Restitutionary Damages for Breach of Contract: An Exercise in Private Law Theory

Hanoch Dagan


This article focuses on cases of restitution within contract, investigating the normative desirability of enabling a promise to pursue the profits derived by the promisor through a breach of contract as an alternative pecuniary remedy of wide applicability. Situated at the frontier of both contractual and restitutionary liability, the question of whether restitutionary damages for breach of contract should be available has received a considerable amount of attention. This article makes a critical examination of the normative groundings that have been proposed for and against awarding this pecuniary remedy.

This article arrives at two significant conclusions. The first is deconstructive. Parts I and II critique two conventional arguments often raised in the debate over restitutionary damages. These Parts raise doubts as to the ability of these arguments to substantiate the doctrinal conclusions they purport to support. I claim that both promise-keeping and unjust enrichment are neutral between rules offering restitutionary damages and denying such awards. The significance of the results of this analysis extends beyond the specific questions at hand, since these arguments dominate many of the debates surrounding private law theory.

The second conclusion reached is reconstructive. Parts III, IV and V present three normative considerations that are more helpful: protection of proprietary rights, enhancement of efficiency, and good faith. Here an attempt is made to reconceptualize the conventional arguments for the derivation of legal rules from these normative prescriptions. From this reconceptualization, we realize that in order to settle the debate over restitutionary damages for breach of contract, a choice must be made between the instrumental conception of contract and its more cooperative alternative. Thus, it emerges that here, too, just as in the case of many other legal issues, the persistent need to choose between two conflicting social visions cannot be avoided.

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