Possible consequences of awarding non compensatory damages for breach of contract on Commercial Law

Table of Contents

I. Introduction

II. The Law of Contract De Lege Lata – The Law of Contract as It Is
A. The Remedies for Breaches of Contract
B. Compensatory Damages as the primary remedy
1. The Protected Interests
2. Limitations on the Recovery of Damages
C. Literal Enforcement as Exceptional Remedy
1. Specific Performance
2. Injunctions
D. The Settled Restitutionary Remedies
E. The law of contract as a default system

III. A-G v Blake
A. The Factual Background
B. The Judgement
C. The Potential Consequences of a Generally Available Blake Remedy on the Orthodox Law of Contract

IV. The Law of Contract De lege ferenda – The Law of contract as it should be?
A. The Morality Approach
B. The Economic Approach
C. Statement
D. Efficient Breach or Efficient Performance?
1. The efficient breach theory
2. Maximizing Profit Breaches
(a) Cost-related arguments
(i) Allocation of the Contractual Resources
(ii) Transaction Costs
(1) The Need to Negotiate for Release
(2) The Need to Oust the Default System
(b) Non-cost Related Arguments
(i) Who Should Make the First Move?
(ii) The Parties’ Expectations
(iii) The Non-Monetary Inconviences
(iv) Disincentive to Co-operate
(v) The Impact on Third Parties
(vi) Inconsistency of the theory of efficient breach with other legal institutions
(vii) The Risk of Uncompensated Losses
3. Minimizing loss cases
(a) Example 1
(b) Example 2
(c) Example 3
(d) Evaluation

V. Conclusion

I. Introduction

In the now famous Blake case¹ the majority in the House of Lords has granted a (restitutionary) remedy for a breach of contract² which has been alien to the law of contract so far. Although it was held to be available only in exceptional circumstances the judgment prompted Lord Hobhouse to express the following warning in his dissenting opinion:³

[I]f some more extensive principle of awarding non compensatory damages for breach of contract is to be introduced into our commercial law, the consequences will be very far-reaching and disruptive

It is the goal of this essay to examine whether Lord Hobhouse’s fear of a silent reconceptualisation of the law of contract is justified. In order to fully understand the potential impact of the Blake case it is vital to bring oneself to mind what the law of contract was before the judgement in Blake was rendered. Accordingly the essay will start with an outline as to which remedies were and in fact still are available to a claimant⁴ under the pre- Blake law.

After a summary of the Blake case itself, it will be described why a broad Blake remedy indeed might have a revolutionary effect on the conventional law of contract.

However, – as history shows – not all revolutions are bad. Thus, even if Blake should have far-reaching and disruptive consequences on the law of contract it is by no means said that this is an undesirable result. Law in general and the law of contract in particular is not an end to itself⁵, but rather has a serving function in that it regulates economic exchange.⁶ It should be borne in mind that the law of contract is a default system that provides remedies for a breach of contract in case the parties did not – unconsciously or deliberately – stipulate their own remedies which they are free to do.⁷ Ideally this default system leads to just and economically reasonable results.

By this measure a default system has to prove its value and practicability. Thus, if it turns out that a law of contract under which the Blake remedy is generally available is superior to the current law its implementation must not be declined only because of its revolutionary character.⁸

Part IV of this essay draws the necessary comparison between the two alternatives in terms of economic efficiency. In doing so special attention is given to what is called the “efficient breach theory”, which is often called upon to defend the current contractual rules. Thereby it is quite helpful to distinguish between contracts that are breached in order to generate a bigger profit and such breaches that aim at minimizing losses. The essay will then conclude with a final assessment as to what the contract of law should be like in the author’s opinion.

II. The Law of Contract De Lege Lata – The Law of Contract as It Is

A. The Remedies for Breaches of Contract

In the event of a breach of a contract three different remedies are in principle available to a claimant suing in a common law jurisdiction: damages, literal enforcement and restitution. As a detailed outline of all remedies would go far beyond the scope of this essay, it will be confined to the features which are of relevance for the further discussion.

