In the United States and other countries around the World it is unlawful to spend funds in your bank account that was deposited to it accidentally. This is called “the law of unjust enrichment”. Finding alot of money in our bank account that just seemed to “magically” appear there overnight is a dream for everyone but alot of legal conditions apply. It is illegal for an individual to transfer, withdraw or spend the money that was accidentally deposited to their account.
There are a few cases of this which have been tried before the courts and they have all ended badly for the accused. In one case there was a couple that accidentally received over a hundred thousand USD in their account and spent it on luxurious purchases after receiving bad legal advice from a few friends. They had to make arrangements to repay the money to the bank in full and they also had to pay 25,000 each in bail money.
The fact that the accidental deposit usually occurs at the inconvenience of someone else is very important here. The bank or financial institution is responsible for the reimbursement of any funds that the intended recipient has lost but the unintended recipient still has an obligation under the law to repay whatever funds they have spent to the bank or financial institution.
So by now you might have probably realized that spending money deposited to your account that was not intended for you is illegal and unlawful and you can get into alot of legal trouble for it. The best course of action to take when you realize that you have received money in your bank account that does not belong to you is to immediately notify the bank or the authorities. If you decide to spend it they will find out eventually whether sooner or later.
The rightfully intended recipient is bound to realize that the funds have not been transferred and notify them at some point. The bank or financial institution also have other ways of finding out. For instance, if an audit is conducted they are able to find information on each and every transaction that has occurred at the bank over a specific time period.
The law of unjust enrichment explained
In laws of equity, unjust enrichment occurs when one person is enriched at the expense of another in circumstances that the law sees as unjust. Where an individual is unjustly enriched, the law imposes an obligation upon the recipient to make restitution, subject to defences such as change of position. Liability for an unjust (or unjustified) enrichment arises irrespective of wrongdoing on the part of the recipient. The concept of unjust enrichment can be traced to Roman law and the maxim that “no one should be benefited at another’s expense”.
The law of unjust enrichment is closely related to, but not co-extensive with, the law of restitution. The law of restitution is the law of gain-based recovery. It is wider than the law of unjust enrichment. Restitution for unjust enrichment is a subset of the law of restitution in the same way that compensation for breach of contract is a subset of the law relating to compensation.
The criteria as stated in the United States law
In United States law the Restatement of Restitution and Unjust Enrichment states that unjust enrichment is enrichment that lacks a meaningful or adequate legal basis. It is the result of a transfer that the law deems to be an ineffective transfer in ownership rights. Five elements are needed to prove that unjust enrichment has taken place. This is a ruling that was made by The North Dakota Supreme Court. These five elements are; An enrichment , An impoverishment, A connection between enrichment and the impoverishment, Absence of a justification for the enrichment and impoverishment and An absence of a remedy provided by the law.
Effectively, the civil law doctrine is now in effect in North Dakota, as it has been in Louisiana and in Puerto Rico; both of which are mixed jurisdictions. In Massachusetts, there are some decisions denying recovery in restitution by the breaching party although this is not generally the rule in the United States. In 1999, unspent funds incorrectly deposited during 1998 into a wrong bank account were frozen when a judge ruled it was unjust enrichment; the unintended recipient sued.
Common law systems such as those of England, Australia, Canada and the United States typically adopt the “unjust factor” approach. In this analysis, the claimant must point to a positive reason why the defendant’s enrichment is unjust. Examples of ‘unjust factors’ that ground a claim for restitution include: mistakes of fact or law; total failure of consideration, duress, undue influence, and the Woolwich ground.
In Roman Law
In civil law systems, unjust enrichment is often referred to as unjustified enrichment. Its historical foundation of enrichment without cause can be traced back to the Corpus Iuris Civilis. While the concept of enrichment without cause was unknown in classical Roman law,Roman legal compilers eventually enunciated the principle of unjustified enrichment based on two actions of the classical Roman period—the condictio and the actio de in rem verso.
The condictio authorized recovery by the plaintiff of a certain object or money in the hands of the defendant. The defendant was considered a borrower who was charged with returning the object or money. For the actio de in rem verso, the plaintiff bore the burden of specifying the cause for his demand, namely, demanding the restitution of assets that had exited the plaintiff’s patrimony and entered the defendant’s patrimony through the acts of the defendant’s servants.
The interpretations of Roman law principles on unjustified enrichment, by the French Jurist Jean Domat, and the German jurist Friedrich Carl von Savigny, formed the respective origins of the modern French and German law on unjustified enrichment. Domat developed the French unjustified enrichment principles based on the actio de in rem verso, as well as a modified version of the Roman concept of causa (cause), which renders contracts actionable even when they are not normally recognized under Roman law. So the United States law has alot of similarities to this law.
