Unjust enrichment - Basic principles

Learning Outcomes

This article explains the core principles, doctrinal structure, and exam-focused application of unjust enrichment in SQE1, including:

• the four elements of an unjust enrichment claim and how they fit together in problem questions
• how to identify “enrichment” and link it “at the claimant’s expense”, including issues of directness, intermediaries, and passing-on
• what makes enrichment “unjust” in law, focusing on mistake, failure of basis, duress, undue influence, and unlawful demands
• the interaction between unjust enrichment, contract, and tort, and when a contractual or tortious claim is preferable or exclusive
• common defences such as change of position, estoppel, and legal justification, and how they operate to limit or defeat recovery
• the availability and choice of restitutionary remedies, including personal and proprietary claims where relevant
• valuation and restitutionary measures (e.g. quantum meruit for services, disgorgement of benefits, and treatment of non-monetary enrichment such as services or discharge of liabilities)
• how valid contracts, statutory schemes, and policy considerations can bar or shape restitutionary relief in examination scenarios

SQE1 Syllabus

For SQE1, you are required to understand the basic structure of unjust enrichment claims and their practical application, with a focus on the following syllabus points:

• the four essential elements of an unjust enrichment claim
• the meaning of ‘enrichment’ and ‘at the expense of the claimant’
• what constitutes an ‘unjust’ factor in law (e.g. mistake, failure of basis, duress)
• the main defences to unjust enrichment
• how unjust enrichment interacts with contract and tort law
• the valuation of benefits conferred (money, services, goods, discharge of debts) and the appropriate restitutionary measure
• mistake of fact and mistake of law, and failure of basis (including total and partial failure)
• the effect of a valid contract or statutory authority as legal justification preventing restitution

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.

1. What are the four elements a claimant must prove to succeed in a claim for unjust enrichment?
2. Give two examples of situations where enrichment is considered ‘unjust’ in law.
3. Can a defendant raise a ‘change of position’ defence to an unjust enrichment claim? Briefly explain.
4. How does unjust enrichment differ from a claim in contract?

Introduction

Unjust enrichment is a separate branch of the law of obligations. It provides a remedy where one party has received a benefit at another’s expense in circumstances the law recognises as unjust, and where no other legal claim (such as contract or tort) is available. The law of unjust enrichment is primarily concerned with reversing gains that are not legally justified. Modern English law takes a structured approach: the claimant must establish enrichment, show it was obtained at their expense, identify a recognised ground of unjustness (an “unjust factor” or a failure of the basis on which the benefit was conferred), and overcome any defences. A mere appeal to fairness is insufficient; the claim must fit within recognised legal principles.

Unjust enrichment frequently operates alongside contract: payments under void contracts, contracts set aside by rescission (such as after misrepresentation), or payments made for a counter-performance that never materialised are common settings. It is also relevant where money is paid in response to an unlawful demand, where benefits are conferred under compulsion, or where services are accepted without a legal basis for retention.

Key Term: unjust enrichment
A legal claim requiring the defendant to return a benefit received at the claimant’s expense, where it would be unjust for the defendant to retain it.

The Four Elements of Unjust Enrichment

To succeed in a claim for unjust enrichment, the claimant must prove all four elements:

1. The defendant has been enriched.
2. The enrichment was at the claimant’s expense.
3. The enrichment is unjust in law.
4. There is no applicable defence.

Each element must be satisfied for the claim to succeed.

Key Term: enrichment
A benefit received by the defendant, such as money, goods, services, or discharge of a debt.

Key Term: at the expense of the claimant
The benefit to the defendant must correspond to a loss or expense suffered by the claimant.

Key Term: unjust factor
A legally recognised reason why it would be unfair for the defendant to keep the benefit (e.g. mistake, failure of basis, duress).

Key Term: change of position defence
A defence where the defendant, in good faith, has changed their circumstances in reliance on the benefit, making restitution inequitable.

