Unjust Enrichment Law Definition Elements & Defenses

Unjust Enrichment Definition

Unjust enrichment is an equitable principle that underlies “various legal doctrines and remedies.” (County of San Bernardino v. Walsh (2007) 158 Cal.App.4th 533, 542.) It is based on the idea that “one person should not be permitted unjustly to enrich himself at the expense of another, but should be required to make restitution of or for property or benefits received, retained, or appropriated, where it is just and equitable that such restitution be made, and where such action involves no violation or frustration of law or opposition to public policy, either directly or indirectly.” (Melchior v. New Line Productions, Inc. (2003) 106 Cal.App.4th 779, 793.) Unjust enrichment is a common law obligation implied by law based on the equities of a particular case and not on any contractual obligation. (Federal Deposit Ins. Corp. v. Dintino (2008) 167 Cal.App.4th 333.)

Elements of Unjust Enrichment

The elements of a claim of unjust enrichment are “receipt of a benefit and unjust retention of the benefit at the expense of another.” (Lyles v. Sangadeo-Patel (2014) 225 Cal.App.4th 759, 769.) The theory of unjust enrichment requires one who acquires a benefit which may not justly be retained, to return either the thing or its equivalent to the aggrieved party so as not to be unjustly enriched.” (Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1132.)

Element 1: Defendant’s Enrichment (Receipt of a Benefit)

Quasi contractual recovery depends upon the defendant’s receiving some benefit. (See Unilab Corp. v. Angeles-IPA (2016) 244 Cal.App.4th 622.)

A person is enriched if the person receives a benefit at another’s expense. The term “benefit” means any type of advantage. (Federal Deposit Ins. Corp. v. Dintino (2008) 167 Cal.App.4th 333, 347.)

Thus, a benefit is conferred not only when one adds to the property of another, but also when one saves the other from expense or loss. Even when a person has received a benefit from another, he is required to make restitution only if the circumstances of its receipt or retention are such that, as between the two persons, it is unjust for him to retain it. Thus, a party who does not know about another’s mistake, and has no reason to suspect it, may not be required to give up the benefit if he also relied on it to his detriment. In other circumstances, however, the party benefiting from a mistake of fact may be not entitled to retain what amounts to a mere windfall. (Federal Deposit Ins. Corp. v. Dintino (2008) 167 Cal.App.4th 333, 347.)

Element 2: Unjust Retention of Benefit at Plaintiff’s Expense

The fact that one person benefits another is not, by itself, sufficient to require restitution. The person receiving the benefit is required to make restitution only if the circumstances are such that, as between the two individuals, it is unjust for the person to retain it. (McBride v. Boughton (2004) 123 Cal.App.4th 379.)

“Where one obtains a benefit which he may not justly retain, he is unjustly enriched. The enrichment is unjust … only if the circumstances are such that, as between the two individuals, it is unjust for the person to retain it. (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350.)

A critical limitation … is that one who confers a benefit officiously is not entitled to restitution. “It must ordinarily appear that the benefits were conferred by mistake, fraud, coercion or request, otherwise, though there is enrichment, it is not unjust.” (Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1132.)

An illegal contract may be enforced to avoid unjust enrichment or unconscionable injury. (Dunkin v. Boskey (2000) 82 Cal.App.4th 171.)

Unjust Enrichment Remedies

• Constructive Trust. Finding of unjust enrichment is necessary for the imposition of a constructive trust. (American Master Lease LLC v. Idanta Partners, Ltd. (2014) 225 Cal.App.4th 1451.)
  
  
• Restitution. Equitable remedy of restitution to avoid unjust enrichment has its roots in the common law. One person should not be permitted unjustly to enrich himself at the expense of another, but should be required to make restitution of or for property or benefits received, retained, or appropriated, where it is just and equitable that such restitution be made, and where such action involves no violation or frustration of law or opposition to public policy, either directly or indirectly. (Dunkin v. Boskey (2000) 82 Cal.App.4th 171, 195.)
  
  
• Equitable Lien. Unjust enrichment is merely an element of a claim for an equitable lien. (County of Los Angeles v. Construction Laborers Trust Funds for Southern California Admin. Co. (2006) 137 Cal.App.4th 410.)
  
  
• Transferee With Knowledge. A transferee with knowledge of the circumstances giving rise to an unjust enrichment claim may be obligated to make restitution. For example, a person who has entered into a transaction with another under such circumstances that, because of a mistake, he would be entitled to restitution from the other, … is entitled to restitution from a third person who had notice of the circumstances before giving value or before receiving title or a legal interest in the subject matter. (First Nationwide Savings v. Perry (1992) 11 Cal.App.4th 1657, 1662.)

