Remedies - Remedial rights of breaching parties

Learning Outcomes

After reading this article, you will be able to identify when a breaching party may recover in restitution or quantum meruit, explain the limits on recovery for partial performance, and apply these rules to MBE-style scenarios. You will also understand the distinction between recovery for breaching and non-breaching parties, and recognize common pitfalls tested on the MBE.

MBE Syllabus

For MBE, you are required to understand the circumstances in which a party who has breached a contract may nevertheless recover some value for benefits conferred. This includes:

  • The right of a breaching party to restitution or quantum meruit for benefits provided.
  • The measure and limits of recovery for partial performance by a breaching party.
  • The distinction between recovery for breaching and non-breaching parties.
  • The effect of willful versus non-willful breach on remedial rights.
  • The application of these principles under both common law and the UCC.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

  1. If a contractor breaches a building contract after completing 60% of the work, what remedy may the contractor seek from the owner?
    1. Expectation damages
    2. Restitution for the value of work performed
    3. Specific performance
    4. Liquidated damages
  2. Under common law, a breaching party may recover in restitution:
    1. Only if the breach was not willful
    2. For the contract price minus the cost to complete
    3. For the reasonable value of benefits conferred, less damages caused
    4. Never
  3. Which of the following is most likely to bar a breaching party from recovering in quantum meruit?
    1. The breach was minor
    2. The breach was willful and deliberate
    3. The contract was for the sale of goods
    4. The non-breaching party suffered no loss
  4. Under the UCC, if a seller breaches but the buyer keeps delivered goods, the seller may recover:
    1. Nothing
    2. The contract price
    3. The contract price minus damages
    4. The value of goods accepted

Introduction

When a party breaches a contract, the usual rule is that the non-breaching party may seek damages. However, the breaching party may sometimes recover for benefits conferred before the breach. Understanding when and how a breaching party can obtain restitution or quantum meruit is essential for the MBE. This article explains the remedial rights of breaching parties, the limits on such recovery, and how these principles are tested.

Remedial Rights of the Breaching Party

At common law, a party who breaches a contract may, in certain circumstances, recover the reasonable value of benefits provided to the other party, even though the contract was not fully performed. This recovery is not based on the contract itself, but on the principle of preventing unjust enrichment.

Key Term: Restitution
A remedy allowing a party who has conferred a benefit on another to recover the reasonable value of that benefit, to prevent unjust enrichment.

Key Term: Quantum Meruit
A claim for the reasonable value of services or goods provided, typically used when a contract is unenforceable or has been breached.

General Rule

A breaching party may recover in restitution or quantum meruit for the value of benefits conferred, but only to the extent that the value exceeds the loss caused by the breach. The non-breaching party is entitled to offset any damages suffered as a result of the breach.

Willful vs. Non-Willful Breach

Most courts allow restitution to a breaching party even if the breach was willful, but some courts deny recovery for deliberate, willful breaches. The MBE may test your knowledge of this distinction.

Measure of Recovery

The breaching party's recovery is limited to the lesser of:

  • The contract price for the part performed, or
  • The reasonable value of the benefit conferred (market value), minus damages caused by the breach.

The non-breaching party may set off any damages suffered due to the breach against the breaching party's claim.

Application under the UCC

For contracts for the sale of goods, the UCC allows a breaching seller to recover the contract price for goods accepted and retained by the buyer, even if the seller breached as to the remainder.

Worked Example 1.1

A builder contracts to construct a garage for $30,000. After completing 70% of the work, the builder abandons the project without justification. The owner hires another contractor to finish the job, paying $12,000 to complete it. The owner refuses to pay the original builder anything.

Question: Can the builder recover anything from the owner?

Answer:
Yes. The builder may recover in restitution the reasonable value of work performed (70% of the contract, or $21,000), minus the damages caused by the breach ($12,000 paid to complete). Thus, the builder may recover $9,000.

Worked Example 1.2

A seller contracts to deliver 100 widgets for $10 each. The seller delivers 60 widgets, then refuses to deliver the rest. The buyer keeps the 60 widgets and buys 40 more from another supplier at $12 each.

Question: What can the seller recover?

Answer:
The seller may recover the contract price for the 60 widgets accepted ($600). The buyer may set off any damages for the breach (the extra $2 per widget for the 40 undelivered widgets, or $80), but this does not affect the seller's right to payment for goods accepted.

Exam Warning

On the MBE, be alert for questions where the breaching party seeks recovery after partial performance. Always consider whether the non-breaching party suffered damages, and whether the breach was willful. Some jurisdictions bar recovery for willful breaches.

Revision Tip

If asked about a breaching party's right to restitution, always subtract the non-breaching party's damages from the value of the benefit conferred.

Summary

A breaching party may recover in restitution or quantum meruit for the reasonable value of benefits conferred, less any damages caused by the breach. Willful breaches may bar recovery in some courts, but most allow restitution to prevent unjust enrichment. Under the UCC, a breaching seller may recover the contract price for goods accepted and retained by the buyer.

Key Point Checklist

This article has covered the following key knowledge points:

  • A breaching party may recover in restitution or quantum meruit for benefits conferred, minus damages caused by the breach.
  • Most courts allow restitution even for willful breaches, but some bar recovery for deliberate breaches.
  • Recovery is limited to the lesser of contract price or market value of the benefit conferred.
  • The non-breaching party may offset damages suffered from the breaching party's recovery.
  • Under the UCC, a breaching seller may recover the contract price for goods accepted by the buyer.

Key Terms and Concepts

  • Restitution
  • Quantum Meruit
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