Unjust Enrichment
Background
Historically, there existed legal forms of action where goods were sold or services were provided without a contract / agreed price. Quantum Meruit applied when services were provided without an agreed price. Quantum Valebat applied where goods were sold without an agreed price.
Another long-standing form of claim was based on money had and received by the defendant. It developed to cover situations where money was paid and received by mistake or wrongly held.
Formerly an implied contract or quasi-contract was the basis on which recovery might be had. The historical theory of implied contract no longer applies. It still exerts an influence. The expressions “monies had and received”, “quantum meruit” and “quantum valebat” survive in the modern law of restitution.
Unjust enrichment is recognised as the basis of claim in modern times. It seeks to provide general principles for recovery. Its progress has been uneven. There have been various approaches taken by the courts, which have not always been coherent.
Relationship with Tort and Contract
Tort law seeks to compensate the claimant for wrongs. Generally, where there has been a breach of contract, the claimant is compensated for expectation losses. Exceptionally there may by A restitutionary award in a breach of contract claim where there is no expectation loss, but the defendant has been enriched.
Restitution looks at the unjust enrichment or gain of the defendant. This is the measure of what may be recovered.
Unjust enrichment and restitution are sometimes used interchangeably. The claim or cause of action is unjust enrichment. The remedy is more properly called restitution.
There may be restitution for unjust enrichment where a contract has failed. This might be on the basis of mistake, misrepresentation or duress. There may also be restitution where there is was no contract. There may also be restitutionary remedies based on principles other than unjust enrichment, such a a proprietary interest in the subject matter.
Restitution & Unjust Enrichment
In most cases where gains and losses occur in everyday life, unjust enrichment as no role. Generally, losses lie where they fall.
Restitution supplements contract law. Restitution is the remedy. Unjust enrichment is the claim or cause of action.
The law regarding unjust enrichment defines the circumstances in which windfall gains and transfers must be undone and the benefit reimbursed. It creates obligations from circumstances.
There must be some recognised unjust factor. Unjust enrichment is not a discretionary claim by which compensation may be awarded in accordance with principles of justice. There are recognised categories of unjust factors for which the remedy of restitution is available.
The defendant must have obtained enrichment or a gain in circumstances in which it would be unjust not to reverse the enrichment or gain. For example, where a person receives a benefit which is not intended to be a gift, restitution may reverse the benefit received. Another commonly, encountered example is where money or benefits have been paid under a proposed transaction, which did not ultimately proceed to the point that a contract was entered.
Contracts & Unjust Enrichment
Where there is a contract, restitution may not be had for breach of contract. The contract determines the position. However, when the contract is fundamentally breached or repudiated, the innocent party may treat it as at an end. In this case, the contract no longer applies and restitution principles arise as if there had been no contract.
Where goods are supplied under a failed or ineffective contract, a claim for a quantum meruit payment (a reasonable sum) may be available for the value of goods and services provided.
Contracts are usually about delivering on expectations. However, there may be restitutionary damages for breach of contract where compensatory damages and specific performance are not an adequate remedy in the circumstances.
Enrichment
The general principle of unjust enrichment is that the defendant must give back the unjust enrichment which he or she has received or gained at the expense of the claimant. The gain or enrichment may consist of the receipt of property, monetary value, saving of expense, improvement of property or the rendering of services. It may also be any positive benefit rendered or an expense saved. It might be a debt paid off by another.
A consequence of the focus on enrichment is that the goods or services are valued at the time of receipt. Later profits or losses made by the defendant will not be recovered by the defendant. If there is an additional element, such as a breach of trust, that may allow recovery of subsequent profits.
The defendant may have received something which belongs to a third party. He may receive a gift of misappropriated assets. A bank may make an unauthorised transfer.
The mere receipt of a benefit is not enough. A transfer intended as a gift or benefit is not subject to restitution. There must be circumstances by which the gain is unjustified. This may happen in the context of an apparent contract, which is rendered void by an invalidating factor. For example, a transfer of a benefit may be made under mistake or duress, which invalidates the intended contract.
Benefits Received
Benefits received by way of unjust enrichment may be in any form. The most obvious example is where money, property or assets are received. However, there may be enrichment where expenses are foregone, services are received and in some cases, where there is improvement or enhancement to the value of an asset.
