Lloyd's Maritime and Commercial Law Quarterly
THE INTERPLAY BETWEEN CONTRACT AND UNJUST ENRICHMENT
Lau Yi Hang, Louis* and Lee Chong Jie†
Dargamo v Avonwick
Although the law of unjust enrichment operates independently within the law of obligations,1 it shares a close relationship with the law of contract. For instance, the orthodox principle accepted amongst restitution scholars and practitioners is that a valid contract precludes a claim in unjust enrichment.2 There are two reasons for this. First, given that the transferee’s receipt of the benefit was premised on a legally valid ground, to allow a claim will contradict the original source of obligation underlying the initial transfer (ie, the contract itself).3 Second, to allow the claim would upset the parties’ agreed distribution of rights, obligations and risks.4 Commentators thus often view the law of restitution as “subservient” to contract.5
However, modern authorities have deviated from this by permitting exceptional claims in unjust enrichment notwithstanding the presence of a valid contract between the parties. Although courts should do justice in deserving situations, this development poses theoretical and practical difficulties. Theoretically, the principles underlying the law of unjust enrichment must not develop in a manner that undermines other well-established laws of obligations. Practically, it is important to ensure that courts do not inadvertently rewrite the parties’ contractual bargain, which would undermine commercial certainty.6
For these reasons, the English Court of Appeal’s decision in Dargamo Holdings Ltd v Avonwick Holdings Ltd 7 helpfully clarifies the boundaries for permitting an unjust enrichment claim where a valid contract exists. Additionally, this note will explore the court’s approach in ascertaining the basis of a transaction in the presence of a valid contract, as well as the controversial doctrine of apportionment. Before considering these issues, a summary of the facts is appropriate.
* Adjunct Faculty, Yong Pung How School of Law, Singapore Management University.
† Research Assistant, Yong Pung How School of Law, Singapore Management University.
1. A Burrows, “In Defence of Unjust Enrichment” (2019) 78 CLJ 521.
2. Pan Ocean Shipping Ltd v Creditcorp Ltd (The Trident Beauty)  1 Lloyd’s Rep 365, 368;  1 WLR 161, 164; Taylor v Motability Finance Ltd  EWHC 2619 (Comm), ; Alwie Handoyo v Tjong Very Sumito  4 SLR 308. This is unless the contract has been rendered void by any vitiating factors, or if it was discharged by breach. See K Barker, “Unjust Enrichment: Containing the Beast” (1995) 15 OJLS 457, 459–461.
3. Kleinwort Benson Ltd v Lincoln City Council  1 AC 349, 407–408; Test Claimants in the FII Group Litigation v HMRC  EWHC 2893 (Ch);  STC 254, . See also G Virgo, The Principles of the Law of Restitution, 3rd edn (Oxford, 2015) (hereafter “Virgo”), 134–145.
4. Costello v MacDonald  EWCA Civ 930;  QB 244, [21–30]. See also P Birks, An Introduction to the Law of Restitution, revised edn (Oxford, 1989), 46–47; J Edelman and E Bant, Unjust Enrichment, 2nd edn (Oxford, 2016), 141.
5. R Grantham and C Rickett, “On the Subsidiary of Unjust Enrichment” (2001) 117 LQR 273; J Beatson and G Virgo, “Contract, Unjust Enrichment and Unconscionability” (2002) 118 LQR 352, 355–356; R Havelock, “A Taxonomic Approach to Quantum Meruit” (2016) 132 LQR 470, 475–478.
6. Virgo, 314.
7.  EWCA Civ 1149 (hereinafter “Dargamo”).
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