THE QUASI-CONTRACTUAL OBLIGATIONS

Himanshu Gupta,

CPJ College of Higher Studies and School of Law

INTRODUCTION

A Quasi-contract is a legal concept where parties enter into a fictional contract implied by law, which prevents unjust enrichment to one party. These contracts are based on the ‘Doctrine of Unjust Enrichment’. In other words, this type of contract can be defined as a legal obligation implied by law on parties without their consent/ will to obey that obligation.

Quasi-contracts are also known as constructive contracts or implied-in-law contracts as there is no actual contact between the parties. Quasi-contractual obligations are imposed by law in situations where one party is getting unjust benefits at the expense of another and it will be inequitable to not compensate the other party.

These contractual obligations are governed by Section 68-72 of the Indian Contract Act, 1872. They are different from implied or express contracts as in these types of contracts parties willingly enter into them, unlike quasi-contracts where the consent of parties is not necessary. The main objective of Quasi-contracts is to prevent unjust enrichment to any person at the expense of other person.

KEY CHARACTERISTICS OF QUASI-CONTRACTS

• NO FORMAL CONTRACT

A Quasi-contract can arise even in situations where there is no actual agreement/ contract between the parties. It can even arise in a situation where they don’t even know each other.

• IMPOSED BY LAW

A Quasi-contract is an involuntarily entered contract by the parties which is imposed by law to ensure that one party is not getting unjust benefits at the expense of the other party.

• EQUITABLE RELIEF

A Quasi-contract is legally imposed in a way that provides equity to both parties in the contract i.e. one which got the unjust benefit and the other which suffered unjust loss/ expense.

• NO MUTUAL CONSENT

A Quasi-contract can be formed without the consent of the parties in the contract as it is a fictional contract that is imposed by law.

• OBLIGATION TO PAY

The most important characteristic of a Quasi-contract is that the party which received the unjust benefit at the expense of the other party is legally obligated to compensate the other party even though both parties never agreed to such an agreement.

LEGAL PROVISIONS OF QUASI-CONTRACTUAL OBLIGATIONS UNDER THE INDIAN CONTRACT ACT, 1872

1. SUPPLY OF NECESSITIES

This type of contract is imposed by law when a person supplies essential goods or services to another person who is not capable of entering into a valid contract. The person can be a minor or of unsound mind. In this case, the supplier of goods is entitled to be reimbursed from the assets of that person. This Quasi-contract is governed by section 68 of the Indian Contract Act, 1872.

For example- if Mr. X provides food and shelter to W (his friend’s wife) who is a lunatic. In this case, Mr. X is entitled to claim reimbursement from W’s property/ estate.

2. PAYMENT BY AN INTERESTED PERSON

This obligation arises when a person who is interested in that matter/ substance pays the money on behalf of another person to protect his interest. Then that person is entitled to claim reimbursement from the other person. This quasi-contract is governed by Section 69 of the Indian Contract Act, 1872

For example- if Mr. H owns a house and gives it on rent to Mr. L on rent. A few months later Mr. L gets a notice from the electricity department to clear his dues otherwise he will face a power cut and a heavy fine. To prevent the power cut and fine the owner of the house i.e. Mr. H cleared the dues of Mr. L. In this case, Mr. H is entitled to claim the money from Mr. L which he paid to protect his interest.

3.OBLIGATION TO PAY FOR NON-GRATUITOUS ACT

This obligation arises when a person lawfully provides a service or delivers goods to another person to whom he was not supposed to deliver and the other person takes the benefit of this mistake. Then that person is liable to compensate the person to whom the goods belonged. This Quasi-contract is governed by Section 70 of the Indian Contract Act, 1872.

Example- if Mr. D, a delivery boy was supposed to deliver a parcel to Mr. H but he accidentally delivered the parcel to the neighbour of Mr. H and the neighbour took the benefit of the situation and opened the parcel. In this case, the neighbour of Mr. H is liable to compensate him for the value of goods even though there was no contract between them.

4. FINDER OF GOODS

This obligation arises when a person finds goods belonging to someone else keeps the goods with him and takes due care of the goods. In this case, that person will have the same responsibilities as a bailee and will be entitled to claim compensation from the real owner for the expenses he incurred in maintaining/ preserving the found goods. This Quasi-contract is governed by Section 71 of the Indian Contract Act, 1872.

Example- If Mr. A while walking in the park finds a watch lying in the bushes and keeps the watch with him and takes due care of it. In this case, Mr. A will be entitled to claim compensation for the expenses he incurred in maintaining that watch.

5. MONEY PAID UNDER MISTAKE OR COERCION

This obligation arises when a person receives a sum of money/ goods which he did not ought to be received by him. In this case, that person must return the received goods/ money to the rightful owner. This Quasi-contract is governed by Section 72 of the Indian Contract Act, 1872.

Example- if Mr. A bought the groceries from the shop of Mr. M for Rs 1,100/-. While he was making online payment through UPI the bank showed that the money had been deducted but Mr. M said that he didn’t receive any money and convinced Mr. A to retry the payment. But in reality, Mr. M got both payments and told Mr. A that he would receive a refund in a few days. In this case, Mr. M is obligated to return the money i.e. Rs 1,100/- to Mr. A which he received from him under coercion.

