Quasi – Contracts: Concept Of Just/Un-Just Enrichment

KEY TAKE-AWAYS

• Section 68 to 72 of the Indian Contracts ACT, 1872 Deals with ‘Quasi-contracts’.
• ‘Quasi Contracts’ are solely based on the conduct/relation of the concerned parties and are reliant on the possibility that one would unjustly benefit over the other.
• It is not a mutually organized contract, and the law creates a fictitious agreement between the concerned parties for preventing unjust embellishment.
• The first-ever case that was recorded under ‘quasi-contracts’, was Sinclair v. Brougham, 1914.
• The Maxim ‘indebutatus assumpsit’ means in common law being indebted or to have undertaken a debt.

INTRODUCTION

A contract means a subsisting agreement that is entered into by two or more parties, it is appreciated by law and can be enforced in a court of law. A contract in the context of ‘Quasi’contract, can be distinguished into two types namely, (a) executed and (b) executory: executed contracts are those where no obligations remain to be performed and all liabilities and dues are paid off, whereas executory contracts are those where some future transaction has to be completed to pay off the dues. The term ‘Quasi’ contracts and a due obligation arising out of the same were first observed under English law. A ‘quasi-contract is defined as a pre-determined and a non-formal contract between the parties having coupled with a set of rights and liabilities. The main objective of this law is to avoid a person gaining an unjust benefit by enriching himself on the expense of others. Therefore, it is a remedy to the aggrieved party.

DETAILED ANALYSIS

A quasi-contract arises because of a court order rather than the parties' consent. To prevent unfair enrichment of a party in a dispute over payment for an item or service, courts adopt quasi-contracts. Without evidence of a contract or other legally recognized agreement, a party that has experienced a loss in a business relationship may not be able to recoup. To avoid this unjust outcome, courts create a fictional agreement in cases where there is no legally enforceable agreement.

Although the sole existence of quasi-contracts is to recover the benefits which the benefiting party has taken at the expense of the aggrieved since the ‘quasi-contracts is a contract ascertained to be made as soon as requirements meted out are satisfied it places an obligation and rights on the concerned parties.

However, because they are quasi-contracts, no distinction can be drawn between them in terms of their nature, whether contractual or non-contractual. No one would argue that explicit agreements are contracts in the strictest sense, and the nature of implicit agreements appears to be the same.

Under the common law jurisdictions, quasi-contracts arose at the dark ages under the kind of act recognized as ‘indebutatus assumpsit’, which means to be obligated or to have attempted a debt. The notion of the courts was that Quasi-contractsis a means of getting one party to repay the other as if the contracts or arrangement already existed between them. Thus, the person who is under suspicion is to be held by the contract as implied by law. From its earliest functions, the quasi-contract was typically enforced to impose damaged obligations.

During the 19th Century, the first-ever case that was recorded to be dealt with under ‘quasi-contracts’, namely Sinclair v. Brougham, 1914,this case concerns depositors' ability to reclaim money deposited (or borrowed) to a building society under deposit contracts that exceeded the building society's powers of ultra vires, the various provisions listed out in this case partially and in some instances wholly relied on torts law subsequently it was termed as an implied in fact contract instead of ‘quasi-contracts’.

Further, it is a known fact that in a ‘quasi-contract’ there exists no mutually agreed consent between the parties to the contract and it is often considered as an implied fact contract, and even without any existence of written agreement of the facts, the parties are ascertained to enter into a contract, because of their action or conduct towards the other person.

For example, When A1 goes to the house of C1, and while his stay in the house of C1, A1 places his textbook on C1’s table, and consequently A1 forgets to take the same back while leaving the house of C1, here in this instance C1 is placed under a supposed legal obligation to restore the goods to A1, this further implies that C1 cannot by unjust means enrich himself as the expense of A1. This example shows that even though a mutual contract does not exist, a fictional agreement was created by law to ensure no person can enrich themselves unjustly at the expense of other losses.

CONCEPT OF BENEFIT AND UNJUST ENRICHMENT

Courts have confined the debate to the specific sort of scenario involved, rather than analyzing the idea of ‘unjust enrichment in its broadest sense. It came from a Romanian Maxim, “Nemo Debet Locule Tari ex Aliena Jactura” which means thatno man should grow rich because of another person’s loss.

