Breach of Contract and 'Unjust' Enrichment

AuthorAlan Bunbury
PositionJunior Sophister LLB Candidate, Trinity College Dublin
Pages94-110
BREACH
OF
CONTRACT
AND
"UNJUST"
ENRICHMENT
ALAN
BUNBURY*
Introduction
The
rule
of
the common
law
is
that
where
a
party
sustains
a
loss
by
reason
of
a
breach
of
contract,
he
is,
so
far
as
money
can
do
it,
to
be
placed
in
the
same
situation,
with
respect
to
damages,
as
if
the
contract
had
been
performed.
1
Thus
spoke
Parke
B
when
he
laid
down
the
"expectation principle"
as
the
cardinal
rule
of
contractual
damages
in
the
well-known
case
of
Robinson
v
Harman.
2
To
this
day
the
expectation
principle remains
the
first
and
foremost
rule
governing
damages for
breach
of
contract.
The
expectation
head
of
damages
has
subsequently been
supplemented,
in
limited
circumstances,
by
the reliance
head,
under which
a
party
is
compensated
for
the
expenditure
incurred
in
reliance on
the
contract.'
Such
damages,
though
at
odds
with
the
expectation principle
in
Robinson
v
Harman,
are
justifiable
as
they
still fall
squarely
within
the
more
general head
of
compensation
damages.
Traditionally
the
courts
have
sought
to enforce
contracts
by
ordering
parties
in
breach
of
their
obligations
to
compensate
the
innocent
party
for
the loss
incurred
as
a
result
of
the
breach.
However,
in
the
past
few
years
the
courts
have
attempted
to create
a
new
general
head
of
damages.
It
has
been argued
that,
where
a
party
to
a
contract
breaches
that
contract
and
thereby
makes
a
profit
even
after
compensating
the
other
party
for
his
or
her
loss, the
courts
should
disgorge
the
party
in
breach
of
that
profit.
This
goes
beyond
the
traditional
compensation
principle
and
constitutes
a
fundamental shift
in
the
focus
of
contractual
damages.
However,
when this
new head
of
damages
is
applied
*
Junior
Sophister
LLB
Candidate,
Trinity
College
Dublin.
The
author
would
like to
thank
Christopher
O'Hara
for
his valuable guidance
in the
process
of
editing and
improving this
article.
The
author would
also
like
to
thank Dr Eoin
O'Dell,
whose
lectures encourage
students
to
form
their
own
conclusions
as
to
what
the law
of
contract
should
be.
1
Robinson
v
Harman
850;
[1843-60]
All
ER
383,
at
385.
2
850;
3
McRae
v
Commonwealth
Disposals
Commission
(1950)
84
CLR
377;
Watts
v
Morrow
937;
©
2010
Alan
Bunbury
and
Dublin
University
Law
Society
Breach
of
Contract
and
"Unjust"
Enrichment
in
cases
concerning commercial
contracts, the
results
are
adverse
to
economic freedom
and
flexibility.
In
this
article,
it
will
be
argued
that
the
emergence
of
such damages
in
the
law
of
commercial
contracts
is
not
a
welcome
development
and
that
legislation
should
be
enacted
to expel
such
a
principle
from
the
Irish
law
of
contract.
Specifically,
it
will
be
argued
that
such
a
departure
from
the
traditional
principles
of
contract
law
is
bound
to
have
an
undesirable
effect
on
economic
freedom
and
modern
commerce,
and
generate
unpalatable
levels
of
uncertainty
in
the
law.
It
will
also
be
argued
that
the
new head
of
damages
is
based
on
unsound
principles
and
flawed
reasoning
and
that
the
disgorgement
principle
is
disproportionate when weighed against competing
legal aims.
A
multi-
jurisdictional
analysis
will
be
employed
to
assist
in
charting
the
development
of
the
law
in
this
area,
and
also
to
highlight
an
alternative
to
the
way
in
which
the
law
has
developed
in
the
UK
and
Ireland.
This area
of
the
law
suffers from
a
confusion
of
terminology.
Restitution
is
a
very broad
area,
which
encompasses
not
only
parts
of
contract
law
but
also
other
areas
of
the
law,
such
as
the
law
of
torts.
This
article
concerns remedies
for
breach
of
contract.
Restitution
can
be
further
divided
into
the two
categories
of
"restitution
by
subtraction",
in
cases
where
one
party
gains
by
subtracting
wealth
from
another,
and
"restitution
for
wrongs",
in
cases
where
one
party benefits
from the
commission
of
a
wrong,
though
"the
quantum
of
[the
wronged
party's]
wealth
remains
unaffected."
4
This
article
concerns
restitution
for
wrongdoing
in
commercial contract disputes,
that
is,
cases
which
disgorge
a
party
in
breach
of
contract
of
an
amount
which
is
greater
than
the
loss,
or
subtraction,
experienced
by
the
other party
to
the
contract.
This effectively
puts
the
plaintiff
in
a
better
position than
he
would
have
been
in
had
the
contract been
performed,
on
the grounds
that
the
defendant
has
committed
a
wrong
by
breaching
the
contract.
Further
problems
of
nomenclature
arise
from
the
fact
that the
distinction
between
restitutionary
damages
and
exemplary
damages
in
contract
law
is
blurred,
due in
part
to
the
considerable
overlap
of
the
two
heads
in
this
area.
Thus
it
will
be
seen
that
exemplary
and
restitutionary
damages
are
often claimed side-by-side.
5
Cases
which
are
considered
by
many
to
authorise
restitutionary
damages
are
therefore
discussed alongside
4
Peter
Birks,
An
Introduction
to
the
Law
of
Restitution
(Clarendon
Press,
1989),
at
23-24.
Note, however,
that
a
wrong
can
often
result
indirectly
in
a
net
change in the
wealth
of
the
wronged party.
Thus,
following
Birks's
example
of
a
gain
by
wrongdoing,
a
party who
has
been
beaten
up suffers a
subtraction
of
wealth
in
paying
medical
and
other
expenses
associated with
the
resulting
injuries, and
perhaps
a
further
subtraction
of
the
opportunity
cost
associated
with
being incapacitated
while
recovering from those
injuries.
5
As
they
were
in
Hospitality
Group
Pty
Ltd
v
Australian
Rugby
Union
Ltd
2010]

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT