SECTION 3 DAMAGES 1073

complete (SR) was $425. The remainder, after subtracting $425 from
$3,075, $2,650, should be broken down into components for a more
thorough analysis, i.e., what part of the $2,650 represents net profit
prevented, what part represents costs incurred up to the breach and, of
those costs incurred, what part is variable and what part is fixed
(overhead) costs? Suppose, then, that the value of the total costs incurred
(TCI) at the time of breach was $2,500. The net profit prevented should
be determined by subtracting from $3,075 (KP) the sum of $425 (SR) and
$2,500 (TCI) for a profit figure of $150. When this is added to the TCI
figure of $2,500, the total recovery for breach of contract is still $2,650. A
more thorough breakdown might try to distinguish between fixed and
variable costs in the $2,500 TCI figure, especially since Owner may claim
that Contractor did not exercise reasonable efforts to salvage materials
purchased or to reallocate labor after the breach. If Owner is correct, the
TCI figure might be reduced in the amount that would have been realized
if a reasonable salvage had been effected. For a fuller exploration of these
complexities, see Colorado Environments, Inc. v. Valley Grading Corp.,
105 Nev. 464 (1989).
In the example above, the damages, whether expressed in a lump
sum or components, protect both the expectation and the reliance
interests. Put more directly, Contractor cannot be put in the place
Owner’s full performance would have put it unless it recovers both net
gains prevented and unreimbursed expenses in part performance. In
addition, Contractor should have the opportunity to plead and prove
consequential damages resulting from the breach that were foreseeable
by the defendant at the time of contracting. See Independent Mechanical
Contractors, Inc. v. Gordon T. Burke & Sons, Inc., 1388 N.H. 110 (1993)
(profits lost in other ventures).
Burden of Proof. Who has the burden of proving what the cost of
completion would have been, the plaintiff or the defendant? In a case
where the plaintiff was a terminated contractor who left a construction
job that was later completed by others, it was held that the initial burden
of coming forward with evidence (and, perhaps, the ultimate risk of non-
persuasion) was on the defendant. United States v. Merritt-Meridian
Constr. Corp., 2000 WL 272177 (S.D.N.Y. 2000). The court analogized the
cost to complete to a set-off, which is traditionally treated as an
affirmative defense. In addition, the court concluded that the burden
should be on the party with superior access to information about
completion costs and who seeks to take advantage of them. In both cases,
that was the defendant.

Britton v. Turner
Supreme Court of Judicature of New Hampshire, 1834.
6 N.H. 481.

Assumpsit for work and labour, performed by the plaintiff, in the

service of the defendant, from March 9th, 1831, to December 27, 1831.
 1074 REMEDIES CHAPTER 6

PAY wut &r The d ed the common counts, and among them a
Sevvicet fendered count in or the labor, averring it to be worth one
, hundred dollars.
At the trial in the C.C. Pies the plaintiff proved the performance of
the labor as set forth in the declaration.
Nor 96Cec & * The defence was that it was performed under a special contract—
<a Por a that the plaintiff agreed to work , from some time in March,
for 1831, to March 1832, and that the defendant was to pay him for said
year’s labor the sum of one hundr nd the
7fer
{Pbed] Wolfe. defendant offered evidence te that such was the contract
Q Monthy under which the work was done.
ag hee acy Evidence was also offered to show that the plaintiff left the
defendant’s service wi and it was contended by the
dotgndant that the in hi

> from the

The court ETRE TS the jury, that if they were satisfied from the
evidence that the labor was performed, under a contract to labor a year,
ib Sta no for the sum of one hundred and twenty dollars, and if they were satisfied
Dyas al that the plaintiff labored only the time specified in the declaration, and
then left the defendant's s service, SHES oe consen d without any

The defendant excepted to the instructions thus given to the jury.

