Quasi Contract

A quasi-contract (or implied-in-law contract) is a fictional contract created by courts

for equitable, not contractual purposes. A quasi-contract is not an actual contract, but is a
legal substitute for a contract formed to impose equity between two parties. The concept of
a quasi-contract is that of a contract that should have been formed, even though in actuality
it was not. It is used when a court finds it appropriate to create an obligation upon a non-
contracting party to avoid injustice and to ensure fairness. It is invoked in circumstances
of unjust enrichment, and is connected with the concept of restitution.

Generally the existence of an actual or implied-in-fact contract is required for the defendant
to be liable for services rendered, and a person who provides a service uninvited is
an officious intermeddler who is not entitled to compensation.

Quasi-contracts are defined to be "the lawful and purely voluntary acts of a man, from which
there results any obligation whatever to a third person, and sometime a reciprocal obligation
between the parties." It "is not legitimately done, but the terms are accepted and followed
as if there is a legitimate contract."

Elements

According to the Oklahoma pattern jury instructions, the elements of quasi-contract are:

Plaintiff furnished / rendered valuable goods / services to Defendant with a reasonable

expectation of being compensated;

1. Defendant knowingly accepted the benefits of the goods / services;

and
2. Defendant would be unfairly benefited by the services / receiving the
goods if no compensation were paid to the Plaintiff.

Knowledge, the second element, is required, and if the defendant had no knowledge of the
benefits, there would be no contract of any kind, even a quasi-contract.

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Contract compared

In contracts, it is the consent of the contracting parties which produces the obligation; in
quasi-contracts no consent is required, and the obligation arises from the law or natural
equity, on the facts of the case. These acts are called quasi-contracts, because, without
being contracts, they bind the parties as contracts do.

"A quasi-contract is not really a contract at all in the normal meaning of a contract,"
according to one scholar, but rather is "an obligation imposed on a party to make things
fair”.

Examples

An example of a quasi-contract is the case of a plumber who accidentally installs a sprinkler

system in the lawn of the wrong house. The owner of the house had learned the previous
day that his neighbor was getting new sprinklers. That morning, he sees the plumber
installing them in his own lawn. Pleased at the mistake, he says nothing, and then refuses to
pay when the plumber hands him the bill. Will the man be held liable for payment? Yes, if it
could be proven that the man knew that the sprinklers were being installed mistakenly, the
court would make him pay because of a quasi-contract. If that knowledge could not be
proven, he would not be liable.

Examples of quasi-contracts vary by jurisdiction. A painter, who mistakenly paints a house

with the owner's knowledge, can sue in court to get paid. A mechanic who fixes the brakes
to a car as requested, but who also makes repairs to the axle (without which the brakes
would not function properly), has an implied quasi-contract. For a casual job, there is almost
never a written contract, but often a quasi-contract. A homebuilder who signs a contract
with a purported agent, who actually has no authority, can recover the cost of the services
and materials from the homeowner.

Under the general heading of the Quasi contract there has been grouped a number of cases
which have little or no affinity with contract. A simple illustration is afforded by the action to
recover money paid by mistake. If the plaintiff on an erroneous interpretation of the facts,
pays to the defendant a sum of money which he does not really owe, law, no less than
justice, will require he defendant to restore it. But his obligation is manifestly not based
upon the consent, even in the extended meaning borne by the word in the English law, and
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its description as a quasi contractual liability serves only to emphasize its remoteness from
any genuine conception of contract.

This shows that there are many situations in which Law as well as justice require that a
certain person be required to conform an obligation, although he has not broken any
contract nor committed any tort. an another example for Quasi Contract would be worthy of
Quoting for the better understanding of Quasi Contract, that is if a person in whose home
certain goods have been left by mistake is bound to restore them. This shows that a person
cannot entertain unjust benefits at the cost of some other person. such kind of obligations
are generally described, for the want of better or more appropriate name, as Quasi
Contractual Obligations.

This would be better to explain it up that Quasi contract consists of the Contractual
Obligation which is entered upon not because the parties has consented to it but because
law does not allow a person to have unjustified benefit at the cost of other party.

