QUASI–CONTRACTS: OBLIGATIONS RESEMBLING THOSE CREATED BY CONTRACT AND CLASSIFICATION OF QUASI-CONTRACTS

ABSTRACT

The research serves to unfold the obligations that are not imposed by way of contracts, but by the existence of implied implications and as a measure to restrict the unjust enrichment of one person at the expense of another person. The theory based on which these obligations were treated turned out to be confusing, the concept was said to have been introduced by Lord Mansfield who derived to rest its foundation on the theory of unjust enrichment, but later this was felt unlawful and the theory of implied-in-fact was followed. Ultimately, which theory was applied in deciding cases as to Quasi-Contractual obligations was analyzed with relevant case laws. The English recognized the Quasi-Contractual by the use of two principles, that the payment was made due to some pressure imposed upon them to make it that is, a non-voluntary act. The other is that the other person is subjected by law to make the law, and by the act of the payer, he is relieved from his liability or receives any benefit as a result of the payment. The Indian Law recognizes Quasi-Contractual obligations through Chapter V of the Indian Contract Act, 1872 as “Certain relations resembling those created by Contract”, this is used rather than the phrase Quasi-Contractual Obligations, so as not to restrict the benefits that would arise from any other sections that would provide remedies of this nature. These obligations are retroactive. The research focused on what leads to Quasi-Contractual obligations, and it was concluded to be an enforcement of the law to protect the rights of the doer/performer of the things against what he had done and to make them eligible to be compensated for their services. These are rights in personam. These obligations are the application of the legal fiction.

KEYWORDS

Quasi-contracts, Liability, Obligations, Unjust enrichment, Equity and Justice.

INTRODUCTION

A Contract refers to an agreement enforceable by law[1]. A contract is legally binding on the parties to the contract. The essentials of a contract are such that it is an agreement between two parties, the promisor and the promisee[2], to execute something with requires consideration. The parties should provide free consent to the agreement. For a contract to be valid,

there should be an offer and acceptance between the parties to the contract,
the terms of the contract must be definite and must project the true intention of the parties to the contract,
the parties to the contract should be capable of entering into the contract, they should be of the age of majority according to the law to which he or she is a subject, and should not be unsound mind, and should not be disqualified to enter into a contract by the law to which he or she is a subject,
there should be a lawful object and consideration to enter into the contract, and
the contract should be capable of possible performance.

A contract enforceable by the law is a valid contract, which ceases to be enforceable is void[3] and that is capable of being enforced at the option of any one of the parties to the contract is a voidable contract[4]. A contract can be an express or implied contract. Further, there exist illegal, contingent, and unenforceable contracts.

One such type of contract is a Quasi-contract, which is also known as the pseudo-contract. Quasi-contracts can also be termed fictional contracts or implied contracts. It is because Quasi-contracts are obligations that are not created by contract, but the people associated are obliged to do as it acts as a remedy for the parties indulged in the un-existing contract. Such contracts are retroactive[5]. The main objective of the Quasi-contracts is to protect the rights and liabilities that arise from the relations that come into force due to the obligations accompanied by those relations.

For example, if a package of some fruits gets delivered to our doorstep, with prepaid payment, by mistake, is it viable to keep it ourselves? Here arises the obligation to return it to the owner, or at least to the persons who would be responsible for delivering it to the right person. This obligation created may serve as an example of a Quasi-contractual obligation. These types of obligations found their place in the Indian Contract Act, 1872 by the provisions provided in Section 68-72 of the respective Act[6].

The Quasi-contractual obligations are based on two theories, the theory of unjust enrichment and the theory of implied-in-fact[7]. The theory of unjust enrichment is based on the principle that “Nemo debet locupletari ex aliena jactura[8]” which means that “no one should grow rich at the expense of others’ loss” and the theory of implied-in-fact theory is based on drawing remedy over the circumstances of the case. It is an equitable principle, to protect the person against whom the other has received a benefit, to prevent unfairness.

