CONTRACT AS PROPERTY: TRIANGLES AND TRAGIC CHOICES

Abstract According to the “Inadequacy Thesis”, the law's refusal to extend the tort of conversion to interferences with contractual rights is evidence of systemic ossification and proof of its failure to protect the most valuable asset class in the modern economy. Whilst it is true that, like chattels, the benefit of contractual rights can be usurped by third parties, transforming such rights into objects of property is the wrong solution to the problem. This article departs from previous analyses by stressing that the analogue of acts of interference with contractual rights is not the conversion of a chattel but a “triangle dispute”. The problem raised by triangle disputes is not how to reach the primary wrongdoer, but how to allocate the loss between the innocent parties. Invoking the concept of “property” cannot solve this problem. Its efficient solution is to be found in better contracts, not more property.


I. INTRODUCTION
Although the family home remains the most valuable asset that many of us will ever own, it is trite to observe that intangible assets constitute the dominant share of wealth in modern economies. As Rudden remarked: "Nowadays the great wealth lies in stocks, shares, bonds and the like, and is not just movable but mobile, crossing oceans at the touch of a keypad in the search for a fiscal Utopia." 1 What unifies the assets mentioned by Rudden is not merely their intangibility, but their status as contractual rights. A bond is a promise to repay a loan at a particular time at a particular rate of interest. Depending on its class, a company share is a promise to allow the shareholder to vote at meetings and to be paid declared dividends and a proportionate share of surplus capital on winding up. 2 To this list of valuable contractual rights we could add exclusive licences to intellectual property, bank money, futures contracts, options and other "synthetics" that can be traded on financial markets. 3 Trends in modern commercial life have certainly vindicated Roscoe Pound's statement that "[w]ealth in a commercial age, is made up largely of promises". 4 The central role played by contractual rights in modern commerce has led to calls for the assimilation of contract and property. Some have argued that the tradability of many contractual rights, initially made possible by assignments in equity, has largely eliminated the divide between property and contract. 5 Others have argued that a limited merger of the rules of property and contract is necessary to ensure that valuable contractual rights receive adequate legal protection from those who would misappropriate their value. 6 Scholars in this camp argue that because contractual rights are, no less than chattels, vulnerable to misappropriation by third parties, the common law should include them within the ambit of the property torts lest it fail to safeguard the principal repository of wealth in most modern economies. Unsurprisingly, the most forceful proponent of this view has described the result in OBG v Allan, 7 in which a majority of the House of Lords confined conversion to acts of interference with chattels, as a "landmark of reactionism" 8 which has made the tort a "commercial anachronism". 9 The purpose of this article is to examine this influential argument, which will be called the "Inadequacy Thesis", and to assess both the accuracy of its diagnosis of the ills afflicting modern property law and the viability of its prescribed treatment.
Section II of the article commences by discussing the nature of contractual rights and the difficulties inherent in treating purely jural concepts, such as rights, as objects of property capable of being converted. Whilst these conceptual difficulties do not prevent third parties from intermeddling with the fact of contractual performance, most instances of third-party interference with contractual performance are adequately covered by existing tortious liability, a conclusion that is not challenged by the fate of the 84 [2023] The Cambridge Law Journal insolvent company in OBG. Although it is possible to conceive of circumstances in which a third-party may deprive a promisee of the value of her contractual rights, a promisee can only be protected against this risk at the cost of recognising liability for pure economic loss.
Section III of the article argues that the basic flaw in the Inadequacy Thesis is its reliance on a false analogy between the conversion of a chattel and an act of third-party interference with a contractual right. The important contribution made by this article is to demonstrate that the true analogue of the latter problem is not a plain vanilla case of conversion, but a more complex "triangle dispute", such as that between an owner and a good-faith purchaser of stolen goods. Consequently, the real question for the law is how to allocate loss between two innocent parties whose interests have been affected by the conduct of a rogue from whom recovery is impossible. Contrary to the thrust of the Inadequacy Thesis, this is not a question that can be answered by invoking the law of personal property.
How, then, should the law answer this question of loss allocation? The argument advanced in Part IV of the article is that efficiency provides the most defensible basis on which to discriminate between the claims of two prima facie innocent parties whose interests have been affected by a judgment proof rogue. Consistently with Calabresi's analysis of accident law, liability for the loss should be allocated in the way that minimises the sum of the cost of third-party interference with contractual rights and the cost of avoiding it. Crucially, and unlike in archetypal triangle disputes, promisors and promisees are not strangers. Consequently, the first-best way of implementing Calabresi's model is to allow the parties to allocate liability for the loss ex ante by the terms of their contract. However, when transaction costs prohibit bargains between the parties, the law should devise default rules that incentivise them to invest in cost-justified precautions. In short, the answer to the problem identified by advocates of the Inadequacy Thesis is not more property rights, but better contracts.

