Recognition of a Disgorgement of Profits for Breach of Contract in the United States of America Law: Lessons for South African Law

Abstract

A disgorgement remedy for breach of contract seeks to take away profits acquired through breach of contract. Since contractual damages only seek to compensate the plaintiff for the patrimonial loss suffered due to breach of contract, the law of contract does not generally provide for the disgorgement of profits generated through breach of contract. However, there have been circumstances where the party in breach generates profits as a result of breach contract and the other party does not suffer patrimonial loss. As a result, the plaintiff in these circumstances would not have a remedy against the defendant because he cannot prove patrimonial loss caused by the breach. However, this position is changing. The recognition of disgorgement of profits acquired through breach of contract appears to be gaining acceptance around the world. The United States of America has recognised a disgorgement remedy to take away profits acquired through breach of contract to ensure that the defendant does not gain as a result of his breach of contract. A similar remedy has not yet gained acceptance in South Africa. This study seeks to assess how the United States of America has recognised a disgorgement remedy and draw some lessons for South African law in recognising a similar remedy.