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What is Unjust Enrichment?
Unjust enrichment is a poor man’s contract claim. At least that’s how I think about it sometimes. Even though North Carolina recognizes this common law claim and it has been around for many years many people are unfamiliar with it and how it can be used. When a client has a conflict over a property deal or business transaction, I know most lawyers, (including myself) would prefer a nice, well drafted written contract that had been expertly prepared and tailored to the situation.
The reality is that people do not always conduct business that one, and that’s especially true in construction and/or in situations where people know each other well. I know many businesses whose principals will tell me that they have operated the same informal way for 30 years and never had a problem…until now. That’s why they come to see me. When that does happen and the other side refuses to pay, we can often recover using other means to prove the contract, or a claim of an implied contract.
Why Would a Company Use an Unofficial Contract?
Sometimes people provide goods and services in good faith and the other side accepts them and we cannot legally prove a contract or an implied contact. This often happens when people exceed the scope of a written agreement and continue working without a further written agreement, fail to obtain a written change order where one is required, or make a good faith mistake.
Examples of Recovery
An example of a mistake where you may recover would be making improvements on the wrong lot which are accepted by the other party, or delivering the wrong goods that are accepted by the other party. Unjust Enrichment may also be used when there are legal impediments to a contract which make the document void.
Options for Filing for Alternative Remedies
Also known as quantum meruit (which is Latin for the measure of damages in unjust enrichment and not the claim itself), I make this claim in any lawsuit I file where there is the slightest chance I will not succeed in proving that an actual contract existed for all of the money we are trying to recover. It’s a good practice to raise the claims as an alternative remedy in pretty much every Complaint involving a failure to pay or contract case. It’s the last bullet we carry into the courtroom, but it’s one you have to use from time to time, and it can very effective. It’s also an issue that every business person should be familiar with both for offense and defense.
If you think about it, people generally tend to only provide services or benefits to people if they have an agreement legally termed a contract that consists of the following:
- an offer
- acceptance of that offer
- and consideration (both sides doing something)
Usually it's supplying goods or services in exchange for money.
As many of us know, a contract can be written or verbal, expressed or implied. Express contracts exist when one party offers to do or supply something, the offer is accepted by the other party, and there is consideration (which sets it apart from a promise to provide a gift, which is not a contract). This can be done verbally or in writing.
Implied contracts exist by virtue of the behavior of the parties.
For example, you walk into a barbershop, take a seat and get your hair cut. You and the barber did not agree to anything specifically, but the agreement may be inferred from the conduct of the parties. You now owe the money and cannot claim you did not have an agreement because you did not speak.
Proving Unjust Enrichment
Unjust enrichment is different from an implied contract in that there was no agreement that can be proven. If you can prove the agreement by words, writings, or conduct, then you do not need the unjust enrichment claim.
For example: Consider Builder A who is hired by Lot owner 1 to build his home.
A contract is drafted and signed and the builder is paid. Lot Owner 1 lives in Florida so he will not be supervising the job.
Builder A sends his crew out to the job and the lots are not marked. They ask someone working at the location which lot to build on and are pointed to an open area and crew begin building.
Unfortunately, they are actually on Lot 2.
The owner of Lot 2 rides by and sees them building, and realizes their mistake, and decides to see if he can take advantage of the situation. The house is completed in 3 weeks and the mistake is discovered.
Builder A does not have a contract with the owner of Lot 2, had no agreement, and there was no behavior on Lot Owner 2's part that implied an agreement.
This is a textbook (overly simplified) claim for unjust enrichment because you cannot prove a contract exists by other means, however, equity (fairness) demands that payment take place even though there was no specific agreement between the parties. You can also use unjust enrichment whenever you fail to prove any technical elements of an expressed or implied contract.
Difficulties with Verbal Agreements
The example above may sound far- fetched, but the fact is many unjust enrichment claims arise when people actually have a verbal agreement and then one of the party later lies about the existence of that agreement.
It is especially prevalent in the construction industry. Contractors, developers, builders, homeowners, they all can lie, and when you accept verbal offers and do work, you take the risk that someone is going to call you liar and attack your contract every time. Then, if you cannot prove by a preponderance of the evidence that there was a verbal offer and acceptance you may well have to rely on unjust enrichment to save you.
How Do You Claim Unjust Enrichment?
In order to prevail in a claim for unjust enrichment, you must prove the following:
- That the plaintiff did render a service.
- That this service had some value to the defendant, and
- That at the time of the service, the plaintiff expected payment. The law presumes that a person expects to be paid whenever he renders a service unless he does so as a gift, or in repayment or satisfaction of a debt or obligation. All of the circumstances existing at the time, including the relationship between the plaintiff and defendant, and their present or previous dealings, should be considered. Furthermore, the plaintiff's expectation to be paid must arise at the time the service was rendered, and not thereafter; and,
- The plaintiff's expectation of payment was reasonable. A person's expectation of payment is reasonable when, under all the facts and circumstances existing at the time, a person of ordinary prudence and intelligence would have expected to be paid; and,
- The defendant received the services with the knowledge or having reason to know that the plaintiff expected to be paid. A person "knows" of a thing when he has actual knowledge of it. A person "has reason to know" of a thing when the circumstances existing at the time are such that a reasonable person at the time would have acquired knowledge of it; and,
- The defendant voluntarily accepted the services that the defendant kept or allowed the services after having a realistic opportunity to refuse them or to not permit the plaintiff to perform them.
These elements can be stated in various different ways and they essentially mean the following in laymen's terms; if you provide a service with an expectation to be paid, and the other guy knew about it and accepted it, and it had some value, then you have a claim for unjust enrichment.
Protect Yourself from Underhanded Business Tactics
In conclusion, please do not rely on unjust enrichment as a basis for failing to insist on quality written contracts. Written contracts tailored for a particular purpose are incredibly valuable and must be used by serious businesses that wish to avoid controversy, litigation, and losing money. Over time they will pay for themselves many times over.
Contracts make disputes less likely, and well drafted contracts can allow you to recover attorney fees (where without it you could not) and pre-judgment interest and will protect you in countless other ways.
Additionally, if you rely on unjust enrichment and succeed you will be compensated based on the “value” of the improvement and not necessarily what you charge.
Contact a Raleigh Lawyer for Help with Your Contracts
You can save yourself a whole of trouble by hiring a lawyer and the team at The Doyle Law Group, P.A. can help. Just fill out the contact form on our website or call our office to get started.
NOTE: This article does not constitute legal advice, and is offered for informational purposes only.