1. The theoretical challenge
“A person who has been unjustly enriched at the expense of another is required to make restitution to the other.”1 In the past few decades, this principle of liability has recently become as firmly established in the common law jurisdictions as it has long been among civil law systems. Being a relatively new basis of liability, unjust enrichment is now the most dynamic of all areas of private law. Nonetheless, skeptical voices continue to be heard. Scholars have contended that unjust enrichment adds little to the traditional arsenal of private law categories;2 that the idea of unjust enrichment is either hopelessly circular or is a conclusion based on unmentioned normative values that do the real work;3 and that the principle of unjust enrichment submerges within a common framework types of claims that should be governed by diverse principles.4 Despite being recognized as never before, unjust enrichment remains the most embattled of the bases of liability in private law.
Two interrelated theoretical puzzles have fueled such expressions of skepticism. First, at the heart of unjust enrichment lies the mystery of what makes an enrichment unjust. This question concerns not merely the positive law, but the normative theory implicit in it, exposing a gap through which seep doubts about the nature and scope of the principle of unjust enrichment. Even proponents of unjust enrichment acknowledge the absence of a viable theory of the unjustness that grounds this form of liability.5 For many years the development of unjust enrichment was impeded by the suspicion that, once recognized as a category of liability, it would direct judges away from traditional legal reasoning to the amorphous exercise of legal discretion on unspecified grounds that vary according to one’s personal sense of justice.6 How, then, can the unjustness of the enrichment be conceptualized in a juridically disciplined manner?
Second, how do the principle’s three elements (that the plaintiff has been “enriched,” that the enrichment has been “at the defendant’s expense,” and that the enrichment was “unjust”) as well as the defense of change of position fit together to form a coherent basis of liability? Historically, the prime impetus for the development of unjust enrichment has been to bring together various instances of restitutionary liability that the common law had assigned to separate compartments. This drive for unity across different kinds of transactions, however, would be pointless unless the principle provided unity within each transaction. For if the elements of liability are merely a potpourri of mutually inconsistent or indifferent considerations, liability would depend on the particular way in which the various considerations are balanced and combined in any given case or group of cases. Unjust enrichment would then provide merely a common label, not a common pattern of reasoning. Only by combining in a coherent set could the elements of unjust enrichment impart the unity of an overarching principle to the various situations that contemporary scholars of restitution claim fall under it.
Moreover, only when they are coherently unified do the individual elements themselves have a stable meaning. What counts as an “enrichment” of the defendant cannot be determined independently of what renders the enrichment “unjust” and “at the expense of the plaintiff.” The idea of an enrichment presupposes a normatively relevant baseline against which the enrichment is measured, and what is normatively relevant has to refer to something to which the appropriate considerations of unjustness can intelligibly apply, and vice versa. The same is true of what it means for the enrichment to be realized “at the expense of” the plaintiff. As with other bases of liability, the meaning of each element conditions, and is conditioned by, the meaning of all the others. Each element is intelligible not on its own but through its place in the principle of unjust enrichment conceived as a unified whole.
The theoretical idea that reflects this concern with the inner unity of the principle of unjust enrichment, as well as of other principles of private law, is corrective justice. Indeed, in a recent judgment the Supreme Court of Canada remarked: “Restitution is a tool of corrective justice. When a transfer of value between two parties is normatively defective, restitution functions to correct that transfer by restoring their parties to their pre-transfer positions.”7 Such an observation testifies to the intuitive plausibility of understanding liability for unjust enrichment as an instantiation of corrective justice. Unjust enrichment at another’s expense seems to be an obvious example of an injustice as between the parties, which a finding of liability then corrects by requiring restoration of the enrichment.
