UNVEILING QUASI-CONTRACTS: BRIDGING THE GAP BETWEEN IMPLIED AND FORMAL AGREEMENTS

ABSTRACT

Similar to explicit contracts, but without a formal agreement between parties, quasi-contractual obligations are also referred to as contracts implied by law or constructive contracts. These duties are derived from the concepts of equity and fairness, which work to stop unjust enrichment and advance justice in cases where one party has benefited at the expense of another without a signed contract.

There are multiple fundamental principles that can be applied to the categorization of quasi-contracts. First and foremost, one party must receive a benefit from another. This benefit may come in the form of products or services offered, harm avoided, or even both. Second, the benefit that has been granted must be expected to be paid for or compensated. The circumstances surrounding the transaction may imply this expectation. Thirdly, the transaction must not be covered by a legitimate contract. The absence of a formal agreement between the parties gives rise to quasi-contractual obligations, as justice requires that the party that benefits from the arrangement cannot keep the benefit without paying the other party.

In conclusion, quasi-contractual obligations are different from contracts in that they don’t originate from a formal agreement, but they still involve the exchange of benefits and expectations of compensation. In the absence of a contractual arrangement, they protect the values of justice and equity by making sure that no one is unfairly enriched at the expense of others.

KEYWORDS

Contract, Quasi contract, Agreement, Fundamental Principles

INTRODUCTION

Similar to contractual obligations, quasi-contractual obligations entail a legal duty to carry out or refrain from carrying out a specific action. Quasi-contracts, on the other hand, are created by operation of law to avoid unjust enrichment or to guarantee fairness in transactions where no formal contract exists, in contrast to contracts, which are formed through mutual agreement between parties. This particular class of duties functions as a legal remedy in cases where one party has benefited at the other’s expense without a legitimate contract. Quasi-contracts have their roots in Roman law, where the idea of “unjust enrichment” served as the foundation for judicial action. This idea developed over time and was incorporated into contemporary legal systems, such as common law nations like the United States and England. A quasi-contractual obligation essentially occurs when one party gives another party a benefit in a way that makes it unfair for the recipient to keep the benefit without paying the provider. This can happen in a number of situations, including when products or services are delivered incorrectly, when someone benefits at the expense of another person as a result of an error, or when someone knowingly accepts a benefit in a situation where there is implied responsibility to pay for it. Quasi-contracts are classified primarily by three factors: the defendant receiving a benefit at the plaintiff’s expense in situations where it would be unfair for the defendant to keep the benefit without paying the plaintiff. All of these components work together to create a quasi-contractual relationship that binds the defendant to compensate the plaintiff in order to avoid unjust enrichment. When determining whether a quasi-contractual obligation exists in a given situation, courts frequently consider a number of different factors. The type of benefit received, the parties’ intentions, any prior interactions or relationships between the parties, and the general equity and fairness of the circumstance are a few examples of these variables. To sum up, quasi-contractual obligations are essential for ensuring justice and fairness in legal transactions by covering the gaps left by traditional contractual agreements. The legal system seeks to preserve the values of equity and prohibit unjust enrichment by acknowledging and upholding these duties, which fosters stability and confidence in both business and interpersonal interactions.

OBJECTIVES

1. Equitable Treatment: Quasi-contracts are frequently used to stop unfairness or unjust enrichment when one party gains an advantage over another without a valid reason.

2. Fairness and Justice: By prohibiting one party from unfairly keeping gains or benefits at the expense of another, quasi-contracts seek to maintain justice and fairness.

3. Restitution: In situations where there isn’t a legitimate contract in place to govern the transaction, quasi-contracts offer a legal means of restitution, enabling a party to get back the value of benefits granted to another.

4. Avoidance of Windfall: By guaranteeing that parties are not unjustly enriched or disadvantaged as a result of events beyond their control, quasi-contracts help prevent windfall gains or losses.

5. Promotion of Good Faith: Dealings Parties are encouraged to deal with one another in good faith when they are aware that, despite the lack of a formal contract, they may still be subject to certain legal obligations.

6. Efficiency and Certainty: By offering a framework for settling disputes in circumstances where the parties’ intentions are murky or where there isn’t an express contract, quasi-contracts help to increase legal efficiency and certainty.

