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Loren, Attorney
Category: Legal
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Experience:  30 years experience representing clients.
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Situation involves Mr. A, who belongs to a social club. Members

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Situation involves Mr. A, who belongs to a social club. Members of the club meet once a month and at that meeting, contribute a fixed amount of money each. The total sum collected at the meeting is then handed over to one member of the group, pursuant to a pre-determined monthly pay-out schedule. As such, each member has a turn at being the beneficiary of the month.

Mr. A benefited from the monthly collection, and immediately stopped attending the monthly meetings and giving his own monthly contributions, thereby causing the other members of the club who had contributed towards his lump sum benefit, but who had not yet received their own pay-outs, to incur a loss.

Is this type of money collection/distribution scheme even legal?

If it is, what recourse, if any, does the group have against Mr. A, given that there is no agreement in place, between the parties.
Thank you for using JustAnswer. I am JudgeLaw and I will do whatever I can to answer your question nd provide excellent service.

I am sorry to hear of your dilemma. I realize how frustrating this is for you and I hope to provide you information which is accurate and useful, even though it may not be the news you were hoping to get.

While such an arrangement is not illegal, so long as it is not a pyramid scheme where members are required to recruit new member in order to receive a payout, it is also not enforceable absent a writtten agreement to repay the money back if you leave the group.

Otherwise, since there is no required payback, it is a gift and gratuitous.

A possible solution is to make the members sign a promissory note to repay the "gift" if they leave before a certain period.

I am sorry. I realize this is not the answer you were hoping for. As a professional, however, I am sometimes placed in the position of having to deliver news which is not favorable to a customer's position, but accurately reflects their position under the law. I hate it, but it happens and I ask that you not penalize me for having to deliver less than favorable news.

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Thank you.


Customer: replied 3 years ago.



Although there was no agreement in place requiring pay-back of the money, could the group still try to re-claim the money through an unjust enrichment suit?


Besides the money distibution scheme, the group has rules and regulations which provide that it shall support members in times of joy (weddings, graduations, births) and sorrow (death of a close family member) with a certain pre-detrmined amount of money, drawn out of a general support fund towards which all members contribute yearly.


Mr. A claims that the reason he stopped attending meetings and participating in the money distribution scheme was because the group failed to give him the financial support he was due, out of the general support fund, when he lost his sister. The fact notwithstanding that he had dutifully made yearly payments into the fund, as required by the rules.


Would this be a viable defense to an unjust enrichment claim, if such claim can be brought?

Thank you for following up with me.

If you were going to sue, promissory estoppel or unjust enrichment would be the closest thing to a remedy you could try.

However, I just do not see a court viewing this as more than a social obligation and courts will not legally enforce a social obligation. This is not a credit union or other banking organization so it is not regulated by anything other than social pressure.

I am sorry. I just do not see a legal solution to your desire for repayment.

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