LLB 120 Lecture Notes - Lecture 11: Trustee Act 1925, Rescission, Bailment
Week 11: 225-251
Restitution – the type of remedy we are concerned with
Unjust enrichment – the source of rights we are concerned with
The law of restitution is concerned with the recovery of gains made at the expense of others
A restitutionary obligation is an obligation to restore a gain which has been received at the
expense of others
A restitutioar reed is oe that reerses a diret trasfer of alue fro the plaitiff’s
assets or labour to the defendant. Granted as a response to wrongs e.g. breach of contract
If retur perforae is’t proided, there is usuall a atio for daages for reah of
contract
A restitutioar oligatio to pa for series o’t arise here there is a eforeale
contract governing the right to compensation for those services
Restitutioar oligatios ust’t alter the rights ad oligatios that hae ee
established by contract or redistribute risks that have been allocated by contract
From Quasi-Contract to Unjust Enrichment
Two restitutionary claims most common:
1. Claim to receive money paid to another party – action for money had and received
2. Claim to recover reasonable remuneration for services performed – action for
quantum meruit – the amount earned
Also the claim to recover a reasonable price for goods delivered – quantum valebant
See Pavey & Matthews Pty Ltd v Paul – pg 227
The core question is whether retention of the payment is unconscionable
The Unjust Enrichment Framework
Three essential elements that underlie the principle of unjust enrichment:
1. The defendant must have been enriched by the receipt of a benefit
2. The eefit ust hae ee gaied at the laiat’s epese
3. It would be unjust to allow the defendant to retain the benefit
No defence is available to the defendant. Three reasons:
1. The High Court has firmly rejected the idea that restitutionary claims can be
analysed by direct reference to a principle or framework. Restitutionary claims must
be approached by reference to specific principles rather than a general formula
2. The list of abstract criteria can give the impression that there is a generalised right to
restitution for unjust enrichment
3. The application of a broad principle of unjust enrichment may point to an erroneous
outcome
Ineffective Transactions
Most common claim – money is paid or services are rendered pursuant to a transaction that
turns out to be ineffective
May be ineffective because of legal reasons or because the contract is never formalised
Where money has been paid under an ineffective contract, it is recoverable if the money
was paid for a consideration that has totally failed
Where services are performed, a restitutionary obligation to pay reasonable remuneration
may arise from a request that the work be done or from free acceptance of the work
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Total failure of consideration
Four important points:
The eaig of cosideratio
1. The giving of a valuable promise is good consideration. The issue is whether the
paee’s proise as fulfilled. Plaintiff must show that a payment was made on a
particular basis or for a particular purpose
See Martin v Andrews – pg 232
The eed for a total failure
2. Recovery is only possible if the failure of consideration is total. Restitutionary relief
is’t aailable if the claimant has received some of that they bargained for
Restitution can be granted where a severable part of the consideration has totally
failed and the payment in question can be apportioned between the failed part and
the effective part of the consideration
See Baltic Shipping Co v Dillon – pg 232
Severable consideration and the apportionment of payments
3. It is possible to recover a part of a sum paid of the amount claimed can be attributed
to a distinct and severable part of the consideration, and that part of the
consideration has failed . See Roxborough v Rothmans of Pall Mall Australia – pg 233
Recovery under a subsisting contract
4. In exceptional circumstances, money can be recovered on the basis of total failure of
consideration even though the contract under which it was paid remains valid
Services requested or freely accepted
Where services are provided under an ineffective contract, a claim to recover a reasonable
sum (quantum meriut) will be available where the services have been requested or freely
accepted
Griffith CJ in Liebe v Molloy – here a a does ork for aother ithout epress otrat
relatig to the atter, a iplied otrat arises to pa for it at its fair alue
Free acceptance
See Pavey & Matthews Pty Ltd v Paul – pg 235
Aeptae aloe is’t eough to geerate a restitutioar oligatio
