Introduction
In the realm of contract law, a quasi-contract is a legal obligation imposed by law, even though there is no formal agreement between the parties. It is based on the principle that no one should unjustly enrich themselves at the expense of another. Quasi-contracts are not true contracts but are treated as such to prevent unfair situations where one party benefits at the expense of another without any reciprocal consideration. Under the Indian Contract Act, 1872, quasi-contracts are governed by Sections 68 to 72, which outline the various circumstances where the law imposes these obligations.
This article will explain quasi-contract meaning, the types of quasi-contract, and the relevant sections under the Indian Contract Act. It will also cover the key principles behind quasi-contracts and the latest judicial interpretations.
Contents of Article
Quasi Contract[Contracts Implied In Law Or Implied Contract]
Quasi contract means a contract which lacks one or more of the essentials of a contract.
Quasi contract are declared by law as valid contracts on the basis of principles of equity i.e. no person shall be allowed to enrich himself at the expense of another the legal obligations of parties remains same.
Quasi Contract Meaning
A quasi-contract is a legal remedy designed to prevent one party from being unjustly enriched at the cost of another. In essence, it is a contract implied by law, where no explicit agreement exists between the parties, but justice demands that one party should compensate the other.
Key Features of Quasi-Contracts:
- No Agreement: There is no formal agreement or mutual consent between the parties.
- Legal Obligation: The law imposes an obligation to prevent unjust enrichment.
- Compensation: The party who benefits must compensate the other party for any loss or expenses incurred.
Example: A mistakenly leaves a package of goods at B’s house. Since B benefits from these goods, the law imposes an obligation on B to compensate A for the value of the goods, even though there was no formal contract between A and B.
Nature of Quasi contracts Under Indian Contract Act
- A quasi contract does not arise from any formal agreement but is imposed by law.
- Every quasi contract based upon the principle of equity and good conscience.
- A quasi contract is always a right to money and generally though not always to a liquidated sum of money.
- A suit for its breach may be filed in the same way as in case of a complete contract.
- The right grouted to a party under a quasi contract is not available to him against the whole world but against particular person(s) only.
- A suit for breach of a quasi contract may be filed in the same way as in case of an ordinary contract
- Although there is no contract between the parties under a quasi contracts, yet they are put in the same position as if he were a contract between them .
Provisions relating to various quasi contracts are contained in section 68 to sec 72 of the contract Act, 1872.
Types of Quasi Contracts
- Sec. 68 Supply of Necessaries
- Sec. 69 Reimbursement of money due
- Sec. 70 Obligation to pay for benefit out of non – gratuitous act
- Sec. 71 Responsibility of Finder of Goods
- Sec.72 Person receiving goods are money by mistake
Section 68: Supply of Necessaries
Section 68: If a person, incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by another person, 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.
Meaning of Necessaries
- Necessaries normally include articles required to maintain a particular person in the state, degree and station in life in which he is.
- They are essentials to run a life.
- An item will not be considered necessary, if a person already has sufficient supply of things of such kind.
- Necessaries include Services rendered to a person.
- What constitutes necessaries depends on the circumstances of each case.
Only property liable: person not liable
- It is only the property (movable and immovable) of the incapable person they shall be liable.
- He cannot be held liable personally.
- Where he doesn’t own any property, nothing shall be payable.
Example
- A supplies B, a lunatic, with necessaries suitable to his condition in life. A is entitled to be reimbursed from B’s property.
- A who supplies the wife and children of B, a lunatic, with necessaries suitable to their condition in life, is entitled to be reimbursed from B’s Property.
Payment By a person who is interested in a transaction [69]
- Condition of section [69]
Sec. 69; A person, who is interested in the payment of money and pays such money, which another is bound by low to pay, is entitled to be reimbursed by the other.- one party is legally bound to make a payment
- Some other persons make such payment
- The person making such payment is not legally bound to make such payment
- The person making such payment is interested in paying such amount
Legal effect of section 69
If all the conditions of sec 69 are satisfy the person who is interested in paying such amount shall be entitled to recover the payment made by him.
Ex.:- The goods belonging to A were wrongfully attached in order to realize arrears of Government revenue due by G. A paid the amount to save the goods from sale at was held that A was entitled to recover the amount from G.
Obligation of person enjoying benefit of non-gratuitous act [70]
- Conditions of section 70.
Sec.70 : Where 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 benefits thereof, then he is bound to make compensation to the other in respect of, or to restore the thing so done or delivered.- A person has lawfully done something for another person or delivered something to another person.
- Such person must have acted voluntarily and non – gratuitously.
- The other person has enjoyed the benefit of the act done for him or the thing delivered to him.
- Legal effect of sec 70.
If the conditions of sec70 are satisfied, there will be quasi contract between the parties.
Consequently, the party who has done something or delivered a thing shall be entitled to recover its value from the person who obtained the benefit of the same.
Ex.:- A a trades man leaves goods at B’s house by mistake, B treat the goods as his own, He is bound to pay A for them.
A saves B’s property from fire. A is not entitled to compensation from B if the circumstances show that be intended to act gratuitously.
Finder of Goods [71]
A person who finds goods belonging to another and takes them into custody, is subject to the same responsibility as a Bailee.
A finder of goods has same rights and duties at that of bailee.
- Duty to take reasonable care of the goods
- Duty not to use the goods for his own purpose.
- Duty not to mix the goods with own goods
Right to recover expenses, reward, sell the goods
Ex.:- X a guest found a diamond ring at a birthday party of Y. X told Y and other guests about it. He has performed his duty to find the own. If he is not able to find the owner he can retain the ring as bales.