Unjust Enrichment Statute of Limitations

The applicable statute of limitations depends upon the gravamen of the action rather than upon the form of the pleading. (Maguire v. Hibernia Savings & Loan Soc. (1944) 23 Cal.2d 719, 733; Reiner v. Hermann (1947) 79 Cal.App.2d 543, 544.) Under California law … the Legislature has provided a separate (two-year) limitations period covering contracts not founded upon an instrument of writing: (such as unjust enrichment) in Code of Civil Procedure §339, subdivision 1. (H. Russell Taylor’s Fire Prevention Services, Inc. v. Coca Cola Bottling Corp. (1979) 99 Cal.App.3d 711, 721.)

Affirmative Defenses

Unconscionability

Unconscionability is a contract defense. The unconscionability doctrine ensures that contracts, particularly contracts of adhesion, do not impose terms that are overly harsh, unduly oppressive, so one-sided as to shock the conscience, or unfairly one-sided. (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899; Cal. Civ. Code, §1670.5.)

Unclean Hands

The doctrine of unclean hands is a defense available in both legal and equitable actions. (Jade Fashion Co., Inc. v. Harkham Industries, Inc. (2014) 229 Cal.App.4th 635, 653.)

Unilateral Mistake of Fact

To prevail on a unilateral mistake claim, the defendant must prove that the plaintiff knew that the defendant was mistaken and that plaintiff used that mistake to take advantage of the defendant: “Defendants contend that a material mistake of fact – namely, the defendants’ belief that they would not be obligated to install a new roof upon the residence – prevented contract formation. A unilateral mistake of fact may be the basis of relief. However, such a unilateral mistake may not invalidate a contract without a showing that the other party to the contract was aware of the mistaken belief and unfairly utilized that mistaken belief in a manner enabling him to take advantage of the other party.” (Meyer v. Benko (1976) 55 Cal.App.3d 937, 944.)

Bilateral Mistake

Where, as here, the extrinsic evidence is not in conflict, the determination of whether a mutual mistake occurred is a question of law. (Hess v. Ford Motor Co. (2002) 27 Cal.4th 516, 527.) “Ordinary negligence does not bar a claim for mutual mistake because ‘“[t]here is an element of carelessness in nearly every case of mistake . . . .”’ ‘Only gross negligence or ‘preposterous or irrational’ conduct will [bar] mutual mistake.’” (Thrifty Payless, Inc. v. The Americana at Brand, LLC (2013) 218 Cal.App.4th 1230, 1243.)

Duress

“Menace” is considered to be duress: “Under the modern rule, ‘“[d]uress, which includes whatever destroys one’s free agency and constrains [her] to do what is against [her] will, may be exercised by threats, importunity or any species of mental coercion. It is shown where a party ‘intentionally used threats or pressure to induce action or nonaction to the other party’s detriment.’”’ The coercion must induce the assent of the coerced party, who has no reasonable alternative to succumbing.” (In re Marriage of Baltins (1989) 212 Cal.App.3d 66, 84.)

Economic Duress

Different elements may apply if economic duress is alleged to avoid an agreement to settle a debt. (Perez v. Uline, Inc. (2007) 157 Cal.App.4th 953, 959-960.) The doctrine of economic duress can apply when one party has done a wrongful act which is sufficiently coercive to cause a reasonably prudent person, faced with no reasonable alternative, to agree to an unfavorable contract. The party subjected to the coercive act, and having no reasonable alternative, can then plead economic duress to avoid the contract. (CrossTalk Productions, Inc. v. Jacobson (1998) 65 Cal.App.4th 631, 644.)

Undue Influence

Undue influence consists of the use of excessive pressure by a dominant person over a servient person resulting in the apparent will of the servient person being in fact the will of the dominant person. The undue susceptibility to such overpersuasive influence may be the product of physical or emotional exhaustion or anguish which results in one’s inability to act with unencumbered volition. (Keithley v. Civil Service Bd. of the City of Oakland (1970) 11 Cal.App.3d 443, 451.)

Fraud

Fraud may be asserted as an affirmative defense: “One who has been induced to enter into a contract by false and fraudulent representations may rescind the contract; or he may affirm it, keeping what he has received under it, and maintain an action to recover damages he has sustained by reason of the fraud; or he may set up such damages as a complete or partial defense if sued on the contract by the other party.” (Grady v. Easley (1941) 45 Cal.App.2d 632, 642.)

Waiver

The waiver may be either express, based on the words of the waiving party, or implied, based on conduct indicating an intent to relinquish the right. Thus, “California courts will find waiver when a party intentionally relinquishes a right or when that party’s acts are so inconsistent with an intent to enforce the right as to induce a reasonable belief that such right has been relinquished.” (Wind Dancer Production Group v. Walt Disney Pictures (2017) 10 Cal.App.5th 56, 78.)