Certain situations where Quasi-contracts may arise are such that, one person might have paid the amount for the debt of another person mistakenly, but this is treated as a valid obligation and the person whose debt has been paid is under an obligation to repay the debt to the payer of the debt; Delivery of goods or services without the existence of a prior valid agreement, Someone who has facilitated the other person with any sort of goods or services, without any proper agreement but based on the social obligation, is entitled to receive the consideration for his or her act. A person who has acted in emergent situations to prevent the property or such of another person is entitled to be compensated against his efforts[9].

The Quasi-contracts are legally enforceable as they rise in the courts of justice. Quasi-contracts are implied by law, that is they are ordered by the judges, where they are remedies and no real contract[10].

OBJECTIVES

To understand the theory based on which the Quasi-contractual obligations are formed.
To analyze the types of Quasi-contracts under which the circumstances provide and the relevant provisions that regulate these types of contracts.
To understand the principles associated with the Quasi-contractual obligations with the help of relevant rulings.
To uncover the benefits and the disadvantages of Quasi-contractual obligations.

THEORIES AND PRINCIPLES OF QUASI-CONTRACT

There exists confusion in deciding the theory based on which the Quasi-contractual obligations were based. The basic principle of Quasi-contractual obligations is to restore the unfair benefit received towards whom it was acquired from. These are remedial[11].

THEORY OF UNJUST ENRICHMENT

Lord Mansfield is regarded as the real founder of Quasi-contractual obligations[12]. He provided that these were based on the theory of unjust enrichment. The meaning of unjust enrichment is that a person gets benefits unfairly at the cost of another person. This principle derived its origin from the English law. The unfairly benefitted people are obliged to return what they have earned this way, by the principles of natural justice and equity.

In the case of Moses v. Macferlan[13], the plaintiff endorsed promissory notes that he had received from another person to the defendant, with an agreement that he would not be personally liable for the notes. However, the defendant sued the plaintiff and was entitled to get the money from the plaintiff despite the agreement. The plaintiff was allowed to recover the amount paid by him as a result of the judgment, stating that the defendant was obliged by the principles of natural justice and equity to refund the money[14].

THEORY OF “IMPLIED-IN-FACT” CONTRACT

This theory was based on that their positions would be restored only when the obligations were implied in the facts of the case. Implied-in-fact contracts are those where the obligations are not expressly provided by words, but it is existent at the face of the contract. It may exist by the conduct of the parties. This was taken to be considered over the theory of unjust enrichment, by the case of Sinclair v. Brougham[15], it was held that the theory of natural justice and equity in this case, would serve to uphold a notional contract, the result of which was an ultra vires action, to declare something valid, which when provided as an express contract would be void. The principle was that if the inference from the circumstances of the case would be against the law, then no liability would arise in such cases.

But then, the theory of unjust enrichment was restored as the theory of implied contracts was seen as a restriction over the principle of natural justice and equity. This was expressed in the case of Fibrosa Spolka Akeyjna v. Fairbairn Lawson Combe Barbour Ltd.,[16] where the sum of money paid as an advance, over the performance of which became impossible due to war, is entitled to be returned. An observation over the case of Sinclair v. Brougham[17] is that the entitled when provided entirely for the depositors being ultra vires would be against both the theories of Quasi-contract.

TYPES OF QUASI-CONTRACTS

The Indian Contract Act, 1872, in Chapter V, titled “Of Certain relations resembling those created by Contract”. The word Quasi-Contracts was avoided not to restrict any remedies of such nature that could arise from other sections of the Act, and it was provided in the name of relations resembling those created by Contract. There are five types of Quasi-Contracts recognized by the Indian Contract Act, of 1872[18].

SECTION 68: LIABILITY FOR NECESSARIES

According to Section 68 of the Indian Contract Act, of 1872, If any person has supplied necessities to another person who is incapable of entering into contracts, or his family or relations whom the person is legally bound to support, then the person who has supplied such is eligible to be reimbursed for what he has done from the property of the incapable person[19]. Those who are incompetent to contract are provided in Section 11 of the Indian Contract Act, of 1872. It could be a minor, unsound person, or persons disqualified by law to enter into the contract.

