Is the Law of Contract Seriously Defective if the Court is Unable to Award Restitutionary Damages for Breach of Contract?

Abstract

It is commonly believed that the general rule is that damages for breach of contract are compensatory not restitutionary. So, the damages are measured by the loss to the plaintiff not by the gain to the defendant. However, there are many academic writings which have advocated that restitutionary damages should be available as general default rule in breach of contract, because it is able to provide adequate remedy to plaintiff when compensatory damages are inadequate. The A-G vs. Blake is the remarkable case which embodied by Hendrix case, posits the general restitutionary remedy. Blake has challenged the traditional approach of damages and signaled a trend of establishing restitutionary damages. The proponents of this point always purport ‘the interests of justice’ for plaintiff, however, they misunderstand the purpose of law of contract which is to balance the interests between claimant and defendant so that to maximize the social profits. Accordingly, the restitutionary damages are an objection to efficient breach in economic view because the restitution and account of profit (disgorgement) will deprive the defendant’s incentive to maximize profits and the claimant’s desire to minimize loss. So, the virtue of damages for breach of contract would be diminished if the general restitution relief is established.


Key Words: Restitutionary damages; Compensatory damages; Freedom of contract; Efficient breach