Quasi-Contracts under the Indian Contract Act

Author: Sourish Saha, Research Associate

Quasi-Contracts are transactions which do not arise between the parties in the proper legal sense but out of rights and obligations similar to those created by a contract. Example- A pays to B the money that C owes B. Therefore, A shall be entitled to be reimbursed by C. Quasi Contract or Implied Contract is used interchangeably. Such contracts deal with rights or liabilities accruing from relations resembling those created by a contract. Such legal relations resembling a contract are known as contract implied in law. It is not a real contract and thus called a consensual contract based on agreement of the parties. Implied contracts are based on the principal of equity and justice and prevent enrichment of one person at the cost of another. Quasi-contract is a fictional contract created by courts for equitable purposes mainly ((Michael Furmston, G.C. Cheshire and H.S. Fifoot, , Law of Contract, Oxford University Press, 15th edn, 2007)). A quasi-contract is a legal substitute formed to impose equity between the two contracting parties. It is used when a court finds it appropriate to create an obligation upon a non-contracting party to ensure fairness and to avoid injustice. It is invoked in circumstances and is connected with the concept of restitution or reimbursement. Generally, the existence of an actual or implied in fact contract is required for the defendant to be liable for services rendered and a person who provides a service uninvited is an overbearing intermeddler who is not entitled to reimbursement ((Douglas Laycock, Modern American Remedies, 3rd edition (2002) pg. 566)).

Kinds of Quasi Contracts

Firstly, we are concerned with the claim for necessities supplied to a person incapable of contracting. If a person incapable of entering into a contract, or if anyone whom he is legally bound to maintain, is provided for by another person with necessities suited to his living conditions, the concerned party who has furnished such supplies in entitled to be reimbursed from the property of such incapable person ((R.G. Padia, Pollock and Mulla Indian Contract and Specific Relief Acts, Butterworths LexisNexis, 13th Edition, 2006 (4th  Reprint,2009).)). Secondly, a quasi-contract is formed by the compensation of a person paying money due by another party, in payment of which he is concerned. A person who is interested in the payment of money which another person is bound by law to pay and who therefore pays it on the other person’s behalf, in entitled to be reimbursed by the other party for whom the money was paid. Thirdly, an implied contract also depends on the duty of the person who is enjoying benefit of non-gratuitous act. In such cases, when a person lawfully does anything for another person or delivers anything to him not intending to do so gratuitously and such other person enjoys the benefit thereof, the person who benefitted from such an act is bound to make compensation to the former in respect of or to restore status quo. Another way, an implied contract can be formed is by the obligation of the finder of goods. A person is subject to the same responsibility as a bailee, who finds goods belonging to another and takes into his custody. Finally, an implied contract is formed by the responsibility of a person to whom money is paid or thing delivered by mistake or under coercion- A contracting party to whom money has been paid or anything delivered by mistake or under coercion must repay or return it.

Comparison of Contracts

According to the law of contracts, the component of consent of the contracting parties produces the obligation to fulfil the terms of the contract. In quasi-contracts, however no consent is required as the mere performance is consent, and the obligation arises from the law of equity based on the facts of the case. Such acts are therefore called quasi-contracts because without acquiring the status of a contract, they tie the parties as contracts do. Therefore a quasi-contract is not really a contract at all in the normal meaning of a contract, but rather it is an obligation imposed on a party to make things fair ((J. Beatson, Andrew Burrows, John Cartwright, Anson’s Law of Contract, Oxford Publishers, 28th edition, 2002.)).

The Oklahoma Supreme Court has described the distinction between a contract and a quasi-contract in T & S Investment Company v. Coury ((593 P.2d 503 (Okla. 1979).)), which meant that a quasi contract is an implication of law whereas an implied contract is an implication of fact. Whereas a quasi contract was based on fiction imposed so that it adapts to a case to a given legal remedy, on the other hand, the latter is a fact legitimately inferred ((Supra n. 2)).

Liability

The defendant’s liability under quasi-contract is equal to the value of the benefit conferred by the plaintiff. The rate is the fair market value of the benefit and not necessarily the subjective value that the defendant gets. A conventional measure of the fair market value is called quantum meruit, which means as much as is deserved. Let us take an example. An accountant prepares tax-payer’s taxes by finding a way to get him an unusually large refund. After this, the tax-payer does not pay the accountant. Presuming a court finds no contract between the two parties, the tax-payer is liable for the fair market value of tax preparation services which is not inflated up to account for the unusually large refund he enjoyed ((T.R Desai, The Indian Contract Act and Sale of Goods Act.)).

Therefore under Oklahoma law, the calculation of damages in a quasi-contract action is the amount which will compensate the party aggrieved for the detriment proximately caused thereby if the obligation is to pay currency, the disadvantage caused by the breach in the amount due by the terms of the commitment. The party to be charged is any defendant or a co-defendant in a breach of contract lawsuit ((Supra n. 3)).

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