Understanding Quasi Contract Under the Indian Contract Act

On this page you will read detailed information about Quasi Contract Under the Indian Contract Act.

As you study the Indian Contract Act, you will learn about the obligations that can arise even without a formal contract. These are known as quasi-contractual obligations. In this article will help you understand what quasi contracts are, how they differ from regular contracts, the types of quasi contractual obligations recognized under Indian law, and examples of situations that may lead to such obligations. Getting familiar with this unique concept can aid your overall comprehension of Indian contract law.

What is Quasi Contract?

Quasi-contract, also known as implied-in-law contracts or constructive contracts, refer to contractual obligations imposed by law. These obligations arise from the conduct of parties or circumstances of the case, regardless of the intentions of the parties. The Indian Contract Act recognizes and enforces certain quasi-contractual obligations under Sections 68 to 72.

A quasi-contract is different from an express or implied-in-fact contract where the parties have reciprocally consented to certain terms. Rather, the law imposes quasi-contractual duties in order to avoid unjust enrichment and prevent one party from retaining gains or benefits derived from another without adequate legal ground. For example, if A builds a house on B’s land under the mistaken belief that he owns the land, B would be unjustly enriched if allowed to retain the house without paying A. The law will imply a quasi-contractual obligation on B to pay A the reasonable cost of construction to avoid unjust enrichment.

Some instances where quasi-contracts arise include:

• Claims for necessaries supplied to a person incapable of contracting (e.g. minor or person of unsound mind)

• Claims for non-gratuitous acts (acts not done voluntarily or with intent to donate)

• Payment of money by another person for the use of a third party under compulsion or coercion

• Benefits obtained under a void or unenforceable contract

• Benefits obtained by lawful acts of a party from the property or services of another party

In summary, quasi-contracts refer to legally implied obligations that arise to prevent unjust enrichment when there is no formal contract. They ensure that one party does not retain benefits derived from another without proper legal grounds. Quasi-contracts demonstrate how the law can impose equitable remedies even in the absence of a traditional contract.

Key Characteristics of Quasi-Contractual Obligations

Quasi-contractual obligations arise from lawful and reasonable acts that benefit another party. These obligations are imposed by law, rather than an actual agreement between parties. Some key characteristics of quasi-contracts include:

Absence of Consent

Quasi-contracts do not require mutual consent or agreement between the involved parties. They are imposed by law to avoid unjust enrichment of one party at the expense of another. For example, if A builds a house on B’s land under the mistaken belief that he owns the land, B would be unjustly enriched if he is allowed to take the house without paying A. Law creates a quasi-contractual obligation on B to pay A the reasonable value of the house.

Reasonable Value

The amount recoverable under a quasi-contract is the reasonable value of the goods or services provided, not necessarily the market price. The reasonable value is determined based on the benefit received by the other party. Using the example above, if the market price of the house built by A is Rs 50 lakhs but its actual value to B is only Rs 30 lakhs, B would be liable to pay only Rs 30 lakhs to A under the quasi-contract.

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Obligation to Pay

The quasi-contractual obligation requires the party that received the unjust benefit to pay the other party the reasonable value of such benefit. Failure to do so would result in legal consequences. In the example above, if B refuses to pay A the reasonable value of the house, A can file a lawsuit to recover the amount from B.

Other Key Points

Other key points regarding quasi-contracts include:

• They are imposed by law and do not depend on the intention or consent of the parties.
• They prevent unjust enrichment of one party at the expense of another.
• Damages are measured by the reasonable value of goods or services provided, not by the contract price.
• They create an obligation to pay on the party that received the unjust benefit.

Quasi-contracts aim to promote fairness and justice between parties even in the absence of a formal contract. They impose obligations on recipients of unjust enrichment to make reasonable restitution to the other party.

Types of Quasi Contract Under Indian Contract Law

Quasi-contracts are imposed by law. There are certain types of quasi-contracts recognized under the Indian Contract Act:

Claims for Necessaries

When a person is incapable of contracting due to minority, lunacy, idiocy, etc., and necessaries of life are supplied to them by another person, the law creates a quasi-contract between them. The incapable person becomes liable to pay the reasonable price of the goods supplied. Payment by an Interested Person When a person interested in the payment of money which another is bound by law to pay, and pays it, the law creates a quasi-contract between them. The person who pays is entitled to recover the amount from the person who is bound to pay.