The liability arises only towards the necessaries, the meaning of which has been illustratively provided in the case of Chapple v. Copper[20], things termed as necessary are without which one could not exist. The basic considerations were food, clothing, and lodging. Further, the necessaries depend upon the fortune and circumstances of the considered person.

In the case of Nash v. Inman[21], an undergraduate who had already had plenty of proper clothes, was supplied by the plaintiff further more fancy clothes and waistcoats. The court held that the price is irrecoverable as the facts of the case present that they were not necessary for the person’s existence as he had already had good clothes.

In the case of Mr. Sharma v. Mr. Nitin[22], the plaintiff supplied the defendant’s minor son with a study table at the minor’s request as he assured that his father would pay the money. He didn’t pay the money, and therefore the plaintiff sued him for recovery of the value of the table. The study table was not proved to be a necessary product, and thus the defendant was not held liable.

SECTION 69: PAYMENT BY INTERESTED PERSON

According to Section 69 of the Indian Contract Act, of 1872, If a person has an interest in money that is to be paid by another, which the other is bound by the law to pay, and that interested person makes the payment, then he is entitled to get the paid money from the person to whom he paid.

The conditions under which the Section 69[23] gets applied are,

The person who makes the payment should be interested in making the payment for the other person.
The person should not be legally bound to make the payment. For example, a person who is jointly liable to make the payment is not entitled to recover it from another.
But the person whose payment is settled by another should have a legal compulsion to pay.
The payment should be made by the payer to another person other than himself. For example, if payment is made by one head of the government to another head to save the land from execution[24], the payment does not come within the scope of this principle.

In the case of Govindram Gordhandas Seksaria v. State of Gondal[25], the party interested in purchasing the mills made payment of the municipal taxes, as otherwise the due of it would lead to the sale of the mills by execution. The person who made the payment was entitled to restore it from the true owner of the mills, as he had an interest in the property, the other person was legally bound to pay the taxes and it was made against the municipality.

SECTION 70: LIABILITY FOR NON-GRATUITOUS ACT

According to Section 70 of the Indian Contract Act, of 1872, If a person delivers something to another person, and the other person enjoys the benefit as a result of the act, with his intention to not do it gratuitously, then he is entitled to be compensated against his act or restored of the thing that he delivered[26].

The essential conditions for the liability to arise were provided by the case of State of West Bengal v. B.K. Mondal & Sons[27],

One person should deliver something lawful,
It should not be done gratuitously, that is a voluntary act with the thought of getting paid,
The person who received the thing should have received some benefit.

In the case of Municipal Corporation, Rajgarh v, M.P. SRTC[28], the municipal corporation constructed a bus stand, that was used by the bus operators, but there was no agreement to use the land. The court held that the corporation is entitled to recover the charges for the use of the bus stand from the bus operators.

Section 70 would not apply[29] when the person who receives the benefit out of the thing, refuses to accept the thing or the benefit. It applies only when something is accepted by the receiver willfully. It could not be imposed without the will of the person.

If a service or an act is rendered at the other person’s request, it creates an implied liability on the person who had requested payment to pay it, in the case of State of West Bengal v. B.K. Mondal & Sons[30], the plaintiff constructed the buildings asked as such for use by the Civil Supplies Department only at the request of an officer of the State of West Bengal, the state accepted the service but refused to make payment stating that there was no contract enriched upon the matter. The court held the state liable. If a service is rendered as a result of an oral agreement, and the other party accepts the service, when the party who rendered the service seeks compensation, whether or not he could prove the agreement, he is entitled to be compensated.

SECTION 71: FINDER OF GOODS

According to Section 71 of the Indian Contract Act, of 1872, A person who finds goods that belong to someone else and has it in his custody, is subjected to the same duties and responsibilities as a bailee[31]. When the finder of the goods is treated as a bailee, he is vested with the duties of,

Taking care of the goods as he would do so when he considers the goods as his own, or at the standard of being taken care of by a prudential person until it is returned to its respective owner[32].
He has the duty not to mix[33] it with any other similar goods, and the ultimate duty is to return it to the owner of the goods.

