This article has been written by Vimala Devi pursuing a Diploma in International Contract Negotiation, Drafting and Enforcement course from LawSikho and edited by Shashwat Kaushik.
This article has been published by Shashwat Kaushik.
Table of Contents
Introduction
A contract is the term that is defined under subsection (h) of Section 2 of the Indian Contract Act of 1872, that “an agreement should be enforceable by law.” There is no definition for quasi contracts under the Indian Contract Act, but we can see the provisions that covered quasi-contracts under the statute of the Act 1872, from sections 68 to 72. The term quasi-contracts is the combination of two words, “quasi” and “contract.” Quasi means nothing but “Pseudo,” which is not a real contract. For a valid contract, there must be an offer, acceptance, consideration and the capacity to contract. A contract that is formed without any offer or acceptance but is still enforceable by law is a quasi-contract. Quasi-contracts are based on the principle of the Latin term “Quantum Meruit,” which denotes “as much as he deserved.” It purely depends on the doctrines of equity and justice.
For example: A and B made a contract where A agreed to deliver the dress to B’s residence and B promised to pay Rs. 3000 for it after delivering it to him. Here, A mistakenly delivers the dress to C’s residence instead of B. When C got home, he assumed that the dress was an anniversary gift and got it. Here, there was no contract between A and C but the court considered this a quasi-contract and ordered C to either pay for the dress or return the dress to A.
We have to note one important thing that quasi contracts differ from the other contracts actually made by the parties. Quasi -contracts are considered a legal tool to prevent one party from benefiting unjustly from the other party without incurring any expenses or contractual relationship.
Essentials of contracts and quasi-contracts
The essentials of the contract are explained under the provisions of Section 10 of the Indian Contract Act:
- There should be an agreement between the parties that is enforceable by law.
- Both parties should give their consent to act upon the same thing, and the consent should not be based on any force or coercion.
- The contract must be made by the competent parties.
- The consideration and the object should not be unlawful, i.e., against law.
- It must be registered when the law in force requires it.
The following are the essentials in the quasi contracts:
- It is created by the promise or relationship, not by the actual contract.
- Right in personam.
- It is based on the principle of “prevention of unjust enrichment of one person at the cost of another.”
- There is no agreement between the parties.
- A valid contract is not required under this contract.
Doctrine of quasi-contracts
Fairness and equity
It would be unfair when one party is getting benefits and the other party is suffering. To ensure that no party is unjustly enriched and each party is treated fairly, it depends on the principles of fairness and equity. Fairness means that each party is treated equally and has the same opportunities. Equity means that each party’s needs are taken into account and that those who are most in need are given the most help.
There are a number of ways to ensure fairness and equity in a situation where one party is getting benefits and the other party is suffering. One way is to require the party that is benefiting to pay compensation to the party that is suffering. For example, the company that is polluting the environment could be required to pay for the clean-up of the pollution or to provide financial assistance to the people who are living near the factory. Another way to ensure fairness and equity is to regulate the activities of the party that is benefiting. For example, the government could pass laws that require companies to reduce their pollution or provide safe working conditions for their employees.
Ensuring fairness and equity is important for a number of reasons. First, it helps to create a more just and equitable society. Second, it can help to prevent conflict and social unrest. Third, it can help to promote economic growth and development.
Restitution
The compensation should be provided by the party who received the benefit to the conferred party to rectify any profit obtained by one party at the expense of another. This is necessary to ensure that both parties are treated fairly and that no one party is unfairly enriched at the expense of another.
There are a number of ways to calculate compensation. One common method is to use the difference between the value of the benefit received by the party who received the benefit and the value of the benefit that would have been received by the conferred party if the benefit had not been conferred. Another method is to use the reasonable cost of providing the benefit.
In some cases, it may be difficult to calculate compensation. For example, if the benefit is intangible, such as a good reputation, it may be difficult to determine its value. In these cases, it may be necessary to use a more subjective approach, such as determining the amount of compensation that would be fair and reasonable in the circumstances.
The amount of compensation that is awarded will depend on the specific facts of the case. However, the goal of compensation is to ensure that both parties are treated fairly and that no one party is unfairly enriched at the expense of another.
Prevention of unjust enrichment
The important principle of a quasi contract is to prevent unjust enrichment and to treat the parties fairly when one party gains a benefit from the other party without any proper justification. A quasi contract is a legal fiction created by the courts to prevent unjust enrichment. It is not a real contract, but it is treated as if it were a contract for the purposes of enforcing the obligation to pay for a benefit received.
