Hi, guys: thank you very much. As you said: "either there is NO VALID CONTRACT or THE SIDE seeking QUANTUM MERUIT is the BREACHING PARTY", quantum meruit shall apply. However, from belandrei's reply (the post above yours), a nonbreaching party may also seek quantum meruit when the subject matter is destroyed. Is this an exception? Please correct me if I am wrong. In an opposite case, if the builder is the breaching party, what will the builder get? Since builder is the breaching party, he is able to seek quantum meruit, that is the value of benefit he conferred to the owner, right? Does it matter how much he has completed the project (5% or 99%), a minor breach or material breach? If the magnitude of breach is considered, it looks like quantum meruit is not the right answer. I really don't know much about the remedy due to the lack of systematic legal education in the U.S. Thank you very much for your help.

Posted By on 04 Jul 2009 01:44 AM
A party may sue on the contract if the OTHER SIDE is in BREACH. [the suit is in law]

Quantum Meruit is an EQUITABLE REMEDY Either there is NO VALID CONTRACT or THE SIDE seeking QUANTUM MERUIT is the BREACHING PARTY.
Thus:

Before construct work is done -- the builder has no cost therefore he only gets his profit on the contract.

During contruction: The builder gets the contract price minus the money saved by not completing the K [mitigation] -- also don't forget to mention the money he can make by selling off materials.

Completed contruction: The builder gets the entire contract price. There can be no mitigation.

Jimmy: Thanks a lot! Sorry that I cost you so much time.

After reading your post, I come up several questions.

1. IMPOSSIBILITY & FULLY PERFORMANCE: As you said, if it is impossible to perform the contract, we should treat the K as invalid/unenforceable, then we look to equitable remedies. What if builder (a foreign construction company) has completed the whole project but the owner is not able to pay because of change of law that forbids a person to pay a foreign company? Is the builder entiled to full contract price because of full performance? Or either restitution (cost) or relaince (benefit bestow -obvious, builder has bestow benefit to owner)? Or nothing because owner's duty is discharged by impossibility?

2. RESTITUTION AND RELIANCE:  I am still not very clear when to apply restitution and when to apply reliance. This issue especially confused me when I read belandrei's post. Under subtitle 3, she gave an example. In the example, although the cost was $6,000, the electrician only got $4,000 which is the FMV of the benefit conferred. Why not 6000? She said because equitable measure is benefit to owner not detriment to electrician. She put this example under "restitution in equity". I am confused when the remedy is cost when is benefit?

3. EXPECTATION DAMAGES & SUBSTANTIAL PERFORMANCE: Is expection damages available if builder has performed 99% ? Considering he is the breaching party and also the contract is not FULLY performed, it looks like he should not get expectation. But my notes say "when the breach is minor, the owner's remedy is an award of damages sufficient to compensate for defective performance, and the breaching party is entitled to get K price with setoff for breach". So is this right that FULLY performance is not a necessary condition for getting expectation damage.

I know it is sounds circular, but:  if there is material breach, there is no substantial performance. And if there was substantial performance there is no material breach,  b/c a party substantially performed and should be treated as if K was performed, while, aggrieved party still can subtract his loss incurred due to that immaterial breach. (there is merely minor, not material breach).

If substantial performance, non breacher has to pay full K price, but is allowed to decrease his payment by damages caused by other party breach,

In context of construction, K price 100K, house is 90 %, builder walks away just because, owner needs to pay 100K minus cost of complete: adjusted K is due b/c there substantial performance, owner needs to mitigate by hiring different builder, and is allowed get credit for that: coneseq and incident damages associated with that breach.

Now if builder built only 20%-no subst perfomance, builder breached and cannot recover under K, builder lost all rights under K, but it would be still unfair to let owner to have 20 % of the house for free so builder still can get recovery under cost of complete formula: K price -minus cost to complete: 100K -80K=20K, but if owner could only find somebody for 100K (more expensive, only available guy), breached builder would get nothing,

That is philosophy of remedies under K.

Now forget about above  builder who had K,  now we do not have a K.

Now, Q-K: compare it to promissory estoppel; both require that there is no enforceable K.  

Usually when P conferred benefit on D and there is unjust enrichment if D were allowed to retain. Justice requires to get the benefit back to P-the rule (it does not require P be compensated for his expenses, it requires disgorgement of profit, gain, appreciation gained by D). 

Now forget above above,

Now there is yet another remedy for K situations its is not Q-K but measure of recovery is the same as above. This called restitution and recover is not limited to the K price or to what P actually expended. Which is answers you question, if P spent  6K, i.e.,  more then D gain 4K (like in the collapsed house example-just too bad, still P only gets 4K, just a rule, I know, sound unfair. But on upside, it could have been electrician spent 4K, and benefit to owner was 6 K, electrician would get 6K)

Main thing is to keep these remedies separate:

1) Compensatory damages (Benefit of the bargain)\

2) Reliance (if MOULS K, K fails b/c of SOF, or promissory estoppel) measured  by out-of pocket costs to P  ----->  and that answers your question above

3) Rescission,

4) Reformation and

5) Restitution (VALID K which was not completed) recovery by benefit to D

6) Q-K ) no valid K , i.e., is implied-in- lawK -recovery in quantum meruit (infant bought thing form merchant, doctor provided service where it was reasonable to expect payment, innocent builder repaired thing for owner who was aware of happening) . As restitution the recovery can be less and more then K price. FMV of doctor average in community is 150/hour, but that particular doc actually charges 200/ hour, Doctor will get his rate, not community.

