Undue Enrichment: Definition and Meaning

Undue enrichment is a compound word composed of the phrases "undue" and "enrichment." If we discuss immorality or injustice, Unfairness is defined as a situation that does not adhere to the rules of justice and justification.

"Unjust" is described as something that is both unjust and not in conformity with the established norms of justice or fairness.

On the other hand, if we are talking about wealth or enrichment, it is claimed that someone has enriched themselves when they get something from someone. Additionally, this prosperity may be both just and unjust. Unless the loss of the other person is adequately made up for, that is, if anything is given in exchange for its loss, this enrichment continues to fall under the category of being unjustified.

What is the meaning of Undue Enrichment?

Undue enrichment is when one person benefits at the expense of another without paying back what they took from them. The greatest theoretical foundation for these kinds of relationships, which might be referred to as "quasi-contracts," is the concept of undue enrichment, which is the undue advantage. "Nemo debet locupletari ex aliena jactura," which means no man should become wealthy out of another person's misfortune, is an old principle of Roman law from which this expression is derived.

A restitutionary remedy would be used to return the benefit to its rightful owner, either on the grounds that there has been a complete failure of consideration or via a quantum merit payment for the reasonable value of the performance. In the general field of contracts, undue enrichment typically takes the form of a benefit accruing to one party that, for some reason, may be regarded as belonging to another. These situations are frequently referred to as examples of enrichment via deductions from the claimant. Restitutionary remedies in this situation do not address a party's failure to meet another party's contractual obligations.

Instead, they attempt to recover money that was paid out or the value of a benefit received in situations where there is no contract or where there is no longer a duty to perform under an acknowledged contract. As a result, their availability is not solely dependent on whether a contract has been broken; however, in cases where a breach has occurred, the plaintiff will need to choose between a claim for expectation loss and a restitutionary remedy to determine which would offer a higher level of compensation. On the other hand, there may be enrichment, which in some cases may be deemed unjust, when one party benefits from an injustice committed against the other party without taking anything away from that party. In such situations, the question of whether restitutionary damages will be available is raised. 

Element of Undue Enrichment

The main elements of undue enrichment are as follows −

The defendant has been enriched by the receipt of a benefit.

The defendant has been enriched by the receipt of a benefit.

The retention of the enrichment be unjust.

There is no defence or bar to the claim.

It is unethical and illegal act in the eyes of society.

Undue enrichment, however, is deliberately done, but it can also be inadvertently or without intentions.

The principle of undue enrichment has evolved to cover situations where the court can order restitution, or, to put it another way, when the courts can fairly provide restitution as opposed to claiming back money or advantages that were improperly gained.

Provisions under the Indian Law

The basis for quasi-contractual responsibilities is the principle of undue enrichment. According to Lord Mansfield, the idea that justice and the law should work to prevent one person from gaining wealth at the expense of another. The type of liability that develops for a person who benefits from it is similar in some ways to tort liability and similar in some ways to contract law. As a result, it can be justified by an implicit contract or under natural justice and equity to avoid undue enrichment. The latter view was more appealing to Lord Mansfield.

Such circumstances are covered under the title "Of Certain Relations Resembling Those Created by Contract" in Chapter V of the Indian Contract Act. Five types of quasi-contractual responsibilities are set out in S. 68–72 −  

Section 68: Claim for necessaries supplied to person incapable of contracting, or on his account

The present section is applicable to persons of unsound mind, minors, and others, if any, who are disqualified from contracting by any law to which they are subject.

Necessaries

This section is applicable only in cases where life's necessities have been provided to such an incapable person. Necessaries, normally, include articles, which is required to maintain a particular person in the state, degree, and station in life in which he lives. It need to be determined with reference to the fortune and circumstances of that person.

Therefore, whenever a person who is unable to enter into a contract does so and enjoys the needs that result from that contract, they are obligated by law to return those benefits to the claimant. The provision of necessities of life and nothing else will prevent this clause from being applied.

Section 69: Reimbursement of person paying money due by another in payment of which he is interested

This section lays down a wider rule than appears to be supported by any English authority. The idea behind this provision is that if one person is obligated to make a payment and another person who is not obligated but has an interest in the payment being made and pays up to protect it is entitled to repayment from the person who was initially obligated to make the payment. The requirements for culpability under this clause might be summed up as follows

• The plaintiff must be motivated to make the payment. Obviously, the plaintiff's interest must be one that is legally discernible. It is sufficient that he really believes he has interests to safeguard.

