Doctrine of Unjust Enrichment and Indian Contract Act
Doctrine of Unjust Enrichment and Indian Contract Act
1. What is Doctrine of Unjust Enrichment?
The Doctrine of Unjust Enrichment is a fundamental principle in law which states:
“No person should be allowed to enrich themselves unjustly at the expense of another.”
It is an equitable principle designed to prevent one party from unfairly benefiting at another's cost when there is no legal basis for such enrichment.
Key Elements of Unjust Enrichment:
One party is enriched.
The enrichment is at the expense of another party.
The enrichment is unjust, meaning there is no legal justification for it.
The enriched party must make restitution (return the benefit or compensate).
2. Doctrine of Unjust Enrichment in Indian Law
In India, the doctrine is not codified under a separate statute, but it is well recognized and applied through the Indian Contract Act, 1872, and the principles of equity and restitution.
3. Unjust Enrichment under the Indian Contract Act, 1872
The key provisions relating to unjust enrichment appear under Section 70 of the Indian Contract Act, 1872:
Section 70 — “Obligation of person enjoying benefit of non-gratuitous act”
It states that if a person enjoys a benefit without a contract, but with the consent or knowledge of the person who conferred the benefit, they are bound to compensate for it.
In other words, if you receive a benefit at someone else’s expense without legal justification, you must pay for it.
Essential Features under Section 70:
| Feature | Explanation |
|---|---|
| Non-gratuitous Act | The benefit must have been conferred with the expectation of payment or compensation. |
| Consent or Knowledge | The person enriched should have accepted or known about the benefit. |
| No Contract | There is no formal contract governing the transaction. |
| Obligation to Compensate | The enriched party must make restitution or compensation. |
4. Relation between Unjust Enrichment and Contract Law
Unjust enrichment is a remedy in the absence of a contract or when the contract is void or unenforceable.
It prevents unjust results where one party benefits unfairly due to mistake, fraud, coercion, or other factors.
The Indian Contract Act recognizes this principle to impose restitutionary obligations.
5. Important Case Laws
P. D. Shastri v. Indian Airlines (1996)
The Supreme Court held that a party who has received money or benefit under a mistake of fact or law is liable to repay it.
The Court reiterated the principle of unjust enrichment to prevent unfair gain.
Union of India v. Raman Iron Foundry (1974)
The Supreme Court recognized Section 70 as codification of the principle of unjust enrichment.
The Court held that when one party receives a benefit without legal justification, they are bound to make restitution.
Commissioner of Income Tax v. B.C. Srinivasa Setty (1981)
This case dealt with the recovery of excess tax paid by mistake.
The Supreme Court held that the taxpayer is entitled to recover the amount, applying the doctrine of unjust enrichment.
6. Examples of Unjust Enrichment in Contract Law
Payment made by mistake: If A pays money to B by mistake, B must return it.
Services rendered without contract: If A provides services to B with B’s knowledge and benefit, B must compensate A even if no contract exists.
Mistaken transfer of goods or property: The recipient cannot keep the benefit unjustly.
7. Limitations and Exceptions
If the enrichment is gratuitous (done out of kindness without expectation), the doctrine does not apply.
If there is a valid contract covering the transaction, unjust enrichment principles give way to contractual obligations.
Enrichment must be at the expense of the claimant.
8. Summary
| Aspect | Explanation |
|---|---|
| Doctrine | No one shall be unjustly enriched at the expense of another |
| Codification in India | Recognized under Section 70 of the Indian Contract Act, 1872 |
| Key Requirement | Benefit received without contract but with consent/knowledge |
| Legal Effect | Obligation to make restitution or compensation |
| Relevant Case Laws | P.D. Shastri v. Indian Airlines, Union of India v. Raman Iron Foundry, CIT v. Srinivasa Setty |
| Role in Contract Law | Applies when no valid contract exists or contract is void/unenforceable |
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