What is Unjust Enrichment?

**Unjust enrichment** is a legal principle that holds that no person should be allowed to profit or enrich themselves unfairly at the expense of another person. When someone receives a benefit — whether in the form of money, goods, services, or the use of property — without any valid legal basis (such as a contract, gift, or statutory entitlement), and it would be unjust for them to retain that benefit, the law requires them to **make restitution** — to return the benefit or compensate the person who provided it.

In simple terms, unjust enrichment means: if you got something at someone else's expense and there is no legal reason for you to keep it, you must give it back or pay for it. The law does not allow you to benefit from another person's loss when there is no contract or other legal basis justifying the benefit.

Legal Definition and Framework

Quasi-Contracts — Sections 68-72 of the Indian Contract Act, 1872

Indian law codifies the principle of unjust enrichment through the provisions on **quasi-contracts** found in **Chapter V (Sections 68 to 72) of the Indian Contract Act, 1872**, titled "Of Certain Relations Resembling Those Created by Contract." These are not contracts in the true sense (there is no agreement between the parties) but are **obligations imposed by law** to prevent unjust enrichment.

#### Section 68 — Claim for Necessaries Supplied to an Incompetent Person

If a person supplies necessaries suited to the condition in life of a person who is **incompetent to contract** (such as a minor or a person of unsound mind), or to anyone whom such incompetent person is bound to support, the supplier can claim reimbursement from the property of the incompetent person.

**Example:** A supplies groceries and clothing to B, who is a minor. A is entitled to be reimbursed from B's property, even though B cannot enter into a valid contract.

#### Section 69 — Payment by an Interested Person

A person who is interested in the payment of money which another is bound by law to pay, and who therefore pays it, is entitled to be **reimbursed** by the other.

**Example:** B holds land on lease from A. The revenue due to the government for the land is payable by A, but A fails to pay. B pays the revenue to prevent the land from being sold for non-payment. B is entitled to reimbursement from A.

#### Section 70 — Obligation to Pay for Non-Gratuitous Acts

When a person lawfully does anything for another person, or delivers anything to them, **not intending to do so gratuitously**, and the other person enjoys the benefit of it, the latter is bound to make compensation to the former, or to restore the thing delivered.

This is the **broadest** and most frequently invoked provision on unjust enrichment. The requirements are:

1. The act must have been done **lawfully** (not by trespass or wrongful means)

2. The act must have been done **for another person** (not for oneself)

3. The act must have been done **not gratuitously** (the doer expected compensation)

4. The other person must have **enjoyed the benefit**

**Example:** A, a contractor, builds a wall on B's land at B's request but without a formal written contract. B enjoys the wall. B is bound to compensate A under Section 70.

The Supreme Court in **State of West Bengal v. B.K. Mondal and Sons (1962)** extensively discussed Section 70 and held that when a person receives and enjoys the benefit of work done or goods supplied by another without a formal contract, the law implies an obligation to pay for the benefit received.

#### Section 71 — Responsibility of Finder of Goods

A person who finds goods belonging to another and takes them into custody has the same responsibility as a **bailee** — they must take reasonable care of the goods and return them to the owner. If they use or sell the goods, they must account to the owner.

#### Section 72 — Money Paid Under Mistake or Coercion

A person to whom money has been paid, or anything delivered, by **mistake or under coercion**, must repay or return it.

**Example:** A pays Rs. 50,000 to B under the mistaken belief that A owes that amount. A later discovers the debt had already been repaid. B must return the Rs. 50,000.

The Supreme Court in **Sales Tax Officer v. Kanhaiya Lal (1959)** held that Section 72 applies to both mistakes of fact and mistakes of law — if a person pays money under a mistake (whether of fact or law), they are entitled to recover it.

The General Principle — Beyond the Statutory Provisions

While Sections 68-72 are the codified provisions, Indian courts have also applied the **general equitable principle** of unjust enrichment beyond these specific sections. The Supreme Court has recognized unjust enrichment as a broader legal principle that underlies not just quasi-contracts but also restitution, constructive trusts, and equitable remedies.

In **Mahabir Kishore v. State of Madhya Pradesh (1990)**, the Supreme Court observed:

> "The doctrine of unjust enrichment is that no person can be allowed to enrich himself unjustly at the expense of another."

In **Municipal Corporation of Delhi v. Gurnam Kaur (1989)**, the Court held that a person who has been enriched at the expense of another is required to make restitution to the other.

Section 65 of the Indian Contract Act — Restitution Upon Void Agreements

While not part of the quasi-contract chapter, **Section 65** is closely related. It provides that when an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract must **restore it** or make compensation for it, to the person from whom they received it.

This provision prevents unjust enrichment arising from void contracts — even though the contract is unenforceable, the benefits received must be returned.

When Does This Term Matter?

