Unjust Enrichment
General
The law on unjust enrichment is not fully coherent. It may be that over time, a general principle of unjust enrichment will be established. However, the criticism has been made that unjust enrichment is too vague a concept, to apply as a general principle.
Certain circumstances are well established as raising an entitlement to restitution for unjust enrichment. However, there are marginal cases where the extent of the benefits/gain and what is or is not unjust, may be less apparent.
Contract Mistakes
Restitution may be allowed for mistakes which negate a contract. Only a very narrow category of mistakes will permit a contract to be unwound. For the most part, parties do not have any obligation to disclose their superior knowledge.
Traditionally the error had to be fundamental in order to allow negation of contract and recover. Generally, the payment must be made to a third party who is not a bona fide purchaser or who has not changed its position in reliance.
In Ireland, the old rule that recovery may not be had for a mistake of law may still apply. The House of Lords in the UK has reversed this rule.
If a person takes the risk of a mistake by the terms of the contract, he will not be entitled to recover. Terms and conditions may provide that errors must be dealt with within certain time limits.
Mistake; No Contract
Money paid by mistake is prima facia recoverable as money had and received. Payment by mistake in the absence of bona fide receipt and change of position gives right to return in absence of a contract. The same applies to monies paid to a third party at another’s request.
Where property is transferred by mistake, a transfer of property may be invalid if the underlying contract is invalidated. Gifts of chattels induced by misrepresentation may be similarly invalidated.
Where a transaction is subsequently avoided there is a right of restitution against the transferee. The assets themselves can be retaken. In some cases, the mistaken transferor of property may have the benefit of a constructive trust.
In some situations, it may be possible to show that the recipient holds the money on trust. This may be available where the money was paid for a very specific purpose. Sometimes in these cases, the Courts decide that the recipient must hold the money on trust. This gives a proprietary remedy to the payer.
Free Acceptance I
Where benefits are freely accepted there may be a right of recovery of a reasonable sum on a so-called quantum meruit (what is deserved) basis. There are limiting factors. There cannot be a forced exchange. Where the benefit is subjective there may not be liable where there is no opportunity to reject it.
A further form of free acceptance is advantage taking. If a person unlawfully or surreptitiously takes advantage it is generally assumed that they must pay a reasonable sum.
A fare dodger or person entering without paying would be obliged to pay a reasonable sum for the advantage taken. In a sense, this is simply restitution of a wrong that has been committed.
Free Acceptance II
Free acceptance applies only where the benefits are rendered at the request of the defendant in a non-contractual but equally non-gift gratuitous way. If, for example, A requests B to do work and B does, debt restitution will be usually available.
If a person undertakes work unrequested and the benefit of this work is taken up and accepted without a contract the person concerned may be entitled to a reasonable sum. The principle may apply where services are provided by an agent and the person later builds on the work of the agent to undertake an alternative transaction.
However, the principle does not go as far as to hold that a contract can be imposed by silence. There must be some specific factor to make it unjustifiable but that the benefit is retained.
Consumer credit legislation allows consumers to keep unrequested benefits in certain circumstances.
Acquiesence
If a person mistakenly delivers goods to another, the latter cannot be forced to purchase. If he accepts and uses them, he may be obliged to pay their fair value where there is no forced exchange.
Services rendered by mistake and accepted are presumptively subject to restitution. Generally, this takes the form of payment for the value of the services. Pragmatic considerations arise. Mistaken payments of money an generally be reversed.
However, the provision of services cannot be reversed but may be the subject of payment only. Services done such as repairing a car without request or acceptance are a fait accompli and are not the subject of restitution where unrequested.
Acquiesence / Taking Advantage
Restitution may be available where a benefit which, while unrequested is taken up or acquiesced in by the recipient at the time or after the event. Acquiescence is a halfway house between acceptance and rejection. In this case, if a person stands by and lets the benefit happen the Courts may decide on an equitable basis that there may be restitution.
Restitution may be available where the defendant deliberately and conscionably takes advantage of something supplied or done by someone else. This may occur where somebody takes a benefit knowing that it should be paid for.
If a person lets another person improve his property knowing the position, he may be held to be estopped from denying the benefit and the persons providing the benefit may be entitled to a lien for improvement. Proprietary estoppel governs much of this area.
Limits
There must be a free choice by the defendant to accept the benefit. It must be known not to be provided free. Services rendered or goods sent under protest cannot succeed in a claim on free acceptance. If a person sends goods in the expectation of payment, free acceptance must not inhibit the recipient from arranging his affairs and using his property as he wishes.
