Quasi Contracts
1. Introduction
A quasi contract is a legal obligation imposed by law, even though there is no formal agreement between the parties. These contracts arise when one party unfairly benefits at the expense of another, and the law intervenes to prevent unjust enrichment.
Even though quasi contracts do not require mutual consent, they are enforced by courts as if they were actual contracts. They are also known as implied-in-law contracts because they are created by legal principles rather than by direct agreement.
📌 Definition (Indian Contract Act, 1872):
Although the Indian Contract Act does not directly define quasi contracts, Sections 68-72 specify situations where a party may be required to compensate another, even in the absence of a formal contract.
💡 Example:
A mistakenly delivers a parcel of expensive clothes to B instead of C. B keeps and uses the clothes. Even though there was no agreement, B is legally bound to pay for them because keeping them without payment would be unjust enrichment.
2. Explanation
A quasi contract is based on the principle of equity, fairness, and justice. The court assumes an agreement exists to ensure that one party does not gain unfairly at the expense of another.
📌 Key Features of Quasi Contracts:
✅ No prior agreement – The obligation arises by law, not by the mutual consent of the parties.
✅ Legal duty, not a contract – A quasi contract creates legal responsibilities similar to a contract but is not a real contract.
✅ Prevention of unjust enrichment – The law ensures that no person benefits unfairly at the cost of another.
💡 Example:
If a person finds lost property and takes care of it, the owner is legally bound to compensate for any reasonable expenses.
3. Types of Quasi Contracts (Sections 68-72, Indian Contract Act, 1872)
The Indian Contract Act recognizes five types of quasi contracts, each dealing with different circumstances where the law imposes obligations.
1. Supply of Necessities (Section 68)
🚫 If a person supplies necessities such as food, clothing, or medicine to a person incapable of entering a contract (such as a minor or mentally ill person), the supplier has the right to claim reimbursement from the person’s estate.
💡 Example:
A doctor provides emergency medical treatment to an unconscious person on the street. Even though the unconscious person did not agree to the treatment, they (or their family) must pay the doctor for services rendered.
📌 Case Example:
A mentally ill person was given food and shelter by a caretaker. The caretaker was allowed to claim payment from the individual’s estate, as the service was a necessity for survival.
2. Payment by an Interested Person (Section 69)
🚫 If a person voluntarily pays a debt that another person is legally bound to pay, they can later recover the amount from the debtor.
💡 Example:
A tenant pays property tax on behalf of the landlord to avoid penalties. The landlord is legally bound to reimburse the tenant.
📌 Case Example:
In a case where a joint property owner paid municipal taxes on behalf of another owner, the court held that the paying party was entitled to recover the amount from the co-owner.
3. Obligation to Pay for Non-Gratuitous Acts (Section 70)
🚫 If a person receives a benefit from goods or services provided by another person, and it was not intended to be a free gift, the recipient must pay a reasonable compensation.
💡 Example:
A mistakenly delivers bricks and cement to B instead of C. B uses the materials to build a wall. Since B received a benefit, they are legally bound to pay A.
📌 Case: State of West Bengal v. B.K. Mondal (1962)
- A contractor mistakenly built facilities for the government, believing there was a contract.
- The government refused to pay, arguing that no formal contract existed.
- The Supreme Court ruled that the government was liable to compensate under Section 70 since they benefited from the construction.
4. Responsibility for Mistaken Payment (Section 71)
🚫 If a person receives goods or money by mistake, they are legally bound to return them or compensate the rightful owner.
💡 Example:
A bank accidentally deposits ₹50,000 into B’s account. B must return it or be legally liable for wrongful retention.
📌 Case Example:
A company mistakenly transferred money into an employee’s bank account. When the employee refused to return it, the court ruled that the money must be repaid, as keeping it would be unjust enrichment.
5. Recovery of Money Paid by Mistake or Under Coercion (Section 72)
🚫 If a person pays money by mistake or under force, they have the right to recover it.
💡 Example:
A person accidentally pays excess income tax. The government is obligated to refund the extra amount.
📌 Case: Sales Tax Officer v. Kanhaiya Lal (1959)
- A businessman was forced to pay an illegal tax.
- The Supreme Court ruled that he could recover the money, as coerced payments are not legally valid.
4. Significance in Real Life
✔️ Prevents Unjust Enrichment – Ensures that people do not unfairly profit at another’s expense.
✔️ Protects Individuals from Loss – Allows individuals to recover payments made by mistake.
✔️ Ensures Fair Transactions – Protects suppliers and service providers from unpaid obligations.
✔️ Legal Certainty in Business – Prevents exploitation in commercial dealings and financial transactions.
💡 Example:
If a person unknowingly receives a refund twice, they are legally obligated to return the extra amount, ensuring fairness in business practices.
5. Conclusion
✔️ Quasi contracts impose legal obligations without formal agreements.
✔️ The Indian Contract Act (Sections 68-72) enforces compensation in specific circumstances.
✔️ They are based on justice, equity, and fairness, ensuring that no person gains an unfair advantage over another.
✔️ Courts enforce quasi contracts to protect individuals, businesses, and institutions from financial loss.
Thus, quasi contracts help maintain fairness, ethical responsibility, and financial justice in legal transactions.
Comments
Post a Comment