Disgorgement of Profits for Breach of Contract: A Comparative Analysis

Abstract

This article considers whether a contract-breaker is obliged not only to pay compensatory damages but also to disgorge to the innocent party the profits obtained from breach of contract. After an introduction to the topic, the approach of the courts in Common Law jurisdictions will be outlined. The main focus will be on English Law and the decision of the House of Lords in Attorney General v Blake, althoughjudgmentsfrom other countries will also be mentioned. Thereafter thefocus will be upon Germany as an example ofa Civil Lawjurisdiction. The German law of contract, negotiorum gestio and unjustified enrichment will be examined as to their ability to award disgorgement. The mixed legal systems of Israel, Louisiana and Scotland will also be studied. The similarities and differences between the different legal systems will then be compared and interpreted. In particular, the article will consider common starting points, exceptions and new legal concepts, as well as differences injudicial decision-making and in thefreedom to draft contractual terms. Finally, it will be contended that disgorgement ofthe benefits resultingfrom a breach ofcontract should in principle be awarded. Moreover, this should not be restricted to certain cases. It is necessary only that the gains should be attributable to breach of contract.

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