lawyers in India

Relevance of Quasi-Contracts

Written By: Deboshree Banerji - An Alumni of ILS law college
Contract Law
Legal Service India.com
  • There are certain situations wherein certain persons are required to perform an obligation despite the fact that he hasn't broken any contract nor committed any tort. For instance, a person is obligated to restore the goods left at his home, by mistake, and keep it in good condition. Such obligations are called quasi-contracts.

    Rationale
    The rationale behind quasi-contract is based on the theory of Unjust Enrichment. Lord Mansfield is considered to be the founder of this theory. In Moses v. Macferlan[1] he explained the principle that law as well as justice should try to prevent unjust enrichment, i.e., enrichment at the cost of others.
    A liability of this kind is hard to classify. Since it partly resembles liabilities under the law of tort and partly it resembles contract since it owed to only a party and not a person or individual generally. Therefore, it comes within the ambit of an implied contract or even natural justice and equity for the prevention of unjust enrichment.

    However, in Sinclair v. Brougham[2], the theory of implied-in-fact was adopted.
    Facts: a building society undertook banking business which was outside its object, and therefore, ultra vires . the society came to wound up. After paying up all outside creditors, a mixed sum of money was left which represented partly the shareholders money and partly that of the ultra vires depositors, but the money wasn't sufficient to pay all of them. The depositors tried to get priority by resorting to the quasi-contractual action for recovery of money had and received for the depositors' benefit, else the shareholders would have been unjustly enriched.

    The House of Lords allowed pari passu distribution of the mixed funds among the claimants, but did not allow any remedy under quasi-contract. It was maintained that the common law knows personal actions of only two classes, viz.,
    a) those founded on contract;
    b) those founded on tort.

    when it speaks of action arising quasi ex contractu it refers only to a class of action in theory which is imputed to the defendant by a friction of law.[3] This approach dominated the scene for quite some time and quasi contracts were taken to be fictional contracts.

    Since this approach was restricting the scope of relief and was leading to unjust enrichment, the theory of unjust enrichment was again restored in Fibrosa Spolka Akeyjna v. Fairbain Lawson Combe Barbour Ltd.[4]by Lord Wright. While referring the ratio decidendi of the decision in Sinclair v. Borogham, he stated that it was against public policy to allow the recovery of an ultra vires deposit, whether the claim is based on contract or quasi-contract. The observations in this particular case were merely the obiter dicta of the Sinclair Case.

    In Indian context, the quasi-contracts are put under chapter V of the Indian Contract Act as OF CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACTS. The framers avoided the direct term quasi-contract in order to avoid the theoretical confusion regarding the same.

    Sections 68 to 72 provide for five kinds of quasi-contractual obligations:

    1. Supply of necessities [s.68]
    2. Payment by interested persons [s.69]
    3. Liability to pay for non-gratuitous acts [s.70]
    4. Finder of goods [s.71]
    5. Mistake of coercion [s.72]

    Supply of necessities [S.68]

    When necessities are supplied to a person who is incompetent of contract or to someone who is legally bound to support, the supplier is entitled to recover the price from the property of the incompetent person. incompetency to contract, here, would mean parties that are not competent to contract as per sec. 10 of the Act, i.e., in following circumstances:
    v Minors
    v Persons of unsound mind
    v Persons disqualified by law to which they are subject

    Payments by interested persons [S.69]

    A person who is interested in the payment of money which another is bound by law to pay and who therefore pays it is entitled to be reimbursed by the other.

    This section s subject to certain conditions:
    v The plaintiff must be interested in making the payment. The interest which the plaintiff seeks to protect must be legally recognizable;
    v It is necessary that the plaintiff himself should not be bound to pay. He should be interested in making the payment in order to protect his own interest;
    v The defendant should have been bound by law to pay the money;
    v The plaintiff should have made the payment to another person and not to himself.

    Liability for non-gratuitous act [S.70]

    S.70 creates liability to pay for the benefit of an act which the doer did not intend to do gratuitously. Where a person does something for another person not intending to do so gratuitously and such person is entitled to enjoy benefits from it. And then such a person who has used the thing has to compensate the other or restore or deliver the thing.

