## Facts

- Telespectrum Worldwide, Inc. (Telespectrum) agreed to provide telemarketing services for Grace Marie Enterprises, Inc. (Grace Marie), for use in political campaigns run by Grace Marie’s clients.
- Telespectrum performed some of the agreed services.
- On the weekend before election day, Telespectrum’s computer servers crashed, and it was unable to transmit its call data to Grace Marie.
- Because of the service failure, Grace Marie discounted its billed charges to its clients by \$162,950.
- Despite the discount, Grace Marie’s clients paid Grace Marie \$828,164.
- Grace Marie’s profit on that amount was calculated at \$282,123.
- Grace Marie paid Telespectrum \$213,801, which was only part of Telespectrum’s invoice.
- Telespectrum sued Grace Marie seeking full payment of its invoice.

## Issues

1. May a party that breaches a contract recover restitution for benefits conferred by partial performance?
2. If restitution is available, is the breaching party’s recovery capped by the non-breaching party’s net enrichment, taking into account the non-breaching party’s profit, breach-related discounts to its customers, and amounts already paid?

## Decision

- The court treated Telespectrum as the breaching party because the server crash and resulting failure to transmit call data were not excused as an event beyond Telespectrum’s reasonable control.
- Because Telespectrum breached, it was not entitled to recover the full contract price as if performance had been completed.
- The court held that a breaching party may still recover in restitution for the benefit conferred by partial performance, but only to the extent the non-breaching party’s wealth actually increased from that performance.
- The court measured the benefit by starting with what Grace Marie’s clients paid Grace Marie (\$828,164), then subtracting (i) Grace Marie’s profit (\$282,123), (ii) the discount Grace Marie gave its clients because of Telespectrum’s breach (\$162,950), and (iii) the amount Grace Marie had already paid Telespectrum (\$213,801).
- The court entered judgment for Telespectrum in the amount of \$169,290, calculated as: \$828,164 − \$282,123 − \$162,950 − $213,801 = $169,290.

## Legal Principles

- A party in breach is not automatically barred from recovery; it may seek restitution for benefits conferred by partial performance.
- Restitution to a breaching party is limited to the recipient’s net enrichment and cannot exceed the recipient’s actual increase in wealth from the partial performance.
- The breaching party bears the burden to prove the amount of the benefit conferred.
- When the recipient’s enrichment can be traced through amounts collected from third parties, the court may use those collections as a starting point and then subtract the recipient’s profit attributable to its own efforts, losses or offsets tied to the breach (such as customer discounts), and sums already paid to the breaching party.

## Conclusion

The court denied Telespectrum full contract recovery because Telespectrum breached when its servers crashed and it failed to transmit call data, but it permitted a limited restitution award measured by Grace Marie’s net enrichment; after subtracting Grace Marie’s profit, the breach-related client discount, and prior payments, the court awarded Telespectrum \$169,290.


Telespectrum Worldwide, Inc. v. Grace Marie Enterprises, Inc., 2000 U.S. Dist. LEXIS 17608 (2000)