BUSINESS LAW

Topic: Quasi Contractual Obligations: An evaluation

Programme: PGDM-HRM

Submitted to: Dr Shailendra Nigam

Submitted by: Group 5

Ananya Thukral 22PGDMHR06

Diwisha Kumari 22PGDMHR15

Ishita Chaturvedi 22PGDMHR21

Kritika 22PGDMHR24

Muskaan Aggarwal 22PGDMHR30

Sameera Arora 22PGDMHR43

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 ACKNOWLEDGEMENT

We want to express our gratitude to Professor Shailendra Nigam for giving us this opportunity to
enhance our understanding of Quasi Contractual Obligations: An Evaluation and for his constant
guidance throughout this project.

This project was a group effort, and we all are thankful to each other. This experience helped us to
develop a deep understanding of the subject.

We would also like to acknowledge the support of our institute, IMI New Delhi, for this learning
opportunity.

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 TABLE OF CONTENTS

S No. Topic Page No.

1. Introduction 4-5

2. Quasi-contracts in different 5
countries

3. The Doctrine of Quasi 6

Contracts

4. Types of Quasi Contracts 6-11

5. Quasi contract v/s Contract 11-12

6. Advantages and Disadvantages 12-13

8. Conclusion 13

9. References 14

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 INTRODUCTION

Chapter V of the Indian Contract Act 1872 defines Quasi Contracts as “Of certainties approximating
those generated by contract.”

A contract inferred by law and serves as a redress in disputes between parties without a contract is
known as a quasi-contract. Unlike a typical contract, a quasi-contract is a judicially determined legal
duty for one party to make restitution to the other. In other words, a quasi-contract is a decision made in
the past to fix a situation where one-party gains something at the expense of the other.
These agreements may be imposed when a party accepts products or services that may not have been
requested. The providing party, therefore, expects to be paid as a result of the acceptance.

Purpose

When one party receives a benefit or piece of property from another, a quasi-contract describes the
responsibility of the first party to the second. Without a written contract, a person may provide anything
of value to another without their knowledge or consent. It is presumed that a reasonable individual
would pay for it, return it, or provide some other kind of payment to the giver in exchange for the good
or service.

In order to protect a giver from exploitation and prevent others from unfairly benefiting, quasi-contracts
are granted as a remedy.

Legality

Neither party is required to consent to the agreement because it was created in a court of law and is
therefore enforceable.

When one side has an advantage over another, the quasi-contract is intended to produce a fair result.
The plaintiff, the person who was wronged, is entitled to compensation equal to the item's worth from
the defendant, the party who gained it.

Requirements

A judge must have the following conditions before issuing a quasi-contract:

● A transfer must have resulted in a loss for one person, the plaintiff.
● The defendant must have either received the valuable item or admitted receiving it, kept it, and
made no attempt or offer to pay for it.
● The burden of proof then shifts to the plaintiff to show why the defendant received an unjust
enrichment.

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 ● The product or service was not presented as a gift.
● It was necessary to give the defendant the option to accept or reject the benefit.

Salient Features of a Quasi Contract

● It is imposed by law rather than coming about as a result of any explicit arrangement.
● A quasi-contract is no longer than an actual contract.
● It is a right that can now be used not just against everyone but also against a particular man or
woman.
● Its foundations are the concepts of justice, fairness, and herbal justice.
● The offer and acceptance rule is no longer the foundation.

How do Quasi-Contracts work in different countries?

In many legal systems worldwide, the idea of quasi-contracts—also known as contracts implied in
law—is recognised. Although the specifics may differ depending on the jurisdiction, quasi-contracts are
generally based on the same principles.

In Indian contract law, quasi-contracts are acknowledged as a key legal notion. Legal obligations
known as quasi-contracts result from the law or equity rather than the parties' verbal agreement. These
obligations are founded on unjust enrichment, which states that no one should be permitted to gain
financially at the expense of another.

Quasi-contracts, which develop when one party is unfairly enriched at the expense of another, are
acknowledged as a sort of implied-in-law contract in the United States. In order to prevent one party
from enjoying the benefits of the enrichment without paying the other party, the court may impose a
contract in law.

Quasi-contracts are also referred to as constructive contracts or contracts implied by law in the United
Kingdom. They occur when there isn't a formal agreement between the parties but one-party benefits at
the other's expense. The law presumes a contract in certain situations to stop unfair enrichment.

In France, the idea of quasi-contracts is known as "obligations sans cause." These duties are implied by
law when one party receives a benefit without proper explanation, and the other party is owed
compensation.

