The Other Hand Formula

A defendant who obtained an undeserved benefit at the plaintiff’s expense must make restitution of that benefit. This is the fundamental maxim of the law of unjust enrichment, allowing recovery based on the defendant’s gain rather than on the plaintiff’s loss. Unfortunately, liability in unjust enrichment is notoriously unprincipled. The key problem is that scholars and courts cannot agree on the correct manner for distinguishing meritorious claims from non-meritorious ones in this important area of the law.

To correct this deficiency, the present Essay provides a simple mathematical formula explaining when plaintiffs should be able to recover the defendant’s gain in restitution, and when they should not. The proposed formula explains the fundamental reasoning underlying gain-based liability following the defendant’s unjust enrichment, just as the classic Hand formula explains the reasoning behind loss-based liability following the plaintiff’s harm. Our proposed Other Hand formula explains that the defendant’s gain in these cases is to be returned to the plaintiff if it is of a general type that plaintiffs could have secured for themselves through a relatively modest investment. Conversely, when plaintiffs were not in a position to secure the benefit in question for themselves, the defendant’s gain cannot be claimed by the plaintiff.

The Other Hand formula provides a clear criterion for gain-based liability, thereby solving the central puzzle courts and scholars have been grappling with in studying this area of civil liability. We illustrate the operation of the proposed formula through an analysis of central categories of liability in unjust enrichment and discuss its normative implications.