When parties transact without a formal written contract, the risk of disputes regarding the terms of any alleged contract increases. Disputes may particularly arise where one party receives the benefits of the alleged contract while the other party bears the burdens. Enter the doctrine of unjust enrichment. The doctrine may apply in such a situation to put the parties back to where they would have been if they had followed the terms of the alleged contract.
Unjust enrichment is based on the theory that one party should not benefit at the other’s expense. When parties do not have a formal written contract and only one party received the benefits of an alleged contract, unjust enrichment may provide an equitable remedy. An equitable remedy is not just money damages but is a request to a court to force a party to perform under the alleged contract. In Texas, it may also be possible to invoke unjust enrichment where a contract exists, but the contract is unenforceable or void.
Unjust enrichment is a remedy, not a cause of action or basis for a lawsuit by itself. That means that if a party claiming unjust enrichment must base their lawsuit on a cause of action such as breach of contract and allege that the other party was unjustly enriched.
To be successful in an unjust enrichment claim, the plaintiff must prove the following three elements:
- A party is unjustly enriched;
- The receipt of the benefit by one party came at another party’s detriment;
- There is no contract between the parties either due to unenforceability, impossibility, mistake, voidness, or absence of a formal agreement.
A Simple Example of Unjust Enrichment
Consider the following as an example of unjust enrichment in Texas. A homeowner hires a contractor to remodel the homeowner’s kitchen. The weekend before the contractor is scheduled to start, she drops off all of the materials she will use to perform the remodel. Unfortunately, the day before the contractor is supposed to start work on the homeowner’s kitchen, she is in a serious accident and she is in the hospital for several weeks. In the meantime, the homeowner hires a second contractor. The second contractor uses the materials purchased by the first contractor to finish the kitchen remodel. The homeowner refuses to allow the first contractor to finish the kitchen or to repay the first contractor for the materials.
In this example, the first contractor could sue the homeowner for breach of contract and claim unjust enrichment regarding the homeowner’s refusal to pay for the materials purchased by the first contractor. The homeowner is unjustly enriched because he only had to pay the second contractor for the cost of labor and not the cost of materials. The homeowner’s benefit came at the first contractor’s detriment because the first contractor paid for the materials. Finally, there was no formal written contract between the homeowner and the first contractor: they only had an agreement. Therefore, the first contractor may be able to get a reasonable amount back for the materials that she lost.