As the finder is vested with the responsibilities, he is entitled to rights[34] as the temporary custodian of the goods,

The finder can retain the goods until, the compensation has been paid concerning the expenses incurred and efforts taken to find the owner of the goods, but can not sue the owner. If there have been specific rewards announced for the return of the lost, then the finder is entitled to sue the owner for non-payment of the rewards.
The finder has to right to sell when the owner by a reasonable effort could not be found, or if he had refused to make payment of the lawful charges incurred, when the goods are perishable soon, or if the lawful charges are more than two-thirds of the value of the product.

In the case of Union of India v. Amar Singh[35], a case involving the transportation of goods between two countries by the use of railways was dealt with to decide who would ultimately be the contractual bailee of the goods. The was ruled that the receiver end should be considered as the finders and not the forwarding end.

SECTION 72: LIABILITY FOR THINGS DONE BY MISTAKE OR BY COERCION

According to Section 72 of the Indian Contract Act, of 1872, the one who is vested or delivered with something by mistake or as a result of coercion is obliged to return it or repay for it[36].

It had been held that a mistake whether by fact or by law is irrecoverable. In the case of STO v. Kanhaiya Lal Mukhund Lal Saraj[37], sales tax was paid by a firm, the Allahabad High Court declared such tax to be ultra vires and held that the firm was entitled to recover the money and mistake of law shall not an exemption to not entitle someone with what he was supposed to.

Payment that has been made as a result of pressure or otherwise that has been imposed on them to make it can be recovered. In the case of Ajay Kumar Agarwal v. OSFC[38], An organization refused to supply electricity to the subsequent purchaser of the property, until he had paid the arrears of the bill by the former owner. The court held this to be unjust enrichment and provided that this act was deprived of its authority under the law.

THE PRINCIPLE OF QUANTUM MERUIT

The principle of Quantum Meruit is that any person who has done some work under the contract, but the work had been disregarded by the other party, then the one who did the work was entitled to get compensation for the service or work which he had delivered.

In the case of Plinche v. Colburn[39], the defendants were publishers who were engaged with the plaintiff to work and write an article with the payment following its completion. The plaintiff had completed a considerable amount of the work, but the defendants discontinued the work. The court held that the plaintiff was entitled to be compensated against the work he had done.

CONCLUSION

Equity and justice served to be the main conscience of the judiciary which led to the application of the principle of unjust enrichment to protect the deprived party against his service. Although the obligations are not created by way of contracts, these obligations form their scope and applicability within the gateways of legal fiction, equity, fairness, and justice. It is a remedial mechanism, the absence of which would lead to a huge impact on the party who provides any benefit or service to the other. It saves as the protector and makes the benefitted compensate for these benefits. This acts as a tool to restitute or restore the doer and receiver to their positions by way of compensation or restoration of the benefits received. It leads to an equitable outcome to be derived from.

Quasi-contractual obligations are suited with benefits and disadvantages, the benefits are many as delivered, with the core aim of an equitable justice delivery process. The disadvantages may include, being an equitable remedy, the decision rests upon the circumstances and the discretion of the courts. The dynamic nature could be beneficial as well as dangerous in certain situations. The amount of loss could only be recovered by action in the courts of law, but the additional costs or damages incurred are not liable to be recovered. When the service has been benefitted by the defendant negligently and unnecessarily are exempted from being held liable for the Quasi-Contractual obligations. The benefits overpower the disadvantages making the concept of Quasi-Contractual obligations, a reliable one.

