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Tag: define Quasi contract

QUASI CONTRACTS

Quasi Contract laws have been derived from the Latin statement “Nemo debet locupletari ex aliena jactura” which proclaims that no human being should gain an unjust benefit from another’s loss. It was one of the main principles of Roman law.

The word ‘Quasi’ means having some resemblance to but not all. Similarly, Quasi Contract means laws that are like regular contract law but not quite so. A regular contract should have some essential components to be considered valid. It includes offers, acceptance, consideration, two or more parties who are legally and mentally capable etc.

There are many situations in which a person may be required to conform to an obligation, although he has neither broken any contract nor committed any tort. For example, A has forgotten certain articles in B’s house. Now B is bound to restore . Such obligations are generally described as ‘quasi contractual obligations’. Quasi contracts are based on the principle of equity and justice. It simply states that nobody shall enrich himself unjustly at the expense of another. In fact, a quasi contract 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 party 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 to retain it, and which in justice and fairness belongs to another. He then is placed under an obligation to restore or repay for such a benefit.


DEFINITIONS OF QUASI CONTRACTS


There is no statutory definition of a quasi contract available either under the English Law or under the Indian Contract Act. Pollock describes quasi contracts as “contracts ‘in law’ but not ‘in fact’, being the subject matter of a fictitious extension of the sphere of the contract to cover obligations which do not in reality fall within it” Quasi contracts are also called implied contracts, They are implied because they create such obligations which resemble those created by contracts. The essentials for the formation of a contract are absent but as outcome resembles those created by a contract they are called quasi contracts. Under English Law, they are also termed as Constructive Contracts or Contracts in Law, etc. Indian Contract Act terms quasi contracts as certain relations resembling those created by contracts and are found under sections 68 to 72.

Salient Facets of Quasi Contractual Rights

  1. A quasi-contract is not longer than an actual contract.
  2. It is no longer based upon the offer and acceptance rule.
  3. It does not occur from any formal agreement but is imposed by means of law.
  4. It is a right that is reachable no longer against the whole world but against a specific man or woman.
  5. It is based on the idea of equity, appropriate conscience, justice, and ideas of herbal justice.


Difference Between Quasi Contracts and Contracts


In case of contracts, it is the consent of the party which produce the obligations. But in quasi contracts there is no question of consent, it is the law alone or natural equity which produces obligations. As noted earlier, a quasi contract is based on the ground that a person shall not be allowed to unjustly enrich himself at the expense – of another. There is, however, similarity
between quasi contract and contracts in case of claims for damages. In case of breach of a quasi contract section 73 of the Indian Contract Act provides for the same remedies (claim for damages) as provided in case of breach of a contract. It reads: When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person has contracted to discharge it and has broken his contract.


TYPES OF QUASI CONTRACTS


Sections 68 to 72 deal with five types of quasi contractual obligations.
i)Supply of Necessaries: According to section 68, if a person incapable of contracting (which would include a minor, idiot and lunatic) or anyone whom he is legally bound to support, is supplied by another with ‘necessaries’ suited to his condition in life such person is entitled to recover the value thereof from the property of such incapable person. You should note that the
aforesaid claim for necessaries is based upon’ quasi contractual obligations because a contract with a person incompetent to contract is void-ab-initio. The following two points must, however, be noted in this regard:
a) The amount is recoverable only from the property (if any) of the incapable person and not from him personally.
b) The goods or services supplied must be ‘necessaries’.

ii)Payment of Money Due by Another(Section 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. Example : B holds land in Bengal on a lease granted by A, the Zamindar. The revenue payable by A to the Government being in arrears, his land is advertised for sale by the Government, Under the revenue law, the consequences of such sale will be annulment of B’s lease. B, to prevent the sale and 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 (Wazarilal v. NaurangLal). For the section 69 to apply, the following essentials must be met:
a) The person paying must be himself interested in making the payment. Thus, where P left his carriage on D’s premises and D’s landlord seized the carriage for non-payment of the rent. P paid the rent to obtain the release of his carriage. Held. P could recover the amount from D
b) The payment should not be voluntary one.
c) The payment must be such as the other party was bound by law to pay.
Example : The goods belonging to A were wrongfully attached in order to realise arrears of Government revenue due by G. A paid the amount to save the goods from sale. Held he was entitled to recover the amount from G (AbidHussain v. Ganga Sahai).


iii)Obligations to Pay for Non-gratuitous Acts :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 compensation to the former in respect of, or to restore, the thing so done or delivered.
Under section 70, three conditions are required to establish a right of action at the suit of a person who does anything for another:
a)The thing must be done lawfully.
b) It must be done by a person not intending to act gratuitously.
c) The person for whom the act is done must enjoy the benefit of it.


iv)Contracts required to be in writing: You should note that where there is a mandatory provision in an act requiring contracts to be in writing, an oral contract is void. But it has been held by the Supreme Court that where work has been done and accepted, Section 70 is applicable and payment should be made for the work done (State of West Bengal v. B.K. Mandal& Sons).


v)Responsibility of a Finder of Goods: A person who finds goods belonging to another and takes them into his custody is subject to the same responsibility as a bailee. In such a case, an agreement is implied by law between the owner and finder of goods and the latter is deemed to be a bailee. A finder is, thus, bound to take as much care of the goods found as a man of
ordinary prudence would under similar circumstances take of his own goods of the same bulk, quantity and value. Besides, he must make reasonable efforts in finding the real owner.


