages are what the court gives you (as lawyers say, “award” you) if you can prove that you have suffered damage. “Damage” remains singular even if the party suffers several different types of injury. For example, Jones paid Smith to deliver 100 kilos of prime beef to Jones for the opening night of Jones’ new steakhouse restaurant. Smith failed to deliver and Jones had to find a supplier who could quickly provide him with enough beef for the evening. Unfortunately, the supplier could only deliver 75 kilos of inferior quality beef at twice the price, the kitchen ran out of steak before the evening was over, and Jones had to close the restaurant early. What is Jones’ damage? He lost the money that he paid to Smith for the delivery. He had to pay the second supplier. He lost income, since he could not fill all the orders for steak that night. He suffered injury to his reputation, since he advertised and could not provide the product that he offered. Jones’ damages are the amount of money that the court awards him for the various types of damage which he has suffered.
The theory underlying contract damages is that a party to a contract is entitled to the benefit of his or her bargain. The damages that are awarded for a breach of contract are compensatory—they compensate the non-breaching party for his or her loss. These damages can be divided into two categories: general damages and special damages. General damages are damages which flow directly from the breach of contract. In the steakhouse example, Jones’ general damages are the money the court awards him to compensate for (1) the amount that he paid Smith, (2) the amount that he paid to replace the meat that Smith failed to deliver, and (3) the lost income for the steak orders that Jones couldn’t fill. His special damages are consequential damages – damages which are a consequence of the breach of contract, namely damages for injury to his reputation and lost income because he had to close the restaurant early. In order to recover these consequential damages he will need to be able to prove the damages with reasonable certainty and show that Smith could have foreseen the loss if he failed to deliver the meat.
Once damage has been proven and the right to damages is clear, the court needs to calculate the damages. As noted above, the non-breaching party is entitled to the benefit of his or her bargain. The simplest remedy is expectation damages, that is an amount of money which will place the non-breaching party in the position he or she would have been in had the contract been performed. The expectation damages for Jones’ steakhouse are set forth in the preceding paragraph.
What if Jones’ hadn’t been able to find a substitute supplier and had been unable to open his steakhouse as planned? He can’t recover expectation damages because there is no way of knowing how much money the steakhouse would have made that night. Instead of expectation damages, he can recover reliance damages. He relied on the fact that Smith would perform and prepared to open his restaurant. He can’t be put in the position he would have enjoyed had Smith performed, but he is entitled to be put in the position he was in before the contract was made; the status quo will be restored and Jones will be made whole. He will be able to recover, for example, the advertising costs, personnel costs, and all other costs expended in preparing his restaurant.
Damages do not always need to be proven. The contract may provide for liquidated damages, sometimes known as stipulated damages. A liquidated damages clause states that in the event of a proven breach of contract, the non-breaching party is entitled to recover a sum stated in the contract. In order to be enforceable, the stipulated amount must bear a reasonable relationship to the breach of contract; the liquidated damages clause may not operate as a penalty. If the contract between Smith and Jones provided for liquidated damages of £1,000,000 for any delay in delivery and Smith delivered the meat 20 minutes late, a strict interpretation of the contract would mean that Smith must pay £1,000,000 for being 20 minutes late. A court would almost certainly find this to be a penalty and strike down the liquidated damages clause (this would not mean that Smith would not have to pay any damages at all, but rather that the amount of damages must be determined by the court according to the principles set forth above.)
The last type of damages available under a contract are restitution damages. These damages require the breaching party to return the monetary value of the benefit that he or she received under the contract. Unlike expectation and reliance damages, which focus on what the non-breaching party has suffered, restitution damages focus on what the breaching party has gained. In addition, restitution damages are only awarded when there was no contract in force at the time of the lawsuit. There are two cases in which this can happen. The first is if the non-breaching party chose to rescind the contract when the breaching party failed to perform. The second case is where no contract ever existed but the non-breaching party performed and the breaching party accepted performance. For example, return to Jones’ steakhouse, but imagine that, without any contract, Smith delivered meat and Jones accepted it. Jones then refused to pay, saying that he had no contract with Smith. A court would find that Jones must pay restitution damages to Smith.
As discussed in another article, tort is the body of law that addresses non-criminal, non-contractual wrongs, such as personal injury, injury to reputation, trespass and non-criminal property damage. The purpose of damages in tort is to compensate the victim for his or her loss; thus we can say that tort damages are compensatory in nature. Nevertheless, on certain occasions, tort damages may also punish a defendant for his or her actions.
