Unjust Enrichment: A Top Ten FAQ

January 27, 2015

By Brian Babcock

1. What is Unjust Enrichment?
It is the principle which organizes the law of restitution. It is used to strip gains from a wrong-doer (even an innocent one) and compensate the person who suffered from the wrong doing, in situations that do not fit other rules of law.
2. When does it apply?
It applies where no contract that applies; no tort was committed by one person against the other; and no statute law applies, but justice requires that the Plaintiff receive a remedy.
3. Can it ever apply when there is a contract?
It might apply in cases where there was a contract that was incomplete, illegal or otherwise cannot be enforced. One of the leading cases involved a natural gas supplier charging illegal interest on overdue payments- though it had contracts with the customers, those contracts could not make the illegal interest fair.
4. How does the law determine when unjust enrichment applies?
The test requires an enrichment of one person; a corresponding deprivation of the other; and there is no juristic reason for the deprivation.
5. What does “juristic reason” mean?
It might fall into established categories (existence of a contract; effect of a statute; or other legal or equitable duties), but it also looks at the parties’ reasonable expectations and public policy.
6. Does it apply to commercial relationships?
It may, in fact these are often the clearest cases because the one sided nature of the flow of the benefit and absence of juristic reason may be simpler than in long term relationships.
7. What sort of long term relationships might give rise to unjust enrichment?
Family relationships are a frequent source of unjust enrichment disputes. Unjust enrichment is the theory often used to compensate “common law” spouses for contributions to property of business held in the other’s name. Estate disputes are another area where contributions to the value of assets often raise issues of unjust enrichment.
8. Why are those more complicated than commercial situations?
The length and complexity of family relationships often creates a flow of benefits going in both directions, so it is more difficult to sort out the deprivation, and of course, to know what the expectation of the parties was, since it likely changed over time.
9. Doesn’t family law solve the issues between couples?
In Ontario, if the couple chose not to marry, the property division rules of the Family Law Act do not apply, so unjust enrichment is the means to compensate a person who is left shortchanged after contributing to a joint family venture. That is determined based on the facts of each case.
10. What remedies are available?
Depending upon the situation, there might be a judgment for money; a declaration of a “trust”; or the outright transfer of property.