Key Takeaways

  • An unjust enrichment claim arises when one party benefits unfairly at another's expense without legal justification.
  • To succeed in a claim, the plaintiff must prove three core elements: enrichment, impoverishment, and a lack of justification.
  • Courts may award restitution or compensation depending on whether the enriched party still holds the benefit.
  • Common examples include mistaken payments, unenforceable contracts, or benefits conferred under duress.
  • Certain defenses like valid contracts or voluntary gifting can defeat an unjust enrichment claim.
  • Courts evaluate factors like knowledge, intent, and fairness when deciding unjust enrichment cases.

Unjust enrichment cases involve one party that benefits either accidentally or by error at the other party's expense.

Unjust Enrichment Definition

Unjust enrichment occurs when one party benefits at the other party's expense. The law considers this act unjust, no matter if the situation occurs accidentally or in error. Those who benefit from unjust enrichment must pay the other party restitution.

On occasion, unjust enrichment claims go to court. These cases typically involve disputed contracts due to a long-standing legal principle. This principle states that a party cannot obtain restitution for unjust enrichment unless they cannot enforce the contract. In cases that involve rescinding a written contract or allegation of fraud, unjust enrichment might be the only way for one party to recover the goods or funds.

Unjust Enrichment Elements

Before you can file an unjust enrichment claim, there are two elements that must exist in order to proceed.

  • Consideration. There must be some form of payment or transfer of property between the defendant and claimant.
  • Unjust Factor. There must be a solid reason that spoiled the claimant's goal of doing business with the defendant.

Additional Requirements for a Valid Unjust Enrichment Claim

To establish a valid unjust enrichment claim, courts often look for the following:

  1. The Defendant Received a Benefit: The enrichment can be financial, property-based, or service-related.
  2. The Plaintiff Suffered a Corresponding Loss: This could include the loss of property, money, or effort.
  3. Lack of Legal Justification: There must be no valid contract or legal basis justifying the enrichment.
  4. Inequity in Retaining the Benefit: The benefit must be unjust for the defendant to keep without compensating the plaintiff.

These elements aim to ensure that a party does not retain something of value when fairness and equity dictate they should not.

Restitution or Compensation in Unjust Enrichment

If the unjustly enriched party benefited from a form of payment, that party must pay it back to the other. This is known as restitution. Restitution might also include a requirement that the enriched party returns a specific item mistakenly taken.

For example, if an unjustly enriched party still has a vehicle that was brought in for repairs, the party might have to pay back for services not performed in addition to returning the vehicle.

Other examples of unjust enrichment cases involving restitution include:

  • One party gives money to the other on accident.
  • Both parties agree to end a contract, but the other party remains in possession of money or assets.
  • One party provides goods or services to the other even though the two parties never entered into a contract.
  • One party settles a debt at the other party's request.

Compensation involves an amount based upon how much the claimant lost, not on how much the enriched party gained. The enriched party might pay the other for the property's value when it came into ownership.

For instance, imagine if two parents both worked full-time and decided that their teenaged child was responsible for doing a majority of the upkeep of the house. That included chores, meal preparation, and caring for younger siblings. This agreement was in place for several years with the understanding that the parents would leave their entire estate to the teenager.

Several decades later, the parents and child had a falling out. Due to their anger, the parents transferred their assets into a trust, leaving the oldest child out of the entire estate. The oldest child sued the parents and claimed unjust enrichment since they persuaded her to do that work with the promise of providing the estate in return. The court reached a verdict that the parents had received unjust enrichment and awarded the oldest child a portion of the estate.

Legal Defenses to an Unjust Enrichment Claim

Defendants in unjust enrichment cases may avoid liability by proving one of the following:

  • Existence of a Valid Contract: If a valid contract governs the parties' relationship, an unjust enrichment claim may not apply.
  • Voluntary Conferral of Benefit: If the plaintiff provided the benefit as a gift or without expectation of repayment, restitution may not be warranted.
  • Failure to Show Unjustness: The enrichment must be unjust; not all benefits received at another's expense qualify.
  • Clean Hands Doctrine: If the plaintiff acted unethically or in bad faith, courts may deny recovery based on equitable principles.

Unjust Enrichment Sample Case

An example of an unjust enrichment case involves Rainbow Media Holdings, Inc., which was the owner and operator of several cable television networks; and Basic Research, LLC, which was a company that sold nutritional products. Basic advertised its products on Rainbow's networks with the assistance of the advertising agency Icebox Advertising, Inc.

Basic paid Icebox to air its ads on Rainbow's networks, but Icebox didn't transfer payments over to Rainbow. However, Basic believed that Icebox would pay Rainbow in advance for all ads placed on Rainbow's networks. Rainbow allowed Icebox to pay up to 60 days after Icebox received invoices for the ads already run. 

Ultimately, Icebox filed for bankruptcy, which allowed Rainbow to recoup some of the money owed for Basic advertising on its networks. Consequently, Rainbow sued Basic for the remaining payment and claimed unjust enrichment. However, Basic believed it paid everything it owed since it made payments to Icebox.

As a result, the district court granted the motion given to Rainbow but denied the motion filed by Basic. It found Basic liable for the missing funds. Once the verdict went to an appeal, the U.S. Court of Appeals for the Tenth District found that the district court made the wrong decision. It found that Rainbow did not give enough evidence that Icebox could purchase ads from Rainbow and that Rainbow didn't have enough evidence that Basic was unjustly enriched by its ads running despite Rainbow not receiving payment.

Factors Courts Consider When Evaluating Unjust Enrichment Claims

Courts typically weigh several contextual factors, including:

  • The Intent of the Parties: Whether the benefit was conferred deliberately or through mistake.
  • The Awareness of the Defendant: Whether the defendant knew about the benefit being conferred.
  • The Nature of the Benefit: Services, money, or property—and whether they can be returned.
  • Circumstances of Transfer: Whether coercion, fraud, or undue influence played a role.
  • Remedial Fairness: Whether granting restitution aligns with principles of equity and justice.

Frequently Asked Questions

  1. What is an unjust enrichment claim?
    An unjust enrichment claim arises when one party unfairly benefits at another’s expense and equity requires restitution.
  2. Can you sue for unjust enrichment without a contract?
    Yes. Unjust enrichment claims are often used when no enforceable contract exists between the parties.
  3. What is the difference between restitution and compensation?
    Restitution restores the specific benefit, while compensation reimburses the value of the benefit lost.
  4. What defenses can be used against an unjust enrichment claim?
    Common defenses include proving a valid contract exists or that the benefit was voluntarily given without expectation of repayment.
  5. Is intent required for an unjust enrichment claim?
    Not always. A claim can succeed even if the enriched party did not intend to benefit, as long as retaining the benefit is deemed unjust.

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