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.
A third theory as to the rights of the parties upon discharge by subsequent impossibility recognizes the right of one who has performed in part to recover for such performance; but instead of permitting recovery of reasonable compensation therefor,1 this theory recognizes his right to recover at the contract rate for the value of the performance.2 If work has been done upon an existing building which belongs to another, and such contract becomes impossible because such building is destroyed, the party who has performed such work has been allowed to recover a pro rata amount of the contract price.3
The difficulty which underlies this rule is that it recognizes the contract as in effect for the purpose of determining the amount of compensation, although it treats it as discharged for the purpose of allowing recovery upon such contract by one who has not performed in full, and who in many jurisdictions,4 could not have recovered at all if it had been a case of breach on his part instead of impossibility. If the contract price is obtained by fixing a value upon a unit of time or material and multiplying it by the total number of units necessary to full performance, the result which is reached by this rule will not be very different from the result which would have been reached if reasonable compensation had been given, except that it gives the benefit of an advantageous bargain to the party whose performance was prevented by such impossibility. Even in cases of this sort, however, the party for whose benefit performance is to be made, may be willing to pay a higher rate for full performance than he would have agreed to pay for incomplete or partial performance. In cases in which the contract is for the payment of a lump sum, on the one hand, and for the performance, on the other hand, of a number of different kinds of work, and the furnishing of a number of different kinds of material of unequal values, it is impracticable to apply this rule; and an attempt to apply it will ordinarily give a far less accurate result than an attempt to give reasonable compensation. If the contract is one for the performance of a number of different kinds of service or for furnishing a number of different kinds of different material of different values, and the value of each service or material is pro rated by the terms of the contract, there is little difficulty in applying the rule, and the only chance of injustice is that a party may be held to pay a price for incomplete performance which he would have agreed to pay for full performance only. In some jurisdictions this rule is further modified so as to allow recovery at the contract rate, less damages which the adversary party has sustained by reason of failure to perform.5 If a contract for personal services is discharged by the illness of the party by whom such services are to be rendered, it has been held that the proper amount of recovery is the contract rate of compensation less the damages sustained by his failure to perform'; 6 and the amount of such damages is ordinarily the difference between the contract rate and the cost at which it is possible to secure performance of such contract for the remainder of the period.7 This rule has been applied where the employer agreed to pay a certain salary, together with a certain share of the profits, and the sickness and death of the employe after about three years prevented full performance.8 v. Lumber Co., 46 W. Va. 56, 33 S. E. 125].
10 Newhall v. Knowles, 28 R. I. 348, 67 Atl. 365
11 Newhall v. Knowles, 28 R. I. 348, 67 Atl. 365.
1 See Sec. 2719.
2 Alabama. Hunter v. Waldron, 7 Ala. 753; Jones v. Deyer, 16 Ala. 221.
New Hampshire. Dame v. Woods, 75 N. H. 38, 70 Atl. 1081.
New York. Clark v. Gilbert, 26 N. Y. 280.
Vermont. Patrick v. Putnam, 27 Vt. 750.
Wisconsin. Cook v. McCabe, 53 Wis, 250,10 N. W. 507; Halsey v. Waukesha Springs Sanitarium, 125 Wis. 311, 110 Am. St. Rep. 838, 104 N. W. 04.
3 Dame v. Woods, 75 N. H. 38, 70 Atl. 1081; Cook v. McCabe, 53 Wis. 250, 10 N. W. 507; Halsey v. Waukesha Springs Sanitarium, 125 Wis. 311, 110 Am. St. Rep. 838, 104 N. W. 04.
4 See ch. LXXXIV and ch. LXXXVIII.
5 Hunter v. Waldron, 7 Ala. 753; Jones v. Deyer, 16 Ala. 221; Clark v. Gilbert, 26 N. Y. 280; Patrick v. Putnam, 27 Vt. 750.
6 Clark v. Gilbert, 26 N. Y. 280; Patrick v. Putnam, 27 Vt. 759.
7 Patrick v. Putnam, 27 Vt. 759.
8 Clark v. Gilbert, 26 N. Y. 280.
In other jurisdictions an attempt is made to do justice between the parties by ignoring the contract rate for such extra compensation; and by giving to the employe reasonable compensation for services rendered less the amount which he has actually received under the contract. See Sec. 2719.
If the contract of employment is not treated as discharged entirely by reason of the sickness of the employe, and the employe is allowed to resume his employment upon his recovery from such illness, it has been held that the employer is bound to pay the contract rate less the loss sustained by reason of such illness.9 It is said that on discharge of a contract by impossibility, the party who is in default may recover reasonable compensation for his services, even in jurisdictions in which he could not have recovered reasonable compensation if his default had been due to a voluntary breach;10 but that the amount of damages which has been caused to the employer by such default must be deducted from such reasonable compensation.11 The effect of this rule is to adopt the rule in force in some jurisdictions in cases of breach,12 and to make it apply to impossibility in other jurisdictions in which no recovery in quasi-contract could have been had in case of breach.
9 Hunter v. Waldron, 7 Ala. 753; Jones v. Deyer, 16 Ala. 221.
10Walsh v. Fisher, 102 Wis. 172, 72 Am. St. Rep. 865, 43 L. R. A. 810, 78 N. W. 437.
11 Walsh v. Fisher, 102 Wis. 172, 72 Am. St. Rep. 865, 43 L. R. A. 810, 78 N. W. 437.
12 See ch. LXXXVII.