WHAT IS CONTRACT

CONTRACT: An agreement that outlines specific legally enforceable rights and obligations for two or more parties is known as a contract. Contracting can refer to the actions and intentions of the parties entering into a contract. A contract usually involves the transfer of goods, services, money, or a promise to transfer any of those at a later time. Should there be a breach of contract, the aggrieved party may pursue equitable remedies like rescission or specific performance, or they may pursue judicial remedies like damages. A treaty is a legally binding agreement between parties to international law[1].

TYPES OF CONTRACTS

Express Contracts

Proposals, offers, and the acceptance of those offers or proposals constitute contracts. It is possible for proposals to be made and accepted implicitly or explicitly. A proposal that is made in writing is considered an express offer under Section 9 of the Indian Contract Act. Therefore, an express contract is made in writing or verbally using words.

Implied Contracts

Implied contracts are also recognised in Section 9[2]. It says that an implicit offer (or acceptance) is one that is made through any means other than words. An implicit contract is determined by the parties’ conduct, gestures, etc.

Electronic contracts

An “electronic contract” is one that is created via online commerce, with little to no in-person meetings between the parties. It describes started and finished electronic commercial transactions.

QUASI CONTRACT

MEANING: Chapter-V, section 68 to section 72 of the Indian Contract Act, 1872, speaks about a “quasi-contract” or certain family members resembling those created by way of contracts. These family members resembling a contract are recognised as contracts implied in law or a quasi-contract. It is, however, not an actual contract, as it is called, a consensual contract-based totally on the parties’ agreement. A court-recognized fictional contract is known as a quasi-contract, implied-in-law contract, or constructive contract. Roman law gave rise to the idea of a quasi-contract, which is still in use in certain contemporary legal systems. Empirical laws derived from the Latin proverb “Nemo debet locupletari ex aliena iactura” assert that no one should profit from the misfortune of another. It was among the main tenets of Roman law[3].

FEATURES:

The right to the money is typically provided by the quasi-contracts.
It is imposed by law rather than being the result of an agreement because there is no contract or mutual consent between the parties.
They are predicated on natural justice concepts, equity, justice, and a clear conscience.

TYPES OF QUASI-CONTRACTS:

Sections 68 through 72 of the Contract Act of 1872 list the various forms of quasi-contracts, as follows:

Section 68: Supplies are given to an incapable person by a third party acting on their behalf or on behalf of anyone they are legally required to support if they are unable to enter into contracts. The unable person’s property may be used by third parties to recoup the supplier’s cost[4].

Section 69: A person who pays money on someone else’s behalf has a legal obligation to do so. Consequently, the payer has the right to receive payment from the recipient[5].

Section 70: The recipient party is required to pay the former party for services rendered lawfully to them, or for gifts they give without intending to do the same gratuitously[6].

Section 71: An individual who discovers property that is the property of another and assumes ownership of it bears the same obligations as a bailee[7].

Section 72: Refund or return money given to someone under duress or who was given money in error[8].

ADVANTAGES AND DISADVANTAGES OF QUASI-CONTRACTS

The fact that quasi-contracts are usually founded on the unjust enrichment principle is one of their advantages. As a result, neither party is given an unfair advantage over the other. It ensures that the person who provides services or goods is paid for the same, protecting innocent victims of wrongdoing and serving as a legal substitute for damages compensation. Since quasi contracts are created by court order, all parties to the agreement are required to abide by them.

There are a few shortcomings or restrictions as well. Benefit recipients who were careless, unnecessary, or miscounted will not be held accountable. A person cannot be charged more than the amount he has received under the contract, even though they may be held accountable under a quasi-contract. Therefore, no provision exists to recover an amount greater than that which the plaintiff has already received; in the event that the plaintiff receives only a portion of the goods or services for which he originally contracted, he will not be entitled to compensation because the entire amount is not recovered.

Plaintiffs must forfeit all profits unless the parties have an express agreement otherwise. Even though a quasi-contract is a legal remedy that guards against the beneficiaries of the services or goods being unjustly enriched, a plaintiff cannot obtain relief unless he can demonstrate that the defendant’s breach of the contract caused him to suffer losses.

