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.
If a party who seeks to recover has not performed a contract fully upon his part to be performed, the question then arises whether he is not discharged or excused in any way from complete performance. If he has performed a part of the contract, and some fact has arisen which discharges or excuse* him from further performance, he may recover reasonable compensation for what he has done under the contract. Thus if a contract contains a term reserving a right of cancellation to one party, and such right is exercised, the adversary party may recover a reasonable compensation for the work which he has done under the contract.1 This right exists even if the party seeking recovery has in some way made default under the contract, by reason whereof the adversary party terminated the contract. In such cases the party who has partly performed the contract is entitled to recover a reasonable compensation for what he has done less damages sustained by the adversary party by reason of such default.2 If the contract provides for the exercise of the right of cancellation, the party who exercises it in a fair and reasonable manner before he has fully performed the contract, may recover a reasonable compensation for what he has done.3 If the parties rescind the contract by mutual agreement, recovery can be had for work done thereunder before such rescission.4 It has been held that in such cases the right of recovery is limited and determined by the contract, and must be a pro rata part of the contract price.5 So if one party has the express or implied privilege of canceling the contract, he may on so doing recover what he has parted with thereunder to the adversary party in excess of what such adversary party is entitled to retain. Thus B, a guardian, deposited with A money, the funds of B's ward, to be applied by A to the education and care of the ward. B subsequently countermanded such order, and demanded that A pay to him the balance of the funds in his hands. If A refuses to do so, he is liable to B in an action for money had and received.6
12 Stafford v. Sibley. 106 Ala. 189; 17 So. 324.
13 Payment for goods. Glasscock v. Rosengrant, 55 Ark. 376; 18 S. W. 379. Payment of wages. Far-rell v. Burbank. 57 Minn. 395; 59 NT. W. 485.
14 Columbus Safe-Deposit Co. v. Bnke, 88 Fed. 630.
15 Burton v. Mfg. Co., 132 N. C. 17; 43 S. E. 480. (Though under the Common Law procedure he can join general and special assumpsit.)
16 Harrison v. Hancock, 2 Neb. Rep. Unofficial 522; 89 N. W. 374.
1 Lyman v. Lincoln, 38 Neb. 794; 57 N. W. 531.