The right to restitution by way of quantum meruit (the appropriate or reasonable amount) or quantum valebat (the value) may arise where there has been a “total failure of consideration”. Quantum Meruit applies to Services. Quantum Valebat applies to Goods.
The position in respect of the provision of services is more controversial. In a sense, a service does not enrich in the same way as payment of money or the receipt of an asset.
Modern restitution law accepts that the provision of services may constitute enrichment. If something is requested for the person’s benefit and freely accepted it is generally regarded as a benefit and an enrichment. There are views to the contrary.
Objective Benefit
The benefit received must be an objective benefit. Although the goods or services may have an objective value, unjust enrichment looks at its value to the defendant. If the defendant does not want or value the benefit he may “subjectively devalue” it.
The claim of subjective devaluation can be countered by showing that the benefit was an “incontrovertible benefit”. It can also be shown that the defendant by his action and behaviour values the benefit notwithstanding the claimed subjective devaluation.
Money is usually deemed to be an incontrovertible benefit because its value cannot be reasonably denied. Equally the payment of a debt or discharge of a legal right liability is in the same category. Services received which were required and would have necessitated payment to another, will usually be in the same category.
There are circumstances where the payment of money is not necessarily an incontrovertible benefit. Sometimes payments are made in circumstances where they are quickly lost, particularly in circumstances of a fraud.
If the defendant keeps what he could easily return, this tends to show that he values, it. However a distinction is made between refusing to return and not bothering to return. It may not be reasonable to impose on the recipient, the burden of seeking out the claimant and returning the benefit. In many such cases, it would be more appropriate and reasonable that the claimant /sender retrieve the thing concerned.
Where a person has freely accepted something which he has little chance to reject there is unlikely to be restitution. This may occur in circumstances where a service is rendered instantaneously without request (cleaning windows in traffic)
In contrast if services are freely received which would otherwise be paid for, in circumstances where the recipient could have rejected them, but deliberately took no steps to do so, restitution is more likely. He may nonetheless be able to subjectively devalue it.
At Claimant’s Expense
The gain must be at the claimant’s expense or in circumstances where the claimant is entitled to the benefit concerned. This usually requires a direct transfer of value from one to the other.
To some extent, this is similar to the position in contract where parties to the contract only have rights. It is similar to the position in tort, where there must be a relationship of proximity, and the loss must not be too remote.
If the defendant makes a profit or windfall gain with the money received, this does not accrue to the claimant. The fact that the services rendered or goods provided give the defendant an opportunity to make profits or even a windfall does not allow the plaintiff to participate in them. The claimant is limited to the benefit transferred. The defendant has not been enriched at the claimant’s expense in this case.
Some Examples
Unjust enrichment may arise where a person receives a benefit which he ought never to have received. This may be a benefit which he receives on the basis of an assumption which is unfounded. It may arise where a person improves another’s property on the understanding created by that other person that he will be entitled to a benefit, such as the right to live there.
A third party’s property rights may have been infringed and the defendant may have received the benefit of those rights. A person may receive money for payment to a third party, but fail to pay it over to that person.
Another type of case arises where a person confers benefits or transfers an asset on the assumption that he will be paid under a contract, but the expected contract does not materialise or is invalidated. Once again, the basis upon which goods, assets or benefits have been transferred or conferred has disappeared.
Similarly, where payments are made to public authorities on the assumption that they are due but later turned out not to be due, there may be a similar failure of a fundamental assumption. Restitution is available in some such cases.
Measure & Loss
The measure of enrichment will be straightforward where money or property are transferred. In the latter case, it will be generally the value of the transferred asset. In the case of service, it may be the value of the service or the cost saved.
The claim need not necessarily be for the amount of the gain. In some cases, there may be a limitation on the amount to be repaid, due to the circumstances or a change of position. In other cases, the measure of enrichment is not the amount of the gain.
The gain must be unjust. The claimant need not necessarily show that he has lost in financial terms. In fact, he may have recouped what is lost elsewhere or have suffered no net loss. There may be, nonetheless, be unjust enrichment that ought to be reversed.
The fact that more than one party has suffered the same loss on account of the defendant’s actions, does not preclude a claim for unjust enrichment for the whole amount. In more than one claimant has the same claim, then each may have to account for the other, if both take action. If one only takes action, then he is entitled to recover the benefit received.