Contracts Class Notes 9/17/03

You can choose to have your expectation interest, reliance interest, or restitution interest protected. More often than not, the expectation interest is the greatest, but if you got into a losing contract, your expectation interest may be negative.

What about your reliance interest? It may be reduced by the loss you would have incurred upon performance. We won’t put the aggrieved party in a better position than performance would have done based on reliance interest.

How about restitution interest? This is the benefit that the injured party gave to the breaching party. This will not be reduced by any losses the injured party would have incurred upon performance.

What is the measure of restitution interest? It’s either the replacement value for the other party for the stuff they got, that is, the market price.

You can get back your restitution interest even if that would put you in a better position than performance would have done.

Expectation interest does not limit restitution interest when the contract breaker has gained value from the injured party’s part performance.

Notice that when you get your restitution interest, there may not be any real promise being enforced. Instead, it is the disgorgement of unjust enrichment.

Problem on p. 109

Say B contracts with S to buy a car for $900 and pays $100 down. S repudiates, and it turns out the car was really worth $700. Can B get the restitution interest even though B would have lost $200 upon performance? Yup, B can get the $100 back, even though this puts B in a better position than performance would have done. This is not the enforcement of any promise that B made and broke.

Making restitution is not the same as enforcement.

Note on pp. 111-115: recovery of “quantum meruit”

What’s “quantum meruit”?

It more or less means a recovery that doesn’t aim at enforcing a promise, but rather recovering the value of performance rendered as restitution. Usually, this term indicates a restitution claim, but not always, so be careful.

What is an express contract?

Most of the agreements that we’ve talked about in this course have been express contracts. It’s a contract in which the promises of both parties are expressed in words, whether written or oral.

What are contracts implied in fact?

There is no express promise in words to pay, but it is “as clear as the nose on your face” that there was a promise to pay. This is a very common contract that occurs all the time.

For example:

· Let’s say you want to go to the airport, and you hail a taxi. He does, and even though you didn’t promise to pay when you got out, your promise to pay was implied. Your promise is implicit due to the factual circumstances. By contrast, if you asked a friend for a ride to the airport, there is no implied promise to pay them for doing so. Instead, you’ve asked for a gift of a small service, and he agreed.

· You want your hair cut, so you go to the barber, get in the chair, and get your hair cut. You can’t just say “thank you” and walk out. You’ve implicitly promised to pay the reasonable value of the service at the end.

· It’s the same thing with doctors and lawyers and sit-down restaurants.

What are contracts implied in law?

These are contracts where something was definitely not promised, but the law enforces it anyway to disgorge unjust enrichment.

For example:

· If a debtor mistakenly overpays a creditor, it is considered unjust for the creditor to retain the mistaken overpayment. It can be recovered as if there was a contract. There is only a quasi-contract.

· Say you take your car to the garage and get repairs. You agree to $425 in repairs, but the garage says you can’t have the car unless you pay $600. You have no choice but to pay the extra $175, or in other words, you’re under duress. You can get that $175 back because the garage dude wrongfully twisted your arm to exact the extra money from you. He didn’t promise to return the $175 to you, but that’s irrelevant because we’re disgorging unjust enrichment.

· How about “your money or your life”? You can get your money back from a robber. There is no promise by the robber to return your money. But this is the plainest kind of unjust enrichment we can think of. This doesn’t happen very often because it’s hard to find the robber, or at least find him with any money on his hands.

· Let’s say a jaywalker gets run over and is unconscious. Dr. Sawbones renders competent medical services, but Jay dies anyway. Dr. Sawbones can collect his regular fees from Jay’s estate. Jay implies consent and there is a quasi-contract. Here, there are two social policies: we want to disgorge unjust enrichment, but we also want to encourage health care providers to render service to unconscious and semi-conscious people who can’t form express contracts.

United States v. Algernon Blair, Inc.

We could call this a case of quasi-contract recovery.

Sometimes we say that a plaintiff sues “on a contract”. That means you stand on the agreement and demand its enforcement. On the other hand, you can ask for restitution and for the disgorgement of unjust enrichment.

What do you have to do, whatever the rules? You must value the part performance.

You don’t recover the value conferred; you don’t recover the amount spent by the injured party. Instead, you recover the contract price.

Why do people not pay what they owe? Often, they don’t have the money. They may not be paying their debts due to financial problems.

This may be a less reprehensible breach than one made halfway through performance.

When there has been full performance by the injured party and the breaching party refuses to pay, the remedy is forcing the breaching party to pay the contract price.

The Restatement § 373(2) says that you lose your right to restitution when you’ve completed performance and everything’s done except for the other person’s payment.

Sometimes you don’t get your restitution interest, but rather, you only get your contract price.

Britton v. Turner

Here we’re talking about a plaintiff in default! That’s different from everything we’ve run into before. The breaching party is trying to get restitution! Weirded out!

This was definitely a minority case at the time it came down. The great weight of authority was against the result of this case. There were a lot of negative comments against this case.

In this case, we are making the party aggrieved by the breach pay to the breaching party. You’re definitely going to make the defendant do something they didn’t promise to do.

What are the arguments in favor of the result? Why does Parker do what he does? One argument is that the defendant got a sizeable benefit and the plaintiff has a detriment. If there’s no remedy, there’s a windfall for the defendant, and there’s a hole in the plaintiff’s pocket.

Also, in this case, the defendant was aggrieved by the breach, but cannot or simply did not show damages. If the defendant had shown some damages, that would reduce the restitution payment to the plaintiff.

The restitution interest is capped by the contract price. Then you subtract any damages the aggrieved party can show due to the breach.

This case isn’t really relevant anymore because pretty much every state has detailed statutes dealing with employment. For example, all states have “periodic pay” statutes: you must get paid (in cash money or, more recently, with checks or, even more recently, by direct deposit) weekly, bi-weekly or at least monthly. Therefore, you wouldn’t have Britton’s problem now.

This case is an antique, but the arguments are interesting.

Tomorrow we’ll talk about Pinches v. Swedish Evangelical Lutheran Church and Groves v. John Wunder Co.

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