Government Contracts and Public Works

Unjust enrichment claims are extremely common in government contracts. When a contractor performs work for the government without a formal contract (or under a contract that is later found to be invalid), the government cannot retain the benefit of the completed work without paying for it. The Supreme Court in **B.K. Mondal** and subsequent cases has consistently held that the government must compensate contractors for work done and benefits received under Section 70.

Mistaken Payments

When a person makes a payment to the wrong person, pays the same bill twice, or pays an amount that is not due (under a mistake of fact or law), they can recover the money under Section 72. This frequently arises in banking transactions, tax overpayments, and insurance claim settlements.

Tax Refunds

When a tax is collected by the government and is later declared unconstitutional or illegal by a court, the taxpayer is entitled to a refund on the principle of unjust enrichment. However, the Supreme Court has also recognized the **defence of passing on** — if the taxpayer has passed on the tax burden to consumers (by including it in the price), the taxpayer may not be entitled to a refund because they have not been personally impoverished by the payment.

Construction and Real Estate Disputes

When a builder constructs on another's land (whether by agreement or by mistake), the landowner cannot unjustly retain the construction without compensating the builder. Similarly, if a buyer makes payments toward a property purchase and the sale falls through, the seller must return the payments (less any legitimate damages).

Services Rendered Without a Contract

When a professional (lawyer, doctor, consultant, contractor) provides services without a formal written contract, and the recipient benefits from those services, the recipient is obligated to pay reasonable compensation. This is one of the most common applications of Section 70.

Insurance and Banking

Unjust enrichment principles apply when insurance companies receive premiums for policies that are void or unenforceable, when banks charge fees for services not rendered, or when a bank credits money to the wrong account.

Practical Significance

- **No contract required:** The defining feature of unjust enrichment is that it creates an obligation **without a contract**. The law imposes the obligation based on the principle of fairness — preventing one party from being enriched at the other's expense.

- **Burden of proof:** The claimant must prove: (a) the defendant was enriched (received a benefit), (b) the enrichment was at the claimant's expense, and (c) retaining the enrichment would be unjust. The defendant can raise defences such as the benefit was a gift, the claimant acted as a volunteer, or the benefit was conferred by a valid contract.

- **Measure of recovery:** The amount recoverable in an unjust enrichment claim is the **value of the benefit received** by the defendant, not the loss suffered by the claimant. This is called **restitutionary measure** as opposed to the compensatory measure used in breach of contract claims.

- **Limitation period:** Claims under Sections 68-72 of the Indian Contract Act are subject to the limitation period prescribed in the **Limitation Act, 1963**. Under Article 113 (residuary article), the limitation period is **three years** from the date the right to sue accrues.

- **Government liability:** The government is not immune from unjust enrichment claims. When the State benefits from a person's work, services, or property without legal justification, the principle of unjust enrichment requires compensation. This is a critical safeguard against arbitrary governmental action.

- **International recognition:** The principle of unjust enrichment is universally recognized across common law and civil law jurisdictions. The English concept of **restitution**, the Roman law concept of **condictio indebiti**, and the Indian quasi-contract provisions all serve the same purpose — preventing unjust benefit at another's expense.

Frequently Asked Questions

What is the difference between unjust enrichment and breach of contract?

A **breach of contract** occurs when a party fails to perform their obligations under a valid contract — the remedy is damages measured by the loss suffered by the innocent party. **Unjust enrichment** arises **without a contract** — it applies when someone receives a benefit at another's expense without any contractual basis, and the remedy is restitution (returning the benefit or its value). A person can claim under unjust enrichment even when there is no contract at all, or when the contract is void or unenforceable.

Can the government be held liable for unjust enrichment?

Yes. The Supreme Court has consistently held that the government is liable under Section 70 of the Indian Contract Act when it receives and retains the benefit of work done or goods supplied, even without a formal contract. In **New Delhi Municipal Corporation v. Kalu Ram (1976)** and **B.K. Mondal (1962)**, the Court held that the State cannot deny liability for benefits received merely because contractual formalities were not completed.

What is the defence of "passing on" in unjust enrichment cases?

The **passing on** defence applies mainly in tax refund cases. When a person pays a tax that is later declared unconstitutional, they claim a refund on the ground of unjust enrichment by the government. However, if the taxpayer has **passed on** the tax burden to their customers (by adding it to the price of goods or services), the government may argue that the taxpayer has not been impoverished and therefore is not entitled to a refund. The Supreme Court in **Mafatlal Industries Ltd. v. Union of India (1997)** discussed this defence extensively.

Does unjust enrichment apply to services rendered without being asked?

Generally, if a person provides services as a **volunteer** — without being asked and without any expectation of payment — the recipient is not bound to pay. However, under **Section 70** of the Indian Contract Act, if the services were provided **lawfully**, **not gratuitously** (the provider expected compensation), and the recipient **enjoyed the benefit**, the recipient must compensate the provider. The key distinction is between a volunteer (who acts gratuitously) and a person who provides services with a reasonable expectation of being compensated.

Unjust Enrichment