Another example would be if builder breached in the middle, he cannot ask court to get him recovery under K, he is breacher, but he can get credit for what he actually conferred on owner, so if owner counterclaims for his damages, builder will pay those damages minus his credit measure by benefit on owner.

Do not mix reliance (which allows recovery out of pocket expenses-- 6K promissory estoppel or failed SOF K) with restitution which would allow all benefit conferred on D -4K to be disgorged back to other side.

Another source of confusion:  see difference b/w

Quasi-contracts are-implied-in-law contracts:

1. Plaintiff furnished / rendered valuable goods / services to Defendant with a reasonable expectation of being compensated;
2. Defendant knowingly accepted the benefits of the goods / services; and
3. Defendant would be unfairly benefited by the services / receiving the goods if no compensation were paid to the Plaintiff
4.  
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A contract which is implied in law is an obligation that is not created by a contract but that is imposed by law to prevent the unjust enrichment of one party from the acts of another. A contract which is implied in law is also called a quasi-contract, because it is not in fact a contract; rather, it is a means for the courts to remedy situations in which one party would be unjustly enriched were he or she not required to compensate the other. For example, an unconscious patient treated by a doctor at the scene of an accident has not agreed (either expressly or by implication) to pay the doctor for emergency services, but the patient would be unjustly enriched by the doctor's services were the patient not required to compensate the doctor.

.A contract which is implied in fact is one in which the circumstances imply that parties have reached an agreement even though they have not done so expressly. For example, by going to a doctor for a physical, a patient agrees that he will pay a fair price for the service. If he refuses to pay after being examined, he has breached a contract implied in fact.
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The above statement is wrong

The reliance interest focuses on the injured party, is backward-looking in the sense that it strives to put her in the position that she would have been in had she not made the contract in the first place. It does so by reimbursing her for the loss caused by her reliance on the contract.  10-thousand in our example is expectation measure or compensatory damages, aka benefit of the bargain.  (see my post before with list of remedies)

The vocabulary matters:  

 The reliance interest also focuses on the injured party, but is backward-looking in the sense that it strives to put her in the position that she would have been in had she not made the

contract in the first place. It does so by reimbursing her for the loss caused by her

reliance on the contract.

The restitution interest, on the other hand, focuses on the breaching party. It is backward-looking in that it aims to put the breaching party in a position similar to the one she would have been in had no contract been made.

B/c in K it matters whose fault it is. Breaching party is treated unequally compare to a party with no fault. (Interestingly, by the same token, under UCC if you breached K even if breached unrelated to the loss –you bear the risk of loss if K is silent on this you sent not 100% conforming goods, goods lost, you are liable b/c you breached by sending wrong staff).

If you are wrongdoer and willfully breached K your equity is less compare to one’s who played by the rules. It does not mean that you lost all right, justice still requires that even breacher was given something, but it does not require to make you whole. I.e., does not require restitute status quo for breacher. After al,l b/w breacher and non breacher they are not in pari delicto, so it is fair to show some preference to nonbreacher even at the expense of breacher.

If builder walked away -he breached he is at fault, his “compensation equity” is at minimum. If building collapsed, and nobody is at fault, just old piece of junk, nobody assumed risk, it is fair to give builder benefit he conferred on owner, b/c  b/w them they are equally innocent, and law has simple rule (I did not make the rule): builder must  be compensate by amount owner was benefitted. (you can argue 50% 50 split would be more fair, but it is just not the rule)

Change facts. In the middle of the way, came situation of legal impossibility that the owner could not pay, builder requested assurance and failed. Builder stopped working. He only finished 30% of the job. What the builder can get? The cost of complete formula or restitution?

Performance of contractual duties (other than a contractual duty to pay money) can be excused under impossibility or impracticability or frustration of purpose.

situation of legal impossibility that the owner could not pay"  is not legal impossibility. hence, Owner breached, builder gets BOB  -complete cost or restitution which ever is more fair: if disgorgment yields more money to builder should get that, b/c he is innocent.

If builder materially breached he does not get restitution (but.... modern court would consider see below).

Restitution is not per se K remedy it is rather equitable remedy not relying on K principles but rather relying on fairness.

So if one side breached, other can choose to rescind the K and sue for restitution.

Usually non breaching party is suing for restitution. Why? b/c  non-breacher can recovery for value conferred which can be more then K price.  (Loosing K):  builder hired architect to make plans -10K is price of K . A drew plans at 90%  of completion showed to builder, builder refused to pay, even  nothing wrong with plans, made to specs.  A can get not just 10K, but say 12 K : if A can show that he actually underpriced himself and real price FMV for drawing is 12K.