II. IS THE COMMON LAW INADEQUATE?
A. Can Contractual Rights be Converted?
The basic claim made by proponents of the Inadequacy Thesis is that contractual rights should be protected by the tort of conversion. A necessary presupposition of this argument is that a contractual right is in fact a "thing" capable of being converted.
David Hume famously remarked that, "the principal disturbance in society arises from those goods, which we call external, and from their looseness and easy transition from one person to another". 10 Tangible things are the objects of in rem rights of exclusion actionable in conversion because they are, by virtue of their existence in the world, vulnerable to non-consensual transfer. To borrow Penner's explanation: "[t]he reason why a right to a material object would seem to entail something like a right in rem is simply that a material object, existing as it does in the world, is . . . in principle accessible by anyone and subject to the depredations of anyone." 11 Whilst contractual rights amount to "property" in the broad sense that they are economically valuable assets, many of which can be assigned, 12 it does not follow that, like tangible things, they are therefore capable of being converted. This argument has been made by Douglas in an important article on the nature and scope of conversion. 13 His argument is that unlike chattels, which exist independently of any legal system, rights to contractual performance are artefacts of a particular legal system. Consequently, whilst the question of whether an owner has been deprived of his chattel by a thief is simply one of fact, the question of whether a promisee has been deprived of his right to performance is one of law, the answer to which depends on the rules of the legal system in which it is constituted and recognised. He explains that "a contractual right . . . is a purely legal construct. It is something which depends upon a legal system for its existence. As such, it is for the legal system to determine when such a right comes into existence and . . .when the holder of such a right is deprived of it". 14 Although subject to important exceptions such as frustration 15 and termination for breach 16 or repudiation, 17 the general position at common law, which will be referred to as the "Basic Rule", is that contractual duties can only be discharged by performance rendered by the promisor to the promisee. 18

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[2023] The Cambridge Law Journal "steal" or "convert" a promisee's right to performance because the promisor's duty to perform remains intact.
Douglas's point can be illustrated with the following example. A is an egg wholesaler who, in consideration of £1,000, agrees to sell B, an egg retailer, 1,000 eggs deliverable by a certain date. The contract provides that B need only pay on receipt of the eggs, but that title to the eggs is not to pass to B until A has been paid in full. C is a rival retailer who is aware of A's contract with B but, due to supply constraints, wishes to acquire the eggs for himself. Using his skills of impersonation, C dupes A into delivering the 1,000 eggs to himself instead of to B. In this example, C has plainly interfered with the fact of A's contractual performance. However, due to the operation of the Basic Rule, C's conduct has not discharged A of his duty to B, meaning that B's correlative right to performance survives. 19 It thus seems impossible to say that C has "converted" B's right to performance against A.
A potential response to this argument is to point out that liability in the property torts requires only interference with, and not deprivation of, an owner's right. If, for instance, A touches B's chattel or trespasses onto his land, A will have committed an actionable wrong against B even though he has not deprived B of his right to the land or chattels. This objection, however, misses the point. As Douglas explains: "When we talk of the conversion of a chattel . . . it is not the right, but the thing to which the right relatesthe chattelwhich the defendant deprives the claimant of." 20 For the purposes of an analogy with conversion, the contractual right takes the place of the chattel as the "thing" or object to which the property right relates. 21 Douglas's point is simply that extinguishment of the contractual right is the only jural event that is analogous to an act of physical interference with a chattel. If the jural structure of a purely jural object remains unaltered by the actions of a third party, then it seems impossible to say that it has been converted.
The proceeding argument can be summarised as follows. Scarce, tangible resources are the objects of in rem rights of non-interference because their physical existence in the world makes them vulnerable to the depredations of others. The corollary of this observation is that resources that are not vulnerable to third-party interference need not be objects of such duties. Because, as Douglas observes, "[t]he legal nature of a contractual right makes it generally impossible for the holder of such a right to be deprived of it", 22 the attempt to transform contractual rights into objects of property for the purposes of an action in conversion seems redundant. 19 For the seminal discussion of jural correlativity see W.N. Hohfeld, "Some Fundamental Legal Conceptions as Applied in Judicial Reasoning" (1913) 23 Y.L.J., 16, 30-59. 20 Douglas, "Scope", 341. If it were otherwise, the former right-holder would have no standing to sue. 21 In other words, a purely jural thing is the object of another purely jural thing. 22 Douglas, "Scope", 340. C.L.J. 87 Contract as Property

