Brief Fact Summary.
Mr. and Mrs. Vines (Plaintiffs) contracted to buy a condominium from Orchard Hills, Inc. (Defendant) and paid $7880 as a down payment. Plaintiffs defaulted on the contract, and sought to recover their down payment from the Defendant.
Synopsis of Rule of Law.
The purchaser’s right to recover in restitution requires the purchaser to establish that the seller has been unjustly enriched. Only if the breaching party satisfies his burden of proof that the innocent party has sustained a net gain may a claim for unjust enrichment be sustained. The time to measure damages at the time of the breach of contract.
Under the contract, the down payment was characterized as a liquidated damages clause. The defaulting Plaintiffs introduced evidence that the price they were supposed to pay for the condominium in 1973 was $78,800, but that the market price had risen to $160,000 in 1979. The trial court concluded that because the seller had gained what it characterized as a windfall—the appreciation in the condominium’s value—the Plaintiffs were entitled to their down payment of $7,800.
When, if ever, may purchasers who are in breach of a valid contract affirmatively invoke the assistance of judicial process to recover money paid to, and withheld by, the seller?
There was error, and the judgment was set aside and remanded for further proceedings.
There was a presumption of validity attached to the liquidated damages clause, so the defaulting plaintiffs had the burden of showing that the clause was invalid and unenforceable.
The trial court’s conclusion that the Plaintiffs had met their burden by presenting evidence of the increased value of the property between the contract of sale and the date of the trial was in error.
The relevant time to measure the seller’s damages was at the time of the breach, and there was no evidence to demonstrate that the seller was not injured at the time of the purchasers’ breach by their failure to consummate the contract.
The principal of remedies for the breach of contract is to provide compensation for loss, so a party injured by breach of contract is entitled to retain nothing in excess of that sum which compensates him for the loss of his bargain.
The Plaintiffs were the breaching party, and would have a high burden of proof on remand to establish that the seller was not injured at the time of their breach, or that the liquidated damages clause was unconscionable and therefore unenforceable.