A Study of Gain-Based Damages for Breach of Contract in Common Law and Iranian Law

Document Type : Research Paper

Authors

1 Associate Professor, Faculty of Law, Qom University, Qom, Iran

2 Phd. Student of Private Law, Qom University, Qom, Iran

Abstract

Breach of contract and damages for it are among the main discussions in the law of contracts. The breach might occur in several ways such as non-performance of contract, delay in performance and delivery of defective goods. Common law system has developed different remedies to face with the breach, the most important one of them is damages. In a general division, damages are divided into two groups: loss-based damages and gain-based damages. The most important kind of damages for breach of contract are expectation and reliance damages which fall within the loss-based damages group and seek to compensate the plaintiff. Gain-based damages, however, aimed at the benefits received by the defendant from his breach and not at the loss suffered by the plaintiff as a result of the breach, and are designed to deprive the defendant of those benefits. 
The article tries to introduce this remedy in Common Law system and to give a brief account of its position in Iranian law. The distinguishing feature of gain-based damages is that it does not pay attention to the plaintiff´s loss and whether the interest or value of the plaintiff asset has been transferred to the defendant assets, but to the profits that violator of the contract has received from his wrongful behavior.
Different bases have been mentioned for this damages but the best and most important of them is deterrence. It means that this damages prevents a defendant from profiting from doing wrong and ensures that both the defendant and the others who might be in a similar position are deterred from committing that type of wrong behavior  where profit might be a motive or encouragement.
There are two methods for measuring this kind of damages: objective measure and subjective measure. The former pays attention to the objective value of the profit received by the defendant. According to the latter measure, the defendant must disgorge the actual profits he has received through the breach of contract.
There are limitations and conditions such as factual causation, legal causation and foreseeability for demanding gain-based remedy. Especially remote profits cannot be demandable and "but for" test normally applied in this regard.
The study shows that this kind of damage is acceptable in a narrow scope in Iranian law and to such an extent that it is inconsistent with the proprietary right of the innocent party.

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References

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Comparative Law Review
Volume 10, Issue 2
Autumn & Winter
October 2019
Pages 783-803

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