The remedial consequences of torts and breach of contract

I return to this blog after sometime. As I have begun to work more on civil-commercial disputes, this post is my first foray on this blog to explore some theoretical justifications for why remedies are different for tort and breach of contract. Simply put, the primary remedy for breach of contract is damages, which are assessed by reference to loss suffered by the claimant. If damages are adequate, claimants are not entitled to specific performance of contract or to disgorgement of gains made by defendants. Tortious claims, especially those which involve interference with property rights such as trespass or breach of confidentiality, require defendants to restitute the gain they have made to the claimant, even when a claimant may not have suffered a loss. In this essay, I explain why is there this distinction between the two actions. As I will elaborate further, the underlying justification is that in contract it is completely justified for parties to a contract to change their minds and compensate their counter-parts monetarily. The same is not true for torts where individuals should not be able to claim impunity for preventing others from enjoying proprietary rights by simply paying more money. The crucial distinction being that proprietary rights deserve more protection.
Contract
The primary orthodox remedial consequence for breach of contract is damages. These damages are assessed by reference to loss or injury of the claimant. Damages aim to satisfy one of two important interests of the claimant. The first is expectation interest whose purpose is to ensure that the claimant occupies a position he or she would have had if the contract had not been breached (Virgo). In other situations, damages try to fulfil the reliance interest of the Claimant by placing the claimant in the position he or she would have been in had she not entered into the contract at all (Virgo). As L Ho and R Nolan have pointed out damages for breach of contract are in a sense substitute for performance. The question is whether the substitute is enough or should parties to a contract be required to fulfil the promises they have made.
Now, the current position of the law is that specific performance for breach of contracts is only available if damages are inadequate. In several cases, courts have discussed what it means for damages to be inadequate. Simply put, damages are adequate even when loss is not recoverable; damages are not inadequate merely because they are difficult to quantify; and defendant’s financial situation is not relevant in determining the adequacy of damages. While courts have a preference for awarding damages, this does not mean that the law does not expect parties to hold their part of the bargain. However, as M Chen-Wishart has pointed out, while there is a right to performance, and the remedy of specific performance is to enforce the right, such a right is cut back by other legitimate concerns of the law at the remedial end.
These concerns, which by no means are ‘artificial restrictions’ are as follows: first, the entire premise of contractual arrangements is individual autonomy. Parties enter into contracts voluntarily and should be permitted to leave such arrangements if they believe that it would be in their interests. For example, if A agrees to sell a car to B for 1000 pounds but later meets C who offers 5000 pounds, A should be able to sell the car to C as long as A can compensate B for the breach of their agreement. This not only recognises that it is justified for A to change their mind but that can also lead to economically better outcomes. Second, compelling parties to do what they do not want to do smacks of slavery. Third, as L Smith has pointed out, damages ensure that courts do not have to exercise supervisory powers. That would be the case if courts order specific performance, and that can increase the burden on courts which already face resource constraints. Fourth, the nature of such power is ‘heavy-handed’ as the consequence of non-compliance can result in imprisonment. As a result, a party would comply with an obligation not because they want to but simply because of fear, which is not just outcome and at the least, requires extremely strong justification.
Therefore, in view of the above, there are several reasons why it is justified for the law to not compel parties to keep promises in the context of breach of contract. As such, the restriction on the award of equitable remedy of specific performance is justified. However, there are certain exceptional situations where specific performance is the default remedy for breach of contract and not damages. As M Chen has pointed out these are cases involving land and agreed sums. In the former, this is the case because each piece of land is different from another and thus, damages are presumptively inadequate. In the latter, contractual obligation to pay money is depersonalised and the defendant does not need to cooperate with the defendant to complete performance. As such, in these situations the fact that promises should be kept is justifiable.
Tort
In the context of torts, the default position should be that equitable remedies such as injunctions, restitution and disgorgement of gains should be available to the claimant by default. I will limit this submission to only those torts which involve interference with property rights. In the context of injunctions, it should be noted that they have always been granted as a matter of course in trespass and in cases of nuisance (PS Davies). The underlying justification has been that these interferences prevent the claimant from enjoying their property rights. Since that is the case, the wrongdoer should not be able to simply pay money and get away with trespassing or committing nuisance. The situation is different in the context of restitution or disgorgement of gains.
There is a distinction between the former and the latter. While in the former category, defendant’s gain has caused a loss to the claimant, in the latter, defendant is required to give up a gain made from the commission of a wrong, even though the gain was not from the claimant (Virgo). Now, the current position of the law is that these remedies are only available if compensatory damages are inadequate and if there is an interference with the claimant’s proprietary rights (Virgo). In Davenish, it was held that where the claimant does not suffer any losses, compensatory damages may be inadequate unless such loss is passed on to other parties. Nevertheless, it is my submission here that the gain-based remedies should be available in response to any tort which affects proprietary rights, irrespective of whether damages are adequate. This is because of the following reasons: first, unlike a breach of contract, a tort is a wrong and the defendant should not be permitted to profit from their wrongdoing. In a contract, a party is free to change their mind and that autonomy justifies their breach. On the other hand, a tort is wrong which cannot be justified in that sense. Second, in common law traditions we confer a premium on property rights which is not granted to contractual rights. This is because the law, as a matter of policy, recognizes that when individuals are able to enjoy their property freely, it leads to better economic and social outcomes for the society. Indeed, it is this rationale behind property rights which fueled the industrial revelation. Lastly, as an extension of the previous two points, as Jackman has pointed out, the right to gain-based remedies is triggered not by harm to the claimant but by harm to facilitative institutions. Therefore, when someone commits a wrong on another’s property, they should be required to restore the benefit they received to the owner of the property, irrespective of whether such an owner has suffered any loss.