The Rule - Restitution is an alternative to the expectation measure of damages. To recover in restitution:
(1) The plaintiff must have conferred a benefit on the defendant, and
(2) It must be unjust to let the defendant retain that benefit.
When (1) and (2) hold, the plaintiff is awarded the reasonable value of the benefit conferred.
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Osteen v. Johnson - Linda Osteen was an aspiring Country and Western singer. She hired Johnson to make and promote two records. She paid $2500 in advance; Johnson breached their contracting by making and promoting only one record.
Expectation/Mitigation Damages?: No - Under the expectation measure, Osteen could recover the profit she would have made had Johnson made and promoted the second record—provided that the lost profit was not avoidable by proper mitigation, was reasonably foreseeable at the time of contracting, and was provable with reasonable certainty.
But Osteen was just beginning her career as a Country and Western singer, so she lacked any history of record sales that would provide a basis on which to estimate the profits she would have made from the second record.
In addition, it is difficult to begin a professional singing career. Osteen’s second record might have been a miserable failure. So, she cannot assume it would have been a success and use the profits made on some other similar singer’s second record as an estimate of her own. She may very well fail to prove the lost profits with reasonable certainty.
Reliance Damages? No - Should Osteen switch to the reliance measure of damages? Remember that under the reliance measure of damages, Osteen can recover expenses incurred in reliance on the contract.
Why not regard the $2500 contract price she paid Johnson as an expense incurred in reliance on the contract and award her that?
The reason is that doing so would give Osteen too much. Johnson was paid $2500 to make and promote two records; he did make and promote one. If we give the entire $2500 back to Osteen, she gets Johnson’s services in regard to the first record for free.
Restitution Damages? Yes - Recall the rule:
To recover in restitution:
(1) The plaintiff must have conferred a benefit on the defendant, and
(2) It must be unjust to let the defendant retain that benefit.
When (1) and (2) hold, the plaintiff is awarded the reasonable value of the benefit conferred.
On these facts, the conditions for a restitution recovery are fulfilled: (1) Osteen conferred a benefit on Johnson, and (2) it is unjust to let Johnson retain that benefit.
The Reasonable Value of the Benefit Conferred - In one sense, we already know the reasonable value of the benefit Osteen conferred on Johnson. It is $2500 minus the value of Johnson’s services in producing and promoting the first record.
In another sense, we do not know the reasonable value of the benefit Osteen conferred on Johnson until we arrive at a dollar amount for the value of Johnson’s services.
There are various ways to measure the value of a service or product, which we examine in related tutorials.
The Law School Experience - These and related topics are covered in our tutorials on Contract Remedies.
To explore some of our free materials, go to The Law School Experience.