A Study On The American Disgorgement Damages For Breach Of Contract

Restatement Second of Contracts section 344 famously provides that judicial remedies in contract law serves to protect three interests of a promisee: expectation interest,reliance interest and restitution interest.The remedies which are based on the abovementioned interests are seeking to protect the plaintiff's losses.According to Holmes' s choice principle,“the duty to keep a contract at common law means a prediction that you must pay damages if you do not keep it,and nothing else.Therefore,in the traditional concept of remedy for breach of contract,the compensation for breach of contract is based on the loss of the non-breaching party,and the calculation of compensation is based on the loss of the plaintiff,which is a principle method widely used in legal theory and judicial practice.The benefit situation and subjective state of the defaulting party are not the focus of the traditional compensation system.According to the traditional breach compensation system,which aims to compensate the loss of the plaintiff(the non-breaching party),the breaching party can keep the remaining benefit from the breach after paying the damages to the plaintiff(the non-breaching party),that is,the breaching party will still benefit after paying the damages to the non-breaching party(the non-breaching party).This benefit from breach of contract is permitted by the traditional breach compensation system.With the development of judicial practice and the progress of legal theory,the judicial precedents and jurists' theories that hold the benefit of the breaching party be the basis and focus of compensation for breach of contract gradually emerge before us.Blake opens the door to the disgorgement remedy,and Section 39 of Restatement Third of Restitution and Unjust Enrichment steps through the door.The object of this paper is remedy of breach of contract which results in benefits on the breaching party side,with a view to providing experience for Chinese compensation system regarding breach of contract.First,this paper first explores the history and present situation of disgorgement remedy practice in America.The disgorgement remedy which bases the focus of calculation of breach damages on the benefits of breaching party is initially indirectly applied through the bridge of constructive trust by judges,later British case law of Blake established legal status of disgorgement remedy in the area of breach of contract.The textualization of disgorgement remedy was achieved by the Section 39 of Restatement Third of Restitution and Unjust Enrichment.Second,this paper explores the justification rationale and the application of disgorgement remedy.The disgorgement remedy is justified by the fact that it can strengthen trust and cooperation and promote the performance of contract and that can restrain efficiency breach,maintain contract system;and that can fully protect property rights and reinforce the weakness of the function of contract remedy.Pursuant to the aforesaid judicial practices and academic works,we can generalize the categories or situations where the disgorgement remedy can be applied,including the contracts of sale of specific goods,contracts that involves public interests,contracts of restrictive or forbidding obligation such as non-competing and the contracts of defective performance.Third,the constitutive requirement of disgorgement remedy is studied.The pattern of constitutive elements is adopted in this section considering deductive reasoning method in the civil law system which is different from the analogical reasoning of common law system.The constitutive requirement of disgorgement remedy includes the existence of benefits from breach of contracts,the wrong on the breaching party side,inadequacy of remedy,and causation.The instances exempting the breach party from liability are the force majeure and plaintiff's fault.The exception of disgorgement remedy includes the consent of release of liability by contract parties and windfall on the plaintiff side.The scope of disgorgement interest in breach cases includes positive benefit and negative benefit.The positive benefit consists of direct gains and consequential gains;Costs saved including diminished-value comprise negative benefit.Finally,this paper analyzes the current situation and deficiencies of China's relief system for breach of contract,and analyzes relevant judicial cases in relation to disgorgement remedy.Considering possibility of application and rationality of the existence of disgorgement remedy,this paper holds that China learn from the disgorgement remedy and this remedy can be placed in section of the general provisions of contract law.