This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
This right of recovery is in the nature of quasi-contract.1 It is not an indirect means of enforcing the contract. It may be exercised even where an action on the contract has failed.2 The contract itself "falls out of view as a ground of legal remedy and appears only to give color to the conduct of the parties in furnishing and accepting the service rendered. It affords the means of determining that the service was not a gift but a sale.3 . . ." Accordingly the party not in default may recover without showing performance on his part.4 So the measure of recovery is the benefit which the defendant has received under the contract, and not the contract price, nor what plaintiff has parted with. A's right to recover for property furnished or services rendered under an oral contract which falls within the statute of frauds is usually limited to such property or services as enured to the benefit of B.5 Hence, if money is advanced to a corporation under a contract with the stockholders thereof, which is unenforceable by reason of the statute of frauds, such money cannot be recovered from such stockholders.6 The liability of the party repudiating the contract to make compensation to the adversary party for loss sustained by him is not always thus limited, however. So where B, the owner of realty, had entered into an oral contract with A for mining coal on B's realty, and B repudiates the contract after A has done some work thereunder, A can recover from B the actual loss sustained by A in mining for coal.7 So where B agreed to convey to A certain realty not then owned by B, and A entered and made valuable improvements and B did not get title to such realty and hence was unable to convey, A was allowed to recover for such improvements.8 In some jurisdictions the party who has furnished property or rendered services under an oral contract, subsequently repudiated by the adversary party as within the statute of frauds can not only recover a reasonable compensation for what he has done, but he can also introduce the oral contract in evidence for the purpose of showing what the parties had agreed upon as a reasonable compensation.9 Thus, where A and B have an oral contract of employment which cannot be performed within the year, and A renders services thereunder and B repudiates the contract, A can recover for services rendered at the contract rate.10 A reason often given for this holding is that the contract is not void, but simply unenforceable, so that no action can be maintained for its breach, and valid for every other purpose. This principle is sometimes pushed so far that recovery for the work actually done may be had under the contract on the theory that the statute does not apply to the executed part of a contract but only to the executory part.11 This principle has been applied to a lease,12 and to a contract to furnish water supply to run for twenty-five years.13 This view is repudiated in other jurisdictions on the ground that it amounts to a substantial repeal of the statute of frauds.14 In courts taking this last view, a reasonable compensation for property furnished or work done under an oral contract within the statute must be determined without reference to the terms of the oral contract.
1See Ch. XXXVII.
2 Action in quasi-contract successful. Wright v. Dickinson, 67 Mich. 580; 11 Am. St. Rep. 602; 35 N. W. 164. Action on contract failed. Dickinson v. Wright, 56 Mich. 42; 22 X. W. 312.
3 Gay v. Mooney, 67 N. J. L. 27, 29: 50 Atl. 596.
4 Peabody v. Fellows, 181 Mass. 26; 62 N. E. 1053.
5 Dowling v. McKenney, 124 Mass. 478; Banker v. Henderson, 58 N. J. L. 26; 32 Atl. 700.
6 Gazzam v. Simpson, 114 Fed. 71: 52 C. C. A. 19.
7 Heilman v. Weinman, 139 Pa. St. 143; 21 Atl. 29.
8 Smith v. Smith, 28 N. J. L. 208; 78 Am. Dec. 49.
9 Currier v. Barker, 2 Gray (Mass.) 224; Lally v. Lumber Co., 85 Minn. 257; 88 N. W. 846; Spinney v. Hill, 81 Minn. 316; 84 N. W. 116; Kriger v., Leppel, 42 Minn. 6; 43 N. W. 484.
10 Murphy v. De Haan, 116 la. 61; 89 N. W. 100; Lally v. Lumber Co., 85 Minn. 257; 88 N. W. 846; Spinney v. Hill, 81 Minn. 316; 84 N. W. 116; Kriger v. Leppel, 42 Minn. 6; 43 N. W. 484.
11 City of Greenville v. Waterworks Co., 125 Ala. 625; 27 So. 764; Murphy v. De Haan, 116 la. 61; 89 N. W. 100; Sanger v. French, 157 N. Y. 213; 51 N. E. 979.
12Lagerfelt v. McKee, 100 Ala. 430; 14 So. 281.
13 Graves County Water Co. v. Ligon, 112 Ky. 775; 66 S. W. 725. Suit by property-owner for loss caused by insufficient supply.
14 Riif v. Riibe, - Neb. -; 94 N. W. 517.