American Contract Law for a Global Age, 2017a

Unit 24
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REMEDIES
Part Two
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Restitution and Reliance
FOCUS OF THIS UNIT
By far the most common judicial remedy for breach of contract in the United
States is expectation damages, introduced in the previous unit. The expectancy is,
however sometimes unavailable or inadequate in certain situations. This unit
addresses the two primary alternatives to expectation damages.
Restitution: Returning the Ill-Gotten Gain. The first alternative is restitution.
The remedy of restitution did not grow up in contract law. You may have run across
it in other contexts, such as when a criminal defendant is ordered to “make
restitution” to a victim for the harm done. In contract law, however, the concept
involves compensating the wronged party with the ill-gotten gain of another—even if
the breach has not technically caused measurable economic harm. Restitution has its
roots in equity, tort law, and fiduciary law. Over the years, many situations have
arisen in which one person wrongfully held the property of another, such as by having
stolen, borrowed without returning, or otherwise used property to make money
without permission of the property’s true owner. The English courts, relying on the
equitable maxim, commodum ex injuria sua nemo habere debet—roughly translated,
“No one shall profit by his own wrong”—developed a remedy that forced the
wrongdoer to pay back what he had obtained.
An early and straightforward English example of restitution involved stable
operators who boarded horses for the horses’ owners. When the horse owners were
out of town for a prolonged period, the stable operators would rent the horses (much
like a modern auto rental business) to other customers. The horse owners did not give
permission for their horses to be rented out, and they were unhappy about this
apparent breach of contract. Yet, they could show no measurable harm. After all, the
horses would have to have been taken out and exercised anyway. With no economic
loss, the owners could not prove expectancy damages, even if the stable owners were
willfully breaching the contract by renting out the owners’ horses without permission.
The transaction was—from an economic perspective, at least—harmless.
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UNIT 24: RESTITUTION AND RELIANCE 501