B. Compensatory Damages as the Primary Remedy

Unlike civilian jurisdictions a claimant in a common law jurisdiction is usually confined to an action for (compensatory) damages. This is the primary, “normal” remedy for breach of contract.⁹ From this it follows that the defendant¹⁰ can usually not be compelled to fulfil his primary, economic obligation as of right. Only in exceptional circumstances the Court, at its discretion, can coerce the defendant to perform its primary obligation.^[11]

1. The Protected Interests

The primacy of damages, to be precise compensatory damages, makes it clear that the law of contract in the first place does not acknowledge a so called performance interest, that is the claimants’ interest to get exactly what he has contracted for. Put differently: In common law systems pacta non sunt servanda. This statement is at least true for the pre- Blake law.

What the law in the first place does protect is the claimants’ expectation interest by making the respondent pay a monetary equivalent of the promised performance. The expectancy principle is future orientated in that it requires the claimant “to be placed in the same situation, with respect to damages, as if the contract had been performed.”¹²

Doctrinally this approach is based on the assumption that in a capitalist economy contracting parties exchange goods in the expectation to generate a surplus. This expectancy is secured by the law of contract from the moment the agreement is entered into. An award of monetary damages will only be granted if the claimant has lost the expected benefit as a consequence of the respondent’s breach of contract. In view of the topic of this essay two things are worth highlighting. Firstly, the respondent only has to make good the net loss suffered by the claimant. In order to achieve the promised performance – and accordingly the expected benefit – the claimant would have had to fulfil his primary obligation as well. By non-performing this obligation the claimant saves expenses. However, the claimant is only put into the position he would have been in had the contract been performed, if the saved expenses are deducted from the gross benefit, that is the value of the defendant’s complete performance. The claimant would be in a better position if he could save the costs of his performance and claim the expected gross benefit. For this reason it is only the net loss which is compensated.

Secondly, the amount of damages to be paid is determined by reference to the claimant’s position. For the quantification of the damages all that matters is the claimant’s loss. A (potential) benefit the defendant might have generated by breaching the contract is not taken into account. Damages are compensatory and as such loss-based rather than gain-based. It is essential to understand that the law of contract permits the breaching party to keep profits that remain after having fully compensated the claimant’s loss. Obviously such a law will not seldom create incentives to breach a contract, where the breach promises to be more beneficial than performance of the contract. The benefit gained by the breach can either be a (higher) profit or the avoidance of a loss. The law of contract does not prohibit such a calculating breach of contract.¹³ As will be seen some would even say that this exactly what it aims at.¹⁴

There is a second ground on which compensatory damages can be conferred. The claimant may also demand to be put into the position he would have been in if the contract had never been made.¹⁵ For instance he might seek compensation for expenditures made in reliance on the contract, which the breach then rendered vain. The relationship between the expectation interest and the so called reliance interest is far from being clarified. However, as this issue is irrelevant to the research question it will not further be dealt with.

2. Limitations on the Recovery of Damages

Three main criteria restrict the recovery of damages. Firstly, the defendant is only held accountable if the claimant can establish a causational link between his loss and the breach of contract. However, as mere causational link would expose the defendant to an incalculable liability risk, a claim for damages has to pass a second threshold – the remoteness test. The test requires that the occurred loss must have been reasonably foreseeable by the parties at the time they entered into the contract. Thereby the defendant is only made liable for the usual risks his contractual promise involves.

Of particular interest for this essay is the mitigation rule – the third criterion. It limits the amount of damages in that it prohibits the recovery of losses C could have avoided by taking reasonable steps subsequent to the breach.¹⁶

Say C and D entered into a contract of sale over a milking machine. The purchase price is $ 50,000. D then fails to deliver the machine. As a consequence C suffers a net loss of $ 5,000 because he was not able to fulfil a contract with E over the purchase of a certain amount of milk. However, C could have avoided this loss by purchasing a substitute milking machine from F for $ 52,000 (= market price).