mw PARKER, J. delivered the opinion of the court. It may be assumed, that
the labor performed by the plaintiff, and for which he seeks to recover a
compensation in this action, was commenced under a special contract to
labor for the defendant the term of one year, for the sum of one hundred
and twenty dollars, and that the plaintiff has labored but a portion of
that time, and has voluntarily failedto complete the entire contract.
7° Cay not (eco ven It is clear, then, that he is not entitled to recov contract
Aull AM ou ee itself, paeee the service, which was to PRE Seat agreed
hecauLR OR upon, ed.
lo CAC But the auestians—— undert astances
recovera reasonab im
for the servicehe ha rform
Muerto oes \under Ae obitin quantum mei
Upon this, and questions of a ~similar nature, the decisions to be
found in the books are not easily reconciled.
It has been held, upon contracts of this kind for labor to be performed
at a specified price, that the party who voluntarily fails to fulfil the
SECTION 3 DAMAGES

contract by performing the whole labor contracted for, is not entitled to

recover any thing for the labor actually performec

A party who contracts to perform certain specified labor, and who lg unjug

breaks his contract in the first instance, without any attempt to perform
it, can only be made liable to pay the damages which the other party has
sustained by reason of such non performance, which in many instances
may be trifling—whereas a party who in good faith ha

. in the nature mf dations for the nonfulfillment of the

remainder, upon the technical rule, that the contract must be fully
performed in order to [justify] a recovery of any part of the compensation.
By the operation of this rule, then, the party who attempts
performance may be placed in a much worse situation than he who wholly
disregards his contract, and the other party may receive much more, by
the breach of the contract, than the injury which he has sustained by
such breach, and more than he could be entitled to were he seeking to
recover damages by an action.
The case before us presents an illustration. Had the plaintiff in this
case never entered upon the performaiice of his contract, the damage
could not probably have been greater than some small expense and
trouble incurred in procuring another to do the labor which he had
contracted to perform. But having entered upon the performance, and
labored nine and a half months inevalue.cosibich sabentothe detegcent
Pap aaataerenooons the defendant can succeed in this defence,
e in fact receives nearly five sixths of the value of a whole year’s labor,
by reason of the breach of contract by the plaintiff, a sum not only utterly
disproportionate to any probable, not to say possible damage which could
have resulted from the neglect of the plaintiff to continue the remaining
two and a half months, but altogether beyond any damage which could
have been recovered by the defendant, had the plaintiff done nothing
towards the fulfillment of his contract.
kK*K*

It is said, that where a party contracts to perform certain work, and

to furnish materials, as for instance, to build a house, and the work is
done, but with some variations Toma the mode prescribed bytthe contract,
- of thetaneylabor
(py bape
and materials
heoan
reasonandly
 1076 REMEDIES CHAPTER 6

Those cases are not to be distinguished, in principle, from the

present, unless it be in the circumstance, that where the party has
contracted to furnish materials, and do certain labor, as to build a house
in a specified manner, if it is not done according to the contract, the party
for whom it is built may refuse to receive it—elect to take no benefit from
ne Mugt what has been performed—and therefore if he does receive, he shall be
bound to pay the value—whereas in a contract for labor, merely, from
DY Value aie ay to day, the party is continually receiving the benefit of the contract
under an expectation that it will be fulfilled, and cannot, upon the breach
of it, have an election to refuse to receive what has been done, and thus
discharge himself from payment.
But we think this difference in the nature of the contracts does not
justify the application of a different rule in relation to them.
The party who contracts for labor merely, for a certain period, does
so with full knowledge that he must, from the nature of the case, be
accepting part performance from day to day, if the other party
commences the performance, and with knowledge also that the other may
eventually fail of completing the entire term.
If under such umstances he actually receives a benefit from the
labor performed, over and above the damage occaSi

enelit, as there is when he

@rs and occu 1es ot house which has been im, but not

at he should pay
for the
Serie value
ac buceer es of the house.
“Selevee eee
**x*

In fact we think the technical reasoning, that the performance of the

whole labor is a
that the contract being entire there can be no
apportionment—and that there being an express contract no other can
be implied, even upon the subsequent performance of service—is not
properly applicable to this species of contract, where a beneficial service
has been actually performed; for we have abundant reason to believe,
that the general understanding of the community is, that the hired
Letorn enh laborer shall be entitled to compensation for the service actuathy
performed, though he do not continue the entire term contracted for, and
> TOCovey ?
such contracts must be presumed to be made with reference to that
understanding, unless an express stipulation shows the contrary.:
__understanaim
eS

It is easy, if parties so choose, to provide by an express agreement

mae PREG that nothing shall be earned, if the laborer leaves his employer without
ty Cr, € ph q having performed the whole service contemplated, and then there can be

