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The Missing Interest: Restoration of the Contractual Equivalence

The analysis of contract remedies is dominated by Fuller and Perdue’s classification of the interests protected by remedies: expectation, reliance, and restitution. This Article argues that in many instances courts and legislatures award remedies that do not aim at any of these interests, but rather aim at another interest, namely, restoration of the contractual equivalence.

Restoration remedies strive to put the injured party in a position similar to the one she would have occupied had the parties made (and performed) a contract in which their obligations were adjusted to the actual performance by the breaching party, while maintaining the contractual equivalence in terms of the agreed value of performance, the chronological relation between their respective obligations, etc. Thus, for example, restoration remedies may put a buyer in a monetary position similar to the one she would have occupied had the contract referred to a smaller parcel of land, to goods of inferior quality, or to delivery at the (belated) time in which the goods were actually delivered.

The Article demonstrates that restoration of the contractual equivalence is a distinctive goal of contract remedies and explores its relations with the familiar interests. Surveying contract doctrines, it shows that various remedies for partial, defective or delayed performance are best understood as aiming at restoring the contractual equivalence. It argues that protection of the restoration interest is justified by various theories of contract law, including the will theory, corrective and distributive justice, economic efficiency, and contract as cooperative relationship. The Article proposes to make restoration remedies more systematically and generally available to the injured party.

Ambivalence About Formalism

In statutory interpretation, many scholars try to reconcile judicial power with democracy by cabining judicial discretion and rendering judges more faithful agents of Congress. Although debate pervades the field, the dominant approach is to rely on formalism to narrow judicial leeway and promote legislative supremacy. In constitutional theory, by contrast, many scholars respond to a very similar problem with a very different strategy. Here too, the concern is that judges will exercise power in a manner that substitutes judicial preferences for political will, and here too, there is as much disagreement as agreement. But instead of casting judicial discretion as the source of the problem, there is a growing trend in constitutional scholarship toward embracing judicial discretion as part of the solution. Many constitutional theorists urge judges to employ discretionary tools in a manner that limits their intrusions into the political process and minimizes the disruption associated with judicial review. These constitutional scholars tend to reject formalism in favor of a form of minimalism that is in many respects the antithesis of formalism.

Professor Molot suggests that both sets of scholars have gone too far in their positions on formalism. Statutory scholars often overlook the importance of judicial flexibility as an antidote to the excesses of formalism. Constitutional scholars often overlook the importance of formal constraints and fidelity to law. Using administrative law as a counterexample, Professor Molot sketches out a more balanced approach to formalism that he argues is superior to the one-sided approaches that have increasingly characterized statutory and constitutional scholarship today.

The Principal Problem: Towards a More Limited Role for Fiduciary Law in the Nonprofit Sector

Nonprofit law scholars have increasingly recognized that state fiduciary law developed to govern for-profit corporations does not readily translate into the nonprofit sector. A substantial body of literature has sought to strengthen nonprofit governance by modifying for-profit fiduciary law to better fit the needs of the nonprofit sector. No one has answered, however, the fundamental question of to whom nonprofit boards and directors owe their fiduciary duties. Without understanding whose interests fiduciary law should protect, attempts to strengthen it are premature.

Directors and officers of for-profit corporations owe their duties to shareholders. Nonprofit corporations lack shareholders but could theoretically be accountable to donors, beneficiaries, customers, the state, or their charitable purpose. This Note argues that nonprofit corporations in fact have no appropriate principals, and thus fiduciary law is a poor governance mechanism for the nonprofit sector. The legal toolkit available to reform nonprofit governance is thus more limited than has been previously acknowledged. In the future, legal efforts to reform nonprofit governance should focus on creating targeted rules to address specific abuses and on creating conditions that allow market-based governance mechanisms to flourish.

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