Punishment and Disgorgement as Contract Remedies

Abstract

This Paper examines contract remedies, especially damage awards that are punitive or restitutionary, from the standpoint of corrective justice. The function of the damage award in corrective justice is to undo, so far as possible, the defendant's violation of the plaintiff's right. Because the nature of the right determines the nature of the remedy, a discussion of contract damages requires elucidation of the right infringed by a breach of contract. Drawing on Kant's now almost forgotten discussion of contractual rights, the Paper sketches the relationship between the promisee's right to contractual performance and expectation damages, which give the promisee the value of that right. The Kantian account of contractual right not only justifies expectation damages as compensatory in accordance with corrective justice (thus resolving the perplexity about expectation damages formulated by Fuller and Perdue), but also discloses the inaptness of requiring the disgorgement of gains resulting from contract breach. Turning then to punitive damages, the Paper addresses the question of how corrective justice and punishment - and the institutions devoted to them - coexist, and how they are differentiated in a legal order based on rights. It then discusses the difficulties that emerge from the elaborate but ultimately unsatisfying recent attempt by the Supreme Court of Canada to work out a coherent treatment of punitive damages for contract breach.