MBA 3rd SEMESTER BATCH

Session 2021-2022
CORPORATE LEGAL FRAMEWORK
Assignment
on
INDIAN CONTRACT ACT 1972 QUASI CONTRACT

SUBMITTED TO: SUBMITTED BY:

MR. TEJU KUJUR PRIYA KUMARI VERMA
(ASSISTANT PROFESSOR) UPASANA PATEL
UTTAM KUMAR DHURI
DIVYANSH SINGH
 TABLE OF CONTENT

S/N TOPIC PAGE NO

1. Introduction 1

2. Evaluation of Quasi contract 1

3. Quashi contract in India 2

4. Meaning of quasi contract 2
5. Quasi contracts under the Indian 2
contract act 1872
6. The principle of unjust enrichment 3
7. Element of quasi contracts 4
8. Role of quasi contract and the court 4
9. Features of a Quasi contract 4
10. Types of quasi contracts 5
11. Similarities between contracts and 5
quasi contracts
12. Difference between contract and quasi 12
contract
13. conclusion 14
14. References 15
 1. INTRODUCTION

If, while riding on a train, a shoe shiner comes, and without us saying anything, starts to
polish our shoes and when they’re done, they ask for some money. Are we obliged to pay
them that amount? Or can we tell them “I did not ask you to polish my shoe anyway!”.
Imagine another situation, where someone else’s Amazon package, with its payment already
done, is left at your door. Do you become all excited and say “YAY! Free Gifts!” or do you
make an effort to find the owner or return the package? This blog post will give you answers
to similar questions.
There are certain obligations, specified in the Indian Contract Act, that are not actually
contracts because they miss one or the other elements of a contract, but are still enforceable
in a court of law. Such obligations are called Quasi-contractual obligations. Each of them
has been talked about separately in Sections 68 to 72 (Chapter V) of the Indian Contract Act,
1872. Let us first look where these obligations arise from, and then discuss each of them
separately.

2. EVOLUTION OF QUASI CONTRACT

The history of quasi-contract can be dated back to the Middle Ages, where there was a
practice known as indebitatus assumpsit. Under this, the law imposed that the defendant
would give a sum of money to the complainant, in an amount directed by the courts of
justice, as if the accused always agreed to pay the complainant for the goods or the services.
The courts used the method called indebitatus assumpsit whereby one party pays another as if
the contract had already been created between the parties. It is already implied by the law that
the defendant is bound by the agreement.
Quasi Contract is not defined in the Indian Contract Act, it refers to them as a relation
resembling those created by a contract. However, a quasi-contract can be defined as a
contract that is initiated by the court when there is no such formal contract that exists between
the parties. Quasi-contracts created by the court help to prevent “unjust enrichment” of one
party at the cost of the other party.
For example, Altaf gets unjust enrichment at Bairam’s cost, Altaf is bound to compensate
Bairam for the same. If for instance, Altaf and Bairam together owe some amount of money
to Anand. Altaf pays the amount of money to Anand and Bairam, not knowing about this
fact, pays the money again to Anand. Here Anand is bound to repay the money back to The
Quasi Contract.

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 3. QUASI-CONTRACTS IN INDIA

The Indian Contract Act, 1872, does not specifically define quasi-contract. However, if we
look at the law quasi-contracts can be called a relationship resembling that a contract.
Further, we can define quasi-contracts as a transaction in which there is no contract between
the parties and the law has created certain rights and obligations between them with is akin to
those created under a contract.

4. 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.

5. 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.
The Quasi contract is defined as: “A voluntary act from which derives obligations subject
to a regime close to the contractual one imposing on the author of the act and a third party,

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not bounding by the contract”. Quasi contract deals with rights or liabilities arise from
relations resembling those created by contract. It is not a real contract and thus called a non-
consensual contract based on agreement of parties.
Quasi contract is based on the principle of equity and justice and prevent enrichment of one
person at the cost of another. It is a contract where there is no intention either side to make a
contract, but the law impose contract. Contract implied in the law are merely remedy granted
by court to enforce equitable or moral obligations in spite of the lack of assent of the party to
be charged.
Quasi-contract are made possible by the application of doctrine of Quantum Meruit that is
what one has earned or deserved on implied assumpsit.

