In today's article, we give you a basic overview of the institution of unjust enrichment. We will briefly try to answer the questions of what is unjust enrichment, what is not unjust enrichment, what causes unjust enrichment and what options the subjects of an obligation relationship based on unjust enrichment have.
What is unjust enrichment?
Unjustified enrichment is, within the meaning of the provisions of the Civil Code, a pecuniary advantage obtained by performance without legal reason, or by performance from an invalid legal act, or by performance from a legal reason which has fallen into disuse, or also a pecuniary advantage obtained from dishonest sources. It should be emphasised that the person who has been unjustly enriched has also been unjustly enriched by the performance of what he ought in law to have performed himself.
The decision of the Supreme Court of the Czech Republic of 18.5.1999, Case No. 33Cdo 973/1998 states that "For the occurrence of unjust enrichment under Section 451(1) of the Civil Code, it is decisive that a person has been enriched to the detriment of another person and that there was no legally recognised reason for this enrichment, i.e. it was unjust enrichment and it is irrelevant whether the fact on the basis of which the enrichment occurred was caused by the enriched person.
Unjust enrichment also plays a significant role in the extinction of contractual obligations. Where a contract has been terminated by reason of its nullity or cancellation, each of the parties to the contract is obliged to reimburse the other for what it has received under the contract. Should the repayment of the benefits received between the parties to the contract not take place, these 'unreimbursed' benefits shall be considered as unjust enrichment.
What is not unjust enrichment?
The following shall not be considered unjust enrichment:
- from a time-barred debt or a debt void only for lack of form,
- from a game or bet concluded between natural persons, the return of money lent to the game or bet.
In relation to the benefits in this point, they may not be sought in court. These are 'obligations in kind', where there is no or no enforceability, or where they have been extinguished as a result of a legal event, even though the creditor has a right or claim against the debtor.
Recovery of unjust enrichment
Pursuant to Section 489 of the Civil Code, obligations arise from legal acts, in particular from contracts, as well as from damage caused, from unjust enrichment or from other facts specified in the law. Both in professional literature and in court practice, unjust enrichment is understood as an obligation-law relationship, the content of which is the obligation of the one who has been enriched to deliver what he has been enriched by, which corresponds to the right of the one at whose expense the enrichment has been made to demand the delivery of the object of unjust enrichment (Judgment of the Regional Court of Žilina Case No. 13 Cob/320/2012 of 17.04.2013). If it is not possible to establish at whose expense the object of unjust enrichment was obtained, it must be handed over to the state.
At the same time, everything acquired by unjust enrichment must be surrendered. If this is not well possible, in particular because the enrichment consisted in performances (e.g. the provision of a service, etc.), monetary compensation must be provided.
Unjust enrichment and good faith
The Civil Code uses the term good faith in several places, but its definition is absent in this legislation. It is therefore necessary to look for a definition of good faith in court decisions.
Generally, good faith can be defined as a state of mind in which a person acts in good faith, taking into account all the circumstances, with the knowledge that he or she is entitled to do so.
Good faith is relevant not only in terms of the length of the limitation period for the right to the recovery of unjust enrichment, but also where the subject matter of the unjust enrichment is a thing which confers a benefit. Where a person who has not acted in good faith has been unjustly enriched, he must return not only the object of the unjust enrichment itself but also its benefits.
Limitation of the right to the recovery of unjust enrichment
The limitation of the right to the delivery of unjust enrichment is generally regulated by Section 107 of the Civil Code. Accordingly, this right is time-barred two years from the date on which the beneficiary becomes aware that unjust enrichment has occurred (two-year subjective period). At the latest, the right to obtain payment for unjust enrichment is time-barred three years (three-year objective period) and, in the case of deliberate unjust enrichment, ten years from the date on which it occurred.
The issue of limitation of a claim for unjustified enrichment in commercial law relations (and thus in particular the length of the limitation period) has long been debated. There are conflicting legal opinions and different case law on this issue. The judgment of the Supreme Court of the Czech Republic, Case No. 35 Odo 619/2002, of 18 June 2003 is a landmark decision according to which it is necessary to assess the limitation of the right to the delivery of unjustified enrichment in commercial law relations exclusively under the Commercial Code. The present legal opinion was also adopted by the Slovak decision-making practice, when the decision of the Constitutional Court of the Slovak Republic, Case No. IV. ÚS 214/2004 of 30.11.2005 admitted that although the assessment of unjust enrichment will be governed by the Civil Code, the statute of limitations of the rights arising from this unjust enrichment in the case of commercial relations will be subject to different rules than those applicable in the regime of the Civil Code, whereby the Constitutional Court of the Slovak Republic in essence admitted the application of the norms of the Commercial Code in relation to the statute of limitations.
How can I claim the unjust enrichment?
A typical example of unjust enrichment is where funds are transferred by mistake from person A to person B's bank account, when there was no legal relationship between person A and person B which would have obliged person A to provide any consideration to person B. Person B is aware that it has no legal title to such funds and nevertheless retains the funds provided by Person A in its bank account. What are Person A's options?
In such a case, the recovery of unjust enrichment may generally be sought by Person A by way of an action for performance of an obligation under Section 137(a) of the Code of Civil Procedure against Person B.
In an action for the recovery of unjust enrichment, in addition to the general particulars of the application, it is necessary to identify the parties, give a true and complete description of the relevant facts, identify the evidence to prove them and state the claim.
For more information or if you need to exercise your rights arising from unjust enrichment, please contact us at: info@grandoaklaw.com
Resources:
https://www.slov-lex.sk/static/pdf/1964/40/ZZ_1964_40_20191201.pdf
https://www.slov-lex.sk/static/pdf/2015/160/ZZ_2015_160_20210801.pdf
FEKETE, I.: Občiansky zákonník 1. Veľký komentár, Bratislava: Eurokódex 2011
