Where a person gains value from another’s assets or labour without any legally acceptable basis, this is termed unjust enrichment. The situation most often appears in three forms: reliance on a ground that is not treated as valid, the complete failure of an expected ground to materialise, or the subsequent disappearance of a ground that existed at the outset. The typical example is a payment made to the other party by someone who believes himself to be a debtor when in fact he owes nothing; if the payer proves his mistake, he may recover what he gave by way of an unjust enrichment action. The outcome of the action is that a duty of restitution arises for the enriched person.
The scope of restitution is not the same in every case. The enriched person is not held liable for the portion which he proves was no longer in his hands at the time restitution was demanded; his obligation is limited to what remains. By contrast, a person who is not regarded as acting in good faith — that is, one who ought to have reckoned with the possibility of having to return what he obtained — is bound to restore the whole of the asset value forming the subject of the enrichment. Nor is the right to claim open-ended. The entitled person must act within two years of realising that he has a right of recovery; and in any event the claim becomes time-barred once ten years have elapsed from the date the enrichment arose.
For the institution to operate there must be, at one end of the relationship, an increase occurring on a ground that is not legally valid and, at the other end, a decrease. It must also be possible to establish an adequate causal link between these two facts. Below we address in turn the elements of the institution, the conditions of the action, the limits of the duty of restitution and the procedural questions arising in the proceedings.
What Is Unjust Enrichment?
The Turkish Code of Obligations No. 6098 groups the sources from which an obligation may arise under three headings: contract, tort and unjust enrichment.
Unjust enrichment means the increase of a person’s asset values without any legally justified basis and in a manner causing the diminution of another person’s asset values. In such a case an obligational relationship is established between the person whose assets are diminished and the person who gains value at his expense. This obligational relationship is governed by Articles 77 to 82 of the Turkish Code of Obligations.
The enriched party is under a duty to restore the asset values obtained to the person at whose expense he was enriched. The statute accepts that this obligation arises in particular where the enrichment rests on a ground that is invalid, has not materialised or has come to an end. An example is a payment made by one party to the other in the belief that a contract has been concluded, when in fact no valid contract exists between them. Here the party who pays without any legal basis is impoverished and the party who collects the payment is enriched; consequently the sum received must be returned.
What Is an Unjust Enrichment Action?
An unjust enrichment action is an action for restitution resorted to where the elements of the institution are present together and the requisite conditions are satisfied. By this route, restitution of the asset values forming the subject of the enrichment is sought from the person who gained value without a justified basis.
Conditions of the Action
- An increase in the assets of one party. If no increase in one party’s asset value has occurred by reason of the relationship between the parties, or if assets which ought to have decreased have instead remained constant, an unjust enrichment action will not arise.
- Impoverishment of the other party. A decrease in the other party’s assets must have occurred. The power to claim restitution belongs to the party whose assets are diminished. That diminution may appear as a reduction in assets or equally as an increase in liabilities.
- Causal link. It must be possible to establish a relationship of cause and effect between the enrichment on the one side and the impoverishment on the other. The source of the increase in the enriched party’s assets must be the decrease in the impoverished party’s assets.
- Absence of a legal ground. The increase in the enriched person’s assets must lack a justified legal basis. Where a creditor collects his claim on the strength of a valid contract, the increase rests on a justified ground. By contrast, if the relationship between the parties lacks a valid legal foundation — for example, where the sale of immovable property was made in ordinary written form rather than in official form — an unjust enrichment action may be brought.
Situations in Which the Action Cannot Be Brought
The statute does not permit certain performances to be reclaimed. If a time-barred debt has been performed, the value paid cannot be recovered by an unjust enrichment action. Enrichments arising from the performance of a moral duty also fall outside the scope of restitution. Article 81 of the Turkish Code of Obligations further provides that things given for the purpose of bringing about a result contrary to law or morality cannot be reclaimed.
Performance of an Obligation Not Owed and Recovery
The case of a person performing an obligation he does not owe is regulated in Article 78 of the Turkish Code of Obligations. Under that provision, a person who voluntarily performs an obligation he does not in fact owe may reclaim what he gave only on condition that he proves he believed himself to be a debtor.
The statute also identifies the enrichments that cannot be reclaimed. Enrichments arising from the payment of a time-barred debt or from the performance of a moral duty fall within this scope. For instance, if a claim subject to a ten-year limitation period is paid in the twelfth year, the debtor who makes the payment will not be able to reclaim that performance by way of an unjust enrichment action.
