[B] Quasi Contract as a Remedial Device for Unwinding Failed Agreements

In certain cases, a restitutionary remedy is available as an alternative to money damages, either for breach of an express contract and for a tort. The measure of recovery in cases of this kind is generally the amount needed to restore the financial equilibrium of the aggrieved party to the economic state this party enjoyed prior to contracting.n22 The recovery is designed to restore the status quo ante.n23 This alternative remedy is very frequently described as quasi-contractual in character. Agreements also fall apart for reasons other than breach. The main role of quasi contracts is to provide remedies to unwind entanglements that may have been caused by part or full performance.n24 Thus, where an agreement is too indefinite to be enforced, where it does not comply with writing requirements,n25 where one of the parties is represented by an unauthorized agent,n26 where no contract is made because each of the parties had a materially different understanding of its terms,n27 where it is avoided for duress, misrepresentation, undue influence, mistake, incompetence, or infancy,n28 where it is discharged because of impracticability or frustration,n29 or where a condition precedent fails to occur,n30 quasi contract is the body of law that determines the remedy, but the primary rights are contract rights. Although it is sometimes said that unjust enrichment is the criterion for allowing quasi-contractual relief, such a statement is a dogmatic over-generalization that is belied by the numerous cases where other criteria have been held to be appropriate. The court must determine the extent to which the status quo ante should be restored. Relevant factors include relative fault, the contractual risks assumed by the parties, any unjust enrichment or unjust impoverishment, and the fairness of alternative risk allocations not agreed upon and not attributable to the fault of either party.n31

Legal Topics:

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

Contracts LawTypes of ContractsImplied-in-Law ContractsContracts LawTypes of ContractsImplied-in-Fact ContractsContracts LawRemediesEquitable ReliefQuantum Meruit

FOOTNOTES:

(n1)Footnote 1. In Grombach Productions v. Waring, 293 N.Y. 609, 59 N.E.2d 425 (1944) , mot. denied, 294 N.Y. 697, 60 N.E.2d 846 (1945) , the plaintiff submitted an ''idea'' by telephone to the defendant and asserted that the defendant used it in a radio program without paying for it. The jury found that there was no contract implied in fact. The court rightly held that no quasi contract or contract ''implied in law'' would exist by reason of a usage or custom either to pay for such ideas voluntarily submitted or not to use them. Such a usage or custom would be evidential of a promise implied in fact; but this was negatived by the jury's verdict. Very likely the jury and the lower court were confused in mind as to the meaning of the terms.

The interplay between implied in fact contract, ''idea theft'' (quasi contract) and copyright violations are explored in Paul v. Haley, 183 A.D.2d 44, 588 N.Y.S.2d 897 (1992) .

U.S. -The distinctions made in this section are discussed at length in Hill v. Waxberg, 237 F.2d 936, 16 Alaska 477 (9th Cir.1956) , showing that in case of a contract ''implied in fact'' the remedy for breach is ''damages'' measured by the loss of of the injured party, while in case of a contract ''implied in law'' there is no ''breach'' and the remedy, if any, is ''restitution'' of benefits received by the defendant. Although these distinctions were not observed in the judgment below, the court was able to affirm it on condition of assent to a specified reduction in its amount.

Cal. -See Desny v. Wilder, 46 Cal.2d 715, 299 P.2d 257 (1956) , for a discussion of the differences between express contracts and contracts that are either ''implied in fact'' or ''implied in law'' (quasi contracts).

See Weitzenkorn v. Lesser, 40 Cal.2d 778, 792, 256 P.2d 947, 958 (1953) , prior opinion, App., 231 P.2d 889 , as to pleading and proof of contracts implied in fact and contracts implied in law.

Conn. - Polverari v. Peatt, 29 Conn.App. 191, 614 A.2d 484 (1992) .

Mich. -See Moll v. Wayne Co., 332 Mich. 274, 50 N.W.2d 881 (1952) , overruled on other grounds Brown v. State, Dep't of Military Affairs, 386 Mich. 194, 191 N.W.2d 347 (1971) .

