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Sender:
Daniel Friedmann
Date:
Thu, 29 Nov 2001 18:24:17 +0200
Re:
Profits from breach (Esso v. Niad)

 

The right to recover gains derived from breach of contract is part of a long process of expanding the protection granted to contractual rights and that of narrowing the gap between property and contractual rights. Earlier stages in this development include the possibility of transferring (assigning) contractual rights and their protection against third parties (Lumley v. Gye). This process reflects the importance of contractual rights and is therefore likely to continue.

The great diversity of contractual rights makes generalization difficult. The relevant factors regarding the question whether to allow restitution of gains derived from the breach include: 1) the nature and importance of the plaintiff's right; 2) the reprehensibility of the defendant's conduct; 3) the question whether the defendant sold to a third party the very performance that he promised to the plaintiff (contrast the following cases: a) A an opera singer undertakes to perform in B's opera house but in breach of the contract accepts a better offer from C to sing in a competing opera house; b) A who is employed by B as a clerk, accepts a much better offer to act in a film produced by C) and 4) the nature of the defendant's contribution to the gain and its social utility (in Esso Petroleum v. Niad it seems to have consisted simply of charging higher prices).

Finally, restitution does not necessarily mean recovery of all gains made by the defendant. The factors enumerated above are relevant also to the measure of recovery. Where the defendant made a substantial contribution, to which the plaintiff was not entitled, it is conceivable that the plaintiff will only recover the value of that which was taken from him or that profits will be apportioned (cf. Sheldon v. MGM Pictures) or that the defendant will receive quantum meruit for his contribution (cf. Boardman v. Phipps).

 


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