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Corbin on Contracts

Copyright 2007, Matthew Bender & Company, Inc., a member of the LexisNexis Group.

PART I FORMATION OF CONTRACTS

TOPIC A OFFER AND ACCEPTANCE

CHAPTER 4 INDEFINITENESS AND MISTAKE IN EXPRESSION

1-4 Corbin on Contracts § 4.5

§ 4.5 N1 Reasonable Price-Quasi-Contractual Remedy After Performance

An agreement to pay a ''fair price'' for land or goods or services may be regarded as identical with a promise to pay a ''reasonable price.'' If such is the accepted meaning, the agreement is sufficiently definite for enforcement. It is obvious that a contract to pay a reasonable price, or reasonable compensation for service, leaves plenty of opportunity for difference of opinion and dispute. It can not properly be assumed that only one price or wage is reasonable under the particular circumstances of any case. Reasonableness is a matter of opinion, and opinions differ, even though they are equally honest and well informed. A promise to pay a reasonable price or wages is, in its legal effect, a promise to pay a sum that a court or jury may determine in case of dispute. Interest, as damages for delay in payment, may in many cases be justly held to begin only after the amount due has been liquidated by a verdict or finding of fact. No hard and fast rule to this effect should be laid down by judicial decision, but often statutes are explicit on this question.

How much is reasonable in any particular case is a question of fact, not one of law.n2 There is no rule of law by which the amount can be deductively determined. Like other inferences of fact, however, the evidence from which it must be drawn might be so clear and convincing as to justify the court in withdrawing it from the jury. It is then generally said that the question is ''one of law for the court.'' It would rarely be so.

After goods have actually been delivered and accepted, or services actually rendered, the defendant is bound to make reasonable compensation therefor, whether the agreement under which the benefit was conferred was too indefinite for enforcement or not. It then becomes unnecessary to determine whether the defendant in reality promised to pay a reasonable price. If the promise was made, the court is enforcing the express promise. If the promise was not made, the duty to pay is described as quasi-contractual,n3 but it is identical in result.n4 ''Reasonable value'' is often expressed in the law-latin phrase quantum meruit. This phrase, or its English equivalent, reasonable value, is used in express or implied-in-fact contracts,n5 and in quasi contract cases. Often it is difficult to know which theory is being applied by the court.n6 Often the court seems confused as to these distinctions.n7 In any of these cases, unless the equities dictate otherwise, the measure of recovery includes cost plus a reasonable profitn8 whether or not the other party was actually enriched in estate.n9

Even if the subsequent action of the parties fails to clarify an indefinite agreement sufficiently to make it enforceable, it may nevertheless confer such an uncompensated benefit upon one of the parties as to create an obligation to pay the reasonable value of such benefit.n10 This obligation is limited to the duty of making payment at a reasonable rate for value generally paid on the market for similar performances.

The indefiniteness and uncertainty may be either as to the performance to be rendered for pay, or as to the amount to be paid for the performance, or as to both at once. If it is the first of these, and a performance has actually been rendered, the defendant must pay the reasonable value of that performance. If it is the second or third, exactly the same result is reached. So where the plaintiff offered to give valuable information for pay and the defendant promised to ''do the right thing and be liberal'' in return for such information, the plaintiff could get judgment for quantum meruit. n11 The information to be given was not specified in advance, but it became definite when given. The price to be paid was not determinable by any available method, but it was understood that the service was not to be gratuitous. The express agreement was not enforceable, but there is a duty to pay.

In Air Technology Corp. v. General Electric Co.,n12 defendant sought to obtain a government contract for construction of a detection system for identification of nuclear explosions. Plaintiff submitted information and plans to be used in defendant's proposals to the government. After initial discussions, defendant said the plaintiff would be a member of its ''team'' subject to Air Force approval if a certain meeting between personnel of both parties proved successful. After the meeting, defendant's representative stated that they were ''all set.'' Plaintiff furnished advice and information utilized by defendant in obtaining government approval of its proposal. Plaintiff understood it would then be awarded the sub-contract for the devices on which it had furnished help, but defendant decided to produce the devices itself. The court held that plaintiff was entitled to recover. The measure of its recovery was not less than the higher of two alternative measures: (a) the value reasonably expended by plaintiff in the performance of its joint arrangement, and (b) the fair value of its contribution to that arrangement. Each of these is, in some sense of the word, a restitutionary recovery.

Legal Topics:

For related research and practice materials, see the following legal topics:

Real Property LawPurchase & SaleContracts of SaleFormalitiesReal Property LawPurchase & SaleContracts of SaleEnforceabilityGeneral OverviewContracts LawFormationDefinite TermsContracts LawRemediesEquitable ReliefQuantum Meruit

FOOTNOTES:

(n1)Footnote 1. This section incorporates § 102 of the prior edition of this treatise.

(n2)Footnote 2. E.L. Klewicki Co. v. American Screw Products Co., 690 F.2d 85 (6th Cir.1982) , a promise of ''some compensation.''

