Restatement of the Law Third: Restitution and Unjust Enrichment, 2 vols.

• Author: Laycock, Douglas
• Position: Book review

RESTATEMENT (THIRD) OF RESTITUTION AND UNJUST ENRICHMENT. Andrew Kull, Reporter. St. Paul: American Law Institute Publishers. 2011. Volume One. Pp. xxxviii, 670. Volume Two. Pp. xxxii, 745. $262.

INTRODUCTION

The Restatement (Third) of Restitution and Unjust Enrichment brings clarity and light to an area of law long shrouded in fogs that linger from an earlier era of the legal system. It makes an important body of law once again accessible to lawyers and judges. This new Restatement should be on every litigator's bookshelf, and a broad set of transactional lawyers and legal academics would also do well to become familiar with it.

Credit for this Restatement goes to its Reporter, Professor Andrew Kull. (1) Of course his work benefited from the elaborate processes of the American Law Institute, with every draft reviewed by a Members' Consultative Group, a committee of Advisers, the Council, and the Membership. (2) I was an active part of that consultative process; I know this project well. (3) But Professor Kull controlled the word processor and did the work, and only he had the breadth and depth of understanding to complete this project. No one else in the American legal academy could have done it since John Dawson and George Palmer, the two great Michigan restitution scholars of the mid-twentieth century. (4) And at least for contemporary legal audiences, Dawson and Palmer would not have done it nearly as well. They were too much a part of the earlier era that American lawyers no longer understand.

1. ACADEMIC NEGLECT

   By the later stages of Dawson's and Palmer's careers, restitution and unjust enrichment was becoming a neglected field. But restitution's importance to the law is greatly disproportionate to the amount of systematic attention it has received over the last generation. The law of restitution and unjust enrichment creates distinctive causes of action with many and diverse applications--to mistake, to joint owners and joint obligors, to unenforceable contracts, to disrupted transactions of all kinds. And it creates distinctive remedies with applications to all sorts of causes of action--to claims in contract, tort, and unjust enrichment, and to claims for equitable wrongs and for violation of statutes. The cases continue to arise, as attested by the many recent citations in the Reporter's Notes in the new Restatement. But few lawyers or judges come to these cases with any systematic understanding of the field, and until now, most of them have found the available reference books difficult to use.

   The restitutionary causes of action dropped out of the curriculum of American law schools in the third quarter of the twentieth century, largely by accident. Innovative law teachers created the modern remedies course by combining separate courses in damages, equity, and restitution, and the idea spread rapidly after about 1960. (5) This change led to a great improvement in the teaching of remedies, including restitutionary remedies. But combining three courses into one left many things on the cutting room floor, including the restitutionary causes of action. And no one picked them up.

   The result is that hardly anyone who graduated from law school in the last forty years has taken a restitution course, and at least by 1989 (probably a good bit earlier), there was no restitution casebook in print. (6) When a lawyer or judge encounters a restitution problem today, there is a substantial risk that she will view it as an isolated problem, only dimly aware that there is a large body of law on restitution and unjust enrichment and that arguments about her particular problem can be tested and refined in light of larger principles.

   Before this new Restatement, she might also have found it hard to investigate either that larger body of law or her particular problem within it. Contemporary lawyers do not find the other available reference books very user friendly. The first Restatement of the Law of Restitution, (7) and Palmer's four-volume treatise, (8) each give substantial weight to the historic division between law and equity and to the historic scope of quasi-contract. Quasi-contract, the nineteenth-century name for the common law's response to cases of what we would now call unjust enrichment, was rooted in fictional pleadings and the forms of action. (9) The first Restatement speaks as of 1937; Palmer's treatise was published in 1978, but it feels much older. Both suffer from rather weak intermediate levels of organization, so it can be hard for new users to find what they are looking for.

   Treatises on remedies give modern and accessible treatment of restitutionary remedies, (10) but they are little help on restitutionary causes of action. And the treatment of restitutionary remedies in the Restatement (Third) is clearer, more systematic, and more precise than in any of the remedies treatises.

