Law of Restitution

Topics: Common law, Law, Contract Pages: 9 (3315 words) Published: March 31, 2013
The law of restitution and the principle against unjust enrichment has developed to a great extent under common law alongside the law of contract and the law of tort. Essentially, for a claim to be made under the unjust enrichment principle, there are four questions which are relevant – first, has the defendant been benefitted/enriched; secondly, was the enrichment at the plaintiff’s expense; thirdly, was the enrichment unjust; and finally, are any defenses available. The first and the third category were recently elaborated on by the UK Court of Appeal, in Gibb v. Maidstone & Tunbridge Wells, [2010] EWCA Civ 678.  The issue arose (in obiter, as the case was decided by the majority on another point) as to whether the foregoing of a claim can be considered to be a ‘benefit’. Lord Justice Laws stated the principle thus:

“If everything else is equal I can see no principled distinction between a benefit consisting in money paid and a benefit consisting in a claim foregone. For the purpose of this branch of the law the material benefit may take many forms…”

The approach that ‘benefit’ need not be only monetary is clearly borne out on precedent – there are several cases where the receipt of a service has been considered to be a benefit. A view was taken (Beatson, The Use and Abuse of Restitution) that pure services – i.e. services which do not produce an end product – are non-beneficial. This argument has however been criticized on strong grounds elsewhere (Burrows, The Law of Restitution).

In India, principles of restitution would be dealt with under the Contract Act. Section 70 requires that where a person lawfully does anything for another person, or delivers anything to that other person, not intending to do so gratuitously, and the other person enjoys the benefit thereof, he is bound “to make compensation to the former in respect of, or to restore, the thing so done or delivered.” On a literal reading, this is somewhat confusing – is there a restitutionary remedy under this section or is there a compensatory remedy? This same issue also arises on the text of Section 65 of the Contract Act which deals with payments made under a void contract. Here too, the section uses the words “bound to restore it, or to make compensation for it…” The fundamental difference between restitution and compensation is that the former is concerned with the return of the benefit derived by the defendant while the latter is concerned with compensating the loss suffered by the plaintiff. The two are conceptually different – and the difference can result in different practical outcomes too. Going further in Indian law, Section 72 states that a person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it. This section does not contemplate pure services; and again, is restricted to mistake/coercion. So where does that leave the law of restitution in India? Will the law of restitution as a matter of common law continue to apply outside the Contract Act? 

The Supreme Court considered the question in Mahabir Kishore v. State of Madhya Pradesh. The Court stated:

“The doctrine of 'unjust enrichment' is that in certain situation it would be 'unjust' to allow the defendant to retain a benefit at the plaintiff's expense. The relatively modern principle of Restitution is of the nature of quasi contract. But the English law has not yet recognised any generalised right to restitution in every case of unjust enrichment. As Lord Diplock has said, "there is no general doctrine of "unjust enrichment" recognised in English law. What it does is to provide specific remedies in particular cases of what might be classed as unjust enrichment in a legal system i.e. based upon the civil law."

The principle of unjust enrichment requires: first, that the defendant has been 'enriched' by the receipt of a "benefit"; secondly, that this enrichment is "at the expense of the plaintiff"; and thirdly, that the...
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