Excess Baggage? Rethinking Risk Allocation in the Restatement (Third) of Restitution and Unjust Enrichment

INTRODUCTION: THE ANALYTICAL STRUCTURE OF THE RESTATEMENTThe law of in the common law has traditionally been explained with reference to specific reasons for or unjust factors. In John Dawson's formulation, the common law requires some specific ground, asserted affirmatively by the party seeking restitution in order to contain enrichment liability within manageable bounds.1 Civilian systems, on the other hand, tend to eschew the elaboration of specific reasons (at least openly) for the return of enrichment. Instead, they look to the absence of any legal ground for the transfer or retention of the enrichment. This difference between the two legal traditions is summed up as follows by Lord Hoffmann in Deutsche Morgan Grenfell Group Plc v. IRC2:The answer, at any rate for the moment, is that unlike civilian systems, English law has no general principle that to retain money paid without any legal basis (such as debt, gift, compromise, etc) is unjust enrichment. In the Woolwich case Lord Goffsaid that English law might have developed so as to recognise such a general principle - the condictio indebiti of civilian law - but had not done so. In England, the claimant has to prove that the circumstances in which the was made come into one of the categories which the law recognizes as sufficient to make retention by the recipient unjust.3Part I of the Restatement of Restitution: Quasi Contracts and Constructive Trusts, entitled Right to Restitution, is organised exclusively around specific reasons for restitution, such as mistake and duress.4 Everything about it points towards an analysis of unjust which focuses exclusively on unjust factors.5 On the other hand, the Restatement (Third) of Restitution and Unjust Enrichment has an important civilian twist to it. Chapter 1, entitled General Principles, states that the subject is better described as the law of unjustified enrichment, and it makes plain that unjustified enrichment is enrichment that lacks an adequate legal basis.6 The civilian cast of the Restatement (Third) is confirmed when we turn our attention to section 6, which is entitled Payment of Money Not Due.7 According to the wording of this provision, payment by mistake gives the payor a claim in against the recipient to the extent was not due.8 However, the civilian import of chapter 1 and section 6 must be set offagainst the overall structure of chapter 2, which clearly accords analytical significance to specific reasons for restitution, such as fraud, duress, undue influence, and incapacity, as well as mistake itself. Regarding mistaken transfers in particular, section 6 must be set offagainst section 5, entitled Invalidating Mistake.9 According to section 5(1), which is intended to epitomize the whole law of mistake, (1) transfer induced by invalidating mistake is subject to rescission and restitution. The transferee is liable in as necessary to avoid unjust enrichment.10 Given this epitome, there can be no doubt that mistake itself plays a key analytical role in justifying or explaining the of mistaken transfers.11In the second edition of his book Unjust Enrichment, Peter Birks argued that English law had come to recognise the civilian absence-of-legal-ground approach (or the absence-of-basis approach as it is sometimes called) in the swaps cases.12 He believed that a legal system had to make a choice between the civilian approach and the traditional common-law approach.13 However, he admitted a limited continuing role for unjust factors. In the words of Lord Walker in Deutsche Morgan Grenfell Group Plc v. IRC,14Nevertheless I would add that my tentative inclination is to welcome any tendency of the English law of unjust enrichment to align itself more closely with Scottish law, and so to civilian roots. I see attractions in the suggestion made by Professor Birks in Unjust Enrichment, under the heading Pyramid: Limited Reconciliation: A pyramid can be constructed in which, at the base, the particular unjust factors such as mistake, pressure, and undue influence become reasons why, higher up, there is no basis for the defendant's acquisition, which is then the master reason why, higher up still, the enrichment is unjust and must be surrendered. …