Possible consequences of awarding non compensatory damages for breach of contract on Commercial Law

Table of Contents

I. Introduction

II. The Law of Contract De Lege Lata – The Law of Contract as It Is

A. The Remedies for Breaches of Contract

B. Compensatory Damages as the primary remedy

1. The Protected Interests

2. Limitations on the Recovery of Damages

C. Literal Enforcement as Exceptional Remedy

1. Specific Performance

2. Injunctions

D. The Settled Restitutionary Remedies

E. The law of contract as a default system

III. A-G v Blake

A. The Factual Background

B. The Judgement

C. The Potential Consequences of a Generally Available Blake Remedy on the Orthodox Law of Contract

IV. The Law of Contract De lege ferenda – The Law of contract as it should be?

A. The Morality Approach

B. The Economic Approach

C. Statement

D. Efficient Breach or Efficient Performance?

1. The efficient breach theory

2. Maximizing Profit Breaches

(a) Cost-related arguments

(i) Allocation of the Contractual Resources

(ii) Transaction Costs

(1) The Need to Negotiate for Release

(2) The Need to Oust the Default System

(b) Non-cost Related Arguments

(i) Who Should Make the First Move?

(ii) The Parties’ Expectations

(iii) The Non-Monetary Inconviences

(iv) Disincentive to Co-operate

(v) The Impact on Third Parties

(vi) Inconsistency of the theory of efficient breach with other legal institutions

(vii) The Risk of Uncompensated Losses

3. Minimizing loss cases

(a) Example 1

(b) Example 2

(c) Example 3

(d) Evaluation

V. Conclusion

Objectives & Core Themes

This essay examines whether the introduction of a more extensive principle for awarding non-compensatory damages, inspired by the Blake judgment, would fundamentally disrupt commercial law. It seeks to determine if the traditional reliance on compensatory damages is sufficient, or if a "Blake remedy" (gain-based disgorgement) should be integrated into the default system to ensure fairer outcomes and discourage breaches.

• The tension between compensatory damages and performance-based remedies.
• The "efficient breach" theory and its role in justifying the current remedies regime.
• The impact of A-G v Blake on the concept of contract law.
• The debate between morality and economic efficiency as a basis for contract remedies.
• Proposals for a "mixed-remedies-default-system" to handle different types of contract breaches.

Excerpt from the Book

Chapter Summaries

I. Introduction: Presents the Blake case and the dissenting opinion of Lord Hobhouse regarding the potential disruptive effects of non-compensatory damages.

II. The Law of Contract De Lege Lata – The Law of Contract as It Is: Outlines the existing legal framework of remedies, focusing on compensatory damages, literal enforcement, and restitution.

III. A-G v Blake: Analyzes the facts, judgment, and the broader implications of the Blake case on the orthodox law of contract.

IV. The Law of Contract De lege ferenda – The Law of contract as it should be?: Compares the moral and economic approaches to contract law, specifically evaluating the "efficient breach" theory.

V. Conclusion: Synthesizes findings to suggest a "mixed-remedies-default-system" that balances efficiency with the necessity of addressing uncompensated losses.

Keywords

Contract Law, Blake Remedy, Compensatory Damages, Efficient Breach Theory, Restitutionary Damages, Disgorgement, Performance Interest, Expectation Interest, Mitigation Rule, Specific Performance, Commercial Law, Economic Efficiency, Breach of Contract, Default System, Unjust Enrichment.

Frequently Asked Questions

What is the central focus of this legal study?

The paper examines whether introducing an extensive principle of non-compensatory damages (the "Blake remedy") would have disruptive consequences on commercial law and whether such a shift is desirable.

What are the primary themes discussed in the work?

Key themes include the distinction between compensatory and gain-based remedies, the economic theory of efficient breach, the moral implications of breaking promises, and the adequacy of current legal remedies.

What is the core research question?

The research asks if the default remedy for a breach of contract should remain compensatory damages or if it should evolve into a system that de facto enforces the performance interest, mirroring the Blake outcome.

Which scientific approach is utilized?

The author employs a legal-analytical and economic approach, assessing legal doctrines against the criteria of economic efficiency, transaction costs, and resource allocation.

What is covered in the main body of the work?

The main body covers the pre-Blake legal landscape, the specific details of the Blake case, the theory of efficient breach, and an evaluation of how different remedies affect various breach scenarios.

Which keywords best describe this research?

Key terms include Contract Law, Blake Remedy, Efficient Breach, Disgorgement, Compensatory Damages, and Economic Efficiency.

What is the "efficient breach" theory?

It is an economic theory suggesting that parties should be allowed to breach a contract if the cost of performance exceeds the benefits, provided the non-breaching party is fully compensated.

How does the author propose resolving the flaws in the current system?

The author proposes a "mixed-remedies-default-system" where compensatory damages serve as the primary remedy for "minimizing loss" cases, while gain-based remedies are available for "maximizing profit" breaches.