The principle of free acceptance requires that the services were not provided gratuitously
and that the recipient must have had reasonable opportunity to reject the services
Elements necessary:
1. There is no subsisting enforceable contract between the parties for the performance
of the services
2. A reasonable person in the position of the recipient would have realised that the
person providing the services expected them to be paid for
3. The recipient accepted the services having had a reasonable opportunity to reject
them
Request – See Lumbers v W Cook Builders Pty Ltd – pg 236
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Total failure of consideration
The identification of either a request for or free acceptance of services serves two functions:
1. Establishes that the defendant has received something which is of benefit
2. It provides a basis for saying that the retention of that benefit is unjust
Failure of consideration provides the most satisfactory basis for determining services claims
Valuing services
A complication of claims relating to services is the difficulty of valuation
Services are valued at the market rate for the work done and materials supplied
In determining the amount to be paid, the court is concerned with the market rate for the
services, not the cost to the plaintiff for supplying them
Types of ineffective transactions
Anticipated contracts that fail to materialise
A restitutionary claim may arise where money is paid or work is done in the expectation that
a otrat ill e ade etee the parties. If the otrat is’t oluded, the reipiet of
the money or services will be under no contractual obligation to reciprocate and so the
payer/provider of services must look to restitution for recompense on the basis of total
failure of consideration or request or free acceptance
See William Lacey (Hounslow) Ltd v Davis
A restitutionary claim for pre-contractual work will fail where the plaintiff has taken the risk
that the work will go unremunerated if agreeet is’t reahed
“ae as here egotiatios are epressl ade sujet to otrat – pg 241
Restitutionary claims can be successful where defendants have withdrawn from contractual
obligations because they have changed their mind
Agreements void for uncertainty
A restitutionary claim may be unavailable in relation to money paid or services rendered
under a contract that is void for uncertainty
See Brenner v First Artists Management Pty Ltd – pg 242
Failure of a condition of formation or performance
Contracting parties may agree that either the formation of the contract or the obligation to
perform it shall be conditional on an event occurring
If it is a oditio of foratio, the o otrat ill arise if the eet does’t our
If it is a condition of performance, then one or both parties may terminate the contract if
the eet does’t our
See George v Roach – pg 243
Termination for breach
Some breaches of contract provide the aggrieved party with the right to terminate the
contract at his or her option
A repudiation of the contract by one party will also provide a basis for termination of the
contract by the other party
If the aggrieved party elects to terminate, the parties may enforce any contractual rights to
payment and the aggrieved party may claim damages for loss suffered
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find more resources at oneclass.com
Document Summary
Restitution the type of remedy we are concerned with. Unjust enrichment the source of rights we are concerned with. The law of restitution is concerned with the recovery of gains made at the expense of others. A restitutionary obligation is an obligation to restore a gain which has been received at the expense of others. A restitutio(cid:374)ar(cid:455) re(cid:373)ed(cid:455) is o(cid:374)e that re(cid:448)erses a dire(cid:272)t tra(cid:374)sfer of (cid:448)alue fro(cid:373) the plai(cid:374)tiff"s assets or labour to the defendant. Granted as a response to wrongs e. g. breach of contract. If retur(cid:374) perfor(cid:373)a(cid:374)(cid:272)e is(cid:374)"t pro(cid:448)ided, there is usuall(cid:455) a(cid:374) a(cid:272)tio(cid:374) for da(cid:373)ages for (cid:271)rea(cid:272)h of contract. A restitutio(cid:374)ar(cid:455) o(cid:271)ligatio(cid:374) to pa(cid:455) for ser(cid:448)i(cid:272)es (cid:449)o(cid:374)"t arise (cid:449)here there is a(cid:374) e(cid:374)for(cid:272)ea(cid:271)le contract governing the right to compensation for those services. Restitutio(cid:374)ar(cid:455) o(cid:271)ligatio(cid:374)s (cid:373)ust(cid:374)"t alter the rights a(cid:374)d o(cid:271)ligatio(cid:374)s that ha(cid:448)e (cid:271)ee(cid:374) established by contract or redistribute risks that have been allocated by contract.