In Hoops v. Gateway Food Products, 824 S.W.2d 451 (Mo.App.1991) , plaintiff, an accountant, testified as to his regular rate, but gave no testimony as to its reasonableness. Thus, there was a failure of proof.

In Ekl v. Knecht, 223 Ill.App.3d 234, 165 Ill.Dec. 760, 585 N.E.2d 156 (1991) , it was held that the plumber's regular rates were unreasonable.

(n3)Footnote 3. Goichman v. Rheuban Motors, Inc., 682 F.2d 1320 (9th Cir.1982) . Plaintiff's illegally parked car was towed away. Plaintiff owed an ''implied in law'' obligation to pay reasonable value for the towing ''service'' which he neither asked for nor wanted.

(n4)Footnote 4.

U.S. - Wehner v. Bauer, 160 Fed. 240 (C.C.Cal.1908) .

Conn. - Rowell v. Ross, 87 Conn. 157, 87 A. 355 (1913) .

D.C. - Bird v. Frye, 216 A.2d 579 (D.C.App.1966) , there was a dispute as to which of two rates applicable to transcript, regular or expedited. Amount between the two had actually been paid and was found to be reasonable under the circumstances.

Ga. - Brown v. Home Security Corp., 106 Ga.App. 147, 126 S.E.2d 439 (1962) , noted under § 566.

Ill. - Miller v. Bloomberg, 26 Ill.App.3d 18, 324 N.E.2d 207 (1975) , appeal after remand, 60 Ill.App.3d 362, 17 Ill.Dec. 602, 376 N.E.2d 748 , later proceeding 126 Ill.App.3d 332, 81 Ill.Dec. 540, 466 N.E.2d 1342 , lessee had option to purchase for the ''then prevailing market price.'' Many similar cases are cited in § 4.3, 4.4 above.

Iowa - Hsu v. Vet-A-Mix, Inc., 479 N.W.2d 336 (Iowa App.1991) .

Kan. - Brakensiek v. Shaffer, 203 Kan. 817, 457 P.2d 511 (1969) , brokerage services in selling a business, promise to compensate; Millspaugh v. McKnab, 134 Kan. 579, 7 P.2d 51 (1932) , to pay an indefinite sum for procuring an oil lease.

Me. - Corthell v. Summit Thread Co., 132 Me. 94, 167 A. 79, 92 A.L.R. 1391 (1933) , ''reasonable recognition'' for inventions to be turned over by employee held to mean reasonable compensation.

Mich. - Huhtala v. Travelers Ins. Co., 401 Mich. 118, 257 N.W.2d 640, 647 n. 14 (1977) , ''full and fair settlement.'' Indefiniteness was not argued, therefore the court expressed no opinion.

N.J. - Van Doren v. Robinson, 16 N.J.Eq. 256 (1863) .

S.Car.-In Costa & Sons Constr. Co. v. Long, 306 S.C. 465, 412 S.E.2d 450 (S.C.App.1991) , there was no contract because of a misunderstanding, but construction work was done and accepted.

Ohio - Dixon v. Kittle, 109 Ohio App. 257, 164 N.E.2d 806, 10 Ohio Op.2d 479 (1959) , services rendered for an indefinite promise to convey ''a choice lot.''

Eng. -British Bank for Foreign Trade, Ltd. v. Novimex, Ltd., [1949] 1 All E.R. 155 (K.B.).

This section is cited in Howard v. Fitzgerald, 58 Wash.2d 403, 363 P.2d 386 (1961) , where the plaintiff offered to sell gasoline station equipment at its ''reasonable value,'' and the defendant accepted by using the equipment.

Where an owner promised to pay a builder a stated weekly wage and also to pay a percentage of the cost of the building, with no definite percentage agreed, after completion of the building the builder can maintain an action for quantum meruit. Cook v. Saltzer, 74 Idaho 97, 257 P.2d 228 (1953) .

This section is cited (also § 102 of prior edition) in Heim v. Shore, 56 N.J.Super. 62, 151 A.2d 556 (1959) holding that where the parties intended to be bound by a contract to sell land but no enforceable contract resulted because of indefiniteness and uncertainty of terms, a party who has with the other's assent made improvements on the land is quasi-contractually entitled to reasonable compensation therefor.

(n5)Footnote 5. E.g., Eaton v. Engelcke Mfg, Inc., 37 Wash.App. 677, 681 P.2d 1312 (1984) .

In Arcade County Water Dist. v. Arcade Fire Dist., 6 Cal.App.3d 232, 85 Cal.Rptr. 737 (1970) , the fire district had been using the plaintiff's water for six years at an agreed price. The water district announced a price increase which the fire district rejected. Yet it continued to use the plaintiff's water. The rejection of the new rates together with continued use indicated ''an implied agreement to pay not the demanded price but a reasonable price.'' This reasoning is contrary to the general run of cases involving acceptance by exercise of dominion. It is explicable on the grounds that the water district is a municipal corporation with the obligation to charge reasonable rates.