B. Loss Caused by Interference with Contractual Performance
Douglas's analysis of the nature of contractual rights suggests that the Inadequacy Thesis fails at the first hurdle. Why extend the ambit of conversion to a species of "thing" that is, by its very nature, incapable of being converted?
One answer is that, whilst Douglas's analysis vindicates the traditional view that one "owns" property and is "owed" obligations, 23 it does not prove that the law adequately protects holders of valuable contractual rights. More particularly, it does not address the fact that a third party can cause a promisee real loss, even where the latter's contractual right survives. This can be demonstrated by altering the egg merchant example.
Recall that A was fraudulently induced into delivering eggs to C, a roguish third party, instead of B, his promisee. Because A's duty to B remains undischarged, we cannot say that C has converted B's rights. C's duplicity thus appears to be a problem for A, who must bear the costs of performing again, but not for B, who can either insist on performance or sue A for breach of contract. Imagine, however, that before being able to correct his embarrassing error, A became bankrupt. That B's rights remain enforceable against A's personal representatives does not alter the fact that C's interference with A's performance of his contractual duties to B has caused B loss. Assuming that there is no change in the market price of eggs, the quantum of this loss will equal the cost of organising substitute performance less whatever meagre sum B recovers from A's trustee in bankruptcy.
We thus have a situation in which C has caused B loss but, following Douglas's analysis, B has no action in conversion against C because his right to contractual performance remains enforceable against A's trustee in bankruptcy. Does this example demonstrate a lacuna in the law? The answer to this question is "no", because the law already affords B a means of redress against C. Because C has induced A to breach his contract with B, C will be liable to B in the tort of inducing contract. 24 Moreover, because C's impersonation of A amounts to an actionable deceit, C will also be liable to B for intentionally causing loss by unlawful means. 25 As both courts and commentators have observed, 26 the tort of inducing breach of contract blurs the boundaries between property and obligation. 23  Nevertheless, the limited in rem effect created by the tort is perfectly compatible with the argument advanced above, which is simply that extending the tort of conversion is unnecessary because the law already recognises an action that enables a promisee to recover loss inflicted by a stranger in these circumstances.
Moreover, the quasi-proprietary status bestowed on contractual rights by the inducing tort does not provide a conceptual stepping stone for those who seek to extend conversion to contractual rights. This is so for two reasons. First, consistently with Douglas's argument, liability for inducing breach of contract does not presuppose that the promisee has been deprived of her right to performance by the actions of the inducer. This is illustrated by the locus classicus, Lumley v Gye. 27 That the promisee, Benjamin Lumley of Her Majesty's Theatre, had an action against the inducer, Frederick Gye of Covent Garden Theatre, did not prevent him from successfully enjoining the promisor, Madame Wagner, from breaking her contract with him by singing at Covent Garden. 28 Secondly, the liability of a converter of chattels is famously strict. 29 By contrast, a plaintiff suing for inducing breach of contract must prove that the inducer intended to procure a breach of contract. 30 The wrong of inducing breach of contract lies not in the inducer's interference with the promisee's right as a "thing", but in his intention to induce the promisor to commit a breach of duty. 31 Conceptually, then, the tort's nearest relation is not conversion or trespass, but personal liability in equity for knowingly receiving property transferred in breach of trust. 32 C. OBG v Allan

The Facts
What happens, however, if a promisee suffers loss at the hands of a third party but has no claim in the economic torts because the facts disclose neither a breach of contract nor an intention to cause loss by unlawful means? Does this demonstrate a lacuna in the legal protection afforded to promisees? Just such a circumstance appeared to arise in the (in)famous decision of the House of Lords in OBG. 89 Contract as Property OBG Ltd ("OBG"), a civil engineering firm, was plunged into a financial crisis when its largest client, North West Water Ltd ("NWW"), refused to pay outstanding invoices following a dispute about the quality of OBG's work. As part of a rescue attempt, OBG sought assistance from a creditor who purported to receive an assignment of an "all-moneys" debenture previously granted to OBG's bankers. Although no money was due under the debenture, the creditor received advice that debts owed to it by OBG could be secured by the otherwise moribund instrument. In purported exercise of its powers under the debenture, the creditor appointed the respondents as administrative receivers. Amongst other acts, the receivers compromised outstanding contractual obligations owed to OBG by its clients, including NWW, for what appeared to be a fraction of their true value. 33 Unfortunately, the advice on which the creditor acted was wrong. The debenture remained lifeless, making the purported appointment of the respondents invalid and rendering their every dealing with OBG's assets ultra vires. OBG subsequently appointed a liquidator who brought proceedings against the respondents claiming, inter alia, that the settlement with NWW amounted to a conversion of OBG's contractual rights. Whilst the respondents admitted that they were strictly liable for interference with OBG's chattels, 34 they denied liability for conversion of OBG's contractual rights on the simple ground that conversion is confined to wrongful interferences with chattels. 35 By a bare majority of three to two, the House of Lords agreed.
Of the majority, Lord Hoffmann and Lord Brown each offered substantive arguments against extending the ambit of the tort to intangible assets. Lord Hoffmann was concerned about making receivers, appointed in good faith, strictly liable for pure economic loss. 36 Lord Brown argued that it was undesirable to extend tortious liability to assets which, so he argued, had no determinable value at the date of their seizure. 37 These arguments were, however, subsidiary to the majority's primary ground for denying the liquidator's claim, which was that any decision to expand the scope of conversion to include intangible assets, such as contractual rights, must be made by Parliament. 38 The minority of Lord Nicholls and Baroness Hale were not persuaded of the need for judicial reticence, arguing that confining conversion to acts of interference with tangible assets is to draw a distinction without a 33 The receivers compromised OBG's rights against NWW for £400,000.

