CONTRACT
Undoubtedly the most significant lawful basis for the transfer of an enrichment arises from contract.5 If the parties have entered into a valid agreement which is to regulate their relationship it is vital that the law of unjust enrichment does not undermine what they have decided. It is only where the agreement does not operate, or has ceased to operate, that the law of unjust enrichment should have a role to play in any dispute between the parties. Consequently, the law of restitution should be considered to be subsidiary to the law of contract. Contract is relevant to the law of unjust enrichment in a variety of ways.
(A) DISCHARGE OF A CONTRACTUAL OBLIGATION
Where the claimant has provided a benefit to the defendant pursuant to a valid contract, payment for the benefit will be governed by the contract and not the law of unjust enrichment. If that contractual obligation has been discharged by the defendant, there is no scope for a further claim by the provider of the benefit in unjust enrichment. So, for example, in Benedetti v Sawiris6 the claim for restitution for services failed because the defendant had already paid money to a company controlled by the claimant in respect of the claimant’s services and pursuant to a contract between the parties. As Lord Reed recognized,[1] [2] [3] if a contract made provision for remuneration in respect of the services which had been provided, and that contract was valid, no question of unjust enrichment could arise. The payment made by the defendant completely discharged the contractual obligation such that there was no role for a residual claim in unjust enrichment.
Similarly, where the claimant owes money to the defendant under a contract and pays the money to discharge the liability, this will constitute a legally effective basis to defeat a claim for restitution of the money. For example, in Steam Saw Mills Co Ltd v Baring Bros Co Ltd8 the claimant paid money due under a contract to agents of a foreign government in ignorance of the fact that a revolution had broken out which subsequently led to the downfall of the government. The money was not recoverable even though the claimant would not have made the payment had it known of the revolution, because ‘the money was paid, not under a mistake of fact as to the existence of an obligation; it was paid in pursuance of an obligation which in fact existed’,[4] and was effective to discharge that obligation. Where, however, the claimant paid money under a contract to the defendant in ignorance of the fact that the contract had already been repudiated by the other party, it was held that the payment was recoverable because it did not discharge any legal obligation.[5] [6]
In Wuhan Guoyu Logistics Group Co Ltd v Emporiki Bank,11 following a demand for payment in respect of a performance bond, a bank mistakenly made payment. Even though the money was not due, the nature of the performance bond meant that there was a complete and enforceable obligation to pay which arose on the demand for payment being made, such that the claim was indefeasible and it was irrelevant that the demand was made on a mistaken premise. Consequently, the discharge of the valid contractual obligation to pay prevented any recourse to a claim in unjust enrichment, because there was a legally effective basis for the defendant’s receipt.
- [1] [2013] UKSC 50, [2014] AC 938. See Chapter 4.
- [2] Benedetti v Sawiris [2013] UKSC 50, [2014] AC 938, [91]. 8 [1922] 1 Ch 244.
- [3] 9 Ibid,254. 10 British American Continental Bank v British Bank for Foreign Trade [1926] 1 KB 328.
- [4] 11 [2013] EWCA Civ 1679, [2014] 1 Lloyds Rep 273.
- [5] 12 Guinness plc v Saunders [1990] 2 AC 663, 697-8 (Lord Goff); Taylor v Motability Finance Ltd [2004]
- [6] EWHC 2619 (Comm), [23] (Cooke J); Mowlemplc v Stena Line Ports Ltd [2004] EWHC 2206; S and WProcess
