Shearman And Sterling

Litigation, Gavel and Scales of Justice

August 04, 2021

English Court of Appeal Considers Unjust Enrichment in Context of Share Purchase Agreement


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Case Highlights Importance of Reflecting All Consideration in Commercial Contracts


In Dargamo Holdings Ltd v Avonwick Holdings Ltd [1] the English Court of Appeal has held that the doctrine of unjust enrichment could not be used to subvert the contractual allocation of risk in a Share Purchase Agreement (SPA).

This is a notable decision for what it says about the interaction between contract law and unjust enrichment (and the limits of the latter). It is also a salutary reminder to those involved in the negotiation of SPAs (and other commercial contracts): wherever possible, parties should expressly reflect the full terms of their agreement, including any associated common expectations or understandings about what the contract provides for, in an executed written document. In relation to SPAs in particular, that means ensuring that all of the assets (and any other consideration) that a party expects to receive in exchange for the price paid should be clearly set out in the contract.


Avonwick (the “Seller”) agreed to sell to Dargamo (the “Purchaser”) and another purchaser (the “Third-Party Purchaser”) its 34 percent interest in a Ukrainian company, by transferring to them its shares in an English holding company (“Holdco”). At around the same time, the Purchaser and the Third-Party Purchaser had sought to acquire a number of additional assets (the “Other Assets”) from the Seller, including its interest in two additional Ukrainian companies (the “Other Shares”).

The terms of the parties’ agreement were recorded in an SPA, which provided only that the Purchaser and the Third-Party Purchaser would each receive 50 percent of the shares in Holdco in return for a total purchase price of $950 million. The SPA expressly provided that “the consideration for the sale of the Shares [i.e. the shares in Holdco] shall be US$950 million (the Consideration)” and made no mention of any of the Other Assets or any asset other than the shares in Holdco. By the time the SPA was signed, the parties had also exchanged drafts of an MOU and a side letter providing for the sale of the Other Assets (including the Other Shares) by the Seller to the Purchaser and Third-Party Purchaser, but neither document was executed.

However, it was accepted by all the parties that $200 million of the $950 million purchase price under the SPA was attributable to the Other Assets, with $165 million of that sum relating to the Other Shares. The Third-Party Purchaser later acquired a 50 percent share of the Other Shares, but only after paying a further $13 million to the Seller in the form of “technical consideration” (said to be required to give effect to the transfer under Ukrainian law). The Purchaser, on the other hand, refused to pay any additional “technical consideration” without assurances (which were not forthcoming) that the Seller would reimburse it for such amount, and also made no attempt, so the Seller claimed, to sign a separate share purchase agreement for the sale of some of the Other Assets. As a result, the Purchaser did not receive its portion of the Other Shares.

Amongst various other claims between the parties, the Purchaser brought a claim in unjust enrichment for restitution of the portion of the purchase price that it claimed was attributable to the Other Shares ($82.5 million), on the basis that there had been a ‘total failure of consideration.’


While the Purchaser accepted that unjust enrichment could not override the terms of a contract in all cases where there is a separate understanding as to the basis of payment, which has failed, it argued that the doctrine should have that effect in this case, primarily because both sides accepted that the $82.5 million was referable to the Other Shares and that position was clear. The Court of Appeal rejected this argument and dismissed the appeal.

The Court focused on whether the Seller’s enrichment had been “unjust” and held that this had to be assessed in light of the terms agreed under the SPA. It also could not be determined by reference to general (and subjective) notions of “fairness” or “justice,” but rather, was based on relevant recognised principles that point to an “unjust” factor.

In this case, the parties had deliberately omitted any of the Other Assets from the consideration in the SPA (and, indeed, the contract generally). The bargain that was struck was simply the transfer of the shares in Holdco (and nothing else) in exchange for the payment of $950 million.[2]

In those circumstances, unjust enrichment could not be relied upon to circumvent the express terms of a contract, particularly where to do so would actually contradict those terms (i.e. there was no “gap” left by the law of contract for unjust enrichment to fill).

The Court of Appeal reaffirmed the position that only in rare cases will unjust enrichment arise on a total failure of consideration where there is a valid contract that has been performed. While the Court considered the few previous cases in which an unjust enrichment claim had succeeded in such circumstances, in those cases (unlike in this one) the ‘basis’ that subsequently ‘failed’ was not in the parties’ contemplation at the time of the relevant contract and was consistent with the parties’ contractual allocation of risk.


The facts of Dargamo are unusual insofar as the parties did not record in a contractually binding document their common understanding that a substantial part of the purchase price paid under the SPA was attributable to assets that were not mentioned in the SPA. It is a stark reminder of why parties should ensure, wherever possible, that SPAs (and other commercial contracts) accurately and comprehensively capture the consideration that it is expected will be exchanged for the purchase price. In particular, purchasers should be careful to ensure that all of the assets (or categories of assets) that they expect to acquire are explicitly reflected in the terms of the executed purchase agreement (or another binding agreement executed contemporaneously with the purchase agreement).

More generally, Dargamo confirms that unjust enrichment will have a limited role to play where there is a valid, performed contract. Parties will rarely if ever be able to circumvent the clear terms of such a contract by claiming they have not received all of the consideration they expected to.


[1]  [2021] EWCA Civ 1149

[2]  In any event, the Court also found that it was not clear precisely how much of the purchase price was referable to the Other Shares, if any.

Authors and Contributors

Jonathan Swil



+44 20 7655 5725

+44 20 7655 5725


Nick Withers


Mergers & Acquisitions

+44 20 7655 5956

+44 20 7655 5956


Chris Collins



+44 20 7655 5688

+44 20 7655 5688