Quasi-contract

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This article is written by Mohit Bhardwaj. A 2nd year Law student, currently pursuing BBA-LL.B from Unitedworld School of Law, Karnavati University. The main objective of this article is to describe Quasi Contract, a contract can become a contract without fulfilling its essential elements.

INTRODUCTION

For understanding the meaning of Quasi Contract firstly we have to understand the meaning of contract and what are the required elements for a valid contract. 

In general terms, the word contract is derived from a Latin term ‘contractum’ which means ‘meet together’ or ‘to bring together’. And in legal sense according to Section 2(h) of The Indian Contract Act 1872, ‘An agreement enforceable by law is a contract’.

There are some terms which we need to understand for understanding contract-:

(i) An Agreement- When one person makes a proposal or offers to do something and another person accepts that offer[Offer – Section 2(a)] or proposal with some valid consideration then it becomes an agreement. For example, there are two parties A and B. A makes a proposal to B to purchase his property for ₹10 lakhs so a made an offer and B accepts this offer [Acceptance – Section 2(b)] and it becomes an agreement [Section 2(e)]. Here we also need to understand the term consideration [Section- 2(d)] and for A the consideration is ₹10 lakhs and for B the consideration is Property.

(ii) And its Enforceability by law – An agreement may be regarded as a contract if it is enforceable by law, i.e. it gives rise to such obligation as may be enforced by the court. Moral, social and religious obligations do not form any agreement because they do not create any legal duty.

For example- A said to M that come to my house and we will go to the cinema together. M went to A’s house but A could not spare time for the movie due to some urgent work. Here M cannot sue A for damages, if any, due to her not fulfilling the promise, the reason is that A was is a social obligation only. A and M have no intension to create any legal obligation. 

CASE LAW- Balfour vs. Balfour

Mr. Balfour was an engineer and he worked for the government as the director in the irrigation sector in Sri Lanka(then Ceylon). Mrs. Balfour was also living with him in Sri Lanka. In 1915, they both came back to Britain during Mr. Balfour’s leave. But Mrs. Balfour had developed arthritis. Her doctor in England advised her to stay in England because Sri Lanka’s climate would be detrimental to her health. Mr. Balfour’s boat was about to set sail, and he orally promised her $30 a month until she came back to Ceylon. They lost contact over time, and Mr. Balfour wrote saying it was better that they remain apart. In March 1918, Mrs. Balfour sued him to keep up with the monthly $30 payments. In July she got a decree nisi and in December she obtained an order for alimony.

Here, in this case, there was no intension to create legal obligations and no contractual relationship was established so the decision was in Mr. Balfour’s favour.

Now we need to understand the essentials of a valid contract given under Section 10 of The Indian Contract Act, 1872.

Section 10 states that all the agreements are contract if they are made by-

i) Free consent of parties,

ii) Competent to contract,

iii) For a lawful consideration with a lawful object and

iv) Are not hereby expressly declared to be void.

So here is the list of essential elements for establishing a valid contractual relationship-:

1. More than one parties

2. Agreement

3. Creating a legal relation

4. Lawful consideration

5. The capacity of the parties to enter into a contract

6. Free consent

7. Lawful object

8. Certainty of meaning

9. Agreement not expressly declared void

10. Possibility of performance

QUASI-CONTRACT 

A quasi-contract is based on a principle of, ‘ unjust enrichment of one person at the cost of another’. In the Indian contract act, 1872, quasi-contract is covered form section 68 to 72.

  • Section 68 describes – Basic necessaries supplied to a person incompetent to enter into a contract. For example: If a major person had supplied basic necessaries (Basic things required to survive) to a minor person who does not have any parent or guardian, this supply of necessaries will result in the formation of a Quasi Contract. The expenses done by the major person can be claimed from the estate of the minor in the future. Because if the person who is supplying the things could not claim the expenses then it would be unjust for that person and that minor person would be benefitted by that action. So there would be unjust enrichment of one party at the cost of another. 
  • Section 69 describes – Payments made by an interested person or party.

For example, I have taken a property on lease and I run a factory on that property and the source of my income is that factory. The owner of that property didn’t pay the taxes that are imposed on the property so the government declared that the factory will be auctioned so that taxes can be recovered. In all this situation the loss is mine because the factory is the only source of my income. So here, I will be the Interested party or interested person. After this, on behalf of the factory owner, paid all the due taxes. Then I approached to the court of law saying that I am not the owner of the land/ property but I paid all the taxes so the court said that in this case, the unjust enrichment is of the property owner so the court imposed a Quasi Contract between me the owner of the property.

  • Section 70 describes – Payment for Non-gratuitous act

Gratuitous act means for free i.e. without any consideration for example- if somebody saves any person from drowning he/she cannot claim anything in return.

And Non-gratuitous means the one in which consideration is involved.

For example one of my friends supplied raw material to my factory by mistake, fortunately, I used that raw material in my factory because that material was useful for my factory. Later on, my friend came to me for claiming the cost of the material used.

I told him that there was no contract between us, there was no offer and there was no acceptance. 

The court in this matter said that if you used the material sent by mistake then there is unjust enrichment and the party is liable to pay for the material used and this is a Quasi-contract.

  • Section 71 describes – Finder of lost goods.

For example, I found a diamond ring in a playground which is worth ₹10 crores. I tried to search for its owner but could not find anyone. After 1 year the owner of the ring came to me and asked for the ring but at that, I’ve already sold that ring 

In this matter, the court said that there is Quasi-contract between the owner of the lost goods and the finder of the lost goods so the finder has to return the goods of the amount equivalent to the goods and the finder can recover the expenses which are incurred in finding the real owner of the goods.

  • Section 72 describes – Payment made under mistake or coercion.

Here coercion means a payment made under pressure or illegally. For example, Your friend is repaying the loan of ₹5 lakh which you have given to him/her. By mistake he paid extra ₹1 lakh, then that extra money can be claimed back and here Quasi-contract comes into action.

Conclusion

So we can conclude that a contract can be made without fulfilling the essential elements which are required to form a contract. These were the five situations in which a Quasi-contract can be made. In these five conditions, we can see that there is no agreement, no offer, no acceptance, no legal consideration, and no legal obligations but the Quasi-contract is there so that there must not be, ‘unjust enrichment of one person at the cost of another’.

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