Quasi- Contract

 

Introduction

Chapter V (Section 68 to 72) of the Indian Contract Act deals with “certain relations resembling those created by contract”. This chapter creates 5 heads of Quasi – Contract. It incorporates those obligations which are known as “Quasi Contract” under English law. In various situations mentioned in that chapter, a person obliged to compensate another although the basis of this obligation is neither a contract between the parties, nor any tort on the part of the person who is bound to compensate. This basis of the obligation is that no one should have unjust benefit at the cost of the other.

An action for a quasi- contract resembles a contractual action in so far as such an action is against a certain person or certain persons, who have got the unjust benefit. Such an action, it may be further noted, is for a liquidated sum of money.

The Indian Contract Act deals with the following quasi- contractual obligations

  1. Claim for necessaries supplied to a person incompetent to contract (Section 68)
  2. Reimbursement of money paid, due by another (Section 69)
  3. Obligation of person enjoying benefit of non- gratuitous act (Sec 70)
  4. Responsibility of finder of goods (Section 71)
  5. Liability of a person getting benefit under mistake or coercion (Section 72)

The basis of obligation:

In these sections a person is obliged to compensate another although the basis of obligation is neither contractual nor tortious. It is unjust enrichment, i.e. enrichment of one at the cost of another.

Mansfield, the real founder of quasi contract, said that law as well as justice should try to prevent unjust enrichment. In Moses vs. Macferlan, the situations in which quasi contact can be invoked was explained

  1. Money paid by mistake
  2. In cases where consideration failed totally
  3. Money paid under imposition/ extortion/ oppression.

In all these situations, the defendant should return the money on the basis of principle of natural justice and equity. According to Mansfield’s viewpoint, the juridical basis of quasi contract was implied, notional or fictional contract.

Implication of this view point.-

The second view point narrowed the scope of quasi- contract. According to this view point, the basis of quasi- contract is implied contract, so where, there is no contract possible, there can be no remedy under quasi- contract.

In Fibrosa v Fairbairn 1942 All E.R (122) HL it was said that any civilized system of law is bound to provide remedies for cases of unjust enrichment/ benefit i.e. to prevent a person from retaining money or, on some benefit derived from another, keeping of which is against conscience.

Such remedies in English law are different from remedies in contract/ tort & are now recognized to fall within 3rd category of common law which is called as quasi contract or restitution.

Indian Statute avoids the term quasi- contract and instead has given the name “of certain relations resembling those created by contract”.

For action under unjust enrichment, there are certain essentials to be proved-

  1. Defendant’s enrichment by receipt of a benefit.
  2. Enrichment at expense of plaintiff.
  3. Retention of enrichment is unjust.

Claim for necessaries supplied to a person incompetent to contract (section 68) –

When one person supplies necessaries suited to the condition in life of a person, whom is incompetent to contract, or to any one whom such incompetent person is legally bound to support for example to lunatic’s wife or children the person furnishing such supplies is entitled to reimbursement from the property of such incompetent person

Section 68 says that “Claim for necessaries supplied to person incapable of contracting or on his account. If,

  1. A person, incapable of entering into a contract, or any one whom he is legally bound to support is
  2. Supplied by another person with necessaries suited to his condition in life.
  3. The person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person

Essentials of Section 68

  1. Supply of necessaries
  2. To person incapable of contracting or to any one to whom incapable person is bound to support.

If these two conditions are satisfied than the consequence follows that the person supplying necessary is entitled to be reimbursed.

Reimbursement of money paid, due by another

Section 69 reads

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.

For the application of this section, the following essentials are to be there-

  1. One person is interested in the payment of money, and therefore , he pays it, while,
  2. The plaintiff should not be bound by law to pay the same
  3. Defendant should be under legal obligation to pay.

The person so making the payment is entitled to be reimbursed by the person who was bound to pay.

