Unjust Enrichment: Everything You Need to Know
Unjust enrichment involves one party benefiting at the expense of the other party in an unjust manner.3 min read
Unjust enrichment involves one party benefiting at the expense of the other party in an unjust manner.
Unjust enrichment happens when one party benefits from another party's mistake, misfortune, or by accident. If this happens, the enriched party must legally return the money or benefit because laws require that restitution must occur.
Although similar, unjust enrichment is different than a gift. One party presents a gift without expecting to receive anything in return, so neither party has a legal right to receive restitution.
Recovering a Claim of Unjust Enrichment
In order to prove that unjust enrichment occurred, the plaintiff needs to prove that the defendant received a benefit at the plaintiff's expense. Recovery typically occurs when neither party signed a contract, or if they did, the contract is invalid.
There are two main principles to help determine if you can issue an unjust enrichment claim. If either one of these principles occurs, you cannot file a claim:
- Gift Principle. The defendant cannot receive a gift from the plaintiff with the plaintiff turning around and suing for unjust enrichment if the plaintiff doesn't receive anything back.
- Choice Principle. The plaintiff cannot benefit from the defendant without allowing the defendant a chance to deny the benefit and hope for something back. For instance, the defendant cannot decide to paint the defendant's house around midnight when the defendant is asleep and then expect payment. This example assumes that the two people did not agree to this condition in a contract.
Unjust Enrichment and the Law
Even though an unjust enrichment doctrine is often called a quasi-contractual remedy, it isn't based on a contract. Instead, litigants use the remedy of unjust enrichment when there isn't a verbal or written contract to support their claims. If this occurs, the litigants ask the court to find an implied contractual relationship.
There are three elements in taking an unjust enrichment claim to the courts.
- The plaintiff must have given the defendant something of value and expected compensation.
- The defendant must have acknowledged or benefited from the services or funds provided by the plaintiff.
- The plaintiff must prove that it is unacceptable for the defendant to benefit from the plaintiff's actions without paying.
From there, the court examines the facts and awards a remedy or denies claims. In certain situations, unjust enrichment is the result of a formal agreement due to an incapacity, mistake, or statute of frauds.
There are other situations where unjust enrichment is the best remedy for parties, especially if one party exceeds expectations of the agreement. For instance, say a homeowner and contractor agree to a contract in which the contractor builds a two-car garage. The contractor decides to pour concrete for the driveway. The owner doesn't say anything about the driveway but refuses to pay for it. The contractor can claim unjust enrichment in the amount of labor and materials for paving the driveway.
After completing half of the garage, the contractor admits that he cannot finish the garage as agreed upon but wants payment for completed work. The owner argues that the contractor breached the contract and should not receive anything. Some jurisdictions would let the contractor recover an amount for his services minus damages suffered by the owner due to the breach. Most jurisdictions would rule that the contractor failed to perform contracted obligations and cannot obtain a remedy.
Where Does Unjust Enrichment Commonly Occur?
Most unjust enrichment cases involve breach of contract lawsuits, particularly in ones where incomplete services aren't paid. They're also found when one party gains property or goods in an unfair manner as well, as in instances that involve personal injuries or criminal violations.
The most common way to remedy an unjust enrichment case involves restitution, which involves a monetary payment given to the wronged party. However, if you're unsure if your dispute involves unjust enrichment, consult with a business lawyer.
Differences Between Restitution and Compensation
There are key differences between restitution and compensation. Restitution involves an amount the enriched party gains. If that party is found to benefit from enrichment, the party almost always has to pay restitution. However, restitution might include a provision that the enriched party returns a certain item they obtained.
Compensation is based upon how much the aggrieved party lost, and not on how much the enriched party gained. This might require an enriched party to pay the other on the property's value, which can affect the overall amount of money owed.
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