In this blog post, Pramit Bhattacharya, Student, Damodaram Sanjivayya National Law University writes about the concept of quasi-contracts. The post talks about the difference between implied and quasi-contract, the notion behind the concept of quasi-contract, and the similarity and differences between contracts and quasi-contracts.

Contracts are those promises coupled with agreements that have legal sanctity and can be enforced. When a contract is made, both the parties are legally bound to fulfill the conditions of the contract. In the case of a quasi-contract, a certain relationship between the parties arise which is very similar to a contract, and this relationship consists of rights and liabilities created by the law.

Contract

A contract is an agreement between two or more parties which is recognized by law and can be enforced. The law provides remedies to the aggrieved party if the conditions or promises stated in the contract are breached. In the case of a contract, performance or non-performance of a thing is considered as a duty. To be legally binding the promises must be exchanged for some consideration. The adequacy if the consideration does not matter, but the Court may look into it if there arises a case of coercion or fraud.

For instance, there cannot be a promise to make a gift, because the donor is getting no consideration in return. Agreement to perform a promise can arise in three ways: standard form of contract, agreement and contract, and promissory estoppel.

Quasi-contract

The obligation arising out of a quasi-contract was first recognized by the English law. The Indian Contract Act, 1872 also follow the same elements which are followed by the English Contract Act. There is no definition given for quasi-contract in the Indian Contract Act. But the Act states that it in the case of a quasi-contract, certain relations are created which are very similar to contracts. But quasi-contract can be defined as a set of rights and liabilities between the parties even when there is no formal contract. The law creates this obligation to maintain justice and fairness between the parties. The law does not allow one person to enrich himself at the expense of the other. If the rights and obligations are not created (quasi-contract) one party would be unjustly enriched. Going by this, it can be said that a quasi-contract is kind of a remedy instead of being a pure contract. Formation of a quasi-contract allows the aggrieved party to recover the benefit which the enriched party has taken at his expense. Since a quasi-contract is a law made by law, there is no statement of consent between the parties. The obligation and rights which are placed on the shoulder of the parties are rather by law than by assent. [1]

Many times, a situation may arise that a legal obligation is placed on a person to uphold justice, even though, the person has not committed any tortious activity or has broken any contract.

For instance, X forgets c=some goods at Y’s place. Y’s is under a legal obligation to restore the goods to Y. this goes on to show that Y cannot enrich himself at the expense of X. such kind of obligations are described as Quasi-contractual Obligation. They are not actual contract in which the parties agree to enter, but are fictional agreements which are created between the parties by law so as to ensure equity.

In quasi-contracts the liability imposed is based on the doctrine of unjust enrichment. Quasi-contact is applied with regards to payment of services rendered or goods delivered or used. In such situations, the main question which arises is the liability of the person who got enriched. Since the basic concept of a quasi-contract is to prevent unjust enrichment, the liability of the enriched party is limited to the value of services rendered or cost of the goods used or delivered. Thus, the liability is limited to the amount of benefit only.

Implied-in-fact Contract and Quasi-contract

One of the main features of a quasi-contract is that there is no mutual consent between the parties. Quasi-contracts are often confused with implied-in-fact (or implied contract). The difference between a quasi-contract and an implied contract is that in the case of an implied contract even if there is no written statement of the fact that the parties want to enter into a contract, their actions and conduct imply that they have mutually agreed to enter into a contract.

For example, P goes to a restaurant for a dinner. The owner of the restaurant expects that P will pay for his food. P also knows that he’ll have to pay for the food which will be provided to him. Thus, the actions of the parties signify that they’ve mutually agreed to enter into an agreement, even though the agreement is not a written one. 

