RESTITUTION&

THE LAW OF UNJUST ENRICHMENT

Restitutionary awards Total failure of consideration for refund of $ purely must return goods,

subject to ability to return goods Quantum Meruit: + contractual ( accounted for in contract) + restitution Quantum Valebat

What is it? Payment for work completed under the terms of a breached contract (such an award

may be made by the court if the contract is partially fulfilled) The recovery of money or property from a person who has been unjustly enriched by

it. A legal procedure whereby you can seek reimbursement from another who benefited

from your action or property without legal justification Three conditions which must be met before you can get a court to force

reimbursement based on "Unjust enrichment": o An actual enrichment or benefit to the defendant, o A corresponding deprivation to the plaintiff, o And the absence of a legal reason for the defendant's enrichment

Restitutionary Awards1. Purpose – to reverse any unjust enrichment gained by the defendant at the expense of

the plaintiff2. Applies – when there is no contract at all between parties OR when the contract has

been vitiated/terminatedSee Infocommunications Development Authority of Singapore v Singapore Telecommunications Ltd (No 2) (2002) (see BPL)

3. QM on a restitutionary basisa. Not under contract lawb. The law of unjust enrichment (also known as the law of quasi-contract)c. A claim may be made for a reasonable sum in relation to the partial provision

of works and services IF the party who was unjustly enriched had the option of freely accepting or rejecting the benefit of the partial performance.

d. If, for example, person A pays money to person B under a contract which is later ruled to be unlawful, A has no action in breach of contract to recover the money, because there is no contract. He probably has no action in tort, because it may be the case that no fault can be ascribed to B. However, if B has been unjustly enriched by the receipt of the money, then A will have an action in restitution.

Unjust enrichment – Is the plaintiff blameless or at fault?Plaintiff Blameless:

1. Total failure of considerationa. See Fibrosa Spolka Akcyina v Fairbarn Lawson Combe Barbour

Ltd (1943)b. Definition of ‘consideration’ - ‘when one is considering the law of

failure of consideration… (in relation to the law of quasi-contract), it is the PERFORMANCE of the promise (and not just the promise itself)”

c. Total failure of basis d. Where the basis or the ‘consideration’ here is the actual

performance and completion of any executory consideration… BPL 16.57e. applied by the courts where there is a breach of contract to the

extent that the defendant has completely failed to provide the performance of his contractual obligations

f. overlap occurs when there is a breach of contract as the plaintiff can decide to sue by

i. total failure of consideration (seeking a refund of money paid)

ii. damages for breach of contract (seeking compensation for all expenses incurred in reliance of the performance of the contract)

iii. the difference is that in restitution there is no mitigation, remoteness issues and the plaintiff is only allowed to recover the sums paid to the party-in-breach

iv. courts may award refunds of advance payments for total failure of consideration, damages for wasted expenditure and/or lost profits

v. See Millar’s Machinery Co Ltd v David Way & Son vi. Treitel suggests that ‘ the claimant cannot combine the

various types of claims so as to recover more than once for the same loss’vii. Requires that the plaintiff got no part of the promised

benefitviii. See Rowland v Divall (1923) and Fibrosa (1943)ix. ‘the test is whether or not the party claiming total failure of

consideration has in fact received any part of the benefit bargained for under the contract or purported contracts’ Rover International Ltd v Cannon Film Sales Ltd (1989)

2. Benefits in Kind – Quantum Meruit (Services) & Quantum Valebant (Goods)

♦ Quantum Meruit1. A claim upon a 'quantum meruit' is a claim in respect of unremunerated services. If one party breaks a contract that involves services, the other party may, instead of claiming damages, sue upon a quantum meruit to recover the amount earned by his labours: Planché v. Colburn 1831

2. Such a claim will not favour the one who has broken the contract:If a person agrees to do something for a lump sum, he can normally only sue for payment if the work is substantially completed. He cannot do half the work, then renounce the contract and claim a quantum merit. The courts will not imply a contract in favour of one who has made an express agreement and failed to perform it:Cutter v. Powell 1795

This seems rather harsh; so in Hoenig v. Isaacs 1952 a quantum meruit was granted on behalf of a party who had failed to perform, subject to deduction of costs accrued to the other party. Furthermore, the Law Reform (Frustrated Contracts) Act 1943 has replaced the rule in Cutter v. Powell 1795.

3. Quantum meruit may also be used in order to recover a reasonable remuneration for the performance of a contract when no specific remuneration has been agreed upon. This ('quantum valebat') also applies when no price for goods is deter- minded.