(n6)Footnote 6. In Hedges v. Schinazi, 144 Vt. 605, 481 A.2d 1046 (1984) , the plaintiff did some paving work. ''It is irrelevant whether the parties actually entered into a contract for the partial repair of the driveway.'' 481 A.2d at 1048 . Under the circumstances the plaintiff was justified in conferring this benefit on the defendant. Reasonable compensation was owed.

(n7)Footnote 7. See United States use of Falco Constr. Co. v. Summit General Contracting Corp., 760 F.Supp. 1004 (E.D.N.Y.1991). The contractor asked the subcontractor to do additional work. The work was done. The court states that the subcontractor could make no contract claim as a material term-price-had not been agreed upon, but had a quasi-contractual claim. The result would be the same, but the court overlooks the thousands of cases where it is held that if the parties did not discuss price, it is presumed that reasonable price was intended. See § 4.3, 4.4 above.

Similarly, in Marta v. Nepa, 385 A.2d 727 (Del.1978) , decedent rendered brokerage services for defendant but no rate of compensation agreed upon. Decedent was the procuring cause of a long-term lease entered into by defendant as landlord. The court held that decedent's estate was entitled to quasi-contractual relief based on quantum meruit. Note that these circumstance typify contracts implied-in-fact.

In Elliot v. Villa Park Trust & Savings Bank, 63 Ill.App.3d 714, 20 Ill.Dec. 529, 380 N.E.2d 507 (1978) , the defendant kept goods in which it had a security interest on plaintiff's property with the knowledge and consent of plaintiff. The duty to pay storage charges seems implicit under the circumstances detailed. Yet the court characterizes the obligation to pay as implied in law. Similarly, in Comm v. Goodman, 6 Ill.App.3d 847, 286 N.E.2d 758 (1972) , an implied-in-fact contract is treated as an implied-in-law (quasi) contract.

(n8)Footnote 8. Fairbanks North Star Borough v. Tundra Tours, Inc., 719 P.2d 1020 (Alaska 1986) ; Heaton v. Imus, 93 Wash.2d 249, 608 P.2d 631 (1980) .

(n9)Footnote 9. Kearns v. Andree, 107 Conn. 181, 139 A. 695, 59 A.L.R. 599 (1928) .

(n10)Footnote 10. In First Nat. Bank v. Burton, Parsons & Co., 57 Md.App. 437, 470 A.2d 822 (1984) , cert. denied, 300 Md. 88, 475 A.2d 1200 , cert. denied, 300 Md. 90, 475 A.2d 1201 . Rankin was a successful inventor in the employ of defendant under a series of agreements. The crux of the agreements was specific compensation plus royalties on named products. As to other products he might invent for defendant, royalties would be agreed upon. As to certain of these products negotiations failed to produce agreement. The court ruled that the agreement to agree on royalties for these products was too indefinite. The court also ruled that Rankin's estate was not entitled to quasi-contractual recovery because Rankin had been compensated by his salary. The court relied on the general rule that when a contract covers the parties' relationship, there is no role for quasi contract. The application of this rule to these facts involves a logical fallacy as well as an injustice. Having ruled that the portions of the contract involving the royalties in issue were too vague and therefore void, where is the logic in stating that the ''contract'' governed their relationship?

A better reasoned case is Varney v. Ditmars, 217 N.Y. 223, 111 N.E. 822 (1916) . The plaintiff was promised a salary of $40 a week plus ''a fair share of my profits.'' The majority, over Judge Cardozo's dissent, ruled that the promise was too vague for enforcement. Therefore, although a share of profits would not be awarded as damages, plaintiff was held to be entitled to the reasonable value of his services minus the $40 a week salary already paid.

To the same effect is Marine Development Corp. v. Rodak, 225 Va. 137, 300 S.E.2d 763 (1983) .

Another well-reasoned case is Montanaro Bros. Builders, Inc. v. Snow, 190 Conn. 481, 460 A.2d 1297 (1983) , appeal after remand, 4 Conn.App. 46, 492 A.2d 223 (1985) . Purchaser paid $16,000 for an option to purchase a farm, the seller to subdivide and retain a house with 6 acres of indefinite description. The sellers successfully defended an action for specific performance on grounds of indefiniteness, but also under the statute of frauds. Having so defended, the sellers were estopped from relying on the agreement's terms to prevent restitution of the option price.

(n11)Footnote 11.

Kan. - Stewart v. Fourth Nat. Bank, 141 Kan. 175, 39 P.2d 918 (1935) .

A restitutionary remedy was also given in Buschmeyer v. Advance Machinery Co., 27 Ohio C.A. 337, 7 Ohio App. 202, 29 Ohio Cir. Dec. 207, 27 Ohio C.C. (n.s.) 337 (1916) , motion overruled.

(n12)Footnote 12. 347 Mass. 613, 199 N.E.2d 538 (1964) .