2. ACCESSIBILITY AND FUNCTIONAL EXPLANATIONS

   The Restatement (Third) is written in plain English for lawyers in the twenty-first century. None of its rules are stated in terms of quasi-contract or the forms of action, and almost none are stated in terms of common law or equity. There is a clear explanation of restitution's separate roots both at law and in equity, correcting the common misconception that restitution is necessarily equitable, and explicitly stating that no remedy for unjust enrichment requires a showing that legal remedies are inadequate ([section] 4). There is an overview of laches and the relevant statutes of limitation, which necessarily says that the applicable time limit in some jurisdictions may depend on the court's view of whether the claim arose at law or in equity ([section] 70). More problematic, the Reporter could not find a way to restate the rights of bona fide purchasers for value without referring to "legal interest[s]" and "equitable interests" ([section] 66). This distinction is mystifying to most contemporary lawyers, but the Reporter understands that it "may be unfamiliar" ([section] 66 cmt. a), and he makes its meaning reasonably clear in the comments ([section] 66 cmts. a, e). Apart from those three sections, the few references to common law or equity are brief and historical, and no legal rule is made to depend on distinctions between the two.

   Finding what you're looking for is considerably easier than in the first Restatement. The Restatement (Third) is divided into four parts: general principles, liability in restitution, remedies, and defenses. "Liability in Restitution" means the substantive grounds for liability, subject to defenses and to further specification of the remedy. As with all the more recent restatements, the number of sections has been greatly reduced, and the explanatory comments, and the collection of cases and authorities in the Reporter's Notes, have been greatly expanded. Consequently, the Restatement (Third) functions not just as a summary of the law but also as a powerful research tool.

   There are forty-four sections on restitutionary causes of action ([section][section] 548), so if necessary, it is quite manageable to simply read through the list in the table of contents. But it is not often necessary. These forty-four sections are subdivided into five chapters and ten topics, providing the intermediate levels of organization that were weak or missing in Palmer and the first Restatement. Most of these chapters, topics, and sections have common-sense titles that make for easy finding. If lawyers discover that the Restatement (Third) exists, they will be able to find what they need and understand what they find.

   The Restatement (Third) states its rules in functional terms. This is clear from the very beginning, in its introductory explanation of "unjust enrichment" ([section] 1 cmt. b). Section 1, closely tracking section 1 of the first Restatement, states the broad general principle that "[a] person who is unjustly enriched at the expense of another is subject to liability in restitution." But what makes an enrichment "unjust"?

   The comment makes clear that this question is not a free-floating moral inquiry, but a matter of legal rules. The phrase "unjust enrichment" is established by long usage, but comment b explains that the concept "might more appropriately be called unjustified enrichment."

   Compared to the open-ended implications of the term "unjust enrichment," instances of unjustified enrichment are both predictable and objectively determined, because the justification in question is not moral but legal. Unjustified enrichment is enrichment that lacks an adequate legal basis; it results from a transaction that the law treats as ineffective to work a conclusive alteration in ownership rights. ([section] 1 cmt. b) The grounds for treating a transfer of property as reversible--as "ineffective to work a conclusive alteration in ownership rights"--are set out in the sections that follow. They are mostly a function of impaired consent by the transferor, wrongdoing by the transferee, failure of communication between the two, or some wholly unexpected development that disrupts the transaction. But no such generalization can substitute for the specific rules that follow. Those rules are emphatically not a matter of what the jury thinks is fair or "unjust." But they necessarily give judges some discretion to take account of new ways in which unjustified enrichment may arise. (11)

   The benefits of functional rules are clearly apparent in a comparison of section 2 to its predecessor. Section 2 of the first Restatement, entitled "Officious Conferring of a Benefit," says that "[a] person who officiously confers a benefit upon another is not entitled to restitution therefor." (12) Comment a explains that "[o]fficiousness means interference in the affairs of another not justified by the circumstances under which the interference takes place." (13) What circumstances are those? Readers have to find out inductively, by examining which benefits are treated as...