Although an action for damages in the amount of $ 5,000 is likely to pass the causation and remoteness test C’s claim is nonetheless doomed to failure. C could have avoided the (consequential) loss of $ 5,000 by acquiring the milking machine from E. The purchase of an adequate substitute at the market price is a reasonable step, which the mitigation rule requires C to take.¹⁷ C shall not just wait and run up losses. In the example C can only recover $ 2,000 from D.

In the above example C was only able to mitigate his loss because a substitute was available. Where there is no such substitute available, a “duty”¹⁸ to minimise the loss can logically not exist. The “ready availability of goods in competitive supply”¹⁹ is a necessary prerequisite for mitigation in this context. Thus, C could have claimed $ 5,000 if D had been a monopolist in the business of milk machine selling.

C. Literal Enforcement as Exceptional Remedy

Although the usual remedy for breach of contract is an action for compensatory damages the claimant in some cases alternatively can successfully ask the court to enforce the primary contractual obligation literally. It is not least because of the existence of this remedy that Holmes’ famous statement that “[t]he only universal consequence of a legally binding promise is that the law makes the promisor pay damages if the promised event does not come to pass”²⁰, cannot be maintained in purity.

For the purpose of this essay it suffices to deal with the following two forms of literal enforcement.

1. Specific Performance

An award of specific performance compels the defendant to do exactly what he has promised to do. Specific performance is only available exceptionally. In some cases the breach cannot be (fully) compensated by a monetary damages award. Where compensatory damages turn out to be inadequate courts can issue an award of specific performance in order to protect the claimant’s expectancy. The compensation of a consumer surplus is a first example.²¹ This non-commercial interest is hard to assess in monetary terms. As long as the market provides for substitutes the law of contract need not worry about that. The damages rules, namely the mitigation rule, will adequately compensate the consumer. Here the damages can easily be assessed by the market price. However, where there is no such substitute the courts will face insuperable evidential difficulties in quantifying the consumer surplus. This evidential impossibility can be bypassed by rendering an award of specific performance.

The danger of an uncompensated loss can also arise in circumstances where it is predictable that the claimant will suffer unquantifiable consequential losses as a result of the defendant’s failure to deliver a “unique” good (= idiosyncratic loss).²²

Even if the claimant has shown compensatory damages to be inadequate, an order of specific performance is not necessarily rendered. All he has done is established a prima-facie case. As being a remedy at equity the court has an overriding discretion to grant it. Impossibility of performance, the defendant’s insolvency, impracticability or the unconscionability in prior negotiations may serve as exemplary factors the court takes into account before exercising its discretion. The defendant can also run the argument that specific performance leads to an undue hardship for him. The Court then has to weigh the advantages and disadvantages of either granting specific performance or under-compensating damages (balance of convenience test). In this context macroeconomic considerations may also play a role.

It is noteworthy that defences like undue hardship cannot be raised when damages are sought. Compensatory damages are awarded at common law to which a discretionary element is alien.

2. Injunctions

Contractual obligations cannot only oblige the defendant to do something, but also not to do a particular thing. The courts can enforce such a negative obligation by awarding a prohibitive injunction. Since the completion with a negative obligation is in principle regarded as less costly and serious, courts do not apply the balance of convenience test. However, the decree of an injunction is still at the court’s discretion.

Has the defendant already breached his negative obligation the appropriate remedy to undo the effects of the breach is a mandatory injunction. Since the defendant is required to take active steps the situation is similar to an order of specific performance. Accordingly the courts will undertake the balance of convenience test.

