(1) Application to cases of goods sold or services rendered. Sec. 263. (2) Application to cases of repudiation and to cases of substantial breach. Sec. 264. (3) Application to cases of contracts under seal. Sec. 265. (III) Restitution by plaintiff as condition precedent. Sec. 266. (IV) What constitutes an election.
Sec. 260. In general: Is the obligation quasi contractual? - It is a general rule that upon the repudiation, or (in America) the substantial breach, of a contract by one party, the other may elect to "rescind the contract" and recover the value of his performance. The use of the word "rescission" in this connection is unfortunate and confusing. In its true meaning rescission signifies the abrogation or annulment of a contract either by decree of court or mutual consent of the parties. No such abrogation or annulment is essential to the right to restitution, though courts have sometimes been misled by the term "rescission" to believe otherwise. What the term really means, when used with reference to the right to restitution, is that, upon the repudiation or substantial breach of a contract, the injured party may elect to disregard his contract - that is, to quit performance on his own side, refuse to accept further performance by the other party, and relinquish his right to compensatory damages measured by reference to the terms of the contract, - and demand restitution in value for what he has done.1
This right to restitution would seem to be in reality nothing more than an alternative remedial right arising from the violation of the contract. Accurately speaking, therefore, it is not a quasi contractual right. The only primary obligation is the obligation to perform the contract; the only primary right the right to such performance. As in the case of the action for restitution as an alternative remedy for certain torts (post, Sec. 270 et seq.), however, it has been commonly regarded as quasi contractual, and for that reason may be considered in this treatise.