Restitution

     Restitution is a theory of obligation, like contract or tort, but generally without a law school class of its own.  The general theory is that a person should not remain unjustly enriched at the expense of another's loss and should disgorge the enrichment or its value in favor of the person who has suffered loss.  A large body of common law, reflected in the Restatement of the Law, Restitution, considers the circumstances in which enrichment is considered unjust and a remedy appropriate. 

     Many cases of unjust enrichment strongly resemble, even if they do not amount to, cases of contractual obligation.  Such cases often employ the label "quasi-contract" or "contract implied-in-law" (not to be confused with a contract implied-in-fact). It is therefore not surprising, even if not entirely logical, that courses in contract law have absorbed some of the responsibility for introducing students to restitution.  In these materials we will encounter several instances in which restitution, as a theory of obligation, becomes relevant.  A few examples will suffice for the purpose of this brief introduction to the subject.

    1.  Husband and wife sign a contract to buy a used Volvo for $26,500.  They want to pay cash, but need to liquidate some stock. Before completing the financial arrangements, Husband leaves to coach a soccer practice.  Wife writes the dealer a check for $26,500 that the dealer agrees to hold for 10 days pending deposit of proceeds of the sale of stock in the couples' checking account.  Husband and wife liquidate $75,000 worth of stock because they also need money for their daughters' college tuition and some home improvement projects.  Husband, unaware (or perhaps not having heard his wife say) that Wife had already written a check for the car, returns to the dealer and gives a different employee of the dealer a second check for $26,500.  Through oversight, the dealer deposits both checks.  While there is a contract between the couple and the dealer for the purchase of a car for $26,500, there is no contract between the two parties relating to the additional $26,500.  However, the dealer is obligated under a theory of restitution to return $26,500 to the couple because the additional money was paid by mistake.  One would expect, of course, that the dealer would willingly write the couple a check for that amount without the need for litigation. 

     2.  Driving the Volvo in the country Husband suffers a serious automobile accident, leaving him unconscious in the driver's seat.  A passing motorist, a doctor, renders life saving emergency aid pending the arrival of an ambulance.   There is no contract between Husband and the doctor requiring the Husband to pay for the emergency services, because a contract requires mutual assent, something that the unconscious Husband could not have given.  However, Husband is liable to the doctor under a theory of restitution for the reasonable value of doctor's services, something doctor may or may not choose to pursue. 

     3.  Driving the Volvo in the country Husband suffers a minor automobile accident, leaving him uninjured, but he must send the Volvo for body work to repair some dents.  When Husband picks up the Volvo after its repair, the manager of the body shop mentions to Husband that the Volvo had previously been in a severe accident and that its frame was somewhat bent.  This surprised and angered Husband who had been assured by the Volvo salesperson that the Volvo had not been in any prior accidents.   Husband and wife would not have purchased the Volvo had they known that it been in a prior major accident.  As we explore more fully in material concerning misrepresentation, Husband and wife might well be entitled to rescind (i.e. undo) their contract with the Volvo dealer because of the misrepresentation.   In such a case, as well as in other types of cases in which a party is entitled to rescind a contract, Husband and wife would be entitled under the theory of restitution to a return of the money paid for the car to prevent the unjust enrichment of the car dealer at their expense, but the car dealer might also be entitled under a theory of restitution to be compensated for the reasonable value of the couple's use of the car prior to the rescission of the contract.   

     4.  After driving the Volvo for half a year, Husband and Wife wish to undo the deal (technically "revoke acceptance of the Volvo") because the seller's numerous attempts to repair the car's defective transmission have been unsuccessful.  Assuming that they are entitled to undo the deal and the seller is required to return all money that Husband and Wife have paid for the car, the seller (the party who has breached the contract by providing a defective good that it has not been able to repair) may be entitled to recover money representing the value of the couple's use of the Volvo for half a year to avoid their unjust enrichment.  We refer to this as restitution for the breaching party. 

     5.  A general contractor, responsible for building an office tower under a contract with the owner of some real property, hires a subcontractor to perform the electrical work on the building.  The subcontractor mistakenly bid the project too low and will lose money on the deal, but has nonetheless has undertaken a substantial amount of the work.  The general contractor breaches the contract with the subcontractor by telling the subcontractor not to complete the electrical work.  The subcontractor may choose to waive (i.e. forfeit) its right to sue the general contractor for damages for breach of contract (which might be $0 because it was a losing deal) and sue instead under a theory of restitution to obtain compensation from the general contractor for the value of that the subcontractor performed.  See United States v. Algernon Blair, Inc. 

     Supplementary reading:  Farnsworth 2.20.