17. Which of the following should be the court's decision?

C is correct. The goal of contract law is to give the non-breaching party the benefit of the bargain by putting the non breaching party in the position he would have been if the contract had been performed. Restatement (Second) of Contracts § 347 (1981). Here, the contractor would be entitled to expectancy damages, which include (i) the loss in the value to the non-breaching party; plus (ii) any other loss, including incidental or consequential loss, caused by the breach; less (iii) any cost or other loss that the non-breaching party has avoided by not having to perform. Restatement (Second) of Contracts § 347 (1981).

Here, because the subcontractor unjustifiably breached the contract by refusing to perform, the contractor had to seek substitute performance to complete the contract, which cost him $120,000. The contractor had to spend $20,000 more than he would have if the subcontractor had completed the original contract. Therefore, the contractor can recover the additional $20,000 spent to complete the work.

In this question, the subcontractor is also seeking restitution damages for the value of the benefits conferred. If a party justifiably refuses to perform on the ground that his remaining duties of performance have been discharged by the other party's breach, the party in breach is entitled to restitution for any benefit that he has conferred by way of part performance or reliance in excess of the loss that he has caused by his own breach. Restatement (Second) of Contracts § 374 (1981). Traditionally, if the breach was intentional, the courts will not award a breaching plaintiff restitution damages. Thus, because the subcontractor unjustifiably refused to perform, the subcontract would not be able to recover the $50,000 extra benefit he conferred upon contractor ($150,000 in goods and services provided by the subcontractor minus the $100,000 the contractor paid in progress payments).

A is incorrect. As discussed above, because the subcontract unjustifiably breached, under traditional rules, the subcontract would not be entitled to any restitution damages. Even under modern rules, the subcontract would not be entitled to additional damages because a breaching party's restitution damages are limited to the value of the benefit, not to exceed the contract price agreed-upon for those services. Here, even though the subcontractor provided $150,000 worth of services and goods and the contractor only paid $100,000, no facts suggest the contractor was behind on any progress payments; the facts state the contractor made progress payments aggregating $100,000 as required by the subcontractor. Thus, because the contractor fully performed his agreed-upon duties under the contract up to the point of the subcontractor's breach, the subcontractor would only be entitled to $100,000 in progress payments that were already paid to him by the contractor and his remedy would be $0.

B is incorrect. As discussed above, as the party that breached unjustifiably, the subcontractor is not entitled to any remedy under traditional rules. Under modern rules, the subcontract would have no recover as well because the contractor fully performed by paying the $100,000 in progress payments that were required by the subcontractor; as the breaching party, the subcontractor is limited to restitution up to the agreed-upon contract price for the services provided up to that point, which was the $100,000 the contractor had already paid.

D is incorrect. As discussed above, the contractor justifiably suspended performance after the subcontractor breached, which means the contractor is entitled to expectancy damages to put him in the place he would've been had the subcontractor fully performed. Thus, even though the subcontractor supplied goods and services up to $150,000 and the contractor only paid $100,000 in progress payments, the contractor had to pay an additional $120,000 to finish the work, which was $20,000 more than the contractor would've paid to subcontractor; the contractor only had $100,000 left in progress payments for the remaining work with the subcontractor.