ClauRe thaz
RleeLuclCC Porpntag
SECTION 3 DAMAGES 1077

no pretence for a recovery if he voluntarily deserts the service before the

expiration of the time.
The amount, however, for which the employer ought to be charged,
where the laborer abandons his contract, is only the reasonable worth, or
the amount of advantage he receives upon the whole transaction, .. . and,
in estimatu

ee,

The benefit and aivaniagekiich the party takes by the labor,

therefore, s, if any, after
deducting the amount of damage... .
KE*

This rule, by binding the employer to pay the value of the service he
actually receives, and the laborer to answer in damages where he does
not complete the entire contract,

Applying the principles thus laid down, to this case, the plaintiff is
entitled to judgment on the verdict.
The defendant sets up a mere breach of the contract in defence of the
action, but this cannot avail him. He does not appear to have offered
evidence to show that he was damnified by such breach, or to have asked
that a deduction should be made upon that account. The direction to the
jury was therefore correct, that the plaintiff was entitled to recover as
much as the labor performed was reasonably worth, and the jury appear
to have allowed a pro rata compensation, for the time which the plaintiff
labored in the defendant’s service. * * *
Judgment
onthe verdict.
NOTES
(1) As one court put it:
Because the application of the [divisibility] doctrine depends on
evidence of ‘agreed equivalents,’ the use of the contract price to
determine entitlements when the contract has not been fully
performed is defensible only when the contract itself can be said to
specify the price for partial performance.... That condition will
rarely be satisfied. If an employment contract is for a year and the
employee quits after his first week on the job, it is artificial to
suppose that the contract entitles him to one week’s wages, for had
he insisted in the contract that he be free to leave after a week the
1078 REMEDIES CHAPTER 6

employer would probably have refused to hire him at all, or at least

at the agreed wage.... The fact that many courts nevertheless
treat employment contracts as divisible probably has less to do with
the logic of the doctrine thart with a policy, embodied in state wage-
payment laws.
Fidelity and Deposit Co. of Maryland v. Rotec Indus., Inc., 392 F.3d 944, 947
(7th Cir. 2004) (Posner, J).
(2) The “constructive” condition dilemma facing Judge Parker in
Britton v. Turner has been resolved in many states by legislation: the
employer must pay the employee’s wages at regular intervals regardless of
“substantial” performance. See, e.g., 820 Ill. Comp. Stat. 115/3 (all wage
earners other than executives, administrators, professionals and commission
agents must be paid on a semi-monthly basis.) The employer’s failure to pay
as required may be a crime. See Holmes v. Tradigrain, Inc., 411 So.2d 1132
(La. Ct. App.1982); Putnam v. Oregon Dep’t of Justice, 58 Or.App. 111 (1982).
For an illustration of the type of question that can arise under these statutes,
see Suastez v. Plastic Dress-Up Co., 31 Cal.8d 774 (1982), where the
California Supreme Court held that a proportionate right to a paid vacation
vested in the employee as labor was rendered and, once vested, was protected
from forfeiture by the applicable legislation.
(3) When you have time you must read Robert W. Gordon, Britton v.
Turner: A Signpost on the Crooked Road to “Freedom”, in the Employment
Contract, Contracts Stories 186 (Foundation Press, 2007).

Comment: Recovery in Restitution by a Plaintiff in Default

Britton v. Turner permitted a plaintiff who had arguably committed
a material breach to recover the reasonable value of work done up to the
breach, “less whatever damages the other party has suffered.” See also
Kulseth v. Rotenberger, 320 N.W.2d 920 (N.D. 1982); Kirkland v.
Archbold, 113 N.E.2d 496 (Ohio Ct. App. 1953); Pinches v. Swedish
Evangelical Lutheran Church, 55 Conn. 183 (1887). Put another way,
although a plaintiff cannot recover “on the contract,” he or she can
recover in restitution the net benefit retained by the defendant after full
compensation for plaintiffs breach of contract. That benefit, however, is
limited by the contract price. Section 357 of the first Restatement
adopted the “net benefit” test, stating that the “measure of the
defendant’s benefit from the plaintiffs part performance is the amount
by which he has been enriched as a result of such performance * * *.”
Restatement § 357(38).
The first Restatement provided that restitution was not available if
the plaintiff's breach was “wilful and deliberate.” Restatement § 357(1).
The apparent purpose of this limitation was to direct attention to the
moral justification for the breach: an intentional breach is not regarded
as willful and deliberate if it was “due to hardship, insolvency, or
circumstances that tend appreciably toward moral justification.”
Restatement § 357 cmt. e. See G. Palmer, Law of Restitution § 5.1 (1978).