However, it is one thing to assert the intuitive plausibility of connecting unjust enrichment to corrective justice, and another to provide an adequate theoretical account of the connection. Such an account must show how liability for unjust enrichment manifests the three interwoven features that make up corrective justice.8 First, corrective justice, reflecting the bipolar nexus of plaintiff and defendant, signifies a normative structure in which the parties are correlatively situated. Second, because this structure requires a content that is itself informed by correlativity, the organizing features of the parties’ relationship are the plaintiff’s right and the defendant’s correlative duty. Third, rights and their correlative duties imply a conception of the parties as persons who interact with each other as free and equal agents, without the law’s subordinating either of them to the other. Accordingly, as an instantiation of corrective justice, liability for unjust enrichment should exhibit the correlative structure of the parties’ relationship, vindicate the plaintiff’s right as against the defendant, and affirm the parties’ freedom and equality. And so the question arises: how are these features of corrective justice implicit in liability for unjust enrichment?
In the recent scholarship on unjust enrichment, doubts about corrective justice flow from difficulties that supposedly pertain to the second of these features, the correlativity of right and duty. On the duty side, the difficulty rests on the defendant’s being obligated to make restitution despite his or her passivity in receiving the enrichment. This passivity means that the recipient cannot plausibly be regarded as a wrongdoer— that is, as someone who is to be subjected to liability as a consequence of having breached a duty owed to the plaintiff. One consequence of this is that liability in unjust enrichment is “strict” or without fault, and therefore at odds with the corrective justice account of tort law.9 Even this, however, understates the difficulty. In fact, the recipient has not merely done no wrong, but has not done anything at all: “there is no sense in which the defendant is the agent of the plaintiff’s misfortune.”10 Nor does it seem possible to say that the injustice consists in the act of withholding restitution. That would be an injustice only if the defendant were already under an anterior duty to make restitution. This is the duty that corrective justice is alleged to be incapable of grounding.
A parallel difficulty emerges in connection with the plaintiff’s right. Cases of unjust enrichment deal with the transfer of money or goods or with the provision of services. In none of these cases does the plaintiff retain a proprietary right to the subject matter of the enrichment. Corrective justice postulates that liability vindicates some right of the plaintiff’s. In cases of unjust enrichment, however, the enriching transaction seems to have wiped away that right, leaving the plaintiff with nothing to vindicate.11
The challenge concerning the plaintiff’s right moves from the premise that the unjust enrichment leaves the plaintiff without a proprietary right to the conclusion that the plaintiff has no right at all. This conclusion does not follow. The plaintiff may well have a non-proprietary right—that is, a right not in rem but in personam. Such a right, consisting in an entitlement against a particular defendant rather than against the world in general, is established through a transaction in which both parties participate. A paradigmatic instance is the right to contractual performance, which arises through a course of dealings (offer, acceptance, and so on) between the parties and runs in favor of a particular promisee and against the particular promisor. In pointing to this instance of an in personam right, I am not proposing a revival of the pernicious view that a claim in unjust enrichment is based on an implied contract. However, I am suggesting that perhaps the reason that unjust enrichment could have been assimilated to contract for so long is that both bases of liability are of a kind that do not rest on a proprietary claim. Of course, one can make good on this suggestion only by specifying (as I hope to do) the elements in the parties’ dealings that perform for unjust enrichment the function that such concepts as offer and acceptance do for contract.
The purpose of this chapter is to elucidate unjust enrichment as an in personam basis of liability that conforms to corrective justice. As in the case of contract, the parties to liability in unjust enrichment (so I shall argue) establish the correlative right and duty through the interaction in which they both participate. Being interactionally established, the in personam right stands in contrast to an in rem right, which the right-holder has prior to and independently of the defendant’s wrong. With respect to both in rem rights and in personam rights, corrective justice undoes an injustice that consists in an inconsistency with the plaintiff’s right that is imputable to the defendant. But there is this difference between them. The in rem right imposes a duty on the whole world; the defendant’s particular duty arises out of membership in that world. The in personam right imposes a duty specifically on the defendant; this duty is the product of a right-establishing interaction with the plaintiff. To be sure, the in personam right is not a creation ex nihilo. It arises out of what is rightfully the parties’: the parties to a contract, for example, have pre-existing rights to what they are exchanging. However, the juridical effect of the parties’ interaction is to transform these pre-existing rights into components of a new relationship of right and duty.
