Compensation of Costs Incurred for Benefit of Other Persons
Generally, a person makes expenses for himself. But there are times when expenses are made to benefit someone else. The following is a summary of possibilities how to get compensation for costs that have incurred for the benefit of another person.
1. Law of Obligations Act provides that a person who incurs costs with regard to an object of another person (it means owner’s object) without a legal basis, therefore may demand compensation of costs to the extent to which the person on whose object the costs are incurred has been enriched thereby. Therefore, it must be evaluated by the facts, if the costs a person has made, who was not obligated to make such costs neither by law or transaction, has caused a decrease in assets and other persons assets have increased accordingly. It must also be considered whether those costs are beneficial to that person and what his intentions were for the object. It is a noncontractual claim.
2. For example, the possessor of the thing (incl tenant) can demand for compensation of costs other than necessary for the thing according to the regulation of unjustified enrichment. Incurred costs for the thing are necessary when the costs are made to preserve the object or it protects it from total or partial destruction, however expenditures are useful when it significantly improves the object.
A spouse may also have a claim for compensation of costs against other spouse arising from unjustified enrichment if the spouse has made expenses for an object that is the other spouse’s separate property at the expense of the first mentioned spouse’s separate property. While the law requires the making of expenses for another person’s object without a legal basis, this can be interpreted broadly to making expenses for another person physically in the Supreme Court’s opinion.
It is important to emphasize that if the person does not understand and is not required to understand that the person lacks justification to act, the principal shall transfer that which is received as a result of the acting to the provisions concerning unjustified enrichment.
3. Evaluating person’s intentions regarding the object for which costs have been made, it can be assumed for example that the person would have made the costs himself if the restoration of the item is justified under the general terms and conditions of insurers. If the restoration of the object is not economically justified regarding the general terms and conditions of the insurers, it could be assumed the person would not have restored it himself.
4. Determination of the extent of enrichment shall be based on the time when the person with regard to whose object costs are incurred has the object returned or is able to begin to use the increased value of the object in any other manner. This means that in determining the compensation it must be considered that whether and to what extent the costs have been exhausted by the time the owner of the object recovers it.
The upper limit for the compensation of costs are the expenses that have incurred, but not, for example, the market value of extension at the moment of the retrieval of the object.
5. In many cases the person who has incurred costs does not have right for claim. This is the case, for example, in the following:
- the person who incurs costs fails, due to circumstances arising from the person, to notify the other person in time of the intent to incur costs;
- the person with regard to whose object costs are incurred has contested incurring of the costs in advance;
- the incurring of costs with regard to the object is prohibited arising from law or the contract.If the person does understand and was required to understand that he has incurred expenditure on another person’s object but has failed to ascertain the will of the owner of the object and / or has incurred expenditure against the owner’s will, he will lose the right for compensation.
6. Lastly, it is important to keep in mind that claims do expire. Therefore, one should not wait too long to enforce one’s potential claim.
If you have any questions regarding the previously mentioned, feel free to contact the author of this article.
Raini Nõu / LEADELL Pilv Law Office