10.3.17.2 Notes - Philadelphia v. Tripple | Kessler, Gilmore & Kronman | September 26, 2012

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10.3.17.2 Notes - Philadelphia v. Tripple

NOTE

1. With respect to the referee's opinion in the Tripplecase, Patterson, Builder's Measure of Recovery for Breach of Contract, 31 Colum. L. Rev. 1286, 1301 (1931), comments: "Several flaws in this analysis may be noted." Do you agree? Still, however flawed Referee Pepper's analysis may have been, all the commentators, including Professor Patterson, are in agreement that the Tripple case has carried the day and that Kehoe v. Rutherford may be dismissed as an eccentric aberration on the part of Judge Dixon. Professor Corbin, who does not dispute the almost universally accepted analysis of the problem, does suggest that Kehoe v. Rutherford on its facts may be distinguished from the general run of such cases in that in Kehoe it may well have been true that neither plaintiff nor defendant had committed a breach of their respective contractual duties (5 Corbin §1113, n.62 and parallel text). In such a case, Professor Corbin suggests, the plaintiff should not be entitled to a restitutionary remedy as distinguished from damages on the contract and the contract price or rate might well be allowed to control the award of damages against the guiltless defendant. On the nature of the "breaches" attributed to defendants in Tripple and cases like it, see Note 4 infra.

2. An often cited case of more recent vintage, following Tripple, is United States (for use of Susi Contracting Co.) v. Zara Contracting Co., 146 F.2d 606 (2d Cir. 1944). Clark, J., citing Williston, wrote:

. . . the measure of recovery by way of restitution, though often compared with recovery on the contract, should not be measured or limited thereby; but . . . the contract may be important evidence of the value of the performance to the defendant, as may also the cost of the labor and materials. . . . It is to be noted that, since it is the defendant who is in default, the plaintiff's performance here is "part of the very performance" for which the defendant had bargained, "it is to be valued, not by the extent to which the defendant's total wealth has been increased thereby, but by the amount for which such services and materials as constituted the part performance could have been purchased from one in the plaintiff's position at the time they were rendered" [quoting Restatement First §347, Comment c].

146 F.2d at 611.

The same rule is reformulated in Scaduto v. Orlando, 381 F.2d 587 (2d Cir. 1967). Anderson, J., commented that:

The impact of the rule is to permit the promise to "rescind" even a contract upon which he would have lost money and base his recovery on the value of the services which he gave to the defendant irrespective of whether he would have been entitled to recovery in a suit on the contract.

381 F.2d at 595. The Scaduto case is instructive on the difficulty of determining which party is in fact in breach in any complicated construction job. The opinion cited was the second appeal to the Second Circuit in the case; the Circuit Court, for the second time, vacated the judgment of the District Court and remanded the case for still further proceedings.

3. In Acme Process Equipment Co. v. United States, 347 F.2d 509 (Ct. Cl. 1965), the Court of Claims applied what we may call the Tripple rule to a contract under which Acme was to manufacture recoilless rifles for the United States Army. The United States having wrongfully terminated the contract, Acme was held entitled to "restitution." It was vigorously argued by the government that Acme's recovery should be limited to "the reasonable value of the goods it actually delivered prior to cancellation." Judge Davis rejected this argument on the following grounds:

It is clear . . . that restitution is permitted as an alternative remedy for breach of contract in an effort to restore the innocent party to its pre-contract status quo, and not to prevent the unjust enrichment of the breaching party. "Judgment will be given for the value of service . . . rendered, even though the product created thereby has been lost or destroyed by the defendant, and even though there never was any product created by the service that added to the wealth of the defendant." [First] Restatement, Contracts §348, Comment "a" (emphasis added). It is when the plaintiff is the party in default that his recovery may be limited by the amount of the benefit to the defendant. See Schwasnick v. Blandin, 65 F.2d 354, 357 (C.A. 2, 1933). But "if the promisee has performed so far as he has gone, and the promisor breaks his promise, the promisee may abandon the contract and sue for restitution, in which he can recover the reasonable value of his services, measured by what he could have got for them in the market, and not by their benefit to the promisor." Ibid. See, also, Restatement, Contracts §347, Comment "c". Acme's recovery is not limited to the value of the goods received by the Government under the contract; rather, it can be based on the reasonable value of the entire performance.

Id. at 530.

4. As the earlier paragraphs of this Note suggest, there has long been, and continues to be, a considerable volume of litigation of the type illustrated by the principal case. The situation is that A has entered into a contract with B under which A, for a price of $10,000, has agreed to do work which, it becomes clear as the job progresses, will cost $20,000. Everyone agrees that, except for the remote possibility of reformation for mistake or something of the sort, A, if he completes the job, gets only $10,000. B merely has to sit tight, meanwhile punctiliously performing his own obligations under the contract, to get $20,000 worth of work for half its cost. Under such circumstances, is it plausible that B would ever lapse in to a default which would allow A to get off the hook by "rescinding" the contract and bringing his quantum meruit action for restitution? Yet, in case after case of this type, we are solemnly assured by the court that B did in fact "default." One possible explanation is offered by cases like the Scaduto case (Note 2 supra); the actual situation is complicated and confused, there are mutual recriminations, each party accuses the other of bad faith, misconduct and faulty performance; until the judicial dice have been rolled, no one has the least idea which side is in breach and which is not. Most opinions in litigation of this sort, however, become extremely cryptic at the point of explaining exactly what B's mysterious default consisted in (the referee's opinion in Tripple is a good example). Apart from the explanation offered by cases like Scaduto, can you think of any reason why courts, in this type of situation, should, for the better part of a hundred years, have strained to discover, or invent, wholly mythical "defaults" on the part of B? Perhaps the materials in Chapter 8 on Impossibility and Mistake may suggest an answer.

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June 11, 2013

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