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Dear all:

I tend to agree with Steve that Peter, Jamie, Steve & I are basically in agreement on Hendrix and that some of our conversation is based on confusion. Peter indeed pointed out to my own misunderstanding -- for which I apologize -- with regard to what he means by uncompensable loss.

To my defense I can say (for what it's worth) that some other courts and commentators do make a case for disgorgement in contract by referring to the promisor's profits as a "solution for undercompensation."

I am also not sure that the term "uncompensable loss" best describes the types of cases Peter refers to (although again, once we agree on the substance, I am not that much concerned with terminological disputes). If I understand him correctly, in addition to the category of fiduciaries (and alike: Blake...), Peter refers to the same types of cases Allan Farnsworth addressed in his "Your Loss or My Gain? The Dilemma of the Disgorgement Principle in Breach of Contract." (94 Yale L.J. 1339 (1985)), namely: cases in which, as a result of the breach, the promisee is left with a skimped performance and no opportunity to use her return performance to attempt to obtain a substitute (the typical example Farnsworth gives is of a case of a contractor who secretly substitutes cheaper materials for the more expensive ones contracted for: because in such cases courts usually limit the promisee's recovery to the diminution in value of the structure, which may be far less than the cost of reconstruction, the breach leaves the promisee with no opportunity to purchase the performance she desired).

Farnsworth claimed -- and I agree -- that the potential advantage of disgorgement in deterring breach in these cases he defines as abuse of contract outweigh their administrative costs, and that (for that reason) contractual parties are likely to endorse a rule that assures promisees against skimped performance. He suggested -- and I agree again -- to call this category of cases "abuse of contract."

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)