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UNJUST ENRICHMENT AND QUASI-CONTRACT IN INDIAN CONTRACT ACT

INTRODUCTION

Nemo locupletari potest aliena iactura’ means no one should be a benefit at others expense in other words it means Unjust Enrichment. Unjust Enrichment means that due to the loss of an individual others should not gain any benefit. One should not be enriched on the loss of another as it will be unjust to that person. It means retention of a property or goods and commodity of others is against the basic principle of Justice as it would be unjust to the other party. It means if A is providing something to B then B should also provide something in return. The gift does not come under unjust enrichment as it is without any expectation of anything in return.

Section 68 of the Indian Contract Act states that ‘Claim for necessaries supplied to person incapable of contracting, or on his account’. If a person, incapable of entering into a contract, or anyone whom 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. It means that – if a person if ‘A’ is supplying some goods to ‘K’ which are necessary for nature then A is entitled to recover the monetary compensation for supplying the goods to K or from K’s property. It means that if someone is getting benefited at the cost of others then he has to return the benefit otherwise it will be unjust benefit or enrichment.

Moses v. Macferlan[1]

Jacob has given promissory notes to Moses and Moses used and endorsed the said promissory notes to Macfarlan as Moses owed money with an agreement that Moses will have no personal liability on the notes. Despite the agreement, Macfarlan sued Moses on the endorsement. And through arbitration Moses has to pay money to Macfarlan even when Moses has no personal liability. Therefore, Moses sued Macfarlan in court to recover the money. The court held that Macfarlan needs to return the money to Moses for equity and natural justice. If not then it will be unjust enrichment to one party. The above case law established the principle of Unjust Enrichment.

Unjust Enrichment and Restitution

They both belong to grey with different shades. It means that Restitution means restoration of property or object to the original owner if obtain through Malafide means. Though the goods or commodity needs to be traceable. Section 65[2]. The obligation of a person who has received advantage under the void agreement, or contracts that become void. When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it or to make compensation for it to the person from whom he received it. It means that they have to restore it to its original position or provide compensation for the benefits received by them to the original owner. If not then it will be unjust enrichment to one party while the other Party will suffer loss.

Quasi-Contract means those contracts which are created by Courts rather than normal relations and are done to dispense justice and to otherwise it will be unjust retention and unjust enrichment of Property. Quasi-Contract is different from the normal contract as there is no offer or prior agreement to form a contract or acceptance by the parties and it is made at the direction of the court. In a Contract, free consent is necessary to form a contract while in Quasi Contract there is no consent by either of the Parties. In Quasi-Contract conduct of the parties who are part of the contract decides the liability and is decided on the basis of natural justice and equity while in the Contract the liabilities of the parties are already decided with the terms of the Contract. Quasi-Contracts are imposed by the courts in India. In India, the Indian Contract Act 1872 does not specifically mention Quasi-Contract However Chapter five of the Act deals with certain relations resembling those created by Contract. It means relations that look like a contract but they are in reality, not contracts. Section 68-72 deals with Quasi-Contracts.

68. Claim for necessaries supplied to person incapable of contracting, or on his account.[3] If, a person, incapable of entering into a contract, or anyone whom 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.” If necessary items are supplied to an unsound person who is incapable of making a contract then the person supplying is entitled to receive money for the commodities so supplied, from the property of the person. The necessaries differ in different cases and are decided by the courts

69. Reimbursement of person paying money due by another, in payment of which he is interested[4]. 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.”  Section 69 forms Quasi-Contract between the parties. The essentials of this section is The Party paying the money needed to have interest on the payment for other parties. The other party was imposed by the government to pay the dues.

Govind ram Gordhandas Seksaria v. State of Gondal[5]

Facts: A has purchased a mill from M, after Purchasing the property A come to know that the mills have overdue Municipal taxes on them and are going to be sold or auction off by the government. In order to save the mills, A paid all the taxes and sued M for recovery of the Payment.

Issue: Should A be reimbursed by M.

Judgment: It was held by the court that A should be reimbursed by M.

70. The obligation of a person enjoying the benefit of a non-gratuitous act.[6] 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.” If one person delivers something to the other party with the intention to get payment for the delivery then he is entitled to receive the reimbursement by the other party. The act should be lawful so that only Plaintiff can claim recovery. If any service is provided to the government or to any organization then Plaintiff can claim recovery if there is an unjust enrichment or benefit to the other party.

State of West Bengal v. B.K. Mondal and Sons[7]

Facts: B has done construction works on behalf of an official of the State of West Bengal for the construction of the warehouse. B demanded payment for his work but was denied on the grounds that the contract was invalid.

Issue: Whether section 70 apply?

Judgment: It was declared by the court that B has provided his services and has the right to receive reimbursement from the government. If not it will be an unjust benefit to another party.

71. Responsibility of finder of goods.[8] A person who finds goods belonging to another, and takes them into his custody, is subject to the same responsibility as a bailee.” It means the person who finds the good needs to take necessary care of the good foundation and to retain the good until it is delivered to its original owner without mixing the good with his own goods.

72. Liability of person to whom money is paid, or thing delivered, by mistake or under coercion.[9] A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it.” It means to protect other parties from any unjust enrichment and benefits. It is under the liability of the person who has received any benefits to return them to the original owner.

Conclusion

Quasi Contracts are not actual contracts in the Indian Contracts Act but there is a certain obligation possessed by it as chapter five of the Indian Contract Act 1872 does deal with relations that resemble Contract. It is imposed by law so as to not unjustly benefit others. The Doctrine of Unjust Enrichment has been evolved over time the Courts have also started using it in wider concepts not only in Contracts but also in Taxes. In situations where taxes have been appropriated wrongly.

Author(s) Name: Needa Nazma Farheen (Hidayatullah National University, Raipur)

References:

[1] (1760) 2 Bur 1005, 1012

[2] India Contract Act 1872, Section 65.

[3] Indian Contract Act 1872, Section 68.

[4] Indian Contract Act 1872

[5] (1950) 52 BOMLR 450

[6] Indian Contract Act 1872, Section 70.

[7] 1962 SCR Supl. (1) 876

[8] Indian Contract Act 1872, Section 71.

[9] Indian Contract Act 1872, Section 72.

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