The restitution legal definition depends on the laws in a given area. Restitution in criminal cases is a classification of damages that a criminal defendant may be required to pay to compensate a victim for pecuniary losses that the victim may have suffered as a result of the defendant's alleged criminal acts. Restitution in civil cases are completely separate from any related criminal actions and are the result of a successful civil action brought by a plaintiff. Civil damages are designed to restore the plaintiff's state to their state of being before he or she was wronged.

What Is Restitution?

Restitution is the act of restoration. The term is commonly used in civil and criminal cases. Restitution in civil cases is a remedy correlated with unjust enrichment in which the funds recovered are generally based on the gain of the defendant rather than the loss of the plaintiff. Restitution in criminal cases is a partial or full compensation payment made to a victim for a loss, that is paid by the criminal. 

The order of payment is usually made during sentencing or as a condition of receiving probation. One of the costs imposed on a criminal may be that they return stolen goods or make a payment to the victim for the damages that they've caused. Therefore, in this case, restitution is a condition where the defendant returns the goods or makes a payment in order to receive probation.

The goal of restitution is to attain fairness and avoid the unjust enrichment of an individual or party. Restitution is commonly used in contractual situations when one party has granted a benefit or compensation to another party but is unable to collect because the contract has become defective or no longer exists. 

For example, consider a person who builds a shed on a piece of property that doesn't belong to them. Assume further that the shed is erected without a contract and that the property owner refuses to pay the contractor for the barn. Under the doctrine of restitution, and because there was no contract, the court has the right to make the property owner pay the contractor for the costs of materials and labor.

Restitution will be calculated, not based on the plaintiff's loss, but instead on the gains of the defendant. Restitution requires defendants to relinquish any profits that they've unlawfully obtained and return them to the plaintiff. Restitution seems to be used most often in contract law. 

Parties looking for restitution are not able to seek out lost earnings or profits caused by a breach of contract. Restitution can only be obtained by a plaintiff that includes this claim in their initial complaint. Also, unless the amount can be accurately calculated, restitution will not be granted.

There are two main reasons why restitution is most commonly awarded:

  • To make the plaintiff whole and to restore them to a place financially where they were prior to the offense.
  • To forestall the unjust enrichment of the defendant.

To summarize, restitution comes in two formats:

  • A financial remedy to restore one party to a financial position where they would've been prior to the improper action of another party.
  • Ordered by courts during an administrative penalty or criminal sentence.

When Does Restitution Apply?

Restitution regularly occurs when one party has reaped a benefit at someone else's loss and there is an obligation to make the victim whole. For example, the non-breaching party in a contract cancels the contract and files a lawsuit for restitution against the breaching party. Because the breaching party received a benefit to the non-breaching party's detriment, they may file for restitution in a contract lawsuit. On the other hand, in a criminal case, a restitution judgment may force the defendant to financially compensate the plaintiff for harm caused or the value of goods stolen. This is recognized as criminal restitution.

What Is the Difference Between Restitution and Compensation?

The difference between compensation and restitution lies in the way in which the financial award was calculated. Restitution is granted based on how much the defendant financially gained from the transgression. Compensation is granted based on how much the plaintiff financially lost. Sometimes a judge may grant the plaintiff with an option between compensation and restitution. Usually, the plaintiff will decide based on the higher award amount.

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