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Quasi Contract And Its Relation With Contract

A quasi-contract (or implied in law contract or constructive contract) is a fictional contract recognised by a court. The notion of a quasi-contract can be traced to Roman law and is still a concept used in some modern legal systems. A valid contract must contain certain essential elements, such as offer and acceptance, capacity to contract, consideration and free consent.

But sometimes the law implies a promise imposing obligations on one party and conferring right in favour of the other even when there is no offer, no acceptance, no genuine consent, lawful consideration, etc. and in fact neither agreement nor promise. Such cases are not contracts in the strict sense, but the Court recognises them as relations resembling those of contracts and enforces them as if they were contracts. Hence the term Quasi contracts (i.e. resembling a contract). 

Even in the absence of a contract, certain social relationships give rise to certain specific obligations to be performed by certain persons. These are known as quasi contracts as they create same obligations as in the case of regular contract. Quasi contracts are based on principles of equity, justice and good conscience. A quasi or constructive contract rests upon the maxims, No man must grow rich out of another persons loss.

In quasi-contract, there would be no offer and acceptance so there shall be contractual relations amid the partners. It is created by means of the virtue of law and is known as a quasi-contract. Quasi contract Sections 68 to 72 of the Indian Contract Act 1872 provide for 5 kinds of quasi-contractual obligations, they are:
  1. Supply of necessities [section 68]
  2. Payment by interested persons [section 69]
  3. Liability to pay for non-gratuitous acts [section 70]
  4. Finder of goods [section 71]
  5. A mistake of coercion [section 72]
     

Essentials of Quasi-Contract:

  1. It is enforced by law. It is not formed by contract.
  2. It is a right in personam.
  3. The individual who incurs expenses is entitled to receive money (unjust enrichment).
  4. It is raised through a legal fiction.

Sections 68 to 72 deals with certain relations resembling those created by contract.

It incorporates those obligations which are known as Quasi-Contracts or Constructive Contracts under English law. It covers cases were the obligation to pay arises neither on the basis of a contract nor a tort, but because a person has obtained an unjust benefit at the cost of another. The principle of natural justice and equity' is thus the determining factor in such obligations.

The quasi contractual obligations are based on the principle that law as well as justice should try to prevent unjust enrichment, i.e. enrichment of one person at the cost of another [Lord Mansfield in Moses v. Macferlan (1760) 2 Burr 1005] or to prevent a man from retaining the money of, or some benefit derived from, another which it is against conscience that he should keep.

These relations are called as quasi contractual obligations. In India it is also called as certain relation resembling those created by contracts.

Salient features of quasi contracts:

  1. In the first place, such a right is always a right to money and generally, though not always, to a liquidated sum of money.
  2. Secondly, it does not arise from any agreement of the parties concerned, but is imposed by the law.
  3. Thirdly, it is a right which is available not against the entire world, but against a particular person or persons only, so that in this respect it resembles a contractual right.

Cases Deemed as Quasi Contracts

1. Supply of Necessaries (Section 68)

Minor's agreement being void ab initio, he cannot therefore, as a general rule, be asked to pay for the services rendered or goods supplied to him. Section 68, however, permits reimbursement to a person, who supplies necessaries to a minor or a lunatic person. For reimbursement no personal action can lie against the minor, etc., but reimbursement is permitted from the property or estate of such incapable person.

What are Necessaries?

Necessaries does not mean bare necessities of life (e.g. food, cloth, shelter, etc.), but means such things as may be necessary to maintain a person according to his conditions in life' (i.e. his status and requirements). Articles of mere luxury are always excluded, though luxurious articles of utility are in some cases allowed. The infant must not have already a sufficient supply of the necessaries.

The following have been held to be necessaries:

  1. Supply of racing cycle for an infant apprentice.
  2. Debt incurred for performing the funeral rites of minor's father.
  3. House given to a minor on rent for living and continuing his studies.
  4. Wedding presents for a bride of minor.
  5. Money advanced for defending criminal proceedings.
But where a minor is engaged in trade, contracts entered into by him for trading purposes are not for necessaries and are not binding on him. It may be noted that the necessaries may be supplied to someone whom the minor is legally bound to support, such as his wife and children.

2. Payment by an Interested Person (Section 69)

A person who is interested in the payment of money, which another is bound by law pay, and who therefore, pays it, is entitled to be reimbursed by the other. For example, where a party had agreed to purchase certain mills, he was allowed to recover from the seller the amount of already overdue municipal taxes paid by him in order to save the property from being sold in execution.

The conditions of liability under Section 69 are:

  1. The plaintiff should be interested in making the payment. It is not necessary that he should have a legal proprietary interest in the property in respect of which the payment is made.
  2. The plaintiff himself should not be bound to pay. He should only be interested in making the payment in order to protect his own interest.
  3. The defendant should be under legal compulsion to pay.
  4. The plaintiff should have made the payment to another person and not to himself.

3. Liability to Pay for Non-Gratuitous Act

Three conditions must be satisfied before Section 70 can be invoked:
  1. A person should lawfully do something for another person or deliver something to him.
  2. In doing the said thing or delivering the said thing he must not intend to act gratuitously.
  3. The other person for whom something is done or to whom something is delivered must enjoy the benefit thereof.