Rationale

So far as there was not an established rule of Quasi Contractual obligation the English
Lawyers were content to enumerate the cases of the Quasi Contract for which they are
provided a remedy as to many species of “indebitatus assumpsit”, but they evaded the
odious task of rationalization. But as soon as the urge was felt to explore their juristic basis,
controversy was born.

The first and the most ambitious attempt to provide such a basis was made by Lord
Mansfield in Moses v. Macferlan in year 1760

Thus it was Lord MANSFIELD, who is considered to be the real founder of such
obligations, explained them on the principle that Law as well as Justice should try to prevent
“Unjust Enrichment”,that is enrichment of one person at the cost of another. His Lordship
offered this explanation in Moses v. Macferlan:

Facts of the case:-

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One Jacob issued four promissory notes to Moses and the latter indorsed them to Macferlan,
excluding, by a written agreement, his personal liability on the endorsement. Even so
Macferlan sued Moses on the endorsement and he was held liable despite the agreement.
Moses was thus compelled to discharge a liability which he had excluded and, therefore,
sued to recover back his money from Macferlan.

He was allowed to do so. After making the defendant liable to restore the money Lord
MANSFIELD continued as follows:

After stating that such money cannot be recovered where the person to whom it is given can
“retain it with a safe conscience”, he stated that “here it lies for the money paid by mistake;
or upon a consideration which happens to be fail; or for money got through imposition; or
extortion; or oppression; or for an undue advantage taken off the plaintiff’s situation,
contrary to laws made for the protection of the persons under those circumstances. In one
word the gist of this kind of action is that the defendant, upon the circumstances of the
case, is obliged by ties of the natural justice and equity to refund the money.”

Position of Quasi Contract in Indian Law

Chapter V of the Indian contract Act 1872 deals with the situations qualifying the quasi
contractual obligations under the heading “Of certain relations resembling to those created
by contract”. The chapter avoids the words “quasi contract”, and in view of the clear
statutory authorization of the courts in India is not hindered in allowing relief under the
different sections of the Act by the theoretical considerations concerning quasi
contracts. But the English cases do provide valuable guidance:

 Not only as to the scope of the relief

 But also as to the way the provisions should be interpreted to keep them in tune
with the changing notions of justice.

Provisions under Indian contract law

Section 68 to 72 of the Indian Contract Act 1872 provides for five kinds of quasi-contractual
obligations they are as follows:-

1. Supply of necessaries [sec. 68]

2. Payment by interested person [sec. 69]

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3. Liability to pay for non-gratuitous acts [sec. 70]

4. Finder of goods [sec. 71]

5. Mistake or coercion [sec. 72]

 Supply of Necessaries :- [SECTION 68]

Where necessaries are supplied to a person who is incompetent to contract or to someone

who is legally bound to support, the supplier is entitled to recover the price from the
property of the incompetent person.

Section 68 reads as under:

“If a person, incapable of entering into a contract or anyone whom he is legally bound to
support, is supplied by the another person with necessaries suited to his condition in life, the
person who has furnished such supplies is entitled to be reimbursed from the property of
such incapable person”.

Ingredients of the section:-

According to the language drawn upon by section 68 we got to know the following essentials
to apply this section.

1) Necessaries are being supplied,

2) Necessaries so supplied must be suited to the condition of life of that person to whom
they are supplied,

3) Necessaries are supplied to a person who is incapable of entering into a contract or

anyone whom he is legally bound to support,

4) The reimbursement is to be claimed from the property of that incapable person.

Examples:-

a) A, Supplies to B, a lunatic, with the necessaries suitable to his condition in life. A is

entitled to be reimbursed from B’s property.

b) A, supplies the wife and children of B, a lunatic, with the necessaries suitable to their
conditions in life. A is entitled to be reimbursed from B’s property.

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  Payment by interested person :- [SECTION 69]

Reimbursement by a person paying money due by another, in payment of which he is

interested: - A person who is interested in the payment of money, which another is bound by
law to pay, and who therefore pays it, is entitled to be reimbursed by the other.

