Study On Disgorgement Interest For Breach Of Contract And Improvements Of Damage Compensation System Of China

Disgorgement damage for breach of contract is developed from disgorgement damage for illegal behaviors in Trust Law,Tort Law and Intellectual Property Law,which the breaching party shall compensate the non-breaching party for the breaching party’s profits.Disgorgement interest for breach of contract has been widely recognized by national legislation and practice.Because protecting the non-breaching party’s benefit is the core of damage compensation for breach of contract,we do not need to consider the breaching party’s profits when measuring the damage.In the meanwhile,as the Chinese damage remedy system adopt the monetary compensation model,the principle of breach of contract is value-oriented when it defines the scope of the loss for the non-breaching party,which the cognizance of the loss is relatively narrow.When breaching party’s profits is much greater than the loss of non-breaching party or the non-breaching party is difficult to prove the loss,it easily leads to the non-breaching party’s interests unfair and inadequate,because disgorgement interest is excluded from the of damage compensation.Some common law countries tried to solve the problem by introducing the restitution rule under the unjust enrichment law to the contract zone so as to disgorge the breaching gains in several typical cases.However,the composition of the rule may be far from flawless.In our country,the cases in which the breaching party receives disgorgement interest often belong to certain types.In such cases,the claimant tends to request the court to award the disgorgement interest instead of damages as an equitable remedy.Under normal circumstances the claim is difficult to get support,but some judges for the sake of fairness express positive attitude to the claim and support the breaching party to return the profits.A majority chooses to take the profits for reference in order to reconcile the welfare distribution of both parties.Because the wording of the contract law may not support the claim,the court’s decision is unlawful although it may be reasonable.To solve this logical contradiction,firstly,it is necessary to expend the interest scope from the value interest to the integrity interest so as to bridge the logic gap between the disgorgement interest and loss of the non-breaching party,reasonably incorporating the disgorgement interest into the scope of damage compensation system.Secondly,to critically reference the legal system related to disgorgement interest of the Common Laws and make adjustment in the composition and elements to improve the damages awarding system in order to ensure the efficiency while taking into account the balance of interests between the contract parties.