Rights of the Finder of Goods : A finder of goods has the following rights:

  1. The finder is entitled to retain the goods against the whole world, except the true owner. For example, A picked up a diamond from the floor of B’s shop and handed it over to B to keep it till the owner is found. In spite of best efforts, the true owner could not be found. After some time, A tendered to B the lawful expenses incurred by him for finding the true owner and asked him to return the diamond to him (A). B refused to do so. Held B must return the diamond to A as A was entitled to retain it against the whole world, except the true owner (Hollins v. Fowler).
  2. The finder has lien in respect of any sum which may be due to him on account of expenditure incurred by him
    in respect of the goods (section 168).
  3. Where the owner has offered a specific reward for the return of goods lost, the finder may sue for such reward, and may retain the goods until he receives it (section 168). This right was re-endorsed in the case of Harbhajan v. Harcharan.
  4. The finder may sell the goods in the following circumstances :
    a) Where the thing found is in danger of perishing.
    b) Where the owner cannot, with reasonable diligence, be found out.
    c) Where the owner has been found but he refuses to pay the lawful charges of the finder.
    d) Where the lawful charges of the finder, in respect of the thing found amount to 2/3rd or more of the value of the thing found.

Advantages and Disadvantages of Quasi Contracts

Advantages of using a quasi contract include the fact that these legal instruments are typically based on the unjust enrichment principle. This prevents one party from gaining an undue advantage over another. Thus, it is a safeguard for innocent victims of wrongful acts and a legal alternative to compensation for damages, ensuring that the one who provides services or goods gets compensated for the same.  In order to comply with quasi contracts, all parties involved are obliged to follow them, as they are created by court order. 

There are also some drawbacks or limitations. Those who received benefits negligently, unnecessarily, and by miscount will not be held liable. Although a person can be liable under a quasi contract, he cannot be charged more than the amount he has received under the contract. Thus, there is no provision available for the recovery of more amount than that which has been received by the plaintiff – if the plaintiff obtains only part of the services/goods that he contracted for originally, he cannot claim a compensation as the whole amount is not recovered. 

 If there’s an express agreement between the parties, plaintiffs have to give up all profits. Though a quasi contract is a legal remedy that provides protection from unjust enrichment of the beneficiaries of the services or goods, a plaintiff can get relief only if he can prove that he has suffered losses due to the breach of the contractual obligations of the defendant.

Conclusion:

A quasi contract is also known as an “implied contract,” in which a defendant is ordered to pay restitution to the plaintiff, or a constructive contract, meaning a contract that is put into existence when no such contract between the parties exists.A quasi-contract exists in the absence of a written contract. It may additionally be a court docket ordered to keep away from one party gaining at the fee of another party’s actions. However, the simple nature and essence of the principle remain identical besides any drastic change

Quasi Contracts

The word ‘Quasi’ means pseudo. Hence, a Quasi contract is a pseudo-contract.There are cases where the law implies a promise and imposes obligations on one party while conferring rights to the other even when the basic elements of a contract are not present. These promises are not legal contracts, but the Court recognizes them as relations resembling a contract and enforces them like a contract.

These promises/ relations are Quasi contracts. These obligations can also arise due to different social relationships .The core principles behind a Quasi Contract are justice, equity and good conscience. It is based on the maxim: “No man must grow rich out of another persons’ loss.

example of a Quasi contract: Peter and Oliver enter a contract under which Peter agrees to deliver a basket of fruits at Oliver’s residence and Oliver promises to pay Rs 1,500 after consuming all the fruits. However, Peter erroneously delivers a basket of fruits at John’s residence instead of Oliver’s. When John gets home he assumes that the fruit basket is a birthday gift and consumes them.

Although there is no contract between Peter and John, the Court treats this as a Quasi-contract and orders John to either return the basket of fruits or pay Peter.

Features of a Quasi Contract

  1. It is usually a right to money and is generally (not always) to a liquidated sum of money.
  2. The right is not an outcome of an agreement but is imposed by law.
  3. The right is not available against everyone in the world but only against a specific person(s). Hence it resembles a contractual right.