D. The Settled Restitutionary Remedies

Besides a claim in expectation and/or reliance there is a third ground on which a claimant may seek damages. Rather than demanding compensation for a loss, the claimant asks for a decree that compels the defendant to return a valuable benefit the claimant has transferred to the defendant in the completion of the primary obligation without having obtained the consideration. Where the transferred benefit is money, the claimant can just claim it back (recovery money paid). For any other benefit conferred to the respondent (services, goods) an action for receiving a quantum meruit is the appropriate remedy. For the goal of this essay it suffices to focus on the basic notion that permeates these two settled restitutionary remedies.²³

An action in restitution differs fundamentally from a claim based on compensation. Doctrinally the former one rests on the notion of unjust enrichment ²⁴ , a legal institute which is – common sense already suggests it – not confined to the law of contract. It is not only because somebody can be unjustly enriched outside a contractual context but also because of the different quantification of restitutionary damages why the restitutionary remedy is often regarded as being quasi-contractual.²⁵

In contrast to compensatory damages restitutionary damages are assessed by reference to the defendant’s position, that is they are gain-based rather then loss-based. However, the claimant’s position remains relevant in a way. Both quasi-contractual remedies require the defendant to be enriched at the expense of or – more accurately – “by subtraction”²⁶ from the claimant. That is to say that the defendant’s gain must be due to a corresponding deprivation of the claimant.²⁷ In other words: The orthodox restitutionary remedies only require the respondent to “give back” benefits; they do not require him to “give up” benefits, he did not gain at the expense of the claimant.²⁸ It is important to see that the law of contract prior to Blake did not know a general remedy of disgorgement following a breach of contract.

E. The Law of Contract as a Default System

It was already stated elsewhere²⁹ that the law of contract only provides a default system. That is to say that these rules only come into play if the parties to the contract omitted to stipulate their own regime of remedies. It is crucial to understand the subsidiary function of the law of contract.

The right to do so follows from the generally accepted principle of freedom of contract. Not only allows this principle the parties – subject to certain limits (e.g. fraud) – to determine their primary economic obligations freely. Additionally they are also free to choose the remedies they want to apply in the event of a breach of the contract.³⁰ Only where the parties did not install their own set of remedies the default remedies provided by the law of contract come into effect as soon as the contract is breached.

III. A-G v Blake

A. The Factual Background

Blake, the defendant, was a former member of the Secret Intelligence Service (SIS). His employment contract contained a clause prohibiting him to disclose any information he received consequential upon his engagement. In violation of that clause he gave away significant information to the Soviet Union wherefore he was sentenced to a 42 years’ prison term. After having served 5 years of that sentence he managed to escape to Moscow where he since then lived. In 1989 Blake entered into a contract with a UK publisher to publish his autobiography carrying him a yield of £ 150,000 of which he already had received £ 60,000 at the time he was sued. In large parts the autobiography contained information he obtained as a member of the SIS. Instead of seeking a prohibitory injunction the Attorney General inter alia ³¹ brought an action for breach of simple contract claiming the £ 90,000 Blake was still to receive as damages.

B. The Judgement

After having found that the disclosure of the information in the autobiography constituted a breach of the life-long contractual obligation not to reveal information the Court considered the orthodox contractual remedies for breach of contract. In a first step it confirmed that “the basic remedy is an award of damages” and that “the rule of common law is that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it to be placed in the same position as if the contract had been performed”³². However, the Court went on to say that damages are “not always ‘adequate’ as a remedy for breach of contract”. It thought this to be true in the case at hand, since the British government did not suffer any monetary loss from the breach of the contract; its damages thus were only nominal.³³

The Court then turned to the alternative, that is specific relief. It stated:³⁴

[S]pecific remedies go a long way towards providing suitable protection for innocent parties who will suffer loss from breaches of contract which are not adequately remediable by an award of damages. But these remedies are not always available.

In the particular case the appropriate remedy would have been a prohibitory injunction not to publish the book. However the government had good reasons to seek a disgorgement of the profits rather than an injunction. The latter one would have been futile, since the book could have easily been published elsewhere.

