Can performance of contract with A amount to an unjust enrichment of B?

In Costello v MacDonald & Co ([2011] EWCA Civ. 930 CA (Eng)) M entered into a building contract with O Ltd (controlled by C) to develop a site owned by C. O Ltd was not C’s agent. C retained the property and was receiving the rents. When O Ltd defaulted on its obligations, M obtained a judgment against O Ltd.  In addition, C was held liable in unjust enrichment for the value of M’s services at the contract rate. O Ltd did not pay the amount due to M under the judgment. C appealed against the unjust enrichment award.

C’s appeal was successful; unjust enrichment could not be used to undermine the contract between M and O Ltd:

‘[The unjust enrichment claim must fail because it would undermine the contractual arrangements between the parties, that is to say the contract between the respondents and Oakwood and the absence of any contract between the respondents and Mr and Mrs Costello. The general rule should be to uphold contractual arrangements by which parties have defined and allocated and, to that extent, restricted their mutual obligations, and, in so doing, have similarly allocated and circumscribed the consequences of non-performance. That general rule reflects a sound legal policy which acknowledges the parties’ autonomy to configure the legal relations between them and provides certainty, and so, limits disputes and litigation.’ ([23) (Etherton LJ).

M should have obtained a guarantee from C.

A second possible defence to the unjust enrichment claim was that the benefit to C was indirect. This was not argued and so Etherton LJ alluded to the possible defence without deciding on it. There is a hint that this too might have succeeded ([22]).

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