Quasi
Contracts
By
Asok Nadhani
10.1
Quasi Contracts
i. A
contract is entered into by two or more parties to create a legal relationship
between them. But under certain circumstances, even without entering into any
contract, a legal relationship comes up with rights and obligations attached to
it like a contract (termed as Quasi Contract).
ii. Strictly
speaking, a Quasi-contract is not a contract as a contract is intentionally
entered into. So, quasi contracts are also sometimes called as
'contracts implied in law’ or ‘implied contracts.'
iii. The legal obligations of parties remain
same in case of a quasi contract also, i.e., the parties will have same
obligations and rights as if such quasi contract fulfilled all the essential of
a contract.
iv.
Characteristics
of Quasi Contract:
a. A quasi contract does not arise from any
formal agreement, but is imposed by law. The parties are put in the same position as if
there were a contract between them.
b. Quasi contract is based upon the principle
of equity and good conscience. It
is imposed by law. Thus, duty (not promise) constitutes the basis of a quasi contract.
c. It grants a right to one party and imposes
a liability on the other party, in connection with the benefit already received.
d. The right granted to a party under a quasi
contract is not available to him against the whole world, but against particular
person(s) only. In this respect, it resembles a contractual right.
e. The aggrieved party is entitled to all
remedies available for breach of contractual obligation. So, a suit for breach
of a quasi contract may be filed like normal contract.
f.
Compensation
for Non-performance of Quasi-Contracts: When an obligation created by
Quasi-contracts is not discharged, the aggrieved party is entitled to
compensation in the same way as if had made a contract and the other party broken
it (Sec.73).
10.2
Kinds of Quasi-Contracts
a. Supply of necessaries (sec.68)
Sometimes a
person is legally bound to support another incapable person, with necessaries
suited to his condition in life. The person providing the supplies is entitled
to be reimbursed from the property of such supported person.
i. ‘Necessities' means necessaries suitable to
the conditions in life of the person to whom such necessities are supplied.
Thus, necessities are determined with reference to the status of such person and
the circumstances of the case.
ii. Food, clothing and housing are basic necessities.
Other items of necessities are education expenses, medical expenses, legal
expenses for defending minor in civil and criminal proceedings, etc.
iii. A loan taken for purchase of necessities
shall bind the incapable person under section 68.
b.
Payment
by an interested person (sec. 69)
A person,
having interest in a transaction makes payment on behalf of someone, is
entitled to be reimbursed by the person. The general rules are:
i. The
payment made should be bona fide for the protection of one's interest. [Exall v.
Partrige,], Ex 10.1
ii. The
payment should not be a voluntary one.
iii. The
payment must be such as the other party was bound by law to pay. Ex 10.2
c.
Obligation
to pay for non-gratuitous acts (sec. 70)
When a person
lawfully does anything for the benefit of another person, not gratuitously, the
person enjoying the benefit should compensate the person. The general rules
are: [Governor General in
Council vs Madura
Municipality
a. The
act must have been done lawfully.
b. The
person should not do it gratuitously.
c. The
person for whom the act is done must have enjoyed the benefit of the
act. [Damodar Mudalier vs
Secretary of India], [Damodar
Mudaliar v. Secretary of state for India
d. Finder of goods (sec. 71)
i. A
person, who finds goods belonging to another and takes them into his custody,
must take care of the goods (like his own goods) and take steps to trace its
owner. Till the owner is found, the finder can retain the goods. [Hollins vs Flower]
ii. However,
the finder can sell the goods in his custody when: (Sec.169)
a. the
thing found is in danger of perishing ;
b. the
owner cannot with reasonable diligence, be found out;
c. the owner refuses to pay the lawful charges of
the finder
d. the
lawful charges of the finder, in respect of the thing found, amounts to at
least two-thirds of the value of the thing found.
e. Mistake or coercion (sec. 72)
A person
to whom money has been paid, or anything delivered, by mistake or under
coercion, must repay or return it to the person. Ex 10.4, Ex 10.5
10.3
Quantum Meruit
i. When
a person has done something under a contract, and the other party repudiates
the contract, or further performance of the contract becomes impossible, then
the performing party can claim remuneration to the extent of the work done. The
right to claim quantum meruit does not arise out of contract but
is claimed on the quasi-contractual obligation implied upon by law.
ii. The
claim for quantum meruit arises only when the original contract is
discharged. If the original contract exists, the party not in default cannot
have quantum meruit remedy, but can claim damages. The party who is not
in default only can claim for qunatum meruit.
iii. When
an obligation created by a quasi-contract is not discharged, the injured party
is entitled to receive the same compensation from the party in default, as if
that person had contracted to discharge it and had broken his contract. [Planche v. Colburn], Ex
10.6, Ex 10.7, Ex 10.8
Examples:
Payment by
an interested person
Ex. 10.1. A left his carriage on B's
premises. B’s landlord seized the carriage as distress for rent. A paid
the rent on behalf of B to obtain the release of his carriage. Held, A could
recover the amount from B. [Ref. 10.2{b(i)}].
Ex. 10.2. The goods
belonging to A were wrongfully attached on account of arrears of
Government revenue due from B. A paid the amount to save the goods from
sale. Held, A was entitled to recover the amount from B. [Ref. 10.2{b(iii)}].
Obligation to pay for non-gratuitous
acts
Ex.10.3. X, a
tradesman, leaves goods at Y’s house by mistake. Y treats the goods as his own.
Y is bound to compensate X. [Ref. 10.2{c(c)}].
Mistake or Coercion
Ex 10.4. A and
B jointly owe Rs. 100 to C. A alone pays the amount to C,B, not
knowing this fact pays Rs. 100 over again to C. C is bound to pay the amount to
B. [Ref. 10.2(e)].
Ex 10.5. A carrier
refuses to deliver certain goods to the consignee, except upon the payment of
an illegal charge for carriage. The consignee pays the sum charged in order to
obtain the goods. He is entitled to recover so much of the charge as is
illegally excessive. [Ref. 10.2(e)].
Quantum Meruit
Ex 10.6. A was
employed as a Manager in a company. After rendering service for three months,
it was found that the directors were not qualified to appoint him. Held, A could
recover remuneration for the services rendered by him on quantum meruit. [Ref. 10.3(iii)].
Ex 10.7. A
contracted with B to build a house for Rs 10000, to be paid only after
completion of the entire work. After having done the work to the value of Rs 4000, A abandoned the
contract. B then completed the work himself. Can a recover Rs. 4000 on the
basis of Quantum Meruit. Held, A can not recover the value of the part
he had completed because the payment was to be made only on the completion of
the entire work. Due to abandonment by A, B had no alternative but to accept
the part completed and complete the rest of the work. [Ref. 10.3(iii)].
Ex 10.8. A agreed
to decorate B’s flat for a lump sum of Rs 10000. A did the work but
was faulty. B got the defects rectified which cost him Rs 4000. B can
recover 4000 from amount payable to A and pay only Rs 6000 for the work. [Ref. 10.3(iii)].
For more details,
refer to Business & Corporate Laws by Asok Nadhani, BPB Publications, www.bpbonlne.com,
bpbpublications@gmail.com
