Restitution and unjust enrichment

Unjust enrichment provides restitutionary relief where the defendant has been enriched at the claimant's expense without legal justification. The modern framework requires four elements: (1) enrichment of the defendant; (2) at the claimant's expense; (3) an unjust factor (such as total failure of consideration, mistake, duress, or ultra vires demand); and (4) no valid defence. The doctrine operates at contract's edges—where contracts fail, are frustrated, or never existed—allowing recovery of value transferred measured by the defendant's gain, not the claimant's loss. Since Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548, unjust enrichment stands as an independent cause of action, no longer disguised as implied contract. The principle responds to the injustice of retention: where one party receives a benefit they cannot justly keep, the law compels restitution to reverse that enrichment.

Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32: Money paid under a contract subsequently frustrated is recoverable where there has been total failure of consideration—the claimant received none of the promised performance. This overruled the harsh rule that losses lie where they fall on frustration.

Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548: Established unjust enrichment as a distinct cause of action independent of implied contract, and recognised change of position as a defence where the defendant in good faith altered their position in reliance on receipt. This case marks the doctrinal turning point.

Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349: Payments made under mistake of law are recoverable—there is no distinction between mistakes of fact and law for restitutionary purposes. This aligned English law with other jurisdictions and removed an anomalous barrier.

Woolwich Equitable Building Society v IRC [1993] AC 70: Money paid to public authorities under ultra vires demands is recoverable as of right, recognising a distinct unjust factor grounded in constitutional principle that taxes cannot be levied without parliamentary authority.

Benedetti v Sawiris [2013] UKSC 50: Quantum meruit claims succeed where the defendant freely accepted services knowing payment was expected. Enrichment is valued objectively by reference to market value, though subjective benefit to the defendant may be considered.

Courts apply a structured four-stage analysis. First, identify the enrichment—money is straightforward; services require proof of 'incontrovertible benefit' (saving necessary expense or discharging obligations) or free acceptance with knowledge. Second, trace the causal link between claimant's loss and defendant's gain—direct transfers are simple, three-party cases require careful analysis. Third, establish the unjust factor from the recognised list—total failure means the claimant received absolutely none of the bargained-for performance; mistake must have caused the payment; duress requires wrongful pressure. Fourth, consider defences—change of position requires good faith reliance; bona fide purchase defeats proprietary claims.

For frustrated contracts, the Law Reform (Frustrated Contracts) Act 1943 displaces common law: section 1(2) allows recovery of payments subject to the court's discretion to permit retention for expenses; section 1(3) permits awards for 'valuable benefits' conferred before frustration. The Act requires careful application—identify the benefit as the end product, value it at frustration, then determine the 'just sum' considering all circumstances.

Students confuse 'failure of consideration' (the contractual performance) with technical consideration for contract formation—they are entirely different concepts. Many forget the 1943 Act governs frustrated contracts, jumping straight to Fibrosa without applying the statutory regime. The unjust factor requirement trips up those who assume enrichment alone suffices—you must identify mistake, failure of consideration, duress, or another recognised factor. Change of position defence is frequently overlooked despite its importance post-Lipkin Gorman. Free acceptance is overused—it requires real choice to reject and knowledge that payment was expected, not mere receipt of benefit. Finally, students misapply Attorney General v Blake broadly when it remains exceptional, requiring legitimate interest in preventing profits beyond ordinary commercial contexts.