Quasi contracts are created when one party receives a benefit from another party, but there is no valid contract between the parties. This can happen in a variety of situations, such as when:
- A person provides services to another person without being asked.
- A person pays for goods or services that are never delivered.
- A person is injured or suffers damages as a result of another person’s negligence.
In these cases, the courts will step in to prevent unjust enrichment by requiring the person who received the benefit to pay for it. The amount of the payment will be based on the reasonable value of the benefit received.
Quasi contracts are designed to ensure that parties are treated fairly when one party gains a benefit from the other party without any proper justification. By preventing unjust enrichment, quasi contracts help to promote justice and fairness in the law.
Nature of remedy
Quasi-contracts are not actual contracts but rather legal obligations that arise out of a person’s actions or omissions. They are created by the law to prevent unjust enrichment, which occurs when one person benefits at the expense of another.
There are two main types of quasi-contracts:
- Constructive trusts: These arise when a person has been unjustly enriched by another’s mistake or wrongdoing. For example, if someone receives money that was mistakenly sent to them, they have a duty to return it.
- Equitable estoppel: These arise when a person has led another to believe that they will perform a certain act, and the other person relies on that belief to their detriment. For example, if someone promises to sell you a house and you take steps to prepare to move in, they cannot later back out of the deal.
Quasi-contracts provide a legal remedy for the parties to restore the affected party to their rightful position. For example, if someone is unjustly enriched by another’s mistake, the court may order them to return the money. If someone is led to believe that they will perform a certain act, and they rely on that belief to their detriment, the court may order the other person to perform the act.
Quasi-contracts are an important part of the law because they help to prevent unjust enrichment and to protect people from being taken advantage of. They provide a way for the courts to ensure that people are held accountable for their actions and that everyone is treated fairly.
Basis of contracts
Contracts are based on the basis of formation and performance.
Formation:
- Express – The contracts are either in oral or written form.
- Implied – Gestures or actions are used in implied contracts.
Performance:
- Executed- It is a fully executed contract signed by both parties, even though the requirements were not met.
- Executory- An executed contract is one where the contract has already been executed but has not been fully executed, i.e., to fulfil the remaining obligations as stated in the agreement.
- Unilateral- It is like one side of the coin on which only one party has to perform its obligations.
- Bilateral- Each party agrees to perform their obligations from each side.
Types of contracts and quasi-contracts
Contracts
- Valid contract- Valid contracts are contracts that are legally binding to the parties. Provision 10 of the Act defines the essentials of a valid contract.
- Void contract- Contracts that are valid when they were originally made by the parties but, in due course, become void due to some circumstances.
- Voidable contract- When contracts are executed by force, undue influence, mistake, misrepresentation or coercion, they should not be legally enforceable. It becomes void.
- Contingent contract- A “contingent contract” is a contract to do or not to do something if some event, collateral to such a contract, does or does not happen.
- Unenforceable contract- A contract that cannot be enforced by the court due to issues like technical defects in the contract, lapse of time and so on.
- Illegal contract- An agreement that has been created against law or public policy is considered an illegal contract. For example: selling marijuana drugs to the public.
Quasi-contracts
Necessaries supplied to incapable person: (Section 68)
When the necessities are supplied by the person to whom he is legally bound to support and incapable of entering into the contract, the supplied furnished person is entitled to reimbursement from the property of such incapable person.
Illustrations: A supplies B, a lunatic, with necessaries suitable to his condition in life. A is entitled to be reimbursed from B’s property.
Reimbursement of person which he is interested (Section 69)
A person who is willing to pay when another is bound by law to pay, and therefore who pays it, is entitled to reimbursement by the other.
Illustration: “D” is a landlord. Y holds one of D’s lands on a lease in Chennai. The revenue from D’s land is in arrears, payable to the government. The land ends up being advertised for sale by the government. Under the revenue law, if the land is sold, it will result in the annulment of Y’s lease. To stop the sale, Y pays D’s dues. In such a situation, D is bound to pay back Y.
Obligation to pay for non-gratuitous acts: (Section 70)
When an individual lawfully works on something or delivers for another person, not intending to do it so gratuitously and another person enjoys the benefit, the latter is bound to pay the compensation for the former in respect of the things done or delivered.
Illustration: A, a salesman leaves some grocery items at B’s door by mistake and B treats the goods as his own. B is bound to pay A for them.
Responsibility of finder of goods: (Section 71)
Any person who finds the goods and takes them into his custody that do not belong to him possesses the same responsibility as the bailee.
