QUASI CONTRACTS

Written By:- Nehraj Bisaria (Amity Law School)

quasi contract picture with a cartoon

Some basic elements must be included in a legal contract, such as offer and acceptance, contracting capacity, consideration and free consent. But often, even though there is no bid, no approval, no real consent, legitimate consideration, etc., and actually neither agreement nor commitment, the law suggests a promise imposing obligations on one party and conferring right in favor of the other. Such cases are not contracts in the strict sense, but they are accepted by the Court as contract-like ties and implemented as if they were contracts.

Hence the word Quasi-contracts, i.e. contract-like). Even in the absence of a contract, certain social relationships give rise to certain particular duties that certain individuals must fulfill. As they create the same obligations as in the case of standard contracts, these are known as quasi-contracts. The concepts of equity, justice, and good faith are the foundation of Quasi-contracts.

“A quasi- or constructive contract is based on the maxims, “No man must become rich from the loss of another human!

Example 1:1, a tradesman, leaves goods at C’s house by mistake. C treats the goods as his own. Cis bound to pay for the goods.

Example 2: A pays some money to B by mistake. It is really due to C.B must refund the money to A.

Example 3: A fruit parcel is delivered under a mistake to R who consumes the fruits thinking of them as a birthday present. R must return the parcel or pay for the fruits. Although there is no agreement between R and the true owner, yet he is bound to pay as the law regards it as a Quasi-contract.

These relations are called as quasi-contractual obligations. In India it is also called ascertain relation resembling those created by contracts!

Salient features of quasi contracts:

  • Such a right is, in the first place, always a right to money and, in general, to a liquidated sum of money, but not always.
  • Secondly, it is not the product of any compromise between the parties involved, but is enacted by law;
  • Thirdly, it is a right which is available, not against the entire world, but only against an individual or persons, so that it is equivalent to a contractual right in that regard.

The quasi-contract relationship is considered to have come into being under the terms of the Indian Contract Act in five distinct circumstances on which we will presently dilate. However, it should be remembered that in none of these situations, in the true sense of the word, there is a contract between the parties. Because of the specific situations under which they are located, the statute imposes contractual responsibility in each of these cases.

(a) Claim for necessaries supplied to persons incapable of entering into a contract (Section 68): where a person who is incapable of entering into a contract or who is legally obliged to help is supplied with necessaries appropriate for his condition in life by another person, the person who supplied such supplies is entitled to be reimbursed from the properties of the person who is incapable.

Example: A supplies B, a lunatic, ora minor, with necessaries suitable to his condition in life. A is entitled to be reimbursed from B’s property.

In order to make his point, the supplier could not only prove that the goods were supplied to the person who was a minor or a lunatic, but also that at the time of sale and delivery they were acceptable to his real requirements.

(b) Payment by an interested party (Section 69): a person who is interested in the payment of money which the other person is obligated to pay by statute and is thus entitled to be compensated by the other person.

Example: B holds land in Bengal, the zamindar, on a lease granted by A. His land is advertised for sale by the Government, the revenue owed by A to the Government being in arrear. Under the revenue law, the effect of the sale will be the termination of B’s lease B, to avoid the sale and the consequent cancellation of his own lease, the amount due from A will be paid to the government. A is bound to make good to B the amount so paid.

  •   Obligation of a person to benefit from a non-free act (Section 70): within the meaning of section 70 of the Act where a person lawfully does or delivers something to another person not intending to do so free of charge and that other person enjoys the benefit of that person, the latter is obliged to pay compensation to the former in respect of, or to recover, the thing thus done or delivered, so it follows that the plaintiff must show for a good suit:

(i) That he had done the act or delivered the thing legitimately,

(ii) That he did not do so for free.

The above can be demonstrated by a case law where ‘K was forcefully retired by the government as a government servant. He lodged a petition for a writ and got an injunction against the order. He was restored and was paying salary but was given no job and in the meantime government went on appeal the appeal was decided in favor of the government and, during the reinstatement period, ‘K’ was ordered to return the salary paid to him. [Shyamlal vs. State of U.P. A.I.R (1968) 130]

Example: A, a tradesman, leaves goods at B’s house by mistake. B treats the goods as his own. He is bound to pay A for them.

  • Duty of the finder of goods (Section 71): a person who finds goods belonging to another person and places them in custody is under the same responsibility as a bailee!

Thus, a lost goods finder has:It would be appropriate to take good care of the property as a man of ordinary caution.

  1. No right to appropriate the goods and the right to appropriate the goods

2. To restore the goods if it finds the owner.

Hollins vs. Howler L. R. In & H. H. & H. On the floor of ‘F’s store,’ L,’ H’ picked up a diamond and gave the same to ‘F’ to hold until the owner was found. The true owner could not be tracked in spite of the best attempts. ‘H’ tendered to ‘F the lawful expenses incurred by him after the lapse of many weeks and demanded to return the diamond to him. ‘F’ declined to do so. Held, the diamond must be returned to ‘H’ as he was entitled to maintain the products found against all but the true owner.

  • Example:‘ P’a customer places a brooch on her coat in’ D’s shop and forgets to pick it up and one of ‘D’s assistants discovers it and puts it over the weekend in a drawer. It was on Monday,

Discovered to have been missing. ‘D’ was known to be the absence of the ordinary care that man can take.

  • Money paid by mistake or under coercion (Section 72): “A person to whom money has anything delivered by mistake or under coercion, must repay or return it”.

Every kind of payment of money or delivery of goods for every type of mistake’ is recoverable. (Shivprasad Vs Sirish Chandra A.I.R. 1949 P.C. 297)

Example: Municipal tax payments made under an incorrect assumption or due to a misunderstanding of the lease conditions can be recovered from the municipal authorities. In the Sales Tax Officer vs. Kanhaiyalalalal proceedings, the above law was upheld by the Supreme Court.

Likewise, any cash compensated for by coercion is also recoverable. Section 15 of the Act doesn’t actually control the word intimidation. The word is interpreted to mean and include oppression, extortion, or such other means (Seth Khanjelekvs National Bank of India).

In a situation where ‘T’ was riding in a tram car without a ticket and he was asked to pay when checking? 5/- as a compound transaction penalty. On the ground that it was extorted from him, T filed a suit against the company for restitution. In his favor, the suit was decreed. (Trikamdas vs. Municipal Corporation of Bombay A. I.R.1954)

In all the above cases the contractual liability arose without any agreement between the parties.