How, then, does an unjustly enriching interaction establish a correlative right and duty of restitution? As the Supreme Court of Canada observed, unjust enrichment occurs “[w]hen a transfer of value between two parties is normatively defective.”12 My focus is on the role of value in a corrective justice account of unjust enrichment. I intend to trace how value starts out as an entitlement of the plaintiff’s that is transferred to the defendant in a normatively defective way, with the result that the value must be retransferred to the plaintiff.
2. The juridical significance of value
What is value and what is involved in its transfer? To address these questions I start with the account of value in Hegel’s Philosophy of Right. This account continues a tradition of enquiry about value that stretches back to Aristotle and was subsequently carried forward by Marx and others. Hegel’s remarks are particularly illuminating for issues of liability, because he treats value initially not as an economic concept but as a juridical one.
Hegel regards value as an incident of property. One is entitled to the value of something by virtue of one’s ownership of the thing that is the locus of the value. Hegel’s description of value as an object of ownership reflects commonplace notions drawn from contract and tort law, respectively, that the owner of anything alienable is entitled to realize its value through exchange13 and to be compensated to the extent of its value in the event of wrongful injury or deprivation.14 The owner of the thing owns the value in the sense that ownership of the thing carries with it an entitlement to something equivalent when the thing is exchanged or injured. Value is thus the potentiality that is actualized through a set of legal operations—exchange and liability— with respect to things that one owns. Indeed, unless it were possible to conceive of this potentiality as an entitlement of the thing’s owner, the transformation of an entitlement to what one owns into an entitlement to what is substituted for it through exchange or liability would make no sense. The entitlement to value thus marks the continuity through the process of exchange and the determination of liability of the owner’s entitlement to the thing owned.
A thing in use is a single thing, determined quantitatively and qualitatively and related to a specific need. But its specific utility, being quantitatively determinate, is at the same time comparable with [the specific utility] of other things of like utility. Similarly, the specific need which it satisfies is at the same time need in general and thus is comparable on its particular side with other needs, while the thing in virtue of the same considerations is comparable with things meeting other needs. This, the thing’s universality, whose simple determinate character arises from the particularity of the thing, so that it is eo ipso abstracted from the thing’s specific quality, is the thing’s value, wherein its genuine substantiality becomes determinate and an object of consciousness. As the full owner of the thing, I am eo ipso owner of its value as well as of its use.15
Hegel here draws attention to three characteristics of value. First, value is quantitative. This is apparent from the contrast between value and use. Use involves reference to the specific qualities that a thing has that allow it to satisfy the specific needs of the specific person using it. I can make use of my shoe, for example, because my shoe has certain qualities: a concave shape into which my foot fits, a flexible material that will bend as I lift and lower my foot, a slightly curved sole that facilitates locomotion, and so on. Only with such qualities can the shoe satisfy the needs of movement and protection that the shoes serve. In contrast, when I enquire into the value of the shoe, my interest is entirely quantitative: to how many units of something else is the shoe equivalent? The movement of our attention from use to value is thus a movement from quality to quantity.
Second, value is relational. As is indicated by the enquiry into the number of units of something else to which the shoes are equivalent, value relates a thing to other things by quantitatively comparing them. The value of my shoes is not at issue so long as these shoes are considered exclusively on their own. Attention shifts to the shoes’ value when I compare the shoes, say, to food by wondering how many loaves of bread the shoes equal.16 Value is thereby a quantitative representation of the relation between the shoes and the loaves.
Third, such quantitative comparison presupposes abstraction from the particular uses to which the compared items are put and from the particular needs that they serve. Nothing can have value that another cannot put to some particular use or that does not serve another’s particular need. When quantitatively compared, however, these diverse uses and needs implicitly share a common dimension of commensurability as instances of usefulness and need generally. For instance, shoes and loaves of bread serve the particular needs of ambulatory comfort and nutrition respectively, which, qua particular needs, are not intrinsically related to each other. In their particularity they are incomparable. Accordingly, if so many shoes are to be treated as equivalent to so many loaves, then the needs served by shoes and bread, or the uses that satisfy these needs, figure in this equivalence only through the general idea of need or usefulness in which they participate as instances. Abstraction from the particularity of need and use is the presupposition of value’s functioning as a medium of quantitative comparability between qualitatively different things.