In the eyes of the Court the orthodox law of contract was not able to do justice in the present case. From that it followed that “circumstances do arise when the just response to a breach of contract is that the wrongdoer should not be permitted to retain any profit from the breach”³⁵. Although disgorgement of profits as a consequence of simple breach of contract was unknown to the previous law, the Court could see no reason, why it “in principle, […] must in all circumstances rule out an account of profits as a remedy for breach of contract”³⁶, “[w]hen, exceptionally, a just response […] so requires”³⁷. The Court finally concluded that the case at stake was such an exceptional one and ordered an account of profits. The Court preferred this term to the “unhappy” term restitutionary damages.³⁸ However, there can be no doubt that it was a gain-based and thus a restitutionary remedy – albeit not one of the orthodox ones – which the Court in fact granted to the Crown, since it was clearly based on the notion of unjust enrichment.

C. The Potential Consequences of a Generally Available Blake Remedy on the Orthodox Law of Contract

Before turning to Blake ’s potential impact on the current law it is quite helpful to point out what is new about the Blake remedy.

What the Blake remedy shares with the two settled quasi-contractual remedies is that it is based on the defendant’s gain, that is the profit made or the loss avoided through the breach. However, it differs from them in that it does not require the benefit to be subtracted from the defendant. The source of the valuable benefit is not the claimant’s fortune, but rather the commitment of the breach as such. Admittedly Blake was unjustly enriched, but not at the expense of the government. Nonetheless he was compelled to return the profits to it.

Generally speaking the Blake remedy thus allows for a total disgorgement of valuable benefits gained by a breach of contract regardless of where they stem from; it does not force the defendant to “give back” a benefit³⁹, but rather to “give” it “up”.

At this stage Lord Hobhouse’s warning shall be recalled. He feared that the consequences of introducing an extensive restitutionary remedy into commercial law will be far-reaching and disruptive. In order to assess his statement it shall now be assumed – as a working hypothesis – that the Blake remedy is a generally available remedy for a simple breach of contract.

It was already stated elsewhere that the orthodox law of contract generally does not deter a party from breaching a contract.⁴⁰ Accordingly a party is, in principle, free to choose to perform his primary obligation or to breach the contract provided he compensates the claimant’s net loss, if any. However, a reasonable party will only breach its contract when it expects the breach to be more beneficial than performance.⁴¹ Under orthodox law the defendant could keep a benefit that remained after having compensated the claimant’s net expectancy. That, however, would simply be impossible under a law of contract where the Blake remedy is routinely granted. If the defendant were to give up any benefit a breach might yield him, what incentive remains then not to perform the contract? The answer is simple: None What the Blake remedy therefore in effect does is to make available a means to the claimant with which he can enforce the primary obligation owed to him. That is a means he was only exceptionally granted under orthodox contract law. The general common law rule thus had to be rephrased. Pacta sunt servanda it then ought to sound.

An extensive Blake remedy would not only lead to a shift from the protection of the expectation interest to the performance interest. Moreover, the defendant might also be deprived of defences (e.g. undue hardship), which he could raise against the equitable remedies of specific performance and injunctions. If he was still able to do that with respect to a Blake remedy, being a remedy as of right, is at least highly debatable.

Conclusively it can be said without doubt that Lord Hobhouse was right in saying that the introduction of an extensive Blake remedy would have far-reaching and disruptive consequences.

One could even go one step further. The availability of an extensive Blake remedy would mean no less than revolutioning the concept of contract law.

Saying that a revolution might be underway necessarily raises a question: Is this revolution desirable after all? What it thus all comes down to is whether the primary default remedy for a breach of contract should be an award for compensatory damages or rather a Blake remedy which de facto equals a right to specific performance?⁴² The following part of this essay seeks to give an answer to this question.

