Hanoch Dagan of Tel Aviv University is a prolific writer on topics related to contract law and its cognates. His most recent piece, Restitution and Relationships (abstract here) exemplifies what I find to be most interesting about his work. Most contemporary efforts in legal theory--an approach external to the law--seek to explain the foundation for a particular body law in one of two flavors: autonomy or utility. (It is this external approach that distinguishes legal theory from legal doctrine; doctrine attempts to rationalize and understand a field of law from an internal perspective.)
Autonomy assumes the perspective that the purpose of law--why it should exist--is to advance the individual's freedom of action. (Law here refers to private law as opposed to "public law" fields like criminal law.) Autonomy has little to say about collective benefits or detriments; only protection of the individual's personal integrity counts. Utility, on the other hand, takes the stance that law's validity rests on its ability to increase net social welfare. With respect to the individual, a utilitarian approach to the law operates to the effect that legal wrongs are okay so long as compensation is paid; no individual loss plus a collective gain justifies legal rules.
Autonomy and utility each have certain virtues in explaining the law that exists but neither can do a complete job alone, nor has anyone figured out a way to combine them consistently and coherently. At least that's what I argued here. Dagan agrees and suggests in his article that "relationships" provide a third way in addition to autonomy and utility that can account for a large area of law known as restitution.
Restitution is a remedy for unjust(ifiable) enrichment. Money damages are typcially awarded for breach of contract. Money damages are also awarded as compensation for a legal wrong, a tort. Restitution is usually awarded in the form of money but not necessarily because someone wronged another and not because someone failed to perform a contractual obligation but because someone was enriched without a good legal reason. The clearest example is restitution for mistake. Most everyone I should think would agree that William A. Macy should send the money back if my check to pay my Macy's bill somehow ended up in his checking account. And further, if he didn't, the law should compel him to do so. That's an example of restitution.
But Dagan has another application of restitution in mind, that which follows upon abuse of a fiduciary or confidential relationship. A fiduciary, like a lawyer, investment advisor, or trustee of a trust has always stood in a unique legal relationship with the client or beneficiary. If a fiduciary breaches a contract by, say, taking money held in trust, the injured client would, of course, have a claim for money damages, just like a run-of-the-mill breach of contract case. Yet, the law goes further and awards not only what was taken but also any gain that what was taken has produced. Thus, if a lawyer takes a client's money and buys some property, the client gets the property even if its value now far exceeds what the lawyer took.
Confidential relationships exist where one person in a close relationship so trusts the other that the other can easily take advantage of the relationship. Typical examples include a child who takes advantage of an elderly parent or parent who connives against an unsuspecting child. Here too the law of restitution gives not only what was taken but that into which it can be traced, all without giving the confidence abuser an offset for expenses. In short, the measure of restitution in both scenarios is disgorgement, not compensation
According to Dagan, neither autonomy nor utility can justify the potential for over-compensation in abuse of fiduciary and confidential relationships. Neither the personal integrity of one suffering at the hands of the dominant party nor promotion of social welfare accounts for disgorgement. Instead, it is the preservation of select relationships that is at stake. By subjecting a dominant abuser to the restitutionary remedy of disgorgement and not merely one of compensation for a wrong, the law does what it can to preserve such relationships.
As Dagan puts it, "by deterring breaches of the fiduciary’s loyalty, restitution plays a crucial role in vindicating the beneficiary’s entitlement to it, thereby preserving the integrity of the fiduciary relationship." The same holds true for confidential relationships. In other words, were it not for the legal remedy of disgorgement, people would be less willing to enter into fiduciary and confidential relationships. Thus, Dagan concludes, it is the relationships themselves and not autonomy or utility that justifies restitution.
Is Dagan correct? Does (should) enhancement of "relationships" justify at least some aspects of private law?
Autonomy assumes the perspective that the purpose of law--why it should exist--is to advance the individual's freedom of action. (Law here refers to private law as opposed to "public law" fields like criminal law.) Autonomy has little to say about collective benefits or detriments; only protection of the individual's personal integrity counts. Utility, on the other hand, takes the stance that law's validity rests on its ability to increase net social welfare. With respect to the individual, a utilitarian approach to the law operates to the effect that legal wrongs are okay so long as compensation is paid; no individual loss plus a collective gain justifies legal rules.
Autonomy and utility each have certain virtues in explaining the law that exists but neither can do a complete job alone, nor has anyone figured out a way to combine them consistently and coherently. At least that's what I argued here. Dagan agrees and suggests in his article that "relationships" provide a third way in addition to autonomy and utility that can account for a large area of law known as restitution.
Restitution is a remedy for unjust(ifiable) enrichment. Money damages are typcially awarded for breach of contract. Money damages are also awarded as compensation for a legal wrong, a tort. Restitution is usually awarded in the form of money but not necessarily because someone wronged another and not because someone failed to perform a contractual obligation but because someone was enriched without a good legal reason. The clearest example is restitution for mistake. Most everyone I should think would agree that William A. Macy should send the money back if my check to pay my Macy's bill somehow ended up in his checking account. And further, if he didn't, the law should compel him to do so. That's an example of restitution.
But Dagan has another application of restitution in mind, that which follows upon abuse of a fiduciary or confidential relationship. A fiduciary, like a lawyer, investment advisor, or trustee of a trust has always stood in a unique legal relationship with the client or beneficiary. If a fiduciary breaches a contract by, say, taking money held in trust, the injured client would, of course, have a claim for money damages, just like a run-of-the-mill breach of contract case. Yet, the law goes further and awards not only what was taken but also any gain that what was taken has produced. Thus, if a lawyer takes a client's money and buys some property, the client gets the property even if its value now far exceeds what the lawyer took.
Confidential relationships exist where one person in a close relationship so trusts the other that the other can easily take advantage of the relationship. Typical examples include a child who takes advantage of an elderly parent or parent who connives against an unsuspecting child. Here too the law of restitution gives not only what was taken but that into which it can be traced, all without giving the confidence abuser an offset for expenses. In short, the measure of restitution in both scenarios is disgorgement, not compensation
According to Dagan, neither autonomy nor utility can justify the potential for over-compensation in abuse of fiduciary and confidential relationships. Neither the personal integrity of one suffering at the hands of the dominant party nor promotion of social welfare accounts for disgorgement. Instead, it is the preservation of select relationships that is at stake. By subjecting a dominant abuser to the restitutionary remedy of disgorgement and not merely one of compensation for a wrong, the law does what it can to preserve such relationships.
As Dagan puts it, "by deterring breaches of the fiduciary’s loyalty, restitution plays a crucial role in vindicating the beneficiary’s entitlement to it, thereby preserving the integrity of the fiduciary relationship." The same holds true for confidential relationships. In other words, were it not for the legal remedy of disgorgement, people would be less willing to enter into fiduciary and confidential relationships. Thus, Dagan concludes, it is the relationships themselves and not autonomy or utility that justifies restitution.
Is Dagan correct? Does (should) enhancement of "relationships" justify at least some aspects of private law?
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