Tort damages can be broken down into types, as follows.
a. Nominal and contemptuous damages
A woman in a fur coat with two small children walks up to a taxi at a taxi station. When she tries to engage the cab, the driver starts to scream and curse and calls her all kinds of horrible names because she is wearing a fur coat and he is offended by fur coats. She is insulted, her children start to cry and ask why the man is calling her a murderer and who she killed. She engages the next taxi in the queue and goes home. She later sues the first taxi driver for defamation of character and damaging her children’s trust in her. The court finds that she indeed suffered injury but that she suffered no loss—she was able to take a taxi to where she wanted to go, her children’s trust was quickly restored without expensive psychotherapy, and she was angry and insulted, but not damaged. The court will award nominal damages. Nominal damages are a token amount awarded by the court when the plaintiff has suffered no loss but an award of damages is appropriate so that the court can (a) order that the defendant pay the plaintiff’s court costs ; or (b) award exemplary damages (see below) if the defendant’s behaviour is so offensive that he needs to be punished.
Contemptuous damages are the mirror image of nominal damages, in that the successful plaintiff is scolded for bringing the lawsuit. Green and Brown are next-door neighbours who have never gotten along. Green’s dog wanders onto Brown’s property one day and relieves himself. Brown steps in the dog’s faeces, is disgusted, and sues Green for trespass and for failing to control his dog. The court finds that Brown was technically legally correct and thus he must win the lawsuit, but that the lawsuit was rather ridiculous and wasted everybody’s time. The court will award damages in the amount of one penny (the smallest monetary amount) to make this statement to Brown.
b. General and special damages
General and special damages in tort are completely different from general and special damages in contract. Special damages are damages that can be itemised at the time of the lawsuit. For example, consider again Green and Brown and the dog. This time, Brown slips, breaks his leg and drops his laptop computer onto a rock. His lawsuit now has merit since he has suffered a real, quantifiable injury. His special damages (think special in terms of specifiable, not special in terms of extraordinary) might include his medical bills, lost wages until the date of the trial and the cost of repairing his computer. His general damages are damages that cannot be specified as of the day of trial, such as projected future lost wages as well as pain and suffering, i.e. his psychological injury.
c. Exemplary and aggravated damages
Exemplary damages, also known as punitive damages, are damages that the court awards when it is shocked by the defendant’s behaviour. To return to the taxicab example, the court could find it highly offensive that a professional cab driver addresses personal insults to a person with small children. An award of exemplary damages would, in essence, tell the driver that although his offence was not criminal, he will nevertheless be punished because we just don’t behave that way in polite society. In the UK, exemplary damages are generally limited to oppressive behaviour by government employees, cases in which the defendant has profited by his actions, or where a large number of people are affected by the action.
Aggravated damages are awarded when the defendant’s behaviour was calculated to insult the plaintiff. They are actually compensatory in nature; the principle is that the loss suffered by the plaintiff was worse than a mechanical application of the rules for calculation of damages would indicate. They compensate the plaintiff for additional mental distress.
As discussed previously, equitable remedies are appropriate when an award of damages will not lead to a fair result.
Equitable remedies in contract and quasi-contract
Where damages will be insufficient because something about the contract is unique, the court will award specific performance. The court enforces the terms of the contract. For example, two parties enter into a contract for the sale of a house. The seller has second thoughts and decides not to go through with the sale. The court may award the buyer specific performance, since real property is unique and another house will not give the buyer the benefit of his bargain. Specific performance is often ordered when the dispute involves art or antiquities.
The remedy of replevin requires a party to return goods that are wrongfully in its possession. For example, Gray hires a storage locker and pays rent for one year in advance. At the end of the year he returns to the storage facility to claim his goods. The owner refuses to release the goods because he says that Gray still owes him money. Assuming that no money is owing, Gray will file an action for replevin to recover his property.
A court may order rescission when a party has entered into a contract under duress or due to fraud or misrepresentation. Rescission cancels the contract as if it was never entered into in the first place and the innocent party is excused of all obligations under the contract. Rescission is only available as remedy when the parties can be returned to the status quo ante, that is when they can be returned to exact position they occupied before the contract was entered into. Otherwise, damages are the appropriate remedy.
