Ruth Lee, ‘A Legal Analysis of Romantic Gifts’

While many law review articles are devoted to the legal analysis of gifts, this article addresses romantic gifts in particular, to which many legal exceptions apply. In addition to offering a review of the legal economics behind gift-giving, this article is the first to survey the five legal theories of revocability for romantic gifts, as well as an unprecedented new theory recently employed in federal court.

Although the general presumption is that gifts are irrevocable, courts have used five main theories to return romantic gifts to their donors — conditional gift, pledge, consideration, unjust enrichment, and fraud — as well as a new approach which has actually been used recently in federal court: criminal fraud. Criminal fraud is a surprising and unprecedented development because it not only requires the disgorgement of the gifts as the other theories do, but also punishes the donee beyond the cost of the gift. Thus, it is the only theory of revocability that will change the ex ante incentives of the donee.

In the course of discussion, this article will note three economic paradoxes that arise in the context of romantic gifts: (1) non-cash gifts appear on first glance to be extremely inefficient because it involves guessing the desires of donees, but are nonetheless ubiquitous; (2) extremely inefficient gifts tend to be better signaling mechanisms than efficient gifts in romantic relationships; and (3) although one who pursues a relationship blatantly for financial benefits faces more social condemnation than one who tastefully hides her motivations, she or he is actually facilitating a more efficient relationship. This leads to a discussion of when romantic gifts should be revocable, which theories of court interference are the most appropriate, and how courts should craft doctrine in the future. Because of the potential of over-deterrence, courts should only impose punishments that exceed the value of the gift when there is a clear enough information asymmetry between the donor and the donee that it would be impossible for the donor to give his informed consent to the relationship or the gift.

Lee, Ruth Sarah, A Legal Analysis of Romantic Gifts (February 15, 2012). John M. Olin Fellowships in Law and Economics Working Paper.

First posted 2012-02-15 22:52:58

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