QUASI-CONTRACTS
Definition: These are the contracts which are not founded on actual promises. These contracts are created by circumstances, where one person has done something for another or paid money on his behalf, and the other person has enjoyed the benefit of the same. It is a kind of contract by which one party is bound to paymoney in consideration of something done or suffered by the other party. Though no contractual relation exists between the parties, law makes out a contract for them and such a contract is called quasi-contract. The basis of quasi-contract is to prevent unjust enrichment or unjust benefit, i:e, no man should grow rich out of another person’s loss.
The Indian Contract Act recognizes such type of contracts and sections 68-72 deal with such contracts. They are as follows.
Cases deemed as Quasi Contracts:-
- Claims for necessaries supplied (Section 68)
If a person incapable of entering into a contract or any one whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the supplier is entitled to recover the price from the property of the incapable person.
A contract by a minor is wholly void and unenforceable. He cannot even ratify it on attaining majority. But section 68 of the act provides an exception to this rule and makes the estate of the minor liable for necessaries supplied to him. In order to make an infant liable for necessaries supplied, the plaintiff must prove, (1) that the goods supplied were necessary for supporting a person in this position. (2) That the infant had not already a sufficient supply of these necessaries.
- Payment by an interested person (Section 69)
This section provides that a person who is interested in the payment of money which another is bound by law to pay and who, therefore, pays it, is entitled to be reimbursed by other.
In order that section 69 may apply, the following conditions must be satisfied.
(i)A person must by law be bound to pay some money.
(ii)Another person must be interested in the payment of that money.
(iii)The other person must have paid the money because of such interest.
Example: B holds land in Bengal on a lease granted by A, the zamidar. The revenue payable by A to the Govt. being in arrear, his land is advertised for sale by the Govt. Under the revenue law, the consequence of such sale will be annulment of B’s lease. B to prevent the sale and the consequent annulment of his own lease pays to the govt. the sum due from A. A is bound to make good to B the amount so paid.
- Obligation of a person enjoying benefit of non-gratuitous act (Section 70)
Where a person lawfully does anything for another person or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof the latter is bound to make compensation to the former in respect of, or to restore the thing so done or delivered.
For the application of this section, the following conditions must be fulfilled.
(i)The thing must have been done lawfully.
(ii)It must have been done by a person not intending to act gratuitously.
(iii)The person for whom the act is done must have enjoyed the benefit of it.
Example: (a) A, a tradesman leaves goods at B’s house by mistake. B treats the goods as his own. He is bound to pay A for them.
(b) A saves B’s property from fire. A is not entitled to compensation from B, if the circumstances shown that he indented to act gratuitously.
DAMODAR MUDALIAR V. SECRETSRY OF STATE FOR INDIA (1894)
The Government carried out repairs to an irrigation tank, owned by the Government jointly with a zamindar and sued the zamindar for contribution in respect of expenses incurred on the repairs, it was held that Government in carrying out the repairs had acted lawfully and had not intended to carry them out gratuitously and that the zamindar who enjoyed the benefit of the repairs was liable to pay the compensation.
Section 70
- Based on the equitable principles of restitution(payment, usually money, for some harm or wrong that somebody has suffered) and prevention of unjust enrichment (when a person is unjustly or by chance enriched at the expense of another, and an obligation to makerestorationarises, regardless of liability for wrongdoing).
- Not applicable to person incompetent to a contract (like a minor) and that he/she is under no obligation to compensate the other person for any benefit received by him/her.
**But in the above discussed case the state is not a minor.
**Section 70 applies as much to Corporations and Government as to individuals.
MONEY PAID OR ANYTHING DELIVERED UNDER MISTAKE
Payment towards tax or duty, without authority of law, is a payment under mistake within the meaning of section 72 and the same ought to be refunded by the Government.
Section 72 applies to mistake of fact and mistake of law.
RESPONSIBILITY OF FINDER OF GOODS(Section 71)
-A person, who finds goods belonging to another and takes them into his custody, is subject to the same responsibility as a bailee.
-A finder of goods is bound to take as much care of goods found as a man of ordinary prudence would take of his own goods.
-The finder should take proper steps to find the owner.
-The finder of the goods is entitled to retain the goods against the owner until he receives compensation from him. He can retain the goods in the following cases:
1)Where the thing found is in danger;
2)Where the owner cannot without reasonable diligence be found out;
3)Where the owner is found out, but refuses to pay lawful charges of the finder;
4)Where the lawful charges of the finder, in respect of the thing found, amount to two-thirds of the value of thing found.
MONEY PAID BY MISTAKE OR UNDER COERCION (SECTION 72)
-A person to whom money has been paid or anything delivered by mistake or under coercion must repay or return it.
-Payment by mistake under this section must refer to a payment which was not legally due. The mistake is thinking that the moneypaidwasdue when in fact it was not due.
** Mistake may be either of a fact or law.
SALES TAX OFFICER, BANARAS V/A KANHAIYA LAL MUKANDLAL SARAF (1959)
A certain amount of sales tax was paid by a firm under the U.P. Sales Tax Law on its forward transactions. Subsequently, the court ruled the levy of sales tax on such transactions to be ultra vires. The firm was allowed to recover back the tax.
A payment made under coercion can be recovered like payment made under a mistake. Thus, money paid as income tax under threat of attachment can be recovered.
QUANTUM MERUIT
- Quantum Meruit i.e. as much as the party doing the service has deserved.
-For the application of this doctrine two conditions must be fulfilled:
1)It is only available if the original contract has been discharged.
2)The claim must be brought by party not in default.
- The object of allowing a claim on Quantum Meruit is to re-compensatethe party or person for value of work which he has done.
-Damages are compensatory in nature while Quantum Meruit is restitutory.
The claim for Quantum Meruit arises in the following cases:
1)When an agreement is discovered to be void or when a contract becomes void.
2)When something is done without any intention to do so gratuitously.
3)When there is an express or implied contract to render services but there is no agreement as to remuneration.
4)When one party abandons or refuses to perform the contract.
5)When a contract is divisible and the party not in default has enjoyed the benefit of part performance.
6)When an indivisible contract for a lump sum is completely performed but badly, then person who has performed the contract the contract can claim the lump sum; but the other party can make deduction for bad work.