The Duty of Restitution in Unjust Enrichment and Its Conditions
The scope of the duty of restitution differs according to whether the enriched person acted in good faith. The obligation arises in both scenarios; good faith functions as the criterion determining the limits of that obligation.
The Enriched Party in Good Faith
If the enriched person is in good faith — that is, unaware that the increase in his assets stems from unjust enrichment — he is bound to restore only what remains after the portion he proves was no longer in his hands at the time restitution was demanded. If the property forming the subject of the enrichment was transferred to another by a contract of gift before restitution was demanded, no duty of restitution arises for the enriched party in good faith. By contrast, if the property was not given away but passed to a third party by a contract of sale, the sale price must be restored. According to the Court of Cassation, where the subject of restitution is a monetary debt, the loss of the money or its exhaustion through spending does not release the debtor from the duty of restitution.
The Enriched Party in Bad Faith
If the enriched person is not in good faith — that is, if he disposed of the property forming the subject of the enrichment in order to escape the duty of restitution, or if at the time of disposal he ought to have foreseen that he might have to restore the property in future — he is liable for the whole of the enrichment. Where restitution in kind is impossible, for example where the property has been broken up, restitution is made in cash, that is, in money.
The Subsidiary Character of the Action
A claim based on unjust enrichment is secondary, that is, subsidiary in character. For this route to be available, it must be impossible to obtain the asset value whose restitution is sought through other actions of a primary character. If that value can be reclaimed by an action for recovery of possession based on the right of ownership, or on the strength of contractual provisions, an unjust enrichment action is not brought.
Accordingly, this route is unavailable where the owner can secure restitution of the property by bringing an action for recovery of possession, or where a valid contract between the parties allows restitution.
Decision of the Assembly of Civil Chambers of the Court of Cassation dated 01.07.2021, file no. 2017/4-1435, decision no. 2021/885:
“…In unjust enrichment, provided for in the Code of Obligations as one of the sources of liability, one party must be enriched while the other is impoverished, an adequate causal link must exist between the enrichment and the impoverishment, and the enrichment must not rest on a legally valid ground.
In unjust enrichment, only the redress of the diminution in assets may be claimed.
In the light of all these explanations, unjust enrichment affords the creditor a right of action of the second degree ( of a subsidiary character ). If the diminution in assets can be prevented by other actions of a primary character, an unjust enrichment action cannot arise.
As a consequence of the same principle, where a legal relationship arising from a contract exists, or where the possibility of bringing an action based on ownership exists, it is not possible for the parties to raise a claim founded on unjust enrichment…”
Comparison of the Unjust Enrichment Action with Similar Actions
Comparison with the Action for Recovery of Possession
An action for recovery of possession enables an owner to regain, on the strength of his right of ownership, a thing that has left his hands or is being withheld. In an unjust enrichment action, by contrast, the basis relied on by the claimant is not the right of ownership. For this reason the conditions of the two actions cannot be satisfied together in the same case. Under Turkish law, the transfer of ownership of movable or immovable property depends on the existence of a valid legal ground; in transactions lacking a valid legal ground, ownership does not pass. Since ownership has not passed to the other party, an action for recovery of possession cannot be brought.
Comparison with Actions on Contractual Claims
Where an action can be brought within the framework of a contractual claim, recourse cannot be had to the provisions on unjust enrichment. If a claim arising from a contract exists, there can be no question of the debtor’s enrichment, so the conditions of the institution are not made out. For example, a creditor who has a valid contract of sale and is unable to collect his claim cannot obtain that claim by way of an unjust enrichment action.
Comparison with Actions for Damages in Tort
Causing harm to another culpably by unlawful conduct constitutes a tort, and no action in tort may be brought in the absence of fault. In an unjust enrichment action, by contrast, fault is not a necessary element. Where fault is present, the injured party may rely on tort as well as on unjust enrichment; in respect of stolen property both routes are open. In that scenario the person wishing to bring an action has a right of election.
The Enriched Party’s Right to Claim Expenses
The enriched person may have incurred certain expenditure on the property in his hands. Such expenditure may be necessary or beneficial in character, or it may take the form of discretionary luxury expenses. In respect of such expenditure, the statute provides for different consequences according to whether the enriched party acted in good faith.
Expenses Incurred by an Enriched Party in Good Faith
An enriched party who does not know that the increase in his assets stems from unjust enrichment — that is, one acting in good faith — may recover from the party seeking restitution the value of the necessary and beneficial expenditure he has borne on the property.
