Quasi Contract

QUASI CONTRACTS UNDER INDIAN CONTRACT ACT,1872

Quasi contracts

There exists certain responsibilities which by nature are not contractual, but are identical to the contractual obligations and the law as well as the justice require that certain person or persons , must conform to such obligation nevertheless the fact that no contractual breach was ever committed by him . Therefore, the law considers them as contracts founded on the theory of equity. More generally, such situations are known as quasi contracts. It is a contract that is created by the court’s order where no agreement exists between the parties. Unlike contracts , quasi contracts does not involve any essentials of a valid contract.

The rationale behind existence of quasi-contractual obligations could be very well derived from the two theories broadly first being the theory of unjust enrichment i.e. the enrichment of one person at the cost of another, this principle came from the old maxim of Roman law ‘Nemo debet locupletari ex aliena jactura’ which means that no man must grow rich because of one’s personal loss. While deciding an issue on this principle of unjust enrichment ,the court ought not to take notice of the element of “intention” of the parties or their agreement for that matter and secondly from the theory of implied contract i.e. it rests upon an imaginary hypothetical contract which is implied by law , which is again a much more restricted view than the former.[1] The case which first recognised this concept of quasi-contractual obligations is Moses v Macferlan[2] wherein the court laid down that this type of action is based on principle of natural justice and equity broadly.

Essentials of the quasi contract are -

1. It comes into picture by operation of law and is not created by contract.

2. It is a right in personam.

3. One party among the two i.e. the defendant must have been benefited from the other party i.e. plaintiff.

4. This enrichment so received by the defendant must be at the expense of the plaintiff and the retention of the same is unfair, therefore the plaintiff is entitled to receive damages.

5. It is raise by legal fiction.

In India, broadly, quasi contracts as a concept has been discussed and incorporated under Indian Contract Act, 1872 in Chapter V , from sections 68 to 72 of the same.

Broadly these includes -

1) Claim for necessaries given to or on behalf of an individual incapable of contracting[3] – Minors ,lunatics etc. are some category of people who are incapable to contract ,since contracts entered with them are regarded to be void ab initio under the law ,however this position may prove to be disadvantageous to the person who under the law are bound to take care of them and are under an obligation to fulfil their basic necessities and had incurred costs while providing the same. This section recognises a quasi-contractual obligation for the payment of necessaries supplied to a minor or lunatic from their estate, so if a person A who is a lunatic is being taken care of by B ,than the person B is entitled to be reimbursed from the A’s estate ,all the costs that he had incurred while taking care of A’s basic needs.

2)Reimbursement of person paying money due by another in payment of which he is interested[4]- This section basically provides for a condition where one person who is interested in certain property or goods made a payment on behalf of the owner who was principally liable for the payment so made by such interested person ,the owner shall in all cases will be liable to pay the amount to the other party. Mr A , who was a leasee of the premises owned by Mr. B made a payment of Rs. 20,000 for setting-off the already overdue municipal taxes in order to save the property from being sold in execution, on payment of the same Mr. A becomes entitled to recover the said amount from Mr. B.

3) Responsibility of the person who had reaped benefits from a non-gratuitous act of another[5] – When a party does an act lawfully and non-gratuitously and the other party has been benefitted by the impugned act of the former party , the latter is liable to compensate the former for his act. In the case of State Of West Bengal vs M/S. B. K. Mondal And Sons[6], the plaintiff had constructed certain structure at the request of an officer of the State. The State accepted the work , however refused to pay for the same , pleading that there was no valid contract with respect to the same ,the Court gave its verdict in favour of the plaintiff.

4) Liability of the finder of goods[7]- Finder of the goods who takes such goods under his custody steps into the shoes of the bailee in relation to the goods of which he has taken custody and is under an obligation to take reasonable care of them and return them back to their lawful owner. For instance , Daksh who is an owner of a grocery shop saw a mobile phone lying unclaimed on the cash counter, later he came to know that this phone belongs to Ms. Sarita his customer ,now Daksh is liable and responsible to keep the mobile safely with him and return it to Ms. Sarita.

5) Liability of the person to whom the money is paid or a thing delivered by force or under a mistake[8] – Payment by mistake refers to a situation where payment of money wasn’t due but there was a false impression that the amount was due which in fact wasn’t . The payment made under coercion or undue pressure shall be treated in same way as payment made under mistake. This section make a person to whom money has been paid, or anything delivered, under coercion or by mistake, liable for either repaying it or returning it. In the case of Sales Tax Officer, Banaras & Ors. vs Kanhaiya Lal Mukundlal Saraf[9] , certain amount of sales tax was paid by the firm on its forwarded transactions, however subsequently when the payment was done ,the Allahabad High Court ruled out that the levy of sales tax on such transactions to be ultra vires. As a result the firm asked to recover back the tax money and the same was allowed by the Apex Court.

Differences between a contracts and quasi contracts

Ø A contact is an agreement which is enforceable by law whereas A quasi-contract is not a real contract. These are also known as “constructive contracts” or “certain relations resembling those created by contracts.” In the words of Salmond “there are certain obligations which are not in truth contractual in the sense of resting on an agreement, but which the law treats as if they were.”[10]

Ø There is always an agreement between the parties , in a contract whereas there exist no such agreement between the parties when it comes to quasi contract.

