Post by Greg Klass
Lon Fuller and William Perdue’s The Reliance Interest in Contract Damages: 1, 46 Yale L.J. 52 (1936), is best known for its analytic claim that there are three basic measures of contract damages: restitution, reliance and expectation. Also familiar are the article’s normative and descriptive theses: that that the reason for judicial intervention decreases as one moves from restitution to reliance and then from reliance to pure expectation, and that in many cases courts calculate damages with an eye to compensating reliance rather than fulfilling the promisee’s expectation. Often overlooked is the article’s methodological claim, which Fuller and Perdue label “the divergence of measure and motive” (66). “Measure” here stands for the remedial measure that attaches to the violation of a legal duty and “motive” designates the duty’s purpose or raison d’être. The divergence of measure and motive claims that the tie between rights and remedies is looser than is commonly thought. It follows that remedies are the wrong place to start when constructing an interpretive theory of legal duties.
Fuller and Perdue offer two arguments. First, practical considerations such as difficulties in proof or measurement often recommend an alternative remedy. “[E]ven where it is reasonable to suppose that a single interest furnishes the exclusive raison d’être of legal intervention it is still possible for reasons of convenience and certainty the court may choose a measure of recovery which differs from that suggested by the interested protected” (66-67). An example can be found in Fuller and Perdue’s explanation of the expectation measure as designed to protect the nonbreaching party’s reliance interest. The expectation measure captures opportunity costs, which are often difficult to prove. And the expectation measure facilitates reliance by dispensing with its proof. More generally, administrative costs, problems of proof, the possibility of error and other practical pressures can all push remedies in directions that might not correspond to the best explanations of the associated duties.
Second, “it is impossible to assume that when a court enforces a promise it necessarily pursues only one purpose and protects only one ‘interest’” (66). When a law has “mixed motives,” the remedy might not reflect all of its functions or justifications, or even the principle ones. Keeping with the example of pre-modern contract law, Fuller and Perdue argue that whereas enforcement was primarily designed to prevent unjust enrichment, perhaps “the element of unjust enrichment present in those cases served to unlock, as it were, the latent impulse to hold men to their bargains” (68).
Was the expectation interest taken as the measure of recovery because it offered a more certain standard than the reliance interest, or because the factor of reliance served to unlock the impulse to compel men to make good their promises? It is, of course, impossible to give any conclusive answer to this question. (69)
The “mixed motive” argument suggests two distinct points. First, contract law as a whole might serve multiple functions or principles. If so, it is possible that the best explanation of its remedial rules is not a complete, or even the best, explanation of the practice as a whole. Second, and more narrowly, legal remedies that look similar on their face can in fact serve very different purposes. Private law remedies can function inter alia to deter bad behavior, to compensate those who have suffered wrongful losses, to effect retribution against wrongdoers, to identify a moral wrong and to express shared outrage. Without knowing in advance which of these or other possible functions the remedies for breach are meant to serve, it is impossible to work back from those remedies to the best account of the duty.
These arguments do not rule out conceptual connections between the best theory of a legal and the remedies for its breach. But there are reasons not to begin with remedies when constructing a theory of the duty. If the law protects more than one interest or serves multiple purposes, the remedy might tell only part of the story. The function of any given remedy cannot be assumed in advance. Remedies are often the result of practical pressures not directly related to the function or justification of the duties to which they attach.