1.The concept of unjust enrichment

By this term, we mean a wealth transfer that occurs between two (or more) individuals, in which the wealth of one party (the recipient) increases in any way, without there being any legal justification for the recipient to retain this pecuniary benefit. Given that in law, every pecuniary transfer must be made for a reason (e.g., in fulfilment of a valid contract), unjust enrichment as a legal phenomenon is precisely this: there is no legally justifiable reason for the wealth to remain in the possession of the recipient. Classic examples of this phenomenon include the payment of a non-existent debt or the receipt of payment for a service rendered for an illegal/unethical purpose (e.g., a seller retaining the price received from selling drugs). It is worth noting that unjust enrichment also encompasses the saving of expenses achieved by using another means (e.g., the difference between the reduced salary provided by the employer to the employee and the legal minimum wage that would be provided under different conditions), and even if the price itself (in money) is not preserved, the item purchased with that price is still considered unjust enrichment and can be reclaimed.

2.What are its prerequisites?

The prerequisites generally for a claim of unjust enrichment against a person are:

• The recipient of the enrichment to have been enriched in a broad sense.
• This enrichment to originate from the property or at the expense of another.
• The enrichment of the recipient to be in direct causal relationship with the loss of the donor’s property.
• There is no legal reason for the recipient to retain the enrichment.

3.What is the concept of the critical time?

A central concept in the law of unjust enrichment is the notion of the critical time = the moment in time when it is examined whether the recipient is still enriched, in other words, whether the enrichment is preserved intact so that the donor (= the one who made the payment) can claim it. The rule in civil law is that the critical time is now when the recipient is served with the donor’s lawsuit against them (extrajudicial notice is sufficient as long as it is in writing to prove the definite chronology). This is because it is easy to determine based on the date of service whether the enrichment is still in the hands of the recipient and in what condition. However, this rule applies on the condition that the recipient did not know/ignorantly from gross negligence that the enrichment ‘does not belong to him’ or that there is no legal reason to retain it (i.e., was acting in good faith). If the recipient was acting in bad faith:

• If a debt was paid to them that was not owed, they are liable from the moment they learned that the debt was non-existent.
• If a benefit was given to them for an unethical/illegal purpose, they are liable as soon as they received it (as they would logically know the unethical/illegal nature of the purpose).
• If the benefit was given in performance of a contract for a cause that did not materialize (e.g., a preliminary agreement for the sale of real estate where the seller was coerced by threat from a third party to sell the property, thus the transfer contract is voidable), the recipient is liable as soon as they learn that the cause on which the entire executed contract was based has been overturned.

4.The liability of the person before and after the critical time

It is important that the liability of the recipient differs before and after the critical time. We are always talking about civil liability and therefore about the obligation of the recipient to return (at least) the benefit to the donor.

• If the enrichment is lost before the critical time (e.g., the car was completely destroyed in a fire), then the recipient is not liable to return it to the donor (because it is assumed that until then they legitimately believed that the enrichment belonged to them).
• However, if the critical time has passed (with some of the prerequisites we mentioned in question 3), there are certain consequences for the recipient:
• The benefit that the recipient must return to the donor becomes final (as well as the specific person who will return it).
• Interest begins to accrue, if it is a monetary benefit.
• The recipient is liable for compensation if the item deteriorates/is destroyed/gets worse until it is returned to the donor.
• If the item produces profit (e.g., a plot of land with fruit-bearing trees), the recipient is liable to return not only the fruits they collected but also those they could have collected.
• The recipient is entitled to ask the donor to reimburse only the necessary expenses they made for the item (if any), and not all expenses.

5.What if the person further transfers the benefit?

In this case, a tripartite legal relationship is created where the donor will try to claim the benefit from the third party to whom the recipient transferred it (conceptually it could be explained as AàBàC where C is the third party of interest). Here are some characteristic cases:

• If B gratuitously (i.e., without consideration, such as a donation) transferred the benefit to C, then A can directly pursue C to claim it through a lawsuit of unjust enrichment.
• If, for example, B sold the benefit to C, A can claim from B not the benefit (since it is no longer in their possession) but the consideration they received from C, whether it is money or some other thing (e.g., if an exchange occurred between B and C).
• In several cases, the recipient transfers the benefit to a third party in order to harm the original donor. Such contracts are called injurious, and A here can file a lawsuit for the breach of that specific contract in order for it to be annulled, and the benefit to return to B’s possession for A to receive it from there. However, it is necessary here for C to know that B transferred the benefit to them with the intention of harming A. We will discuss the lawsuit for breach in detail in our next analysis.
• As the donor, A has the above-mentioned options, provided that B transferred the benefit to C BEFORE the critical time (=before A filed a lawsuit against B, or B learned in some other way about the non-existence of the debt, etc.), and as long as the enrichment is not preserved in B’s possession.

