DOCTRINE OF UNJUST ENRICHMENT & RESTITUTION

This Article is written by Madhvi  student of UILS, Panjab University. CHANDIGARH.

INTRODUCTION

When a person has been unduly benefited at the outlay of the other person, it is called unjust enrichment. The doctrine has been derived from the English law upon the principle of assumption or ‘had and received’. The foundation for this can be traced from Roman Maxim Nemo debet locupletari ex aliena jactura which means “No man should grow rich out of another person’s losses.”

The 13th Report of the Law Commission of India, considered the principle of unjust as the finest theoretical foundation of relations which can be termed as quasi contracts. the doctrine basically focuses on the restitution to the rightful owner. Lord Mansfield in Moses v. Mcfarlon, that the essence of this kind of act is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money.

Lets understand it with an example, now A (house owner) hires B for renovating his house and A terminated the contract prematurely, by the time almost half of the work was done. A refuses to pay to B for the work he has done. here, A was unjustly enriched.

The implied contract theory paved its way into Indian jurisprudence through Rambux Chittangeo v. Modhoosoodun Paul Chawdhry, while deciding the case and it was held that claim from contribution from co-surety was not a contractual claim, the use of language of implied contract was forced on common law by entirely unexpected fact that remedy was framed in assumpsit.

The principle of unjust enrichment can be understood in three ways,

  • Unjust enrichment can be construed as a principle of Aristotelian equity, presenting correction when usually sound rules generate unjust outcomes in particular cases.
  • Unjust enrichment can be illustrated as a ‘legal principle’ integrating a broad ideal for justice, from which courts can deduce solutions to particular restitution problems.
  • Unjust enrichment can be understood simply as expressing an ordinary theme of restitution cases.

POSITION IN INDIAN LAW

In India, the doctrine of unjust enrichment is codified in enactments such as the Contract Act, 1872 (Sections 68-72), the Central Excise and Customs Law (Amendment) Act, 1991. The law has been advanced by various judgments.

The Indian Contract Act 1872, describes five obligations which are known as Quasi- Contract. The Quasi Contractual obligations are those obligations imposed between two parties without even existence of an agreement between the parties. These contracts are not expressed or implied. The quasi contractual obligation prevents unjust enrichment.

The Supreme Court of India while deciding Indian Council for Enviro-Legal Action v. Union of India, chose to evaluate the law of unjust enrichment on the basis that no one can take advantage of his own wrong.

ESSENTIALS OF DOCTRINE OF UNJUST ENRICHMENT

  1. A person/ defendant  has been benefited.
  2. Another person incurred losses because of that.
  3. The acquired  enrichment is unjust or unfair.
  4. Defendant/unduly benefited person obliged to reimburse the other person.

REMEDIES AVAILABLE FOR UNJUST ENRICHMENT, INDIAN CONTRACT ACT 1872

  1. Section 68 of the Act, if any person supplies necessaries to a minor or a lunatic person who is incompetent of entering into a contract, then compensation is allowed from property or estate of such person.

Necessaries include articles required to maintain a particular person in the state, degree and station in life in which he is. It must be determined with reference to the fortune and circumstance of the particular person.

In Jai Indra Bahadur Singh v. Dilraj Kaur, it was stated that money advanced to a minor for marriage of his sister has been considered as necessaries under this section and also recoverable from the property.

In the case of Benaras Bank Limited v. Dip Chand, it was said that a creditor can recover money from minors possession if he has advanced money to minor for necessaries.

  1. Section 69 of Act , any person  who is interested if pays the money which another person is bound to pay then as per law the person who has paid the money can get money back from that person.
  2. Section 70, Liability to pay for non-gratuitous act- when a person does an act for another person legally, or delivers anything to him, not intentionally doing it gratuitously and another person benefits from it, the latter is bound to reimburse to the former in respect of the thing so delivered.

In Great Eastern Shipping Company Limited v. Union of Indiathe plaintiff legitimately carried a cargo of coal and conveyed  it to the defendant’s. Plaintiff didn’t do it gratuitously and defendant also accepted it. The defendant was held liable to compensate the plaintiff for the same.

