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Why Breach of Contract and Unjust Enrichment Claims Are Mutually Exclusive


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1/1/2016
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n the legal world, you can generally pursue different theories - even if they are inherently at odds with each other - to try and recover your losses.

As with any general rule, though, there are some exceptions. And the realm of breach of contract - at least in New York - is precisely one such circumstance. 

You Either Have Breach of Contract, or Unjust Enrichment. You Can't Have Both.

Simply put, as a claimant you must decide from the get-go whether your claim is based upon the breach of a valid written contract, or whether your claim is grounded in quasi-contract, i.e., to seek recovery on an strictly equitable basis.

In Fwan Management Co., LLC v. 420 West Broadway Corp., a New York County trial court dismissed the unjust enrichment claims of a shareholder in a real estate cooperative and proprietary lessee of commercial property space's claims that he had been overcharged by the landlord. And the reason that his claims were dismissed, as noted in my earlier blog post, "Why Lacking a Valid Contract Doesn't Have to Mean You Lose," was based upon a straightforward application of New York law:

"Generally, an enforceable written contract precludes recovery in quasi contract with respect to events arising from the same subject matter. See Curtis Properties Corp. v. Greif Companies, 236 AD2d 237, 239 (1st Dep't 1997).

"An unjust enrichment cause of action is 'precluded by the fact that a simple breach of contract claim may not be considered a tort unless a legal duty independent of the contract-i.e., one arising out of circumstances extraneous to, and not constituting elements of, the contract itself-has been violated.' Brown v. Brown, 12 AD3d 176, 176 (1st Dep't 2004).

An Important Caveat

Notwithstanding that general rule (which is logical), the Court went on to answer the following important question - a factual scenario that comes up an awful lot in breach of contract claims:

What happens if it is unclear whether the parties entered into a valid, enforceable agreement or not?

Fortunately, the Court provided some guidance as this as well, stating:

"However, a plaintiff may proceed on both breach of contract and quasi-contract theories where there is a genuine dispute as to the existence of a contract. Id." [Emphasis supplied]."

Why the Court in Fwan Got it Right

Since, in Fwan, there was no question that the issues were governed by express contractual language, the plaintiff's unjust enrichment (i.e., "quasi-contract") claims were correctly dismissed.



Category: Breach of Contract

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Jonathan Cooper
Non-Compete, Trade Secret and School Negligence Lawyer

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