There are cases which hold that if, before rescission, the plaintiff was paid in full for a distinct part of his performance or there was a settlement of the amount due for a distinct part of his performance, such payment or settlement is conclusive and he cannot show that the performance was actually of greater value:
Rodemer v. Hazelhurst, 1850, 9 Gill (Md.) 288: The plaintiff contracted to grade a section of railroad for the defendants. Monthly estimates were to be made of the quantity and value of the work done during the month, four fifths of which value was to be paid to the plaintiff immediately, and the balance on completion of the work, said estimates to be conclusive between the parties. Estimates and payments were made for several months, and then, the defendants repudiating the contract, the plaintiff brought this action for the value of the work done. Frick, J. (p. 294): "Are these adjustments obligatory upon him, or is the contract open in its entirety to claim, as he does here, the fair and full value of his work, independent of the prices regulated by the contract ? . . . He is concluded by these settlements, and by reason of their being closed as distinct and separate portions of the contract, he cannot open them again to prove and recover the actual value of his work. His claim has in fact been liquidated upon the quantity of work done and the value ascertained by the prices in the contract, 11848, 21 Vt. 17, 22. 434 and he is effectually barred by adopting the adjustment and receiving payments under them." 1
This rule is doubtless a sound one when applied to an agreement which is severable in the sense that it really constitutes two or more separate contracts. But the propriety of its application to cases like Rodemer v. Hazelhurst2 and Doolittle v. McCullough3 is at least questionable. Payments pro tanto in such cases are not received in extinguishment of the defendant's liability; or, at most, the extinguishment is subject to the condition that the contractor be allowed to complete the job and receive compensation, at the contract rate, for the whole of it. This is very clearly pointed out in a New Hampshire case:
Clark v. Manchester, 1872, 51 N. H. 594: The plaintiff, who had contracted to work as a laborer for the defendants for a year at $25 per month or $300 for the year, and who had drawn his salary for several months, was discharged without cause. It appeared that he had worked during those months when he could have earned $30 or $35 per month, whereas for the balance of the year he might not be able to earn more than $15 or $20 per month. Sargent, J. (p. 595): "If he had continued the year out, and had gone every month and received his $25, that would have completed the contract on both sides, and that sum, by the month for the whole year, would have been payment in full for his services; yet, when the defendants rescind the contract in the midst of the term, without sufficient cause, they cannot claim that the payments which have been made, though at the rate per month stipulated for the whole time, shall be received in full for the services rendered, if those services were worth more for that time than the average for the year.
1 Accord: Farnum v. Kennebec Water Dist., 1909, 170 Fed. 173; 95 C. C. A. 355, (contract to lay water pipe); Doolittle v. McCullough, 1861, 12 Ohio St. 360, (contract to grade railroad). And see Chicago v. Sexton, 1885, 115 111. 230; 2 N. E. 263, (building contract).
Professor Keener adopts this rule ("Quasi-Contracts," p. 312): "If, however, under the terms of the contract, the plaintiff was to be paid for the work as it progressed, and has in fact been paid therefor, the fact of the defendants subsequently refusing to allow the plaintiff to further perform cannot change the fact that he has been paid for the part done according to the terms of the contract. If he has suffered a loss in consequence of the defendant putting an end to the contract at the time he did, whereas, in fact, he would have made a profit had the defendant permitted him to perform the contract, he has established a right to recover damages in an action for breach of contract, for refusing to allow him to fully perform the contract. But the fact is not changed that he has received in extinguishment of the defendant's liability that which it was agreed before the work was begun should be paid by the defendant."
See also Sutherland, "Damages " (2d ed.), Sec. 713.
21850, 9 Gill (Md.) 288.
31861,12 Ohio St. 360.
"The contract is to be construed as a whole. It is not $25 per month for a single month, or for each separate month, or for any number of months less than the year. The contract being entire, the defendants cannot break one part of it and still insist upon the performance of the other part. When the defendants rescinded the contract, they put it out of their power to enforce it upon the other party, but the other party may consider it as rescinded and claim pay just as though it had never existed, which will be just what he is claiming here, namely, to recover what his services were worth for the time he labored.
"The error of the defendants' counsel in their brief is in assuming that here was payment made by the defendants and received by the plaintiff in full for the services of each month. The defendants cannot hold the plaintiff to the agreed price per month only in connection with the other part of the contract, viz. that the employment should continue at the same rate for the whole year."