QUASI CONTRACTS

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This Article is written by Ishita Jain of 2^nd year of B.A LLB (Hons.) of University Institute of Legal Studies, Panjab University, an intern under Legal Vidhiya

ABSTRACT

Contracts are agreements, between two or more persons and are enforceable by law. An agreement becomes enforceable by law, when it fulfils certain essentials like free consent of the parties, consensus ad idem, i.e., meeting of minds, competency of the parties, lawful consideration and object. Therefore, agreements and promises which are enforceable by law are termed as contracts.

The parties to a contract are obliged to perform their reciprocal promises. If a party fails to perform their promise or makes a breach of the contract then, they are bound to compensate the other party for the loss that they have suffered. However, there are certain situations in which a person is bound to compensate the other, but the basis of such obligation is neither a contract nor a tort on the part of the person who is to compensate. This article focuses on such relations that resemble those created by contract.

KEYWORDS: Essentials of Quasi contracts, Unjust benefit, Types of Quasi-Contracts, Necessaries, Non-gratuitous act

INTRODUCTION

Contracts are formed when both the parties agree to the same thing and in the same sense, i.e., there is consensus ad idem. However, there are certain relations which resemble a contract but are not entered into due to meeting of minds. Such relations are formed and create an obligation on the basis that no one should gain an unjust benefit at the expense of the other. These relations are termed as quasi contracts or non-consensual contracts. These contracts are based on the legal maxim, nemo debet locupletari ex aliena jactura which states that, no man must grow rich out of another person’s loss. Such contracts are the result of an obligation created by law, as a remedy ordered by the judge, where no prior contract exists between the parties.

For instance, A, owes Rs.1000 to B. A, due to some miscalculation gives Rs.1100. Here, B has gained an unjust enrichment and is bound to return Rs.100 to A.

In the case of Lothamasu Sambasiva Rao vs Thadwarthi Balakotiah[1], the three common law actions of a quasi-contractual nature were discussed:

Money paid by the plaintiff for the defendant’s use
Something received by the defendant which is for the plaintiff’s use
Quantum meruit, where the plaintiff has performed his part of the contract, before the breach of the contract occurred, then the plaintiff can claim the value of the part that he has performed.

ESSENTIALS:

Requisites to prove an action of unjust enrichment are:

The defendant has gained a benefit or is enriched
Enrichment is at the expense of the plaintiff
Continued possession of it is unjust

For instance, A has ordered a pre-paid item online with a valid address of his residence, but the delivery of the same is made to B. In such a case, the person who receives and accepts the item, i.e., B, has gained an enrichment at the expense of the person who has placed the order, i.e., A. The retention of such an item would be considered as unjust, thereby, creating a quasi-contract.

The purpose of such contracts is to ensure that the principles of equity and justice are maintained and no one is deprived of what is due to them. Indian Contract Act deals with various types of quasi-contracts under sections 68-72. \

TYPES OF QUASI CONTRACTS:

SECTION 68- CLAIM FOR NECESSARIES SUPPLIED TO AN INCOMPETENT PERSON

This section deals with the claim of necessaries which are supplied to a person who is incompetent to a contract or to persons who are dependent on an incompetent person. Section 11 of the Indian Contract Act states, that a person who is a minor, i.e., below eighteen years of age, or is of unsound mind, or is disqualified by law (prisoner and insolvent) is considered as incompetent to a contract.

Anyone who supplies necessaries of life to a person who is incompetent to contract or persons who are dependent on such a person, is entitled to claim reimbursement from the property of the incompetent person. Under this section, no action shall lie against an incompetent person for the necessaries supplied, however, reimbursement can be claimed from the property of the incompetent person.

In case of R.V. Rajarathna Chettiar vs Shari Shaick Mahboob Sahib and Another[2], a person who had supplied necessaries for a minor, claimed for reimbursement from the minor’s property.

Necessaries are those things without which an individual cannot live. The basic necessities like food, shelter, water etc. are essential for the survival of each individual. Things like religious and moral information or practices maybe considered as a necessity. In the case of Chappel vs Cooper[3], the minor widow was asked to bear the expense of her husband’s funeral because it was considered as a necessity under religious customs and practices prevalent.

According to section 68, necessaries are those things that maintain a person according to their condition or standard in life. It includes goods that are harmonious with status of the person and their requirement at the time of delivery.

SECTION 69- REIMBURSING THE PERSON FOR PAYING THE DUE OF ANOTHER

This section states that, if a person makes a payment in which he is interested but it is due by another person, then such a person is entitled to be reimbursed for the same.

