A constructive trust is a remedy used by the courts to resolve situations where it would be unjust to allow one person to retain property they have obtained or hold at the expense of another. It’s not a trust in the traditional sense but rather a legal tool to prevent unjust enrichment. In the context of common-law relationships, if one partner has significantly contributed to the property owned by the other – either through financial investment or through efforts that increased the property’s value (like renovations, maintenance, or even contributing to the family welfare in a way that allowed the other partner to earn more) – the courts may recognize these contributions by granting the contributing partner a beneficial interest in the property. This is done by declaring the property, or a portion of it, held in a constructive trust for the benefit of the contributing partner.
Unjust enrichment occurs when one person benefits at the expense of another in a manner that the law sees as unjust. To claim unjust enrichment, three elements must be proven:
- Enrichment: One party has benefited or gained something of value.
- Deprivation: The other party has suffered a loss or deprivation, typically by contributing to the enrichment of the first party.
- Absence of a Legal Reason: There’s no legal basis for the enrichment (e.g., there was no contract in place that justified the enrichment).
If these requirements are met, the courts may order a remedy, such as the payment of compensation or the imposition of a constructive trust, to correct the imbalance and ensure fairness.
Application in Common-Law Relationships
In common-law relationships, these principles are particularly relevant when partners separate and need to divide property or assets. If one partner can demonstrate that they have directly contributed to their partner’s property or assets, leading to an increase in value without a corresponding benefit or compensation, they may be entitled to a portion of the property or a financial award. This is especially common when the property is in one partner’s name, but both have contributed to its value.