Quasi-contracts are described in Japan as "obligations arising from acts or facts." These occur when
one party has obtained an advantage at the expense of another without a valid reason, and the law
implies a responsibility to provide restitution to the victim.

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 The Doctrine of Quasi Contracts

Unjust enrichment refers to a person's inability to enrich oneself at the expense of unidentified parties.
When a contract is absent or there is uncertainty regarding the amount owed for work completed but
achieved in circumstances where fees should be expected, the amount to be paid for services is
determined by quantum meruit, or "the actual value of services operated."

Unjust enrichment is frequently mentioned or considered as a basis for restoration; nevertheless, it may
be more accurate to view it as a prerequisite since, typically, restitution is impossible without unjust
enrichment. Restitution and "unjust enrichment" were described by the Hon. The Supreme Court
has two different shades of green, one leaning more towards yellow and the other towards blue.

With restitution, injustice continues to the same extent as long as the suffering of others has not been
fully compensated. When it comes to identifying abuse or opposition to court orders, the courts have
extensive authority to allow reparation. However, this is just the tip of the iceberg.

Implied-In-Fact Contract And Quasi-Contract

The distinguishing characteristic of a quasi-contract is the lack of a contract or mutual consent between
the parties. Quasi-contracts and implied-in-fact contracts are commonly confused. Implied-in-fact
contracts, which lack a written agreement, aren't contracts in the traditional sense either. In the second
case, even if the parties didn't agree to a contract based on the facts, their actions and words amounted
to a mutual agreement over the contentious issue.

An illustration of the differences between the two could be given.

A goes to a doctor for therapy. A and the doctor have agreed to this situation. The doctor expects
payment from A in exchange for the doctor treating A. It serves as an illustration of an implied-in-fact
contract, where the parties' conduct suggests their consent. In contrast, the parties to the dispute in a
quasi-contract (like the one in the previous example) didn't even know one another. There is, therefore,
no consent issue between them.

Types of Quasi-Contracts

The types of quasi-contracts are listed under sections 68-72 of the Indian Contract Act of 1872.
Due to the exceptional circumstances, the law imposes contractual liability even when there is no
contract between the parties.

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 ● Section 68 - Supply of necessities to persons incompetent to contract

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 an incapable
person.

What are Necessaries?

Necessary 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 already have a sufficient supply of the necessities.

Example:

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

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 ● Section 69 - Payment by a person who is interested in a transaction

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.

Example:

B holds land in Bengal, on a lease granted by A, the zamindar. The revenue is payable by A to the
Government being in arrear, and his land is advertised for sale by the Government. Under the revenue
law, the consequence of such a sale will be the annulment of B's lease. B, to prevent the sale and the
consequent annulment of his own lease pays the Government the sum due from A. A is bound to make
good to B the amount so paid.

Related Case:

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

In Brook’s Wharf v. Goodman Brothers, the defendants 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 or from the
warehouseman. The warehouseman i.e., plaintiffs was 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.

● Section 70 - Obligation of person enjoying the benefit of Non - Gratuitous Act

As defined under 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.

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 Examples:

(a) Anubhav, a tradesman, leaves goods at Puneet's house by mistake. Puneet treats the goods as
his own. He is bound to pay Anubhav for them. (Here as we can see that since Anubhav
delivered goods at Puneet’s place without intending them to be delivered free of charge,
Puneet uses them like his own, deriving benefit from them, therefore it becomes
imperative that Puneet pays for them)

(b) Sarvesh saves Indira’s property from fire. Sarvesh is not entitled to compensation from
Indira if the circumstances show that he intended to act gratuitously. (In this scenario Sarvesh
acted without an intention to be compensated therefore Indira is not bound to make
compensation to him)

Related Case: Mahanagar Telephone Nigam Limited v/s Tata Communication Limited

The Supreme Court of India has ruled that when parties enter into a binding contract, a claim
under Section 70 of the Indian Contract Act, 1872 cannot be made.
This decision was made in response to a case involving Mahanagar Telephone Nigam Limited
and Tata Communication Limited, in which the former deducted money from invoices raised by
the latter due to the latter's failure to fulfil its obligations under a purchase order. Tata
Communication Limited argued that the amounts deducted were not in line with the monetary
amounts specified in the purchase order, while Mahanagar Telephone Nigam Limited claimed
that the sums were due under 'quantum merit.
The Supreme Court analysed Section 70 of the ICA, which pertains to circumstances in which a
non-gratuitous act by a person leads to the formation of commitments on another party who
benefits as a result of such an act.
The court held that Section 70 does not apply to cases where an express contract exists.
Therefore, Mahanagar Telephone Nigam Limited can only claim the sum stipulated in the
purchase order, and not 'quantum meruit'.