DIFFERENCES BETWEEN CONTRACT AND QUASI CONTRACT

A quasi-contract is not an actual agreement but rather a document that mimics one, whereas a contract is a true agreement between two or more parties.
In a quasi-contract, neither party’s consent is present because it is not freely given; in a contract, both parties freely give their consent.
A quasi-contract creates liability based on the behaviour of the parties and is founded on morality, natural justice, equity, and a clear conscience. In contrast, a contract establishes liability based on the terms mentioned and agreed upon by both parties.
While quasi-contracts are mandated by law, general contracts are freely entered into by interested parties without any coercion.
Rights in Personam (against any specific person or entity) and rights in Rem (against the entire world) can both be found in general contracts. However, quasi-contracts are merely Personam rights, meaning that they can only be used against a particular individual.
The entirety of the Indian Contracts Act of 1872 covers every aspect of contracts. Section 2(h) defines a contract, and sections 68–72 contain all of the information pertaining to quasi-contracts[9].

OBJECTIVE OF QUASI-CONTRACT

In quasi-contracts, one party’s responsibility to another is outlined when the first gets something of value or property from the second. Unintentionally giving something valuable to someone else without their consent is a possibility. It is presumed that, upon receiving the good or service, a reasonable person would reimburse the giver in some other way or pay for it.

A giver may be granted quasi-contracts as redress to prevent exploitation and to prevent others from unfairly benefiting from their generosity[10].

CASE LAWS

The applicant in the case of Hari Ram Sheth Khandsari v. Commissioner of Sales Tax (1958) deposited the tax as a significant turnover of Khandsari, and it was initially subject to a 2 percent tax rate. Due to an error, the applicant deposited the tax at the 4 percent rate in the fourth quarter, resulting in the deposit of an excess of Rs. 10,198.22. Although the term “quasi-contract” was not used in this case law, the concept has been discussed nonetheless[11].
In Spolka Anonyme v. Fairbairn Lawson Combe Barbour Ltd. (1942), the courts ruled that commitments that developed in this case and that will develop in the future in which one person benefits at the expense of another cannot be classified as contracts or torts under the law. They belong in the category of quasi-contracts, also known as pseudo contracts, or restitution[12].
In the 2004 case of Moses v. MacFarlane, the idea of quasi-contracts was first presented and explored. This was an English case, and the ruler of Mansfield declared that such commitments, or to put it another way, the duty underlying quasi-contracts, were based on the law and justice with the expectation that no one would gain an unfair advantage at the expense of another[13].

CONCLUSION

The Doctrine of Quasi-Contract under the Indian Contract Act, 1872, plays a crucial role in ensuring fairness and justice in situations where no formal agreement exists. quasi-contracts and contracts both have important functions in the field of legal agreements, even though they have different traits and histories. In situations where there is no formal contract, quasi-contracts fill the gaps and stem from equitable principles to prevent unjust enrichment. They are required by law to maintain fundamental justice principles and guarantee equity. Contrarily, contracts are explicit agreements with defined terms and obligations that are created between parties through offer, acceptance, and consideration.
Although quasi-contracts are imposed by the law to address situations where one party unfairly benefits at the expense of another, contracts are voluntary and intentionally created by parties. Comprehending the distinctions among these legal doctrines is imperative in guaranteeing equitable results in diverse contexts, encompassing commercial dealings, interpersonal connections, and additional legal domains. Though in different ways and in different contexts, both contribute to upholding justice and maintaining fairness in society.

REFERENCES

[1] Wikipedia https://en.wikipedia.org/wiki/Contract

[2] Indian contract act, 1872,& 9, no.09 Acts of Parliament, 1872 (India)

[3] Wikipedia https://en.wikipedia.org/wiki/Quasi-contract

[4] Indian contract act, 1872,& 68, no.09 Acts of Parliament, 1872 (India)

[5] Indian contract act, 1872,& 69, no.09 Acts of Parliament, 1872 (India)

[6] Indian contract act, 1872,&79, no.09 Acts of Parliament, 1872 (India)

[7] Indian contract act, 1872,& 71, no.09 Acts of Parliament, 1872 (India)

[8] Indian contract act, 1872,& 72, no.09 Acts of Parliament, 1872 (India)

[9] Lawcorner.in https://lawcorner.in/differences-between-contract-and-quasi-contract/

[10] Investopedia https://www.investopedia.com/terms/q/quasi-contract.asp

[11] Hari Ram Seth Khandsari vs Commissioner Of Sales Tax on 11 September, 2003

[12] Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1942]

[13] Moses v. Archie McFarland & Son Annotate Case 119 Utah 602 (1951)

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