Expenses Incurred by an Enriched Party in Bad Faith
An enriched party not regarded as acting in good faith may claim payment of his necessary expenses, and, as regards beneficial expenses, only the increase in value existing at the time of restitution.
Luxury Expenses
As regards expenditure falling outside the scope of necessary and beneficial expenses, which may be characterised as luxury expenses, the statute draws no distinction according to good or bad faith. Whether or not he acted in good faith, the enriched party cannot claim reimbursement of such expenditure. If the addition in question can be separated from the property forming the subject of the enrichment without causing damage, it may be removed and taken away. However, if the party entitled to claim restitution pays the value of the addition, the possibility of removing it falls away.
Decision of the 11th Civil Chamber of the Court of Cassation dated 08.06.2020, file no. 2019/4294, decision no. 2020/2692:
“…Having regard to the documents in the file, to the fact that judgment was given in accordance with the reversal decision complied with by the court, to the absence of any error in the assessment of the evidence, and to the finding that the respondent was enriched by reason of a ground that did not materialise within the meaning of Art. 77(2) of the Turkish Code of Obligations, so that under Art. 79(2) of the Turkish Code of Obligations the enriched party is bound to restore the full amount by which he was enriched, all of the appellate objections of the respondent’s counsel, and those of the claimant’s counsel falling outside the scope of the following paragraph, are unfounded.
The action concerns a claim for restitution, under the provisions on unjust enrichment, of money given to the respondent for the purpose of carrying out construction pursuant to the agreement between the parties. It is established and undisputed that the claimant remitted the sum of USD 107,126.00 to the respondent, and the evidence collected shows that the agreed construction was not carried out by the respondent, that the money remitted by the claimant was spent by the respondent for other purposes, and that in these circumstances the respondent is under an obligation to restore in full what he received…”
Limitation Period in the Unjust Enrichment Action
The legislature has adopted a special limitation regime for the right of claim arising from unjust enrichment:
Turkish Code of Obligations Art. 82
“The right of claim arising from unjust enrichment becomes time-barred upon the expiry of two years from the date on which the entitled person learns of his right of recovery and, in any event, upon the expiry of ten years from the date on which the enrichment occurred.”
Two criteria operate together as to time: the short period tied to knowledge, and the maximum period running from the moment of enrichment.
Where the enrichment has occurred through the enriched person’s acquisition of a claim, a different possibility is afforded: the other party may at any time refuse to perform that obligation, even if the right of claim has become time-barred.
Court with Subject-Matter Jurisdiction and Venue
The legislation lays down no special rule of subject-matter jurisdiction for unjust enrichment actions. Accordingly, the Civil Courts of First Instance have jurisdiction over these actions as the courts of general subject-matter jurisdiction.
As to territorial jurisdiction, the court of the respondent’s domicile at the date the action is brought is determinative; the basis is Article 6 of the Code of Civil Procedure (HMK). Under the general rules of territorial jurisdiction, the action will be heard by the Civil Court of First Instance in the place where the action is brought.
Independent Legal Assessment
The most frequent error in unjust enrichment disputes is the misclassification of the legal nature of the claim at the outset. Because of the subsidiary character of the institution, an action founded on these provisions will be dismissed where the same result can be reached by relying on contract or on ownership. For this reason, at the very start of the file, it must be examined in detail whether the relationship rests on a valid contract and whether ownership has passed to the other party.
The second critical heading is time. The two-year period running from knowledge is quickly exhausted in practice, while the ten-year maximum period becomes decisive in the case of payments noticed late. When the good-faith debate, which directly affects the scope of the duty of restitution, and the question of setting off the expenses incurred are added to this, it becomes clear that the claim must be framed with a careful calculation of quantum. In a concrete file, the following points should be prioritised:
- Clarifying whether the claim is to be founded on unjust enrichment or on the provisions governing contract or ownership
- Establishing the elements of enrichment, impoverishment and the causal link on documentary evidence
- Evidencing the date on which the right of recovery became known, for the purposes of the start of the two-year period
- Assessing whether the other party is to be regarded as acting in good faith, in view of the effect on the scope of restitution
- Separating the necessary, beneficial and luxury expenses incurred on the property and calculating the possibility of a set-off
- Reviewing the possibility of refusing performance, against the eventuality of a limitation defence being raised
Independent Legal provides advisory and litigation services at every stage of restitution claims arising from unjust enrichment, from the classification of the dispute through to the conduct of the proceedings.