• Section 71 - Responsibility of 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.

The position of the finder of lost goods has been considered with the agreement of bailment. As
per Section 148 of the Indian Contracts Act, of 1872, a bailment is an act of delivering goods to
a person for any purpose or to accomplish the motive. The person delivering such goods is the
bailor and to whom the goods have been delivered is the bailee. A bailment is an act of placing
the goods in the custody of another person using an agreement in which the bailee is obliged to
keep those goods safe and return them when the terms and conditions of the agreement are
fulfilled.

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 For example, Ram (bailor) wants to transport his goods from Mumbai to Goa and comes into a
bailment agreement with XYZ transport company (bailee) and imposes a duty on the bailee to
safeguard the goods and deliver them as per terms and conditions of the agreement. Various

provisions of the Indian Contract Act, 1872 oblige the finder of goods, to perform a duty of
bailee in the contract of bailment.

Duties of the finder of the goods:

1. Duty to take reasonable care of the goods: As per section 151, the finder of the goods has a
duty to take reasonable care of the goods until they are claimed by their rightful owner. This
duty includes taking care of the goods in a manner that is appropriate for their nature and value.
2. Duty to try and find the owner: The finder of the goods has a duty to try and find the owner of
the goods, and if the owner is known, he must take reasonable steps to inform the owner of the
goods and to hand over the goods to him.
3. Duty to communicate the finding of the goods: The finder of the goods has a duty to
communicate the finding of the goods to the owner, or to any person who is likely to be
interested in the goods. If the finder fails to do so, he may be liable for any damages that may be
caused.
4. Duty not to use the goods: The finder of the goods has a duty not to use the goods for his own
purposes, and not to dispose of them in any way. The goods must be held in custody until they
are claimed by their rightful owner.
5. Duty to claim reasonable compensation: If the owner of the goods wants them back, he must
pay the finder a reasonable sum as compensation for the trouble and expense he has gone
through in finding and taking care of the goods.

Section 71 of the Indian Contract Act, 1872 deals with the rights of a finder of goods. According to this
section, a person who finds goods belonging to someone else and takes them into his custody is subject
to certain obligations and is entitled to certain rights.

The following are the rights of a finder of goods under Section 71:

1. Right to possess the goods: The finder of goods has the right to possess the goods until they
are claimed by their rightful owner.
2. Right to sue for compensation: If the owner of the goods wants them back, he must pay the
finder a reasonable sum as compensation for the trouble and expense he has gone through in
finding and taking care of the goods.
3. Right to sell the goods: If the rightful owner of the goods does not claim them within a
reasonable time and the goods are perishable or are likely to decline in value, the finder has the
right to sell them and keep the proceeds.
4. Right to hand over the goods: If the rightful owner of the goods is known to the finder, he
must take reasonable steps to inform the owner and hand over the goods to him. If the owner
cannot be found, the finder must take reasonable care of the goods until they are claimed.
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It is important to note that the finder of goods is not entitled to any reward for finding the goods. If a
reward has been offered, it can only be claimed by the person who finds the goods if he communicates
his intention to do so at the time of taking possession of the goods.

Related Case:

In the case of State Of Bombay (Now Gujarat) vs Memon Mahomed Haji Hasam, the Supreme
Court passed a ruling which it says that the bailment is a relationship between the bailor and bailee and
in certain circumstances, the finder of lost goods plays the role of the bailee. Hence, the finder of lost
goods is subject to act as the bailee to the real owner of that goods and he has the same responsibility as
a bailee towards the owner of that goods also the provisions of Section 148 would be applicable to
finders of lost goods.

● Section 72 - Money paid under mistake or coercion

As defined under section 72, the person to whom money has been paid, or anything delivered, by
mistake or under coercion, must repay or return it

Examples:
Arvind and Bhuvan were jointly responsible for paying Shekhar Rs. 10,000 for the reconstruction of
the wall between their houses. However, Arvind ended up paying the entire amount himself, as did
Bhuvan. As a result, Shekhar must repay the portion of Arvind's share that he paid to him in excess.

Paresh paid municipal tax by mistake because he misunderstood the terms of the lease. When he
realised his error, he asked the municipal authorities for a refund. He is eligible for reimbursement
because he paid the money by mistake.