Enrichment covers more than receipt of money: it includes the receipt of goods, services, the discharge of a debt, or the acquisition of rights. Valuation is typically objective. For services, courts look to the market value (quantum meruit), though the measure may be reduced in some circumstances to reflect the defendant’s lack of desire for the service or the absence of free acceptance. Where a debt has been discharged, enrichment lies in the defendant’s improved financial position. A claim may also lie when a defendant’s liability is reduced or avoided due to the claimant’s payment.

“At the expense of the claimant” requires a sufficient connection between the defendant’s gain and the claimant’s loss. This directness requirement prevents recovery where the claimed loss is too remote from the gain. For example, where funds move through intermediaries or complex chains, the court will assess whether the defendant’s gain corresponds to the claimant’s specific transfer or loss, rather than to a general economic effect. In practice, this can be significant in tax or multi-party payment scenarios. The claimant must identify a transfer of value from them to the defendant, either directly or via an instrument that the law treats as equivalent.

The enrichment must be unjust in law. English law recognises specific unjust factors (mistake, failure of basis, duress, undue influence, compulsion) and also permits restitution where payments were extracted by unlawful demands. A shift over time towards “failure of basis” has broadened focus to whether the agreed or assumed basis for the transfer has failed. The unjustness is not general moral unfairness; it must be grounded in a recognised principle.

Finally, even if those elements are established, the defendant may raise a defence. The most common is change of position (requiring good faith reliance on the receipt), but defences also include estoppel, legal justification (such as a valid contract or statutory authority), and situations where counter-restitution is impossible or inequitable.

Key Term: failure of basis
Where the reason or condition for conferring a benefit fails, so the defendant’s retention of the benefit is unjust.

Worked Example 1.1

A bank customer accidentally transfers £2,000 to the wrong account due to a typing error. The recipient, unaware of the mistake, spends the money on a non-refundable holiday. Can the bank recover the funds?

Answer:
The recipient has been enriched at the bank’s expense by mistake (an unjust factor). However, if the recipient can show they changed their position in good faith by spending the money irreversibly, the court may reduce or deny the bank’s claim.

What Makes Enrichment ‘Unjust’?

Not every enrichment is ‘unjust’ in law. The courts recognise certain ‘unjust factors’ that justify restitution. The most common are:

• Mistake: The claimant paid money or conferred a benefit by mistake (of fact or law). Mistake does not need to be reasonable; it need only be causative of the transfer. Recovery is generally permitted unless the claimant took the risk of being wrong or the defendant can point to a legal justification for retention. Mistake of law is also actionable: payments made under a misunderstanding about the legal obligation may be recovered, subject to any countervailing considerations (such as change of position or practical impossibility of counter-restitution).
• Failure of basis (failure of consideration): The reason for the payment or benefit fails (e.g. a contract is void or rescinded, or the expected return does not materialise). Traditionally, recovery of money required a “total failure” of consideration, but modern analysis looks to the failure of the basis and permits restitution where the basis of the transfer has failed, sometimes allowing apportionment if the basis was severable and failed in part.
• Duress or undue influence: The benefit was obtained through illegitimate pressure, coercion, or exploitation. Duress includes threats of unlawful action (e.g. threats to breach a contract or seize goods) and economic duress where consent is vitiated. Undue influence addresses exploitation of relationships of trust or ascendancy resulting in unconscionable advantage.
• Other factors: Such as payments made under compulsion, necessity, or unlawful demands by public authorities. Where a levy or tax demand is ultra vires, restitution may be available even absent mistake.

Key Term: failure of basis
Where the reason or condition for conferring a benefit fails, so the defendant’s retention of the benefit is unjust.

Mistake is a common unjust factor. Examples include overpayments, duplicate payments, or transfers made due to a misunderstanding of the identity of the recipient. Mistake of law claims are now recognised, allowing recovery of payments made under a mistaken view of legal obligations (e.g. paying a fee later determined unlawful). Courts consider whether the claimant voluntarily assumed the risk of being wrong or intended the payment to be irrevocable despite uncertainty; if so, restitution may be denied.

