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Quasi Contracts

The Quasi Contract[1]:

is defined as:
A voluntary act from which derives obligations subject to a regime close to the contractual one imposing on the author of the act and a third party, not bounding by the contract. Quasi contract deals with rights or liabilities arise from relations resembling those created by contract. It is not a real contract and thus called a non-consensual contract based on agreement of parties.

Quasi contract are based on the principle of equity and justice and prevent enrichment of one person at the cost of another . It is a contract where there is no intention either side to make a contract, but the law impose contract. Contract implied in the law are merely remedy granted by court to inforce equitable or moral obligations in spite of the lack of assent of the party to be charged.

Quasi-contract are made possible by the application of doctrine of Quantum Meruit that is what one has earned or deserved on implied assumpsit.

There are two main theoretical bases of quasi contracts liabilities and they are:
Implied contracts[2]
Unjust enrichment[3]
Sections 68-72 of the Indian Contract Act, 1872 detail five circumstances under which a Quasi contract comes to exist. Remember, there is no real contract between the parties and the law imposes the contractual liability due to the peculiar circumstances
  • Section 68 states that Claim for necessaries supplied to person incapable of contracting , or on his account.
  • Section 69 states that Reimbursement of person paying money due by another , in payment of which he is interested
  • Section 70 states that Obligation of person enjoying benefits of non-gratuitous act
  • Section 71 states that Responsibility of finder of goods
  • Section 72 states that Liabilities of person to whom money is paid , or thing delivered , by mistake or under coercion
Unjust Enrichment
Section 68 TO 72 of the Contract Act embody the principles of unjust enrichment. It would be unjust to allow one person to retain a benefit received at the expense of another person. Nemo debetlocupletari ex alienajacturai.e, No man should grow rich out of another person's loss .[4]

This unjust receipt may become a result of chance or misfortune for someone else . To be enriched unjustly, someone has to receive a benefit, but not paid for or worked to get that benefit . Therefore, it is considered ethically and morally appropriate to return it.

Proving unjust enrichment will require five elements:
 Enrichment must be received by the defendant.
 A disadvantage must have been suffered by the claimant.
 Said enrichment must be proven to be unjust.
 An explanation must be lacking for the enrichment and disadvantage.
 A remedy, provided by law to the claimant, must be lacking.

Evolution Of Quasi Contract

The history of quasi contract can be followed back to the Middle Ages, under a practice that was referred to back then as indebitatus assumpsit.[5] In that period, the law dictated that a plaintiff would receive a sum of money from the defendant, in an amount dictated by the courts, as if the defendant had always agreed to pay the plaintiff for his goods or services.

Indebitatus assumpsit was a method used by the courts to make one party pay another as if a contract had been created between the two parties. The defendant's agreement to be bound by a contract that required compensation was implied by the law. The early days in the history of quasi contract saw such contracts being used to enforce obligations related to restitution.

Elements Of Quasi Contracts

There are three inherent principles to a quasi contract.
  1. The plaintiff must show evidence of the goods or services they should have been compensated for.
  2. The defendant must have accepted those goods or services and receive some type of benefit from them.
  3. Finally, the defendant must have accepted said goods or services under unfair circumstances where the plaintiff didn't receive any compensation.
A standard, legal contractwould typically set out stipulations agreed upon by both parties before the services were rendered, or the goods received. A quasi contract, however, comes into play when one party never had any intention of entering into a legal contract. This is when the court steps in to create a contract and achieve a level of fairness between the parties involved.

Types of quasi contracts
  • Section 68states that Claim for necessaries supplied to person incapable of contracting , or on his account.[6]
    If a person, incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by another with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person.
     
  • Ingredients of the section are as:
    1. Necessaries are being supplied
    2. Necessaries so supplied must be suited to the condition of life of that person to whom they are supplied
    3. Necessaries are supplied to a person who is incapable of entering into a contract or anyone whom he is legally bound to support
    4. The reimbursement is to be claimed from the property of that incapable person

Case:
Mr. Sharma v. Mr. Nitin[7]
Facts:
Mr Sharma owns a furniture shop. Kamal, a class X student wanted a study table for his room. His father Nitin was adamant at not splurging money in buying unnecessary items. Kamal visited Mr Sharma's shop and offered to buy a study table for 5000/- rupees. Mr Sharma looked at Kamal and realized that Kamal was not yet eighteen year old. Mr Sharma told Kamal that only if his father agreed to pay the price, will Mr Sharma sell the table to Kamal. Kamal promised to Mr Sharma that he would ensure that his father Nitin makes the payment. Nitin refused to make the payment.