IV. The Law of Contract De Lege Ferenda – The Law of Contract as It Should Be

The law of contract is not an end to itself but a means to an end. Which remedy serves the end best requires a determination of this end a priori. It should be taken for granted that a remedy’s principal goal, be it compensatory damages or restitutionary damages, must first of all secure that the non breaching party obtains (at least) the (net) benefit, if any, he bargained for.⁴³ What this part of the essay is concerned with is the supplementary doctrinal footing the law of contract, in particular the remedies regime, rests on. Two possible approaches are thinkable.⁴⁴

A. The Morality Approach

Contracting, in the first place, means nothing else than making a promise. It is common sense that if I make a promise I am morally obliged to keep it.⁴⁵ The promisee expects me to be true to my word. Breaking a promise means disappointing the promisee’s expectations and the trust he put in my word. In society the breach of a promise is generally regarded as something blameworthy. The breach of a promise is a perceived wrong. One could therefore argue that the law of contract should take measures to ensure that a promise is worth something. Accordingly it has to procure that the promisee gets exactly what he was promised to get.⁴⁶ Contract law must not help to establish a society in which the breach of a promise is regarded to be something “normal” or even something good.⁴⁷ Hence, breach has to be prevented in general. In other words: Pacta sunt servanda. Only thereby the cynical consequence could be prevented that the wrongdoer may even profit from the committed wrong. Any other outcome would be immoral and unethical.⁴⁸

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¹ A-G v Blake (Jonathan Cape Ltd Third Party) [2001] 1 AC 268 (HL).

² The remedy will hereinafter be referred to as the Blake remedy.

³ A-G v Blake (Jonathan Cape Ltd Third Party) [2001] 1 AC 268 (HL) at 299.

⁴ Whenever the essay refers to the “claimant” the “non-breaching party” is meant.

⁵ L L Fuller and W R Perdue, Jr. “The Reliance Interest in Contract Damages” (1936) 46 Yale Law Journal 52 at 52.

⁶ D Harris, D Campbell and R Halson Remedies in Contract and Tort (2nd ed, Cambridge University Press, Cambridge, 2005) at 5 – 7.

⁷ I Ayres and R Gertner “Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules” (1989) 94 Yale Law Journal 87.

⁸ Another issue is whether such a “revolution“ should be undertaken by the courts or whether it should rather be left to Parliament.

⁹ J D McCamus The Law of Contracts (Irwin Law Inc., Toronto, 2005) at 813.

¹⁰ Whenever the essay refers to the “claimant” the “breaching party” is meant.

¹¹ For a detailed discussion about the relevant interests in contract law see L L Fuller and W R Perdue, Jr. “The Reliance Interest in Contract Damages” (1936) 46 Yale Law Journal 52.

¹² Robinson v Harman (1848), Exch. 850, 154 E.R. 363.

¹³ A fortiori it does not prevent unconscious breaches either.

¹⁴ See infra IV.D.1.

¹⁵ G H Treitel The Law of Contract (12th ed, Sweet & Maxwell, London, 2007) at 940.

¹⁶ D Harris, D Campbell and R Halson Remedies in Contract and Tort (2nd ed, Cambridge University Press, Cambridge, 2005) at 110.

¹⁷ The onus to prove that C has omitted to take such a reasonable step, however, is placed on D.

¹⁸ The term “duty” must not be understood in a strict legal sense, since it is not an enforceable obligation owed to D.

¹⁹ D Harris, D Campbell and R Halson Remedies in Contract and Tort (2nd ed, Cambridge University Press, Cambridge, 2005) at 114.

²⁰ O W Holmes, Jr. The Common Law (Macmillan, London, 1882) at 300.

²¹ D Harris, D Campbell and R Halson Remedies in Contract and Tort (2nd ed, Cambridge University Press, Cambridge, 2005) at 168 – 171.

²² Behnke v Bede Shipping Co Ltd [1927] 1 KB 649. S Macaulay “Renegotiations and Settlements: Dr. Pangloss’s Notes on the Margins of David Campbell’s Papers” (2007) 29 Cardozo Law Review 261 at 264.

²³ A noteworthy feature of a claim in restitution is that the rules of causation, remoteness and mitigation do not apply.

²⁴ L D Smith “Disgorgement of the Profits of Breach of Contract: Property, Contract, and ‘Efficient Breach’” (1994) 24 Canadian Business Law Journal 121 at 121.

