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Quasi-Contractual Obligations

The basics of law of contract states that there are certain essential elements to make it a valid contract. These essential elements are offer, acceptance and consideration. But there are contracts which are possible without these. These are known as quasi contracts.

There are certain obligations , particularly specified in the Indian Contract Act, that are not actually contracts because they miss one or the other essential elements. These obligations are called Quasi Contractual obligations. These contracts are though missing one or more essential elements but are still enforceable in court.

Salmond defines quasi contractual obligations as:
there are certain obligations which are not in truth contractual in the sense of resting of an agreement but which the law treats as if they were[1].

So basically these are the obligations between parties which is not contractual but treated as contractual but treated contractual by law.

Quasi contracts are actually a result of certain social relationships which give rise to certain specific obligation. These are contracts which are not founded on actual promises. A quasi contract is not a true contract, the parties which are the part of the contract, mostly do not even know each other and are not familiar at all.

Quasi contracts are based on the principle of Nemo debet locupetari ex aliena factura which in layman language mean that:
No man should grow rich out of other person's loss[2].

Research Questions:
  1. What is the responsibility of the finder of the goods?
  2. What is the liability of a person to whom money is paid by mistake or under coercion?

Quasi contracts come into function when there is no actual contract but social relationships which create obligations for those people. They are same as normal contracts in the eyes of the law.

Quasi contractual obligations were identified in the British law but the Indian contract act defined these as relations relating to contract. Therefore, the Indian Contract act has a lot in common with the British law. The procedural term for the same is quantum meruit.

Now there are certain situations in which people are expected to be bound by certain obligations under law, even though he/she may not be at fault and may not have committed any contract or tort. This rule is applicable in various situations. For instance, if you enjoy some service even though you did not ask for it, it is your responsibility to pay it back. Therefore, under these contracts a person can not enjoy unjust benefits without paying for somebody else's work or service provided.

Under section 71 of Indian Contract Act 1972, any individual who is a finder of some good, he/she will be treated as someone who will hold responsibility of the good for the meantime and he/she will not be having the ownership of the same. Basically, he will be treated as a bailee. It is his/her instant duty to and find the actual owner of the goods. The bailee will have certain rights and obligations as the overseer of the product for now.

This can be better understood with the help of an example. For instance, Ram found an expensive gold chain which actually belongs to Sham. Here, Ram is the finder or overseer of the goods. In this case Sham has the option to hold the ownership of the gold chain against all the people of the world except for Ram.

But, in this case, Ram should be ready to pay for all the work that Sham did in finding him.

Now, there are certain obligations at the part of finder of the products:
The finder should make sure that he does not use the object for personal use. He/ she should make genuine efforts to find the actual owner of the found object. These and other sensible consideration should be kept in the minds of the locater.

Also, there are some exceptions or advantages in the hands of the locater
  1. The locater has the option to sell the goods in certain conditions for instance
    • If the goods found are perishable and will be wasted if not used in a limited period of time.
    • If the actual owner is not found even after multiple and genuine trials
    • If the proprietor is not willing to pay any compensation to the locator[3].
  2. The overseer or finder also has in hand the right to hold the products with himself if the actual owner of the goods is not ready to pay compensation or remuneration. This is called the right to lien.
  3. There are some cases in which the locator also has the right to sue. This is possible only if in case the real owner has reports an award to be claimed for anyone who finds the goods but later on refuses to give the reward.
Now, Quasi contracts can prove to be a very confusing topic. Many questions can pop up in a people's mind after reading about quasi contractual obligations. The most common and the most confusing question is �� Is there any difference between contracts and quasi contracts?

The answer is pretty simple.
  • The most basic difference between the two is that any contract to be fulfilled needs an offer, an acceptance, and an agreement as mentioned earlier. Quasi contracts can lack one or the other elements. Due to this reason a quasi-contract is also known as a pseudo contract.
  • Any simple contract is a right in rem while quasi contracts are right in personam.
  • Quasi contracts unlike simple contracts are not created by contract but are imposed by the law itself.
Quasi contracts in the Indian constitution are stated under the Indian contract act 1872 under section 68 to 72.
There are five types of quasi contractual obligations. They include supply of necessities(section 68), payment by interested person(section 69), liability to pay for non-gratuitous act(section 70), finder of goods(section 71) and mistake of coercion(section 72)[4].