Where the parties entered into a written contract and both parties agree that the written contract does not reflect their understanding or circumstances have changed, the court may order reformation of the contract. For example, White is a dog breeder and contracts with Black for the sale of a purebred puppy from the next litter produced by the kennel. During negotiations, both parties understood that Black wanted a female puppy so that she could start her own kennel. However, the parties failed to specify the gender of the puppy in the contract and, when the litter is born, it contains only male puppies. White seeks to enforce the contract and require Black to purchase a puppy, but since there is clear and convincing evidence that the parties intended that the contract refer only to a female puppy, the court can order reformation of the contract.
Restitution, discussed above, can also be an equitable remedy, and is the remedy whereby a party must return something to its rightful owner. For example, you lend your car to your neighbour, who then refuses to return it to you as agreed. He hasn’t stolen it (because he acquired possession lawfully) but you can sue for restitution and force him to return it.
Where a party wants a declaration of its rights under a contract but is not seeking enforcement of the contract or damages, the court may issue a declaratory judgment setting forth the relative rights and obligations of the parties. A classic example of this is when an insurance company refuses to provide coverage under the insurance contract because it says that the loss does not fall within the scope of the insurance. The policyholder will then sue for a declaratory judgment so that the court can determine whether the loss is covered. The policyholder is not asking the court to enforce the contract—presumably once the parties’ relative rights and obligations are determined, the insurance company will comply with the terms of the contract.
Equitable remedies in tort
A court can issue an injunction to order a party to stop doing something (a prohibitory injunction) or to do something (a mandatory injunction).
A factory is dumping toxic waste into the river. The neighbours down-river sue for an injunction, asking the court to order the factory to stop dumping waste—damages will be inadequate because once the environment is destroyed, no amount of money will adequately compensate for the loss. While the lawsuit is pending, the plaintiffs want the factory owner to stop dumping so that the pollution does not get worse while their relative rights are determined. The plaintiffs will request a temporary injunction (also known as an interlocutory or preliminary injunction) to stop the dumping until a judgment is entered in the matter. Assuming the plaintiff prevails, the court will then issue a permanent injunction, ordering the factory to never again dump toxic waste into the river.
The court may also issue a mandatory injunction, ordering the factory to clean up the river.
Restitution and declaratory judgment are also available in tort.
Law in practice
The remedy sought must always be appropriate to address the damage suffered. When a lawyer takes a case, he or she must understand not only the law relating to the damage the plaintiff is alleged to have suffered, but also the law regarding the available remedies.
Some lawyers work primarily with contracts, such as commercial lawyers, real estate lawyers, corporate lawyers, competition lawyers, and employment lawyers. These lawyers must understand the remedies necessary to help their clients receive the benefit of the bargain that they entered into. For example, the dispute between Jones, the restaurant owner, and Smith, the meat supplier, is a commercial dispute and their lawyers must understand how to calculate damages in contract. The calculation of certain consequential damages, i.e. injury to reputation, may require expert assistance from, for example, an accountant who has worked with many restaurants. If this accountant testifies at trial regarding the loss, she will be called as an expert witness. Smith’s lawyer will then (presumably) call his expert witness to provide another calculation for the judge or jury to consider.
There are also lawyers who deal primarily with tort claims, such as personal injury lawyers, environmental lawyers, and libel and slander lawyers. The damages calculations that their work requires can be, arguably, more complex than those used by lawyers working primarily with contracts. Consider again the case of the factory dumping toxic waste into the river. In addition to the injunction, the neighbours down-river may seek damages for the loss of use and diminution in value of their waterfront property or, if they are farmers or fishermen or hotel owners, damages for lost income. If they have become ill as a result of the dumping, they may also seek damages for medical expenses and future medical expenses. The services of an expert witness are almost always required in such cases.
The law is complex, and there is no such thing as a “tort lawyer” or a “contract lawyer”. An employment lawyer works primarily with contracts, but if her client suffered emotional trauma or illness as a result of being unfairly terminated, she will need to understand and apply tort law principles and remedies. Since environmental problems usually develop over time and a polluting factory may change owners during the course of the pollution, the environmental lawyer needs to understand the complexities of contractual relationships and the allocation of liability among everyone who has ever owned the factory. Similarly, since personal injury cases may also involve insurance issues, the personal injury lawyer needs to understand his client’s rights and remedies under the insurance contract.