Two key components of this section are:

Interest in the payment of money- The person who makes the payment must have an interest in making the payment. If someone voluntarily pays for another, without any implied interest in the payment, he cannot claim for reimbursement.

For instance, A is the owner of a property and B is a tenant of the same. A keeps his land as collateral to take a loan. Due to A’s negligence and inability to repay the loan on time, the bank authorities give an ultimatum, to pay for the same or else the property would be confiscated. Here, B repays the loan and is therefore, bound to be reimbursed by A.

Another person is bound by law to pay- The person who pays the due of another should only be interested in the payment and the other person should be bound by law to pay for the same.

For instance, A is under an obligation by law to pay a due, however, B pays for the same as he is interested in the payment. This would entitle B to get reimbursed.

In certain cases, reimbursement is not granted. For instance, when A is not bound by law to pay, however, B in his interest makes the payment. This would not lead to the formation of a quasi-contractual obligation. Therefore, B would not be entitled to get a reimbursement from A. Also, if the person who is making the payment is himself bound by law to pay for it, he cannot claim for reimbursement.

SECTION 70- COMPENSATION FOR A NON-GRATUITOUS ACT

If a person lawfully does something for another non-gratuitously, the person who enjoys the benefit of the same is bound to compensate that person. The essentials of this section are:

Lawfully doing something for another- If a person does something for another or delivers to him, with no intention of doing a gratuitous act, then he can claim compensation. A person must indulge in a positive act which entitles another with a benefit or enrichment.
Non-gratuitous Act- To claim compensation under this section it is essential to prove that the act done or the thing delivered was done non-gratuitously.

For instance, A buys land/property on behalf of B, his relative, and maintains the same. If there is nothing to prove that it is a non-gratuitous act. A, is not entitled to get compensation for the same. The compensation is dependent upon the intention of the party while doing the work. If the intention is to work non-gratuitously then compensation can be claimed. Therefore, intention to do something gratuitously or not is of utmost importance.

Enjoyment of benefit- The person must enjoy the benefit of the work done or delivered to him by the other. The acceptance of the same is deemed as the basis for getting compensation under section 70.

Therefore, under section 70, it is essential to prove that a person gained an enrichment at the cost of another, where the act done was non-gratuitous. The person who delivered his/her services expected the payment for the same.

It is also applicable against the government, where if the government entered into a contract which didn’t materialise, but they enjoyed the benefit of the services provided. They would be bound to compensate for the same. Also, in case of a minor no compensation can be claimed under this section.

SECTION 71- FINDER OF GOODS

As stated in this section, a person who finds the goods of another, is endowed with the same responsibility as that of a bailee.

The Finder of goods is expected to:

take care of the goods like an ordinary prudent man would take of his own goods
Search for the true owner with reasonable diligence
Return the goods to the true owner
Compensate the owner for any deterioration etc. in the goods

A finder cannot sue the owner for the time, energy, expense and effort he spent to find the owner, however, he can claim for compensation and is entitled with a right of lien over the goods until such compensation is made.

For instance, A finds a watch which belongs to C. On finding C, he does not return the watch and asks for compensation. Here, A entitled to exercise his right of lien over the watch until the compensation is made to him.

SECTION 72- UNJUST BENEFIT UNDER MISTAKE OR COERCION

As per this section, if money is paid to a person i.e., he gains a benefit, either by mistake or under coercion, he is obliged to repay the same. For a valid contract to exist, it is essential that it is not entered into under a mistake or influenced by coercion.

Mistake as covered under Indian Contract Act, states that a contract is considered as void if it is entered into under a mistake of fact essential to the agreement. For instance, A, under a mistake of fact, pays for the same thing twice to D. A, can claim for the repayment of half of the money.
Section 15 of the Indian Contract Act states that, if an agreement is entered into by detaining, or threating to detain any property of another, in order to obtain his consent, then such a contract is voidable at the option of the party whose consent is so obtained.

For instance, A, is obliged to sign the papers of transfer of property to D, under coercion. The contract is voidable at the option of A. D, has gained an unjust benefit under coercion and is bound to repay.

In P.B Mills vs Union of India[4], It was held that if an amount is not legally payable but under coercion the payment is made. The plaintiff is entitled to get the repayment of such money.

CONCLUSION

Contracts are agreements which are entered into by the parties willingly. However, there are instances where even without a prior agreement a contractual obligation is created. Such contract like relations come under the purview of quasi-contracts. They are based on the principle that, no one should get an unjust benefit at another person’s cost. These obligations are created by the court, to provide remedies to the distressed and uphold the flag of justice and equity.

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