Illustration:-

B holds a land in Bengal, on a lease granted by A, the Zamindar. The Revenue payable by A
to the Government being in arrears, his land is advertised for the sale by the government.
Under the Revenue Law, the consequences of such sale will be the annulment of B’s Lease.
B, to prevent the sale and annulment of his own lease, pays to the government the sum due
from A. A is bound to make good to B the amount so paid.

Conditions for Liability:

The conditions for liability under this section may now be stated:

1) Payer must be interested in making payment:

The first condition for establishing the liability is that the Plantiff should be interested in
making payment. The interest which the plantiff seeks to protect must be of course legally
recognizable.

2) But should not be bound to pay:-

The second essential condition is that it is necessary that the plantiff himself should not be
bound to pay. He should only be interested in making the payment only for the purpose of
protecting his own interest. Where a person is jointly liable with others to pay, a payment by
him of the others’ share would not give him a right of recovery under this section.

3) Defendant should be under a legal compulsion to pay:-

Thirdly the defendant should have been “Bound by Law” to pay the money. The words
“bound by law” have been held after some hesitation, to mean bound by law or by contract.
It is not necessary that the liability should only be statutory. In a judgment of Privy Council it

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was held that it is enough that “the defendant at the suit of any person might be compelled
to pay”

4) Payment should be made by one party to some other person:-

Lastly the Plantiff should have made payment to some other person and not to himself.

 Liability to pay for Non Gratuitous Acts :- [SECTION 70]

Obligation of a person enjoying benefit of a non-gratuitous act:- where a person lawfully

does anything for another person, or delivers anything to him, not intending to do so
gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make
compensation to the former in this respect of, to restore, the thing so done or delivered.

Illustrations:-

a) A, a tradesman leaves his good at B’s place/home by mistake. B treats the goods as
his own. He is bound to pay A for them.

b) A saves B’s property from fire. A is not entitled to compensation from B, if the
circumstances shows that he intended to act gratuitously.

Conditions of Liability under the section:-

a) A person should lawfully do something for another person or deliver something to him;

b) In doing the said thing or delivering the said thing he must not intend to act
gratuitously; and

c) The other person for something is done or to whom something is delivered must enjoy
the benefit thereof.”

 Finder of Goods :- [SECTION 71]

Responsibility of finder of goods: A person, who finds goods belonging to some another and
takes them into his custody, is subject to the same responsibility as a bailee.

Thus in respect of duties and liabilities, a finder is treated at par with bailee. The finder’s
position is therefore considered along with bailment.

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  Mistake or Coersion:- [SECTION 72]

Section 72 deals with the payments made or things delivered under mistake or coercion.

Liability of a person to whom money is paid, or things delivered, by mistake or under

coercion: - A person to whom money has been paid, or anything delivered, by mistake or
under coercion, must repay or return it.

Illustration:-

 A and B jointly owe 100 rupees to C. “A” alone pays the amount to C and B, not
knowing the fact pays another 100 rupees to C. C is bound to repay the amount to B.

 A railway company refuses to deliver up certain goods to the consignee except upon
the payment of an illegal charge of carriage. The consignee pays the sum charged in
order to obtain the goods. He is entitled to recover so much of the charge as was
illegally excessive.

 Mistake of Fact or Mistake of Law:-

Money paid under mistake is recoverable irrespective of the fact that whether the mistake is
of fact or of law.

“The Payment by Mistake” in section 72 must refer to a payment which was not legally due
and which could not have been enforced: the “Mistake” is on thinking that the money paid
was due when in fact, it was not due. There is nothing in section 72 to relate with that
whether the mistake is of law or of a fact.

 Refund of Tax Money paid without being due:-

The Supreme Court in its decision in Sales tax Officer, Banaras v Kanhaiya Lal Mukund Lal
Saraf has accepted this interpretation of section 72.

“A certain amount of the Sales Tax was paid by a firm under the U.P. Sales Tax Law on its
forward transactions and subsequently to the payment; the Allahabad High Court ruled the
levy of the sales tax on such transaction to be ultra virus. The firm sought to recover back
the tax money.

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And as far as English, American and Australian Laws and their contentions are concerned
they do not allow the payments made under mistake of law to be recovered.