N.J.-This section is quoted in St. Paul Fire & Marine Ins. Co. v. Indemnity Ins. Co. of North America, 32 N.J. 17, 158 A.2d 825 (1960) , holding that on the facts as proved the defendant insurer owed no quasi-contractual duty to reimburse the plaintiff insurer any part of the cost of defending an action against an insured who held policies in both companies. But the court ordered a new trial to determine whether or not the defendant was bound to contribute by reason of a promise implied in fact.

Ohio.-This section is quoted in Hughes v. Oberholtzer, 162 Ohio St. 330, 123 N.E.2d 393 (1954) , quoting the author's definition of quasi contract.

S.D. -In St. John's First Lutheran Church v. Storsteen, 77 S.D. 33, 84 N.W.2d 725 (1957) , implied contracts and quasi contracts are properly distinguished. The Church was held not to be liable quasi-contractually for services voluntarily rendered without expectation of payment.

Tex.-This section and § 1.18 are quoted at length in Ferrous Products Co. v. Gulf States Trading Co., 323 S.W.2d 292, 296, 297 (Tex.Civ.App.1959) , aff'd, 160 Tex. 399, 332 S.W.2d 310 . The plaintiff shipped steel beams consigned to the M.B. Company. On arrival at destination, an unauthorized person told defendant that the beams were intended for it; and they were taken by defendant. The plaintiff sued the defendant and obtained judgment on the theory of an ''implied contract.'' The court sustained the action, properly regarding it as an action quasi-contractual in character. Assent was not required. The defendant was a tort feasor; his tort could be waived and judgment for the value of the goods recovered in ''assumpsit.''

Wash. -When an overpayment under a contract has been made, there is a duty to make restitution. This duty is ''quasi-contractual''; and an action for its enforcement is subject to a three-year statute of limitations pertaining to unwritten contracts, not to a six-year statute pertaining to written contracts. Halver v. Welle, 44 Wash.2d 288, 266 P.2d 1053 (1954) .

See the discussion in Mill & Logging Supply Co. v. West Tenino Lbr. Co., 44 Wash.2d 102, 265 P.2d 807 (1954) as to implied and quasi contracts, where the court holds that the use on its land by the defendant of machinery and supplies delivered by plaintiff under a contract with the previous owner of the land created a quasi-contractual duty to pay the reasonable value. Plaintiff did not know of the change of ownership.

Many similar cases are cited in § 1.19 above.

(n2)Footnote 2. Restatement (Second) of Contracts § 4 comment b. There seems to be no consensus on whether or not term should be hyphenated. This treatise follows, on this point, a style manual that suggests ''quasi contract'' without a hyphen and ''quasi-contractual'' with a hyphen, except of course if the treatise is quoting a source, or citing a title with a different usage. Cf. notes 4 & 5 below.

(n3)Footnote 3. Restatement (Second) of Contracts §§ 370-77 and passim. The profusion of terminology is discussed in Note, Restitution: Concepts and Terms, 19 Hastings L.J. 1185 (1968).

(n4)Footnote 4. William A. Keener, A Treatise on the Law of Quasi-Contract (1893).

(n5)Footnote 5. Frederick C. Woodward, The Law of Quasi Contracts (1913).

(n6)Footnote 6. A famous early use of the term was by Lord Mansfield in Moses v. Macferlan, 2 Burr. 1005 (1760).

(n7)Footnote 7. The common counts are discussed in § 1.18 above.

(n8)Footnote 8. See § 1.18 above. In Nehi Beverage Co., Inc. v. Petri, 537 N.E.2d 78, 85 (Ind.App.1989) the court said ''Our courts have used the phrases quasi-contract, contract implied-in-law, constructive contract and quantum meruit synonymously.'' It quite correctly ruled that, whatever the terminology, the action was at law and not in equity, thereby triable by jury.

(n9)Footnote 9.

Alaska - B.B. & S. Constr. Co. v. Stone, 535 P.2d 271 (Alaska 1975) ;

Mass. -In Salamon v. Terra, 394 Mass. 857, 477 N.E.2d 1029 (1985) the express agreement together with the factual implications negated any possible quasi-contractual relief for a builder who, on speculation, made improvements to defendant's land.

