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Recovering When You Don’t Have a Contract

January 28, 2014

Posted in Business Litigation, Business Start Ups, Employment Law

Case Management ConferenceIn most states in the if you were wronged by a business deal and cannot recover because you did not have a valid contract, unjust enrichment, or quantum meriut might be used to allow you to recover restitution damages from the party in the wrong.

However, California law is unclear whether unjust enrichment is allowed as a separate law suit (cause of action). In Falk v. General Motors Corp., 496 F.Supp.2d 1088, 1093 (N.D.Cal.2007) a federal court dismissed the unjust enrichment claim of a plaintiff who sued under violations of the California Consumer Legal Remedies Act, Unfair Competition Law, Fraud, and Unjust Enrichment because unjust enrichment would not be available if other remedies were available. Some courts have gone so far as to never allow unjust enrichment to be a claim on its own, regardless of whether other claims are available Melchior v. New Line Productions, Inc., 106 Cal.App.4th 779, 793 (2003).

Quasi Contracts

The restrictions placed upon unjust enrichment means that there will be few situations where you would be able to successfully make a claim for damages under a theory of unjust enrichment in California. One exception is when you have a quasi-contract, which means a contract implied in law. This usually requires a party to show that the plaintiff provided a product or service to the defendant, the defendant benefited from the product or service, and that both parties should have expected that the product or service would be paid for.

Getting to Restitution without Unjust Enrichment

The weakness of the court’s ability to provide a remedy of unjust enrichment is not necessarily a bad thing. A number of other statutory provisions will provide relief in situations where a business deal goes bad. For example, California’s Unfair Competition law (UCL) is an extremely broad law that allows parties to recover from a wide range of wrongdoing. In these situations the recovery is limited to unjust enrichment damages, also known as restitution. However, courts are much more comfortable applying UCL as compared to unjust enrichment. A business practice violates the UCL if it violates public policy or is immoral, unethical, oppressive, or unscrupulous to consumers.

Restitution Damages

The damages under unjust enrichment are often much less than the damages that are available due to a breach of contract. Restitution damages are based on the amount that you provided to the other party, rather than the amount that you should have received from the benefit of the bargain. Restitution is sometimes referred to as disgorgement.

Defenses to Unjust Enrichment and Restitution

Because unjust enrichment is an equitable doctrine, it can be countered by equitable defenses. The doctrine of unclean hands will prevent a party from recovering restitution for unjust enrichment if the party who has done some wrong in connection with the dealings. Similarly, Laches will prevent a party from recovering if they engaged in an unreasonable delay before pursing their claims.

Getting More than Restitution

Usually a party without a contract may be able to allege fraudulent or negligent misrepresentations where the misrepresentations of a defendant cause a plaintiff to suffer harm. This allows the party the opportunity to recover additional damages.

Business Law Expertise

To learn more about restitution and unjust enrichment contact the Law Offices of Tony T. Liu. Call (714) 415-2007 to schedule a consultation today.