Learning Outcomes
After studying this article, you will be able to explain when restitution and unjust enrichment arise following the discharge or termination of a contract, distinguish between contractual and restitutionary remedies, define total failure of consideration, and identify when a quantum meruit or unjust enrichment claim may be available. You will also be able to apply these principles to SQE1-style scenarios and avoid common exam pitfalls.
SQE1 Syllabus
For SQE1, you are required to understand the basic principles of restitution and unjust enrichment as they apply to contract discharge and termination. In your revision, focus on:
- the meaning and significance of restitution and unjust enrichment in contract law
- when a claim for restitution may arise after contract termination (including total failure of consideration and quantum meruit)
- the distinction between contractual and restitutionary remedies
- the requirements for a claim based on unjust enrichment
- the effect of partial performance or partial failure of consideration
- how these remedies interact with the rules on contract discharge and termination
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
- What is meant by "total failure of consideration" and when does it allow a party to recover money paid under a contract?
- In what circumstances can a party claim a quantum meruit after a contract is terminated?
- What are the four elements required for a successful unjust enrichment claim?
- Can a party recover money paid if they have received part of the contractual benefit? Explain.
Introduction
When a contract is discharged or terminated, parties may have already performed some or all of their obligations. Sometimes, the usual contractual remedies (such as damages) are not available or are inadequate. In these cases, the law of restitution and unjust enrichment may provide an alternative remedy, allowing a party to recover benefits conferred on the other party or to claim a reasonable sum for work done. For SQE1, you must know when these remedies are available and how they interact with the rules on contract discharge.
Restitution and Unjust Enrichment: The Basics
Restitution is a remedy aimed at reversing unjust enrichment. It is available where one party has conferred a benefit on another, and it would be unjust for the recipient to retain it without payment.
Key Term: restitution
A remedy requiring a party to return a benefit received, to prevent unjust enrichment, usually when a contract is set aside or fails.Key Term: unjust enrichment
A principle that a person should not retain a benefit at another's expense where it would be unjust to do so.
When Does Restitution Arise After Discharge?
Restitution may be available after a contract is discharged or terminated if:
- a party has paid money or supplied goods/services but received nothing in return (total failure of consideration)
- a party has performed part of the contract and the other party has accepted the benefit (quantum meruit)
- the contract is void, voidable, or set aside (e.g., for misrepresentation or mistake)
Key Term: total failure of consideration
A situation where a party has received no part of the contractual benefit for which they paid or performed.Key Term: quantum meruit
A claim for a reasonable sum for work done or services provided, usually where there is no enforceable contract or the contract has been discharged.
Worked Example 1.1
A pays £5,000 in advance for goods. The seller never delivers any goods, and the contract is terminated. Can A recover the £5,000?
Answer: Yes. There has been a total failure of consideration. A can claim restitution to recover the £5,000 paid.
Worked Example 1.2
B agrees to paint C's house for £3,000. B paints half the house, then C tells B to stop and hires someone else. C uses the work B has done. Can B claim anything?
Answer: Yes. B can claim a quantum meruit for the reasonable value of the work done and accepted by C, even though the contract was not fully performed.
The Four Elements of Unjust Enrichment
To succeed in a claim for unjust enrichment, the claimant must show:
- The defendant has been enriched (received a benefit)
- The enrichment was at the claimant’s expense
- The enrichment is unjust (e.g., due to failure of consideration, mistake, or other recognized ground)
- There is no applicable defence (such as change of position)
Key Term: enrichment
The receipt of a benefit, such as money, goods, or services.Key Term: at the claimant’s expense
The benefit received by the defendant must have come directly from the claimant.Key Term: unjust factor
A legally recognized reason that makes the enrichment unjust, such as total failure of consideration or mistake.Key Term: change of position defence
A defence where the defendant has changed their position in reliance on the benefit, making restitution unfair.
Restitution for Money Paid: Total Failure of Consideration
If a party pays money under a contract and receives none of the promised benefit, they may recover the money by a restitution claim. However, if they have received part of the benefit, recovery is generally not allowed unless the failure is "total".
Worked Example 1.3
D pays £2,000 for a training course. The provider cancels before any sessions are delivered. Can D recover the £2,000?
Answer: Yes. D has received nothing in return, so there is a total failure of consideration.
Exam Warning
If the claimant has received any part of the contractual benefit (even a small part), the failure is not "total" and restitution for money paid is usually not available. In such cases, the claimant may need to rely on a contractual damages claim instead.
Quantum Meruit: Reasonable Payment for Work Done
Where a party has performed work and the other party has accepted the benefit, but the contract is later discharged or terminated, the performing party may claim a quantum meruit for the reasonable value of the work.
This remedy is available when:
- the contract is void, voidable, or unenforceable
- the contract is terminated before full performance, but the other party has accepted part performance
- there is no contract, but work is requested and accepted
Worked Example 1.4
E is hired to deliver 100 chairs for £1,000. After delivering 40 chairs, the contract is terminated. The buyer keeps and uses the 40 chairs. Can E claim payment?
Answer: Yes. E can claim a quantum meruit for the reasonable value of the 40 chairs delivered and accepted.
Restitution and Unjust Enrichment vs. Contractual Remedies
Restitution is not a substitute for contractual damages. It is only available where the contract does not provide an adequate remedy, or where the contract is void, voidable, or set aside. If a contract is valid and provides for damages, the claimant must usually pursue a contractual claim.
Revision Tip
Restitution is most likely to arise where the contract is void, set aside, or terminated before any benefit is received. Always check if a contractual remedy is available first.
Partial Failure of Consideration
Generally, restitution for money paid is only available where there is a total failure of consideration. If the claimant has received part of the contractual benefit, they cannot recover the money paid, even if the benefit is small. However, in some cases, the courts may allow restitution for a severable part of the contract if the contract can be divided into separate parts.
Worked Example 1.5
F pays £900 for three separate online courses. Only one course is delivered. Can F recover any money?
Answer: F may be able to recover the proportion of the payment relating to the two undelivered courses, if the contract is divisible.
Unjust Enrichment and Discharge by Frustration
When a contract is discharged by frustration (i.e., due to an unforeseen event making performance impossible), the Law Reform (Frustrated Contracts) Act 1943 allows recovery of money paid and, in some cases, compensation for benefits conferred before discharge. The court has discretion to allow the payee to retain expenses incurred.
Key Term: frustration
The automatic discharge of a contract due to an unforeseen event making performance impossible, illegal, or radically different.
Key Point Checklist
This article has covered the following key knowledge points:
- Restitution and unjust enrichment provide remedies when a contract is discharged or set aside and a party has conferred a benefit without receiving the agreed return.
- A claim for restitution of money paid is available where there is a total failure of consideration.
- Quantum meruit allows a party to claim a reasonable sum for work done and accepted, even if the contract is not fully performed.
- Four elements are required for unjust enrichment: enrichment, at the claimant’s expense, unjust factor, and no defence.
- Restitution is not available where the contract is valid and provides a contractual remedy, unless the contract is void, voidable, or set aside.
- Partial failure of consideration usually bars restitution for money paid, unless the contract is divisible.
- When a contract is frustrated, statutory rules may allow recovery of money paid and compensation for benefits conferred.
Key Terms and Concepts
- restitution
- unjust enrichment
- total failure of consideration
- quantum meruit
- enrichment
- at the claimant’s expense
- unjust factor
- change of position defence
- frustration
