Disgorgement of Profits in Chilean Private Law
© Springer International Publishing Switzerland 2015
Ewoud Hondius and André Janssen (eds.)Disgorgement of ProfitsIus Comparatum – Global Studies in Comparative Law810.1007/978-3-319-18759-4_2525. Disgorgement of Profits in Chilean Private Law
(1)
Institute of European and Comparative Law, University of Oxford, Oxford, UK
(2)
Brasenose College, Oxford, UK
(3)
University Católica del Norte, Antofagasta, Chile
Abstract
This chapter examines the availability of account of profits both in cases of breach of contract and in tort. The main focus will be placed on the latter, where the theory of unjustified enrichment and the action based on Articles 2316 and 1458 of the Civil Code may be considered, at least theoretically, as the two main sources for disgorgement of profits in Chilean private law.
Keywords
Disgorgement of profitsBreach of contractChilean private lawCareer Development Fellow in Comparative Law, Institute of European and Comparative Law, University of Oxford; Supernumerary Fellow in Law, Brasenose College. Honorary Lecturer, Molengraaff Institute for Private Law, Utrecht University. Visiting lecturer, University Católica del Norte, Chile.
Introduction
The subject of disgorgement of profits has usually been neglected by Chilean legal doctrine. This can be explained because the general principle in Chilean private law, both in contract and in tort is that liability has a compensatory nature, i.e. damages are aimed at compensating the loss or injury suffered by the creditor or the victim.1 In other words, damages are the measure and limit of compensation. The award of damages cannot put the affected party in a better position than he was before the breach of contract or the tort.
In theory, this rule applies to any kind of damages, even those which are difficult to measure, such as future losses or moral prejudices (daño moral). Thus, damages have essentially a compensatory nature. The case law has persistently stated that ‘the compensatory nature of civil liability requires that the only measure of the damage is the loss suffered by the victim, without any consideration to any other criteria or element, particularly those with a subtle punitive aim.’2 Therefore, in principle, the profits derived from the breach of contract or tort have no relevance for the amount and award of damages, and cannot be claimed as part of the compensation by the affected party.
Additionally, punitive damages are not an admitted category in Chilean law.3 However, Chilean legal doctrine has stated that in fact, the wrongdoer’s behaviour is a relevant element for the amount of damages awarded by the courts, particularly in tort. Thus, in similar circumstances, it is claimed that the damages awarded by the courts for an intentional tort (delito) may be higher than the awarded for a mere negligent tort (cuasidelito).4
This chapter examines the availability of account of profits both in cases of breach of contract and in tort. The main focus will be placed on the latter, where the theory of unjustified enrichment and the action based on Articles 2316 and 1458 of the Civil Code may be considered, at least theoretically, as the two main sources for disgorgement of profits in Chilean private law.
Disgorgement of Profits for Breach of Contract
The subject of disgorgement of profits, as one of the available categories of damages in contract law, has not been the subject of study by Chilean legal doctrine. Traditionally, the analysis is focused exclusively on the categories of damages recognised by the Civil Code: daño emergente (damnun emergens, i.e. economic loss) and lucro cesante (loss of profit).5 More recently, the discussion has turned to the availability of moral prejudices (daño moral) for the creditor in cases of breach of contract. In any case, it is not discussed in Chilean legal doctrine that the nature of damages for breach of contract is compensatory, neglecting any further analysis about the possibility to claim the profits made by the promisor as a consequence of the breach of contract. Perhaps because of this absence of doctrinal development, the case law is inexistent on the subject.
Disgorgement of Profits in Non-contractual Liability
Compensatory and Restitutionary Damages
As stated above, in Chilean private law, the award of damages is aimed to compensate the loss or injury of the victim.
However, it is also accepted in private law that a wrongdoer should not be allowed to profit from its wrong. The aim of this principle is not to compensate the victim for damage, either derived from tort or breach of contract, but to remove an incentive to wrongdoing or to prevent the immoral consequence of profiting through a wrong.6 Following these ideas, modern Chilean legal doctrine has stated that in cases of non-contractual liability, specially related with unauthorised use of property, besides compensatory damages, the aggrieved party may be also be entitled to claim the restitution of the gains that are the consequence of the wrong. This action would be a particular case of unjustified enrichment, with the special requirement of fault (culpa) or fraud (dolo) by the wrongdoer. The recoverable gains include both the expenses saved and the profits made by the wrong.7
On the contrary, traditional legal doctrine does not recognise restitutionary damages as a recoverable category of damages for the party affected by a wrong. In this sense, it is stated that the recoverable damages are limited by the compensatory nature of non-contractual liability, and therefore the victim is entitled only to claim the damages equivalent to the loss suffered. Although some cases related with the unauthorised use of intellectual property have been cited as awarding restitutionary damages, the courts have avoided express references to those damages, instead awarding to the plaintiff a sum for the moral prejudices derived from the wrong.8
Unjustified Enrichment
Although the restitution of unjustified enrichment is not expressly recognised in the Chilean Civil Code, legal doctrine and case law have stated that this institution is both a general principle of private law and also a source of obligations.9 The lack of a general rule on the subject is a common feature of the nineteenth Century Civil Codes.10 Nevertheless, the Civil Code includes a number of rules based on or related with unjustified enrichment, such as those on pago de lo no debido, (Articles 2295 to 2303), which are related to payments made by mistake in the absence of any legal or contractual duty. It has to be clarified that the Chilean Civil Code expressly regulates contractual restitution, i.e., restitution derived from the termination (resolución) or avoidance (nulidad) of a contract. Therefore, the lack of rules on unjustified enrichment is exclusively related to cases of non-contractual relationships.11
The traditional view in Chilean legal doctrine is that a person who has suffered a loss that increases the wealth of another, without any contractual or legal basis for that enrichment (absence of causa), is entitled to claim restitution from the enriched person, up to the amount of the loss or detriment he has borne (actio in rem verso).12 The measure of restitution is, therefore, the loss and not the increase of wealth of the enriched party. The basis for this assertion is that restitution cannot put the affected party in a better position than he was before the wrong. In other words, even when the profits of the unjustly enriched party were higher than the detriment suffered by the affected party, the latter has no claim in relation to those profits. Therefore, under this view, liability is always limited to the actual loss of the affected party.
However, modern doctrine has stated that the relevant element in cases of unjustified enrichment is not the loss suffered by the victim, but the economic advantages or profits gained by the enriched party (i.e. the enrichment). In this sense, it is claimed that the enriched party has no title to retain the profits derived from the unlawful use of another’s property or rights; and the existence of a counter-loss is irrelevant.13 Therefore, the measure of restitution should be the enrichment and not the detriment, i.e. the profits and not the losses.
With this view, even in cases where the victim suffers no loss, he would be entitled to claim the disgorgement of profits obtained by the enriched party. However, because one of the requirements of unjustified enrichment under Chilean private law is the absence of causa