  1. Section 71 Responsibility of finder of goods: A person who discovers goods belonging to someone else and takes them into his  safekeeping has to take the same responsibility as a bailee. He has to take care of goods as a prudent man would have taken care of it. He must try to find out the actual owner of the goods and should not use the property.

In Newman v. Bourne and Hollingsworth, X, a customer, left a brooch with her coat in B’s shop. B’s helper placed the brooch in a cabinet in the shop. But later when the owner came back and asked for it, it was found missing, B was accountable to X as he was incapable of taking care of the brooch as a cautious man would have taken care of.

  1. Section 72 , A person to whom anything is delivered or anything or money has been paid, under coercion, must repay the same. For example, A and B owes Rs. 5000 to Z jointly. A paid Z total money. Unaware of this fact, B also paid money to Z. then Z is bound to repay or return the money to B.

In Food Corporation of India v. K. Venkateswara, the rice millers were paid an excess amount of the agreed rate because of a fault in the categorization according to quality, they were required to disgorge the unjust enrichment.

QUANTUM MERUIT VS UNJUST ENRICHMENT

When a party has entered into a contract, and has done some work  and the rest of the work cannot be completed because of other party, he can recover the compensation for the quantity of work done under contract. To avail quantum meruit remedy, the original order has to be discharged by the defendant if plaintiff considers himself as discharged from further performance.

Unjust enrichment is failure to pay for the services rendered and quantum meruit is the fair pay that should be given on the basis of the quantity of work.

In Indian Contract Act,  Section 70 of Act impliedly contains doctrine of quantum meruit, provides for the compensation where a person does something  for benefit of someone without intention to do it gratuitously.

RESTITUTION AND UNJUST ENRICHMENT

The theory of unjust enrichment is essential to the subject of restitution, and is approached as a fundamental principle. The meaning of term restitution has been extended to include not only restoration but also reimbursement for the benefits derived out of it and even losses.

Although unjust enrichment is often regarded as a ground for restitution, it is possibly more precise to regard it as a prerequisite, there can be no restitution without unjust enrichment.

Unjust enrichment is a vastly charged idea, capable of accepting many contestable views of corrective and distributive justice. Thus unjust enrichment is a flexible remedy that allows courts great latitude in shifting the gains and losses between the parties as equity, fairness and justice demand.

REFERENCES

Websites:

LAWBHOOMI, Doctrine of Unjust Enrichment and Indian Contract Act, May 27, 2020 https://lawbhoomi.com/doctrine-of-unjust-enrichment-and-indian-contract-act/

SWETA MADHU, Unjust Enrichment in India – An Introspection, S&P, (Aug 22, 2017) https://singhania.in/blog/unjust-enrichment-in-india-an-introspection

VATS JYOTI, The Restoration Theory of Unjust Enrichment, LatestLaws.com., (Aug 9,2020) https://www.latestlaws.com/articles/the-restoration-theory-of-unjust-enrichment/

SARANSHKOTHARI92, Theory of Unjust Enrichment, Legal Service India.com http://www.legalservicesindia.com/article/1351/Theory-of-Unjust-Enrichment.html

RAI RUCHIR, The Principle of Unjust Enrichment (April 16, 2012). Available at SSRN https://ssrn.com/abstract=2353502 or http://dx.doi.org/10.2139/ssrn.2353502

Case Citation:

Benaras Bank Limited v. Dip Chand, AIR (1936) All 172.

Food Corporation of India v. K. Venkateswara, (1988)1 Andh LT 930.

Great Eastern Shipping Company Limited v. Union of India’, AIR (1971) Cal 150.

Indian Council for Enviro-Legal Action v. Union of India, 1996 AIR 1446, 1996 SCC (3) 212

Jai Indra Bahadur Singh v. Dilraj Kaur, AIR (1921) Oudh 14.

Moses v. Mcfarlon, (1760) 2 Burr 1005 at 1012 (97 ER 676 at 681).

Newman v. Bourne and Hollingsworth, P (1915) 31 TLR 209.

Rambux Chittangeo v. Modhoosoodun Paul Chawdhry, (1867) 7 WLR.