Unjust enrichment arises when one party benefits from the other party, one party is deprived in the process and, at law, there is an absence of juristic reason for the enrichment, as per Iacobucci J Garland v. Consumers’ Gas Co., [2004] 1 SCR 629

In reality, unjust enrichment is exemplified by the following

Auto insurance pays out the claim after a vehicle is written off following a traffic accident. Auto insurance company sends a cheque for the value of the vehicle to the policy holder, thus completing contractual obligations as per insurance contract. The policy holder had an outstanding car loan with a bank. The policy holder, instead of paying the outstanding loan, cashed the cheque and purchased a new car for cash, leaving the balance of the loan unpaid. Insurance company wishes to exercise its rights to salvage attempts to secure the title, but finds out that the policy holder has not cleared the title of the car by paying out the loan. The insurance company issues another cheque to secure the title of the car. The insurance company sues the policy holder for unjust enrichment and wins.

Another common example of unjust enrichment occurs in renovations and home construction projects. A home owner and a general contractor made an agreement to construct a patio, with base terms being material cost covered by home owner and $50 per hour for building work. The home owner is impressed by the work of the contractor and asks him to build a 10 by 10 gazebo as well. Unfortunately, the home owner does not discuss the details of the new contract with the contractor, and when the work is finished, the costs are substantially higher due to increased cost of specialized labour work involved. The homeowner refuses to pay the increased cost, believing that he should only pay as per terms of the previous agreement.

The amount that is worth (quantum meirut)

When there is no established contract on the value of the work, this becomes necessary to establish at law. In general, the courts avoid creating a contract where there isn’t one but at the same time, the courts will establish the fair price for something. For example, if the market value of a gazebo is ‘x’, court will award the fair value instead of the value that is presented by the invoice that was not agreed to at the start.

Juristic reason

Third element in proving a case of unjust enrichment requires the absence of a juristic reason that might otherwise negate the legal obligation for the plaintiff to receive restitution from the defendant for the received benefit, the received benefit must be an ‘unjustly’ received benefit.

There are juristic reasons from established categories which may bar a plaintiff from recovering under unjust enrichment including:

  • A contract whereas if a contract truly exists then the contract takes precedence – the law of unjust enrichment is intended only to fill the gap where a contract is absent;
  • A disposition of law where a juristic decision was previously reached;
  • A donative intent where the received benefit was intended as a gift but the giver subsequently seeks payment; and
  • A common law or equitable law or statutory law reason such as unlawfulness.

The fourth category above may be best understood by substituting something that would be considered illegal under the Criminal Code. While in a simple backyard construction project not much can be done that will be against the Criminal Code, but as per contract law, a contract is considered to be invalid from the beginning if it is for something or involves something that is illegal.

‘under the table agreement’

Often enough a contractor and a home owner may enter into a cash agreement or an ‘under the table’ agreement’ for the purpose of avoiding taxes. This type of agreement is technically unlawful, but at the same time, it is not blatantly illegal. As such, a claim for unjust enrichment may still be pursued as the courts seem to take a softer view on avoiding taxes compared to something criminal.

It is worth to note that construction law cases where the contract itself is not valid for various reasons, a claim for unjust enrichment rests on thin air, for example, when a home owner gives payment but later defective workmanship is discovered, it makes it easy to defend with the fact that- in the absence of a valid agreement, there are no warranties.