Failure of basis applies where the purpose or condition governing the transfer has not been fulfilled. If goods are paid for but title never passes, or if an upfront fee was paid for a service that never occurs, the basis has failed and restitution typically follows. While earlier cases often insisted on total failure of consideration for recovery of money, modern approaches examine the operative basis. If the agreed return is severable (e.g. instalments for discrete services) and only part fails, a partial restitutionary remedy may be appropriate.

Duress and undue influence are concerned with the quality of consent. Economic duress requires illegitimate pressure that leaves the victim with no practical alternative but to submit; the resulting transfer may be recoverable in restitution. Undue influence involves abuse of trust or confidence to procure a benefit; restitution often follows rescission, with the transfer reversed.

Public law demands can also ground unjust enrichment. If a public authority requires payment under an invalid demand, money paid is prima facie recoverable without the need to prove mistake or duress, subject to defences. This protects individuals and businesses from unlawful exactions and complements the broader constitutional principles that unlawful demands should not stand.

Worked Example 1.2

A customer pays £100 in advance for a concert ticket. The concert is cancelled and no replacement is offered. Is the organiser unjustly enriched?

Answer:
Yes. The organiser has been enriched at the customer’s expense, and the basis for the payment (the concert) has failed. The customer is entitled to restitution.

Worked Example 1.3

A person receives an overpayment from a friend, realises the error, but spends the money on luxury goods after being told by the friend to keep it. Can the friend later claim unjust enrichment?

Answer:
If the friend encouraged the defendant to keep the money, the defendant may have an estoppel defence and may not be required to repay.

Worked Example 1.4

A retailer collects a levy from customers described as a “statutory environmental charge” and pays it to a government department. The levy is later ruled unlawful. A customer seeks restitution from the department. Is the enrichment at the customer’s expense?

Answer:
The department is enriched by receipt of the levy, but whether it is “at the customer’s expense” depends on the legal character of the transfer. Courts examine the chain of payments and whether the customer’s transfer can be legally linked to the department’s gain. If the retailer’s payment is treated as the operative transfer, the customer may need to claim from the retailer rather than the department. Directness of the transfer is critical.

Worked Example 1.5

A business pays a local authority licence fee, later declared unlawful. The business had no mistake at the time but paid due to the demand. Can it recover the money?

Answer:
Yes, payments extracted under unlawful demands are generally recoverable even without mistake. Restitution may be granted, subject to defences such as change of position and any statutory scheme governing refunds.

Defences to Unjust Enrichment

Even if the four elements are satisfied, the defendant may have a defence. The main defences are:

• Change of position: The defendant has spent or relied on the benefit in good faith, making repayment unfair. This defence is flexible and may reduce or extinguish liability. It requires the defendant to show that they altered their position in reliance on the receipt and that restitution would be inequitable. Bad faith or notice of the mistake defeats the defence. The reduction will reflect the degree to which the defendant’s position has been irreversibly changed, rather than conferring a windfall.
• Estoppel: The claimant’s conduct led the defendant to believe they could keep the benefit. If the defendant reasonably relies on the claimant’s representation or conduct, the claimant may be prevented from asserting their right to restitution.
• Legal justification: The law or a valid contract allows the defendant to retain the benefit. If a binding contract governs the transfer and allocates the risk (e.g. non-refundable deposits under a valid contract), restitution is not available. Similarly, retention authorised by statute or regulations constitutes legal justification and bars a claim.

Change of position is the primary defence in mistaken payment cases. It requires good faith. If, for example, the defendant became aware of the mistake and continued spending, the defence may be limited to expenditures made before knowledge of the mistake. Courts assess whether the reliance was causative and whether any part of the enrichment remains. The defence operates to prevent unfairness and avoid forcing defendants into hardship where they have innocently relied on funds.

