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QUASI-CONTRACT: NO MAN MUST GROW RICH OUT OF ANOTHER PERSON’S LOSS

Quasi Contract - Neelanjana Roy

INTRODUCTION

A contract where even there is no contract or agreement made by the parties to it. Is it a contract even? Is it enforceable by the law? What if it is made by the law itself? A quasi-contract is supposed to prevent the unjust enrichment of a person out of another’s loss. But they are not parties to any contract. They did not form any contract even. What is the status of such contracts? Does any law cover them? We will get a clear answer to all the questions and doubts that arose in understanding the concept of Quasi-contract.

CONTRACT – BASIC FEATURES

Before we begin with the concept of Quasi – Contract, a basic knowledge of a general contract is required.

The Indian Contract Act, 1872, has covered both the general principles of contract and some special kinds of contract. But again, this act is not exhaustive. There are other Acts related to partnership, sales of goods, and many more which cover the form of contracts in those particular circumstances. This Act extends to the whole of India, even to the State of Jammu and Kashmir after the abrogation of Article 370 of the Constitution of India in 2019.

Under section 2(h) of the Indian Contract Act, 1872, a contract is defined as, “An agreement enforceable by law is a contract. It encompasses two elements, visibly, ‘Agreement’ and ‘Enforceability by law’. The agreement is defined as a set of promises along with considerations for each other in section 2(e). A proposal has to be made by a person to get assent for it from another person as defined under section 2(a). When this proposal is accepted, it becomes a promise. This promise from both the parties to one another forms the agreement.

Therefore, Agreement = Offer + Acceptance

When this is enforceable by the law, it forms a contract.

So, Contract = Agreement + Enforceability by Law.

It can also be remembered easily by the following flow chart:

Proposal > Promise > Acceptance > Consideration > Enforceability by Law > Contract

Essentials elements for the formation of a valid contract:

  1. Two or more parties
  2. Offer and acceptance
  3. Intention to create a legal relationship
  4. Lawful consideration
  5. The capacity of the parties to form a contract
  6. Free consent
  7. Lawful object
  8. The agreement has not declared void
  9. Certainty and possibilities of performance of the contract
  10. Legal formalities

QUASI – CONTRACT – WHETHER A CONTRACT OR NOT?

The Indian Contract Act, 1872 has covered all the circumstances where there is a contract. But it has also covered quasi- contracts where there is neither a contract nor an agreement. So, are these contracts even? Quasi- contracts are based on ‘certain relations resembling those created by the contract’ and the incorporated obligations form the quasi-contract. Despite having any agreement or contract among the parties, those are taken into consideration as though there has been an agreement or contract among them.

It is basically based on the Latin maxim: “Nemo Debet Locupletari Ex Aliena Jactura” meaning “No man must grow rich out of another person’s loss.” Justice, equity, and good conscience form the basic principle behind it. There are some circumstances where the law finds that another person is better entitled to get paid or compensated on the basis of the obligation even though there is no contract or agreement between the parties. Therefore, a person cannot get benefited himself at the expense of the other. It prevents the unjust enrichment of a person. The principle of unjust enrichment has the following essentials:

  1. The defendant has been enriched by the receipt of a benefit.
  2. This enrichment is at the expense of the plaintiff; and
  3. That the retention of the enrichment is unjust.

It can be concluded that quasi-contracts are created by the law rather than the parties themselves. It is therefore an implied contract.

The Law of quasi-contracts is also referred to as the Law of Restitution. The word ‘restitution’ connotes restoring something to its preceding condition or form as far as possible. Therefore, the law of restitution means if any one of the parties had enjoyed any unjust benefit out of a contract, he must make good to the other party to balance it out.  

QUASI- CONTRACT OBLIGATIONS

Under sections – 68-72 of the Indian Contract Act, 1872, five kinds of Quasi- contract are mentioned. These are as follows:

  • SUPPLY OF NECESSARIES: Section 68 of the Indian Contract Act, 1872, elucidates it precisely.

