Contracts April 4/13 PDF

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Contracts 4/1 United States ex. rel Coastal Steel v. Algernon Blair (CoA 4th Circ., 1973) Facts - Blair was to build a naval hospital in South Carolina for the United States. They subcontracted with Coastal Steel to perform steel erection and supply equipment. - Coastal began performance by using its own cranes o Blair did not want to pay for the crane rental and argued that it didn’t have to under K o 28 % of the work had been completed, but since Blair didn’t want to pay, the repudiated - Blair sought a new subcontractor PH - Coastal seeks recovery for labor and equipment supplied under the provisions of the Miller Act - District court finds that nonpayment was a material breach o Amount due is $37,000 o DC found that Coastal would have lost more than $37,000 if it had completed the performance so any amount due to Costal must be reduced by any loss it would have incurred by complete performance; recovery denied - COA believes they are entitled to quantum meruit - Remanded to find out what the reasonable value of labor and equipment used, when found judgement will be in favor of Coastal Issue - Whether a subcontractor is permitted to recover for the value of services rendered, even if he could not have recovered in a breach of contract suit? Quantum Meruit - Allows a promise to recover the value of services he gave to the (d) irrespective of whether he would have lost money on the K and been unable to recover in a suit - Measure: reasonable value of the performance and recovery is undiminished by any loss which would have been incurred by complete performance o K price is not always equal to the cost of performance o The reasonable value of the services rendered is the amount for which such services could have been purchased from one in the (ps) position at the time and place the services were rendered Holding - Reversed & remanded - The court held that the Defendant breached the subcontract by not paying for the crane rentals. - The court then found that precluding the Plaintiff from recovering would allow the Defendant to be unjustly enriched. o Therefore, the Plaintiff should recover in quantum meruit. o The measure of recovery from quantum meruit is the reasonable value of performance, which is determined by the amount for which such services could have been purchased. Lancelloti v. Thomas (Superior of Penn. 1985) Facts - Lancelloti bought Thomas’ luncheonette business for $25,000 and agreed to rent the building for five years and build a 16'×16' addition costing at least $15,000. o Rent was $8,000 per year (Sept 1973-Aug. 1978) o Lease agreement specified that the agreement to builder existing building was a condition of the lease

In exchange for the appellant’s promise to build, no rent would be charged until Aug. 1973—if the building was not constructed, it would automatically terminate the K Lancelloti runs into problems during construction as the building permit was denied by the city. But Thomas argues that they obtained the license but Lancellotti refused to build the addition, so defendants built a 20'×40' addition it for $11,000. After a year, Lancelloti no longer wanted to run the business, and so he stopped paying rent and vacated the business to start his own competing restaurant. o

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PH Issue -

Lancellotti resumed operation of it but found that some equipment was missing. Plaintiff sued to recover his $25,000 purchase price + interest, Thomas counterclaimed for $52,000—$6,665 for unpaid rent and $45,335 for damage to the business and Mrs. Thomas's emotional distress resulting from the default. Trial court allowed defendants to retain the $25,000 purchase price and awarded them $6,665 for the rent. Can a defaulting party recover based on his reliance?

Reasoning—RSTMT §375 - The court determined that appellees were unjustly enriched by the judgment and ordered the lower court to determine whether appellant would be entitled to restitution. - The court held that Lancelotti, as the party who breached the contract was entitled to recover any benefit, in excess of the loss caused by the breach. - The court concluded that the lower court failed to consider whether appellant was entitled to restitution, and if not, whether appellees retention of the entire amount paid by appellant was reasonable in light of the anticipated or actual loss caused by the breach o While a party should not be allowed to get an advantage from his breach, the nonbreaching party should not get a windfall from the breach either. Under the common law rule, the non-breaching party gets more benefit in the event of a breach the more the breaching party performed before breaching o Likewise, the breaching party is more severely penalized the more he performs. o Many jurisdictions have adopted the Restatement's liberalization of the common law rule. This rule should be adopted here. Holding: - Yes, a breaching party is entitled to restitution for a benefit he has conferred in performance or reliance in excess of the loss that he has caused. Remanded. Dissenting Opinion: - Tamilia: The Restatement has not been adopted in Pennsylvania, so it is not applicable to this case. The common law rule should be followed. Plaintiff acted in bad faith and should not be rewarded for this.

Roth v. Speck (Dist. Court of Apps., 1956) Facts - (P) owns a beauty salon that operates on a seasonal basis. He employed the (d) Thomas as a hairdresser whose salary was to be paid the greater of $75/wk. or a 51% commission o Receives 7% of the gross receipts per hairdresser - She worked for 6 ½ months before leaving—(d) was a well-qualified and experienced hairdresser o He testified that the (ps) shop conditions were unbearable and asked for wage increase (though salary was not the main reason as to why he left) o Got a new job and had been earning $100/wk. - (p) attempts to mitigate his damages when he employed another person who he paid $350 which ended up being another loss - (ds) former employer was called as a witness for the (p) who was also a salon owner. The (d) had worked for him since Nov. 1, 1955 and earned $100, he gave the (d) high remarks as well (Ds) argument - Argues that the TC, when assessing what damages to reward, did not consider the value of (sd0 services or the profits lost by (p) PH - TC grants nominal damages o Judgement for (p) for $1, (P) appeals - Dist COA finds that there was proof of actual damages + damages in regard to (ds) services. Judgment reversed with new instructions as to the damages Employment K damages - The measure of the cost of obtaining other services equivalent to that promised and not performed - Compensation for additional consequential injury may be recovered if at the time the K was made the employee had reason to foresee that such injury would result from his breach Holding - Where a plaintiff proves a breach of contract he is entitled to damages. However, when he offers vague proof or no proof of actual damages, he is entitled only to nominal damages. o Evidence revealed the (ds) statement of earnings, Roth’s net profit was 7% of gross receipts per hairdresser, his business is seasonal o An employee assigned customers and some requested a particular hairdresser - In the instant case, there was proof of accurate damages with regard to the value of the Defendant’s services. o It follows that if Speck believed his damages would be lessened by proving that if he stayed for the remaining 24 weeks in the K the 51% commission would have been higher than his guaranteed salary, he had the burden of proving that o His market value = $100/wk since that’s what he earns with his new employer...