Liability of person when something is delivered by mistake or under coercion (Section 72)
When money has been paid or delivered by a person by mistake or under coercion, he must repay or return it.
Illustration: A and B jointly owe 100 rupees to C, A alone pays the amount to C, and B, not knowing this fact, pays 100 rupees over again to C. C is bound to repay the amount to B.
Advantages and disadvantages of quasi-contracts
The main advantages of a quasi contract involve the concept that these legal tools depend upon the principle of unjust enrichment and prevent one party from getting unjust benefits from the other party without incurring any expenses or contractual relationship. Therefore, it protects the aggrieved party and provides legal remedy to him by compensating for the damages incurred by him.
However, there are also some cons involved in quasi contracts. There is no provision for recovery of a higher amount than that which has been received by the plaintiff. Thus, no person is charged more than the amount he originally received under the contract; he cannot demand compensation as the whole amount has not been recovered. Even though a quasi-contract is considered a legal remedy, a plaintiff can get relief only after he proves his losses due to the breach of contractual obligations by the defendant.
The recovery of quasi contracts
Under quasi -contracts, there are three situations for the recovery:
- There should be an absence of a contract that allows the plaintiff to be compensated.
- The existence of the contract is not enforceable.
- The plaintiff’s receipt of some type of benefit while breaching an existing contract.
Role of quasi contract and the court
Generally, disputes between the parties will arise when there is overpayment for the services or goods rendered by one party to the other based on the actual contracts. When there is no agreement between parties, the court will create a quasi-contract as a substitute for a contract to prevent unfair enrichment and promote fair treatment or equity between the parties involved in the dispute.
Differences between contracts and quasi-contracts
| Contracts | Quasi-Contracts |
| There should be an offer, an acceptance and an agreement. | It is a Pseudo-contract and there is no agreement. |
| The liability of the contract involved between the parties. | It wholly depends on equity, justice, and a good conscience. |
| It is a right, both personal and legal. | It is strictly available against one person only and not against the entire world. i.e., right in personam only. |
| It is created by contract. | It is created by law. |
Case laws
State of Haryana vs. Raja Ram (2017)
According to the Supreme Court of India, the existence of a legal contract is not necessary for the creation of quasi-contracts. In this instance, the court emphasised the importance of the unjust enrichment principle and the avoidance of unfair benefits in figuring out the obligation resulting from a quasi-contractual connection.
State of Rajasthan vs. Basant Nahata (2019)
The Rajasthan High Court ruled that a quasi-contract can arise when a party makes payments on behalf of another party, and such payments are not voluntary or without any obligation. The Court held that the party making the payments is entitled to reimbursement or compensation based on quasi-contractual principles.
State of Madhya Pradesh vs. Sahi Infracon India Pvt. Ltd. (2021)
The Madhya Pradesh High Court held that the principle of unjust enrichment is a crucial factor in determining the liability arising from a quasi-contractual relationship. The Court ruled that if one party has received a benefit or advantage at the expense of another, the principle of restitution should be applied to restore the aggrieved party to their original position.
Conclusion
Quasi-contracts act as an important legal remedy that fills the gaps in contractual relationships and wholly depends upon the principles of restitution, the prevention of unjust enrichment and the promotion of equitable outcomes. When quasi contracts are not formed by express agreement, it is imposed by law to prevent the loss of one party from unjustly benefiting at the expense of another.
Individuals, businesses, and legal practitioners can navigate contractual relationships more effectively and ensure equitable outcomes by comprehending the principles and legal framework surrounding quasi-contracts. Quasi-contracts play an important role in promoting fairness, upholding restitution, and preventing unjust enrichment within the legal landscape. Understanding and applying these principles contributes to a more just and equitable society in the realm of contractual obligations.
References
- https://lawbhoomi.com/law-of-contracts-meaning-nature-and-important-definitions/
- https://www.toppr.com/guides/business-laws/indian-contract-act-1872-part-ii/quasi-contract/
- https://legalstudymaterial.com/wp-content/uploads/2021/10/Quasi-contract-under-Indian-contract-act.pdf
- https://www.lawctopus.com/academike/contracts-and-quasi-contracts/
- https://lawtrend.in/what-are-the-types-of-contract-under-the-indian-contract-act-1872/
- https://www.writinglaw.com/quasi-contracts-in-india/
- https://unacademy.com/content/upsc/study-material/law/quasi-contract/
- https://www.northeastlawjournal.com/post/quasi-contracts-the-indian-contract-act-1872
- https://lawnotes.co/quasi-contracts-2/
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