 Coersion:-

The word “coercion” used in this section is used in the general sense and not as defined in
section 15. Thus the money paid under pressure of circumstances, such as prevention of the
execution of a decree on a property in which the party paying is interested, may be
recovered even though “coercion” as defined in sections 15 is not established.

Conclusion:-

The principle of quasi contract is often ignored but still it holds a very important place, since
the principle is grounded on the principles of justice and equity. Despite the fact that Quasi
Contract is molded in the Indian Contract Act under a new name, the basic nature and
essence of the principles of the remains the same without any drastic change. Thus, Quasi
contract forms an integral of the contracts Act and it definitely comes to an aid of the victim
when the person enriched unjustly over the former.

Cases

 WOOD V. BOYNTON (1885)

Facts: P. owned an rough and uncut stone she did not know the identity of, although she
thought it might be a topaz. P. sold said stone to D., who also did not recognize the identity
or value of the stone, for $1. Upon finding out that the stone was actually a very valuable
diamond, P. tendered the D. $1.10, and demanded return of the stone. D. refused, and so P.
brought suit.

Nature of the Risk(s): In the absence of explicit contractual statements otherwise, the seller
assumes the risk that he under-charged for an item, and the buyer assumes the risk that he
over-paid for an item.

Issue(s): Is the P. entitled to rescind the sale because she was ignorant as to the
"hypothetical fair market value" of the stone she sold D.?
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Holding(s): "In the absence of fraud or warranty, the [hypothetical] value of the property
sold, as compared with the price paid, is no ground for recission of the sale."

Reasoning: Neither the P. nor the D. had any knowledge that the stone was a diamond, so
there was no fraud. In addition, there was no agreement of warranty, either stated or
implied. Therefore, the risk was equally borne by both the buyer and the seller, and the
seller could not rescind the sale.

 ANDERSON V. BACKLUND (1924)

Facts: P. was having difficulty "making ends meet" because the crop was poor on the farm
land he leased from D. P. alleges that D. agreed to provide enough water for 100 additional
head of cattle, if he would put them to pasture on his land. The water supply failed,
however, and so the then 174 head of cattle lost value due to starvation, and the P. was
damaged in the sum of $2,500.

Nature of the Risk(s): Both parties assume the risk of fulfilling exactly the terms of the
contract, however absurd or improbable, as long as it remains possible to fulfill that
contract.

Issue(s): Was there a contract between P. and D.?

Holding(s): "Contracts must be in certain terms and not so indefinite and illusory as to make
it impossible to say just what is promised".

Reasoning: The language between P. and D. was taken as advice and not a contract, and so
the court concluded there was no contract.

Notes: The court overlooked the fact that D. was aware that P. bought the cattle, as the D.
had induced him to do by relying on D.'s "advice". This would probably constitute a contract.

 SOMMERS v. PUTNAM BOARD OF EDUCATION (1925)

Facts: P. is a father of high school students. D. is the school board. P. requested D. provide
high school facilities within 4 mi. of his house, as was the local public law. D. refused, and so
P. transported his children to school for 1 semester, after which he presented the bill for
transportation to D.. D. refused to pay, and P. sued. D. demurred claiming no cause of
action, and lower court sustained. P. appealed to this court.

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Nature of the Risk: When a person does not perform his obligations, and someone else
fulfills his obligation for him, he may be held liable for a "quasi-contract" because he was
benefited.

Issue: Was a there a contract between the father and the school board, solely because the
father benefited the school board by taking his children to school?

Holding: Yes. When a person makes an "act of beneficial intervention" in discharging the
duties of another, the parties resultantly enter into a contract.

Reasoning: The court reasoned that the school board had benefited inequitably. The father
was required to make sure that his children were in school, so he was justified in performing
the school's duties. Thus, there was a contract because of the beneficial intervention.

 UPTON-ON-SEVERN RURAL DISTRICT v. POWELL (1942)

Facts: D.'s barn was on fire and he called the local Upton police chief and asked him to send
"the fire brigade". The Upton fire brigade showed up and began to put out the fire. While the
fire was still burning, a neighboring fire chief came by and informed all that the farm was
really in his district, and so the Upton fire brigade was not under obligation to put it out for
free. When the D. refused to pay for the service, they sued.