Here, two persons are mentioned, one who is incompetent to form a contract or whom one is legally bound to support and another person who supports them by supplying necessaries for the condition of one’s life. As we see, the former person is getting advantages from the services provided by the latter person, but he himself does not make any kind of remuneration to him for the same. From the concept of quasi-contract, we have learned that this unjust benefit must be undone. So, the latter must be compensated for supplying those necessaries to undo the unjust enrichment of the former.

  • REIMBURSEMENT OF MONEY PAID, DUE BY ANOTHER: From Section 69 of the Indian Contract Act, 1872, we can enumerate two persons from this definition too:
  • One who makes the payment is interested to do so; and
  • One who is actually bound by the law to make such payment.

The former person making the payment must have the interest to do so. The latter person as clearly evident is getting the benefit out of it. The latter person is actually legally bound to pay such an amount, not the former person. So here too, the former person is needed to be compensated by the latter one.

In the case of Exall v. Partridge, the plaintiff placed his carriage at the defendant’s place where the landlord of the defendant seized his carriage because of arrears of rent of the defendant’s. The plaintiff had paid such rents and so the defendant was bound to repay him as held by the court.

  • OBLIGATION OF PERSON ENJOYING BENEFIT OF NON-GRATUITOUS ACT: We can segregate the following conditions of this kind of quasi-contract from Section 70 of the Act:
    • A person lawfully does anything or delivers anything to another person
    • He does not do it gratuitously, meaning, expecting payment for that
    • The other person enjoys the benefit out of it.

The most important point is that he must not do the act gratuitously. It means that the person wants payment for the service he has provided. The latter person enjoying the benefit out of it must repay the due amount to the former person.

In the case of P. Mudaliar v. Neelavathi Ammal, the plaintiff had worked for five years for the defendants, who were three sisters and the defendant was the husband of one of them, for the matter of dispute of the certain properties after the death of their father. He had asked for the remuneration of such service from them for which they wrote a promissory note of Rs 15,000 which they later ignored to pay. But the plaintiff with the intention of not doing the service gratuitously was entitled to get such payment as held by the court.

  • RESPONSIBILITY OF FINDER OF GOODS: In Section 71 of the Indian Contract Act, 1872, the finder of the goods is here considered as a ‘bailee’. He is supposed to take as much care as he would have done if it was his goods under the same situation. He is ought to return these goods to its owner if he finds him after reasonable search and if there is any deterioration of the goods, if it is unlike to happen to such goods, as not in the case of perishable goods, he must compensate for the same to the owner. Till the owner is found, the finder can retain it against the whole world except for the owner.

The finder can retain the goods until the compensation for the troubles and expenses he incurred to preserve the goods are paid by the owner of the good. But he cannot sue the owner for the same because he took the responsibility voluntarily. Section 169 also gives the finder to sell the goods if it is perishable in nature or there is a fear of losing its greater part, when the owner could not be found after reasonable diligence or he refused to pay lawful charges to the finder and when the lawful charges for the same amounts 2/3rd of its value.

  • LIABILITY OF A PERSON GETTING BENEFIT UNDER MISTAKE OR COERCION: In Section 72, the payment or the delivery is done by mistake or coercion. The person delivering it had no intention to do so. This section makes no distinction between the mistake of fact or the mistake of law. Another important factor is that there must be unjust benefit taken out of it by the person who gets such payment or delivery. If such benefit is absent, there cannot be any compensation or repayment for that.

In the case of Union Bank of India v. A.T. Ali Hussain & Co., since the receiver of the money that was made under mistake parted with the unjust benefit out of it, so, he was not entitled to make compensation for the same.

CONCLUSION

From the above facts, it can clearly be stated that a quasi-contract is a kind of contract which is formed by the law itself safeguarding the undue advantage taken in this contract by a party, maintaining the balance, equity, and fairness in it. These contracts are created out of the obligation of the party benefitting unjustly to do well to the other one to preserve the equilibrium of it.

Author(s) Name: Neelanjana Roy (Surendranath Law College, Kolkata)

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