Ainsley McCabe | Senior Litigation Paralegal

Unjustified Enrichment

Following the outbreak of Covid-19, there will be a lot of instances in many sectors of the economy where parties will have been prevented from performing their obligations under a previously agreed contract because of the various lockdown regulations in force throughout Scotland and the UK.  In these circumstances, the law treats these contracts as having been “frustrated” and this means that parties are freed from any of their future obligations under an agreement.

Frustration of a contract occurs when a new law/new legal obligation or a state of affairs make the performance of a previously agreed contract impossible.  Much of the case law that governs this area of law discusses the relationship between contracting parties following the outbreak of war in either World War I or World War II.  For example, there are several examples of cases where parties had contracted with companies in Germany or Austria and following the outbreak of war were prevented by legislation from trading with them in future.  In these circumstances, the law treated these contracts as being “frustrated” and as a result, the parties were freed from their future obligations.

Following a contract having been frustrated, Scots law attempts to provide a resolution to a party that may have already performed their obligations under an agreement and are awaiting performance of future obligations of the other party by providing them with a claim for “unjustified enrichment”.  Unjustified enrichment arises where party A has been undeservingly paid money by party B and the legal principal of unjustified enrichment in simple terms means party B can lodge a claim in the courts for the return of their money.

For example, if a band were paid to go and play at a concert venue by event organisers.  Then after they had already been paid, the various Covid-19 lockdown regulations came into force, were not legally permitted to travel to perform at the venue on the agreed date, this would mean that the contract would be frustrated and the event organisers would have a potential claim for unjustified enrichment against the band.   Other examples may involve contracts related to weddings where what was agreed prior to the Covid-19 outbreak may now not be possible due to social distancing rules.

We expect to see a lot more justified enrichment claims being brought in the courts following the outbreak of Covid-19 and it will be interesting to hear how the courts deal with these matters in practice.  However, if contracting parties that have been unjustifiably enriched are not willing to provide refunds or agree to resolve matters, unfortunately this may mean that the innocent party may be waiting quite a significant time to have their money refunded because it does not look likely that the courts will be working at full capacity for any time soon.

If you are involved in a similar type of dispute and are considering raising court proceedings or if you are defending a court action raised against you we are more than happy to assist you.  We have an experienced team of lawyers who are on hand to answer any questions you may have.

Ainsley McCabe

Ainsley McCabe

Personal Injury Team

“Those unfortunate enough to be involved in an accident often find themselves dealing with challenging circumstances in the aftermath. I enjoy assisting clients through what can be a difficult time in their lives, helping them to resolve their issues and look positively to the future.”

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