Estoppel is narrower and depends on the claimant’s representation. It may arise where the claimant encourages retention or induces reliance that would make recovery inequitable. This defence prevents the claimant from resiling from their representation where it would be unjust to do so.

Legal justification prevents restitution where a valid legal basis supports retention. Payments made pursuant to a valid contract are generally not recoverable in unjust enrichment because the contract allocates rights and risks. If the contract is set aside (e.g. rescission for misrepresentation), restitution may then become available to unwind the transfer and restore the parties to their pre-contract positions. In the regulatory context, if the payment is required by valid law, restitution does not lie.

Other defences can arise in practice. For rescission-based restitution, counter-restitution must be possible: if the claimant cannot restore what they received (or its value) due to their own acts, rescission (and associated restitution) may be barred. Time limits also apply: claims for money had and received are generally subject to limitation periods under the Limitation Act 1980, although discoverability rules for mistake may affect when time runs.

Worked Example 1.6

An employee receives a mistaken bonus of £5,000 and, believing it theirs, donates the full amount to a charity. The employer later seeks repayment. Can the employee rely on change of position?

Answer:
Possibly. If the employee acted in good faith and irreversibly changed their position by donating the money, a court may reduce or extinguish liability. If the employee knew or ought to have known of the mistake at the time of donation, the defence may not apply or may be limited.

Unjust Enrichment Compared to Contract and Tort

Unjust enrichment is distinct from contract and tort:

• Contract: Focuses on enforcing promises. Unjust enrichment applies where there is no valid contract, or the contract is void or unenforceable. If a contract exists and governs the transfer, unjust enrichment is generally excluded because the parties have allocated risks and obligations. Where a contract is rescinded (e.g. for misrepresentation), restitution is sometimes used to unwind transfers and restore pre-contract positions. In other situations, restitutionary remedies like quantum meruit may arise where services were provided but no contract was formed or a contract becomes ineffective (for example, payment for necessary services rendered after an agreement fails to materialise).
• Tort: Focuses on wrongful acts causing loss. Unjust enrichment does not require wrongdoing—only unjust retention of a benefit. Damages in tort are loss-based and compensatory, whereas restitution aims to reverse a gain. The absence of fault is consistent with unjust enrichment’s focus on the claimant’s transfer and the defendant’s retention without legal basis.

Key Term: restitution
The remedy requiring the defendant to return or repay the value of the benefit received.

In practice, tort and contract can interact with unjust enrichment. For instance, misrepresentation may entitle rescission (contractual remedy) and the reversal of transfers (restitution). Damages for misrepresentation are assessed on principles distinct from restitution: they seek to compensate the loss stemming from reliance on the misrepresentation, while restitution seeks to reverse the gain from the transfer. Where a contract is frustrated or void for illegality, restitution can play a role in reallocating benefits to avoid unjust retention, subject to policy considerations.

Key Point Checklist

This article has covered the following key knowledge points:

• The four elements of an unjust enrichment claim: enrichment, at the claimant’s expense, unjust factor, and no defence.
• Enrichment includes money, goods, services, or discharge of a debt; valuation is typically objective and reflects market value (for services, quantum meruit).
• ‘At the expense of the claimant’ requires a direct link between the claimant’s loss and the defendant’s gain; multi-party chains raise issues of directness.
• Unjust factors include mistake (fact or law), failure of basis (including total failure and, if severable, partial failure), duress, undue influence, and unlawful demands.
• Main defences include change of position (good faith, reliance), estoppel, and legal justification (valid contract or statutory authority); counter-restitution may bar rescission-based restitution.
• Unjust enrichment is separate from contract and tort claims; contract allocates risks and usually precludes restitution unless the contract is ineffective or rescinded.
• Restitution is a gain-based remedy focused on reversing unjust retention, not compensating loss.

Key Terms and Concepts

• unjust enrichment
• enrichment
• at the expense of the claimant
• unjust factor
• change of position defence
• failure of basis
• restitution