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When is an Unjust Enrichment Claim Relevant to a Commercial Dispute?

Business and Commercial Disputes By Harvey Binnall PLLC - 2018/05/10 at 08:35am

If you’re involved in a commercial dispute with one or more parties, you may be wondering about the potential damages recoverable for “unjust enrichment” and what it actually means for your case.

What is unjust enrichment?

Stated simply, unjust enrichment is a claim that is based on the idea that the defendant — the breaching party — has somehow gained an advantage by virtue of their conduct, and that this has led to a fundamentally unfair situation.  If the court were to allow the defendant to keep this advantage (usually in the form of obtained assets, financial or otherwise), then it would not only deprive you of the value of such assets but would also give the defendant an unearned and unjustifiable benefit.

For example, suppose that you deliver goods to the defendant’s warehouse, despite the fact that no express contract was signed.  In fact, your delivery of such goods was not wholly justified by the circumstances, as the defendant did not properly imply that they wished to make a purchase.  Regardless, after the delivery, the defendant decides to keep the goods, and does not pay you.

Now, despite the fact that there is no express contract, if the defendant were to keep the goods without paying, they would be “unjustly enriched,” since they would gain an unearned benefit — the value of the goods.  During litigation, the court will almost certainly allow you to recover restitution damages.

Though unjust enrichment is an important concept in commercial litigation, it’s not universally applicable — only certain circumstances allow for a legitimate unjust enrichment claim to be litigated against the defendant.

Let’s explore the basics.

Applicable When No Express Contract Exists

It’s critical to understand that damages for unjust enrichment are only available in situations where no valid express contract exists.  If there is an express contract, then you will have to sue the defendant for breach of said contract.  By contrast, an unjust enrichment action lives in the realm of “quasi-contracts” and recovery is based on equity (i.e., principles of fundamental fairness).

If there is a dispute as to whether the contract exists in the first place, then you are entitled to sue the defendant for both breach of contract and unjust enrichment (though it’s worth noting that only one will apply, after the existence of the contract is determined).

Unjust Enrichment and Restitution

When the court finds unjust enrichment, restitution damages are proper.  Restitution damages are a remedy in which the benefit provided to the defendant by the plaintiff — perhaps in the form of a monetary gain or a delivery of valuable goods — will be measured and returned to the plaintiff.  Even if the plaintiff’s losses are more significant, the damages will be capped at the defendant’s gains.

Let’s return to the previous example involving the delivery of goods to the defendant’s warehouse.  Suppose that you delivered goods worth $100,000 in total.  Restitution damages would likely be $100,000, though if there were other benefits that the defendant gained as a result (i.e., the defendant subsequently sold the goods to another buyer for a profit), then those gains might also be considered as a component of restitution.

Now, suppose that your losses are in fact greater than $100,000.  Perhaps you expected that the defendant would accept delivery of additional shipments after the initial shipment, but they did not, thus leading to excess, unsold inventory.  Restitution damages do not account for such losses, however.  In the commercial dispute context, the plaintiff’s losses are only recoverable in a breach of contract claim — not a claim for unjust enrichment.

Contact an Experienced Alexandria Business Dispute Lawyer for Assistance

Harvey & Binnall, PLLC is a boutique litigation firm located in Alexandria, VA, with decades of experience serving clients throughout Virginia, Maryland, and Washington DC in a range of business disputes (including those that involve unjust enrichment issues).  We are committed to comprehensive, client-oriented representation, and to that end, we prepare for each case as though it will ultimately lead to trial litigation — this gives us a competitive advantage during settlement negotiations.

Call (703) 888-1943 or submit an online claim form to connect to an experienced Alexandria business dispute lawyer here at Harvey & Binnall, PLLC.  During your initial consultation, we will evaluate your claims and determine a workable strategy for moving forward with such claims through litigation.