A Commonwealth of Perspective on Restitutionary Disgorgement for Breach of Contract

Abstract

The muse of restitution enraptures the world's legal scholars. Yet America resists her lure. This article focuses on an American black-letter law endeavor to follow the Commonwealth's lead on restitutionary disgorgement as a remedy for contractual breach - Section 39 of the pending Restatement (Third) of Restitution and Unjust Enrichment. England's Attorney General v. Blake opens the door to the remedy. America's Restatement Section 39 steps through the door. It does so with much timidity despite its bold title, "Profit Derived from Opportunistic Breach." Though narrowly bounded, Section 39's sweeping foundation is in tension with the American Holmesian model of contractual choice and efficient breach theory.

This author's other scholarship casts the Restatement's recognition of a restitutionary disgorgement remedy for opportunistic breach as potentially revolutionary for contract law because the remedy focuses on defendant's mindset and gains rather than plaintiff's loss. Further, the remedy seeks to deter if not punish wrongdoing. A well-developed, canon of scholarship and precedent on restitutionary disgorgement exists in Australia, Canada, Great Britain, Ireland, and New Zealand. The Commonwealth experience should guide America's adoption of restitutionary disgorgement for contractual breach.

America should embrace restitution's riddles. We should call restitution to our imagination. The Restatement proposal for restitutionary disgorgement advances unjust enrichment theory and merits serious scholarly attention, praise, and critique. It will admirably extend the stable of alternative remedies for contract plaintiffs. But, let's be honest about its shortcomings as drafted and its underlying morality-infused rationale. Then, we can glean the deeper lessons from the Commonwealth's lead and appreciate the consequences of our new path.

Keywords: contracts, remedies, restitution, disgorgement, unjust enrichment, Restatement, Commonwealth, Blake

JEL Classification: K12, K00