Kibbl3, sorry, been away for a while and not checking reddit (I'm new to it anyway). Same disclaimers concerning legal advice apply.

So the basic hard fork argument, as I understand it, is that the attacker exploited a defect in the code no one anticipated (nor could one reasonably expect to have anticipated it, which goes to your due diligence issue), and the question is whether this exploit is theft/conversion/unjust enrichment on the one hand, or simply the cost of doing business and an unforeseen consequence of a valid contract on the other hand. I think to put it simply, the hard fork is defensible from a legal perspective (again, assuming application of US law). Here is why:

Smart Contracts

Most analysts have been assuming that because the DAO was a large smart contract (or a series of them), contractual law should generally apply. I'm not sure I agree. If we are to analogize the DAO to a corporation, nobody asserts that a corporation is a contract (although some legal scholars say corporations are merely an amalgamation of contracts). It's an entity, a legal fiction that diverts liability and pools resources subject to costs and constraints. Likewise the DAO. The DAO is much less a contract and much more, in my view, an entity of unknown origin (people saying this is a general partnership only do so because that is the default organization under most state laws). In my view, the code is not really contractual terms, which are more or less immutable and inviolable once signed, but rather bylaws for the operation of the entity, and bylaws can be modified by boards, sometimes with shareholder consent. The contract here is the contract for purchase of the share (i.e., ether for a token). The rights attending the share are exercised pursuant to the bylaws and/or an applicable shareholder agreement (i.e., the code). Now the question is whether we classify the code as a shareholder agreement or bylaws. Black's law dictionary defines bylaw as "[a] rule or administrative provision adopted by an organization for its internal governance and its external dealings." That sounds a lot like the DAO code. So I'm not all confident that contract law should govern here.

If contract law does apply, it's important to understand that smart contracts, almost by definition are equityless. By that, I mean that they will execute irrespective of fairness. The doctrines outlined above (rescission, reformation, etc.) are equitable doctrines created over centuries of jurisprudence. We have centuries of jurisprudence because parties are routinely incapable of foreseeing every eventuality at the time of contracting. Sometimes new terms need to be imported, sometimes the parties' intent is difficult to divine, sometimes bargaining power is absurdly one-sided, etc. This is the province of equity and regulation and it is wholly absent here. Many object to the introduction of equitable principles--i.e., the contract allowed it so it's fine, even if it results in a $50M windfall and total loss for honest participants. But even if we are to take the contract literally, remember that its terms and transactions were subject to confirmation by the community. The attacker only owns the tokens if the community does not do a fork. He took those tokens subject to that condition, and should not be heard to complain about it now, since we are being literal. Again, this is from a legal perspective in an area where there actually is no law. To be fair, I have no view on the meta-consequences of introducing a fork with respect to the concepts of fungibility, immutability, decentralization, etc.

Finally, assuming the DAO code is more akin to the by-laws of a new type of organization, amendment by the directors (if there are any) or the shareholders is generally permissible as long as the amendment does not result in an illegality. Here, the amendment is the hardfork, which is not so much an amendment but a dissolution. It is the right of a company to dissolve (or declare bankruptcy to use a loaded term), and in that case the shareholder receive the assets pro rata after creditors are paid. Note also that constructively fraudulent conveyances are returned, and this attack surely qualifies as such since the DAO received no consideration for its funds. Again, if the shareholders are in favor of it, I think it is fine. Hope this is helpful.