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RDG
online Restitution Discussion Group Archives |
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Dear All,
I want to echo Lionel's point that I do not think that
gain-based or non-loss based damages for breach of contract (whether in
the reasonable use-value measure or full disgorgement measure) need to
be understood in policy terms, such as deterrence, at all. In other words,
that cases like Blake
and Hendrix
(which I still have to work through) can be understood as manifestations
of corrective justice. The argument, which is of course still tentative,
is as follows:
1. The right to property includes, to use the civilian
expression, the right to the use, fruits, and abuse (destruction/sale)
of the property
2. In general, violations of property rights usually
take two forms: (a) an unauthorized use which leaves the property intact
(which allows for traditional compensation or the reasonable use value
damages); (b) an authorized sale through which the property cannot be
returned (which allows for traditional compensation or the sale price
received by the wrongdoer).
3. It is plausible to view all of the remedies give in
(a) and (b) as vindicating the right of the property owner since the right
to property includes the right to this gain (the use and fruits), see
Weinrib's Restitutionary Damages as CJ. The wrongdoer, or other wrongdoers,
might be deterred because of these awards but that is merely the flip
side of the gain-based award whose purpose is to undo the violation of
the rights of the plaintiff. [In any event, the award might not deter
this wrongdoer, or other wrongdoers, given the likelihood of detection
in the future but the courts do not routinely increase the award on this
basis, an increase which would be in line with the deterrence rationale].
4. The question then is: When can a contractual right
be treated as if it were a property right? A "judicial consensus" seems
to be emerging that a contractual right can be thus treated when the court
would have given an injunction or ordered specific performance, see e.g.,
Bank
of America Canada v Clarica Trust, (2002), 211 DLR (4th) 385 (SCC)
and the cases cited in Waddams, The Law of Damages, 3rd ed, (Toronto:
Canada Law Book, 1997) at §9.200. Why? Because in those types of cases,
only the giving of the actual thing promised, rather than a payment of
money, will undo the violation of the plaintiff's right (i.e. compensate
them) when the defendant refuses to perform.
5. Assuming that in cases of SP/injunction a contractual
right to performance will be treated as if the plaintiff has actual ownership
of the thing promised, the question then becomes which type of property
interference has the defendant committed (on the facts of the particular
case) by breaching the contract. Is it more like a sale-type infraction
which leads to the profits from the sale (a plausible interpretation of
Blake), or is it more like a use-type infraction which leads to reasonable
user-damages (which from the description thus far, seems like a plausible
interpretation of Hendrix).
6. Thus, non-loss based damages should be available for
breaches of contract (in rare circumstances) but the court does not have
a discretion (or sliding scale) to award whatever it feels like on the
facts of a given case. They can only award those damages that undo the
wrong represented by the breach in the particular circumstances.
Jason
-- Hanoch Dagan wrote:
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 <== Previous message Back to index Next message ==> |
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