Suppose that Charlie owes Alice $100. Charlie is on his way to pay Alice the money when it falls out of his pocket. It is picked up by Bob. Charlie does not now have enough money to pay Alice. Does Alice have a claim based on unjust enrichment against Bob in respect to the $100?
Unjust enrichment (UE) is when one party has obtained a benefit at the expense of another party under circumstances that make it unfair for the recipient to retain the benefit without paying for it. [1]
The elements of unjust enrichment are:
- The recipient must have been enriched at the expense of the claimant,
- And the circumstances must be such as to make this enrichment unjust. [2]
Because the second element seems to be without question. Let’s examine that element first. Bob picked up and kept money that was never intended for him. Charlie never intended to transfer title (ownership) to the money to Bob. In fact, the money was dropped by mistake. This fact certainly reflects unjust enrichment and because of this, the second element is satisfied. [3]
To further support why Bob was unjustly enriched pursuant to the second element, Barlow explains that in the case of found property, “the title of the finder is good as against the whole world except the true owner.” [4] Bartow continues on to state that lost property is property the owner unintentionally and unknowingly drops or loses and that property belongs to the finder unless and until the true owner is located. [4] Then yet, even if Charlie intentionally laid the money on the ground with intent to return at a later time to retrieve the money, Barlow tells us this mislaid property still belongs to the owner unless and until the true owner is located. [4] Indeed the owner’s right has been established an because of that, Bob has been unjustly enriched.
However, satisfaction of the first element requires that “the recipient (Bob) must have been enriched at the expense of the claimant”. [2] My question is who has standing to be the claimant? Is it Alice or Charlie? Can it be both? Or can it be any other person who wants to collect a monetary debt from Alice or Charlie who states, for instance, that Bob was unjustly enriched and Joe, who is owed rent by Alice, steps forward as a claimant in the unjust enrichment claim?
Consider this, even though the money was intended for Alice, Alice never had possession of that particular $100, nor did she have any type of relationship with Bob. Because of that fact, it seems Alice’s claim to the money is too vague. Possibly had the property been a bailment, then Alice’s standing as a claimant would have been unquestionable. Barlow explains:
A bailment is the transfer and delivery by an owner or prior possessor (the bailor) of possession of personal property to another (the bailee):
- Whose purpose in holding possession is often for safekeeping or for some other purpose more limited than dealing with the object or chattel as would the owner, and
- Where the return of the object or chattel in the same, or substantially the same, undamaged condition is contemplated. [5]
Basically, the bailment is when the owner allows someone to hold onto his property and expects the property to be returned, thus the owners right to the property is unchallenged, giving him standing as a claimant in the UE claim. [5]
- Secondly, suppose that Alice has an account with Megabank. Megabank pays $100 to Bob, mistakenly believing that Alice has instructed it to do so, and debits Alice’s account accordingly. Megabank goes into liquidation. Does Alice have a claim against Bob to recover the $100?
The elements of unjust enrichment are:
- The recipient must have been enriched at the expense of the claimant,
- And the circumstances must be such as to make this enrichment unjust. [2]
In this scenario, it is clear the elements of unjust enrichment were satisfied as they relate to Megabank and Bob’s transaction. However, since Megabank is not in position (due to liquidation) to pursue the unjust enrichment cause of action, we must look to see if the elements of unjust enrichment apply to Alice and they do. [2] Because of a mistake, Bob was enriched at the expense of Alice. These facts satisfy the two required elements and Alice can seek restitution from Bob. [2]
- Thirdly, suppose that Alice sells a painting to Charlie very cheaply, mistakenly believing Charlie to be her brother. Charlie knows that Alice has made a mistake and that he will soon be asked to return the painting. In an attempt to make a profit, he sells the painting on to Bob. The sale is at a low price because Bob knows that the painting does not really belong to Charlie. Can Alice recover the painting or its value from Bob in an action based on unjust enrichment?
The elements of unjust enrichment are:
- The recipient must have been enriched at the expense of the claimant,
- And the circumstances must be such as to make this enrichment unjust. [2]
Yes, in this scenario because of a mistake, Alice sold the painting to Charlie at a cheap price. Her mistake (which Charlie was aware of) caused Charlie to be unjustly enriched at the expense of Alice. [2] Because of these facts, both elements for UE are satisfied and Alice has a cause of action against Charlie. [2] However, since Charlie tried to avoid returning the painting to Alice by selling the painting to Bob (who knew Charlie was selling a painting to him cheaply because he knew the painting didn’t belong to Charlie), Bob has also been enriched at the expense of Alice and Bobs knowledge that Charlie did not own the painting, coupled with the cheap selling price is prima facie evidence that Bob intended to possess the property unfairly. Thus, both elements of the cause of action have been satisfied. [2]
[1] Brian A. Blum, Examples & Explanations: Contracts 269 (6 ed. 2013).
[2] Id. at 279
[3] Id.
[4] D. Barlow Burke & Joseph A. Snoe, Property: Examples & Explanations 35 (3rd ed. 2008).
[5] Id. at 43