Also known as: restitutory rights · restitutionary right · right to restitution
Written by attorneys — see sources below.
A right to recover the value of any benefit conferred on the other party by way of part performance or reliance when the contract is breached by nonperformance or repudiated. The right is unavailable if the claimant has performed all duties under the contract and the only remaining obligation is payment of a definite sum of money.
CodeFlow completed and delivered a custom inventory platform to Apex under a fixed-price contract. Apex accepted the platform and launched it but refused the final payment. CodeFlow then sought restitution of the value of its performance. Because CodeFlow had fully performed and only a definite sum remained due, CodeFlow had no restitutory right and was limited to an action for the contract price.
Neri contracted to buy a boat from Retail Marine but breached before delivery. Retail Marine resold the boat at the same price and faced no proven incidental damages. Neri sought restitution of the deposit. The court applied the UCC restitution rules to determine the amount recoverable after the breach.
Plaintiffs contracted with defendant Retail Marine Corp. to purchase a new boat of a specified model for $12,587.40, initially depositing $40 and later increasing the deposit to $4,250 to obtain immediate delivery on a firm sale basis instead of the originally specified four-to-six-week period. Plaintiffs' attorney sent defendant a letter rescinding the contract on the ground that plaintiff Neri faced imminent hospitalization and surgery that would make payments impossible. The boat had already been ordered from the manufacturer and was delivered to defendant at or before receipt of the rescission letter. Plaintiffs commenced an action to recover their deposit after defendant declined to refund it. Defendant counterclaimed for breach of contract and damages in the amount of $4,250. Defendant obtained summary judgment on the issue of liability, after which Special Term directed an assessment of damages to determine whether plaintiffs were entitled to return of any portion of their down payment. At the damages hearing, the boat was shown to have been sold four months later to another buyer for the same price negotiated with plaintiffs. Defendant proved without contradiction that its profit on the contract sale would have been $2,579 and that it had incurred $674 in expenses for storage, upkeep, finance charges, and insurance during the period the boat remained unsold; defendant also sought $1,250 in attorneys' fees. The trial court awarded defendant $500 on its counterclaim and directed that plaintiffs recover the $3,750 balance of their deposit. The judgment was affirmed without opinion by the Appellate Division, and defendant appealed to the Court of Appeals by leave.
View caseShareholders sued under a federal securities statute after a merger approved through misleading proxy materials. The Court recognized an implied private right of action. That right included remedies necessary to make the statutory protection effective, including restitutionary recovery for losses caused by the violation.
Respondent owned 2,000 shares of common stock of J. I. Case Company acquired prior to the merger. He brought a civil action based on diversity jurisdiction. Respondent sought to enjoin a proposed merger between Case and the American Tractor Corporation on grounds including breach of the fiduciary duties of the Case directors, self-dealing among the management of Case and ATC, and misrepresentations contained in the material circulated to obtain proxies. The complaint was in two counts. The first count was based on diversity and claimed a breach of the directors' fiduciary duty to the stockholders. The second count alleged a violation of § 14(a) of the Securities Exchange Act of 1934 with reference to the proxy solicitation material. The injunction was denied and the merger was consummated. Successive amended complaints were filed. The case was heard on the two-count complaint. The allegations included that petitioners solicited proxies for a special stockholders’ meeting at which the merger was to be voted upon. The proxy solicitation material was false and misleading in violation of § 14(a) and Rule 14a-9. The merger was approved by a small margin of votes and would not have been approved but for the false and misleading statements. Case stockholders were damaged thereby. The District Court held that as to the federal count it had no power to redress the alleged violations of the Act but was limited solely to the granting of declaratory relief thereon under § 27 of the Act. The court held the Wisconsin security for expenses statute applicable to both counts except the declaratory portion of Count 2. It ordered respondent to furnish a bond in the amount of $75,000. Upon his failure to do so, the court dismissed the complaint save that part of Count 2 seeking a declaratory judgment. On interlocutory appeal the Court of Appeals reversed on both counts. It held that the District Court had the power to grant remedial relief and that the Wisconsin statute was not applicable. The Supreme Court granted certiorari limited to the question of whether § 27 of the Act authorizes a federal cause of action for rescission or damages to a corporate stockholder with respect to a consummated merger authorized pursuant to a proxy statement alleged to contain false and misleading statements violative of § 14(a) of the Act.
View caseThe restitutory right is unavailable once the injured party has performed all contractual duties and the only remaining obligation is payment of a definite sum. In that situation the claimant must sue for the contract price rather than seek restitution measured by benefit conferred.
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Yes. When one party repudiates after receiving part performance, the injured party may elect restitution for the reasonable value of the benefit conferred. This prevents unjust enrichment even if expectation damages would differ.
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Yes. A minor who timely disaffirms an executory contract and returns any benefit received may recover the value conferred on the other party. Restitution restores the parties to their pre-contract positions after avoidance.
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No. Restitution remains available for the reasonable value of services performed in reliance on an unenforceable oral contract unless the statute itself would be frustrated by allowing recovery. The remedy does not enforce the contract.
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