These three characteristics of quantity, relation, and abstraction are reciprocally entailed in the idea of value. The presence of each is demanded by the presence of the other two. Value’s quantitative character requires abstraction from one thing’s particular use to the usefulness that allows that thing to be quantitatively compared to another. If the value of shoes is represented by the formula that so many shoes equal so many loaves, each characteristic of value pauses on a different aspect of the shoes’ valuation. Quantity looks to the numbers modifying the things being compared. Relation looks to the fact that the quantification of shoes is here stated comparatively by reference to the number of loaves that the shoes equal. Abstraction from the particularity of need and use looks to what is presupposed in conceiving of the relation between two particular items, such as shoes and loaves, in terms of their quantitative equality.
Value refers to the possibility of exchange and is concretized through the process of exchange. In exchange the owners of things of value determine what is to be exchanged for what and how many units of one thing are to be given for how many units of the other. They thereby give expression to the relational and quantitative characteristics of value. They do so, however, not merely in fulfillment of their own particular needs or in anticipation of the particular uses they will make of what they receive through exchange, but as participants in a world of value that abstracts from those needs and uses.
Because value treats particular needs and uses as instantiations of need and usefulness in general, the quantitative comparison between the two things being exchanged is systematically linked to quantitative comparisons between these things and other things. By abstracting from the particularity of need or use, value becomes indifferent to the particularity of the things being exchanged and can therefore be expressed through the comparison of anything of value with any other thing of value. If I wish to exchange a pair of shoes for loaves of bread, the number of loaves that I receive is a function not merely of the relationship between shoes and loaves, but also of the relationship between shoes or loaves and anything else for which they might possibly be exchanged. Even if I want bread and someone else wants shoes at the end of the day, we can each reach our desired destinations through a series of exchanges involving other commodities. The value of my shoes and the value of another’s bread exist in equilibrium with the value of other things. The formula that so many shoes equal so many loaves can be expanded to include the equality of these numbers to so many of any other thing of value. Value thus reflects the possibility of equalizing all things of value with one another, and equating any given thing of value with all other things of value.17
Consequently, the quantification of equivalents in exchange is beyond the power of the exchanging parties alone. The value to be attached to things that they exchange is determined not by either the party’s subjectivity or by the relationship between their respective subjectivities. Rather, value reflects the relationship between all possible exchanging parties with respect to all possible exchangeable things. Equivalence in exchange is an objective rather than a subjective idea. In the formula “so many shoes equal so many loaves,” the quantities do not represent merely what the owners of the shoes and the loaves, as persons who wish to satisfy their particular needs, accept from each other. Given the abstracting characteristic of value, the quantities of shoes exchanged for loaves represent what the shoes and the bread are objectively worth relative to each other.
Value is thus the medium for measuring whether what was received is quantitatively equivalent to what was given. The difference between these two marks the extent to which one party gave the other something for nothing. Only if there is such a difference does the transaction constitute a transfer of value.
The reason for this is as follows. When dealing with transfers, one must distinguish between things that have value and value itself. The transfer to another of a thing that has value does not necessarily mean that there has also been a transfer of value. Take the example of exchange. When I exchange a certain quantity of shoes for a certain quantity of food, I no doubt have transferred something of value, the shoes, and received something of value in return, the food. But if the food is of equal value to the shoes, no value has been transferred. Exchange on such terms features the reciprocal transfer of things of value but not the transfer of value itself, since it keeps constant the value to which each party is entitled. Exchange demonstrates that value “is distinct from the external things which change owners in the course of the transaction,”18 because in an exchange external things are transferred but value is not. To be sure, I would not engage in this exchange unless the food I received was more useful or valuable to me than the shoes I surrendered. But the value that is expressed in and through the exchange abstracts from me as a particular person with a particular preference for this amount of food rather than that amount of shoes. What matters to value in exchange is not the value to me in isolation, but value as determined by the intrinsically relational process of exchange among those trading shoes and food.
