The obligation of an Individual enjoying Profit/Benefit of a Non-Gratuitous Act

Introduction

A gratuitous act is one that someone performs without the anticipation of a return. For instance, giving a presentation on a birthday is a gratuitous act as it is done in a gratuitous nature, and the act is done without any anticipation in return. On the other hand, if a person lawfully does something for another person without wanting to do it ‘gratuitously’ and the other person receives profit or benefits from that act. The latter is obliged to reimburse the other person for the act performed. For instance, X, a tradesman, leaves his commodities at Y’s residence by mistake. Y treats the goods as his own and derives benefits from them. In this case, Y is bound to reimburse X for the goods.

The obligation of an Individual enjoying Profit/Benefit of a Non-Gratuitous Act

Under the Indian Contract Act, 1872, it is section 70 which elaborates upon the obligation of an individual enjoying profit/benefit of a non-gratuitous act. Section 70 states that: “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.”

Justice V.K. Jain made the recognition and analysis of the above-stated principle of Delhi High Court in the judgment of M/S S.N. Nandy & Co. v M/S Nicco Corporation Ltd. In this judgment, Justice V.K. Jain provided an in-depth analysis and stated that additional works alleged by the claimant were not approved by the defendant and held that the defendant was not under any contractual liability to pay for those works. The claimant was entitled to receive only a fair payment. 

From the above elaboration provided under section 70 of the Indian Contract Act, 1872, it is clear that three conditions need to be fulfilled to ensure application of this section:

1. A person should lawfully do something for another person or, precisely, should deliver something to him.

2 The contention of the individual making payment, performing the act, or delivering the think should be non-gratuitous, that is, he should anticipate in return. 

3. The other person should enjoy/derive the benefit/profit of this payment or the delivery of the thing.

A person should lawfully do something for another person or specifically, should deliver something to him

If an individual does something or another individual or delivers any commodities to him without a gratuitous intent, then the individual is entitled to claim the reimbursement/payment for the same from the other individual. In Damodar Mudaliar v Secretary of State for India, a specific tank was repaired by the government, and the tank was used for irrigating the fields of the defendants. The government did not undertake the repairs with gratuitous content, and the defendants were aware of this fact. The defendants still took benefits of the repairs of the government. It was held that the government was entitled to recover from the government the part of the cost of the repairs in proportion to the lands belonging to the defendants.

The contention of the individual making payment, performing the act, or delivering the think should be non-gratuitous, that is, he should anticipate in return

If an individual does an act to expect reimbursement/payment in return, then he can ask for compensation under section 70 of the Indian Contract Act, 1872. In Haji Abdullah H.A.S. Dharamsthapanam v T.V. Hameed, it was held that if a tenant of property makes additions and improvements in the property and the landlord accepts the same, the presumption established by the court was that the tenant didn’t intend to do so gratuitously. He was entitled to recover reimbursement from the landlord for the improvements made. But, if the intention is to do the act with a gratuitous intent, then nothing can be demanded reimbursement/compensation for the same. In C.I. Abraham v. K K.A. Cheriyan, it was held that if an individual purchases a property for a close relative residing in a foreign country and agrees to collect rent and deposit the amount collected into the relative’s account, and there is no non-gratuitous intent, that is, the anticipation of payment for the services rendered, then nothing can be claimed for the reimbursement of the services done.

The Other Person Should Enjoy/Derive The Benefit/Profit Of This Payment Or The Delivery Of The Thing

Another essential that needed to be proved for the application of section 70 is that the defendant enjoyed the benefit of work done or thing delivered to him by the plaintiff. In P.C. Wadhwa v. the State of Punjab, a significant judgment of Punjab & Haryana High Court, the appellant got selected in the respondent state’s forest department’s service. He was given training in education at the Indian Forest College for about ten months. He was to sign a bond to serve the Forest Department of Punjab state for five years, and if he rejected to do so, he would have to reimburse otherwise the costs incurred by the state of Punjab. He was selected in the I.P.S and subsequently left the forest college without sanctioning the Punjab Government. The Punjab Government brought an action for recovery of Rs. 3,250 is the cost of the training and education of the appellant. It was held that the appellant voluntarily enjoyed the benefit out of the training and education, and the same was done in a non-gratuitous nature indicated by the bond that was to be signed by the appellant, and hence, section 70 was applied. The state was entitled to recover the costs from the appellant. 

Exception

An exception under section 70 of the Indian Contract Act, 1872, is that it cannot be enforced against a minor. A contract with a minor is void-ab-initio; he cannot be made liable under sections 64 and 65 of the Indian Contract Act, 1872. He can only be made liable for the necessities supplied under section 68 of the Indian Contract Act, 1872. In-State of West Bengal v. B.K. Mondal & Sons, it was held that there is the absence of voluntary acceptance of the work done or service rendered in case of a minor, which is the foundation of section 70, is absent and hence section 70 is inapplicable and unenforceable against a minor.

Conclusion

From the above discussion, it is clear that the main motive of incorporation of section 70 under the Indian Contract Act, 1872 was to prevent unjust enrichment and benefit to one party and unfair losses to the other party to ensure that the other party is compensated/reimbursed for the work done or service rendered. Undersection 70, there are three basic essentialities that need to be fulfilled to ensure application of section 70, namely: A person should lawfully do something for another person or precisely, should deliver something to him, the contention of the individual making payment, performing the act of providing the thing should be non-gratuitous, that is, he should anticipate in return, and the other person should enjoy/derive the benefit/profit of this payment or the delivery of the thing. There are some exceptions under section 70, such as unenforceability in the case of minors, etc.

References:

  1. Vatsala Sood, Obligation of Person enjoying the Benefits of a Non-gratuitous Act LegalBites (Dec. 15, 2020) https://www.legalbites.in/obligation-of-person-benefit-non-gratuitous-act/ (last accessed Mar. 15 2021).
  2. The Indian Contract Act, 1872, No. 70 Illustration (a) (Indian).
  3. The Indian Contract Act, 1872, No. 70 (Indian).
  4. M/S S.N. Nandy & Co. v M/S Nicco Corporation Ltd, CS(OS) No. 2448/2000.
  5. Dr. R.K. Bangia, The Indian Contract Act, 2 (12th Edition, 2005), Allahabad Law Agency, Haryana.
  6.  Id., at 277.
  7. Damodar Mudaliar v Secretary of State for India, A.I.R. 1987 All. 309.
  8. Haji Abdullah H.A.S. Dharamsthapanam v T.V. Hameed, A.I.R 1985 Ker. 93.
  9. Bangia, supra note 5, at 278.
  10. C.I. Abraham v. K.A. Cheriyan, A.I.R. 1986 Ker. 60.
  11. Bangia, supra note 5, at 279.
  12. P.C. Wadhwa v. State of Punjab, A.I.R. P&H 117.
  13. Bangia, supra note 5, at 280.
  14. State of West Bengal v. B.K. Mondal & Sons, A.I.R. 1962 S.C. 779.
  15. Bangia, supra note 5, at 283.
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I am Raghav Sehgal, a 1st Year FYIC BALLB student at Rajiv Gandhi National University of Law, Patiala. I am new to the arc of law. I am actively seeking opportunities in Academic Writing, Networking and Critical Skills Development. My fields of interest include International Humanitarian Law, Human Rights Law, Current Affairs and Legal Developments around the law. I have two publications under my belt, and this is indicative of my orientation towards academic writing. My career objective is to be an expert in my profession and improve my standard of thought and mental capabilities and to add wealth to my nation and make my nation and family proud.