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Revlon might try to claim under a [[mistake]], though that would be difficult as any mistake was not mutual, and unilateral mistakes are not compensable under the ancient doctrine of ''[[durum caseum]]''. It might also claim that as the debt was ''not'' then due the lenders should be obliged to return the money under some kind of [[constructive trust]] (or even [[money had and received]]). But — since ''it'' wasn’t out of pocket and wasn’t being sued, Revlon might be forgiven for just sitting quietly and keeping its powder dry in case it needed it against Citi. | Revlon might try to claim under a [[mistake]], though that would be difficult as any mistake was not mutual, and unilateral mistakes are not compensable under the ancient doctrine of ''[[durum caseum]]''. It might also claim that as the debt was ''not'' then due the lenders should be obliged to return the money under some kind of [[constructive trust]] (or even [[money had and received]]). But — since ''it'' wasn’t out of pocket and wasn’t being sued, Revlon might be forgiven for just sitting quietly and keeping its powder dry in case it needed it against Citi. | ||
==The [[discharge-for-value defense]]== | |||
We struggle to agree with the court’s conclusion, and the heart of the matter is its application of the [[discharge-for-value defense]]. | |||
{{discharge for value capsule}} The [[discharge-for-value defence]] defeats a claim for [[unjustified enrichment]] where a recipient, without notice of mistake and not having induced the payment, receives funds that discharges a valid debt: | |||
{{quote|“When a beneficiary receives money to which it is entitled and has no knowledge that the money was erroneously wired, the beneficiary should not have to wonder whether it may retain the funds; rather, such a beneficiary should be able to consider the transfer of funds as a final and complete transaction, not subject to revocation.” {{citer|Banque Worms|Bank America|1991|570 N.E. 2d|189}}}} | {{quote|“When a beneficiary receives money to which it is entitled and has no knowledge that the money was erroneously wired, the beneficiary should not have to wonder whether it may retain the funds; rather, such a beneficiary should be able to consider the transfer of funds as a final and complete transaction, not subject to revocation.” {{citer|Banque Worms|Bank America|1991|570 N.E. 2d|189}}}} | ||
This is the crux of the decision: the payment, though mistaken, discharged a debt, was made without inducement and receiveed without notice of the mistake. | |||
''Ouch''. The “[[discharge-for-value defense]]”, generally, has been criticised by some US authorities<ref>A Schall, ''Three-Party Situations in Unjust Enrichment Epitomised by Mistaken Bank Transfers'' [2004] RLR 110.</ref> and has no equivalent in English law, where courts have reached the opposite conclusion (see: {{cite|Barclays Bank Ltd|WJ Simms|1980|QB|677}}) but even if the principle is valid, its application here seems rather to have the quality of [[Durum caseum per magnos canibus|hard cheese one feeds to big dogs]]. | |||
===No notice of the mistake? ''Seriously''?=== | |||
It is not at all clear that prepaying a loan when the loan is not due ''does'' discharge the debt, nor is it remotely credible that any of the lenders laboured for an instant under the misapprehension that the payment was anything but a howling clanger: it is axiomatic that distressed lenders can’t repay their loans ''at all'', let alone ahead of time. | |||
===Must the debt be “due”?=== | ===Must the debt be “due”?=== | ||
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One might take the court to task for being a little too literal there. Nor does the court seem to have considered what “in discharge of the debt” means, but assumes it means that, mathematically, “has the effect of discharging the debt”. One could apply a ''reductio ad absurdam'' here: any payment made by a debtor to a creditor would have the effect of retiring debt. It also seems to ram the letter box of ordinary contract: If I have a contract and, for good consideration, have borrowed money for eight years, my accidental ''factual'' repayment of it early, without legal obligation to do so — worse, my dopey ''agent’s — surely cannot unilaterally [[amend]] that [[contract]]. | One might take the court to task for being a little too literal there. Nor does the court seem to have considered what “in discharge of the debt” means, but assumes it means that, mathematically, “has the effect of discharging the debt”. One could apply a ''reductio ad absurdam'' here: any payment made by a debtor to a creditor would have the effect of retiring debt. It also seems to ram the letter box of ordinary contract: If I have a contract and, for good consideration, have borrowed money for eight years, my accidental ''factual'' repayment of it early, without legal obligation to do so — worse, my dopey ''agent’s — surely cannot unilaterally [[amend]] that [[contract]]. | ||
==Citi and Revlon== | ==Redux: Citi and Revlon== | ||
This all leaves things rather delicately poised between Citi and Revlon. Forgetting for a moment that Revlon might not be able to pay Citi back, does it ''have'' to? A rather odd artefact of agency law comes into play here. | This all leaves things rather delicately poised between Citi and Revlon. Forgetting for a moment that Revlon might not be able to pay Citi back, does it ''have'' to? A rather odd artefact of agency law comes into play here. | ||