    For example, A, a tradesman, leaves goods at B's house by mistake. B, treats the goods as his own. He is bound to pay A for them. Conditions of liability under this section are as follows:
    v One of the purposes of the section is to assure payment to a person who has done something for another voluntarily and yet with the thought of being paid.
    v The person for whom the act is being done is not bound to pay unless he had the choice to reject the services
    v It is necessary that the services should have been rendered without any request
    v Services should have been rendered lawfully
    v The person rendering services should not have intended to act gratuitously

    Finder of goods [S.71]

    Section 71 lays down the responsibility of a finder of goods. The duties and liability of a finder is treated at par with the bailee. The finder's position, therefore, has been considered along with bailment.

    Mistake or coercion [S. 72]

    Section 72 states that payments or delivery made under mistake or coercion must be made good or be returned. In Sri Shiba Prasad Singh v. Maharaja Srish Chandra Nandi[5]it was made clear that money paid under mistake is recoverable whether the mistake is of fact or of law. If a mistake either of law or of fact is established, the assessee is entiled to recover the money and the party receiving it is bound to return it irrespective of any other consideration. The scope of the word mistake has been clarified by the Supreme Court in Tilokchand Motichand v.Commissioner of Sales Tax[6].

    Recovery proceedings generally are instituted by way of writ petition. There is no period of limitation in writs. The only requirement is that there should not be unreasonable delay amounting to laches. In Chrisine Hoaden India Ltd. v. N.D. Godag[7], it was held that the period of limitation would not begin to run until the applicant has discovered the mistake or could have discovered it with reasonable diligence. The claim was laid within one month of the mistake of law becoming known. It was held that the claim could not b e defeated on the ground of limitation. The term coercion is used in this section in its general sense and not as defined in Sec.15.

    Nature of quasi-contractual obligations

    The English Law identified quasi-contractual obligations first, the framers of the Indian Contract Act modified it and placed it in the Act as- certain relations resembling those created by contracts. Therefore the elements that are present in the English Quasi-contract are also found in that of the Indian Contract Act.

    1] Payments to the defendant's use.
    Two principles govern this liability they are:
    payment should have been made under pressure and not voluntarily;
    The defendant should have been bound to pay and has been relieved of his liability by the payment made by the plaintiff.
    The kind of pressure that the law recognizes for the purposes of this remedy is clearly understood by the case of Exall v. Partridge[8], where, the plaintiff had left his carriage upon the premises which the defendant was leaving as a tenant. The landlord lawfully seized all the goods on the premises including the carriage for non-payment of rent and would have sold them in execution of his claim. The plaintiff paid the outstanding rent to get back his carriage and then sued the defendant for the amount. He was held entitled to it.

    2] Voluntary payments
    Ve been liable to pay
    Payments made under the mistake of fact can be recovered provided that the party paying would have been liable to pay if the mistake of fact were true. In this respect one must look at the case of Kelly v. Solary[9], where the money was paid under a life insurance policy which to the knowledge of the company had lapsed. But, the fact of lapse having been forgotten at the moment, the company was held entitled to recover back the money. One of the essential conditions of this action is that the mistake must be of fact and must make the person liable to pay the money.

    3] Quantum Meriut
    There are situations wherein a party does the performance of a contract and further performance is made useless by the other party. In such cases the former can recover reasonable compensation from latter. An authority over the principle of quantum meruit is the case of Plinche v. Colburn[10],

    FACT: the plaintiff was the author of several dramatic entertainments. He was engaged by the defendants, who were the publishers of a work called The Juvenile Library that used to illustrate the history of armour and costumes from the earlier times. For this he was to be paid 100 guineas. The plaintiff made several drawings and completed a considerable part of the manuscript when the defendants discontinued his services. The plaintiff claimed an amount of 50 guineas for his work. Due to the principle of quantum meruit the plaintiff was held to be entitled to the claim.

    Conclusion
    The principle of quasi-contract is often ignored but still it holds a very important place, since the principle is grounded on the principles of justice and equity. Despite the fact that quasi contract are moulded in the Indian Contract Act under a new name. However, the basic nature and essence of the principle remains same without any drastic change. Thus, quasi-contracts form an integral part of the contracts act and it definitely comes to an aid of the victim when a person is enriched unjustly over the former.

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