Discuss with the help of decided cases: ‘Theory of Unjust Enrichment’ under the Contract Act, 1872.

Question: Discuss with the help of decided cases: ‘Theory of Unjust Enrichment’ under the Contract Act, 1872. [HPJS 2019]

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Answer

The principle of unjust enrichment is stated simply: A person who has been unjustly enriched at the expense of another is required to make restitution to the other.

Sections 68 to 72 of the Contract Act embody the principles of unjust enrichment. This proceeds on the basis that it would be unjust to allow one person to retain a benefit received at the expense of another person. The theory is based on the maxim: Nemo debet locupletari ex aliena jactura, ie, no man should grow rich out of another person’s loss.

Under English law, unjust enrichment as a foundation of claim in restitution was recognized in, and a four-stage test adopted for claims in restitution:

1. Has [the defendant] benefited or been enriched?
2. Is this enrichment at the expense of the plaintiff?
3. Is the enrichment unjust?
4. Are there any defenses, i.e., is there nevertheless reason of policy for denying the remedy?

In Indian law, the principle of unjust enrichment finds recognition in the Contract Act.

Lord Mansfield, who is considered to be the real founder of such obligations, explained to them on the principle that law, as well as justice, should try to prevent “unjust enrichment“, that is, enrichment of one person at the cost of another.

He explained in the case of Moses v. Macferlan [2 Burr 1005 (1760)] the theory as

“But it lies for money obtained through imposition, or extortion; or oppression; or for the undue benefit of the situation of the plaintiff contrary to laws made under those circumstances for the protection of persons.” In one word, the nature of this form of proceeding is that the claimant is bound by the ties of natural justice and equity to repay the money in the conditions of the case.”

If in cases where it would be unjust to allow the beneficiary to continue those advantages without compensation, a privilege has been given to the recipient, the right of action of unjust enrichment is open to the individual who conferred the benefit. The conferrer will demand the relief of restitution using this cause of action, in which the court will return the profit or its worth to him. Earlier common-law courts used multiple fictions in order to incorporate this recently recognized cause of action into current legal forms.

The fiction that we are dealing with is the advantage that was negotiated for, i.e., the court inferred a contract in law even if there was no such contract between the conferrer and the beneficiary in fact. Quasi-contract was named the alternate title for this type of relief.

Thus, it can be easily deduced from the above lines that whenever a person has received anything that takes undue advantage of the other person, he would be liable under quasi-contractual duties to repay the benefit to the conferrer.

It should be considered that the responsibility arising from such obligations is part of the law of tort as it exists irrespective of any contract as well as part of related contracts as it is owed solely to one person and not to the public in general. Therefore, the avoidance of unjust enrichment should be compensated for in either an implicit arrangement or under natural justice and equity.

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Law of Contract Mains Questions Series: Important Questions for Judiciary, APO & University Exams

1. Law of Contract Mains Questions Series Part-I
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3. Law of Contract Mains Questions Series Part-III
4. Law of Contract Mains Questions Series Part-IV
5. Law of Contract Mains Questions Series Part-V
6. Law of Contract Mains Questions Series Part-VI
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8. Law of Contract Mains Questions Series Part-VIII
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10. Law of Contract Mains Questions Series Part-X