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[2023] The Cambridge Law Journal difference. 39 Each noted that, because one who converts a cheque is liable to pay damages equal to its face value and not the value of the paper on which it is printed, it is clear that the tort already protects contractual rights. The only barrier to recognition of OBG's claim is the mystical significance that the law appears to attach to certain scraps of paper. 40

Does OBG Reveal a Lacuna in the Law?
Because the receivers' conduct was not unlawful, was not intended to cause loss and did not result in a breach of contract, OBG could not avail itself of the economic torts. 41 Its only chance of being made whole thus depended on its novel conversion argument. The rejection of this argument is, according to supporters of the Inadequacy Thesis, irrefutable evidence of an ossified legal system whose preoccupation with traditional forms of property has resulted in the systemic under-protection of the most valuable asset-class in most modern economies. 42 If the receivers compromised OBG's contractual rights for a fraction of their true value, then it is undeniable that the company's unsecured creditors suffered a real loss. However, the existence of this loss does not prove that the law failed to protect the insolvent company's contractual rights from the actions of the receivers.
Green has observed of OBG that "[s]ince settled debts no longer exist as items of property, the receivers, in acting as they did, deprived the rightful owners substantially of the value of those assets". 43 Whilst this is undoubtedly true, the real question is why OBG's debtors were discharged of their duties to OBG given that, by paying the invalidly appointed receivers, they appeared to render performance to the wrong party. 44 To again illustrate with the example of the credulous egg merchant, the outcome in OBG appears to be the equivalent of holding that A's mistaken act of delivering the eggs to C effected a good discharge of his contractual duty to B. What explains this apparent departure from the Basic Rule?
The answer is that OBG involved no such departure. What is insufficiently emphasised about OBG is the way in which two crucial decisions transformed an unremarkable corporate insolvency into what Green regards as a missed opportunity to drag property law kicking and screaming into the twenty-first century. 45 The first was the creditor's decision to appoint liquidators pursuant to powers nominally acquired as the assignee of a 39  C.L.J. 91 Contract as Property debenture. But for this intervention, OBG would have skipped receivership and proceeded directly to an orderly insolvency. 46 The second was the liquidator's decision to concur in the void settlement that the receivers reached with NWW. Because the liquidator had power to dispose of the company's assets, his concurrence in the otherwise void settlement meant that the debtors in fact rendered performance to the correct party. Had it not been for the liquidator's intervention, NWW's contractual obligations would have remained undischarged, rendering the claim in conversion redundant. 47 Put briefly, the outcome in OBG simply does not reveal the lacuna in legal protection of contractual rights claimed by its critics. This is because, contrary to Green's view, 48 ultimate legal responsibility for the fate suffered by OBG's unsecured creditors lay with the properly appointed liquidator, and not the alleged tortfeasors. If it is true that the liquidator ratified a compromise that grossly undervalued OBG's contractual rights, 49 the appropriate response is not to upend the law of property, but to allow OBG's creditors an action against the liquidator. 50

Explaining the Face Value Rule
Before concluding the discussion of OBG, a final argument must be confronted. As noted above, the minority in OBG made much of the "face value" rule, according to which damages for the conversion of a negotiable instrument are equal to its face value, and not the value of the paper on which it is printed. 51 Their purpose in doing this was not so much to argue that the tort of conversion ought to apply to contractual rights, as to point out that it already does. 52 According to Lord Nicholls, acceptance of OBG's claim only required the law to "discard the fictional significance of a piece of paper". 53 This, however, betrays a misunderstanding of the face value rule.
Contrary to Lord Nicholls's statement, the requirement of a document is not "hocus pocus", but a necessary consequence of the law's decision to completely subsume a promise to pay within a physical document which, 46 The trial judge found that OBG was inevitably headed for insolvent liquidation.

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[2023] The Cambridge Law Journal like chattel money, is fully negotiable. 54 Merging a promise to pay within a chattel such that the promise obeys the rules of chattel money has several advantages. It obviates the need to deal in specie because it allows debt instruments to circulate like cash. 55 It enables the benefit of a contractual right to pass by manual delivery which, prior to statutory assignment, 56 overcame the common law's prohibition on the assignment of contractual rights. 57 And even since the advent of statutory assignment, drawing a cheque is a more convenient payment method than executing an instrument of assignment in favour of the payee and giving notice to the assignor's debtor. 58 However, one cannot enjoy the benefits of negotiability without also bearing its infirmities. Imagine that A pays B by a bearer cheque that is subsequently stolen by C, who uses it to purchase goods from D, a "holder in due course". 59 When D presents the cheque for payment and the drawee debits A's account, the bill will be "discharged", 60 extinguishing B's contractual rights against A. That B can sue C for the face value of the cheque, and not its value as a scrap of paper, is not a fiction but recognition of the reality that C has, by his actions, deprived B of her contractual rights against A. 61 In this important respect, a bearer cheque with a face value £50 is no less vulnerable to acts of third-party interference than a £50 note. 62 Contrary to the minority position, the difference between negotiable and non-negotiable instruments is not that the former are printed on magic paper whilst the latter are not. It is instead that, unless a document is negotiable, interference with it will not alter the rights evidenced by it. 63 Consequently, as Douglas also notes, 64 no analogy can be drawn between acts of interference with chattels and attempted acts of interference with contractual rights that are evidenced by non-negotiable instruments. If the foregoing analysis is correct, it is neither true to say that "the tort of conversion has already jumped the gap between tangibles and intangibles", 65 nor that it ought to. However, merely demonstrating that OBG does not reveal a lacuna in the legal protection of contractual rights does not prove the broader point that the law is adequate.
Take the following example. B, a large football club, signs A, a star football player, on a multimillion-pound, multi-year contract. To celebrate, A goes out to a bar where he is assaulted by C. A's injuries are sufficiently serious that he will miss the entire season. 66 C's actions have plainly diminished the value of B's rights against A. However, because C neither caused A to breach his contract with B, nor intended to cause B loss, B has no claim in inducing breach of contract or the unlawful means tort, and thus no means of recovering from C. 67 Is the absence of a claim proof of the Inadequacy Thesis, and can we envisage a way in which B can recover from C? According to what Douglas has described as the "reification" theory of contractual rights, the answer may be "yes". Douglas explains that: Under this analysis of contractual rights, which is sometimes called "reification" by its advocates, it is possible to view the financial value of the right as something distinct from the right itself; it may be seen as the "thing" to which the right relates. The importance of this for present purposes is that it allows us to say that there is something which a defendant can deprive the claimant of. 68 Because it "propertises" the value of a contractual right, the reification theory is a variation on the theme proposed by advocates of the Inadequacy Thesis. On this view, C will be liable to B because he has breached the in rem duty not to interfere with the value of B's contractual rights against A. Likewise, the receivers in OBG would be liable to the insolvent company for diminishing the value of its contractual rights against its customers. Whilst this expansive notion of "contract as property" captures third-party conduct that eludes the economic torts, "reification", and all cognate theories, suffers from three problems, each more serious than the last.
The first is that, as Douglas has demonstrated, 69 there is no authority for an in rem right to the value of a contractual right.