Where the person has no reasonable opportunity to refuse a benefit, restitution will not usually arise. Unless guilty of a specific wrong such as breach of third party rights, one is entitled to do what one wants with one property.
The principle must not turn gifts into sales. If the person had no reason to believe the matter was intended to be charged for, then recovery will not lie.
The mere giving of unsolicited benefits and services by itself does not give a right to restitution. There must be some further factor. An “incontrovertible” benefit may constitute the requisite additional factor. The defendant’s subjective circumstances are relevant as to whether and to what extent the enrichment/benefit is unjust
Duress
Monies paid under duress may be recoverable. Monies paid under direct threats of violence are recoverable. Monies paid and assets transferred under threat of violence or harm are recoverable.
The position regarding economic duress or unlawful pressure is more difficult. Some threats in relation to legal rights may be bona fide. For example, in a contractual action, a person may threaten a course of action which technically is a breach of contract.
A threat to commit a civil wrong or breach of contract presumptively amounts to duress and allows recovery of benefits. This would be the case even if the person is acting in good faith.
Duress Issues
Duress will not generally extend to threats of lawful conduct. The presumptive position is that if a person is entitled to do something he is entitled to keep gains thereby made.
Generally, the threat must be against the payer. More difficult questions arise if the threat is against a third party.
Difficult questions arise as to whether the unlawful threat caused the payment. If however, the payer has acted unreasonably or obviously foolishly they may not be entitled to recover.
In the case of physical duress transfer of property is likely to be void. No title passes. In the case of economic duress, it is likely that the transfer of property is voidable at the option of the transferor. This means that if a bona fide purchaser may acquire good title before the contract is avoided.
In the case of services rendered under duress, a claim for reasonable payment would be likely. In the case of improvements to property, a lien may be allowed.
Generally, benefits rendered in response to a demand by litigation or threats are irrecoverable. The threat of litigation must be in good faith. Transfers of property may generally be avoided in the event of transferred economic duress. This may mean that it is transferred to a third party bona fide purchaser it is then too late to avoid the contract.
In the case of blackmail, it is generally the case that monies paid to avert a threat can be recovered. If a person threatens legally permissible acts, he cannot do so to obtain more than reasonable compensation.
Undue Influence
Undue influence arises where a person abuses a particular position of trust. Where a position of undue influence arises either by means of a relationship, monies and benefits which pass may be required to be returned.
A relationship of trust is presumed to arise in the case of solicitor and client, doctor and patient, religious office holder and follower, trustee and beneficiary and parent and child. Benefits can be recovered unless they are proved to have been rendered voluntarily and independently.
Apart from this, where a natural relationship of trust is shown it must be proved that any benefit was given voluntarily. Proof of independent legal and other sufficient advice is generally desirable.
Unconscionable Bargains
In Ireland, there is a further category of undue influence in relation to unconscionable bargains. This may arise where an exchange is patently unequal, where the person undermining the transaction lacked education or was very vulnerable so as to be unable to look after his interests and the person had no independent advice.
Sharp practice is usually present, although it is not necessarily essential if it is obvious that a reasonable person would not have consented, if the matter was properly considered. Cases of this nature very often involve the transfer of land at undervalue or la ow value between a vulnerable older person and another person in a position of influence.
Remedies
Where a person requests a benefit he implicitly agrees to pay a reasonable price. If for any reason there is no contract the person must pay the reasonable value of the benefit received
Monies paid under physical or economic duress can be recovered as monies had and received. In the case of undue influence monies and assets transferred are held as trustee by the recipient.
Property Claim
In many cases restitution involves the recovery of property belonging to the claimant.A distinction is made between a void and a voidable contract. A void contact does not pass title. A voidable contract is provisionally valid until steps are taken to avoid it.
Property based claims are not restitution claims in the strict sense. For example, they will not be defeated by some change in circumstances or unjust factor. Property, where it exists, is absolute. If an asset belongs to the claimant it will be returned subject to limitations of the types above as to purchase by an bona fide purchaser.
Most equitable property claims are lost, if monies or assets are received by a bona fide purchaser, without notice of the claim. See the section in relation to tracing, which is an equitable remedy. Similarly, constructive trusts which are imposed, in order to do justice, and the principle of salvage, creates equitable rights which may be lost in the above circumstances.
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 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.
Measure
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 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.