Money paid under a mistake or conversion [72]
Sec. 72: A person to whom money has been paid, or anything delivered by mistake or under coercion, must repay or return it.
Conditions of Sec. 72
- A person has
- Paid money to another person or
- Delivered something to another person
- Such person must have acted
- Under a mistake or under coercion.
Legal effect – quasi contract, recover its value from the person who obtained the benefit of same.
Example:
- A and B jointly owe Rs.1,000 to C.A alone pays the full amount to C and B not knowing this fact, pays Rs.1,000 again to C.C is bound to repay the amount to B.
- A Railway Company refuses to deliver certain goods to the Consignee except upon payment of an illegal charge for carriage. The Consignee pays the sum charged in order to take delivery of goods. He is entitled to recover so much of the charge as was illegally excessive.
Compensation for failure to discharge obligation created by quasi contract [73]
When an obligation created by quasi contract is not discharged the injured party is entitled to reline the same compensation from the party in default as if such person had, contracted to discharge is and broken his contract.
Quantum meruit: – [as much as is earned]
One party preventing the other:- If a party prevents the other party from completing his obligation under the contract the aggrieved party may claim payment on quantum merit for the part of contract already performed by him.
- In case of void agreement or contract that becomes
Any person who has received any advantage under such agreement or contract is bound to restore if or to make compensation for it, to the person from who received it.
Ex.:(1)- A – B – 10000 – to marry c (A’s daughter) – C – death of the time of performance of contract – B must repay A Rs 1000.
Ex.(2):- A – B decline 250 quince of rice before the 1st of May. A delivers 130 qu. Only before that day and none after. B retains the 130 qu. after the first of May. He is bound to pay A for them.
Ex(3):- A singer – two nights in every week during the next two month and B any ages to pay her Rs 100 for each night’s performance on the sixth night, A willfully absent perfect. B must pay a for the five night on which she had sung.
- In case of Act preventing the completing of contract:-
If a party does not complete the contract or prevents the other party to complete the contract the aggrieved party can sue or quantum meruit.
Ex.:- owner – P write a book to be published as series in his magazine. After a few series were published the publication of the magazine was stopped. It was held that P could claim payment on quantum meruit for the part already published.
- In case of divisible contract :-
- If the contract is divisible and
- If the party not at default has enjoyed benefit of the point performance.
- the contract is party performed
If the above condition an satisfied, the party at fault may claim on payment on quantum meruit for the part of contract performed by him be con recover such proportion of the contract price as the work done, by him bears to the work under the contracts.
- In case of indivisible contract performed completely but Badly.
- Contract is indivisible
- Lump sum consideration
- Completely performed
- Performed badly
The party at fault may recover the contract price (Lump sum price) less the deduction made for done badly.
Ex.:- X agreed to decorate Y’s flat for a lump sum of Rs20,000. X did the complete work but Y complained of faulty work man stop. It costs Y another Rs3000 to remedy the defect. X could recover only Rs 17000 from Y.
- In case of Non – gratuitous Act – Three condition
- The thing must have been done or delivered lawfully.
- The person who has done or delivered the thing must not have intended to do so gratuitously And
- The person from whom the act is done must have enjoyed the benefit of the act.
Ex.:- A, a tradesman leaves goods at B’s shop be mistake B treats the good as his own. He is bound to pay A for them.
Principles of Quasi-Contracts
The principles behind quasi-contracts are rooted in preventing unjust enrichment and ensuring fairness. The primary principle is that no one should be allowed to benefit at the expense of another without compensating them. While there is no formal agreement between the parties, the law imposes a duty on the benefiting party to restore what they have gained or to compensate the other party.
Characteristics of Quasi-Contracts:
- Imposed by Law: Unlike regular contracts that require mutual consent, quasi-contracts are imposed by law.
- No Mutual Consent: The obligation arises without any agreement between the parties.
- Unjust Enrichment: The primary aim is to prevent one party from being unjustly enriched at the expense of another.
Difference between Quasi Contract and Contract
| Matter | Quasi – contract | Contract |
| Intentionally Form | It is not intentionally formed but law imposes upon the parties. | It is intentionally formed by parties. |
| Essentials of contract | A quasi – contract does not possess all the essential of a valid contract. | A contract possesses all the essentials of a valid contract. |
| Obligations | Obligations are implied upon by the law. | Obligations are mutually created by the parties. |
| Foundation | It is founded upon the principle of equity. | It is founded upon general principal of law of contracts. |
Latest Case Law on Quasi-Contracts
- ONGC v. Association of Natural Gas and Oil (2021)
In this case, the Supreme Court of India reaffirmed the principles of quasi-contractual obligations, holding that a party who has benefited from another party’s actions, even in the absence of a formal contract, must compensate the other party to prevent unjust enrichment. The court applied Section 70 of the Indian Contract Act and ruled in favor of the party that had performed a non-gratuitous act. - State of West Bengal v. B.K. Mondal & Sons (1962)
This classic case is an example of Section 70, where the court held that when the government accepted the benefit of construction services provided by a private contractor without a formal contract, the government was liable to compensate the contractor for the value of the services.
Conclusion
The concept of quasi-contracts under the Indian Contract Act, 1872, is essential for ensuring fairness in situations where one party benefits at the expense of another without an explicit agreement. The Act outlines various types of quasi-contracts, including those dealing with the supply of necessities, payment by interested parties, and obligations related to found goods. The principles governing quasi-contracts aim to prevent unjust enrichment and provide legal remedies for those who suffer losses in the absence of a formal contract. By understanding the kinds of quasi-contracts, law students and professionals can better navigate the complexities of this area of law.