N.Y. - Clark-Fitzpatrick, Inc. v. Long Island R. Co., 70 N.Y.2d 382, 521 N.Y.S.2d 653, 516 N.E.2d 190 (1987) .

Pa. - Schott v. Westinghouse Elect. Corp., 436 Pa. 279, 259 A.2d 443 (1969) is a difficult, but wise, decision. The defendant invited suggestions from employees, promising awards from $5.00 to $15,000 for each suggestion adopted. As a term of the plan the offer provided the decision of the committee ''will be final.'' Plaintiff's suggestion was expressly rejected, but the plaintiff alleges that the company adopted and utilized the suggestion anyway. It was held that no cause of action was stated in contract, because the offer was expressly rejected, but the complaint stated a cause of action in quasi contract. If the complaint stated the true facts, surely the defendant should pay. Had an express contract been made, it may well be that the defendant could have paid $5.00 as full payment. The case can be likened to cases where a party takes offered property and exercises dominion over it, at the same time stating that the offer is rejected. It has long been held that this conduct constitutes tortious conversion, which the aggrieved party can, by election, treat as a contract or quasi contract. See § 3.17 below.

(n10)Footnote 10. The thoughts expressed in this and subsequent paragraphs of this section are developed in greater detail in Joseph M. Perillo, Restitution in a Contractual Context, 73 Colum.L.Rev. 1208 (1973). See also Joseph M. Perillo, Restitution in the Second Restatement of Contracts, 81 Colum.L.Rev. 37 (1981).

(n11)Footnote 11.

Eng. -Jenkins v. Tucker, 1 H.Bl. 90, 126 Eng.Rep. 55 (C.P. 1788) (husband liable); Tugwell v. Heyman, 3 Camp. 298, 170 Eng.Rep 1389 (K.B. 1812) (Executors liable).

Cal. - Estate of Kemmerrer, 114 Cal.App.2d 810, 251 P.2d 345, 35 A.L.R.2d 1393 (1952) . See also Annot. 82 A.L.R.2d 873, 899-91 (1962); Restatement of Restitution § 115 comment b (1937).

(n12)Footnote 12. In Parev Products Co. v. Rokeach, 124 F.2d 147 (2nd Cir.1941) , Judge C.E. Clark said: ''Should, therefore, a covenant be implied under all the present circumstances? When we turn to the precedents we are met at once with the confusion of statement whether a covenant can be implied only if it was clearly 'intended' by the parties, or whether such a covenant can rest on principles of equity. Expressions can be found which insist on 'intention,' Brimmer v. Union Oil Co., 81 F.2d 437, 440, 105 A.L.R. 454 (10th Cir.1936) , cert. denied, 298 U.S. 668, 56 S.Ct. 833, 80 L.Ed. 1391 ; which seem to combine both a requirement of 'intention' and of 'equity and justice,' Macloon v. Vitagraph, Inc., 30 F.2d 634, 636 (2nd Cir.1929) ; and which by-pass 'intention' and rely solely on equity. Dermott v. State, 99 N.Y. 101, 109, 1 N.E. 242 (1885) ; King v. Leighton, 100 N.Y. 386, 391, 3 N.E. 594 (1885) ; Genet v. Delaware & Hudson Canal Co., 136 N.Y. 593, 609, 32 N.E. 1078, 50 N.Y.St.Rep. 53, 19 L.R.A. 127 (1893) ; cf. Eustis Mining Co. v. Beer, Sondheimer & Co., 239 F. 976, 984 (S.D.N.Y.1917) ; Hotchkiss v. National City Bank, 200 F. 287, 293 (S.D.N.Y.1911) , aff'd, 201 F. 664 (1912) ; Id., 231 U.S. 50, 34 S.Ct. 20, 58 L. Ed. 115 (1913). One may perhaps conclude that in large measure this confusion arises out of the reluctance of courts to admit that they were to a considerable extent 'remaking' a contract in situations where it seemed necessary and appropriate so to do. 'Intention of the parties' is a good formula by which to square doctrine with result. That this is true has long been an open secret. See 3 Samuel Williston on Contracts, 3d ed., § 825; Oliver W. Holmes, The Path of the Law, 10 Harv.L.Rev. 457, 466; Lon L. Fuller, Legal Fictions, 25 Ill.L.Rev. 363, 369; Zechariah Chafee, The Disorderly Conduct of Words, 41 Col. L.Rev. 381, 398. Of course, where intent, though obscure, is nevertheless discernible, it must be followed; but a certain sophistication must be recognized-if we are to approach the matter frankly-where we are dealing with changed circumstances, fifteen years later, with respect to a contract which does not touch this exact point and which has at most only points of departure for more or less pressing analogies.''