There are two main theoretical bases of quasi contracts liabilities and they are:
1. Implied contracts
2. Unjust enrichment

6. THE PRINCIPLE OF UNJUST ENRICHMENT

Section 68 TO 72 of the Contract Act embody the principles of unjust enrichment. It would
be unjust to allow one person to retain a benefit received at the expense of another person.
Quasi-contracts are based on the principle of “Nemo debet locupletari ex aliena
jactura”, which means ‘No man should grow rich out of another person’s losses’. Therefore,
liability in the case of quasi-contractual obligations is based on the principle of ‘unjust
enrichment’. It essentially means that no man should get unjustly enriched at the cost of
another person’s loss. That means no person should gain anything unjustly, when his gaining
such a thing may mean a loss for another person.
This unjust receipt may become a result of chance or misfortune for someone else. To be
enriched unjustly, someone has to receive a benefit, but not paid for or worked to get that
benefit. Therefore, it is considered ethically and morally appropriate to return it.
Proving unjust enrichment will require five elements:
1. Enrichment must be received by the defendant.
2. A disadvantage must have been suffered by the claimant.
3. Said enrichment must be proven to be unjust.
4. An explanation must be lacking for the enrichment and disadvantage.

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5. A remedy, provided by law to the claimant, must be lacking.

7. ELEMENTS OF QUASI CONTRACTS

There are three inherent principles to a quasi-contract.
1. The plaintiff must show evidence of the goods or services they should have been
compensated for.
2. The defendant must have accepted those goods or services and receive some type of
benefit from them.
3. Finally, the defendant must have accepted said goods or services under unfair
circumstances where the plaintiff didn't receive any compensation.

A standard, legal contract would typically set out stipulations agreed upon by both parties
before the services were rendered, or the goods received. A quasi contract, however, comes
into play when one party never had any intention of entering into a legal contract. This is
when the court steps in to create a contract and achieve a level of fairness between the parties
involved.

8. ROLE OF QUASI CONTRACT AND THE COURT

A court will create a quasi-contract when an official agreement is lacking between certain
parties. Usually, disputes will arise over payments for services rendered or goods. The court
will be seeking to prevent unfair enrichment to any party involved in the dispute.
This makes a quasi-contract a substitute for a contract, designed to promote fair treatment, or
equity, between the parties involved. It's safe to say that quasi contracts are formed where
legal agreements were not established but should have been.

Typically, an actual contract is necessary to hold a defendant liable for goods or services.
When this is not the case, many jurisdictions in the United States will find that restitution
may be achieved through a quasi-contract.

9. FEATURES OF A QUASI-CONTRACT
Their origin does not lie in the offer and its acceptance, that is, in an agreement between the

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parties.
They are rather based on justice, equity, and a good conscience and on the principles of
natural justice.
Sections 68 – 72 of the Indian Contract Act, 1872 detail five circumstances under which a
Quasi contract comes to exist. Remember, there is no real contract between the parties and
the law imposes the contractual liability due to the peculiar circumstances
1. Section 68 states that Claim for necessaries supplied to person incapable of
contracting, or on his account.
2. Section 69 states that Reimbursement of person paying money due by another, in payment
of which he is interested.
3. Section 70 states that Obligation of person enjoying benefits of non – gratuitous act
4. Section 71 states that Responsibility of finder of goods
5. Section 72 states that Liabilities of person to whom money is paid , or thing delivered
, by mistake or under coercion.

10. TYPES OF QUASI CONTRACTS

1. Section 68 (Claim for necessaries supplied to person incapable of contracting,

or on his account)

If the “necessaries” for a person, who is incapable of contracting (for example, a minor or a
mentally disabled person) or of the dependants of such a person are taken care of by
someone, he has the right to be reimbursed from the property of such incapable person.
Although the word “necessaries” has not specifically been defined in the Act, it is impliedly
clear that it means the necessaries to sustain life, basic things like food, clothing, education,
etc. These are things without which a person cannot reasonably exist. In simple terms, if a
person A supplies another person B (who is incapable of entering into a contract) or his
family or anybody else who is dependent on him, with necessaries for life, he is entitled to
take his due return from the property of person B. He is entitled only to such a reasonable
amount as the value of the goods or services he may have supplied hold.
If a person, incapable of entering into a contract, or anyone whom he is legally bound to
support, is supplied by another with necessaries suited to his condition in life, the person who
has furnished such supplies is entitled to be reimbursed from the property of such incapable
person.

