Voluntary payment rule explained

Contracts profs usually don’t spend much time talking about the “Voluntary Payment Rule,” but Diane Bettino of the Reed Smith law firm has published a handy introduction to it.

The Voluntary Payment Rule is an equitable defense based on the general common law rule that a person cannot recover money which he has voluntarily paid with full knowledge of the facts. The Rule charges the claimant with knowledge of the law, even arcane law such as tax law.

Bettino points out that the rule was used to throw out a case challenging an early lease termination fee as a penalty under Article 2A, because the lessee had already paid the fee.