Unjust enrichment must be restituted
Definition
Restitution of unjust enrichment is one of the principles of civil law that aims to ensure justice in property relations. Unjust enrichment refers to a situation in which someone gains wealth or other economic benefit without legal justification at the expense of another: the loss of one is matched by the gain of the other. This may happen due to mistake, nullity of contract or any other cause which renders the benefit unjust.
Finnish law does not have any general rules on the restitution of unjust enrichment. However, several decrees in public and private law concern the restitution of unjust enrichment and identify the principles governing it. A general principle has emerged from legislation and case law that unjustified transfers of assets must be rectified.
Requirements for restitution
Neither tort law nor contract law applies to revocation of performance, as there is not necessarily a contract between the parties. Three following conditions must be met for restitution of unjust enrichment to be applied:
- Benefit: The recipient of the benefit must have received either benefit or advantage. Benefit or advantage can be of various kinds, such as a payment of money, work done for someone or possession or right of use of an object.
- Benefit is unjustified: The Benefit or advantage must be unjustified, i.e. the beneficiary must not have had a legal basis for obtaining it. A benefit may for example be considered unjustified if the provider did not intend to confer the benefit to the beneficiary or the benefit is intended for another person. A service provided by a company to someone who has not ordered the service, or holidays taken by an employee by mistake or a tenant staying in an apartment after the lease has been terminated can be seen as unjustified benefit.
- Gaining benefit at the expense of someone else: The benefit has been obtained at the expense of another person. The benefit obtained unjustifiably must be in causality to the loss suffered by the party who gave the benefit. There is no ground for restitution if the benefit is not matched with a similar loss.
In legal terms, the restitution of unjustified benefit is a matter of returning an unjustly obtained benefit to its owner. If the benefit cannot be restituted, the person liable for restitution must compensate the value of the benefit. Restitution of the benefit is however primary in relation to compensation.
It has been held in case law and legal literature that restitution of an unjust enrichment is not a consequence of a breach of a contract, but a contractual remedy for damages. Moreover, restitution of unjust enrichment should not be used to balance relations between the parties in order to achieve some sort of equilibrium in the contractual relationship.
Claim for restitution
When a creditor who claims restitution becomes aware that they have lost an unjustified enrichment, they must take an immediate action and start to investigate the matter. If the creditor does not make a notice of defect or a claim in time, they may lose their right of action. Failure to make a claim may result in the claim for restitution of unjust enrichment becoming void. This underlines the obligation of the parties to be proactive and diligent in reviewing the legal grounds.
Acts of the wrongful beneficiary do not need to be done in bad faith since the restitution of the enrichment is not based on negligence. However, the obligation to restitution may be waived in order to protect the good faith of the recipient. A long-standing practice may give rise to legitimate expectations to the binding nature of the practice. In such situation, the beneficiary may be in good faiths and assume that they are entitled to the received benefit. Although unjustified enrichment must be restituted, the protection of good faith may affect the extent of the restitution obligation. Passage of time and good faith of the beneficiary may be grounds for conciliation and modification for the amount of restitution. Law of obligations generally seeks to protect good faith arising from the conduct of the opposing party.
General statute of limitation periods are applied for the restitution claims. Under the Act on the Limitation of Debts, the debt becomes time-barred within three years from the time when the creditor became aware or should have become aware of the payment made in error, invalidity of the contract or other event on which the restitution is based and of the recipient of the unjust enrichment.
If the wrongful beneficiary does not agree to return or compensate for the value of the benefit they have received, creditor may claim that the District Court orders the beneficiary to make the restitution.
Conclusion
Restitution of unjust enrichment is a key principle for achieving justice in property relations. It ensures that benefits obtained without legal basis are restituted to the rightful party. The application of the conception of unjust enrichment is varied and each case is assessed individually in the light of the circumstances and legal principles. In the context of restitution claims, both the duty to give notice of defects and limitations provisions must be considered.