Another query that comes in the minds of the readers is �� What is the liability of a person to whom money is paid, or things are delivered by mistake or under coercion.
Any person who has been paid money by mistake or anything delivered by mistake or under coercion, must repay or return it as soon as possible and keep it as a responsibility until it is repaid or returned to the actual owner.

This can be better understood by an illustration.
For instance, there are two people, Mr. Sam and Mr. Smith, who are in a business partnership. They have to pay a certain amount of money, say Rs. 2 crores to Mr. Jacob. In a meeting in which only Mr. Sam and Mr. Jacob are present, Mr Sam transfers the full amount of money that id Rs. 2 crores to Mr. Jacob. Now in this situation, Mr. Jacob is bound to repay the amount of money given by Mr. Smith back because the promised amount has already been transferred and the extra money transferred by Mr. Smith is done by mistake.

Another illustration which can help us know this concept is:
For instance, there is a taxi company and a family hires a taxi from the company to go to an outstation trip. In between the road trip, the taxi driver asked the passenger to pay for the petrol but as per the rules of the company, it is the responsibility of the taxi driver to pay for the petrol. If the family had paid the money for the petrol filling, it can rightfully ask back for the undue payment done for the petrol.

This liability of any person to whom money is paid or things are delivered by mistake comes under section 72 of the Indian Contract Act 1972. It basically states that any person who is having a belonging of some amount of money or some object is bound to pay or give it back to the actual owner as soon as possible.

These are the basics of Quasi contracts and its obligations. Sometimes Quasi contracts are confused with Implied in fact contracts. We now know that quasi contracts are the ones which lack mutual consent between the parties. On the other hand, implied in fact contracts are the ones which are even though not actual contracts but the parties have a mutual consent on the controversial matters.

Implied in fact contracts lack written agreement on the controversial matters. For instance,
Bunny, a student of class XII is week in physics and needs some extra tuition classes for the same. Naina, a high school physics teacher is ready to teach him.

Now in this situation it is obvious that Naina will teach Bunny physics and in return Bunny will have to pay some amount of money to Naina for the services rendered to him. This is an Implied in fact contract.

On the other hand, in a quasi-contract the parties in most cases are not familiar to each other at all, so mutual consent or understanding is not expected.

Quasi Contracts has had a very interesting history in our country. The historical agreements of these Quasi Contractual Agreements can be taken back to the middle ages under a name that was implies back then as 'indebitatus presumption'. Indebitatus presumption was basically a strategy utilised by the courts to form one party to pay another as though an agreement hosted between the two parties[5].

It is important to note that any contract in its initial stages is an agreement. In other words it will not be wrong to say that no contract is possible without an agreement. Therefore, we can say that Quasi contracts are just contracts for the saying. The only thing which makes it relevant, is that it is enforceable under law.

Quasi contract has been used in many successful cases such as:
  • Clay v. Independent School Dist. No. 1 of Tulsa County, 935 P.2d 294 (Okl. 1997)
  • Bloomgarden v. Coyer 479 F.2d 201 (D.C. Cir. 1973).
  • Moses v. Macferlan [1760], 97 Eng. Rep. 676 (2 Burr. 1005)
  • Sinclair v. Brougham [1914] AC 398
  • Fibrosa Spolka Akeyjna v. Fairbairn Lawson combe Barbour Ltd. UKHL 4,, AC 32,, 2 All ER 122

At last, we can conclude that an agreement has certain components such as offer and its acknowledgement that gives rise to an agreement. So, agreement is basically the event that turns lawfully enforceable, that is it very well may now be dealt in an official courtroom in front of both the gatherings in question.

However there are some circumstances where even without an understanding accordingly, either party is obliged to perform something. Such commitment are called Quasi Contracts. Chapter V of the Indian Contract Act 1872 deals with such obligations.


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