LL.M., Assistant of Civil Law, University of Tartu

• Author: Age Värv
• Position: The Draft Common Frame of Reference’s Regulation of Unjustified Enrichment: Some Observations from Estonia’s viewpoint
• Pages: 63-75

Age Värv

LL.M., Assistant of Civil Law, University of Tartu

The Draft Common Frame of Reference's Regulation of Unjustified Enrichment: Some Observations from Estonia's viewpoint

1. Introduction

Questions regarding the harmonisation of private law have evoked several debates in the European Union in the last few decades. These have expanded and become livelier especially in connection with the European Civil Code project¹. The process of harmonisation of European private law also affects Estonia, even in areas not regulated by European Union legislation mandatory for the Member States. Thus, for example, the Principles of European Contract Law² (PECL) and the UNIDROIT Principles of International Commercial Contracts³ (PICC) played a special role in the drafting of the Estonian Law of Obligations Act⁴ (LOA).

On 28 December 2007, the European Commission was presented with the Draft Common Frame of Reference⁵ (DCFR), which comprises the principles, definitions, and model rules of European private law. As the general provisions of the law of obligations in the Draft Common Frame of Reference are based on the PECL⁶ , it is likely that the need to supplement or amend existing Estonian legislation in light of the general principles set out in the DCFR may more particularly concern the specific provisions of the Law of Obligations Act, among them the provisions pertaining to non-contractual obligations⁷ , including unjustified enrichment law. With regard to the DCFR, the following functions are given primary emphasis: 1) a model for a political Common Frame of Reference, envisaged by the European Commission in its Communication document of 2003⁸ ; 2) an academic text as a model for teaching and research work, aiding in understanding of the similarities of the private law in the jurisdiction of the European union; and 3) a source of inspiration for the legislators of countries in the process of modernising national law⁹.

This article examines the third of the above-mentioned functions and discusses the regulation of unjustified enrichment within the DCFR in comparison with the existing Estonian legislation. The objective of this article is to answer the question of whether and to what extent the DCFR could serve as an inspiration for the amendment, supplementation, or interpretation of Estonian unjustified enrichment law. On account of limitations of space, the article focuses on only some aspects of DCFR unjustified enrichment model rules, among them the prerequisites for claims for the transfer of that which is received without legal basis, the method for reversing enrichment, and the calculation of compensation, and it compares the solutions provided to those of existing Estonian legislation. The article also discusses certain questions regarding delimitation of the rules of unjustified enrichment and negotiorum gestio.

2. Unjustified enrichment regulation within the Common Frame of Reference and the Estonian Law of Obligations Act

Unjustified enrichment law is a traditional part of the law of obligations in the legal systems of Continental Europe¹⁰ , regulating situations in which one person has received something (i.e., been enriched) to the disadvantage of another person without legal basis. As European directives have almost no regulation on questions related to unjustified enrichment law¹¹ , the DCFR comprises the first attempt to outline the common principles of unjustified enrichment law in the Member States. The Study Group on a European Civil Code adopted the common principles for unjustified enrichment in Tartu in late 2005, and these are included in Book VII of the DCFR.

2.1. Delimiting the unjustified enrichment law from the provisions regarding negotiorum gestio

2.1.1. The regulation and prerequisites for application of negotiorum gestio

As part of its earlier work, the Study Group on a European Civil Code has developed the common European principles of negotiorum gestio¹² , which, similarly to unjustified enrichment law, must fill the gaps that might appear between the rules of violation law and contract law. Regulation of benevolent intervention is included in Book V of the DCFR and applies where a person (the intervener) acts predominantly with the intention of benefiting another (the principal) while lacking the principal's prior consent¹³.

In Estonia, benevolent intervention in another's affairs is governed by Chapter 51 of the Law of Obligations Act which entered into force on 1 July 2002. Before the enactment of the Law of Obligations Act, situations involving benevolent intervention were subject to § 477 of the Estonian SSR Civil Code¹⁴ (CC), laying down the obligation to return assets obtained or saved without legal basis. Thus, no separate negotiorum gestio law was recognised. This also means that, so far, Estonia has lacked significant amounts of judicial practice regarding the delimiting of unjustified enrichment and negotiorum gestio, and the application of the rules pertaining to negotiorum gestio depends upon the date of the activity constituting the object of dispute. Namely, according to § 21 of the Law of Obligations Act, General Part of the Civil Code Act and Private International Law Act Implementation Act ¹⁵ , the provisions of the Law of Obligations Act related to negotiorum gestio apply to acts performed after 1 July 2002; § 23 foresees that the provisions of the Law of Obligations Act concerning unjustified enrichment apply in cases of unjustified enrichment occurring after 1 July 2002. Hence, if a person paid costs for the benefit of another prior to the enactment of the Law of Obligations Act and continued to do so after the enactment thereof, a situation could have arisen in which some of the costs must be compensated for pursuant to § 477 of the CC and some of them under the provisions of the LOA (and the application of the Law of Obligations calls for determining whether the situation constituted negotiorum gestio or unjustified enrichment).

According to § 1018 of the Law of Obligations Act, negotiorum gestio is deemed to be justified if a person (the negotiorum gestor) acts for the benefit of another person (the principal) without being granted the right or being obliged by the principal to perform the act and the negotiorum gestor has justification for the act, meaning that 1) the principal approves of the act; 2) the act corresponds to the interests and actual or presumed intention of the principal; or 3) in the case of failure to act, the principal's obligation arising from the law to maintain a third party would not be performed in a timely manner or the act is essential in view of the public interest for another reason. If, in the absence of such justification, the negotiorum gestor acted for the benefit of another person with the intention of benefiting said person, this constitutes unjustified negotiorum gestio.

Both in the common European principles and in Estonian law, the rules of negotiorum gestio have priority over unjustified enrichment regulation: negotiorum gestio can constitute the legal basis on account of which a person may have received any thing from another¹⁶.

The problems related to the delimiting of unjustified enrichment and negotiorum gestio could be characterised on the basis of the following example¹⁷ :

In 1999, cohabitants A and B commenced the construction of an annex to the dwelling of B's aunt C with her knowledge and consent, with the purpose of settling in the annex. When B died in 2003, A continued paying expenses related to the annex. In 2004, C denied A access to the annex. A filed a claim against C for compensation of the expenses he incurred and that B had paid (insofar as A is heir to B) for building the annex. In court, it was not established that A and B had ever concluded a contract with C regarding the construction of the annex.

With application of the provisions of the DCFR, pursuant to Articles V.-1:101 and V.-3:101, A would be entitled to compensation for reasonable costs incurred for the purpose of the action, if he and B acted with the predominant intention of benefiting C and they had reasonable grounds for their action, or C approved of the act without such undue delay as would adversely affect the interveners. The first question would thus be whether this case constituted negotiorum gestio or whether unjustified enrichment is to be held applicable. For A and B, the purpose of constructing the annex was to ensure a future dwelling. Is this to be deemed acting predominantly in their own interest or predominantly in C's interest (as the activity constituted improving her property)? In the eyes of the judge, this criterion may be too ambivalent¹⁸. If one were to deem A and B to have acted with the predominant intention of benefiting...