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[2023] The Cambridge Law Journal an intellectual property right cannot bring an action against a third party who, by infringing the underlying intellectual property right, diminishes the value of his contractual rights against the licensor. 70 The second problem is that the judicial creation of any such novel property right or "fancy" 71 is forbidden by the numerus clausus principle, according to which there is a fixed or "closed list" of property rights recognised at common law. 72 Finally, irrespective of whether it is created by a court or Parliament, the creation of an in rem right to the value of an in personam contractual right would undermine the fundamental principle that third parties are not liable for causing pure economic loss, whether maliciously or otherwise. 73 As established in Allen v Flood 74 and affirmed in OBG, 75 a plaintiff can only recover pure economic loss from a third party who intentionally induced a breach of contract or inflicted loss by unlawful means.
The law's general prohibition on claims for pure economic loss not only reflects the concern that allowing such claims would create "liability in an indeterminate amount for an indeterminate time to an indeterminate class". 76 It also reflects the fact that allowing individuals the liberty to inflict pure economic loss on each other is the sine qua non of competition, without which there could be no efficient markets through which to allocate scarce resources. 77 This imperative was expressly recognised by Lord Nicholls, who remarked that "[c]ompetition between businesses regularly involves each business taking steps to promote itself at the expense of the other . . . Far from prohibiting such conduct; the common law seeks to encourage and protect it". 78 To recognise any free-standing right to the value of a contractual right, in whatever theoretical form, would be to overthrow this fundamental principle by a side-wind. 79 70

A. False Analogies
Despite the criticisms made above, the basic truth underpinning the Inadequacy Thesis is that contractual rights can be vulnerable to acts of third-party interference. For instance, if a rogue agent acting outside his actual, but within his ostensible, authority makes a withdrawal from his principal's bank account, the bank will receive a good pro tanto discharge of its duties to the principal as its customer. Nothing in the foregoing denies that, in a colloquial sense, the agent has "stolen" or "converted" his principal's rights against the bank. However, what is denied is that invoking the tort of conversion can solve the problem faced by the contracting parties. To the contrary, it is argued that viewing the problem through the prism of conversion diverts attention from the very real problem that the law must solve in these circumstances; viz. how best to allocate the loss between the innocent promisor and promisee.
Invoking conversion is misleading because, unlike a simple conversion of chattels, attempts by third parties to usurp a promisee's right to contractual performance invariably involve three protagonists: an innocent promisee, an innocent promisor and a wrongdoer. The appropriate analogue of the latter problem is thus not a dispute between an owner and a thief, but that between an owner and a good-faith purchaser who has purchased the former's goods from a thief. Like the problem of the good-faith purchaser, acts of third-party interference with contractual rights create one of the "eternal triangles of the law". 80 In a legal Utopia in which rogues were identifiable and solvent, and legal proceedings cheaply and expeditiously resolved, triangle disputes would cause the law little anxiety. 81 In the case of stolen goods, for instance, either the owner would forfeit the goods to the purchaser and sue the thief in conversion, or the purchaser would forfeit the goods to the owner and sue the thief for breach of his implied warranty to pass good title. 82 In the real world, however, the rogue often cannot be identified or is not worth suing. Consequently, the real significance of the law's solution to any triangle dispute is not that it determines which of the two innocent parties must endure the tedium of suing the rogue, but who must bear the loss that cannot be recovered from him. 83 80 83 See also Mautner, "Eternal Triangles", 108. 96 [2023] The Cambridge Law Journal

