(ii) Contractual Term Specifying a Restitutionary Remedy
The parties may insert a clause into the contract which stipulates that damages for breach of contract should be assessed by reference to the benefit gained by the defendant as a result of the breach rather than the claimant’s loss.[1] That such a clause is effective to justify the award of restitutionary remedies for breach of contract was recognized by the Privy Council in Reid-Newfoundland Co v Anglo-American Telegraph Co.[2] The defendant had entered into a contract with the claimant to use a telegraph wire for the transmission of messages which related to the defendant’s railway business. To ensure that the wire was not used to transmit messages which related to other aspects of the defendant’s business, a term was included in the contract to the effect that the defendant could not use the wire to transmit commercial messages ‘except for the benefit and account’ of the claimant. The defendant used the wire for the transmission of messages which were unrelated to its railway business and was held liable to account to the claimant for the profits which accrued to it from the use of the wire. Such a remedy was appropriate because of the clause which had been inserted into the contract, the effect of which was that any profit which was made by the defendant in breach of the agreement was deemed to have been received for the benefit of the claimant. The right to restitutionary remedies in such cases derives from the contract itself, rather than by operation of law, and so falls within the law of contract rather than the law of restitution.[3]