Nature of the Risk: You may contract by implied promise when you ask for assistance in
protecting your property.

Issue: Was there a contract between the fire brigade and the farmer by implied promise of
the farmer to pay if payment was required?

Holding: Yes. Parties create a contract by implied promise when one renders service that
requires payment, even though the other may not be aware that the service requires
payment.

Reasoning: The court reasoned that the fact that neither intended to enter into a contract
was irrelevant. The contract was created because the service was performed and therefore
there was an implied promise to pay.

 NOBLE v. WILLIAMS (1912)

Facts: P.'s were teachers who were hired to teach public school. The D., school board, failed
to pay the schoolhouse rent, or furnish necessary classroom materials. The P.'s allege that

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they were therefore required to pay for the supplies themselves, and so they sought to
recover their costs in furnishing the schoolhouse. D. demurred and circuit court sustained
the demurrer.

Nature of the Risk: When a person does not perform his obligations, and someone else
fulfills his obligation for him, he may be held liable because he was benefited.

Issue: Was a there an implied contract between the teachers and the school board, solely
because the school board benefited from the teachers' actions?

Holding: No. "No man, entirely of his own volition, can make another his debtor".

Reasoning: The court reasoned that the teachers had no right to provide the supplies
themselves and then demand payment, because they would be forcing the school board into
a contract that the school board did not intend.

Notes: This case is in sharp conflict with Sommers where a school board was found to have
contracted when someone fulfilled their obligations for them.

 COTNAM v. WISDOM (1907)

Facts: Co-P.'s are physicians who performed an emergency surgery in an attempt to save
the life of a accident victim who had fallen from a street car. The victim never regained
consciousness and later died. The D. is the administrator of the victim's estate. P.'s are suing
for the cost of performing the surgery, which they allege to be customarily dependent on the
victim's ability to pay. D. claims that since the victim never gained consciousness, there
could have been no contract (not very good argument), and further say that the ability of
the victim's estate to pay should have no bearing on the value of the services provided.

Nature of the Risk: A person who commits resources by performing a service in the absence
of the other committing resources, runs the risk that he might not be compensated for his
performance.

Issue: 1. Was there a contract between the unconscious victim and the physicians?, and 2. If
so, what was the value of the services they provided.

Holding: Yes. 1. A person who receives medical care while in an injured and helpless position
is liable for payment by way of implied contract when such medical care is provided in good

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faith. 2. The value of medical services rendered to a victim who cannot negotiate is
reasonable compensation for the services rendered.

Reasoning: 1. Although there was no negotiation, no agreement or "meeting of the minds",

these are NOT requirements for the creation of a contract. The physicians provided
competent medical care in good faith. The victim received a benefit which requires equitable
compensation. 2. The victim could not have contemplated the charges since he was
unconscious, and so this is an implied contract without a negotiated price where the only
equitable determination of price would be the fair value of the service provided.

 HILL V. WAXBERG (1956)

Facts: Appellant is a property owner who asked Appellee to assist him in securing a FHA
guarantee for a construction loan, with the mutual understanding that the Appellee would be
awarded the contract for construction if the FHA guarantee came through. In securing the
FHA guarantee, Appellee incurred many costs which he expected would be offset by the
profits from the construction contract. However, once the FHA guarantee came through,
negotiations on the construction contract broke down, and Appellee sued for his costs and
the value of his services, without which the Appellant would not have secured the FHA
guarantee. Appellant appealed stating the judgment was /excessive, and that the court
incorrectly instructed the jury.

Nature of the Risk: The Appellee risked that he would have committed his time and money
better had he not relied on the promise of a future construction contract. In constructing an
"implied in law" contract, the court shifted that risk to the Appellant.

Issue: 1. Is there a contract? 2. If so, how should the damages be measured?

Holding: 1. Yes. An implied in law contract results when one renders service at the request
of another, regardless of whether he expects his payment therefore to be in the form of
immediate payment or future profits from an ensuing contract. 2. The damages should be
limited to the amount of the unjust enrichment.

