The Goals of Contract Remedies

This article offers a general account of the rules that regulate exit and loyalty in contract disputes to make some fundamental points about the goals of contract remedies. The dominant goal of these rules, like all of contract remedies, is vindicating contracting rights. When contract rights give way it is almost always for one of two reasons. Rights sometimes give way to advance the goal of efficient performance. This goal is familiarly expressed by the mitigation principle and, in American contract law, by the theory of efficient breach. Rights also give way to advance the goal of remedial simplicity. In a nutshell, the rules that regulate exit and loyalty in contract disputes, like all of contract remedies, vindicate contract rights at the least cost and with the least fuss. This should be utterly unsurprising. More interesting are the trade offs made when these goals conflict. A contract right’s certainty is of crucial significance. I define a contract right as certain when the right to a performance from another is indisputable. There is an important distinction between the right to a performance and the worth of that performance to the right-holder. Often the right a performance is certain while its worth to the right-holder is uncertain. When a contract right is certain or indisputable contract law permits a right-holder to take a self-help measure, such as exiting from a contract, to avoid suffering an uncompensated loss even though the measure inflicts a disproportionate loss on the defaulter. In other words, the goal of vindicating rights trumps the goal of efficient performance when it comes to self-help remedies that do not unduly tax courts. More bluntly, the theory of efficient breach is bunk as a descriptive matter when it comes to the rules that regulate self-help responses to an indisputable default. The goal of efficient performance drives other aspects of contract remedies. Trivially, the mitigation doctrine and other rules compel a party to vindicate a right in the cheapest way possible. More interestingly, the goal of efficient performance explains the law’s response to loyalty in the face of contract uncertainty. By this I mean when a party performs a disputed obligation or accepts performance of disputed adequacy. I show that performance of a disputed obligation (or acceptance of performance of disputed adequacy) does not preclude the later assertion of a claim of a lesser obligation (or of a greater right), but only if performance (or acceptance of performance) avoids a loss. This point, which I believe is novel but seems obvious once you think about it, systematizes what now is a very tangled thicket of law. There is scant authority on the related question whether contract uncertainty warrants withholding or refusing performance. I think this is because courts have not had to confront the question directly. It tended not to arise under traditional common law rules, which made contract rights and obligations certain or unenforceable. This is changing. I highlight a fascinating decision by Judge Posner that confronts the question and answers that contract uncertainty does warrant exit, indeed his reasoning suggests uncertainty may require exit. Judge Posner is on to something important. However, putting the issue in a broader frame shows that the power to exit from an uncertain contract is cosseted by other rules that discourage exit when it would result in a consequential loss

Territoriality and the Perils of Formalism

Recently in this journal Donald Regan published a pair of essays on CTS Corp. v. Dynamics Corp. of America. Much of the first essay elaborates his theory that what the Supreme Court should be doing and what it is doing under the dormant commerce clause is checking state laws adopted with a substantial protectionist purpose. The rest of the first essay and all of the second essay develop a different check on state lawmaking power in interstate affairs: a rule that states may not regulate conduct beyond their borders. He calls this the extraterritoriality principle. Elsewhere I have questioned whether Regan\u27s theory of protectionism is sufficient to explain what the Court is and should be doing under the dormant commerce clause. Here I want to question the extraterritoriality principle. My argument is that it works poorly, if it works at all, as a check on the regulatory authority of states. I also make the broader point that Regan\u27s two proposals are overly formal. They blind us to what should be our real concerns when reviewing state laws that affect out-of-state interests and may generate an intolerable number of bad results. At the end I briefly sketch an alternative approach to these problems that is more open-ended

Brief of Restitution and Remedies Scholars as Amici Curiae in Support of Respondent: \u3cem\u3eSpokeo v. Robins\u3c/em\u3e

Both consumer protection and restitution may be casualties in a collision with the constitutional law of standing. Spokeo collects information from the internet and publishes it; however, Spokeo neither verifies the facts nor confirms which same-named person it refers to. Robins alleges that Spokeo violated the Fair Credit Reporting Act by disseminating false information about him. He seeks class certification and up to $1,000 in statutory minimum damages instead of compensatory damages. Spokeo argues that Robins lacks standing because he suffered no “injury in fact,” no “concrete harm.” Statutory minimum recoveries for defendants’ violations of plaintiffs’ individual rights without proof of pecuniary damages or actual harm were well known before the American founding. Indeed the First Congress enacted at least one statutory minimum recovery. Congress continues to need the ability to legislate statutory minimum damages as remedies to protect consumers and other plaintiffs. This brief argues that the Court should not erode Congress’s efforts by denying standing to those plaintiffs. The search for harm beyond defendants’ violations of plaintiffs’ legally protected interests arose where defendants’ alleged public-law violations were not individualized, more generally where the laws at issue did not actually apply to plaintiffs. If, on the other hand, a defendant actually invades a plaintiff’s individualized statutory private-law “legally protected interest,” then that violation satisfies the standing prerequisite of “injury in fact.” The Court has never required a plaintiff to adduce an additional or consequential harm beyond a violation. This brief also warns the Court that accepting Spokeo’s standing argument will inadvertently lock the federal courthouse door to much of the law of restitution. Restitution is based on defendant’s gain, not plaintiff’s loss. Many restitution defendants made improper profits by violating plaintiffs’ legal rights without causing plaintiffs any pecuniary loss or harm. The brief reviews numerous long-standing restitution claims that do not involve any “injury in fact” under Spokeo’s apparent definition. These claims to recover a wrongdoer’s improper profits or to set aside a transaction tainted by a wrongdoer’s conflict of interest are crucial parts of our restitution jurisprudence. This brief calls on the Court to stand up for restitution