Osteen v. Johnson
473 P.2d 184 (1970)
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Rule of Law:
When a breach of contract is so substantial that it goes to the essence of the agreement, the injured party is entitled to the remedy of restitution, which requires the breaching party to return any payments received, less the value of any benefits conferred upon the non-breaching party through partial performance.
Facts:
- Emmett and Mildred Osteen entered into an oral contract with Ritchie Johnson, a music promoter, paying him $2,500 to promote their daughter Linda's singing career for one year.
- The agreement required Johnson to, among other things, arrange for Linda to record songs, prepare two records from those songs, and press and mail the first record to disc jockeys.
- A key term of the contract was that if the first record met with any success, Johnson was then required to press and mail out copies of the second record.
- Johnson arranged recording sessions, produced a first record with two of Linda's songs, and mailed 340 of the 1,000 pressed copies to disc jockeys.
- The first record received a favorable review and a high rating in a trade magazine, meeting the condition of success.
- Despite the success of the first record, Johnson failed to press or mail out copies of the second record.
- Johnson also listed another person as a co-author on one of Linda's songs, claiming it would make the record more likely to be played.
Procedural Posture:
- Emmett and Mildred Osteen sued Ritchie Johnson in a Colorado trial court for breach of an oral contract.
- After a trial to the court, the trial court found that Johnson had substantially performed the contract.
- The trial court entered judgment for the Osteens for nominal damages of $1.00 and ordered the return of certain master tapes.
- The Osteens, as plaintiffs in error, appealed the trial court's judgment regarding the adequacy of the damages to the Colorado Court of Appeals.
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Issue:
Does a music promoter's failure to press and distribute a second record after the first record achieved success, as required by an oral agreement, constitute a substantial breach of contract that entitles the other party to restitution of the money paid?
Opinions:
Majority - Dufford, J.
Yes, the failure to perform this key part of the agreement was a substantial breach of contract justifying the remedy of restitution. A minor breach would only allow for an action for damages, but a non-performance so material that it goes to the 'essence' of the contract entitles the injured party to restitution. The court reasoned that the primary purpose of the contract was to publicize Linda and make her talent known, and both parties agreed that distributing records was the primary method to achieve this. Therefore, Johnson's failure to press and mail the second record after the first one succeeded was a breach of a vital term of the contract, not a minor one. While Johnson partially performed, this specific failure was substantial enough to discharge the Osteens from further duty and allow them to seek the return of their payment.
Analysis:
This case illustrates the critical distinction between a minor breach, which only gives rise to damages, and a material or substantial breach, which can justify rescission and restitution. It emphasizes that the remedy of restitution is particularly appropriate when damages are difficult to calculate, as they would be in a case concerning potential fame and career promotion. The decision establishes that courts will look to the 'essence' of a contract to determine the severity of a breach. By allowing the defendant to receive credit for the value of services already rendered, the court also reinforces the equitable nature of restitution, preventing the non-breaching party from receiving an unfair windfall.
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