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For example, if a person X supplies another person Y (a lunatic) or anyone who is dependent
on him, with necessities for life, such a person is entitled to be compensated from the
property of person Y.

Ingredients of the section are as:

⮚ Necessaries are being supplied.

⮚ Necessaries so supplied must be suited to the condition of life of that person to whom
they are supplied.
⮚ Necessaries are supplied to a person who is incapable of entering into a contract or
anyone whom he is legally bound to support.
⮚ The reimbursement is to be claimed from the property of that incapable person.

Case:
Mr. Sharma v. Mr. Nitin
Facts:
Mr Sharma owns a furniture shop. Kamal, a class X student wanted a study table for his
room. His father Nitin was adamant at not splurging money in buying unnecessary items.
Kamal visited Mr Sharma's shop and offered to buy a study table for 5000/- rupees. Mr
Sharma looked at Kamal and realized that Kamal was not yet eighteen year old. Mr Sharma
told Kamal that only if his father agreed to pay the price, will Mr Sharma sell the table to
Kamal. Kamal promised to Mr Sharma that he would ensure that his father Nitin makes the
payment. Nitin refused to make the payment.
Judgement:
The court justified that we should look at the very basis of Section 11, which is that a party
incompetent of understanding the consequences should not be the party which suffers losses,
monetary or otherwise, because of its inability to understand the consequences of the
contract, in perspective with the law,[xl] which says a good may be a “necessary” to a minor,
but the quality or quantity supplied may render them unnecessary.
The counsel for Plaintiff has failed to show through valid arguments or evidence that the
study table in question was indeed a “necessary” and has also failed in negating the fact that
5000/- rupees is not a huge amount to pay for a study table. This leads us to the conclusion

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that the study table in question is out of the definition of “necessaries”. The court therefore
holds that the study table in question is not a “necessary” under the definition of Section 68.

2. Section 69 (Reimbursement of person paying money due by another, in

payment of which he is interested)

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 the other.

If a person A pays something in someone’s (a person B’s) place, that which person B is

himself ‘bound by law’ to pay, A will be reimbursed by B. Please note that the person A

should be ‘interested’ in this payment. It is a case of implied indemnity.

For example, X is a landlord. Y holds one of X’s land on a lease in Mumbai. The revenue of
X’s land is in arrears, payable to the government. The land ends up being advertised for sale
by the government. Under the revenue law, if the land is sold, it will result in the annulment
of Y’s lease. To stop the sale, Y pays X’s dues. In such a situation X is bound to pay back Y.
A similar action is permitted under English Law, as an action for money reimbursed by the
plaintiff to the defendant.

For instance, Joe is a Zamindar. Annie holds one of his lands on lease in Punjab. The
revenue of Joe’s land is payable to the government in arrears. So, the land ends up being
advertised for sale by the government. According to the Revenue Law, if the land is sold, it
will end Annie’s lease. To prevent this sale, Annie pays Joe’s dues to the government. Joe is
bound to pay back to Annie.

The aforementioned illustration satisfies the following conditions-

⮚ The party paying the other party’s dues is interested in the payment.
⮚ The party whose payment is due was in fact bound by law to pay.

The conditions of the liability under sec. 69 are:

1. The first condition to be followed is that plaintiff should be interested in making the
payment.

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2. The second essential condition is that it is necessary that the plaintiff himself should
not be bound to pay. He should only be interested in making the payment only for the
purpose of protecting his own interest. Where a person is jointly liable with others to
pay, a payment by him of the others' share would not give him a right of recovery.
3. Thirdly the defendant should have been “bound by law” to pay money. The word
bound by law have been held after some hesitation, to mean bound by law or by
contract. It is not necessary that the liability should only be statutory.
4. The fourth and the last condition is that the plaintiff should have made payment and
not to himself.

Case:
Gobind Ram Sanchaiti And Anr. vs Ram Kishore Choudhari And Ors
Judgement:
In this case the judgement was held that case was made by a. purchaser of an estate from a
limited owner during the existence of his interests in order to redeem a subsisting mortgage
on the property. This chapter deals with the question of reimbursement. Section 69 relates to
a case where the person who makes the payment is interested in such payment, although
another is by law bound to pay it.