Ø In a contract , the parties must consent on a similar topic and in same sense whereas in the case of quasi-contracts , parties don’t consent with each other.

Ø The liabilities of the parties to a contract ,largely depends upon the terms of the contract whereas the liability exists regardless of an agreement between the parties in the quasi-contract and broadly rests upon on the principles of equity, fairness and good faith.

Remedies for the breach of quasi contractual obligations

When a party sues for damages under a quasi-contract, the remedy is typically restitution or recovery under a theory of quantum meruit. “Quantum meruit” is a Latin phrase which means “what one has earned” or more properly “as much as one deserves.” It covers situations in which someone gets a profit and nothing is earned by the other party. In contracts, this applies to the gain or enrichment earned by one party as a consequence of the conduct of the other party. Even if there is no specific contract this law implies a promise to pay a reasonable amount for the labour and material furnished. It is a claim under quasi-contract, generally the claim of the same arises in either of the situations first being the case when the contract is discovered to be unenforceable ,or where one party abandons or refuses to perform the contract , when a contract is divisible and the party not in default has enjoyed benefit of the part performance , the party in default may sue on a quantum meruit or a case when an indivisible contract is performed completely but unsatisfactorily.

One must ,however needs to understand that the concept of Quantum meruit is different from the concept of unjust enrichment ,while the latter deals with the issues relating to the failure for the payment of services so rendered ,the former generally deals with the fact that the amount of the payment so paid or liable to be paid is reasonable and fair .The service provider, i.e. the complainant, must show that the beneficiary of the services, i.e. the defendant agreed to the services rendered, knowing that he must pay the complainant for the services provided and that the defendant was unfairly enriched, which means that he got everything for nothing, in order to be successful in a quantum meruit suit. This concept was applied in various cases one of them being the case of Craven-Ellis v Canons Ltd[11] ,the facts of same are that there was a plaintiff who was appointed as a managing director of the company . The appointment was made by the other directors of the company who were also disqualified by reason of not having taken their qualification shares ,the plaintiff also didn’t took the same ,but despite of this fact he continued to act as a managing director and sued the company for agreed renumeration or a reasonable remuneration on the basis of quantum meruit, the Court of Appeal rejected the claim for the agreed renumeration for the fact that the very contract of appointment was void, but the claim which was based on quantum meruit was however allowed. The obligation to pay for a fair renumeration in absence of any implied contract is imposed by rule of law and not from the fact of acceptance of services or goods.

Conclusion

One can fairly reach from the discussion above to a conclusion that quasi contracts can’t be regarded to be as a contract under the Indian Contract Act, 1872, but that doesn’t mean that there exists no remedy for the party so aggrieved under a quasi-contract. The law is laid down in such a way so as to protect interest of every individual ,one can’t do away from his liabilities by making an excuse of non-existence of any contract ,when the party making excuse has gained or obtained some benefit out of the other’s act . In such situations the concept of quasi-contract emerges out to be as a saviour to fill in the loophole or excuse of non-existence of contract ,that is to say that ,even if no agreement exist or if there was no acceptance ,one is liable to be reimbursed from the other party who was unjustly enriched. This concept basically advocates that no individual must get unjustly enriched at the cost of another individual's loss which is conformity with the rule of law as well.

References

Linton Corbin, “Quasi-Contractual Obligations”21 The Yale Law Journal 533 (1912).

Avtar Singh, Contract and Specific Relief ( Eastern Book Company , Lucknow, 12th edn., 2017)

Anirudh Wadhwa, Mulla on The Indian Contract Act (LexisNexis Butterworths, Haryana, 15th edn.,2016)

Moses v Macferlan (1760) 2 Burr 1005,1012’

Craven-Ellis v Canons Ltd (1936) 2 KB 403 (CA).

State Of West Bengal vs M/S. B. K. Mondal And Sons AIR 1962 SC 779

Sales Tax Officer, Banaras & Ors. vs Kanhaiya Lal Mukundlal Saraf AIR 1959 SC 135

Sinclair v. Brougham, (1914) AC 398.

The Modern Law Review,Vol. 9, No. 2 (Jul., 1946), pp. 198-202.

[1] Sinclair v. Brougham, (1914) AC 398. [2] (1760) 2 Burr 1005,1012. [3] The Indian Contract Act, 1872 (Act 9 of 1872), s.68. [4] The Indian Contract Act, 1872 (Act 9 of 1872), s.69. [5] The Indian Contract Act, 1872 (Act 9 of 1872), s.70. [6] AIR 1962 SC 779 [7] The Indian Contract Act, 1872 (Act 9 of 1872), s.71. [8] The Indian Contract Act, 1872 (Act 9 of 1872), s.72. [9] AIR 1959 SC 135 [10] The Modern Law Review,Vol. 9, No. 2 (Jul., 1946), pp. 198-202. [11] (1936) 2 KB 403 (CA).