Rural Power Utility,Inc.,enters into a contract with Shovel Excavation Service to dig up,replace,and rebury Rural's cables in a certain location.Rural advances Shovel 10 percent of its cost.The parties rescind the contract.Shovel's refund of the payment is
A)a penalty.
B)liquidated damages.
C)restitution.
D)a breach of contract.

Question

Quizplus · Accepted Answer

Restitution means making a payment to restore something to its original condition. In this case, as the contract is rescinded, and Rural Power Utility, Inc. has paid an advance payment to Shovel Excavation Service, the refund of payment by Shovel to Rural is considered restitution. It is not a penalty or breach of contract since the contract has been rescinded, and no obligations remain. It is not liquidated damages as there is no damage to quantify. Therefore, option C is correct.