Judgement:
The court justified that we should look at the very basis of Section 11, which is that a party incompetent of understanding the consequences should not be the party which suffers losses, monetary or otherwise, because of its inability to understand the consequences of the contract, in perspective with the law,[xl] which says a good may be a necessary to a minor, but the quality or quantity supplied may render them unnecessary.

The counsel for Plaintiff has failed to show through valid arguments or evidence that the study table in question was indeed a necessary and has also failed in negating the fact that 5000/- rupees is not a huge amount to pay for a study table. This leads us to the conclusion that the study table in question is out of the definition of necessaries. The court therefore holds that the study table in question is not a necessary under the definition of Section 68.

Section 69states that Reimbursement of person paying money due by another , in payment of which he is interested[8].
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.

The conditions of the liability under sec. 69 are:
  • The first condition to be followed is that plaintiff should be interested in making the payment.
     
  • The second essential condition is that it is necessary that the plaintiff himself should not be bound to pay . He should only be interested in making the payment only for the purpose of protecting his own interest . Where a person is jointly liable with others to pay , a payment by him of the others' share would not give him a right of recovery
     
  • Thirdly the defendant should have been bound by law to pay money . the word bound by law have been held after some hesitation , to mean bound by law or by contract. It is not necessary that the liability should only be statutory
     
  • The fourth and the last condition is that the plaintiff should have made payment and not to himself

Case:
Gobind Ram Sanchaiti And Anr. vs Ram Kishore Choudhari And Ors[9]

Judgement:
In this case the judgement was held that case was made by a. purchaser of an estate from a limited owner during the existence of his interests in order to redeem a subsisting mortgage on the property. This chapter deals with the question of reimbursement. Section 69 relates to a case where the person who makes the payment is interested in such payment, although another is by law bound to pay it.

Section 70 states that Obligation of person enjoying benefits of non-gratuitous act.[10]
When a person lawfully does anything for another person or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the things so done or delivered.

Before any right of action under sec. 70 arises, 3 conditions must be satisfied:
  1. The thing must have been done lawfully.
  2. the person doing the act should not have intended to do it gratuitously.
  3. The person for whom the act is done must have enjoyed the benefit of the act

Case:
The above can be illustrated by a case law where 'K' a government servant was compulsorily retired by the government. He filed a writ petition and obtained an injunction against the order. He was reinstated and was paid salary but was given no work and in the mean time government went on appeal. The appeal was decided in favour of the government and 'K' was directed to return the salary paid to him during the period of reinstatement .[Shyam Lal vs. State of U.P. A.I.R (1968) 130][11]

Section 71 states that Responsibility of finder of goods.[12]
A person, who finds goods to another and takes them into his custody, is subject to the same responsibilities as a bailee. He is bound to take as much care of the goods as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quality and value. If he does not, he will be guilty of wrongful conversion of the property. Till the owner is found out, the property in goods will vest in the finder and he can retain the goods as his own against the whole world.

Case:
The supreme court has ruled in Union of India vs Amar Singh [13]that the statutory fiction by which a contract of bailment is inferred between a finder of goods and the real owner should not be enlarged by analogy or otherwise and, therefore , a railway authority which took into its custody wagons containing the plaintiff's goods and which were left across the border in Pakistan become the contractual bailees of goods , and it was not necessary to regard them as finders within the meaning of section 70 .

Section 72 Liabilities of person to whom money is paid , or thing delivered, by mistake or under coercion.[14]
A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it to the person who paid it by mistake or under coercion.
Every kind of payment of money or delivery of goods for every type of 'mistake' is recoverable. [Shivprasad vs Sirish Chandra A.I.R. 1949 P.C. 297][15]

A payment of municipal tax made under mistaken belief or because of misunderstanding of the terms of lease can be recovered from municipal authorities. The above law was affirmed by Supreme Court in cases of Sales tax officer vs. Kanhaiyalal A.I.R.1959 S.C.835[16]

Similarly any money paid by coercion is also recoverable. The word coercion is not necessarily governed by section 15 of the Act. The word is interpreted to mean and include oppression, extortion, or such other means [Seth Khanjelek vs National Bank of India][17]. In a case where 'T' was traveling without ticket in a tram car and on checking he was asked to pay ` 5/- as penalty to compound transaction. T filed a suit against the corporation for recovery on the ground that it was extorted from him. The suit was decreed in his favour. [Trikamdas vs. Bombay Municipal Corporation A.I.R.1954][18]

The Recovery Of Quasi Contracts

Three general situations outline recovery in a quasi contractare:
  1. The absence of a contract that would allow the plaintiff to be justly compensated.
  2. The existence of an unenforceable contract.
  3. The plaintiff's receipt of some type of benefit while breaching an existing contract.

