THE OPERATION OF TOTAL FAILURE OF BASIS
Total failure of basis is the relevant ground of restitution in a number of different contexts, which raise particular problems which will be examined in turn.
(A) CONTRACTS WHICH ARE DISCHARGED FOR BREACH
Where a contract has been discharged for breach there are two remedial options available. First, the claimant may seek a remedy for the breach itself. Normally this will be compensatory damages assessed with reference to the claimant’s loss, but in certain exceptional circumstances it is possible to award a gain-based remedy, which is assessed with reference to the benefits obtained by the defendant as a result of breaching the contract. This remedy is not founded on the reversal of the defendant’s unjust enrichment, but instead on the wrong of the breach of contract, hence this remedial option is considered in Part III.
Alternatively, once the contract has been discharged for breach, the claimant may seek to obtain a restitutionary remedy which is not founded on the breach but is based on total failure of basis, in the sense that the condition for the transfer of benefits to the defendant has not been and will not be satisfied as a result of the breach of contract. Here restitution is founded on the reversal of the defendant’s unjust enrichment. The relevance of the breach of contract is simply that, if it is a repudiatory breach (which is a breach of a condition or a term the breach of which is sufficiently serious) or renunciation which has been accepted by the claimant as discharging the contract, the contract ceases to be operative, so opening the way for the restitutionary claim. But the breach itself does not constitute the underlying cause of action for the claim.
Where the claimant’s restitutionary claim is founded on total failure of basis it should make no difference that it was the claimant who breached the contract. This is because the fact that the claimant committed a wrong by breaching the contract should not affect a claim founded on the reversal of the defendant’s unjust enrichment. Unfortunately, the courts have not always recognized this, so it is necessary to analyse separately the cases where the defendant breached the contract and where the claimant did so.