Illustrations
  1. A, a tradesman, leaves goods at B's house by mistake. B treats goods as his own. He is bound to pay A for them.
  2. A save B's property from fire. A is not entitled to compensation from B if the circumstances show that he intended to act gratuitously.
Similarly, where a coolie takes the luggage at the railway station without being asked by the passenger or a shoe-shiner starts shining shoes of the passenger without being asked to do so, and if the passenger does not object to that, then he is bound to pay reasonably for the same as the work was not intended to be gratuitous.

In cases falling under Section 70, the person doing something for another cannot sue for specific performance, nor ask for damages for breach, as there is no contract between the parties. All that Section 70 provides for is that if the services or goods are accepted a liability to pay arises.

The person for whom the act is done is not bound to pay unless he had the choice to reject the services. It is only where a person voluntarily accepts the thing or enjoys the work done that the liability under Section 70 arises. Further, it is necessary that services should have been rendered without any request.

However, reasonable compensation may be recovered for services rendered at request. Services rendered to a person incompetent to contract (e.g. minor) at the time cannot be made the basis of an action under this section. Section 70 applies even if there is a non-compliance of constitutional requirement of contracting with the State (viz. Art. 299 of the Constitution). Thus, in State of W. B. v. B.K. Mondal & Sons (AIR 1962 SC 779), the plaintiff made certain constructions at the request of an officer of State.

The State accepted the work but refused to pay pleading that there was no valid contract. The Court held in favour of the plaintiff. Similarly, in another case, the corporation tried to escape liability on the ground that the contract was not made in accordance with Bombay Municipal Corporation Act. The Corporation was held liable under Section 70.

4. Finder of Goods

A person, who finds goods belonging to another and takes them into his custody, is subject to the same responsibility as a bailee (Section 71).

5. Mistake or Coercion

A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it (Section 72).

Illustrations
  1. A and B jointly owe Rs. 100 to C. A alone pays the amount to C, and B, not knowing this fact, pays Rs. 100 over again to C. C is bound to repay the amount to B.
  2. A railway company refuses to deliver up certain goods to the consignee, except upon the payment of an illegal charge for carriage. The consignee pays the sum charged in order to obtain the goods. He is entitled to recover so much of the charge as was illegally excessive.
In Sales Tax Officer v. Kanhaiya Lai Sara (AIR 1959 SC 135), it has been held that the money paid under mistake is recoverable whether the mistake is of fact or of law. And the term mistake' has been used without any limitation under Section 72. In this case, a certain amount of sales tax was paid by a firm under the U.R Sales Tax laws on its forward transactions. Subsequently to the payment the Allahabad High Court ruled the levy of sales tax on such transactions to be ultra vires. The firm sought to recover back the tax money. The Supreme Court allowed it.

The court observed:
Payment by mistake in Section 72 must refer to a payment which was not legally due and which could not have been enforced; the mistake' is thinking that the money paid was due when, in fact, it was not due.

In Tilok Chand Moti Chand v. Commr. of Sales Tax (AIR 1970 SC 898) a firm paid sales tax in respect of sales to consumers outside the State of Bombay and which were, therefore, not liable to any sales tax. The firm had itself collected the tax money from its customers. The amount was ordered to be refunded to the customers. The firm paid back the amount, however, the Act under which the recovery was made from the firm was declared to be ultra vires.

The firm sought to recover back the money as having been paid under either mistake of law or coercion. The Supreme Court held that the firm did not suffer from any mistake under Section 72. The court, however, held that the payment was made under coercion and would have been recoverable under Section 72.

A quasi-contract was distinct from a contract implied in fact:

  1. Contract implied in fact. A person's assent to be bound by an agreement can be expressed or implied. In the latter case, assuming the requisite formalities for a valid contract are met, there is a perfectly normal contract. The only distinction between a contract arising by express agreement between two people and a contract implied in fact is that the latter was recognized by a court drawing inferences from facts proved at trial. When the plaintiff sued on either sort of contract, she was suing in the law of contract in respect of a consensually assumed obligation and her remedy for the defendant's breach was damages.
     
  2. Quasi-contract. In contrast, quasi contract refers to situations in which a defendant is bound as if there were a contract. When the plaintiff sued on such a contract' by bringing an action of indebitatus assumpsit, she was not enforcing some consensually assumed obligation, but rather an obligation imposed by law.

The quasi-contracts differ from that of a contract which is generally expressed as they contain each term in words whereas, in the latter, the terms come into existence through the conduct of the individuals. The express contracts are approved by individuals as a matter of law both share equal interests with equal consequences though the conditions are specified expressly whereas in the case of quasi contracts the law enforces obligations considering the conduct of the individuals in order to prevent undue advantage to one individual at the cost of another.

Similarities between Quasi Contracts and Contracts

The result of the contract, as well as the quasi-contract, is similar to that of contracts. In case of the claim for damages are concerned both of them are very similar to that of contracts because Quasi contract Section 73 of the Indian Contract Act, 1872 if offers remedies for the violation of quasi-contracts as provided for the breach of express contracts in many sections of the Indian Contract Act, 1872. Remedies are also available under the quasi-contract under the Indian contract act, 1872.

Conclusion
Quasi-contracts are based on the principle of Nemo debet locupletari ex aliena jactura, which implies that no man should grow rich out of another person's loss. Consequently, liability in the case of quasi contractual responsibilities is based on the principle of unjust enrichment. Quasi contract basically means that no individual must get unjustly enriched at the cost of another individual's loss. That means no individual must gain anything unjustly when his gaining such a thing might mean a loss for another individual.

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