♦ Quantum Valebat1. As much as it was worth. When goods are sold, without specifying any price, the law implies a promise from the buyer to the seller that he will pay him for them as much as they were worth.

The plaintiff may, in such case, suggest in this declaration that the defendant promised to pay him as much as the said goods were worth, and then claim that they were worth so much, which the defendant has refused to pay.

2. Where plaintiff has completed some obligationsi. An award for QM seems to be unobjectionable so long as

such an award wold be less than any possible award fr damages for breach of contract.

ii. Based on Boomer v Muir (1933) and Lodder v Slowey (1904), the recovery based on QM need not be related to the contractually agreed price for the plaintiff’s work.

iii. Should not be assumed that every case of partial performance of an obligation amounts to a benefit to a defendant since ‘benefit’ is determined subjectively.

iv. A plaintiff’s partial performance can be subjectively devalued.

v. Hard to prove this if the benefit is incontrovertible (benefit takes the form of money or savings)

vi. Is the benefit to the defendant incontrovertible or derived from the ‘bargained-for’ presumption?

3. Where plaintiff has completed all obligations

i. Plaintiff cab sue the defendant to recover the price in an action for a fixed sum

ii. Damages for breach of contract usually unavaible for an obligation merely to pay money.

iii. QM only used when the amount recoverable would be greater than the contractually agreed price as in Boomer.

4. Resitutionary Damages for Breach of Contract

a. General position: Breach of contract simpliciteri. Traditional view – restitution is not awarded for breach of

contract

ii. See Tito v Waddell (No 2) (1977) – ‘ the question is not one of making the defendant disgorge what he has saved by committing the wrong , but one of compensating the plaintiff”

iii. See Surrey County Council v Bredero Homes Ltd (1993) –no damages based on the excess profit earned by the defendants as a result of their breach of contract is awarded.

b. More than just breach of contract i. Wrotham Park Estate Co Ltd v Parkside Homes Ltd (1974)

– it was held that the defendants could be made to disgorge the profits it had made

ii. Highly restrictive approach to awards of damges on a resitutionary basis may be open to change as observed by the case of Attorney General v Blake (2001) involving the obligations of a fiduciary and special interests

Plaintiff at fault:1. Benefits in Money: Total Failure of consideration?

a. No restirctionn on an action for unjust enrichment where the benefit provided is in the form of money.b. See Dies v British and International Mining and Finance Corporation, Ltd (1935) and Rover (1989)c. Both cases support the view that it is irrelevant whether the plaintiff himself is a contract-breaker.

2. Benefits in Kind: QM?

a. See Sumpter v Hedges (1898) and Bolton v Mahadeva (1972)b. Both judgments were decided against the plaintiff seeking QM and were based on the fact that the obligations on the part of the plaintiff were ‘entire’.c. In Hain Steamship Company Ltd v Tate & Lyle Ltd (1936), Lord Wright suggested otherwise.d. In Singapore, as observed by the case Lee Siong Kee v Beng Tiong Trading, Import and Export (1988) Pte Ltd (200), hints that QM is unavailable to a contract-breaker. However this issue remains unclear.

Where the contract is Discharged for other reasons than breachSo long as the requirements for a restitutionary claim are fulfilled, refunds and quantum meruit are available regardless of the cause of the failure of contract.Note exceptions:

1. Contracts discharged by agreement

a. In Lee Siong Kee (2000) – QM unavailable

b. Position in Singapore unclear.c. Rule of interpretation or Rule of law?

2. Contracts discharged by frustration

a. Frustrated Contracts Act (1943) overruleb. Except for categories of contracts which are excluded – section 3(5)

3. Contracts Vitiated by Illegality

a. ‘the loss falls where it lies’b. Restitutionary damages unavailable

Again: Plaintiff can establish liability for restitution by proving,1. the defendant was enriched 2. at the expense of the plaintiff3. in circumstances which are unjust (there is no justification or reason for the defendant

to keep that enrichment)4. there is no defence available to the defendant to resist the justice of disgorgement of

his unjust enrichment in favour of the plaintiffRestrictions on recovery for unjust enrichment:De Beers (2002)Defence of the change of position recognized in Lipkin Gorman (a firm) v Karpnale Ltd (1991) and locally, Seagate Technology Pte Ltd v Goh Han Kim (1995) and most recently IDA v Singtel (2002).A defendant recipient of a benefit from the plaintiff will be able to resist or minimize restitution if:1.the payee has changed his position2. the change is bona fide3. it would be inequitable to require him to make restitution or to make restitution in full4. there is a causal link between the receipt of the benefit and the recipient’s change of positionTake note of earnest money and forfeiture clauses.