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Dear all,

I agree with much of Jamie's analysis. I would add that the choice between these two remedies is (as actually implied in Jamie's own comments) a choice between deterring potential appropriators of people's entitlements (profits) and preserving the value of people's entitlements (use-value). This choice, in turn, requires a normative choice as to the content of such an entitlement: the former implies a libertarian entitlement, vindicating people's negative liberty; the latter implies a utilitarian entitlement, vindicating their well-being. Hendrix thus stands for the (normatively appealing) propositions that the entitlement of a commercial promisee in the performance of the promise may be utilitarian, and that there are only exceptional circumstances (such as Blake) where an entitlement of a promisee would be libertarian.

Hanoch

At 01:23 27/03/03 +0000, James Edelman wrote:

Dear all,

I certainly agree with Peter that the claim in Hendrix was not one of disgorgement damages. But I do not think that the decision supports the thesis in his stimulating monograph, The Nature and Scope of Restitution, that a "use claim" (restitutionary damages) does not arise from a wrong (here the breach of contract) but is based on an imputed contract between the parties. It seems to me that the Court of Appeal, having rejected the disgorgement damages award (account of profits) for the breach of contract, was quite clearly awarding restitutionary damages (the use claim) for the breach of contract.

In relation to the rationale for each, I don't think it is possible to support disgorgement damages as a type of surrogate for compensation. When a court focuses exclusively upon stripping the profits of a defendant the only possible rationale I can see is to deter the defendant, and others, from commission of that wrong. Undoubtedly there will be difficulties in determining how that profit should be measured (for instance, to what extent should allowances for skill and effort be given as expenses incurred, should opportunity costs should be allowed as expenses) but this should not distract from the deterrent focus of this award. Courts have long emphasised that the award of an account of profits (disgorgement damages) for a breach of fiduciary duty is based upon deterrence. Other profit-stripping or disgorgement damages awards should be no different.

I also agree that the use-value claim is restitutionary. And where it is given for a wrong, perhaps it should be called "restitutionary damages" (to differentiate it from restitution for unjust enrichment). The basis and rationale for this claim depends upon the cause of action which gives rise to it. Where courts say that these restitutionary awards are given for a wrong (in this case, the breach of contract) I think they should be taken at their word. There is no necessary reason why we should say that what the judges really meant was that the claim was one for an imputed contract or that it should be re-interpreted as a claim in unjust enrichment. The rationale in such cases is simply that there was a wrongful transfer. If it is possible to reverse transfers for other reasons then it must be possible to reverse a transfer where it is recognised that it has been wrongfully made. For a superb explanation of the corrective justice basis of reversal of transfers (although focussing on unjust enrichment) see Lionel Smith's discussion of Weinrib's "The Idea of Private Law" in (2001) Texas Law Rev 2115.

Jamie