Only to the extent that the transfer is gratuitous—that is, involves no receipt of equivalent value—does the transfer of a thing of value become a transfer of value as well. If I transfer shoes but receive in return nothing or food of less value (like the Homeric hero who foolishly “exchanged gold armor for bronze armor, a hundred oxen’s worth for nine”),19 then I have transferred not only the shoes as things of value but value itself. In contrast to what happens in an exchange, the transaction does not preserve intact the amount of value that I have, because there is no equivalence of value in what was given and received. Through this gratuitous transfer the value of what is rightfully mine has been diminished and the value of what is rightfully the transferee’s has been increased by the amount of value that has been transferred without reciprocation. In the language of unjust enrichment, the transferee has been enriched at my expense. This does not mean, of course, that the transferee is obligated to return the enrichment. That further consequence depends on whether the retention of that enrichment is unjust—that is, whether the transfer occurred under conditions that generate an obligation to restore the transferred value.
Being unreciprocated, the transferred value of the shoes thus has a double aspect. On the one hand it is an incident of the transferee’s proprietary right in the shoes. As is the case with every owner, the transferee who becomes the owner of the shoes also thereby becomes entitled to their value. If the transferee sells the shoes, the transferee is entitled to keep the value realized through the sale. If the shoes are tortiously destroyed or converted, the transferee is entitled to receive from the wrongdoer their equivalent value as compensation. Because the transferee’s right to the shoes (and the consequent entitlement to their value) is good against the whole world, I am not differently situated with respect to this value than is everyone else.
On the other hand, the transferred value in the shoes is also a component of the normative relationship, unshared by anyone else, between me as transferor and the transferee. Even if the transfer of the shoes (and therefore of their value) is valid from a proprietary standpoint, the gratuitousness of the transfer raises a distinct issue of justice between us as parties to the transaction. Because the law assumes that persons generally act to further their own ends rather than another’s, it seeks to ensure that I truly intended the transfer to be gratuitous. And conversely because the law does not allow obligations to be created behind another’s back, restitution of the transferred value has to be consonant with the free will of the transferee. Thus, aside from the passage of title in the shoes, the question arises whether the circumstances of the gratuitous transfer of the value in the shoes are such that the transferee is under an obligation to restore this value to me. These circumstances pertain to the relationship between the two of us as participants in the transfer of value rather than the relationship between the transferee, as the new owner of the shoes, and everyone else. Put more technically, although I have lost the in rem right to the shoes (and thus to their value), one can still ask whether the conditions of transfer were such that I now nonetheless have, as against the transferee, an in personam right to their value. It is this aspect of the transferred value that engages the principle of unjust enrichment.
Exchange and transfer of value are thus mutually exclusive notions. Exchange features a movement of things of value from each party to the other. It does not, however, feature any movement of value. In contrast, a transfer of value occurs when one party gives the other something of value, but in return receives nothing or something of lesser value. This transaction transfers not only a thing of value, but also value itself, for through this interaction one party loses and the other party gains value.
This contrast between a transfer of value and a transfer of a thing of value is the consequence of the inherently relational nature of value. Characterized as it is by quantitative comparability that abstracts from the qualitative differences between things of value, value equates an amount of one thing to an amount of another. Value is not concerned with anything on its own but with the quantitative relationship between one thing and another. Whether a transfer of value has occurred thus depends not on the movement of any single thing of value, but on whether that movement has been matched by the reciprocal movement of some other thing of equivalent value. This reciprocal movement is a contingent matter. When it occurs, one has an exchange in which things of value have been transferred but not value itself. When it does not occur, one has a transfer of value.
3. The transfer elements of liability
I now turn to the juridical significance of treating unjust enrichment as involving a transfer of value, understood as the giving of something (whether objects or labor) for nothing. How is the idea of a transfer of value actualized through the requirements for liability? These requirements reflect the idea to the extent that it provides a structure to which they conform. They also construct the idea by endowing with legal specificity what would otherwise be an abstraction. Several points deserve notice.
