Expectancy, Restitution, and Reliance are probably the scariest words uttered during this past first week of 1L (besides cold call). But they shouldn’t be. Most explanations I’ve seen are ridiculously convoluted. Here’s how it works:
Expectancy (Agreement w/Consideration): What would you have received had the contract been completed? Essentially, what did you expect?
Restitution (Unjust Enrichment): What did you give to the defendant? What do they need to give back?
Reliance (Promissory Estoppel): What if the contract had never been made in the first place? Did you do (or buy/sell) anything based on the agreement (promise)?
Let’s apply it (this is a watered-down version of the Johnny Apple Hypo):
You, the owner of an incredibly reputable pie shop, contract with Johnny Apple for a large shipment of his best apples early the next day. You and Johnny agree that you’ll pay $400 up front. Upon agreement, you buy an extremely rare spice for $200 that is due to expire in 24 hours. You also rent a shipping truck for $100 to be sent to Johnny’s warehouse to pick up the apples.
Johnny takes your $400 and hauls ass to Kentucky, never to be heard from again.
The following day, you have no apples, a useless shipping truck, a rare and terribly expired spice, and no pies. You were expecting to make a total income of $1500 from the pies you were supposed to sell. Time to get a lawyer.
What are you owed?
Expectancy: Since your pie shop is reputable and established, you have a good idea as to your daily income. Since you needed apples to make your famous apple pies for the next day, you entered into this contract with Johnny with the expectation that you were going to make and sell these awesome pies the following day and generate $1500 of revenue. Had the contract been completed, you would have made $1500. Therefore, Johnny owes you $1500 (lost revenue).
Restitution: You gave Johnny a down payment of $400. He took off to Kentucky and had a good time on YOUR $400. Johnny was unjustly enriched BY YOUR $400 and therefore owes you $400.
Reliance: Knowing that you had a good, solid contract in place with Johnny, you did a lot of prep work for this apple shipment. You bought an expensive ($200) spice knowing you had to use it in 24 hours and you also rented a shipping truck for $100 to be sent to Johnny’s warehouse. You were relying on Johnny to hold up his end of the deal when you made these purchases. But Johnny flaked, and now he owes you $300.
But what about punitive damages? You really want Johnny to learn a lesson.
Sorry, punitive damages are never available for just a breach of contract. But if Johnny chucked an apple at your head in a drive by on his way to Kentucky, you might have a case for battery!
3 thoughts on “Expectancy, Restitution, Reliance”
Doesn’t the $400 deposit you gave for the apples also count for reliance?
Al, everything made sense up until that point. I was left wondering the same thing.