Restitution
Encyclopedia
The law of restitution is the law of gains-based recovery. It is to be contrasted with the law of compensation
, which is the law of loss-based recovery. Obligations to make restitution and obligations to pay compensation are each a type of legal response to events in the real world. When a court
orders restitution it orders the defendant to give up his gains to the claimant. When a court orders compensation it orders the defendant to compensate the claimant for his or her loss.
This type of damages restores the benefit conferred to the non-breaching party (the plaintiff). Simply, the plaintiff will get the value of whatever was conferred to the defendant when there was a contract. There are two general limits to recovery, which is that a complete breach of contract is needed, and the damages will be capped at the contract price if the restitution damages exceed it.
The orthodox view suggests that there is only one principle on which the law of restitution is dependent, namely the principle of unjust enrichment
. However, the view that restitution, like other legal responses, can be triggered by any one of a variety of causative events is increasingly prevalent. These are events in the real world which trigger a legal response. It is beyond doubt that unjust enrichment and wrongs can trigger an obligation to make restitution. Certain commentators propose that there is a third basis for restitution, namely the vindication of property rights with which the defendant has interfered. It is arguable that other types of causative event can also trigger an obligation to make restitution.
Whether or not a claimant can seek restitution for a wrong depends to a large extent on the particular wrong in question. For example, in English law, restitution for breach of fiduciary duty is widely available but restitution for breach of contract
is fairly exceptional. The wrong could be of any one of the following types:
Notice that (1)-(5) are all causative events (see above). The law responds to each of them by imposing an obligation to pay compensatory damages. Restitution for wrongs is the subject which deals with the issue of when exactly the law also responds by imposing an obligation to make restitution.
Example. In Attorney General v Blake
[2001] 1 AC 268, an English court found itself faced with the following claim. The defendant had made a profit somewhere in the region of £60,000 as a direct result of breaching his contract with the claimant. The claimant was undoubtedly entitled to claim compensatory damages but had suffered little or no identifiable loss. It therefore decided to seek restitution for the wrong of breach of contract. The claimant won the case and the defendant was ordered to pay over his profits to the claimant. However, the court was careful to point out that the normal legal response to a breach of contract is to award compensation. An order to make restitution was said to be available only in exceptional circumstances.
s or breaches of fiduciary duty often allow for claims of unjust enrichment, as well as cases of statutory torts and breaches of contract. A plaintiff can even have a claim in unjust enrichment when there is no other substantive claim. The Uniform Commercial Code
("UCC") entitles a buyer who defaults restitution of the buyer's deposit to the extent it exceeds reasonable liquidated damages or actual damages. If the contract does not have a liquidated damages clause, the UCC provides a statutory sum: 20% of the price or $500, whichever is less, and the buyer who defaulted is entitled to restitution of any excess.
Damages
In law, damages is an award, typically of money, to be paid to a person as compensation for loss or injury; grammatically, it is a singular noun, not plural.- Compensatory damages :...
, which is the law of loss-based recovery. Obligations to make restitution and obligations to pay compensation are each a type of legal response to events in the real world. When a court
Court
A court is a form of tribunal, often a governmental institution, with the authority to adjudicate legal disputes between parties and carry out the administration of justice in civil, criminal, and administrative matters in accordance with the rule of law...
orders restitution it orders the defendant to give up his gains to the claimant. When a court orders compensation it orders the defendant to compensate the claimant for his or her loss.
This type of damages restores the benefit conferred to the non-breaching party (the plaintiff). Simply, the plaintiff will get the value of whatever was conferred to the defendant when there was a contract. There are two general limits to recovery, which is that a complete breach of contract is needed, and the damages will be capped at the contract price if the restitution damages exceed it.
The orthodox view suggests that there is only one principle on which the law of restitution is dependent, namely the principle of unjust enrichment
Unjust enrichment
Unjust enrichment is a legal term denoting a particular type of causative event in which one party is unjustly enriched at the expense of another, and an obligation to make restitution arises, regardless of liability for wrongdoing.Definition:...
