Unjust Enrichment Claims Give You a Right to Recover Without a Contract

In California, as in many other states, an "unjust enrichment" cause of action exists where you have suffered damages in a business deal gone awry (and a valid, enforceable contract is not present). Unjust enrichment claims can be confusing - after all, most prospective plaintiffs are only familiar with breach of contract claims, which give them a right of action to recover damages in situations involving the violation of an established agreement.

Let's take a look at some of the fundamentals of unjust enrichment.

The Principle of Unjust Enrichment

Unjust enrichment defines a particular dynamic that occurs between two parties (whether individuals or business entities). Simply put, California courts will find that there has been unjust enrichment if:

  1. one party has received a benefit at the expense of the other party, and
  2. the receiving party has unjustly retained that benefit.

The benefit conferred by one party to another in unjust enrichment scenarios need not always involve the positive transfer of assets, goods, or the provision of definable, specific services. A court may find that a party has been unjustly enriched if that party has been prevented from suffering a loss, too.

For example, suppose that you have provided a unique service to an industrial goods delivery company. The delivery company must make a timely delivery of goods to one of its major clients, but its fleet of eighteen-wheelers is grounded due to serious mechanical issues. They do not have the internal resources to fix their fleet in a timely manner, however.

Without signing a contract, or even verbally agreeing to any terms, you and your team of mechanics swoop in and perform the necessary repairs. It takes your team a full day of focused work to complete the necessary repairs, but the repairs are successful.

Now, in a normal breach of contract case, it would be rather difficult to sue and recover damages for the services you provided. Ostensibly, you might not even be entitled to recover damages pursuant to a "promissory estoppel" claim, if the circumstances do not prove that the delivery company intended to pay you for your services (and therefore induced you into committing resources).

Your one option for recovery is therefore unjust enrichment. If you are not allowed to recover damages for the services provided, the delivery company will have gained an advantage (and retained it) unjustly.

Unjust enrichment is founded on principles of equity. In other words, it is up to the court to determine whether the situation is fundamentally unfair - this is generally dependent on the totality of the circumstances. As such, there is no single factor that is dispositive of unjust enrichment.

How Unjust Enrichment Claims Work - Quasi-Contract Actions

Unjust enrichment claims are deemed quasi-contract claims, and as such, they are not applicable where a valid, enforceable contract exists. In California, you may make both an unjust enrichment and a breach of contract claim, of course, but you may not recover damages for both - each applies exclusive of the other.

Quasi-contracts are implied contracts. The court will determine whether the contract is implied by looking at the facts of the case. If the parties involved reasonably expected that some exchange of value would occur (but ultimately, the exchange of value occurred only in one direction), then an unjust enrichment claim may be legitimate under such circumstances.

Damages for Unjust Enrichment - Restitution

Damages for unjust enrichment are generally based on restitution. Restitution damages do not attempt to account for the benefit you "should have received." Instead, restitution damages account only for the benefit you provided to the unjustly enriched party.

How does this work?

Suppose that you have provided lunch services to the defendant's construction site for a month's time. No contract was in place, however. You subsequently sue the defendant for unjust enrichment. The court may grant restitution damages - rather than give you the amount that you would have charged had you entered into a valid contract (which would include a profit margin), restitution damages will likely only account for the actual cost of the food ingredients and services.

Schedule a Free Consultation with an Experienced San Jose Business Attorney

Brian J. O'Grady has spent his career - more than 35 years - representing individual and business clients in a range of commercial disputes, including those that involve complicated quasi-contract issues such as unjust enrichment. Attorney O'Grady is a strong believer in the effectiveness of personalized representation, and as a result, he makes himself available to clients throughout the engagement process, devoting special attention to their case from beginning-to-end.

If you or your business have provided a service that another party has taken advantage of without payment, then California law may give you a cause of action pursuant to the principle of unjust enrichment.

Call (650) 318-6131 or submit a brief online form today to speak with an experienced San Jose business attorney here at O'Grady Law. During your free initial consultation, we will evaluate your claims and consider the available options.