In Govindram Govardhandas vs. State of Gondal AIR 1950 P.C 99. It was said that the general purpose of this section is “to afford to a person who pays money in furtherance of some existing interest an indemnity in respect of the payment against any other person who rather than he, could have been made liable at law to make the payment

Under English law, a similar action is permitted, as being an action for money paid by the plaintiff to the defendant’s use.

  1. Interest in making payment:

The person, who makes payment, and then claims its reimbursement must have an interest in making the payment. The purpose of making payment should be bonafide protection of his interest by the plaintiff. This provision in India is wider than English law.

  1. The plaintiff should not be bound to pay-

It is necessary that the plaintiff himself should not be bound to pay. He should only be interested in making payment in order to protect 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 to recovery under this section.

  1. Defendant should be under legal obligation to pay-

The defendant should have been “bound by law” to pay the money. The words “bound by law” have been held to mean bound by law or by contract.

Where a person is only morally bound and is not legally compellable to pay, he will not be bound to reimburse the party discharging his moral obligation.

Liability to pay for non- gratuitous acts (Section 70)

Section 70 creates liability to pay for the benefits of an act which the doer did not intend to do gratuitously. This section reads as

Obligation of person enjoying benefit of non- gratuitous act-where a person lawfully does anything for another person or delivers anything to him not intending to do 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.

Three conditions must be satisfied before this section can be invoked-

  1. A person should lawfully do something for another person or deliver something to him
  2. In doing the said thing or delivering the said thing he must not intend to act gratuitously
  3. The other person for whom something is done or to whom something is delivered must enjoy the benefit thereof.

Not intending to act gratuitously:

One of the conditions is that the person doing the act should not have intended to do it gratuitously. He should have contemplated being paid from the very beginning. Secondly, the person for whom the act is done is not bound to pay unless he had the choice to reject the services. If a person delivers something to another, it would be open to the latter to refuse to accept the thing and return it; in that case section 70 would not come into operation.

In other words, the person liable under section 70 always has the option not to accept the thing. It is only where he voluntarily accepts the thing or enjoys the work done that the liability under section 70 arises.

Service should have been rendered without request –

It is necessary that services should have been rendered without any request. Reasonable compensation may, however, be recovered for services rendered at request.

The minor is excluded from the operation of Section 70 for the reason that his case has been specifically provided for by Section 68. What Section 70 prevents in unjust enrichment and it applies as much to corporations and government as to individuals. Besides, in the case of a minor, even the voluntary acceptance of the benefit of the work done or thing delivered, which is the foundation of the claim under Section 70, would not be present and so, on principle, section 70 cannot be invoked against a minor.

Lawfully does-

Services should have been rendered lawfully, commenting upon this in State of West Bengal vs. B.K Mondal & Sons AIR 1962 SC 779. , The Supreme Court said that the word “lawfully” refers to an object or consideration which is not forbidden by Section 23 of the Contract Act, but requiring the Government to pay for benefits enjoyed without fulfilling the requirements of the constitution is not lawful.

Enjoys the benefit-

Lastly, the defendant must have derived a direct benefit from the payment or services. Where the works done by a railway company developed the adjoining lands and consequently the municipality received more taxes, this was held to be not a sufficient benefit to enable the railway company to recover compensation from the municipality.

FINDER OF GOODS

Section 71 lays down the responsibility of a finder of goods.’

It says, A person who finds goods belonging to another, and takes them into his custody, is subject to the same responsibility as a bailee. Thus, in respect of duties and liabilities,  a finder is treated at par with bailee.

MISTAKE OR COERCION

Section 72 deals with payments made or things delivered under mistake or coercion.

Section 72 Liability of person to whom money is paid, or thing delivered, by mistake or under coercion – A person to whom money has been paid or anything delivered by mistake or under coercion must repay or return it.

Mistake of fact or of law- money paid under mistake is recoverable whether the mistake be of fact or of law. The section in terms does not make any distinction between mistake of law or a mistake of fact. The term “mistake” has been used without any qualification or limitation or whatever.

 

 

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