²⁵ See P Birks An Introduction to the Law of Restitution (Clarendon Press, Oxford, New York, 1989) at 28 – 39.

²⁶ Ibid at 23 – 24. Birks contrasts this narrow form of restitution to a broader restitution for wrongdoing.

²⁷ L D Smith “Disgorgement of the Profits of Breach of Contract: Property, Contract, and ‘Efficient Breach’” (1994) 24 Canadian Business Law Journal 121 at 121; D Campbell and D Harris “In Defence of Breach: A Critique of Restitution and the Performance Interest” (2006) 22 Legal Studies 208 at 222.

²⁸ L R Caprice “A Commonwealth Perspective on Restitutionary Disgorgement for Breach of Contract” (2008) 65 Washington and Lee Law Review 945 at 982.

²⁹ See supra I.

³⁰ D Campbell and D Harris “In Defence of Breach: A Critique of Restitution and the Performance Interest” (2006) 22 Legal Studies 208 at 231.

³¹ In the Court of Appeal the Crown also invoked a breach of a fiduciary obligation Blake allegedly still owed to his former employer in order to make available an account of profits. However, the Court dismissed that claim. Apart from the fact that there is no life-long duty of loyalty to a former employer, the information ceased to be confidential, A-G v Blake (Jonathan Cape Ltd Third Party) [1998] Ch 439 (CA) at 453 – 454.

³² A-G v Blake (Jonathan Cape Ltd Third Party) [2001] 1 AC 268 (HL) at 282.

³³ Ibid 288.

³⁴ Ibid.

³⁵ Ibid 284.

³⁶ Ibid.

³⁷ Ibid. Regarding the proposed approaches and the difficulty to make a reliable statement as to which circumstances are exceptional see D Campbell and P Wylie “Ain’t No Telling (Which Circumstances Are Exceptional)” [2003] Cambridge Law Journal 605.

³⁸ It can only be assumed that this is the reason why the Court did not deal with the two orthodox restitutionary remedies at all, although it would have been the next logical step.

³⁹ That would logically imply that the claimant possessed it before, which is exactly not the case.

⁴⁰ See supra II.B.1.

⁴¹ D Harris, D Campbell and R Halson Remedies in Contract and Tort (2nd ed, Cambridge University Press, Cambridge, 2005) at 9.

⁴² At the core of this discussion is the question whether contract law should rather protect the performance interest. Over the years various means – specific performance, punitive damages, gain-based damages – have been promoted, which all seek to deter breaches, see R Stone and R Cunnington Text, Cases and Materials on Contract Law (Routledge-Cavendish, Abingdon, New York, 2007) at 1145; D Friedmann “The Performance Interest in Contract Damages” (1995) 111 Law Quarterly Review 628 at 629.

⁴³ Both remedies are capable of complying with this goal. A broad restitutional remedy deters breach and thus ensures that the claimant gets exactly what he has bargained for. Hence he is in the position he would have been in had the contract been performed. Likewise compensatory damages are able to fulfil that aim. They put the claimant monetarily in an as good position.

⁴⁴ See A Schwartz “The Case for Specific Performance” (1979) 89 The Yale Law Journal 271 at 278.

⁴⁵ C L Roberts “Restitutionary Disgorgement as a Moral Compass for Breach of Contract” (2009) 77 University of Cincinatti Law Review 993 at 1018.

⁴⁶ P Linzer “On the Amorality of Contract Remedies – Efficiency, Equity and the Second Restatement” (1981) 81 Columbian Law Review 111 at 138 – 139.

⁴⁷ E J Weinrib “Punishment and Disgorgement as Contract Remedies“ (2003) 78 Chicago-Kent Law Review 55 at 75.

⁴⁸ However, this approach cannot explain why it is exactly the claimant who should be entitled to that profit in cases where the benefit is not gained by subtraction, see E J Weinrib “Punishment and Disgorgement as Contract Remedies“ (2003) 78 Chicago-Kent Law Review 55 at 74.