K breached by plaintiff: typically only P will sue for restitution b/c defendant breached K.  But some courts would allow breaching plaintiff to sue for restitution, but cap the max to K price less damages incurred as result of the breach.

Builder breached in the middle, O refused to pay anything at all. Modern court would allow Builder to get paid for the value of services up to K price less reasonable amount owner had to expand to hire new builder.

Also, would you mind answering the first question in my last post regarding impossibility and fully performance? The question is regarding a valid and enforceable contract at the beginning but it becomes unenforceable in the middle. What if in the middle of the performance, one party's duty of performance is discharged by impossibility while the other party has already fully performed?

If we had valid K can a duty to perform can be discharged?  Yes by:  Impossibility, FP, Subsequent  Agreement, Impracticability

Performance of contractual duties (other than a contractual duty to pay money) can be excused under impossibility or impracticability or frustration of purpose.

Possible differences between impossibility and impracticability include (i) former is objective/latter subjective; (ii) former means can't be done while latter means can only be done with EXTREME and UNREASONABLE difficulty and expense. Bar questions are more likely to focus on whether there is any basis for excusing performance than on whether that basis should be called impossibility or impracticability. 

Impossibility is one of excuses which can discharge contractual obligation -->There is no K any more and, party who spent time, efforts, money  will have remedy in Q-K for the work done.  

(But you need to make sure that a destruction is not fault if a party. (to factor in whether a party is at fault (voluntary disablement-owner burned down his house to get insurance), party assumed risk (builder to drill well, there is rocks under, will cost 10x more then agreed K price, builder assumed risk b/c he is professional), unique subject matter is gone. etc )

P contracts to paint O's house for $1,000. After P begins painting, the house burns down. Is P excused from performing on this contract so that P is now free to take another painting jobs YES,  Is O excused from performing, i.e., paying Yes

contracts to build a house for O for $100,000. After B begins work, the house burns down. Is B excused from performing on this contract so that B is now free to take another construction job? No b/c SM IS HOUSE to be built , just more money but possible

[Seller's risk of loss and destruction]. A contracts to sell B  his 1973 Cadillac for $700. After the contract but before the risk of loss has passed to B,  Cadillac is destroyed in an unseasonable flood. When  A fails to perform the contract (fails to deliver the Cadillac) B  sues A for breach of contract, is A’s nonperformance excused?  But b/c it was unique is excused b/c impossibility

[Seller's risk of loss and destruction—different answer]. A contracts to sell B 100 sacks of  apples for $300. After the contract but before the risk of loss has passed to B,  A's  fruit  is  destroyed by an unseasonable flood. Not excuse b/c   A can buy and sell elsewhere not unique

K breached by builder:  

option1: (passive owner)  Owner can rescind K and owes nothing. In theory guys can walk different ways, builder breached, owner rescind K, meaning K never existed, everybody is happy. But then, of course, builder, comes back and sues to get money in Q-K for value conferred. But then owner, of course, compulsory counterclaims for cost of completion. Court calculates the difference allowing builder to get a credit against owner’s claim. Justice is served. easy

option2:  (active, litigious oner) Owner can sue first for standard remedy w/o rescinding K: K price –cost of completion minus money not yet paid to builder.

"MOULS K"?   is  an acronym to help remember all types of Ks requiring writing per S. of fraud”

Marriage , >One year services (cannot not be performed w/i), , Usury( guaranty), sale of Land,  Sale of >$500, you can make your one, but I thought this one was pretty common.

builder's expectation damages: $$ that would place builder in the same position she would have occupied had their contract been fully performed

did the poster not ask "if the contract is breached by the owner, to what remedy is the builder entitled?"

<!--[if !supportLists]-->A.  <!--[endif]-->Builder's Remedies, owner is in breach :

<!--[if !supportLists]-->1.  <!--[endif]-->Before Performance: Builder's lost profits.

<!--[if !supportLists]-->2.  <!--[endif]-->After Full Performance: Action for the Price  of K or restitution in Quasi K for value of services.

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note** if owner knew about work-->different theory-->implied-in-fact.

3.  <!--[endif]-->After Partial Performance: K price -cost of completion (to builder).

Assume for purposes of this question only that Owner committed a total breach of the contract at a time when Builder had already incurred costs of part performance of $30,000, and Builder would have to spend an additional $60,000 to finish the job. Builder is entitled to recovery in the amount of:

(A) $10,000.

(B) $30,000.

(C) $40,000.

(D) $60,000

(C) Builder is entitled to his profit plus costs. Where an owner breaches a construction contract after construction has been started but before construction is completed, the builder is entitled to recover any profit he would have derived

from the contract plus any costs he has incurred to the date of the breach.  Here, Builder's profit would have been $10,000 and his costs up to the time of the breach are $30,000. Thus, he can recover $40,000. Another way of saying this is contract price minus the cost of completion. Here, the contract price was $100,000 and the cost of completion was $60,000. Thus, Builder is entitled to $40,000.