The first-ever case instance of ‘Unjust enrichment’ came before the English Court in the matter of Fibrosa Spolka v. Fairbain Lawson Combe Ltd (1942). In this particular case, some amount of money was advanced under a contract for the delivery of a machine for the supply of machinery, and the performance was hampered by the beginning of the war. Their Lordship authorized the loan to be repaid as payment for a consideration that had completely failed.

Lord Wright, J observed that “It is obvious that every civilized legal system is obligated to offer remedies for situations of what has been called unjust enrichment or unfair advantage, which is to prohibit a man from retaining the money of or any benefit gained from another that he should keep. Such remedies in English law differ from those under contract or tort and are now considered to fit into the third category of common law known as quasi-contract or restitution.”

In a subsequent case of United Australia Ltd v. Barclays Bank (1914),Lord Atkin, J proposes rationale behind the principle of unjust benefit and unjust enrichment, the principle presupposes the following conditions:

(a) Firstly, that the defendant had been enriched by a receipt of benefit;

(b) Secondly, the enrichment was at the expense of the plaintiff;

(c) Thirdly, it would be unfair to allow such enrichment at others’ expense.

POSITION OF QUASI-CONTRACTS UNDER INDIAN LAW

Chapter V of the Indian Contract Act of 1872 addresses the scenarios that qualify for quasi-contractual responsibilities. But there is no specific mention of the word ‘Quasi contract’anywhere in the statute, only a hint of the same is mentioned under the heading “of certain relations resembling those created by contract.”

In the case of Hari Ram Seth Khandsari v. Commissioner of Sales Tax (2005),The Hon’ble High Court concluded that despite the absence of the phrase in this chapter, the court found that it is about the existence of the theory of ‘Quasi-contracts.’

Referring to the aforementioned case of Spolkain India, a similar reasoning about the three conditions that are required to fulfill the conditions of a ‘Quasi contract’ was observed in the case of Mahabir Kishore & Others v. the State of Madhya Pradesh (1990),that:

(a) the defendant had been enriched by a receipt of benefit,

(b)the so enrichment was at the expense of the plaintiff,

(c) it would be unfair to allow such enrichment at others’ expense.

Likewise, there are provisions mentioned under Indian Contract law, from Section 68 to Section 72 of the Indian Contract Act, 1872, which provides five kinds of ‘Quasi Contractual’ obligations namely: -

(a) Supply of Necessaries (Section. 68) - When necessaries are given to a person who is legally unable to contract or to someone who is legally obligated to support, the provider is entitled to reclaim the payment from the incompetent person's property.

(b) Payment by an interested person (Section 69) - A person who is interested in the payment of money that another is legally obligated to pay and so pays it has the right to be reimbursed by the other.

(c) Liability to pay for non-gratuitous acts (Section 70) - Where a person legitimately performs something for another person or provides something to him without intending to do so gratuitously, and that other person benefits from it, the latter is obligated to compensate the former in this regard, to restore the thing thus done or provided.

(d) Finder of goods (Section 71) - A person who discovers items belonging to another and takes them into his custody bears the same liability as a bailee. In terms of obligations and liabilities, a finder is handled similarly to a bailee. As a result, the position of the finder is considered in addition to bailment.

(e) Mistake or coercion (Section 72) - A person who has received money or anything supplied by mistake or compulsion must refund or return it.

Furthermore, the claim for damages under ‘Quasi Contracts’ is similar to that of a normal contract and the claim for compensation and damages under both the concepts are alike and are also covered under the similar section provided under the Indian Contract Act, 1872. Further, for claiming damages in case of a breach of contract, section 73 of the Actstates that “Any person damaged as a result of the failure to discharge it is entitled to the same compensation from the party in default as if such person had agreed to discharge it and had breached his contract”.

Thus, it can be ascertained that damages which are provided under the basic provisions of the contract are similarly applicable to the ‘Quasi Contractual’ agreements,the remedies provided in the event of a breach are likewise comparable.

CONCLUSION

Quasi-contract is an important part of the Contracts Act, which provides equity and prevents unjust enrichment at the expense of other person’s loss, it forms an integral part of the Indian Contract Act,1872 to facilitate justice and equity. A Quasi-contract is not a contract made with a pre-existing conscience between the parties, it is said to be a fictitious form of a contract. Hence, the basic premise of a quasi-contract is that a contract cannot supersede a demand or a feeling of fairness.