Non-Gratuitous Acts

When services are rendered or goods are delivered to another person without his consent, and he enjoys the benefit thereof, there arises a quasi-contract to the effect that he must make reasonable compensation for them. For example, when a doctor gives treatment to an unconscious patient to save his life, the law implies a contract and the patient is bound to pay reasonable charges for the services rendered.

Finder of Lost Goods

When a person finds goods belonging to another and takes them into his custody, a quasi-contract arises whereby he is subject to the same responsibility as a bailee under a contract of bailment. He must take reasonable care of the goods and return them to the true owner. He will be entitled to claim compensation for the expenses incurred in preserving the goods and finding the owner.

Unjust Enrichment

When a person retains money or property belonging to another without legal grounds, the law raises an obligation on his part to make restitution to the other. The law implies a quasi-contract in such cases to prevent unjust enrichment.

In summary, quasi-contracts are imposed by law to prevent unjust enrichment and to give effect to the principle that law implies a promise to pay where none was in fact made. They are based on the principle of restitution and equity.

Judicial Interpretation of Quasi-Contracts in India

The Indian Contract Act defines certain relations between parties as ‘quasi-contracts,’ where obligations arise from voluntary acts or operation of law. The judiciary has played an important role in interpreting quasi-contractual obligations in India.

The courts have held that quasi-contractual obligations arise where a person retains benefits voluntarily conferred upon them. In Khopkar Paints and Hardware v. Bharat Petroleum Corporation Ltd., the Bombay High Court ruled that when a person obtains an advantage from the act of another, the law implies a promise to pay for the value of the advantage taken. Similarly, in Sales Tax Officer v. Kanhaiya Lal Makund Lal Saraf, the Supreme Court held that an unjust enrichment claim arises when a person retains money or benefits which in justice belong to another.

The judiciary has also clarified that quasi-contracts require the voluntary acceptance of benefits. In Rajasthan SRTC v. Krishna Kumari, the Rajasthan High Court ruled that the doctrine of unjust enrichment is not applicable when benefits are obtained under a mistake. There must be conscious retention of benefits for quasi-contractual obligations to arise.

Further, the courts have held that quasi-contracts arise regardless of a party’s intentions or motivations. In Rangoon Botataung Baptist Church v. The Collector, Rangoon, the Privy Council ruled that the receipt of money paid by mistake gives rise to a quasi-contractual obligation to repay it, regardless of the recipient’s bona fide belief that they were entitled to it. Quasi-contracts are imposed by law based on the objective consequences of a person’s actions, not their subjective intentions or motivations.

In summary, the Indian judiciary has broadly interpreted quasi-contracts as legally enforceable obligations arising from the voluntary acceptance of benefits, regardless of intentions or motivations. By accepting conferred benefits, a legal obligation is imposed to provide restitution. The courts have played an important role in clarifying and upholding these quasi-contractual principles.

Quasi-Contract FAQs: Your Top Questions Answered

A quasi-contract refers to an obligation imposed by law in the absence of an actual agreement or contract between the parties. Some common questions about quasi-contracts are:

In summary, quasi-contracts prevent unjust enrichment and imply an obligation to pay when no formal contract exists between the parties. They remedy situations where one party has provided a benefit to another without an agreement for payment.

Conclusion

So in conclusion, by understanding the legal principles governing quasi-contracts under the Indian Contract Act, you as a business professional can protect your interests when disputes arise over goods or services provided without an express contract. The key takeaway is that while Indian law implies certain obligations even absent an actual agreement between parties, you should still take care to formally document any transactions with proper contracts whenever possible. Overall, gaining literacy around quasi-contractual relationships equips you to avoid potential pitfalls and approach business dealings in an informed manner. With this knowledge in hand, you can now apply these learnings to safeguard your business while upholding ethical standards under the prevailing legal framework in India.

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