• It is essential that the plaintiff himself not be obligated to pay.

• The defendant ought to have been required by the law to make the payment. When someone owes someone money only morally and not legally, they are not obligated to repay the person who fulfills their moral responsibility.

• The plaintiff ought to have paid the other party instead of keeping the money for himself.

Therefore, the undue enrichment principle forbids the defendant from unfairly benefiting himself to the point where he would be obligated to reimburse the claimant for the sum that was paid on his behalf but not at his instruction.

Section 70: Obligation of person enjoying benefit of non-gratuitous act

Section 70 creates a liability to pay for the benefits of an act that the doer did not intend to do gratuitously, following the conditions

• The person who did the act should have done it without any intention of doing it gratuitously. He should have contemplated being paid from the very beginning.

• The person for whom the act is done is not bound to pay unless he has the choice to reject the services. The services so rendered should be without request.

• The services should be lawfully rendered. Here, a point must be noted that some lawful relationship must exist between the person claiming for compensation and the person against whom it is claimed. Furthermore, it should arise by reason of the fact that what has been done by the former has been accepted and enjoyed by the latter.

Section 71: Finder of goods

The responsibilities of a finder of items are outlined in this section. In essence, it implies that if someone finds anything that belongs to someone else, they must care for it as the owner's bailee under the law. In other words, to treat it as his own and give it back to its rightful owner upon request. When a person finds someone else's possessions, the idea of undue enrichment is therefore applied.

Section 72: Liability of a person to whom money is paid, or thing delivered, by mistake or under coercion

If money is paid to or a thing is delivered to a person under coercion or mistake, he must repay or return it. Thus, if A and B jointly owe a sum of money to C, and A pays it, and thereafter, not knowing of A's payment, B also pays the same amount to C, C must repay the amount to B.

Coercion

The Judicial Committee had established that the definition of "coercion" in Section 15 is not controlling and that the word is employed in this section in its wide and ordinary sense. As a result, when Z, who had obtained a decree against Y, obtained an attachment against W and took possession of his property to obtain satisfaction for the amount of the decree, and W paid the amount claimed under protest after being evicted from his property, W was held entitled to recover the amount as money paid under coercion in accordance with this section.

If a person accused of a non-compoundable crime is persuaded to pay money to the complainant in order to thwart the prosecution, he may be able to get that money back under this section.

Defenses of Undue Enrichment

In cases where a restitution ground has been established, relief will nonetheless be refused if a recognized defense or bar applies. If the claimant is estopped, the defendant cannot be put back in his prior position, or if public policy prohibits repayment, restitution will be refused. In the location where the benefit was given, it is also denied

As a valid gift.

Pursuant to valid common law, equitable or statutory obligation owed by the claimant to the defendant.

By the claimant while performing an obligation owed to a third party.

In submission to an honest claim, under process of law or a compromise of a disputed claim.

By the claimant acting “voluntarily” or “officiously”.

Conclusion

Undue enrichment is not based on a written agreement. When there is no written or verbal contract to back up their request for remedies, plaintiffs typically turn to the remedy of undue enrichment. In some situations, parties to a lawsuit urge a court to identify an implicit contract, or fake connection, hat was formed by the law to serve justice in a particular case.

In some other cases, undue enrichment is an appropriate remedy for parties who have made a legally binding agreement, but whose performance by one party goes beyond the specific terms of the contract. Therefore, endue enrichment is a versatile remedy that gives courts significant flexibility in distributing benefits and losses among the parties as equality, fairness, and justice require.

Frequently Asked Questions

Q1. What is an example of undue enrichment?

Ans. A painter who paints someone's home is a prime example of undue enrichment. The painter may walk outside and paint the defendant's home, providing the defendant with a benefit in the form of fresh paint.

Q2. Who has the burden to prove undue enrichment?

Ans. In order to succeed on an undue enrichment claim, the plaintiff must demonstrate that the defendant unfairly benefited from the plaintiff's loss. Therefore, the plaintiff has the burden of proof.

Q3. When a person can sue for undue enrichment?

Ans. In English law, a claim for undue enrichment must satisfy four requirements −

• The defendant had to benefit;

• The benefit must have come at the expense of the claimant;

• There must be an unfair factor that is significant; and

• There must be no adequate defenses.