3. Section 70 (Obligation of person enjoying the benefit of the non-gratuitous

act)

When 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 things so done or
delivered.
A gratuitous act is one that is done for a person by another without the expectation of a
return. For example, giving someone a gift is a gratuitous act. Here comes your Amazon
package delivered to the wrong address. A pack of chocolate chip cookies that you ate as
soon as they arrived. You are liable to compensate the actual owner of the package. The
illustration of a shoe-shiner unsolicited polishing one’s shoes or that of the coolie picking up
one’s goods will lie under Section 70. Such acts and services are not done gratuitously and
therefore a liability to pay back arises on the part of the person on the receiving end.

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Before any right of action under sec. 70 arises, 3 conditions must be satisfied:
1. The thing must have been done lawfully.
2. The person doing the act should not have intended to do it gratuitously.
3. The person for whom the act is done must have enjoyed the benefit of the act

Case:
The above can be illustrated by a case law where 'K' a government servant was compulsorily
retired by the government. He filed a writ petition and obtained an injunction against the
order. He was reinstated and was paid salary but was given no work and in the meantime
government went on appeal. The appeal was decided in favour of the government and 'K' was
directed to return the salary paid to him during the period of reinstatement. [Shyam Lal vs.
State of U.P. A.I.R (1968) 130].

4. Section 71 (Responsibility of finder of goods)

A person, who finds goods to another and takes them into his custody, is subject to the same
responsibilities as a bailee. He is bound to take as much care of the goods as a man of
ordinary prudence would, under similar circumstances, take of his own goods of the same
bulk, quality and value. If he does not, he will be guilty of wrongful conversion of the
property. Till the owner is found out, the property in goods will vest in the finder and he can
retain the goods as his own against the whole world.

Simply, a person who finds goods that belong to another person shall be treated as a bailee. A
bailee is essentially a safe keeper of the goods, who is supposed to return the goods to the
actual owner or dispose them in the manner in which the actual owner may want them to. The
bailee has certain duties and rights as the ‘possessor’ or ‘custodian’ of the goods for the time
being. For example, Sarah finds a diamond lying on the floor in a shop. She picks it up and
keeps it in her safe possession. Sarah makes all reasonable efforts to find the true owner of
the diamond. The diamond actually belonged to Nadia. Sarah has the right to hold the
possession of the diamond against all the world except Nadia, and is supposed to make
reasonable efforts to find her, and return it to her. In this case, Nadia will have to pay the
compensation for all the loss suffered by Sarah in finding her.

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For example, if X finds a gold ring on the floor of Y’s shop. X hands it over to Y until the
true owner is found. No one claims it even after newspaper advertisements. X claims the ring
back from Y, who refuses to return. It was held that Y was entitled to retain the ring against
everyone but the true owner.

Duties of the finder of goods

The finder has a duty to take reasonable care.

● He/she has a duty not to use the goods for his personal purposes.
● He/she has a duty not to mix the found goods with his own goods.
● He/she has a duty to make reasonable efforts to find the actual owner of the goods.
Rights of the finder of goods
● Right to Lien– The right to retain the goods found until he receives compensation for
all the expenses suffered in finding the owner.
● Right to Sue– If the owner had announced a reward for whoever finds the good, the
finder has the right to sue the owner for such reward or retain the goods until he is
compensated.
● Right to Sell– The finder of goods has the right to sell the goods in certain specific
circumstances, for example:
⮚ If the owner could not be found even after reasonable efforts.
⮚ If the owner is found but refuses to pay compensation or the lawful charges of
⮚ the finder.
⮚ If the goods are in immediate danger of perishing if not used.
⮚ If the lawful charges of the finder amount to two-thirds of the value of goods.

Case:
The supreme court has ruled in Union of India vs Amar Singh [13] that the statutory fiction
by which a contract of bailment is inferred between a finder of goods and the real owner
should not be enlarged by analogy or otherwise and, therefore, a railway authority which took
into its custody wagons containing the plaintiff's goods and which were left across the border
in Pakistan become the contractual bailees of goods, and it was not necessary to regard them
as finders within the meaning of section 70.

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 5. Section 72 (Liability of person to whom money is paid or thing delivered by
mistake or under coercion)

As the heading suggests, if something is delivered to a person by ‘mistake’ or under

‘coercion’, he is liable to pay it back. For instance, Aristotle and Dante share a flat and
contribute in half for the rent to be paid. Aristotle, without knowing that Dante has already
paid the due rent to the landlord in whole, pays again to the landlord. The landlord, in this
case, is liable to give back the money delivered to him by mistake. The term mistake here can
mean both mistake of fact or mistake of law.
The section also uses the term ‘coercion’. Here is an example of something delivered under
coercion- A railway company refuses to deliver goods to a certain consignee except upon the
payment of a certain illegal sum of money. The consignee pays the sum to obtain his goods.
The company is liable to return the sum of money illegally charged.

