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Quasi-Contractual Obligations under the Indian Contract Act

Contracts are the bedrock of commercial transactions, providing a legal framework for parties to define their rights and obligations. However, not all agreements are established through explicit consent. In the realm of contract law, a concept of quasi-contractual obligations emerges as a means to prevent unjust enrichment and promote fairness. This blog will delve into the intricacies of quasi-contractual obligations under the Indian Contract Act, shedding light on their significance and applications.

Understanding Quasi-Contractual Obligations:

Quasi-contractual obligations, also known as “implied-in-law contracts,” are not actual contracts formed by mutual agreement. Instead, they are obligations imposed by courts to ensure that one party does not unfairly benefit at the expense of another. These obligations arise when there is no explicit contractual relationship, but the law deems it necessary to rectify an unjust situation.

The Basis for Quasi-Contractual Obligations:

Quasi-contractual obligations are founded on the principle of restitution, which aims to restore the aggrieved party to their position before unjust enrichment occurs. The Indian Contract Act recognizes quasi-contractual obligations as an essential aspect of contract law, providing recourse in situations where a party has conferred a benefit upon another without the latter’s consent.

Scenarios Leading to Quasi-Contractual Obligations:

Several situations can give rise to quasi-contractual obligations:

• Supply of Necessaries: When a person provides necessary goods or services to another who is incapable of giving consent, the law may imply a quasi-contractual obligation for the recipient to pay for those goods or services.
• Payment for Mistake or Coercion: If a person pays money or transfers property to another due to a mistake or under duress, the law can impose a quasi-contractual obligation on the recipient to return the amount or property received.
• Non-Gratuitous Act: When one party performs a non-gratuitous act for the benefit of another, and the latter gains from it, the law may enforce a quasi-contractual obligation on the recipient to compensate the benefactor.

Key Features of Quasi-Contracts:

Understanding the distinct features of quasi-contracts is essential:

• Lack of Mutual Consent: Quasi-contracts are not consensual agreements. Instead, they are imposed by law to avoid unjust enrichment and to uphold fairness.
• Limited Scope: Quasi-contractual obligations cover only specific aspects of a regular contract. They are designed to rectify unjust situations and may not encompass all elements of a typical contract.
• The objective of Restitution: The primary objective of quasi-contractual obligations is to restore the aggrieved party to their pre-enrichment state, ensuring fairness and equity.

Enforcement of Quasi-Contractual Obligations:

To enforce a quasi-contract, the claimant must prove the existence of a benefit conferred upon the defendant, a corresponding appreciation or retention of that benefit, and the absence of any justification for such retention. Courts consider the circumstances and equities of each case before arriving at a decision.

The Principle of Unjust Enrichment

Quasi Contractual obligation is based on the maxim, “Nomo debit locuplatari ex-line justice,” which means “as much as earned,” or ‘No man should grow rich out of another person’s loss’. The liability arising from a quasi-contractual obligation is solely based on the principle of ‘unjust enrichment.’ To put it simply, it means no man has the right to get unjustly enriched at the cost of another person’s loss.

Is There A Difference Between Contracts And Quasi-Contract?

Contracts	Quasi Contracts
The contract is formed by an offer, acceptance and an agreement.	There is no such agreement in a quasi-contract as it is not an actual contract but a pseudo-contract.
The liability exists between the parties.	Under this, the liability exists independent of the agreement, and it wholly rests upon equity, justice, and good conscience.
It is a right in rem and personal.	It is a right in personam only as it is strictly available against one person only and not against the entire world.
It is made by contract	It is imposed by law and not created by a contract.

Quasi-Contracts in India

The Indian Contract Act of 1872 does not specifically define quasi-contract. However, if we look at the law, quasi-contracts can be called a relationship resembling a contract. Further, we can define quasi-contracts as a transaction in which there is no contract between the parties, and the law has created certain rights and obligations between them that are akin to those made under a contract.

Quasi-Contractual Obligations under the Indian Contract Act, 1872

The Indian Contract Act of 1872¹, under sections 68 to 72, provide for five kinds of quasi-contractual obligations:

1. Supply of necessities [s.68]
2. Payment by interested persons [s.69]
3. Liability to pay for non-gratuitous acts [s.70]
4. Finder of goods [s.71]
5. The mistake of coercion [s.72]

Section 68 – The Supply of Necessities

Under this, necessities are supplied to people who are incompetent to contract. The supplier is entitled to recover the price from the property of the incompetent person.

Minor, a person of unsound mind and person who is disqualified by law, come under the definition of incompetent person under the Indian Contract Act of 1872.

Section 69 – Reimbursement to the Aggrieved Party

• If A, a person, pays on someone else’s behalf, say B, which the other person is bound by law to pay, then A will be reimbursed by the other person, here, in this case, B. This thing is known as implied indemnity.
• For example, one of the properties of Ram is held by Ravi on lease in Punjab. The revenue generated from Ram’s land is payable to the government in arrears. When Ram fails to pay the revenue to the government, the government can sell the land. And according to the Revenue Law, if the land gets sold, the lease agreement will be annulled. To prevent this from happening, Ravi can pay the dues to the government and in return, Ram can repay him later.

Section 70- Obligation on the Party Enjoying the Benefit

A person, say, for example, does something for someone gratuitously without the intention to do so, and the other person enjoys the benefit. In this case, section 70 creates an obligation on the person enjoying the benefit of a non-gratuitous act or for the goods received. He is liable to pay compensation or, if possible, to restore the thing done or delivered.

However, in this case, the person has to prove that

• The act is done, or goods delivered were lawful
• It was not done gratuitously
• The other person accrued the benefits

Section 71 Responsibility for the Finder of Goods

Generally, a person who finds goods belonging to another person is known as Bailee. He is essentially the keeper of the goods found and has certain rights and duties, including returning the goods to the actual owner.  

Following Are the Responsibilities of the Custodian of the Goods-

• Taking reasonable care of the goods found
• Cannot appropriate the goods
• Mix the goods with his goods
• Restoring the goods to the owner

Section 72- Liability of Person to Whom Money Is Paid By Mistake or Under Coercion

• If someone receives money or goods by mistake or under coercion, he is liable to repay or return it to the owner.
• For instance, Peter and Dave rent a house together, and they share the rent. Peter pays the whole rent to the landlord without the knowledge that it was already paid by Dave. Here, Peter is entitled to be reimbursed by the landlord. In another example, the lessee/tenant misunderstood the lease agreement and paid municipal tax erroneously. He is also entitled to be reimbursed by the municipal authorities.
• If the money is paid by coercion, then also it is recoverable.

Conclusion

Quasi-contractual obligations play a crucial role in bridging the gaps when formal contracts are absent. By preventing unjust enrichment and promoting fairness, they uphold the ethical fabric of business dealings in India. Understanding the nuances of quasi-contracts empowers individuals and entities to navigate legal situations with clarity and ensures that the principles of restitution and justice are upheld in the realm of contract law.

FAQs

1. https://www.indiacode.nic.in/handle/123456789/2187?view_type=browse&sam_handle=123456789/1362