6.Is there a variation for the above case?

The scenarios mentioned above also have another case: the recipient transfers the benefit to a third party after the critical time (=after they were served with the lawsuit by the donor). In this case, which is not uncommon in practice, A has the option to pursue only B to claim from them the consideration they received (if the benefit was given due to a sale) from C. It is crucial to emphasize that here there is no liability of C towards A, as the third party, except in cases concerning injurious contracts, they may seriously not be aware that the person from whom they acquired the benefit was not the rightful owner. For this reason, it would be legally impermissible for the third party to ‘lose’ their benefit because they did not know certain circumstances, which they could not know anyway.

7.When is the pursuit generally excluded?

The provisions of unjust enrichment establish certain cases in which the pursuit of the benefit by the donor is excluded. Specifically, pursuit is excluded in the following cases:

• If the donor knew that the debt they paid was groundless (=that they did not owe it in reality). However, the recipient of the benefit must prove this.
• If the donor fulfilled their obligation from a special moral duty or from considerations of decency (it is worth noting that in this case, the one who provided the benefit can only pursue the portion that exceeds the special duty and is not justified by the circumstances, for example, the portion that makes a monetary amount excessive, which was given as additional compensation for the termination of an employment contract).
• If the benefit was given for an unethical purpose, and the donor was aware of the immorality on which the benefit was based (for example, if the donor sold drugs to the recipient, they cannot claim the consideration, since the recipient does not pay it, as the sale of drugs as the cause of the contract falls within the concept of unethical purpose, and it is very likely, if not certain, that the donor was aware of it).

8.The connection of the unjust enrichment and nominal price in a contract

As we have mentioned in another analysis, there are many times when contracts for the purchase/sale of real estate state a lower price than the actual value for mainly tax reasons. Although based on the decisions of Greek courts, these contracts are valid, however, the additional price received by the seller, which is not stated in the transfer contract, makes the latter unjustly enriched. In connection with a relevant question submitted to Greek courts, regarding whether the buyer can, through a lawsuit of unjust enrichment, claim the additional price from the seller, the answer given (not uniformly) was that the buyer can claim the additional price, provided that it does not exceed the commercial value of the property of which the buyer became the owner. For example, if the buyer gave 100,000 euros (70,000 euros were stated in the contract and 30,000 euros were given ‘under the table’) for a property worth 80,000 euros, the buyer, in this case, can claim as unjust enrichment the difference of 20,000 euros (100,000-80,000 euros) resulting from the total price paid compared to the value of the property, which was the subject of the contract. However, it is another matter if a buyer would want to pursue this claim, given that the consequences of tax violations would be very severe.

9.When does this claim prescribe?

The general rule is that the claim of unjust enrichment is subject to the usual 20-year limitation period for claims from the time it arose (i.e., from the time the recipient acquired the enrichment and all the conditions of the law were met, as described in question 2, to establish liability under the law). However, there are exceptions to this rule:

• If the claim of unjust enrichment is part of a larger legal relationship (e.g., a sales contract with a different limitation period), then the claim prescribes in the same time frame as the main claim (thus, here the claim of unjust enrichment will prescribe in 5 years from its inception, just like the claim from the sales contract, instead of the usual 20-year limitation period).
• When someone raises unjust enrichment as an objection rather than as a claim (e.g., with their arguments in a lawsuit), then they can raise it at any time without limitations (since only claims prescribe and not objections).

10.The significance of a reservation clause when paying contested claims

Based on the above, as well as on transactional practice in everyday life, three things emerge:

• It is not unlikely for a contract to be overturned (even with fault on the other side). That’s why it’s critical to carefully study its terms. It’s important not only for something to be legally correct but also not to create excessive difficulties in resolving the contract if things don’t go as planned.
• It’s one thing for the contract itself to be overturned and another for the reason for which we entered into this contract to be overturned (genuine claims of unjust enrichment arise only in the second case, and there are prospects for pursuing them).
• For the above reasons, when the terms of a contract trouble us, it is considered advisable to seek the assistance of a legal representative to review it (and accordingly approve or reject it). If there is an urgent need (and formally, we are pressed to sign it immediately), we could do so by including a reservation clause stating ‘ All rights reserved.’ This way, we declare to the other party that if claims arise from the contract or because of it, we will not hesitate to pursue them, without the risk of them being dismissed as unfounded.

Next to the client and his needs.

Athina Kondogianni-Lawyer

 

The above do not constitute legal advice, and no liability is assumed for them. For more information, please contact us.