I have mistakenly sent money to an incorrect account – what can I do?
In this digital world we find ourselves in, making payments to third parties often now happens at the click of a button – over 350 million faster payment bank transfers are sent each month!
Inevitably, the result of this ever-advancing technology is that even despite having policies and procedures in place to minimise any risk, mistakes do happen.
Such mistakes could take the form of adding an extra digit to the payment made (for example, intending to send £500 but sending £5,000 instead!) or intending to send payment to Party A, but mistakenly sending it to Party B instead.
So what are your rights and responsibilities if you mistakenly make payment to the wrong party and they refuse to pay it back?
This note focuses on the legal principles of ‘unjust enrichment’ and ‘restitution’ to explain the answer.
If I make a payment in error, what should I do?
It is very important to act quickly when realising that a payment has been made in error.
As soon as the mistake has been discovered, you should contact your bank who will make efforts to retrieve it on your behalf. In most cases banks will take action within 2 working days, in accordance with best practice.
If your bank is unable to recover the funds on your behalf, then you should write directly to the third party requesting the return of the misdirected payment.
If the third party is unwilling to return the payment, or does not respond at all, then you will need to consider taking legal action to recover the money.
Am I entitled to recover the money back from the third party who received it?
Whilst every case needs to be considered on its own facts, in most instances you are entitled to recover money back if you have mistakenly paid it out to a third party.
To do so you rely on the legal principle of ‘unjust enrichment’ to argue that the third party has been unjustly enriched by receiving the money which it was not entitled to, as a result of your mistake, and refusing to return it.
What do I need to prove for my claim to be successful?
You need to be able to satisfy three elements to the Court:
- The third party has been enriched, or has received a benefit (of money or otherwise);
- This enrichment, or receipt of a benefit, is unjust;
- This enrichment, or receipt of a benefit, was at your expense.
Is there any defence to an unjust enrichment claim?
There are multiple defences to such a claim which would need to be considered (one of the most common being that the money paid, whilst in error, does discharge an existing debt owed to the third party), but in the absence of such a defence, it should be possible to claim back the money.
The remedy you are seeking is known as restitution, and will most commonly take the form of a Court order requiring the third party to pay back your money, plus any interest and costs.
Do I still have to make payment to the correct party in the meantime?
Again, whilst every case needs to be considered on its own facts - the short answer is yes.
If you have a contractual or other liability to make a payment, sending payment to an incorrect recipient does not serve to discharge this liability. As such, the requirement to make payment to the contracting party remains, and you should be careful not to fall foul of your contractual obligations.
Get in touch
If you need any advice or assistance in relation to the above, please do not hesitate to contact the experienced Commercial Litigation team at mfg Solicitors LLP, call us on 0845 55 55 321, or fill in our contact form and a member of our team will be in touch shortly.
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