B. Bank Money and Triangle Disputes
A particularly good example of a contractual triangle dispute is that caused by a rogue who attempts to steal bank money. The term "bank money" is, of course, something of a misnomer. The relationship between a bank and its customer is fundamentally contractual, 84 and "bank money" is a chose in action; a debt owed by the bank to its customer equal to the sum deposited and payable on demand. 85 If, at the instigation of a rogue, a bank processes an unauthorised transaction on its customer's account, the question that the law must answer is whether the payment constitutes a good pro tanto discharge of the debt that it owes its customer. Because financial fraud forms the core business of many organised crime syndicates, attempts to steal bank money are, unlike the peculiar dispute in OBG, a problem of great practical concern. 86 As is true of all triangle disputes, the problem caused by the fraudulent targeting of bank accounts is not legal inadequacy in the sense that the rogue falls into some interstice between forms of action and cannot be sued. If, for instance, a rogue agent is acting within his ostensible authority, the bank will be entitled to debit the principal's account, 87 leaving the principal to sue the agent for breach of the contract of agency. If, on the other hand, the agent was acting outside both his actual and ostensible authority, the bank will not be entitled to debit the principal's account but can recover the sum from the agent either as compensatory damages for deceit or, by "waiving the tort", as money had and received. 88 Whichever way the court answers the mandate question, the rogue will be liable for his misdeeds. The problem is instead that an infinity of claims is of no assistance against a rogue who either cannot be found or is so impecunious as to be judgment proof. Consequently, the resolution of the jural question of whether the bank discharged the debt to its customer amounts to the following: which of the two nominally innocent parties should bear the loss caused by the absence of the true wrongdoer? No appeal to the tort of conversion can assist in answering this question. . 86 In 2019, it was reported that £2 million was "stolen" from British bank accounts every day. Many of the criminal gangs perpetrating this financial fraud did so using the relatively low-tech means of "card skimming". See S. Feay, "'Fraud: How They Steal Your Bank Account': The Low-tech and Effective Ways to Get Your Bank Details", The Financial Times, available at https://www.ft.com/content/ cadf5258-44c1-11e9-a965-23d669740bfb (accessed 22 October 2022). 87 This is not because the bank is acting within mandate per se, but because the principal will be estopped from denying that it is. On the relationship between ostensible authority and estoppel see Whilst the apparent moral symmetry of the true parties to a triangle dispute seems to make this "an impossibly difficult question", 89 the law must answer it if the dispute is to be resolved. Who, then, should draw the short straw?
One possibility, suggested by the symmetry of the parties, is to pick at random. According to one principle of decision-theory, a decision maker should aim to "minimize the sum of the costs of making decisions and the costs of error". 90 Because all decisions about liability in a generic triangle dispute are equally unfortunate, none can be considered erroneous. Consequently, the only imperative is to minimise the cost of decisions. In resolving such disputes, the law should thus refrain from expending resources in "choosing" a winner and should instead arbitrarily "pick" one. 91 Whilst this proposal appears radical, picking strategies are used to resolve other disputes where the merits of the parties appear equal. Take the maxim in pari delicto potior est conditio possidentis. 92 Where both parties to a dispute over the ownership of a chattel are tainted by illegality, the law is content to allow the possessor to prevail, not because he is worthier, but because the alternative is no better. So long as no decision is superior to any other, the decision maker is not justified in incurring costs in altering the status quo ante.
Just as there is nothing to choose between parties in pari delicto because they are equally bad, there is nothing to choose between innocent parties to a triangle dispute because they are equally good. The rules "favour the promisor" and "favour the promisee" are thus equally satisfactory. The only imperative is to make a choice between the alternatives and, to avoid creating prospective uncertainty, stick with it.
Picking rules are both cheap to apply and have the welcome effect of "sanitising" decisions that require discrimination between equals. 93 Despite these virtues, many will chafe at the idea of harnessing randomness to resolve a question of just distribution. 94 Whilst one might sympathise with this intuition, those who hold this view must find a satisfactory way

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[2023] The Cambridge Law Journal of breaking the symmetry of the parties to a generic triangle dispute. 95 The problem here is not that arriving at a more just outcome requires a more costly decision process. If a fairer outcome can be reached, then incurring additional decision costs may be justified. It is instead that it is difficult to conceive of decision criteria that a court would find acceptable.
The essential difficulty is that triangle disputes raise questions of just distribution that fit awkwardly, if at all, into the familiar private law paradigm of corrective justice in which reasons for liability are correlatively structured. 96 One need not be a corrective justice evangelist to appreciate that its inherently bilateral structure spares courts from the embarrassment of deciding questions of liability by appeal to unipolar considerations. For instance, whilst a defendant's deep pockets might be a reason to subject her to a higher marginal tax rate, 97 its irrelevance to her bilateral relationship with the plaintiff means that it is an incoherent basis on which to make her liable to the plaintiff as a matter of corrective justice. 98 However, because the innocent parties to a triangle dispute cannot be considered as the "doer" and "sufferer" of the same wrong, 99 some non-correlatively structured basis for liability must be found. What might this be?
A utilitarian, for instance, might solve the problem by assigning liability in the way that minimises the net loss of social utility. If one accepts the law of diminishing marginal returns, a utilitarian decision rule could be to "allocate liability to the richer of the two parties". 100 Someone who sought to allocate liability on the ground of relative "need" may arrive at the same conclusion. Putting aside objections to the philosophical rigour of interpersonal comparisons of welfare 101 and the equivocal nature of "need", 102 the fatal objection to any such rule is that it would be far too controversial for a court to apply. 103 The criterion of "desert" fares little better. Unlike need, desert is generally conceived of as an entitlement justified by something that one has done or achieved. 104 The winner of the 100-metre sprint "deserves" her gold medal because she crossed the finish line first. Whilst desert works well in some applications, 105 it is difficult to conceive of what a party might relevantly have done to warrant favourable treatment in a triangle dispute. Whilst we might say that the party who took reasonable precautions is deserving of preferential treatment, this is simply to clothe the least-cost-avoider principle in the language of non-consequentialist morality. 106