Related case:

The case of Sales Tax Officer v. Kanhaiya Lai Sara established that whether money paid under
mistake is due to a mistake of fact or a mistake of law is irrelevant, as it is recoverable either way.
Section 72 does not impose any limitations on the term "mistake." In this case, a firm paid a certain
amount of sales tax on its forward transactions under the U.R. Sales Tax laws. Later, the Allahabad
High Court declared the levy of sales tax on such transactions as ultra vires. The firm requested a
refund of the tax money, which the Supreme Court granted.

Quasi Contract vs Contract

● A contract is a legitimate agreement between two or more parties, whereas a quasi-contract is

neither an agreement nor a contract but resembles both.

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 ● In a contract, both parties must freely consent, whereas in a quasi-contract, neither party must
consent because it is not given voluntarily.

● In a contract, liability arises from the actions of the parties and is based on morality, natural
justice, equity, and a clear conscience. In a quasi-contract, liability arises from the actions of the
parties and is based on the conduct of the parties.
● While quasi-contracts are mandated by law, general contracts are voluntary agreements between
interested parties.
● General Contracts can be rights in personam (against a specific person or entity) or rights in
Rem (against the entire world). However, quasi-contracts are only personal rights, which can
only be used against a specific person.
● An offer and acceptance with free consent are the fundamental elements of a contract. A quasi-
contract, on the other hand, is not a contract at all because it is missing one or more essential
components.
● In the case of a contract, the parties' agreement led to the obligation. As opposed to a quasi-
contract, where the obligation results from the application of the equity principle of law.

Quasi Contract and its relation with a contract

Both the contracts and the quasi-contract outcome are comparable to that of actual contracts. Because
Section 73 of the Indian Contract Act, of 1872, which provides remedies for the violation of quasi-
contracts, is very similar to many other sections of the Indian Contract Act, of 1872, insofar as the
claim for damages is concerned, both of them are very similar to that of contracts. The Indian Contract
Act of 1872 also provides remedies under the quasi-contract.

Advantages & Disadvantages of Quasi Contract

Advantages are:

● It prevents the undue advantage of one party over the cost of other parties as it is based on the
unjust enrichment principle. This prevents one party from gaining an undue advantage over
another. Thus, it is a safeguard for innocent victims of wrongful acts and a legal alternative to
compensation for damages, ensuring that the one who provides services or goods gets
compensated for the same.
● It is created by order of the court, so none of the parties involved can disagree with such orders.
So, all the parties involved are obliged to follow it.

Disadvantages are:
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 ● The enriched party will not be held liable in the cases where the benefit he received was
tendered negligently, unnecessarily, and by the miscount.
● A person can be liable under a quasi-contract, he cannot be charged more than the amount he
has received under the contract. Thus, there is no provision available for the recovery of more
than that which has been received by the plaintiff - if the plaintiff obtains only part of the
services/goods that he contracted for originally, he cannot claim compensation as the whole
amount is not recovered.
● It is generally created only to the extent necessary to prevent unjust enrichment. The plaintiff
must forgo all the expected profit he would have earned if there is a whole expressed agreement
between the parties involved.

Conclusion

The underlying principle of quasi-contract is that no one should unjustly lose anything or unjustly gain
anything from anything. A quasi-contract is an obligation placed on a party that is not strictly a
contract, whereas a contract has certain parts, including an offer, acceptance, and withdrawal. These
aspects are responsible for building an agreement and ultimately a contract. It results from a party not
performing their obligations or from doing nothing at all.

A legal notion known as quasi-contracts is acknowledged in many different legal systems all over the
world. Although the specifics may differ depending on the jurisdiction, quasi-contracts are generally
based on the same general principles.

In general, quasi-contracts offer a crucial legal framework for settling disputes when there is no explicit
agreement between the parties. They strive to maintain justice and fairness in contractual relationships
and stop one party from unfairly benefiting at the expense of another.

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 References

1. https://indiankanoon.org/doc/1454268/
2. https://www.lexology.com/library/detail.aspx?g=c39230e4-f7dc-4f34-b197-71b0d625c513
3. https://llbmania.com/2022/07/05/quasi-contracts-under-indian-contract-act-1872/
4. https://keydifferences.com/difference-between-contract-and-quasi-contract.html
5. https://indiankanoon.org/doc/1363267/
6. https://blog.ipleaders.in/critical-study-section-71-indian-contract-act-1872/

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