Notions behind Quasi-contracts

Quasi-contracts follow the principle of unjust enrichment, which came from the Roman Maxim, “nemo debet locule tari ex aliena jactura“ which in simple language means that no man must grow rich because of one’s personal loss.[2]

Quasi-Contracts falls under Chapter V of the Indian Contracts Act, 1872[3] under the heading “Of certain relations resembling those created by contract.” Although the word “quasi-contacts” is not expressly mentioned, it can be interpreted that the framers of the statute pointed towards the concept of quasi-contract and doctrine of unjust enrichment only. In the case of Hari Ram Seth Khandsari v Commissioner of Sales Tax,[4] The Court also agreed to the fact that, although the term has been avoided in this chapter, this chapter is about the doctrine of quasi-contracts.

The concept of quasi-contract was first discussed in the case of Moses v MacFarlane[5] (an English case). In this case, Lord Mansfield stated that such obligation was based upon the law as well as justice to prevent undue advantage to one person at the cost of other.

In the case of SpolkaAkeyjna v Fairbairn Lawson CombeBarbor Ltd,[6] the Court stated that the obligations which arise in such situations where one person are enriched at the expense of another- the obligation does not fall purely either under torts law or contracts law. They fall under the concept of “restitution or quasi-contracts.”

To summarize, to evoke the concept of Quasi-contracts, three conditions are required to be fulfilled as stated by the Court in the judicial pronouncement of Mahabir Kishore & others v. the State of MP[7]:

• There has to be an unjust enrichment due to receipt of a benefit.
• The enrichment should take place at the expense of some other party.
• The retention of such enrichment is unjust.

Similarity between a Contract and a Quasi-contract

The result of a contract and a quasi-contract are similar. The claim for damages under both is also similar. Section 73[8] of the Indian Contract Act that states that damages for quasi-contracts can be claimed which are same as for the breach of an express contract. The remedies available for a breach are also similar.[9]

Distinction between a Contact and a Quasi-contract

A quasi-contract can be considered as a constructive contract or an implication of law. It is just a fictitious contract, aimed towards providing a remedy to the aggrieved party, which is not the case in an express contract. In the case of quasi-contracts, the intention of the parties is not considered, but in the case of an express contract, the intention of the parties is very crucial as, without the intention to enter into an agreement, there would be no contract at all. In the case of an express contract, the duty of the parties defines the contract, which forms the terms of the contract. But on the other hand, in the case of quasi-contract, the duties are defined due the formation of a contract.[10] 

In words of Keener,[11] A quasi-contract is one which has been implied by the law, and it denotes the nature of evidence through which the aggrieved party can claim restitution. Though the party who has been enriched would not set out to assume any obligation, the law will impose it. In an express contract, both the parties have equal interests, but in the case of a quasi-contract, the contract comes into being because the interest of one party is affected.

Concluding Remark

As stated above, a quasi-contract is not a contract in the pure sense. It can be considered as a fictitious contract. This also may be the reason why the statute does not mention the term “quasi-contract” expressively, but indirectly covers the concept to prevent unjust enrichment. Therefore, the basis of a quasi-contract is very simple that a contract cannot override the requirement and sense of justice. When something is done for a person or a thing is delivered to him without a gratuitous intention, he is bound to make a compensation or restore the aggrieved party to his previous position.

Footnotes:

[1]The State of Punjab v. Hindustan Development Board, AIR 1960 P-H 585

[2]13^th Report, Law Commission of India, P.12; http://lawcommissionofindia.nic.in/1-50/report13.pdf

[3]http://comtax.up.nic.in/Miscellaneous%20Act/the-indian-contract-act-1872.pdf

[4]MANU/UP/1273/2003

[5](1760) 2 Burr 1005

[6]1943 AC 32

[7]Mahabir Kishore & others v. State of Madhya Pradesh, AIR 1990 SC 313

[8] Compensation for loss or damage caused by breach of contract

[9]Mulam Chand v. State of Madhya Pradesh, (1968) A.SC.1218

[10]T & S Inv. Co. v. Coury, 593 P.2d 503 (Okla. 1979)

[11]A Treatise on the Law of Quasi-Contracts. By William A. Keener, Kent Professor of Law and Dean of the Faculty of Law in Columbia College. New York: Baker, Voorhis, and Company. 1893. 8vo