"Payment received by mistake must be refunded". Discuss with reference to decided cases.

Question: “Payment received by mistake must be refunded”. Discuss with reference to decided cases. [UPJS 1999]

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Answer

Any civilized system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, ie, to prevent a man from retaining the money of, or some benefit derived from, another which it is against conscience that he should keep.1Such remedies are found in this Chapter V of The Indian Contract Act, 1872.

Lord Mansfield who is considered to be the real founder of quasi-contractual obligations explained it 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. His Lordship offered this explanation; in Moses v. Macferlan [(1760) 2Burr 1005, 1012]

But it lies for money paid by mistake; or upon a consideration which happens to fail; or for money got through imposition; or extortion; or oppression; or for an undue advantage taken of the plaintiff’s situation, contrary to laws made for the protection of persons under those circumstances. In one word, the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by ties of natural justice and equity to refund the money.” This is the concept of unjust enrichment“.

The concept behind this is the Latin maxim, “Nemo Debet Locupletari Ex Aliena Jactura” which essentially means that no one should get undue benefit/enriched of another person’s loss.

The duty to restore becomes an obligation or duty which is cast upon the parties by law, but not by the terms of the contract to which they have given assent.

If a person who is under an obligation under the provisions of this Chapter V fails to discharge the obligation after it has been incurred, he is liable to compensate the person injured by his failure to the same extent as if he had contracted to discharge it, and had broken the contract.

Thus, stands the statement “payment received by mistake must be refunded” because there has existed a quasi-contractual obligation between the parties which is created by law and hence must be abiding by.

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

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