Reasoning: The court distinguished between "implied in fact" contracts, where both parties
acted as if they had contracted, and "implied in law" contracts, where one party was unjustly
enriched at the expense of the other. For "implied in fact" contracts, the court enforces what
the contract would have been, and thus awards compensatory damages measured by the
going contract rate. In "implied in law" contracts, the court limits the damages to the
amount of the unjust enrichment. The court stated that either might apply in this case, but
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since the lower court had decided that it was an implied in fact contract, the damages would
be the Appellee's costs and fees.

 MARTIN V. CAMPANARO (1946)

Facts: P. was a bus driver for a company that contracted year-to-year with its drivers. In the
year in question, the contract had not been renewed, and the union was negotiating for
higher wages while the drivers continued to work, in anticipation of being paid back wages.
The labor negotiations broke down, and the bus company fell bankrupt and into the hands of
D. who refused a gov't order to pay back wages at the higher rate. P. sued for back pay at
the higher wage rate.

Nature of the Risk: In the absence of a contract, the P. bore the risk that he would only be
paid at the previous rate after performing services that he expected would be paid at the
higher wage rate. An implied in fact contract would shift that risk to D.

Issue: 1. Was there a contract? 2. If so, what should the nature of the damages be?

Holding: 1. Yes. A contract implied in fact arises from the "presumed" intention of the parties
when their actions indicate that both considered the contract to be in existence. 2. The
damages for implied in fact contracts should be the reasonable value of the services.

Reasoning: The Court of Appeals agreed with the lower court that there was a contract
"implied in fact", however they reversed the decision that the amount of the services should
be measured at the old rate. They stated that the reasonable value of the services should be
determined by taking into account the fact that the union was negotiating new wages.

 Austin v. Burge (1911)

Facts: D. received and read a newspaper over the course of several years. He had at one
time subscribed for a two-year period, but claims that after the expiration of those two
years, he requested that service be stopped. P. is the newspaper owner, who claims he
never received notice of stoppage.

Nature of the Risk: In the absence of a contract, the P. assumed the risk that D. would not
pay for his newspaper.

Issue: Was there a contract implied by the conduct of the D. in reading the newspaper?

Holding: One who accepts an unsolicited newspaper, and reads it, is liable for the cost of the
newspaper subscription if it is understood that the newspaper is not free.

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Reasoning: The court stated that although one cannot be forced into a contract unilaterally
by the newspaper company, the D.'s actions of reading the newspaper, which he knew was
not free, implied that he had to pay for it. The court constructed a quasi-contract due to the
D.'s deriving benefit, and held D. liable for the subscription price. (Restitution Interest.

 Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour, Ltd., (1943)

Facts: The P. is a polish company who expressly contracted with the D. to buy some
machines and have them delivered to Poland. They were supposed to have made a down
payment of 1/3 upon order, but paid somewhat less than that. The D. began the
construction of the machines. Poland was subsequently invaded by Germany, which made it
impossible to deliver the machines. The P. sued to get his down payment back.

Nature of the Risk: Standard sale of goods risks.

Issue: Is the subsequent impossibility of performance by the D. sufficient to release the

parties from further contractual liability, as well as entitle the P. to recover any down
payment, even though the D. had already gone to some expenditure to make the machines?

Holding: Yes. Where the performance of a contract has begun, but further performance of a
contract becomes impossible due to events unanticipated by the parties and beyond their
control, the contract fails for lack of consideration, and any partial payment by the buyer is
refundable.

Reasoning: The court expressly overruled Chandler v. Webster, and claimed that the P. was
entitled to recovery, not by release by implied condition, but that failure of consideration
prevented the contract from being formed at all. The court reasoned that the contract was
for delivery, and so when delivery became impossible, the whole contract failed for lack of
consideration. Thus, they awarded restitution damages to the P. on a theory of quasi-
contract because the whole contract had failed. [The promise by the D. to deliver was an
unconditional one. Thus, the risk of invasion preventing delivery was never reallocated to
the P.. Under that view, this is an express contract, entitling the P. to expectation damages.
But these would be hard to calculate. The burden would be on the P. to demonstrate how
much it would have made if the machines were actually delivered. However, they only sued
for their down-payment. It seems that the announced theory of the case - quasi contract,
was a means to get the theory to match the request for reimbursement.]

