If the K has not been affirmed (rescission), restitution is available. Check both legal and equitable alternative remedies, but court will only grant one or the other. ELEMENTS

If the K has not been affirmed (rescission), restitution is available. Check both legal and equitable alternative remedies, but court will only grant one or the other. ELEMENTS:

7. Misrepresentation of fact by D : more lenient standard. Even mistake by D could suffice. [Gilbert 249]

   1. NO scienter required

   2. Intent to induce reliance

   3. Materiality/Justifiable reliance: is it (1) a material fact and (2) likely to induce an objectively reasonable person. [Gilbert 249]

1. Innocent mispreps: required

   1. Intentional misrep: not required to be material

1. Actual reliance: causal element same as above [Gilbert 249]

2. Injury: must have some injury, but not necessarily pecuniary loss. Principle is whether it is unjust for the wrongdoer to retain a benefit.

3. Compensatory damage measure:[Gilbert 246]

6. Benefit-of-the bargain: K school of thought. Sale of goods are governing by the UCC using this measure and includes incidental and consequential damages.

   1. Out-of-Pocket Rule: Tort school of thought.

2. Buyer breach: OOP Costs + damages proximately resulting from the fraud. [Gilbert 248]

1. Sometimes consequential damages are recoverable. Limited by proximate cause or, if based on a material breach of K, then by Hadley rule. [Gilbert 256]

2. No recovery for mental distress [Gilbert 247]

3. Punitive damages may be recovered where fraud is intentional and malicious.

1. If P rescinds the K AT LAW through lawsuit, must first: [Gilbert 251]

1. Giver prompt notice and

   1. offer to restore anything he has received from D. Exceptions for money, benefits that are worthless or benefits that were consumed prior to discovery of the fraud.

   2. Right to jury trial

1. Rescission in equity through equitable decree accomplished by judicial decree.

1. Still requires prompt notice, but restoration to status quo not required until after the decree. [Gilbert 253]

1. Legal remedies available after rescission for fraud

1. Replevin of P’s chattel

   1. Conversion (tort): if D retains dominion over the chattel, P can sue for the chattel’s real value

   2. Quasi-K: P waives the tort and sues (usually for goods sold and delivered) to recover the valued of the chattel obtained by D’s fraud. Except under UCC where D’s fraud relates to solvency, P can only recapture the chattel.

   3. Restitution for securities fraud.

1. Equitable remedies for fraud

1. Equitable jd required (inadequate legal remedy, deeds must be cancelled or executed, etc.) [Gilberts 255]

   1. Restitution

   2. Upon rescission of land sale K for Seller fraud, buyer gets: [Gilbert 255]

1. The consideration paid with interest

   1. Expenditures for reasonable improvements, less depreciation

   2. Maintenance costs

   3. Insurance and taxes

   4. Incidental expenses

   5. Seller’s offset to P’s recovery includes possession of the land and the value of its use received by P.

1. Rescission of land sale K for Buyer fraud, Seller gets: [Gilbert 256]

1. Possession of the realty

   1. Value of its use, computed at FMV or buyer’s profits at Seller’s election

   2. Buyer recovers offset for (1) consideration paid + interest (2) taxes paid and (3) expenditures for necessary improvements only, at cost.

1. Rescission of sale of business for Seller fraud, Buyer gets: [Gilbert 256]

1. Consideration paid + interest, less the benefit buyer received for use of premises, calculated as the lesser of FMV or profits.

1. MISAPPROPRIATION OF MONEY [Gilbert 83]

1. Legal remedies

1. Conversion (tort): D exercised unlawful dominion over $.

1. P must prove a specific identifiable fund was taken

   1. Remedy: Seeks damages and can get punitive damages.

1. Quasi-K (waive the tort and sue for common count of money had and received): Goal is restitution.

1. P must prove that D is unjustly enriched.

   1. Remedy: Seeks damages.

1. No recovery against innocent purchaser. Because title to money transfers upon delivery to a bonifide purchase, where a person has taken possession/title to money without knowing it is stolen, the rightful owner cannot recover it because law (title) prevails over equity. [Gilbert 84]

1. Equitable Remedies (c/a = unjust enrichment. Remedial goal = Restitution)

1. Constructive Trust: P must specifically identify money and trace to possession of wrongdoer. P usually cannot obtain a constructive trust over D’s other assets.

1. Requires: Existence of identifiable property as res AND

   1. Possession of res or its product by D (constructive trustee)

2. Equitable Lien: may be imposed on D’s other assets to avoid unjust enrichment. Cut off by transfer of property to bona fide purchaser. [Gilbert 79]

3. Subrogation: substitution of other collateral if applicable. [Gilbert 81]

4. Alternative remedy: P has option of constructive trust or equitable lien where D is a conscious wrongdoer. [Gilbert 89]

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