Sections 68 to 72 deals with “certain relations resembling those created by contract” under Indian contract act, 1872. It incorporated those obligations which are known as “quasi contracts” under English law. It covers cases where the obligation to pay arises neither on the basis of a contract nor a tort, but a person has obtained an unjust benefit at the cost of another. The quasi-contractual obligations are based on the principle that law as well as justice should try to prevent unjust enrichment means enrichment of one person at the cost of another or to prevent a man from retaining the money of, or some benefits derived from , another which it is against conscience that he should keep.
Thus the principle of unjust enrichment requires: 1st that the defendant has been ‘enriched’ by the receipt of a benefit : 2nd that this enrichment is at the expense of the plaintiff: and 3rd that the retention of unjust of the enrichment is unjust 1 Strictly speaking, a quasi-contract is not a contract at all. A contract is intentionally entered into. A quasi -contract ,on the other hand , is created by law. In an American case Miller v. Schloss, it was observed: “In truth it is not a contract at all.
It is an obligation which the law creates in the absence of any agreement, when the acts of the parties or others have placed in the possession of one person, money or its equivalent, under such circumstances that in equity and good conscience he ought not retain it, and which ex aequo et bono (in justice and fairness) belongs to another”. A quasi-contract (or implied-in-law contract or constructive contract) is a fictional contract created by courts for equitable, not contractual, purposes. A quasi-contract is not an actual contract, but is a legal substitute formed to impose equity between two parties.
The concept of a quasi contract is that of a contract that should have been formed, even though in actuality it was not. It is used when a court finds it appropriate to create an obligation upon a non-contracting party to avoid injustice and to ensure fairness. It is invoked in circumstances and is connected with the concept of restitution. Generally the existence of an actual or implied-in-fact contract is required for the defendant to be liable for services rendered, and a person who provides a service uninvited is an officious intermeddler who is not entitled to compensation.
“Would-be plaintiffs cannot deliver unordered goods or services and demand payment for the benefit…. A corollary is that one who does have an enforceable contract is bound by the contract’s terms: subject to a few controversial exceptions, she cannot sue for restitution of the value of benefits conferred… ” However, in many jurisdictions under certain circumstances plaintiffs may be entitled to restitution under quasi-contract (as in the example of Oklahoma below). They are used as remedies for unjust enrichment, management of another’s affairs, or “restitution of the undue”. _________________________________________ 1 mahabir kishore vs. state of M. P. ,AIR. (1990)S. C. 313.
KINDS OF QUASI CONTRACTS: (1) SUPPLY OF NECESSITIES (Sec. 68) 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. Ex. A supplies B, a lunatic, with necessaries suitable to his condition in life. A is entitled to be reimbursed from B’s property. (2) PAYMENT BY AN INTERSTED PERSON (sec. 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. Ex. B holds land in Bengal, on a lease granted by A, the Zamindar. The revenue payable by A to the govt. being in the arrears, his land is advertised for sale by the govt. under the revenue law the consequencesof such sale will be annulment of B’s lease. B to prevent the sale and the consequent annulment of his own lease, pays to the government the sum due from A. A is bound to make good to B the amount so paid.
The conditions of the liability under sec. 69 are: 1. The plaintiff should be interested in making the payment. It is not necessary that he should have a legal proprietary interest in the property in respect of which the payment is made. However, often it is used to determine whether plaintiff was interested. Sec. 69 does not invite such judicial limitation that aperson who has not an interest in the property can be interested in a payment of that property. 2. The plaintiff himself should not be bound to pay.
He should only be interested in making the payment in order to protect his own interest. 3. The defendant should be under legal compulsion to pay. 4. The plaintiff should have made the payment to another parson and not to himself.
(3) OBLIGATION TO PAY FOR NON-GRATUITOUS ACTS (Sec. 70) 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. Example. 1. A, a tradesman, leaves goods at B’s house by mistake. B treats the goods as his own. He is bound to pay for them to A. Example 2. A saves B’s property from fire.
A is not entitled to compensation from B, if the circumstances show that he intended to act gratuitously. 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[union of India vs. Sita ram, AIR 1977,S. C. 329] Ex: A village was irrigated by a tank. The government effected certain repairs to the tank for its preservation and had no intention to do so gratuitously for the zamindars. The zamindars enjoyed the benefits thereof. Held, they were liable to contribute 2.
(4) RESPONSIBILITIES OF FINDER OF GOODS (Sec. 71) 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, theproperty in goods will vest in the finder and he can retain the goods as his own against the whole world. Ex. F picks up a diamond on the floor on k’s shop.
He hands it over to K to keep it till true owner is found out. No one appears to claim it for quite some weeks in spite of the wide advertisement in the newspapers. F claims the diamond from K Who refuses to return. K is bound to return the diamond to F who is entitled to retain the diamond against the whole world except the true owner. (5) MISTAKE OR COERSION (Sec. 72) 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. Ex. (1) A pays some money to B by mistake. It is really due to C.
B must refund the money to A. C, however, cannot recover the amount from C is no privity of contract between B and C. (1) A railway company refuses to deliver up certain goods to the consignee, except upon the payment of an illegal charge for carriage. The consignee pays the sum charged in order to obtain the goods. He is entitled to recovers so much of the charge as is illegally 3 excessive. Sec. 72 does not draw any distinction between a mistake of fact and mistake of law For example: K paid sales tax on his forward transactions of bullion. Subsequently this tax was declared ultra vires.
