When is there unjust enrichment?

Chapters of the article

• The concept of unjust enrichment
• What is the procedure in the case of unjust enrichment?
• Action for the recovery of unjust enrichment
• When is there no obligation to return the enrichment?

The concept of unjust enrichment

TheCivil Code regulates unjust enrichment in the context of “obligations for other legal reasons”. It is therefore an obligation between two parties which is not based on a contract. One party to the relationship has the right to demand certain performance from the other and the other party is obliged to provide it. Both should then provide the cooperation to fulfil the obligation.

“Nor is ‘other legal cause’ the damage suffered, which gives rise to an obligation to compensate for damage and not to the delivery of unjust enrichment. Moreover, unjust enrichment always presupposes that one party has suffered to the detriment of the other, which is not the case for damages.

Imagine you’ve had lunch in a restaurant. The waiter was very prompt, the ambience was pleasant and you enjoyed your lunch very much. You want to add the obligatory ten percent to the price of lunch as a tip. However, you only have a legal reason to pay the amount written on the bill. Is there not unjust enrichment on the part of the restaurant?

The Civil Code also characterizes unjust enrichment as payment without “just cause.” So, although there is no legal reason, the payment of the tip can be considered a just cause and is not unjust enrichment.

However, a legal reason does appear in the definition of unjust enrichment, which outlines typical examples of when unjust enrichment may occur. This may be the acquisition of a pecuniary advantage:

• performance without legal justification – or so-called non-debt performance. However, such situations must be due to the mistake of the person who has been impoverished. For example, he or she performs in error for another person, or performs more than he or she should but does not realise it. This is the typical way in which unjust enrichment occurs.
• performance on the basis of a legal reason that has fallen away – unlike the previous case, here the legal reason (for example, a contract) existed but the contract was cancelled, for example, and the performance was still made.
• unlawful use of someone else’s value – these are examples where I have obtained a thing illegally (through criminal activity) which will bring me further benefit. For example, I use a car that I have stolen.
• by performing for someone what he or she was rightfully obliged to perform himself or herself – an example is a situation where Mr. Ulč has to pay a certain debt, but Mr. Diviš pays it for him or her, although he or she has no such obligation (for example, he or she is not a guarantor). In such a case, although there is no direct enrichment of Mr Ulč by way of an increase in his assets, there is a reduction in his assets that would not have been caused by the performance under the law. We therefore speak of enrichment here too.

The conditions which must be met for there to be unjust enrichment:

• thebenefit of the wrongful acquirer and his enrichment,
• harm to the other party,
• acausal link between the acquisition of the enrichment by one party and the detriment of the other party,
• the enrichment may be considered unjustifiable.

What is the procedure in the case of unjust enrichment?

The basic premise of such a situation is that the person who has enriched himself at the expense of the person who has been impoverished without just cause must repay him what he has enriched himself.
If the unjust enrichment is to be given in money and if the debtor fails to fulfil his payment obligation on time, the creditor is also entitled to claim interest for late payment.

But what are we to do if we are unable to return the object of unjust enrichment? For example, because we no longer have it? In such a case, we will pay the depleted party a monetary compensation for the item, equal to the normal price.

If the recipient is an honest recipient, who at the time believed that he or she was not enriched, but the item rightfully belongs to him or her, and he or she passes on the item (donates it or sells it), he or she can reimburse the impoverished person what he or she earned from the sale of the item. If he has kept the item but has in the meantime repaired or improved it in some way, he is, on the other hand, entitled to claim compensation for the necessary costs incurred.

Example: in addition to his purchase, Mr Vrba received a card from the e-shop announcing that he was the lucky winner and had won a hair curling iron worth CZK 900. However, Mr Vrba has neither long hair nor a wife to please with the gift, so he sells the curling iron for 500 crowns. Later, when the shop calls him and tells him that they made a mistake with the prize and someone else won, Mr Vrba can either return the original value of the curling iron, i.e. CZK 900, or what he got for selling it, i.e. CZK 500. In such a case, however, it would be most worthwhile for him to have a wife, because if he gave her the curling iron, he would not have to return anything.

Action for unjust enrichment

If the enriched person does not want to return the unjustified enrichment voluntarily, he should take legal action for the recovery of the unjustified enrichment and bring it to court.

When is there no obligation to repay the enrichment?

The law also refers to situations where, for example, enrichment has occurred but there is a circumstance which does not give rise to an obligation to repay the enrichment.

Performance of the debt

The first such situation is where there has been a performance of a debt. For example, if the debtor has paid the creditor early and the creditor has accepted the payment, the debtor cannot recover it on the basis that they will not pay until later as they agreed. The same principle applies to the performance of a time-barred debt. Although the right of the creditor is weakened by the statute of limitations, the right still exists. If, for example, the debtor was not aware of the limitation and fulfilled the debt, there is no unjust enrichment.

Deliberate performance of a debt

If a situation has arisen where one person has given a performance to another person knowing that he is under no obligation or duty to do so, this is known in law as knowing performance of a debt which does not have to be repaid. The emphasis must be on the fact that the performer is indeed fully aware of the situation. In practice, such a situation will be very similar to a gift.

Unauthorised use of someone else’s property

As we have stated above, in general, the unlawful use of another’s property, including immovable property, can also be regarded as unjust enrichment. In such a case, the enrichment, i.e. its financial expression, would be the amount, in this case the rent, normally spent in a given place and time for the use of a similar leased object and which the lessee would normally be obliged to pay under the lease.

An interesting and closely watched situation in this context was addressed by the Supreme Court, which reviewed one of the cases of squatting (i.e. unauthorised use of an abandoned property). Rather surprisingly, in its decision it concluded that the immovable property could not have been rented at all during the relevant period, the right of use was therefore of zero value, and therefore it could not even be concluded that the subject who used it was enriched. In his view, there was therefore no unjust enrichment in the present case.