Analogy: Underwear bought from a store cannot be returned as it may be soiled.
by Kevin Koo
“Restitutio in integrum” is a remedy of contract and tort law. It means, returning everything to the way it was before. You may not have heard of it, but it is a fundamental concept of law. When a deals fall apart, or when people are wronged, it is the duty of the courts to put them back in the place they were before.
There’s an old Superman movie, where Superman was upset that he couldn’t save the girl. In a rage, Superman flew around the Earth multiple times. The Earth rotated the opposite way, and time turned backwards. Superman managed to save the girl by turning back the clock.
That’s an example of restitutio in integrum. It’s simply putting things back to how they were.
The logic of Restitutio In Integrum
There’s a logic to the remedy of restitutio in integrum.
If a party is harmed, he should be compensated. The idea is to put him in the same position as he was before he suffered harm. If a party suffers loss, he should be reinstated as though he never suffered the loss. In the case of theft, the courts often order for the stolen items to be returned to their rightful owners. All of these show that there are situations where restitution is a good remedy.
But, there’s a limit to this logic.
A murder victim is dead; he can never be resurrected. Underwear bought from a supermarket cannot be returned, because the underwear might be soiled. A puppy that was brought home, and is later injured, cannot be returned. As Philip Hellwege in the book “Unjustified Enrichment” said, there has been a change of position.
Does restitutio in integrum apply to Bitcoin?
Maybe it would be helpful, at this stage, to examine the nature of Bitcoin. Bitcoin, by its nature, is fungible. That means that one bitcoin looks just the same as the next bitcoin. Bitcoins aren’t destructible by their nature. They reside on a tamper proof ledger called the blockchain. It’s safe to say that all bitcoins are homogeneous, with no difference between two bitcoins.
For the reasons described below, it will become clear that restitutio in integrum doesn’t always work with Bitcoin.
The volatile price of Cryptocurrencies
Cryptocurrencies like Bitcoin have volatile prices. If you buy Bitcoin, and just a few minutes later, you demanded a refund, probably the price would not have changed much. No problems there.
But what if you demanded a refund, long after the fact?
In early 2018, Bitcoin touched a high of $19,000. The world exploded with euphoria as grannies hopped aboard the crypto bus and poured their life savings into crypto. By early 2019, Bitcoin’s price had slid below $4,000. Interest in cryptocurrencies waned. Mining companies turned off their mining machines. People were getting laid off.
If someone bought cryptocurrency when prices were at their peak, it is tempting to say, “Give me back my money, and I will give you back your crypto. I get back what’s mine, and you get back what’s yours.” That’s a restitutio in integrum demand: “Let’s go back to the way things were.”
These things can get complicated.
If you sold Bitcoin at its peak of $19,000, and you received cash for it, you may be reluctant to refund the money. Even if the buyer said, “I’ll give your Bitcoin back, and you give my money back.” Because, if you got your Bitcoin back, it could only be sold for about $4,000 today. You’d be reluctant to return the money, knowing that, $19,000 cash in hand is better than $4,000 in bitcoin.
You might say to yourself, it’s fair for you to keep the money — because Bitcoin could have gone up, or gone down, in price. Nobody could predict the price movement. You could be right. And it shows that “restitutio in integrum” isn’t appropriate for situations involving volatile cryptocurrencies.
A lesson from Bitcoin history
Back in 2009, Bitcoin was first accepted in the real world as payment for pizzas. The small circle of Bitcoin fans celebrated at this first milestone, because it meant that Bitcoin finally had a value as a means of payment. But the amount of bitcoin paid in that inaugural transaction would raise eyebrows today. The first Bitcoin transaction involved the payment of 10,000 bitcoins for 2 pizzas. Today, you could buy a truckload of pizzas with that kind of money.
What if, the pizza buyer said, “Those pizzas were just so-so, I prefer to get a refund.” Could he get his 10,000 bitcoin back? Most likely answer? No. There are many possible reasons why not. But the most logical reason would be, those bitcoins are long gone. Even if they could refund the 10,000 bitcoins, it’s not likely that they would want to.
Restitutio in integrum wouldn’t work here, either.
Why this is a problem?
We expect some cases to crop up in the following vein.
A person falls in love with the idea of Bitcoin, and buys Bitcoin from a P2P seller. After a few months, Bitcoin’s price falls tremendously, causing him losses. “Give me back my money”, he will say, “and I will give you back your Bitcoin.”
The other side will say, “It’s only worth this little today, so we’ll buy it back from you at this price.” “No”, the buyer will say, “I’m calling the deal off. I don’t want you to repurchase it from me.” In the end, whether or not it is fair for the deal to be rescinded, will depend on the facts of the case.
If restitutio in integrum isn’t the solution, then the courts will have to look elsewhere. This might include compensation through damages, instead of restitution.
Thanks for reading.
This article has been prepared for general information purposes only. If you require more information, please consult with a lawyer.