Contract II: Spring 2010: Professor Jones
RESTITUTION:
– When a person, without intending to make a gift, confers (to bestow upon as a gift) a benefit on another.
Restitution can be used in 2 ways:
1. Separate Cause of Action (no contract) OR
Quasi contract or Contract implied in law: Restitution when there is no contract.
No Contract but one party has conferred a benefit on another. Justice requires that the benefit be returned to the party who conferred it.
Also known as unjust enrichment. P must prove that D was unjustly enriched and that unjust enrichment was created at P’s expense.
Remedy:
P gets back amount by which the D was enriched. Not the amount of P’s loss. Might be the same, but not always.
Restatement §371: Measure of Restitution Interest
Restitution may be measured (as justice requires) in 1 of 2 ways.
1. The amount the recipient of the benefit would have had to pay to get the benefit OR
2. The amount by which the recipient’s property has been increased in value.
EXAMPLE:
1. Benefit conferred by mistake: Bank intend to wire money into A’s bank account and mistakenly sends it to B’s account. B has to give money back to the bank. Restitution is the courts vehicle of making you give the money back.
2. A faints at soccer stadium during World Cup in Germany. B a doctor does emergency surgery before A wakes up. A lives. A must pay B for the surgery, even though he never agreed to pay (No K).
Law is going to imply a contract. It is fair and is going to make B pay anyway.
§ Quantum Meruit: type of quasi-contract.
The value of services rendered to another.
Feingold v. Pucello Case: Restitution when there is no contract
Facts: Pucello injured in car accident. Calls Feingold to ask about representing him. Legal representation discussed, but no price quoted. F recommends a doctor and sets up appt. F starts to work, then send formal contingency fee K. P refuses to sign-price it too high. F sues P.
Issue: Is there a K?
Holding: No. F acted in bad faith as a lawyer and the court will not give him equity considerations. There was no implied contract formed in which Feingold could recover in quantum meruit.
Rule: A cause of action in a quasi-contract for quantum meruit is made out where one person (D)has been unjustly enriched at the expense of another (P).
Elements of Unjust Enrichment:
Benefits conferred on D by P;
Appreciation of such benefits by D AND
Acceptance and retention of benefits under such circumstances that it would be unjust for D to retain the benefit without paying.
Damage Interest: Restitution for breach of contract, On the contract
Used as a remedy for breach of contract of a real contract.
Real contract= express, conduct, or implied in fact.
$$ can be awarded to innocent party.
A party with a claim for damages might get restitution instead of the usual expectation damages when the expectancy = 0. The expectancy would = 0:
When the innocent party has made a losing K OR
P can’t prove damages with certainty OR
Innocent party has started performance before the breach and thus conferred a benefit on the breacher.
Innocent party can only get back benefits that came from him.
$$ can be awarded to breaching party.
In breach of K cases where breacher must pay damages to innocent party for breach, but can still get restitution of benefits breacher conferred on non-breacher.
Ex. A and B make a K and begin performance. Half-way through B stops performing and breaches. At the time of breach B’s partial performance to A was $200, but the value of A’s partial performance to B was only $50. A’s damages from breach are only $10 and B gets $140 in restitution.
Implied in Fact K
Sometimes parties do not have an EXPRESS K, but court will hold that their conduct indicates they did in fact have an agreement. This is a “normal” K, just one established by conduct rather than express agreement.
Example: A has a shoe shine stand, B sits in A’s chair and puts his foot forward. A shines B’s shoe, but B does not pay. A sues B for breach of an implied-in-fact contract. B will have to pay for shoe shine.
United States v. Algernon Blair, Inc. Case: Restitution for Breach of Contract
Facts: P= Subcontractor. D= Prime Contractor. D breached contract and P stopped work under the K.
Rule:
Restitution:
Where one party has the benefit of money, property, or services of another, and it would be unjust to allow that party to keep the benefit without paying for it, the law presumes a promise of restitution.
Quantum Meruit:
The value of services rendered to another.
The measure of recovery for quantum meruit is the reasonable value of the performance; and recovery is undiminished by any loss which would have been incurred by complete performance.
Issue: Can P recover under quantum meriut?
Holding: Yes, a subcontractor who stops performance while under contract because of the contractor’s breach of that contract can recover in quantum meruit the value of labor and equipment already furnished because the nor
injury for which his damage remedy at law will not be adequate, or where other equitable considerations require that the relief be granted.
Statute of Frauds:
Restatement 131: General Requisites of a Memorandum
A contract within the SOF is enforceable if it is evidenced by any writing, signed by or on behalf of the party to be charged, which
Reasonably identifies the subject matter of the contract
Is sufficient to indicate that a K with respect thereto has been made between the parties or offered by the signer to the other party, and
States with reasonable certainty the essential terms of the unperformed promises
SOF only covers certain types of contract:
Land Contract: A promise to transfer an interest in land. Covers sales, mortgages and leases.
Suretyship K (3rd party will pay debt of another): Promise to answer for the debt, default, or miscarriage of another person.
Yarbro v. Neil B. McGinnis Equipment Co. Case: Suretyship Contracts
Suretyship Contract:
An accessory agreement by which a person binds himself for another already bound, either in whole or in part, as for his debt, default or miscarriage.
Facts: Tractor sold to Russel but McGinnis wants to take Yarbro to court because he orally agreed to make payments.
Rule: No action shall be brought in any court in the following cases unless the promise or agreement upon which the action is brought, or some memorandum thereof, is in writing and signed by the party to be charged, or by some person by him there under lawfully authorized…
(2) To charge a person upon a promise to answer for the debt, default or miscarriage of another.
Exception: where the leading object of a person promising to pay the debt of another is actually to protect his own interest, such promise if support by sufficient consideration is valid, even though it be oral.
In this case Yarbro only said he would make the payments for Russell not to help Russell out but to serve his own interests, therefore Yarbro falls within the exception and is liable.
