Quasi Contract

A Quasi contract is a type of contract under which a party to the contract compensates the other party who has sustained loss or injury. Contract according to the Indian Contract Act 1860 means a mutual agreement between two parties. This agreement consists of promises liabilities and obligations which both parties must perform to a contract to make the discharge of the contract successful. A contract formed through mutual agreement and the parties to the contract are competent to contract is a legal contract and a legal contract is enforceable by law. Both parties to a contract are bound by the law to perform all the promises made in an agreement, non-performance of which leads to a breach of contract.

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A contractual obligation arises in the following way as mentioned under

1. Through an agreement or contract

2. Through the standard form of contract

3. Through a promise of Estoppel

1. Through agreement or contract

An agreement between two parties leads to a contract. When two parties to a contract mutually agree to perform their duties and obligations it leads to a legal contract which is enforceable by the law. A contract is mutually negotiated and both parties to the contract are competent enough to come into an agreement or contract forms a legally binding contract and can be enforceable by law or the parties can be bound to perform the obligations made in a contract.

2. Through the standard form of contract

There are contracts which are pre-drafted and the pre-drafted contracts are easy to use for a contractual agreement. Companies and organizations have to go through many negotiations, agreements and contracts. So, it becomes impossible for a company to draft a new contract every time they enter into a contract with the copmanies. However, standard forms of contract are used to make the drafting process more efficient and time-saving.

3. Through a promise of Estoppel

According to the doctrine of Estoppel, there are some negotiations which do not form a contract or agreement and cannot be called a contract in the strict meaning. Such type of failed contracts consists of promises between two parties which are obliged to be performed even if there is no such contract between two parties.

Essential Conditions to be fulfilled for a contract:

For the formation of a valid contract, there are some essential conditions which must be fulfilled, they are given below-

• There must be two parties to an agreement. And there should be valid acceptance and offer between the two parties.

• Both the parties entering into the contract should be competent enough to enter into a contract.

• In a valid contract, there should be law full consideration and a lawful object.

• Free consent is essential for a valid contract. Neither party to a contract should be forced.

• The contract will be termed invalid when the contract is expressly declared to be invalid in the initial process of the agreement.

Meaning of Quasi-Contract

Quasi is derived from the Latin word ‘Pseudo’ which means ‘as if’ or ‘almost’. Quasi-contracts are a contract that is a dispute resolution clause for the parties who are in a dispute. The Quasi-contract means helping the parties find an alternative way in cases when the parties are not in a contractual relationship. Quasi-contracts are based on the values of Justice, equity and good conscience.

We know that for a valid formation, certain essential elements must be fulfilled like an offer, acceptance, a mutual agreement, competency of the parties to a contract, lawful objects, etc. Quasi-contracts come into existence when the basic essential elements of a contract are missing Quasi contract is inspired by the maxim,” No man must grow rich out of another man’s loss.” which means that a party to a contract shouldn’t earn profit out of the loss of another party to a contract. And a Quasi contract is legally enforceable by law.

Quasi-Contract Example- If M receives a parcel that belongs to A, M has a legal duty to return it to A. A is entitled to sue M if he consumes all of the contents of the package for himself. In that scenario, quasi-contract law allows the court to force M to compensate A.

Working in a Quasi-Contract

In a quasi-contract neither party the contract shows interest in coming into a contract, there are no mutual negotiations or mutual contract between the two parties. Under such a contract which is not usually a valid contract both the parties to the contract try to acquire profit by the loss sustained by the other party to the contract. The quasi-contract is legally enforceable by law.

The quasi-contract acts as a remedy to the party who sustained the loss. The quasi-contract makes the other party liable to pay the compensation to the party who has sustained loss.

A quasi-contract works on the principles of justice, equity and good conscience. A quasi-contract is enforceable by the law and the plaintiff files a suit in the court under the provisions of the quasi-contract for compensation against the loss incurred because of the unjust and unfair practices of the other party in a contract. A judgement on such a case is delivered by looking at the agreement of the two parties. On the court finding out that there was no such contract between the two parties the remedies provided under the quasi-contract are laid down.

Elements of a Quasi-Contract:

The Important elements to form a quasi-contract are given below-

• Doctrine of enrichment

• Enrichment of defendant’s

• The plaintiff should have incurred a loss

• No intention to form a contract between the two parties

1. Doctrine of enrichment

The Doctrine of Enrichment in a quasi-contract means when a party has earned a profit on the loss sustained by the other party and there is no mutual agreement or contract between the parties. These circumstances usually occur when one party to the contract fails to perform the promises made.

2. Enrichment of defendants

The quasi-contract is mostly used when one party faces loss due to the non-performance of the other party to a contract. When one party earns profit on the damages or loss sustained by the other party the quasi contract comes into effect.

3. The plaintiff should have incurred a loss

To establish a quasi-contract one party or the plaintiff must have incurred a loss because of the non-performance of the contract by the other party.

