Legal Drafting Tip: Equitable Remedies

Thursday, September 8, 2016

An equitable remedies clause will only be effective if monetary damages are unlikely to be available, are incalculable, or are an insufficient remedy. If properly drafted, this clause will help to persuade the court to grant an equitable remedy. It indicates the parties’ agreement that an equitable remedy is appropriate in a particular set of circumstances, so that the parties do not have to show the court all the requirements that otherwise would need to be satisfied (for example, irreparable harm where the relief sought is an injunction, or there is a uniqueness of subject matter where the relief sought is specific performance).

When you are drafting this clause, consider the following:

  • Should the provision be mutual or unilateral?
    • Do not use a mutual clause if it is inappropriate for both or all parties to be entitled to equitable relief. Likewise, do not use a one-sided provision where there should be mutuality. For example, a confidentiality agreement may provide that it is only the party to whom the obligation is owed that is entitled to an equitable remedy, while a sale of goods agreement should provide for equitable relief to both parties in the event of breach.
       
  • What are the unique provisions that are more likely to merit equitable relief?
    • List those provisions in the equitable remedies clause. A provision that is tailored to address the subject matter, obligations, and circumstances of the contract is more likely to persuade the court.
       
  • Does the agreement have express remedies, exclusion of remedies, or limitation of liability provisions?
    • If the parties intend that certain remedies constitute the exclusive or sole remedies for particular breaches, those remedies should be excluded from the equitable remedies clause. Similarly, you should review any other clauses that speak to remedies being cumulative, to ensure there is no redundancy or conflict with the equitable remedies clause.