A person to whom money has been paid, or anything delivered, by mistake or under coercion,
must repay or return it to the person who paid it by mistake or under coercion.
Every kind of payment of money or delivery of goods for every type of 'mistake' is
recoverable. [Shivprasad vs Sirish Chandra A.I.R. 1949 P.C. 297]
A payment of municipal tax made under mistaken belief or because of misunderstanding of
the terms of lease can be recovered from municipal authorities. The above law was affirmed
by Supreme Court in cases of Sales tax officer vs. Kanhaiyalal A.I.R.1959 S.C.835

Similarly, any money paid by coercion is also recoverable. The word coercion is not
necessarily governed by section 15 of the Act. The word is interpreted to mean and include
oppression, extortion, or such other means [Seth Khanjelek vs National Bank of India]. In a
case where 'T' was traveling without ticket in a tram car and on checking he was asked to pay
` 5/- as penalty to compound transaction. T filed a suit against the corporation for recovery on
the ground that it was extorted from him. The suit was decreed in his favour. [Trikamdas vs.
Bombay Municipal Corporation A.I.R.1954]

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 11. SIMILARITIES BETWEEN CONTRACTS AND QUASI CONTRACTS

The most basic similarity between a contract and quasi-contract is that the final outcome is
the same as that of a contract. As far as damages are concerned, it is very similar to that of a
contract because Section 73 of the Indian Contract Act, 1872 extends remedies for the breach
of the quasi-contract as it provided for the breach of an express contract in different sections
of the Indian Contract Act, 1872

12. DIFFERENCE BETWEEN CONTRACT AND QUASI CONTRACT

The major differences between contract and quasi contract are as follows –

Sr.No Contract Quasi contract

1 Two or more parties will come Not a real contract.

together for common intention
and generate an agreement.

2 It is always an agreement No agreement between parties.

between the parties.

3 Parties will give their consent. Parties’ consent is not required.

4 Liability exists between parties Liability is independent of agreement.

by terms.

5 It is created by the operation of It is not created by the operation of a contract.

a contract.

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6 It includes right in rem and It includes only right in personal.
right in personal.

7 It is defined in section 2 (h) in Legal Scholar John Salmond defines quasi

Indian Contract Act, 1872. contracts as “certain obligations which are not in
truth contractual in the sense of resting on
agreement, but which law treats as if they were”.

8 It has free consent. It is imposed by law.

9 Parties must be competent A person who is entitled will receive the incurred
expenses.

10 Lawful considerations and It is raised by legal fiction.

lawful objects.

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CONCLUSION
The conclusion of quasi contract is that the principle of quasi-contract is often ignored but

still, it holds a very important place, since the principle is grounded on the principles of
justice and equity. Despite the fact that quasi contract is moulded in the Indian Contract Act
under a new name. However, the basic nature and essence of the principle remains same
without any drastic change. When dealing with quasi contract, you may hear the term
quantum merit.

This measures the severity of the plaintiff's suffering. If someone has will fully breached a
contract, quasi contract recovery is less likely. Yet, you'll find this sort of restitution is often
less severe in instances when an employee will fully breach a contract. Thus, quasi- contracts
form an integral part of the contracts act and it definitely comes to an aid of the victim when
a person is enriched unjustly

There is a significant difference between a contract and a quasi-contract. Quasi-contracts are

not contracts but are obligations imposed by law to prevent or stop any undue advantage of a
person at the cost of another. Hence it can be said that the very foundation of quasi-contracts
is based on justice, a good conscience, and equity. Nobody shall benefit unjustly at someone
else’s cost. This is also known as the Principle of Unjust Enrichment.

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REFERENCES:

https://www.investopedia.com/terms/q/quasi-contract.asp

https://en.wikipedia.org/wiki/Quasi-contract

https://cleartax.in/g/terms/quasi-contract

https://www.wallstreetmojo.com/quasi-contract/

https://www.civilserviceindia.com/subject/Law/notes/kinds-of-quasi-contract.html

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