First, at the most general level the idea of a transfer of value is reflected in two of the requirements for liability under the principle of unjust enrichment, that the defendant be enriched and that the enrichment be at the expense of the plaintiff. Understood as aspects of a transfer, these two requirements are not mutually independent elements but the integrated moments of a single bilateral phenomenon. Unjust enrichment deals not with maintaining the wealth of one party or another against an increase or decrease in the value of their respective resources, nor even with a matching increase and decrease in each party’s wealth, but with a relationship between the parties that can ground the liability that one of them may have to the other. The idea of a transfer establishes the requisite relationship by pointing to an enrichment that has moved from the plaintiff to the defendant. Accordingly, the “enrichment” and “expense” mentioned in the principle of unjust enrichment are terms of mutual relation, each requiring the other in order to function as constituents of liability. They refer not to gains and losses simpliciter —that is, to one person being better off and another person being worse off than before, but to the connection of each to the other through the giving and receiving of value.
Second, enrichment at the expense of another should be understood as structured by the immediacy of the link between the parties as transferor and transferee of value. The notion of a transfer thereby defines the ambit of liability, preventing liability that is either too restrictive or too expansive. Liability is too restrictive when the plaintiff’s claim is disqualified on the grounds of absence of enrichment even though value has been transferred to the defendant. An example is the now fading suggestion that the plaintiff’s passing on to third parties of the loss from the transfer excludes recovery of the value from the transferee.20 Liability is too expansive when the plaintiff’s claim is allowed even though the parties are not related as transferor and transferee. An example is the view that the relationship between the parties can be indirectly established through the remotely causal stages of the enrichment’s transmission.21
Third, not every benefit realized from the action of another involves a movement of value. For value to move, the enriching action must be directed toward something that is the defendant’s. If the purpose and intended effect of the action refer only to the plaintiff and the plaintiff’s property, the value remains with the plaintiff even though the defendant has been advantaged as a result. The absence of liability for incidental benefits illustrates this. In a typical case of incidental benefit, the plaintiff acts with reference to what is his or her own property or in the exercise of his or her own rights but in the process happens to confer a benefit on a neighbor. Classic examples are the cutting down of a wood that obscures a neighbor’s prospect or building a wall that happens to shield a neighbor’s house from windstorms.22 Because the work was done not on the defendant’s property but on the plaintiff’s property and for the plaintiff’s own purposes, nothing has occurred that can be construed as a transfer of value from the plaintiff to the defendant.23 One can phrase this conclusion in the terms of the principle of unjust enrichment by saying that the defendant’s enrichment has not come at the plaintiff’s expense.24 What this means is that by virtue of the labor having been expended on the plaintiff’s property and for the plaintiff’s purposes, the value of the labor has been retained by the plaintiff and has not passed to the defendant.25
Fourth, conceiving of the enrichment as a transfer of value casts doubt on the appropriateness of terms like “subjective devaluation” and “incontrovertible benefit.” In the current treatment of unjust enrichment, these terms qualify the segment of the analysis that deals with enrichment. “Subjective devaluation”26 suggests that a benefit may not qualify as an enrichment if a defendant can plausibly assert that, despite the benefit’s objective value, he or she subjectively attaches no value to it. Once enrichment is understood as signaling a transfer of value, however, subjective devaluation cannot pertain to the determination of whether there has been an enrichment. Because value abstracts from the parties’ particularity, neither value nor its transfer is determined subjectively. Whether a person who gives another something of value has in return received something of equivalent value is an objective question, the answer to which is systemically determined by market exchanges. Value, therefore, cannot be subjectively devalued. Nor can subjective devaluation be defeated by subjectively revaluing the benefit on the ground of its incontrovertibility. At bottom, subjective devaluation is not about the nature of the enrichment, but about the transferee’s freedom to make his or her own choices.27 This is of course an important consideration, but it concerns not the existence of an enrichment but the justness of the defendant’s retaining it.
Fifth, because one can transfer only that to which one has a right, the notion of a transfer of value recognizes that the transaction enriched the defendant with what was initially within the plaintiff’s entitlement. Recall Hegel’s observation that “as full owner of the thing, I am eo ipso owner of its value as well as of its use.”28 The enrichment is at the plaintiff’s expense not merely because the transaction had an adverse effect on the plaintiff, but because that effect operates on value as an incident of what the plaintiff owned on entering the transaction.29 The plaintiff’s right to the value at the inception of its transfer is the precondition of the claim that the value should be retransferred to the plaintiff once the transfer is shown to be defective.30