D. The "Calabresian" Turn
Does the foregoing discussion lead inexorably to the conclusion that the law should resolve triangle disputes by some version of a coin flip? The answer is "no". Whilst the virtues of a coin flip are not to be underestimated, a better way of breaking the symmetry between the innocent parties is to allocate liability on the grounds of relative cost.
Unlike flipping a coin or any other arbitrary "picking" rule, a decision rule that turns on relative cost pursues a socially worthwhile end, viz. efficiency, and does so without committing any obvious moral faux pas. 107 Indeed, as noted above, it is entirely possible that considerations of efficiency and desert will pull in the same direction. 108 In any case, the modest claim being advanced here is not that efficiency is the premier value. 109 It is instead that, where questions of just distribution are too difficult or controversial for a court to decide, it is desirable, ceteris paribus, to employ rules that minimise the cost of the dispute.
If the foregoing is true, how should disputes between innocent promisees and promisors be resolved? In light of Mautner's suggestion that triangle disputes should be viewed as examples of the accidents that form the core of tort law, 110 their efficient resolution is best achieved by following Posner is particularly concerned to establish the superiority of wealth maximation, as measured in dollars, over the utilitarian concern for utility maximisation. See especially at 120-23. 108 Mautner, for instance, has argued that the cheapest cost-avoider can also be regarded, in moral terms, as the more blameworthy party. Mautner, "Eternal Triangles", 128.

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[2023] The Cambridge Law Journal Calabresi's rule that liability should be allocated so as to "reduce the sum of the costs of accidents and the costs of avoiding accidents". 111 Because the Calabresian framework is based on a global assessment of cost, it nominally requires two enquiries. 112 Ex ante, the law should minimise the cost of prophylaxis by identifying the party who can avoid the accident at least cost. Ex post, after attempts at prevention have failed, the imperative is to minimise the net sunk cost of the accident. 113 This second imperative may favour imposing the loss on the party who, though she may not have "caused" the accident in the conventional sense, is the superior loss spreader or has the deepest pockets. 114 That cost is a defensible basis on which to discriminate between the parties to a triangle dispute does not mean that it is perfect. Calabresi's solution not only requires the legal architect to answer difficult empirical questions about least cost-avoiders and best loss-spreaders, it also requires her to solve a complex optimisation problem where the party who is best able to spread the costs of an accident is not also the least cost-avoider. 115 In these cases, it must be decided whether the benefits of loss distribution following an accident justify increasing the costs of avoiding accidents in the first place.

IV. IMPLEMENTING EFFICIENCY: LESS PROPERTY, MORE CONTRACT
If a rogue dupes a promisor into rendering performance to someone other than the promisee, and the law determines that the promisor's performance constitutes an effective discharge of the duty he owed the promisee, then one might say that the third party has converted the promisees's right to performance. This invocation of property is, however, purely conclusory. By contrast, Calabresi's framework, though imperfect, has the virtue of providing the law with a principled basis for resolving questions of liability. How, then, should the law apply it? The key to answering this question lies in the privity between the parties to contractual triangle disputes. Calabresi, efficiency tied with "justice" as one of the two principal goals of accident law: at 24. Discussion of Calabresi's justice goal is beyond the scope of this article. 112 In fact, Calabresi's scheme involves three subgoals. In addition to minimising the costs of accidents and the costs of preventing them, the third relevant goal is minimising the cost of administering the system. In Calabresi's terms, these are the primary, secondary and tertiary subgoals of accident law. Ibid., at 28-29. See also Mautner, "Eternal Triangles", 102. Discussion of the "tertiary" subgoal is not necessary given the thesis of this article. 113 Mautner, "Eternal Triangles", 101-02. 114 This is not only because assigning liability on this basis minimises economic dislocation by dispersing the costs of accidents. It is also because, due to the diminishing marginal utility of money, spreading the loss or imposing it upon the wealthier of the two parties minimises the loss of total utility caused by an accident. Mautner describes the paradigmatic triangle dispute as one in which, "parties not in contractual privity themselves assert simultaneous claims of rights over the same asset whose concurrent discharge is legally impossible". 116 A crucial point, and one that is completely overlooked in the "contract as property" literature, is that triangle disputes involving contractual rights diverge from the paradigm case of the good-faith purchaser of stolen goods because, unlike an owner and purchaser, promisors and promisees are not strangers.
In principle, then, the law can implement the Calabresian solution by doing nothing. This is because, as the "strong version" of Coase's theorem tells us, 117 in a world of full information and costless bargaining, the parties will reach the efficient outcome themselves. Returning to the example of bank money, imagine that it costs a customer £10 to avoid losses caused by the misuse of a lost bankcard, but that it costs the bank £20 to avoid the same loss. If, under the default rule, the bank were liable for these losses, then it would be willing to pay, and the customer willing to accept, some amount between £10.01 and £19.99 to transfer liability to the customer. If the roles were reversed and the customer were liable, the outcome would be the same because the bank would demand £20.01 for the reversal of the default rule, and no rational customer would pay a bank £20.01 to assume liability for a risk that, to her, costs £10 to avoid.
Whilst, ex post, each party will disclaim liability for all losses, ex ante, rational parties will agree to an efficient contract. 118 Any arbitrary allocation of initial entitlements will do because, as the example above demonstrates, any misallocation will be corrected by transactions between the affected parties. 119