Although this case deals with the implication of a covenant in a true contract, rather than the creation of a quasi contract, many of the same considerations go into the latter process.

This section is quoted at this point in Borough of West Caldwell v. Borough of Caldwell, 26 N.J. 9, 138 A.2d 402, 412, (1958) , citing also Arthur L. Corbin, Quasi Contractual Obligations, 21 Yale L.J. 533 (1912). This case is noted herein under § 553.

This section is cited in Cox v. Shaw, 263 N.C. 361, 139 S.E.2d 676 (1965) in discussing the right of an employer found liable for employee's negligence to recover over against the employee.

(n13)Footnote 13. General works on the subject include the works of William A. Keener and Frederick C. Woodward cited at notes 4 & 5 above and the Restatement of Restitution. A review of the literature is John W. Wade, The Literature of the Law of Restitution, 19 Hastings L.J. 1087 (1968). The Restatement (Second) of Contracts (1981) treats restitution in §§ 370-377. The most recent thorough treatment is the 4 volume work, The Law of Restitution (1978) by George Palmer. There are many law review articles. A recent treatment is Douglas Laycock, The Scope and Significance of Restitution, 67 Tex.L.Rev. 1227 (1989).

(n14)Footnote 14.

U.S. - Bright v. Boyd, 4 Fed.Cas. 127, No. 1875, 1 Story 478 (C.C.1841) .

See also the so-called ''Betterment Acts'' of various states.

There are innumerable cases and many doctrines dealing with a remedy for money paid or other performances rendered by mistake of law or of fact. It is enough to refer to a few cases such as:

Ill. - Partipilo v. Hallman, 156 Ill.App.3d 806, 109 Ill.Dec. 387, 510 N.E.2d 8 (1987) . The county assessed plaintiff's property, mistakenly adding the value of the improvements on neighboring property owned by the defendant. Plaintiff could recover from his neighbor that portion of the taxes he paid attributable to these improvements.

N.J. - Deskovick v. Porzio, 78 N.J.Super. 82, 187 A.2d 610 (1963) . Two brothers paid the medical bills of their deceased father in the mistaken belief he was unable to pay. These facts were a sufficient basis for a quasi-contractual right against the father's estate for reimbursement.

N.Y. - Wheadon v. Olds, 20 Wend. 174 (N.Y.1838) ; Continental Casualty v. Van Deventer, 277 A.D. 553, 101 N.Y.S.2d 342 (1950) .

S.C. -McDonald's for three years negligently made monthly rent payments that were double the amount due. It was permitted to recover the overpayment. McDonald's Corp. v. Moore, 237 F.Supp. 874 (W.D.S.C.1965) .

(n15)Footnote 15. See Arthur L. Corbin, Waiver of Tort, 19 Yale L.J. 221 (1910). In addition to the traditional torts discussed in the cited article, there is a quasi-contractual duty to reimburse the government where it incurs costs discharging a duty the wrongdoer had a duty to perform, for example, cleaning oil spills. United States v. P/B STCO 213, 756 F.2d 364 (5th Cir.1985); United States v. C & R Trucking Co., 537 F.Supp. 1080 (N.D.W.Va.1982) . These cases are important on the measure of recovery and the choice of the appropriate statute of limitation. So too is United States v. Neidorf, 522 F.2d 916 (9th Cir.1975) , cert. denied, 423 U.S. 1087 , holding that the liability of the transferee of a fraudulent conveyance, as well as the liability of a corporate shareholder who receives its assets, is a quasi-contractual liability governed by the six-year limitation statutes.

