Summary
- A claim for unjust enrichment arises when a defendant is unfairly enriched at the claimant’s expense, and the law obliges them to return that amount.
- Businesses must prove the defendant was enriched, the enrichment was unjust, and it came at the claimant’s expense.
- The limitation period is six years from when the unjust enrichment becomes apparent, or from when a mistake is discovered.
- This article is a plain-English guide to unjust enrichment claims for business owners operating under English law.
- It was produced by LegalVision, a commercial law firm that specialises in advising clients on disputes and commercial litigation.
Tips for Businesses
Document all payments carefully and act promptly if you suspect unjust enrichment. Identify when the enrichment occurred or when a mistake was discovered, as this starts the six-year clock. Consider negotiation or mediation before litigation. Non-monetary benefits can also form the basis of a claim.
If you are in a business dispute with another business, it is always good practice to resolve this as soon as possible. You should do so as amicably as you can and avoid court action. However, if you need to take on commercial litigation, you may wonder about the type of claim you can make. One potential business claim following a business dispute is a claim for unjust enrichment. However, there is a time limit for this under English law. This article will explain what a claim for unjust enrichment is and how long you can wait to bring this claim.
What is a Claim for Unjust Enrichment?
A claim for unjust enrichment is a type of common law claim. It is where a claimant is at a loss through unjustly enriching the defendant in a court case. Therefore, the claim is not solely about the claimant’s loss but must be where their loss enhances the defendant.
For example, your business is the claimant, and you need to pay an invoice for a service a business provides you with, such as to your internet provider. However, by mistake, you pay the invoice to a different supplier you regularly pay, such as your landlord, to whom you pay rent. If that other supplier, your landlord, does not return the money to you, they experience an unjust enrichment at your expense.
This guide outlines how to resolve commercial disputes.
If your business has been unfairly affected by unjust enrichment, you may wish to make a claim. The law obligates the defendant to return the amount you enriched them by. There are specific elements you need to prove for this claim in a commercial dispute, including that:
- you enriched the defendant;
- the enrichment was unfair or unjust; and
- the enrichment was at your expense as the claimant.
What Do I Need to Show for a Claim for Unjust Enrichment?
In addition to bringing the claim within the limitation period, you must understand what is considered unjust or unfair. A court is particular about this and will not think the enrichment to be unjust if you and the defendant who experiences enrichment had an agreement with the details that the other party will receive enrichment in this way. Instead, a court will consider the following to constitute unjust enrichment:
- a lack of consideration for the defendant whom you enrich;
- where, like the example the article details, the payment was a genuine mistake on your behalf;
- if you enrich the other business under duress, so due to a threat or persuasion;
- where payment is due to undue influence, which may mean the other company takes advantage of you; or
- the other business did something which resulted in their enrichment by you.
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What Happens After You Make a Claim?
Once you bring a claim, a court can order the defendant to pay back the amount they were unjustly enriched by. This is called restitution. The court does not award you compensation for any wider losses your business suffered. It only orders the return of the specific benefit the defendant received at your expense.
For example, using the invoice mistake above, the court would order your landlord to return the overpaid amount. It would not award you additional damages for any disruption the mistake caused your business.
It is also worth knowing that the defendant may argue they no longer hold the benefit. For instance, they may say they spent the money before realising it was not theirs. This is called the “change of position” defence. If the court accepts this, it may reduce or remove the amount they must repay. This is why acting quickly and keeping clear payment records matters.
How Long Can I Wait to Bring a Claim?
If your business has been affected, you have a time limit to make a claim. This is the limitation period, which applies to many different types of court claims.
For this claim, you do not need to start at the end of any relevant contract but can begin before this. Instead, the time limit to make the unjust enrichment claim begins when there appears to be no basis or reason for the unfair enrichment you make to the defendant. The time limit from this point is in the Limitation Act 1980. It says that the time limit from this point is six years, in which you can try to bring the claim.
If the unjust enrichment was caused by a mistake, the six-year limitation period only begins once you realise the mistake.
Key Takeaways
To claim unjust enrichment, you must do so within the strict six-year limitation period. This begins when it is clear there is no basis for the enrichment, rather than when any relevant contract ends. If the entrenchment is through a mistake, it starts once you realise this mistake or could have done it.
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Frequently Asked Questions
Can you settle an unjust enrichment claim out of court?
Yes, you can settle an unjust enrichment claim through negotiation or mediation before pursuing litigation.
Does unjust enrichment apply to non-monetary benefits?
Yes, unjust enrichment can cover non-monetary benefits where the defendant gains something of value at the claimant’s expense.
Can a defendant raise defences against an unjust enrichment claim?
Yes, a defendant can raise defences, such as showing they changed their position in good faith after receiving the enrichment.
Does the six-year limit apply if the defendant concealed the enrichment?
If the defendant conceals the unjust enrichment, the six-year limitation period may not begin until you discover, or reasonably could have discovered, the concealment.
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