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The law of restitution is the law of gains-based recovery. It is to be contrasted with the law of compensation, which is the law of loss-based recovery. Obligations to make restitution and obligations to pay compensation are each a type of legal response to events in the real world. When a court orders restitution it orders the defendant to give up his gains to the claimant. When a court orders compensation it orders the defendant to compensate the claimant for his loss. Restitution, like other legal responses, can be triggered by any one of a variety of causative events. These are events in the real world which trigger a legal response. Broadly speaking, an obligation to make restitution can be triggered by two different types of causative event It is arguable that other types of causative event can also trigger an obligation to make restitution, but the above two are by far the most important. They will be considered in turn. It should be pointed out at this stage that the following analysis is based on English law. However, it is largely an analysis of principle rather than case law and therefore should have considerable relevance for most common law systems. Imagine that A commits a wrong against B and B sues in respect of that wrong. A will certainly be liable to pay compensation to B. If B seeks compensation then the court award will be measured by reference to the loss that B has suffered as a result of A’s wrongful act. However, in certain circumstances it will be open to B to seek restitution rather than compensation. It will be in his interest to do so if the profit that A made by his wrongful act is greater than the loss suffered by B.
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