REMEDIES FOR QUASI-CONTRACTUAL OBLIGATIONS

The primary objective of a Quasi-contract is to compensate the party for the unjust loss they suffered from the party which got the unjust benefit. The best method to do this is restitution which aims to restore the parties to the position they were in before the unjust enrichment occurred. Restitution can be provided through: -

• The party which got the unjust benefit should return the property to the rightful owner i.e. other party.

• The party which enjoys the unjust benefit should give monetary compensation to the other party.

LEGAL THEORIES RELATED TO QUASI-CONTRACTS

1. UNJUST ENRICHMENT

Unjust enrichment is the most important legal principle governing the Quasi-contracts. Unjust enrichment means when one party gets an unjust benefit at the expense of the other party. The court imposes a Quasi-contract in such a situation to prevent unjust outcomes.

2. CONSTRUCTIVE TRUST

This remedy is not imposed in every matter but sometimes, the court may impose constructive trust as a remedy. This means that the court assumes that the party who received the unjust benefit holds it in trust for the rightful owner.

3. IMPLIED IN LAW CONTRACT

This theory helps to distinguish implied in-law contracts also called Quasi-contracts and implied-in-fact contracts. The main difference that lies between them is that the implied in fact contract arises from the conduct of the parties unlike implied in law contracts which are imposed by the court on the principle of equity.

LANDMARK CASES

In Satyabrata Ghose v. Mugneeram Bangur and Co., the petitioner i.e. Satyabrata Ghose paid a substantial sum of money to the respondent i.e. Mugneeram Bangur and Co. for purchasing land. However, the Government of India requisitioned the land due to which the transfer of land could not happen. The petitioner sued the respondent to return his money.

The Supreme Court of India ruled the judgement in favour of the petitioner and stated that the petitioner was entitled to recover his money from the respondent as if the money stayed with the respondent, then he would be unjustly enriched. This case reinforced the Quasi-contract doctrine in India.

In State of West Bengal v. B.K. Mondal and Sons, the respondent i.e. B.K. Mondal was a contractual builder and with the due permission of the State of West Bengal he constructed buildings and other infrastructure on the land owned by the State of West Bengal but while taking the work no formal contract was signed between the parties. After the work was completed, the respondent approached the State of West Bengal for the payment of work but the government refused to pay for the work and stated that there is no valid contract governing this construction.

The Supreme Court of India held that the contractor was fully entitled to receive the payment for the construction on a quasi-contractual obligation and if the contractor is not compensated then it will lead to an unjust benefit to the State of West Bengal. This case established that a formal contract is not necessary to demand restitution.

In Mahabir Kishore and Ors. v. State of Madhya Pradesh, the petitioner was illegally taxed by the State of Madhya Pradesh without any legal authority and the petitioner sued the respondent to claim the refund of those taxes.

The Supreme Court of India ruled the judgement in favour of the petitioner and stated that the State of Madhya Pradesh had no authority to collect tax illegally from the citizens. The Court also stated that the state was obligated to return the amount collected from the respondent under the principle of unjust enrichment.

In Indian Oil Corporation v. Shree Ganesh Petroleum, the respondent i.e. Shree Ganesh Petroleum delivered the petroleum goods to the petitioner i.e. Indian Oil Corporation. After the delivery of products, Indian Oil Corporation refused to pay for some of the deliveries stating that there was no formal agreement between them.

The Supreme Court of India ruled the judgement in favour of the respondent and stated that even though there was no formal agreement between the parties. According to the principles of unjust enrichment and quasi-contract. The India Oil Corporation was liable to pay for products it received and enjoyed the unjust benefit from them.

CONCLUSION

Quasi-contractual obligations are legal obligations created by virtue of law and the consent of parties to enter into this obligation is not required. The main purpose of Quasi-contractual obligation is to promote the principle of equity and fairness.

Quasi-contracts are also called implied in law contracts which means that they are implied by law and ensure that no one gets unjust enrichment at the expense of someone else. This type of contract can be presumed by the court in cases where an actual contract does not exist. Quasi-contracts play a crucial role in the Indian legal system by addressing situations where formal contracts do not exist, yet one party benefits at the expense of another.

The Quasi-contractual obligations are governed under Chapter 5 (Section 68–72) of the Indian Contract Act, 1872. Understanding Quasi-contractual obligations is necessary for fairness, risk management and legal compliance in both personal and business matters.

REFERENCES

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

●  https://www.law.cornell.edu/wex/quasi_contract_(or_quasi-contract)

●  https://www.lawyered.in/legal-disrupt/articles/contracts-and-quasi-contracts/

●       https://www.indiacode.nic.in/bitstream/123456789/2187/2/A187209.pdf

●       Satyabrata Ghose v. Mugneeram Bangur and Co., 1954 AIR 44

●       State of West Bengal v. B.K. Mondal and Sons, 1962 AIR 779

●       Mahabir Kishore and Ors. v. State of Madhya Pradesh,1990 AIR 313

●       Indian Oil Corporation v. Shree Ganesh Petroleum,2022 AIR 744