Notes: In English law, there has been a Law Reform (Frustrated Contracts) Act which
attempts to make an equitable adjustment of the losses of the parties when performance is
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frustrated. It attempts to protect a reliance-type interest of the party who has begun partial
performance (as in Fibrosa), as well as the restitution interest of one who has pre-paid for
services which have not yet been performed. The U.S. law has taken a less forgiving
approach. letting the losses fall where they may unless the parties have contracted
otherwise. For example the holding in Bennet: "[W]here a party, by his own contract, creates
a duty or charge upon himself, he is bound to make it good if he may, notwithstanding any
accident by inevitable necessity, because he might have provided against it by his contract."

 Jacob & Youngs, Inc. v. Kent, (1921)

Facts: The P. built a house for the D.. The contract specification called for wrought iron pipe
made by Reading. The P.'s subcontractor delivered Reading pipe for the first 1,000 feet of
pipe, but thereafter delivered pipe from other manufacturers. When the building was
completed, the D. took possession and noticed that the pipe was not made by Reading. The
P.'s architect refused to sign off the final certificate, and the P. withheld payment. There was
evidence that the pipe actually used was of the same quality as Reading pipe, and that the
cost of replacing the entire plumbing with the Reading pipe would have been exorbitant
because it would have required rebuilding the house.

Nature of the Risk: The D. risked that he could have a better house for less money. The P.
risked that he could be paid more for his building services.

Issue: Is the omission of Reading pipe in the house a cause for forfeiture of the final contract
payment?

Holding: No. An omission which is trivial and innocent does not necessarily result in a
forfeiture, but rather may be remedied by the payment of damages.

Reasoning: The majority [Cardozo] reasoned that the omission of the pipe was not wilful,
and furthermore, there was evidence that the pipe actually used was of the same quality.
The brand name of the pipe was not crucial to the building of the house, and it would be
extremely burdensome on the P. to require him to rebuild the plumbing. Although the P.
could not simply substitute his own judgement for what is stipulated in the contract, the
deviation was so minor as to be considered a convenant and not a condition. The measure of
damages, therefore, was not the price of installing new plumbing, but rather the difference
in value between what was actually installed and the Reading pipes.

Dissent: The dissent [McLaughlin] stated that the D. was entitled to exactly the kind of pipe
that was stated in the contract, whether the other kind was just as good, even if it was
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simply a whim. The dissent concluded that the deviation was not innocent, and whether it
was intentional or unintentional, it should be treated as intentional because it was careless.
Otherwise, parties would be motivated to deviate from contracts intentionally, and the law
would suffer.

Notes: 2. Cardozo conceded that the D. could have used explicit terms to evidence his desire
to have exactly what was called for in the contract, but he felt that the deviation was not
significant. However, there was an explicit clause in the contract that stated that all work
not exactly to spec would be torn down and rebuilt correctly. 3. There was evidence that the
use of the brand name "Reading" was as a generic reference to any high quality wrought
iron. The D. may have seized upon this event to express other dissatisfactions with the P.'s
work. 4. Both opinions cited Spence v. Ham, where the court held that the partially
performing party had to prove not only the value of what he had done, but also the value of
what remained to be done. In the instant case, the P. clearly had not met the burden of
proof as to the difference in value between the actual pipes and the Reading pipes.
However, Cardozo got around this by stating plainly that his conclusion was that it was
either "nominal or nothing." In Mass., the courts have adopted a quasi- contract theory to
deal with substantial performance cases, so the P. does not have to prove the difference in
value, but only the value of his performance. Under either theory, the cases come out the
same way. 5. The absence of the architect's certificate probably is not essential to the
outcome of the case because the architect could be acting unreasonably. It may not have
been critical to the parties' consideration. 6. Cardozo stated that the "cost of replacement" is
the general rule for the D.'s remedy in a case of substantial performance, but that the
"difference in value" rule is used when the "cost of replacement" would result in unjust
results. Part of this determination involves whether the builder was warned by the contractor
of the importance of strict adherence with the specification before it became unduly
burdensome to correct the deviation.

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