restitution v. reliance damages Forum

[swtlilsoni]

I still don't get what the difference is. In theory they are both difference, but in practice don't they amount to the same thing?

[presidentk1]

they are totally different..

reliance damages compensate the plaintiff for losses incurred as a result of "relying" on the agreement that the defendant breached
restitution damages purge the breaching defendant from what they gained

[swtlilsoni]

they are totally different..

reliance damages compensate the plaintiff for losses incurred as a result of "relying" on the agreement that the defendant breached
restitution damages purge the breaching defendant from what they gained

Can you give a simple example that illustrates the difference?

[presidentk1]

reliance = you own a gold mine and i want to lease it. I tell you that if you lease it to me, i'll buy mining equipment and give you a portion of what i find ...you agree ...i go buy the stuff ..you renege on our deal ...reliance damages would be me suing u for the cost of the mining equipment

restitution = you are a doctor and agree to perform surgery on me next week for $100 if i pay you today, i pay, then show up next week, you refuse to perform the surgery, restitution damages would be me suing for my $100 back

[swtlilsoni]

reliance = you own a gold mine and i want to lease it. I tell you that if you lease it to me, i'll buy mining equipment and give you a portion of what i find ...you agree ...i go buy the stuff ..you renege on our deal ...reliance damages would be me suing u for the cost of the mining equipment

restitution = you are a doctor and agree to perform surgery on me next week for $100 if i pay you today, i pay, then show up next week, you refuse to perform the surgery, restitution damages would be me suing for my $100 back

So for the second situation, the doctor one, wouldn't reliance in that situation also give you the 100 back? So both restitution and reliance would have the same result in that one?

[presidentk1]

no..

with restitution, consideration passes to the breaching defendant, restitution aims at getting that back
with reliance, the defendant doesn't get anything, but pays for what you lost as a result of depending on your agreement with him

..they are very very different

[D1989]

Restitution may be available when there is no contract between the parties, when there is a contract that is rescinded, or when a contract is breached. To recover in restitution, a plaintiff must show that he conferred a benefit on the defendant and that it would be unjust to allow the defendant to retain that benefit.

By contrast, the aim of reliance seems to be to put the non-breaching party back in to the status quo ante -- the position he was in before the contract was made.

In short, restitution is where the aggrieved party conferred some benefit on the defendant and seeks to regain it. Reliance is where the aggrieved party incurred expenses by relying on the contract and seeks compensation for them from the breaching party.

[swtlilsoni]

Restitution may be available when there is no contract between the parties, when there is a contract that is rescinded, or when a contract is breached. To recover in restitution, a plaintiff must show that he conferred a benefit on the defendant and that it would be unjust to allow the defendant to retain that benefit.

By contrast, the aim of reliance seems to be to put the non-breaching party back in to the status quo ante -- the position he was in before the contract was made.

In short, restitution is where the aggrieved party conferred some benefit on the defendant and seeks to regain it. Reliance is where the aggrieved party incurred expenses by relying on the contract and seeks compensation for them from the breaching party.

Hmm..okay so....in the doctor example you gave me, what would reliance damages be?

[Mick Haller]

Reliance damages are measured by what you spent in reliance on the other party performing the K.

Restitution is disgorging the other party of unjust enrichment.

IIRC reliance is a legal remedy while restitution is usually equitable.

[presidentk1]

Restitution may be available when there is no contract between the parties, when there is a contract that is rescinded, or when a contract is breached. To recover in restitution, a plaintiff must show that he conferred a benefit on the defendant and that it would be unjust to allow the defendant to retain that benefit.

By contrast, the aim of reliance seems to be to put the non-breaching party back in to the status quo ante -- the position he was in before the contract was made.

In short, restitution is where the aggrieved party conferred some benefit on the defendant and seeks to regain it. Reliance is where the aggrieved party incurred expenses by relying on the contract and seeks compensation for them from the breaching party.

Hmm..okay so....in the doctor example you gave me, what would reliance damages be?

there wouldn't be any

[musicfor18]

Actually, you could sue for reliance damages in the doctor hypo. In that case, the amount awarded for reliance and restitution happens to be the same. But, if for example, you had paid a babysitter to watch your kids during the surgery, you might be able to also get that back under reliance, I think.

Here's an example where reliance and restitution would end up at different amounts:

A contract with B to build a house for $50,000. A buys supplies for the job for $10,000 and starts building the house. After he builds the foundation, B repudiates the contract.

If the court awarded expectation, A would get $40,000 (minus any loss he could reasonably avoid by not having finish building, such as salvageable supplies)

If the court awards reliance, he'd get $10K (the cost of his supplies)

If the court awarded restitution, he'd get only the value that the foundation already built is worth to B.

Restitution can also be sought on an equitable quantum meruit theory when there is no valid contract (the idea being that its unfair for D to enjoy the benefit of Ps work without having to perform anything in return).

Quantum meruit actions can also be brought by a breaching party if the non-breacher has been unjustly enriched. An example of this:

A contracts to build a house for B, with $50K to be paid upon completion. A builds the foundation and then repudiates. B doesn't have to pay because A didn't perform his contracted obligation. But A can sue in quantum meruit for the value of the foundation to B.

[MrSparkle]

Reliance is simply the cost incurred in reliance of a deal. So I thought we had a contract, made some purchases/incurred costs, you breach. I can sue for expectation (my expected profit PLUS reliance costs) or reliance by itself (a secondary consolation prize compared to expectation, but one that courts use if expectation is too speculative, or any reason that makes expectation damages otherwise unreasonable/difficult). Note that expectation and reliance are somewhat related, because they are damages from the non-breaching party's perspective.

Restitution is confusing because it is asking for the actual "benefit" conferred. The benefit is always looked at from the defendant's point of view. This can be either the breaching party or non-breaching party. There was a case where party A sued party B for restitution for the return of a down payment, even though party A was the breaching party. Court held for party A, because it would otherwise be unjust enrichment

Another example is if our contract is unenforceable for some reason, e.g. because it falls outside the statute of frauds. The plaintiff can still recover for any "benefit" conferred onto the defendant. Perhaps an example would be if I thought I bought a house from you, but turns out we didn't write it down (and part-performance doctrine notwithstanding), I can get restitution damages for all the landscaping I did when I had the property, because to otherwise not get compensated would leave you unjustly enriched.

[sconnielaw13]

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