Role Of Quasi Contract And The Court

A court will create a quasi contract when an official agreement is lacking between certain parties.[19] Usually, disputes will arise over payments for services rendered or goods. The court will be seeking to prevent unfair enrichment to any party involved in the dispute.

This makes a quasi contract a substitute for a contract, designed to promote fair treatment, or equity, between the parties involved. It's safe to say that quasi contracts are formed where legal agreements were not established but should have been.

Typically, an actual contract is necessary to hold a defendant liable for goods or services. When this is not the case, many jurisdictions in the United States will find that restitution may be achieved through a quasi contract.

Difference Between Contracts And Quasi Contract

Contracts Quasi Contracts
  • A contract is a contract between two parties. In contract, always there is an agreement between the parties.
  • In contract, the parties must give their consent to it
  • In contract, the liability exists between the parties by the terms of the parties
  • It is created by the operation of the contract.
  • It is right in rem, and also right in personam.
  • A quasi-contract is not a real contract . Where as in quasi-contract, there is no agreement between the parties
  • In quasi-contract, the parties do not consent.[20]
  • In quasi-contract, the liability exists independent of the agreement and rests upon equity, justice and good conscience
  • It is imposed by law. It is not created by the operation of the contract.
  • It is right in personam. i.e. strictly available against a person and is not available against the entire world.

Conclusion
The conclusion of quasi contract is that 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 is 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. When dealing with quasi contract , you may hear the term quantum merit.

This measures the severity of the plaintiff's suffering. If someone has willfully breached a contract, quasi contract recovery is less likely. Yet, you'll find this sort of restitution is often less severe in instances when an employee willfully breaches a contract. 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.

End-Notes:
  1. The Indian Contract Act, 1872
  2. Avtar Singh Law of contracts
  3. Avtar Singh Law of contracts
  4. William Albert KeenerA Treatise on the Law of Quasi-Contract
  5. legaldictionaryQUASI CONTRACThttps://legaldictionary.net/quasi-contract/
  6. Quasi-ContractsTypes of Quasi Contractfile:///C:/Users/ravee/Downloads/5_QUASI_CONTRACT_.pdf
  7. AIR 1950 Mad 274
  8. lawyersclubindiaQUASI-CONTRACT-A-COMPREHENSIVE-STUDY-OF-SITUATIONS-https://www.lawyersclubindia.com/articles/QUASI-CONTRACT-A-COMPREHENSIVE-STUDY-OF-SITUATIONS--3079.asp
  9. AIR 1953 Pat 145
  10. Quasi-Contracts Types of Quasi Contract file:///C:/Users/ravee/Downloads/5_QUASI_CONTRACT_.pdf
  11. AIR 1968 All 392, 1968 CriLJ 1461
  12. Quasi-Contracts Types of Quasi Contract file:///C:/Users/ravee/Downloads/5_QUASI_CONTRACT_.pdf
  13. 1960 AIR 233, 1960 SCR (2) 75
  14. lawyersclubindia QUASI-CONTRACT-A-COMPREHENSIVE-STUDY-OF-SITUATIONS- https://www.lawyersclubindia.com/articles/QUASI-CONTRACT-A-COMPREHENSIVE-STUDY-OF-SITUATIONS--3079.asp
  15. (1950) 52 BOMLR 17
  16. 1959 AIR 135, 1959 SCR Supl. (1)1350
  17. (1913) 15 BOMLR 472
  18. AIR 1954 Bom 427, (1954) 56 BOMLR 264, ILR 1954 Bom 727
  19. upcounselQuasi Contract Elements: Everything You Need to Knowhttps://www.upcounsel.com/quasi-contract-elements
  20. lawyeredContracts And Quasi-Contractshttps://www.lawyered.in/legal-disrupt/articles/contracts-and-quasi-contracts/

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