The decision in United States ex rel. Sunworks Div. v. Insurance Co. of North America, 695 F.2d 455 (10th Cir.1982) may rest on this ground. Sunworks contracted with Welco to deliver solar collectors to a government construction project. A month after delivery Welco walked off the job. Fortec, the general contractor, hired someone else to install the Sunworks collectors. The court said Sunworks could recover in quasi contract against Fortec and thus have protection under its bond. It is unclear whether Fortec's use of the collectors was tortious. If it was, Sunwork could elect to waive the tort. If not, then an implied in fact contract would have arisen.

Where a broker produced a prospective customer pursuant to a contract with a corporation which would have entitled the broker to a commission if the corporation did business with the prospect, a corporate officer's appropriation of that opportunity for the officer's own benefit results in the officer's quasi-contractual liability to the broker. Bradkin v. Leverton, 26 N.Y.2d 192, 309 N.Y.S.2d 192, 257 N.E.2d 643 (1970) . This may or may not have been a tort.

CBS Surgical Group, Inc. v. Holt, 37 Conn.Supp. 555, 426 A.2d 819 (1981) . The court missed an opportunity to rectify an injustice. A CBS surgeon amputated Holt's leg. Medicare sent her a check for $2,000 for CBS's fee. Maringola, her friend and agent, cashed the check and appropriated the money. The court reversed a judgment against Maringola on the grounds that (1) the benefit he received was from Holt and not from CBS and (2) no constructive trust could be raised as there was no confidential or fiduciary relationship between Maringola and CBS. Potential theories to rectify this injustice abound. Crime should not pay. For example, the court could have found that CBS had equitable title to the check.

(n16)Footnote 16. See:

Ala. - Mobile Light & R. Co. v. S.D. Copeland & Son, 15 Ala.App. 235, 73 So. 131 (1916) .

Pa. - Hogg v. Longstreth, 97 Pa. 255 (1881) .

Eng. -Exall v. Partridge, 8 T.R. 308 (1799).

(n17)Footnote 17.

Cal. - Todd v. Martin, 37 P. 872, 4 Cal.Unrep.Cas. 805 (1894) .

Mass. - Chase v. Corcoran, 106 Mass. 286 (1871) .

(n18)Footnote 18. See State v. Barthalow, 150 Ohio St. 499, 83 N.E.2d 393 (1948) , rightly holding that a city's obligation to pay a judgment for the amount of an officer's salary was included within the statutory phrase ''judgments for personal injuries or based on other non-contractual obligations,'' thus empowering a city to issue bonds for the payment of such a judgment. Of course, the meaning to be attributed to a legislature in a statutory provision must be determined with due regard to the purposes to be attained, often forcing ''dictionaries'' and many common ''usages'' to be disregarded.

A statute or regulation entitling assigned counsel to attorneys' fees creates a quasi-contractual right to payment. State v. Law Offices of Coleman and Iacopelli, 716 P.2d 1 (Alaska 1986) .

(n19)Footnote 19.

Eng. -Slade's Case, 4 Coke, 92b (1602).

(n20)Footnote 20. The following cases illustrate and explain the difference between true contract and quasi contract:

U.S. - City of New York v. Davis, 7 F.2d 566 (2d Cir.1925) .

Ariz. - Crane v. Franklin, 17 Ariz. 476, 154 P. 1036 (1916) .

Ark. - Caldwell v. Missouri State Life Ins. Co., 148 Ark. 474, 230 S.W. 566 (1921) .

Conn. - Fischer v. Kennedy, 106 Conn. 484, 138 A. 503 (1927) ; Gregory v. Lee, 64 Conn. 407, 30 A. 53 (1894) .

Ill. - People v. Dummer, 274 Ill. 637, 113 N.E. 934 (1916) .

N.H. - Sceva v. True, 53 N.H. 627 (1873) .

Okl. - First Nat. Bank v. Matlock, 99 Okla. 150, 226 P. 328, 36 A.L.R. 1088 (1924) .

Pa. - Hertzog v. Hertzog, 29 Pa. 465 (1857) .