Kinds of Quasi Contracts –

Section 68 to Section 72 of the Indian Contract Act, 1872 deals with Five Kinds of Quasi-Contract which are as follows –

1) Claim for necessaries supplied to person incapable of contracting, or on his account (Section 68):

If the “necessaries” for a person, who is incapable of contracting (for example, a minor or a mentally disabled person) or of the dependents of such a person are taken care of by someone, he has the right to be reimbursed from the property of such incapable person. Although the word “necessaries” has not specifically been defined in the Act, it is impliedly clear that it means the necessaries to sustain life, basic things like food, clothing, education, etc. These are things without which a person cannot reasonably exist. In simple terms, if a person A supplies another person B (who is incapable of entering into a contract) or his family or anybody else who is dependant on him, with necessaries for life, he is entitled to take his due return from the property of person B. He is entitled only to such a reasonable amount as the value of the goods or services he may have supplied hold.

2. Reimbursement of person paying money due by another, in payment of which he is interested (Section 69):

If a person A pays something in someone’s (a person B’s) place, that which person B is himself ‘bound by law’ to pay, A will be reimbursed by B. Please note that the person A should be ‘interested’ in this payment. It is a case of implied Indeminity.

For instance, Joe is a Zamindar. Annie holds one of his lands on lease in Punjab. The revenue of Joe’s land is payable to the government in arrears. So, the land ends up being advertised for sale by the government. According to the Revenue Law, if the land is sold, it will end Annie’s lease. To prevent this sale, Annie pays Joe’s dues to the government. Joe is bound to pay back to Annie.

The aforementioned illustration satisfies the following conditions-

  1. The party paying the other party’s dues is interested in the payment.
  2. The party whose payment is due was in fact bound by law to pay.

3. Obligation of person enjoying the benefit of the non-gratuitous Act (Section 70)

When a person lawfully does something for another person (for example, delivers a good or a service) without intending to do so ‘gratuitously’, and the other person enjoys the benefit of the delivery of that good or service, the latter is bound to pay back to the former.

A gratuitous act is one that is done for a person by another without the expectation of a return. For example, giving someone a gift is a gratuitous act. Here comes your Amazon package delivered to the wrong address. A pack of chocolate chip cookies that you ate as soon as they arrived. You are liable to compensate the actual owner of the package. The illustration of a shoe-shiner unsolicitedly polishing one’s shoes or that of the coolie picking up one’s goods will lie under Section 70. Such acts and services are not done gratuitously and therefore a liability to pay back arises on the part of the person on the receiving end.

4. Responsibility of finder of goods (Section 71)

Simply, a person who finds goods that belong to another person shall be treated as a bailee. A bailee is essentially a safe keeper of the goods, who is supposed to return the goods to the actual owner or dispose of them in the manner in which the actual owner may want them to. The bailee has certain duties and rights as the ‘possessor’ or ‘custodian’ of the goods for the time being. For example, Sarah finds a diamond lying on the floor in a shop. She picks it up and keeps it in her safe possession. Sarah makes all reasonable efforts to find the true owner of the diamond. The diamond actually belonged to Nadia. Sarah has the right to hold the possession of the diamond against all the world except Nadia, and is supposed to make reasonable efforts to find her, and return it to her. In this case, Nadia will have to pay the compensation for all the loss suffered by Sarah in finding her.

Duties of the finder of goods

  1. The finder has a duty to take reasonable care.
  2. He/she has a duty not to use the goods for his personal purposes.
  3. He/she has a duty not to mix the found goods with his own goods.
  4. He/she has a duty to make reasonable efforts to find the actual owner of the goods.

Rights of the finder of goods

  1. Right to Lien– The right to retain the goods found until he receives compensation for all the expenses suffered in finding the owner.
  2. Right to Sue– If the owner had announced a reward for whoever finds the good, the finder has the right to sue the owner for such reward or retain the goods until he is compensated.
  3. Right to Sell– The finder of goods has the right to sell the goods in certain specific circumstances, for example:

i) If the owner could not be found even after reasonable efforts.

ii) If the owner is found but refuses to pay compensation or the lawful charges of the finder.

iii) If the goods are in immediate danger of perishing if not used.iv) If the lawful charges of the finder amount to two-thirds of the value of goods.

5. Liability of person to whom money is paid or thing delivered by mistake or under coercion(Section 72)

As the heading suggests, if something is delivered to a person by ‘mistake’ or under ‘coercion’, he is liable to pay it back. For instance, Aristotle and Dante share a flat and contribute in half for the rent to be paid.  Aristotle, without knowing that Dante has already paid the due rent to the landlord in whole, pays again to the landlord. The landlord, in this case, is liable to give back the money delivered to him by mistake. The term mistake here can mean both a mistake of fact or mistake of law.

The section also uses the term ‘coercion’. Here is an example of something delivered under coercion-  A railway company refuses to deliver goods to a certain consignee except upon the payment of a certain illegal sum of money. The consignee pays the sum to obtain his goods. The company is liable to return the sum of money illegally charged.

Conclusion

A contract has certain elements, like the offer, and its acceptance, that give rise to an agreement. The agreement, if it is legally enforceable becomes a contract, that is, it can be taken care of in a court of law in case it is not performed by either of the parties involved. Yet, there are certain situations where even in the absence of an ‘agreement’ as such, one or the other party is obliged to perform something. Such obligations are called quasi-contractual obligations.