B. Are Contracts Efficient?
The Coasean thought experiment demonstrates why the solution to acts of third-party interference with contractual rights is not to treat contractual rights as property, but to create the conditions that allow the contracting parties to draft more complete contracts. The obvious question is: do parties create tolerably efficient contracts in the real world? There are good reasons to believe that they do. Once again, bank money provides an illuminating example. Although Coase never used the language of "least" or "cheapest cost-avoider", as the example above demonstrates, this person will always bear liability in the Coasean universe of zero information and transaction costs.

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[2023] The Cambridge Law Journal When a third party induces a bank to process an unauthorised transaction on the customer's account, the jural question is whether the bank's actions constitute a good discharge of the debt that it owes its customer. As should be obvious from the foregoing discussion, the general answer to this question is "no". 120 As is true of other contractual relationships, that between a bank and its customer follows the Basic Rule, according to which a promisee's rights can only be discharged by performance rendered to the promisee herself. This is demonstrated by Rogers v Kelly, 121 in which money deposited by the plaintiff was mistakenly paid by his bankers to the defendant. The plaintiff's claim in money had and received failed because, in restitutionary terms, the defendant was not enriched at his expense. The enrichment was instead at the expense of the bank, which paid the defendant with its own money and, in the absence of authorisation, had no right to debit the plaintiff's account. Although a transfer of value occurred, the plaintiff's "bank money" remained intact. As Lord Ellenborough explained: "The plaintiff's claim is on the bankers, and they [the bankers] must seek their remedy against the defendant the best way they can. The plaintiff's money must still be considered as in the hands of the bankers. His account with them is the same as if this mistake had not been committed." 122 In these circumstances, a customer is entitled to have his account re-credited, and the bank must attempt to recover its losses from the mistaken payee. 123 Whilst this outcome will certainly be welcomed by the customer, the relevant question is: is it efficient?
Any assessment of the efficiency of contracts between banks and their customers should commence by noting that, whatever default rule is applied, the bank is unlikely to bear the cost of financial fraud in the long term. Whilst the Basic Rule initially places liability on the bank, this arrangement simply transforms the costs of fraud into another operational expense which, in a (reasonably) competitive market, 124 banks will pass on to their customers. 125 In functional terms, the Basic Rule As is true of the insurance contracts discussed above, the liability-shifting provisions in these regulatory codes allow for the creation of a contract between a bank and its customer that preserves the loss-spreading benefits of the Basic Rule whilst avoiding the worst of the moral hazard created by it. This is not to say that they perfectly replicate the frictionless universe, or even that this is their primary objective. Like every legislative or regulatory instrument, the PSR and the Code are the product of lobby-group pressure and political expediency. 150 The important point is that they demonstrate that, even in our non-Coasean world of expensive information and costly bargains, the solution to the problem caused by acts of third-party interference with contractual rights is not more property rights, but better contracts.

V. CONCLUSION
Proponents of the Inadequacy Thesis are correct to point out that, like chattels, contractual rights can be vulnerable to the depredations of third parties. Whilst the ability of third parties to damage the interests of promisees is not doubted, to search for a solution in personal property law is to pursue a conceptual dead end. Acts of third-party interference with contracts are not analogous to simple cases of conversion, but to more complex triangle disputes. The problem at the heart of all triangle disputes is not a gap in the law, but how to allocate loss between two prima facie innocent parties, neither of whom can recover from the true wrongdoer. When applied to the resolution of triangle disputes, the term "property" simply becomes, as Cohen famously observed, one of the "magic 'solving words' of traditional jurisprudence" which "add[s] precisely as much to our knowledge as Moliere's physician's discovery that opium puts men to sleep because it contains a dormitive principle". 151 Putting aside the Realists' extreme scepticism of legal concepts, 152 Cohen's observation captures the flaw at the heart of the Inadequacy Thesis. To say, for instance, that a rogue "stole" or "converted" a customer's contractual rights against the bank is simply to state the conclusion that the loss allocation exercise between the bank and its customer has been resolved in favour of the former. What it cannot explain is why the customer drew the short straw. If the law is to at least approximate the efficient resolution of such disputes, it needs better contracts, not more property.