However, Civil law systems such as those of France and Germany typically adopt an “absence of basis” approach. On this analysis, the defendant is obliged to make restitution if there is no ‘basis’ for her receipt: for example, because the contract under which the defendant received the benefit was void ab initio. Some common law systems have showed signs of a possible shift towards this approach.
In most cases, the conceptual approach does not affect the outcome of a case. For example, suppose that A makes an oral contract with B under which A will pay $100 for certain services to be provided by B. Further suppose that A pays the money but B discovers that, pursuant to legislation, contracts for such services are void unless in writing. B refuses to perform.
Can A recover his payment? On both approaches, B is unjustly enriched at A’s expense. On the “absence of basis” approach, B’s enrichment has no legitimate explanatory basis because the contract was void. On the “unjust factor” approach, there has been a total failure of consideration; that is, A has received no part of the bargained-for counter-performance; restitution follows automatically from the fact of invalidity.
In English Law
In English law, the orthodox view is that unjust enrichment generally triggers personal, rather than proprietary remedies. This is because the law of quasi-contract only generate personal money awards: either a liquidated debt (as in actions for money had and received or money paid) or a sum assessed by a civil jury or the court itself (as in quantum meruit or quantum valebat).
Scholars seeking to expand the explanatory power of unjust enrichment have argued that other areas of the law such as subrogation and claims to traceable substitutes form part of the law of unjust enrichment. This view has been accepted, though its implications remain unclear.
The law of unjust enrichment in England rapidly developed during the second half of the 20th century. It has been heavily influenced by the writings of jurists from Oxford and Cambridge.England adopts the “unjust factor” approach.In Scotland, the law developed in a piecemeal fashion through the twentieth century, culminating in three pivotal cases in the late 1990s.
The most crucial of these was Shilliday v Smith, in which Lord Roger essentially laid the bedrock for what is now considered modern Scots unjustified enrichment law, bringing together the fragmented law into one framework, drawing from the principles of Roman Law upon which Scots Law as a whole is based (note the term “unjustified” is preferred to “unjust” in Scotland). Unjustified enrichment is more established as a fundamental part of the Scots law of obligations than unjust enrichment is in English law.
The questions bellow are a familiar part of the modern English law of unjust enrichment, having been popularised by the writing of Professor Peter Birks and expressly endorsed by English courts. The framework provides a useful taxonomical function in Australian law, though the concept of unjust enrichment has been subject to inconsistent treatment by Australian courts, as discussed below. Stated at this level of abstraction, the framework is a useful grounding for comparative study between common law and civil law jurisdictions.
Cases of unjust (or unjustified) enrichment can be examined in the following way:
- Was the defendant enriched?
- Was the enrichment at the expense of the claimant?
- Was the enrichment unjust ?
- Does the defendant have a defense?
- What remedies are available to the claimant?
Solutions for unjust enrichment
The solution for unjust enrichment is restitution: the restoration of what was conferred to the claimant. In short, the correcting of the injustice that occurred when the claimant suffered a subtraction of wealth and the defendant received corresponding benefit. Restitution can take the form of a personal or a proprietary remedy. Where a personal remedy is awarded, the defendant is ordered to pay the money value of the benefit received. This personal money award is the typical form of restitution ordered.
Where a proprietary remedy is awarded, the court recognises (or declares) that the defendant has a beneficial or security interest in specific property of the defendant. Whether proprietary remedies can be awarded depends on the jurisdiction in question. Most countries settle matters of unjust enrichment in the courts by taking into consideration a variety of factors and conditions.
There are nations the take both a common law approach and nations that take a civil law approach to the matter of unlawful enrichment. They all have varying factors which they depend on in order to make just rulings on each individual matter. Unjust enrichment can be on a person vs person matter or a person vs financial institution matter because as it has been mentioned before no one has the right to spend money that has been deposited to them that is not actually theirs. There is always human error no matter the circumstances and the laws of whatever country you live in makes provisions for this.
The hands of the law are very powerful and it is even able to solve the most delicate of matters. No one is bigger than the law and no one can outrun it for too long so it is always a good thing to be on the right sigh of it. The right side of the law may be narrow but it yield its benefits. So if it so happens that money is accidentally deposited into your account it is in your best interest that you contact the authorities or the financial institution and notify them immediately and may who knows? Maybe you will receive a reward for being a good citizen.
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