Prior Posts: Remedies: Reliance versus Restitution Interests
An approach to Reliance and Restitution Damages
?~ 349 Reliance Damages [Put The Non-Breaching Party In The Position They Would Have Been In Had No K Been Formed] [Security Stove v. American Railways ] [L. Albert & Son v. Armstrong Rubber ]
- Reliance damages compensate the injured party for expenses or loss incurred in reasonable reliance on the K that was breached. Reliance damages are usu. awarded when expectation damages cannot be proven ,
- Stove – Where the ƒÎ is unable to recover for loss of profits, especially where profits were not the basis for the K, the ƒÎ should be able to recover the reasonable expenses it has incurred as a result of its reliance on the ? in performing the K as agreed.
- Policy – This is an equitable result b/c the ct felt that the ƒ¢ owed the "? some degree of compensation and the only damages available were for the expenses incurred in reliance on the ƒ¢’s ability to perform.
- Albert – The non-B party can recover reliance damages but these damages are subject to reduction by the breaching party by as much as the breaching party can show the non-B party would have lost if the K had been performed.
- L. HAND ‘ s policy rationale – The Ct will not in a suit for reimbursement of losses incurred in reliance on a K knowingly put the "? in a better position than he would have occupied, had the K been fully performed.
- ?~ 349 Reliance :
- (reliance costs due to preparation or performance) – (costs avoided due to breach)
- Sec. Stove Finger & Holding: ?
?~371 Restitution [Restore To The Non-Breaching Party The Benefits They Conferred Upon The Breaching Party In Order To Prevent Unjust Enrichment.]
- Restitution compensates a party for the benefit conferred on the other party as a result of partial performance or reliance , and is aimed at preventing unjust enrichment. Restitution damages may be measured by:
- the reasonable value of the benefit received in terms of what it would have cost to obtain such benefit from another source
- the extent to which the value of the party’s property has been increased or his other interests advanced.
- Restitution damages are often sought & awarded when a benefit was conferred on the other party under a K, but the K is unenforceable because of the S of F [Statute of Frauds], impossibility, mistake, etc.
- Restitution may be available:
- in cases of breach, to either party
- where a K is unenforceable (e.g., due to lack of consideration or writing)
- where a K is voidable
- where a duty is excused or discharged due to impracticability, frustration of purpose, non-occurrence of a condition, or disclaimer by a beneficiary
- in void Ks to a party not in pari delicto [void Ks where a party is not equally at fault].
- Restitution by Injured Party
- An party injured by a breach is entitled to restitution for any benefit he conferred on the breaching party by way of partial performance or reliance.
- Restitution is not available, however, if the injured party has performed all of his K duties and the breaching party owes no performance other than payment for a definite sum of money for the injured party’s performance. [RST Ks ?~ 373]
- Restitution by Breaching Party
- Where the aggrieved party justifiably suspends his performance on the ground that other party’s breach discharged his remaining duties, the breaching party is entitled to restitution for any benefit he conferred by way of part performance or reliance in excess of the loss that he caused the aggrieved party by his breach. [RST Ks ?~ 374(1)]
- ?~ 371 Restitution :
- Value conferred on the other party.
Quantum Meruit [Oliver v. Cambell ]
- A "? who has materially breached (but has not fully performed) may normally bring a quasi-K suit, and recover his restitution interest , less the ƒ¢’s damages for the breach. When services have been performed also called a recovery in quantum meruit (as much as he deserves) [a "ƒÎ in default" case].
- General rule of K breach damages: One who has been injured by a breach of K is entitled to pursue any of 3 remedies:
- (1) He may treat the K as rescinded and recover upon a quantum meruit so far as he performed (this remedy is not available where full-performance has already been rendered);
- (2) He may keep the K alive, for the benefit of both parties, being at all times ready and able to perform, or;
- (3) He may treat the repudiation as putting an end to the K for all purposes of performance, and sue for the profits he would have realized if he had not been prevented from performing (i.e. expectational damages).