Restitution, Compensation, Accumulation of Remedies and Freedom of Contract (An Analysis of Supreme Court Civil Appeal No. 4630/04, Rendered 13-12-2006)

Abstract

This article examines focal issues in the law of remedies, in light of the Supreme Court judgment in the case of Kanyonin Nechasim uVinyan Ltd. v. Beney Ya'acov (2006). The case involved a contract for the sale of land. The contract empowered the seller, in case of termination following a fundamental breach by the buyer, to keep certain amounts of money paid under the contract and, in addition, to demand liquidated damages for the same breach. The main issue concerned the right of the seller, who terminated the contract and regained possession of the property, to apply these two remedial mechanisms (the first of which was described in the judgment as a sort of agreed restitution) simultaneously. Answering this question called for an investigation into two key issues in the law of remedies. The first issue concerned the question of whether and to what extent an aggrieved party should be allowed to accumulate different remedies for a single violation (in this case, a breach of contract). The second issue involved the scope and limits of the power of contracting parties to modify the rules governing the first question. Are the rules on accumulation mandatory or can the parties opt out of the rules to create their own accumulation regime? In spite of their obvious practical importance, these basic questions have so far eluded close scrutiny. Unfortunately, although vital for the decision, they were not systematically examined by the Supreme Court in the Kanyonim judgment. The present articles aims to fill the gap. It opens, following a brief summary of the factual and legal background, with an outline of a general model for the resolution of accumulation issues. The model distinguishes three relevant questions: First, is the plaintiff entitled to each of the relevant remedies considered separately? Second, are the required remedies compatible with each other? Third, assuming no inconsistency is identified between remedies, would the accumulation lead to double recovery by the plaintiff? The article discusses these questions. It offers a number of guiding tests for their implementation, distinguishing between accumulation of remedies protecting a single interest from one involving different remedial interests. In addition, the article discusses partial accumulation as a possible new legal technique, to overcome problems presented by existing rules on double recovery. The authors then move on to discuss the power of individuals to modify the rules governing accumulation. They conclude that while a provision limiting a party's remedial rights will generally be enforced, a court should not, and probably will not, uphold a provision reflecting the parties will to join incompatible remedies or to allow double recovery, properly defined.Finally, the article applies the theoretical models discussed in the previous parts to the concrete facts of the Kanyonim case. It concludes that, contrary to the Court's propositions, the seller was not entitled to enforce, as against the buyer, the two contractual remedies at one and the same time. The Court in this case had no other choice but to totally disallow the accumulation or, alternatively, to allow partial accumulation, thus reducing one of the remedies in part, in order to avoid double recovery. Indeed, the authors argue that the latter solution had been actually applied by the Court, although without an explicit mention. This interpretation of the judgment may help to elucidate the Supreme Court's subtle reasoning, as well as to provide a more solid justification for the specific legal result reached by the Court.