Restitution and Equity: An Analysis of the Principle of Unjust Enrichment

Article excerpt

The law of restitution, as we know it, was invented in 1937 with the publication of the Restatement of Restitution. The reporters of the Restatement, Warren Seavey and Austin Scott, set out deliberately to create a field of law. To that end, they assembled a variety of doctrinal rules-- not previously linked-which, in their view, were connected by the principle of unjust enrichment.1

The principle of unjust enrichment, as expressed in the first section of the Restatement, holds that "[a] person who has been unjustly enriched at the expense of another is required to make restitution to the other. "2 The reporters did not invent the notion of unjust enrichment; it dates at least to Roman law.3 But for the most part, prior to the Restatement, English and American courts deciding what we think of as restitution cases did not refer to unjust enrichment.

The Restatement's proposals were widely accepted. Restitution is now acknowledged to be a component of our law, and unjust enrichment is generally understood to be the guiding principle of the field of restitution.4 In the Draft Restatement now underway, unjust enrichment not only retains its status as a unifying "general principle," but appears in the title of the work: Restatement (Third) of Restitution and Unjust Enrichment.

This Article is a study of the principle of unjust enrichment and its connection, if any, to "equity."5 The problem addressed here is not the substantive meaning of unjust enrichment, but the role that unjust enrichment plays in judicial decision making. I will argue that the principle of unjust enrichment can be understood in at least three ways. First, unjust enrichment can be interpreted as a principle of Aristotelian equity, providing correction when normally sound rules produce unjust results in particular cases. Second, unjust enrichment can be characterized as a "legal principle" incorporating a broad ideal of justice, from which courts can deduce solutions to particular restitution problems. Finally, unjust enrichment can be understood simply as expressing a common theme of restitution cases. On this view, unjust enrichment is a descriptive and organizational principle, one which plays no direct role in judicial decision making. It may shape judicial decision making in a general way, but is not a source of authority for particular outcomes.6

The first two of these interpretations associate unjust enrichment-and hence the law of restitution-with equity, although they invoke different meanings of the term "equity." The third view does not imply a special affinity between restitution and equity. Instead, restitution is no more or less equitable than other areas of law.

The choice among these different conceptions of the principle of unjust enrichment will have at least a psychological effect both on the process of restating the law of restitution and on judges deciding restitution cases. Moreover, in difficult cases-both those that fall between doctrinal rules and those in which doctrine yields controversial results-the decisional role attributed to the principle of unjust enrichment may be decisive.

This Article begins with a background discussion of unjust enrichment and equity, and two illustrative cases. It then examines the principle of unjust enrichment as a source of authority for judges to do equity in the form of case-by-case exceptions to rules, and concludes that unjust enrichment should not be employed for this purpose. Equity of this kind may be desirable, but it should not be conflated with restitution. Next, this Article describes an alternative approach in which unjust enrichment functions as a legal principle, providing judges with a substantive standard of decision. The final section discusses and endorses the view that unjust enrichment is best understood as a useful organizational principle that does not link restitution to equity in any special way.

Background: Unjust Enrichment and Equity

Despite wide citation of the principle of unjust enrichment, the nature of the principle is somewhat mysterious. …