Documente Academic
Documente Profesional
Documente Cultură
2
3
4
5
6
7
8
9
10
11
12
Is Claimant still entitled to seek specific performance?
13
14
15
What is disgorgement of profits?
16
Blake was a former member of the Secret Intelligence Service who in 1944 signed an
agreement not to divulge any official information gained as a result of his employment.
Blake broke this agreement in 1966 when he fled to Moscow and wrote an
autobiography outlining details of his work with the Secret Intelligence Service. The
Crown sued Blake for breach of contract. Had the Crown been awarded compensatory
damages (which it was not),47 it would have been impossible for those damages to have
been used to purchase substitute performance. It was too late; Blake had already
divulged the official information and there was no way that this act could be undone. To
that extent, there was no market substitute for performance and damages were
inadequate. This explains why Lord Nicholls emphasised the significance of the
obligation breached:
The present case is exceptional. The context is employment as a member of them
security and intelligence services. Secret information is the lifeblood of these services.
There was no substitute for Blake’s performance. Damages could not be used to right
Blake’s wrong. Therefore compensatory damages were inadequate.
In Blake, the defendant was required to give up all his profits regardless of whether it
could be shown that the profits had been derived directly from the Crown. Indeed, it
seems that the Attorney General would still have been entitled to claim gain‐based
damages even if Blake had been able to show that all of his profits had been generated
by his own work and skill. The Blake measure was a real assessment of the actual profits
received by the defendant as a consequence of his breach.
17
The defendant, Parkside Homes, erected homes on their land in breach of
covenant. A mandatory injunction was refused on the ground that it would have
constituted an
unpardonable waste of much needed houses. Instead, Brightman J awarded
damages. Compensatory damages, measured by reference to diminution of
value, would have been nominal because the value of the plaintiff’s land had
been unaffected by the construction of the new houses.
Brightman J considered that this result was unsatisfactory—
J considered that this result was unsatisfactory ‘justice
justice would
would
manifestly not have been done’—and for that reason he awarded gain based
damages calculated at 5% of Parkside’s anticipated profit.
18
Friedman: CLAIMANT would, thus, be able to obtain part of the increased gain
resulting from RESPONDENT's contract with Super wines (part because
RESPONDENTS still gets to keep his regular profits he would have had under the
contract with CLAIMANT). There is nothing wrong in this.
After all, CLAIMANT is required to give up his entitlement to RESPONDENT's
performance, so he should be allowed to charge an amount higher than that
arrived at by calculation of expectation damages.
19
Inspired by Friedman.
This result is most probably in line with the reasonable expectations of the parties.
In their original contract, CLAIMANT and RESPONDENT could have agreed on an option
to terminate the contract, subject to payment of a specific amount or subject to
payment of expectation damages.
If they had done so, no problem would arise.
Since they did not do so, there is no reason for the court to imply such a term.
If they negotiated beforehand their respective rights in case of a third‐party offer, it is
doubtful that they would have limited CLAIMANT's right to expectation damages only.
It is very likely that they would have chosen terms more generous to CLAIMANT,
especially if the original contract stipulated that the promisee could obtain an injunction
or specific performance.
20
Peter Jaffey (Saidov 152) The adequacy of damages test serves to determine
whether the defendant had a duty of performance or was at liberty not to
perform.
21
22
23
24
25
Friedman, ….it would be unwise to give RESPONDENT a "right" to break the
contract with CLAIMANT. Oftentimes there are massive other complications
lurking
in the wings.
26
Inspired by Friedman: What is objectionable is an attempt by RESPONDENT to
obtain through the commission of a wrong (breach of contract) the benefit of a
transaction that should have been concluded between CLAIMANT and Super
Wines (or Super Wines’ customers).
Inspired by Friedman: The real issue …. is who should benefit from [Super
Wine's] willingness to pay a high price for the ….wine promised to CLAIMANT.
In principle, there should be a transaction between Super Wines and CLAIMANT
(the promisee under the Contract).
(the promisee under the Contract)
If RESPONDENT promised to sell wine to CLAIMANT for 41.5 US$ and Super
Wines was willing to have it for 50US$, he should negotiate its purchase from
CLAIMANT.
RESPONDENT is simply not entitled to sell to Super Wines something he has
promised to transfer to CLAIMANT, and RESPONDENT was therefore not the right
party to negotiate with.
27
28
What does theory of efficient breach state?
FRIEDMAN: The efficient breach theory is in fundamental conflict with a basic premise
of both the common law and other Western legal systems, namely, that property (including
contractual rights)35 is not to be taken and given
to another without the owner's consent.
FRIEDMAN: Property and contract rights are not absolute and may be compromised in various
ways under circumstances
of genuine necessity. But it is a vast leap from the narrow confines of the necessity cases to the
far broader proposition that there is some
general right to violate property or contract rights solely if there is some willingness to pay the
owner's loss. The theory of "efficient" breach
' l h h f " ff "b h
cannot overcome that gap.
Friedman: In modem commercial‐industrial society, contractual rights constitute a major form of
wealth, and consequently their adequate protection becomes of the utmost importance. Such a
society is likely to reject the idea that a person can be deprived of his bank account, his
insurance policy, or pension rights subject merely to payment of expectation damages to be
decided at a later date by a tribunal that might not correctly appraise the damage inflicted.
29
Friedman: As a normative matter, parties in a contractual setting should be left free to define
the ambit of their rights and it is open to them to
the ambit of their rights, and it is open to them to
stipulate that the promisor will be allowed to terminate the contract subject to payment of
damages. The efficient breach theory assumes, however,
that, even if they have not done so and even if they intended to confer on the promisee a
broader entitlement, the law will nevertheless
defeat their joint intention by granting the promisor an option to breach. For those who believe
in the parties' freedom to determine their rights,
efficient breach means that the promisee's contractual right may be appropriated without his
consent if that which was promised to him can be
used in a way that would yield profits exceeding his loss. However, such a taking of an
entitlement, for the sake of private gains, runs counter to the
l f h k f h
very basis of private law.
30
31
Friedman: Hence, the set of remedies that deter breach (such as specific enforcement,
injunction, punitive damages or restitution of gains acquired
j ,p g g q
through breach of contract) are likely to reduce the number of transactions
as compared to situations in which expectation damages provide the
sole remedy. There
is good reason to believe that the frequency of breach will be reduced
where specific performance and restitution are provided, if only because
the defendant has less to gain from breach.
The relaxation of contract remedies also has deleterious effects on the
willingness of parties to enter into mutually beneficial contracts in the first
place.
Friedman: In practice, all cases for future production involve a constant course of dealing in which modification of
previous arrangements is part and parcel of an ongoing course of business.‐
previous arrangements is part and parcel of an ongoing course of business ‐
Friedman, for procedural costs: Indeed, the extra payment made
under pressure may be regarded as a kind of "self‐help" to obtain performance.
It induces the promisor to honor his obligation, yet it is recoverable
on the ground of duress.
32
Friedman: Hence, the set of remedies that deter breach (such as specific enforcement, injunction, punitive damages
or restitution of gains acquired through breach of contract) are likely to reduce the number of transactions as
g q g ) y
compared to situations in which expectation damages provide the
sole remedy. There is good reason to believe that the frequency of breach will be reduced where specific
performance and restitution are provided, if only because
the defendant has less to gain from breach.
33