Vt. - Underhill v. Rutland R. Co., 90 Vt. 462, 98 A. 1017 (1916) .

Eng. -Moses v. Macferlan, 2 Burr. 1005 (1760), by Lord Mansfield.

Just as in Slade's Case, 360 years ago, a modern court may still properly say that a ''duty'' implies a promise. In Begovich v. Murphy, 359 Mich. 156, 101 N.W.2d 278 (1960) the court said: ''This court has said that where some duty would justify a court in imputing a promise to perform it, a contract will be implied.'' The following were the facts: An attorney undertook to defend a client who was charged with murder. The client made two payments of $2,500 and $4,000 to the attorney and then prevented performance by wilfully committing suicide. The court held that the client's administrator was entitled to restitution of the fees insofar as they were not earned by the attorney. There was no evidence justifying a finding that the attorney made a promise implied in fact to repay any part of the fee.

See also the many cases cited in § 1.19 above.

(n21)Footnote 21. Crist v. United Underwriters, Ltd., 230 F.Supp. 136 (D.Colo.1964) , aff'd, 343 F.2d 902 (10th Cir.) ; Collins v. United States, 532 F.2d 1344 (Ct.Cl.1976) ; Berry v. Druid City Hospital Board, 333 So. 2d 796 (Ala.1976) . Simpson v. Sumner County, 669 S.W.2d 657 (Tenn.App.1983) .

(n22)Footnote 22. This is the error into which some of the dogmatic treatments of the subject have fallen. See, e.g., Middle Atlantic Conference v. United States, 353 F.Supp. 1109 (D.D.C.1972) . The court stated that a trucking company's claim to demurrage is not based on a benefit to the warehouseman, but on compensation to the carrier for detention of its truck. This is clearly correct, but not in itself a sufficient ground for denying quasi-contractual relief.

(n23)Footnote 23. CBS, Inc. v. Merrick, 716 F.2d 1292 (9th Cir.1983) . Restitution as a remedy for breach is treated in §§ 1102-1122.

(n24)Footnote 24. Kearns v. Andree, 107 Conn. 181, 139 A. 695, 59 A.L.R. 599 (1928) (''The measure of recovery is the reasonable value of the services performed, and not the amount of benefit which actually accrued from them to him for whom they were performed.'')

(n25)Footnote 25. Farash v. Sykes Datatronics, Inc., 59 N.Y.2d 500, 465 N.Y.S.2d 917, 452 N.E.2d 1245 (1983) .

(n26)Footnote 26. Campbell v. Tennessee Valley Authority, 421 F.2d 293 (5th Cir.1969) ; Matarese v. Moore-McCormack Lines, 158 F.2d 631 (2d Cir.1946) .

(n27)Footnote 27. Estok v. Heguy, 44 W.W.R. 167 (Brit.Colum.1963); Vickery v. Ritchie, 202 Mass. 247, 88 N.E. 835 (1909) . In the last two cases recovery was based on the reasonable value of the plaintiff's services and not on the amount of the defendant's enrichment. In later litigation in the Massachusetts case, the dogmatic separation between contract and quasi contract led the court to refuse to subtract from plaintiff's recovery a deduction of $10 a day as liquidated damages because such damages are contractual. Vickery v. Ritchie, 207 Mass. 318, 93 N.E. 578 (1911) .

(n28)Footnote 28. See John D. Calamari & Joseph M. Perillo, The Law of Contracts chs. 8 & 9 (3d ed. 1987).

(n29)Footnote 29. Albre Marble and Tile Co. v. John Bowen Co., 338 Mass. 394, 155 N.E.2d 437 (1959) . See §§ 1367-1372 of this treatise.

(n30)Footnote 30. Abrams v. Financial Service Co., 13 Utah 2d 343, 374 P.2d 309 (1962) .

(n31)Footnote 31. See Jefferey L. Harrison, A Case for Loss Sharing, 56 So.Cal.L.Rev. 573 (1983); Joseph M. Perillo, Restitution in a Contractual Context, 73 Colum.L.Rev. 1208 (1973); John Murray, Contracts § 126(C) (1990).