Held, K could recover the amount of sales tax and that sec. 72 is wide enough to cover not only mistake of fact but also mistake of law. {sales tax officer, benares vs. kanhaiya lal mukand lal safaf, 1959 S. C. J. 53}. (2) An insurance company paid the amount on a policy under the mistake that the goods had been destroyed by a peril insured against. The goods infact had been sold. Held, the money could berecovered by the insurance company {Norwich etc. society ltd. vs. price W. H. LTD 1934 A. C. 455} ___________________________________________________________________________ 2 Damodar mudaliar vs.
secretary of state for India, 1894, 18 Mad. 88 3 D. Cawasji & co. vs. State, AIR. 1969 mys. 23 (3) An insurance co. paid the amount on a policy which had lapsed by a reason of non- payment of premiums by the assured. The company knew this fact but it was overlooked at the time of payment. Held, the company could recover the amount “however careless the party (company paying money) may have been omitting to use the diligence to inquire into the fact”{Kelly vs. solari 1841 9 M. &W. 54} Basis of Quasi Contract: It is based on the maxim of “nomo debit locuplatari ex liena justua” i. e. , no man must grow rich out of another person’s costs.
In other words, a person shall not be allowed to enrich himself at the expense of another. A quasi-contract, also an implied-in-law contract, is a legal substitute for a contract. A quasi-contract is a contract that should have been formed, even though in actuality it was not. It is used when a court wishes to create an obligation upon a non-contracting party to avoid injustice. An example of a quasi-contract is the case of a plumber who accidentally installs a sprinkler system in the lawn of the wrong house. The owner of the house had learned the previous day that his neighbor was getting new sprinklers.
That morning, he sees the plumber installing them in his own lawn. Pleased at the mistake, he says nothing, and then refuses to pay when the plumber hands him the bill. Will the man be held liable for payment? Yes, if it could be proven that the man knew that the sprinklers were being installed mistakenly, the court would make him pay because of a quasi-contract. If that knowledge could not be proven, he would not be liable. Another example, suppose that vacationing physician Jane Doe is driving down the highway and finds Joey Bloggs lying unconscious on the side of the road. Doe renders medical aid that saves Bloggs’s life.
Although the injured, unconscious Bloggs did not solicit the medical aid and was not aware that the aid had been rendered, he received a valuable benefit, and the requirements for a quasi contract were fulfilled. In such a situation, the law will impose a quasi contract. Quasi contracts are the contracts which are not founded on actual promises. The relationship is created by the circumstances, where one party has done something for another or paid money on his behalf, and the other person has enjoyed benefit of the same.
Thus some legal rights and obligations are created between the concerned parties even in the absence of real contract. such kind of contractual relations are known as quasi contracts. Quasi contract rests on the grounds of equity that a person shall not be allowed to enrich himself unjustly at the expense of another. The principle unjust enrichment requires following- 1. The defendant has been enriched by the receipt of a benefit, 2. The enrichment is at the expense of the plaintiff, 3. The retention of the enrichment is unjust.
If a person incapable of entering into a contract, or anyone 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. 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 other. The payment made should be bona fide for the protection of one’s interest. The payment should not be voluntary.
The payment must be such as the other party was bound by law to pay. The payment must not be made to self. 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 benefit thereof, the latter is bound to make the compensation to the former in respect of, or to restore, the thing so done or delivered. The essential elements of this provision are:-
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. The law implies an agreement between the finder of the goods and the owner. Try and find out the true owner. Not to appropriate the property to his own use.
When real owner is traced he must restore the property to him. The finder is bound to take as much care of the goods as a man of ordinary prudence would have under similar conditions, taken care of his own goods of similar nature. The property shall vest in the finder and he is entitled to retain it against the whole world, except the true owner. The finder has a lien on goods for expenses incurred by him in preserving the goods and finding the true owner. Where the owner has declared a reward for the lost goods, the finder may claim such reward and retain the goods till he gets it.
Where the owner refuses to pay the lawful charges of the finder he can sell the goods – When the goods are in danger of being perished, or when such lawful charges amount to two thirds of the value of goods or more. CONCLUSION A quasi contract is a contract that exists by order of a court, not by agreement of the parties. Courts create quasi contracts to avoid the unjust enrichment of a party in a dispute over payment for a good or service. In some cases a party who has suffered a loss in a business relationship may not be able to recover for the loss without evidence of a contract or some legally recognized agreement.
To avoid this unjust result, courts create a fictitious agreement where no legally enforceable agreement exists. Quasi contracts sometimes are called implied-in-law contracts to distinguish them from implied-in-fact contracts. An implied-in-law contract is one that at least one of the parties did not intend to create but that should, in all fairness, be created by a court. An implied-in-fact contract is simply an unwritten, nonexplicit contract that courts treat as an express written contract because the words and actions of the parties reflect a consensual transaction.
The difference is subtle but not without practical effect. A quasi contract may afford less recovery than an implied-in-fact contract. A contract implied in fact will construct the whole agreement as the parties intended, so the party seeking the creation of an implied contract may be entitled to expected profits as well as the cost of labor and materials. A quasi contract will be created only to the extent necessary to prevent unjust enrichment. As one court has put it, contracts implied in law are “merely remedies granted by the court to enforce equitable or moral obligations in spite of the lack of assent of the party to be charged”.
4 The amount of recovery for an implied-in-law contract usually is limited to the cost of labor and materials because it would be unfair to force a person who did not intend to enter into a contract to pay for profits. ________________________________________________________ 4 Gray v. Rankin, 721 F. Supp 115 [S. D. Miss. 1989] BIBLIOGRAPHY This paper on quasi-congtracts is the product of research from three contract law books. They are: 1. MULLA The Indian Contract Act by Sir Dinshah Fardunji Mulla 2. Contracts I: Cases And Materials by V Kesava Rao 3. Law Express: Contract Law (Revision Guide) 3rd Edition.