Quasi Contracts under the Indian Contract Act, 1872

The concept of Quasi-contracts is inspired by the theory of Unjust Enrichment. These agreements resembling relations similar to a contract are based on the principle of Nemo debet locupletari ex aliena jactura, which basically implies that one person should not get rich or gain, at the expense of someone else's loss.

In various circumstances discussed below, a person is obliged to compensate another although the basis of this obligation is neither a contract between the parties nor any tort on the other party, who is bound to compensate.

MEANING OF QUASI-CONTRACT

Quasi-contracts are certain relations “resembling those created by contract.” It is covered in Chapter V (Section 68-72) of the Indian Contract Act, 1872.

In this circumstance, an individual is obliged to compensate another although the basis of this obligation isn't an agreement between the parties.

The basis of this obligation is that one should have an unjust benefit at the cost of another.

The following are the essentials of Quasi-Contract:-

1. The benefit has been received by the defendant.

2. The benefit is at the expense of the plaintiff.

3. The benefit received is unjust.

DIFFERENT TYPES OF QUASI-CONTRACTUAL OBLIGATIONS-

The Chapter V of the Indian Contract Act, 1872 discusses 5 categories or types of such obligations. These obligations are not originated in the proposal or acceptance of any agreement, but rather are based on the principles of justice, equity, and good conscience, and natural justice, viewed through the perspective of the Theory of Unjust Enrichment.

1. Claim for necessaries supplied to a person incompetent to contract under Section 68:

When one person supplies necessaries to another person who is incompetent to contract, or to anyone whom such incompetent person is legally bound to support, and the person furnishing such supplies is entitled to reimbursement from the property of such incompetent.

It is already known, that any contract with a minor, lunatic or incompetent person is void ab initio. The person who is legally required to be reimbursed cannot bring a suit against such an incompetent person.

However, reimbursement can be claimed only through the property of such a person.

For instance- a minor or lunatic or to anyone whom such incompetent person is bound to support (for example- a lunatic, wife or children) the person furnishing the supplies is entitled to reimbursement from such incompetent person’s property.

Illustration:

(a) A supplies B, a lunatic with necessities suitable to his condition in life. A is entitled to be reimbursed from B’s property.

(b) A supplies the wife and children of B, with necessaries suitable to their condition in life. A is entitled to be reimbursed from B’s property.

2. Reimbursement of Money paid, due to another under Section 69 :

An individual who is interested in the payment of money, which another is limited by law to pay and who consequently pays it, is qualified for reimbursement by the other.

For the application of this Section, the following two essentials need to be satisfied:

(i) One person is interested in the payment of money therefore he pays it-

In Brook’s Wharf v. Goodman Brother’s, the defendant’s warehoused certain goods, which they had imported from Russia, with the plaintiffs. The goods were stolen. Under the (circumstance) law of customs, duty on the goods could either be recovered, from the owners of the goods from the warehouseman.

The warehouseman i.e. plaintiffs were called upon to pay the customs duty which the owners of the goods i.e. defendants were bound to pay. The plaintiffs claimed the amount of duty paid by them from the defendants. It was held that they were entitled to recover the same.

(ii) Another person is bound by law to pay the same, but he fails to pay-

In Port Trust, Madras v. Bombay Company, an employee of the Port Trust was injured and was compensated under the Workmen's Compensation Act. After the payment of compensation, the plaintiffs brought an action against the defendants, due to whose fault the injury was caused. This action could have been maintained under the tort of negligence by the defendant.

But the Courts dismissed the claim for reimbursement under Section 69 of the Contract Act because of the following reasons-

• The plaintiff was not merely interested in the payment, as the injured worker had already been compensated.

• During the payment by the plaintiff, the defendant was not bound by law, as the defendant's liability to pay under the law of torts had yet not been determined.

3. Obligation of person enjoying Non-Gratuitous Act under Section 70 :

At the point when an individual legitimately works on something for someone else, or conveys anything to him, not intending to do so gratuitously and such other person enjoys the benefit were of the latter is bound to make the compensation to the former in respect of or to restore the thing so done or delivered.

