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Dear all,

I find the Hendrix case interesting and important because it seems to me to open a promising path in the ongoing debate over restitutionary damages for breach of contract (I apologize for using this term, which I know may be out of favor by some).

As I read the opinion of Mance LJ in Hendrix, it stands for two convincing propositions:

1. An actual profits measure of recovery (Blake) should be available only in exceptional circumstances. More particularly -- and I know that this one is controversial -- I read Hendrix in this respect very much like Andrew does, namely: that the Blake rule applies where "the relationship between the parties came close to being fiduciary." In any event, Hendrix clearly rejects an Adras approach in which full, actual net profits are available for a deliberate breach even in a purely commercial setting. For reasons that I've discussed elsewhere ( 98 Michigan L. Rev. 138 and 1 Theoretical Inquiries in Law 115 respectively) I support both prongs of this proposition.

2. On the other hand, as Jamie indicated, the prescribed remedy is "a wholly separate measure from an award of disgorging profits," because it is an objective measure: the "reasonable payment for use value." This measure does not effectively deter breaches; indeed, as I've just indicated it stands for the proposition that in commercial settings breaches need not be deterred. In terms of the celebrated Calabresi-Melamed scheme this measure of fair market value is a classic example for a liability rule.

More precisely, to use the terminology I developed in my Unjust Enrichment book, the Hendrix rule does not vindicate a promisee's libertarian right in a contract. But -- pace Steve's comments -- the measure of recovery it prescribes does go further than just protecting a promisee against loss (at least under the strict -- but helpful -- meaning of the term "loss"). The Hendrix rule vindicates the promisee's utilitarian right in the performance by allowing recovery of reasonable use value even where, on any fair reading of the circumstances, the breach did not cause the promisee any actual harm. This indeed seems to me an appropriate remedy in a commercial setting where the promisee does the very thing it contracted not to do. Furthermore, if this is the rule of the case, it does not involve any discretionary remedialism: this measure of recovery applies in other restitutionary contexts as well; notably, in the American context, in cases of patent infringements.

Hanoch

Hanoch Dagan
Affiliated Overseas Professor
University of Michigan School of Law
625 South State Street
Ann Arbor, MI 48109-1215
(734) 647-7352 (o)
(734) 764-8309 (fax)