. However, the view that restitution, like other legal responses, can be triggered by any one of a variety of causative events is increasingly prevalent. These are events in the real world which trigger a legal response. It is beyond doubt that unjust enrichment and wrongs can trigger an obligation to make restitution. Certain commentators propose that there is a third basis for restitution, namely the vindication of property rights with which the defendant has interfered. It is arguable that other types of causative event can also trigger an obligation to make restitution.
Restitution for wrongs
Imagine that A commits a wrong against B and B sues in respect of that wrong. A will certainly be liable to pay compensation to B. If B seeks compensation then the court award will be measured by reference to the loss that B has suffered as a result of A’s wrongful act. However, in certain circumstances it will be open to B to seek restitution rather than compensation. It will be in his interest to do so if the profit that A made by his wrongful act is greater than the loss suffered by B.Whether or not a claimant can seek restitution for a wrong depends to a large extent on the particular wrong in question. For example, in English law, restitution for breach of fiduciary duty is widely available but restitution for breach of contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
is fairly exceptional. The wrong could be of any one of the following types:
- A statutory tortTortA tort, in common law jurisdictions, is a wrong that involves a breach of a civil duty owed to someone else. It is differentiated from a crime, which involves a breach of a duty owed to society in general...
- A common law tort
- An equitable wrong
- A breach of contract
- Criminal offences
Notice that (1)-(5) are all causative events (see above). The law responds to each of them by imposing an obligation to pay compensatory damages. Restitution for wrongs is the subject which deals with the issue of when exactly the law also responds by imposing an obligation to make restitution.
Example. In Attorney General v Blake
Attorney General v Blake
Attorney General v Blake [2000] is a leading English contract law case on damages for breach of contract. It established that in some circumstances where ordinary remedies are inadequate, restitutionary damages may be awarded.-Facts:...
[2001] 1 AC 268, an English court found itself faced with the following claim. The defendant had made a profit somewhere in the region of £60,000 as a direct result of breaching his contract with the claimant. The claimant was undoubtedly entitled to claim compensatory damages but had suffered little or no identifiable loss. It therefore decided to seek restitution for the wrong of breach of contract. The claimant won the case and the defendant was ordered to pay over his profits to the claimant. However, the court was careful to point out that the normal legal response to a breach of contract is to award compensation. An order to make restitution was said to be available only in exceptional circumstances.
Restitution to reverse unjust enrichment
Cases of intentional tortIntentional tort
An intentional tort is a category of torts that describes a civil wrong resulting from an intentional act on the part of the tortfeasor. The term negligence, on the other hand, pertains to a tort that simply results from the failure of the tortfeasor to take sufficient care in fulfilling a duty...
s or breaches of fiduciary duty often allow for claims of unjust enrichment, as well as cases of statutory torts and breaches of contract. A plaintiff can even have a claim in unjust enrichment when there is no other substantive claim. The Uniform Commercial Code
Uniform Commercial Code
The Uniform Commercial Code , first published in 1952, is one of a number of uniform acts that have been promulgated in conjunction with efforts to harmonize the law of sales and other commercial transactions in all 50 states within the United States of America.The goal of harmonizing state law is...
("UCC") entitles a buyer who defaults restitution of the buyer's deposit to the extent it exceeds reasonable liquidated damages or actual damages. If the contract does not have a liquidated damages clause, the UCC provides a statutory sum: 20% of the price or $500, whichever is less, and the buyer who defaulted is entitled to restitution of any excess.
See also
- English unjust enrichment lawEnglish unjust enrichment lawEnglish unjust enrichment law is a developing area of law in unjust enrichment. Traditionally, work on unjust enrichment has been dealt with under the title of "restitution". Restitution is a gain-based remedy, the opposite of compensation, as a loss-based remedy...
- Quasi-contractQuasi-contractA quasi-contract is a fictional contract created by courts for equitable, not contractual purposes. A quasi-contract is not an actual contract, but is a legal substitute for a contract formed to impose equity between two parties. The concept of a quasi-contract is that of a contract that should...
- Restitution (theology)Restitution (theology)Restitution in moral theology signifies an act of commutative justice by which exact reparation as far as possible is made for an injury that has been done to another....
- Equity (law)
- Blood moneyBlood money (term)Blood money is money or some sort of compensation paid by an offender or his family group to the family or kin group of the victim.-Particular examples and uses:...