For the application, this Section, the following essentials must be satisfied-

(i) A individual ought to legally work on something for someone else or ought to convey something to him;

(ii) The individual making the payment or conveying the thing should not do as such needlessly i.e. he should expect payment for the same.

(iii) The other person enjoys, the benefit of this payment or delivery of the thing.

Thus, if A, a tradesman leaves some goods at B’s house by mistake and B treats the goods as his own, B is bound to pay A for them.

Case law:

In Aries Advertising Bureau v. C.T. Devraj, the offended party advertiser made advertisements for a circus at the instance of the circus owner. The advertiser was not involved with the agreement between the financer and the circus owner.

The sponsor brought an activity against the financer to recuperate promotion costs from the financer. In this case, it was held that the financer did not enjoy any benefit from the advertisements and hence the finance could not be made liable to pay under Section 70.

4. Responsibility of finder’s Goods under Section 71 :

A finder of goods is a person who finds goods belonging to another and takes the goods into his custody. Although, it must be mentioned that there is no pre-existing contract between the finder of goods and the original owner of goods. This has responsibility has been fixed by Section 71 on the finder of goods.

The Finder of Goods is also endowed with certain responsibilities, such as-

(1)The finder of goods is to take such care of goods as a man of ordinary prudence would, under similar circumstances, take care of his goods of the same bulk, quality, and value as found by him.

(2) He should not mix the goods found with his goods.

(3)He is bound to return the goods to his true owner if he can after a reasonable search is found.

(4)If because of the finder's default, goods are not returned to the true owner or there is any loss, destruction, or deterioration of the goods, the finder must compensate the owner for the same.

But Section 169 of the Contract Act, also provides that the finder of goods has the power to sell the goods if the following conditions are met-

(1) The owner of the goods cannot with reasonable diligence be found.

(2)If he refuses, upon demand, to pay the lawful charges of the finder of goods; and

(3) Either the thing found is in danger of perishing or of losing the greater part of its value.

(4)In case the goods are not of perishable nature, but the lawful charges of the finder, in respect of the thing found, amount to two-thirds of its value.

It also must be noted that a Finder of Goods is only considered a Bailee against the true owner of such lost goods, as was held in Armory v. Delamorie.

5. Liability of a person getting benefit under Mistake or Coercion under Section 72 :

When money has been paid or anything has been delivered by one person to another, either by mistake or under coercion, the money so received or the thing delivered, must be repaid or returned.

Illustration:

A railway company won't convey up specific products to the recipient besides upon the payment of an illegal charge for carriage. The representative pays the total charged to get the products. He is qualified to recuperate such a large amount of the charge as was unlawfully unnecessary.

UNJUST BENEFIT UNDER MISTAKE-

In Sales Tax Officer, Banaras v. Kanhaiya Lal, the respondent had paid sales tax on the respondent forwarding transactions in silver bullion under UP Sales-Tax Act. The levy of sales tax on such transactions was held to be ultra vires by the High Court of Allahabad.

Then the respondent claimed the refund of the tax already paid. It was held that Section 72 does not make any distinction between a mistake of law and a mistake of fact, and refund of payment made under a mistake of law, in this case, was allowed.

UNJUST BENEFIT UNDER COERCION-

In T.G.M. Asadi v. Coffee Board, the plaintiff purchased some coffee from the coffee board, and made necessary payment of the price and sales tax thereon.

Thereafter, the Coffee Board demanded further taxes from the plaintiff firm, and informed them if the payment was not made, the Coffee Board would adust such taxes from an amount from the firm's deposit to the Board would be utilized for the same purpose.

But such demand had no basis under the Madras General Sales Tax Act. The plaintiff firm repudiated the demand, but paid the amount to the Board, under protest reserving the right to recover the amount by filing the suit.

On an action by the plaintiff firm, it was held that the firm was made to pay additional taxes under compulsion and duress and the Coffee Board was directed to return the amount.

CONCLUSION

Even though in a lot of cases, an agreement might abide by the essential conditions for a valid contract, but they still might not be valid. These special circumstances are only of a few kinds but can be of varying nature.

Thus this topic indicates that the assessment of contracts for their validity transcends the basic rules, and we must consider these possibilities as well when analyzing any form of agreement or contractual deeds.

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