REFERENCES

DR. AVTAR SINGH, CONTRACT & SPECIFIC RELIEF 558-589 (Eastern Book Company 2020).
Wardah Beg, Quasi-Contractual Obligations under Indian Contract Act, BLOG IPLEADERS (Mar. 19, 2019), https://blog.ipleaders.in/quasi-contractual-obligations/
Suhani Dhariwal, What are Quasi Contracts with Examples, Principles, Types, and Cases? WRITING LAW, https://www.writinglaw.com/quasi-contracts-in-india/.
Raveesha, Quasi-contracts, LEGAL SERVICE INDIA,https://www.legalserviceindia.com/legal/article-4072-quasi-contracts.html.
https://unacademy.com/content/upsc/study-material/law/quasi-contract/
https://www.investopedia.com/terms/q/quasi-contract.asp
https://blog.ipleaders.in/all-about-quasi-contracts-and-types/
https://www.legalserviceindia.com/legal/article-2318-quasi-contract-and-its-relation-with-contract.html

[1] The Indian Contract Act, 1872, § 2(h), No. 9, Acts of Parliament, 1872(India).

[2] The Indian Contract Act, 1872, § 2(c), No. 9, Acts of Parliament, 1872(India).

[3]The Indian Contract Act, 1872, § 2(j), No. 9, Acts of Parliament, 1872(India).

[4] The Indian Contract Act, 1872, § 2(i), No. 9, Acts of Parliament, 1872(India).

[5] DR. AVTAR SINGH, CONTRACT & SPECIFIC RELIEF 558 (Eastern Book Company 2020).

[6] The Indian Contract Act, 1872, § 68-72, No. 9, Acts of Parliament, 1872(India).

[7] DR. AVTAR SINGH, CONTRACT & SPECIFIC RELIEF 559 (Eastern Book Company 2020).

[8] Wardah Beg, Quasi-Contractual Obligations under Indian Contract Act, BLOG IPLEADERS (Mar. 19, 2019), https://blog.ipleaders.in/quasi-contractual-obligations/.

[9] Suhani Dhariwal, What are Quasi Contracts with Examples, Principles, Types, and Cases? WRITING LAW, https://www.writinglaw.com/quasi-contracts-in-india/.

[10] Id.

[11] Raveesha, Quasi-contracts, LEGAL SERVICE INDIA,https://www.legalserviceindia.com/legal/article-4072-quasi-contracts.html.

[12] DR. AVTAR SINGH, CONTRACT & SPECIFIC RELIEF 558 (Eastern Book Company 2020).

[13] (17600 2 Burr 1005.

[14] Id at 11.

[15] 1914 AC 392 (HL).

[16] 1943 AC 32 (HL).

[17] Id at 15.

[18] Id at 6.

[19] The Indian Contract Act, 1872, § 68, No. 9, Acts of Parliament, 1872(India).

[20] (1844) 153 ER 105.

[21] (1908) 2 KB 1.

[22] AIR 1950 Mad 274.

[23] The Indian Contract Act, 1872, § 69, No. 9, Acts of Parliament, 1872(India).

[24] DR. AVTAR SINGH, CONTRACT & SPECIFIC RELIEF 564 (Eastern Book Company 2020).

[25] AIR 1950 PC 99.

[26] The Indian Contract Act, 1872, § 70, No. 9, Acts of Parliament, 1872(India).

[27] AIR 1962 SC 779.

[28] 1991 MPLJ 910.

[29] DR. AVTAR SINGH, CONTRACT & SPECIFIC RELIEF 566 (Eastern Book Company 2020).

[30] Id at 27.

[31] The Indian Contract Act, 1872, § 71, No. 9, Acts of Parliament, 1872(India).

[32] The Indian Contract Act, 1872, § 151, No. 9, Acts of Parliament, 1872(India).

[33] The Indian Contract Act, 1872, § 155,156,157, No. 9, Acts of Parliament, 1872(India).

[34] The Indian Contract Act, 1872, § 169, No. 9, Acts of Parliament, 1872(India).

[35] AIR 1960 SC 233.

[36] The Indian Contract Act, 1872, § 72, No. 9, Acts of Parliament, 1872(India).

[37] AIR 1959 SC 135.

[38] 2005 (4) SCC 223.

[39] (1831) 172 ER 876.

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