Quasi Contracts

Introduction:

At traffic lights, car or bike cleaner comes, and without asking or saying anything, starts to clean our cars and bikes and when they’re done, they ask for money. Are we legally or morally bound to pay them? Or can we tell them “I didn’t ask you to do so!”. Or when a courier boy delivers someone else courier package at your doorstep, which is already paid. Do you try to contact the real owner and return the courier package or do you become all excited about free gifts? Or when a person mistakenly transfers an amount to your bank account or your Paytm/Phonepe account because of the similar bank account number or similar mobile number. Do you try to find that person or do you become all excited? This article will give you all the answers.  

There are certain obligations, specified in the Indian Contract Act, 1872. But they are not true contracts because, in those contracts, elements of the contract are missing. But they are still enforceable in the court of law. These obligations are called Quasi – contractual obligations. These obligations are in Part V[1] of the Indian Contract Act, 1872.

What is a Contract?

A contract is an agreement enforceable by law. A contract is an agreement between two or more parties for them to do something or to abstain from doing something. A contract governs the legality of agreements made between two or more parties. If an agreement is not enforceable by law, then it is said to be void. The making of a contract requires the shared consent of the parties. And a contract without offer, acknowledgement, consideration, etc. are known as Quasi-contract.

What is a Quasi Contract?

The word ‘Quasi’ means pseudo. A Quasi contract may be a pseudo contract. A Quasi Contract is also known as a constructive contract or implied-in-law contract. A quasi contract is a contract that is created by the court in the absence of an official agreement between the parties. The court creates quasi contracts to avoid the unjust enrichment of a party in a dispute over payment for a good or service.

The aim of a quasi contract is to prevent one party from unfairly enjoying the situation at the other party’s expense.

History of Quasi Contract

Quasi contracts originated in the middle ages under a form of practice known as “indebitatus assumpsit”. Indebitatus assumpsit means to have undertaken a debt.

This practice was a method used by the courts to make one party pay another as if a contract had been created between the parties.  The court could compel the defendant to pay the plaintiff an amount that the court determined.

Requirements for Quasi Contract

• One party, the plaintiff must have granted a tangible good or service to another party or the defendant, with the expectation that payment would be given.
• The defendant must have accepted the good or service, but made no effort or offer to pay for it.
• The plaintiff must explain why it is unjust to receive the good or service without paying for it for the defendant.

Unjust Enrichment

Unjust enrichment is a general principle that no person should be allowed to profit at another’s expense without compensating for the fair value of any property, goods, services, or other benefits that have been wrongly obtained and maintained.

There are five elements to prove enrichment:

1. The defendant must have accepted an enrichment.
2. The plaintiff must have suffered a disadvantage.
3. The enrichment must be established as unjust.
4. There must be an absence of an explanation for the enrichment.
5. There must be an absence of a remedy provided to the plaintiff by law.  

Difference between Quasi Contract and a Contract

An agreement between two parties is not a concern for the court in quasi contract cases since the court identifies an obligation between the defendant and plaintiff without the consent of both the parties. And in other contracts, two or more parties are required to agree that they will mutually benefit by exchanging goods and services. This lack of mutual agreement differs from other types of contract.

Quasi Contract under Indian Contract Act, 1872

Chapter V of the Indian Contract Act, 1872 deals with the “certain relations resembling those created by contract”. Chapter V incorporates those obligations which are known as “Quasi Contracts”. There are five circumstances under which a Quasi-contract comes to exist.

Section 68 – Necessaries supplied to people unfit of contracting.^[2]

Section 69 – Installment by an interested person if an individual pays the money on someone else’s behalf which the other person is bound by law to pay, at that point he is entitled to reimbursement by the other person.^[3]

Section 70 – Commitment of an individual enjoying the benefits of a non-gratuitous act.^[4]

Section 71 – Responsibility of finder of goods.^[5]

Section 72 – Money paid by mistake or under coercion. If an individual gets money or goods by mistake or under impelling, at that point he is at risk to reimburse or return it.^[6]

Landmark Cases

Hari Smash Seth Khandsari v Commissioner of Sales Tax:

In this case, the court also agreed to the truth that, although the term has been avoided in this chapter, this chapter is about the quasi contracts. In this case, ruler Mansfield stated that such commitment was based upon the law as well as justice to anticipate undue advantage to one individual at the cost of others.^[7]

Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd.

In this case, the court expressed that the obligations which emerge in such situations where one individual is enhanced at the cost of another-the commitment do not drop simply either beneath torts law or contract law.^[8]

Conclusion

A quasi contract can be considered as a constructive contract or an implication of law. It can be considered as a fake contract. This also may be the reason why the statute does not mention the term “quasi contract”. But indirectly covers the concept to prevent unjust enrichment. When something is done for a person or some good or services is delivered to him without gratuitous intention, he is bound to compensate.

---

References:

^[1] Part V, Indian Contract Act, 1872, Government of India

^[2] Section 68, Indian Contract Act, 1872, Government of India

^[3] Section 69, Indian Contract Act, 1872, Government of India

^[4] Section 70, Indian Contract Act, 1872, Government of India

^[5] Section 71, Indian Contract Act, 1872, Government of India

^[6] Section 72, Indian Contract Act, 1872, Government of India

^[7] Hari Ram Seth Khandsari v. Commissioner of Salex Tax, 2003, 2005 139 STC 358 All

^[8] Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd, 1942 UKHL 4