4. Non-intention to form a contract between the two parties

The main difference between an absolute contract and a quasi-contract is that in an absolute contract, both parties come into a contract through mutual negotiations and agreements whereas in a quasi-contract both parties lack the intention to come into a contract. In such circumstances when both the parties are not in a mutual agreement and the other party sustains loss the provisions of quasi-contract are used.

Landmark cases on Quasi-Contract

In the case State of Rajasthan vs Basant Nahahta (2019)

In this case, the Rajasthan High Court held that the provisions of a quasi-contract come into effect when one party make a payment on behalf of another party to the contract voluntarily or involuntarily with obligations or without obligations. In such circumstances, the party who has made the payment is entitled to compensation as given under the provisions of the quasi-contract.

In the case of Kailash Nath Associates vs DDA (2015)

In this case, the Delhi High Court ruled When either party to a contract performs the duties and obligations and services in the circumstances when the other party is absent and in return earns profit then the party who has performed the duties and obligations are entitled to receive compensation under the provisions of the quasi contract.

Different types of quasi-contractual obligations:

The types of Quasi-judicial obligations are incorporated under Chapter 5 (Section 68 to Section 72) of the Indian Contract Act, of 1872.

Section 68- The delivery of goods by persons incompetent to form a valid contract-

According to Section 68 of the Indian Contract Act 1872, a person who is not competent to enter into a contract for reasons such as a person of unsound mind, a minor, or a person lawfully constrained from entering into a contract is competent enough to deliver the supply of goods and is also entitled to payment for the supply of goods of services provided.

For example- A is a person who is a minor and supplies goods or provides a service to B. Even if A is a minor if he has delivered the goods or provided the services then according to section 68 of the Indian Contract Act 1872, A is entitled to reimbursement from B

Section 69- the payment is done on behalf of another person-

Section 69 of the Indian Contract Act 1872 lays down that when a person makes a payment on behalf of another person to discharge the debt that has been incurred upon another person with the interest to protect the rights of the person who is in debt. In such circumstances, the person who made the payment to discharge the debt of another person to protect his right is entitled to reimbursement under section 69 of the Indian Contract Act 1872.

For Example: A took some debt from B due to a financial crisis which A is facing and A fails to pay the debt to B. C a friend of A pays the debt on A’s behalf and has discharged the debt. Now, C is entitled to reimbursement under section 69 of the Indian Contract Act 1872.

Section 70- profit earned from a non-gratuitous act-

Section 70 of the Indian Contract Act 1872 lays down that when a party earns profit from another party’s non-gratuitous act then it becomes liable for the party to compensate the other party who has performed the duties or obligations or provided the services under section 70 of the Indian Contract Act 1872.

For example- A parks his car in the shade down a tree and when a severe storm comes it damages the car that was parked in the shade. B is a neighbour to A and being a good neighbour B on witnessing the damages done by the tree removes the tree in such circumstances, A enjoys the non-gratuitous act of B and there was no agreement between A and B to save the car from the storm so now A is entitled to pay a reasonable amount to B for hid non-gratuitous act.

Section 71- Obligations on finder of goods

According to Section 71 of the Indian Contract Act 1872 a person finds the goods and takes custody of the certain goods, the person not being the owner of the goods and the goods are owned by someone else which he does not know of. In such a case it is the responsibility of the finder of the goods to take good care of the goods until it is delivered to the actual owner of the goods. The founder of the goods is also obliged to return the goods to the owner rightfully without any damage to the goods found. While the goods were in the custody of the founder any damage was done to the goods then he was liable to compensate the owner of the goods.

For Example- A finds a golden ring in the streets, and A takes custody of the ring while the owner of the ring is not known to A. Now, A has to take good care of the ring until the rightful owner of the ring is found. And if any damages are incurred to the ring while it was in the custody of A then A will be liable to compensate B the rightful owner of the ring if any damages are incurred to the ring.

Section 72- Payment done by mistake or coercion

According to section 72 of the Indian Contract Act 1872 When a person by mistake or coercion delivers any goods or makes any payment to another person then the person who has received the goods or received the payment is obliged to return the goods or the goods to the rightful owner or the transferer without damaging it. If the goods get misplaced or the paid amount is spent then the person who has received the goods or received the payment is liable to compensate the owner.

For example: A who intends to pay an amount to B mistakenly pays it to C. After A gets to know that he made a mistake by transferring the amount to C he informs B to pay back his money. In such circumstances, B must pay back the money to A.

Difference between quasi-contract and contract

The Quasi-contract is a contract under the Indian Contract Act 1872, which is similar to a normal contract but leaves some differences. The below given table mentions the differences between Quasi-contract and contract.

Conclusion

The quasi-contracts are a tool for the court to provide justice and to prevent unlawful and unjust enrichment of a party's benefits from the expenses incurred by another party. The concept of quasi-contract is based on the values of justice, equity and good conscience. The concept of quasi-contract is drafted under sections 68 to 72 of The Indian Contract Act 1872.

With passing time and trends the provisions given under the quasi-contract have become very important for the seekers of justice and also the corporates, banks and businesses to save themselves from such unjust enrichment.