QUASI CONTRACTS
1. Introduction......................................................................................................................................2
2. Key Characteristics of Quasi-Contracts...........................................................................................2
3. Categories of Quasi-Contracts.........................................................................................................2
4. Repayment by Someone Paying Another Person's Debt.................................................................3
5. Responsibility of Benefitting from Non-Gratuitous Actions (Section 70)......................................3
6. Responsibility of Goods Finder (Section 71)..................................................................................4
7. Liability for Receiving Money or Goods by Mistake or Under Coercion [Section72]...................6
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1. Introduction
1.1 Contracts result from enforceable agreements.
1.2 Some situations lack elements like offer, acceptance, and mutual understanding, but legal
obligations arise.
1.3 These obligations are implied by law, even without a formal contract.
1.4 Known as 'Quasi-Contracts' in English law and 'certain relations resembling contracts' in
Indian law.
1.5 They resemble contracts in their outcomes but differ in how they are created.
1.6 Rooted in the equitable principle of preventing unjust enrichment.
1.7 Quasi-contracts are based on equity, justice, and fairness.
1.8 They are founded on duty, not promises.
1.9 You can file a lawsuit for damages in quasi-contract cases, like completed contracts (Section
73).
2. Key Characteristics of Quasi-Contracts
2.1 Quasi-contracts involve rights primarily related to money, often a specific amount.
2.2 These rights are not based on an agreement between parties but are legally imposed.
2.3 The rights in quasi-contracts are specific to certain individuals, like contractual rights.
3. Categories of Quasi-Contracts
3.1 The Contract Act covers 'quasi-contractual obligations' in Sections 68 to 72, and here are the
details of Section 68:
3.2 Claim for necessaries supplied to a person incapable of contracting or on his account (Section
68):
(a) Section 68 states that if a person, who cannot enter into a contract due to incapacity
(e.g., minors, idiots, lunatics, etc.) or someone whom that person is legally
responsible for (e.g., a guardian's responsibility for a minor) is provided with
necessaries suitable for their situation in life by another person, the supplier of these
necessaries is entitled to reimbursement from the property of the incapable person.
(b) Section 68 doesn't establish personal liability but holds the estates of the incapable
persons accountable.
(c) The term 'necessaries' encompasses not only basic necessities like food and clothing
but also items reasonably necessary for the individual, considering their social status,
such as a watch, radio, or bicycle.
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(d) Necessaries should be supplied only to the incapable person or someone they are
legally obligated to support, like a spouse or children.
(e) property of the incapable person is liable to pay only a reasonable price for the
supplied goods or services, not the price they might have agreed to, as an incapable
person cannot legally agree to anything.
3.3 Illustrations:
(a) A provides necessaries suitable for the condition in life of B, who is a lunatic. A can
claim reimbursement from B's property, but not for luxury items. If B has no
property, A cannot make a claim.
(b) A supplies necessary suitable for the condition in life of B's wife and children. A can
seek reimbursement from B's property.
4. Repayment by Someone Paying Another Person's Debt
4.1 Section 69 states that "If someone pays money that another person is legally obligated to pay,
and the payer has a vested interest in the payment, they have the right to be reimbursed by the
obligated person."
4.2 Conditions of Section 69:
(a) There must be a person legally obliged to make a payment.
(b) Another person makes that payment.
(c) The person making the payment is not legally required to do so.
(d) The person making the payment has an interest in paying that amount.
4.3 If all these conditions are met, the person with an interest in paying the amount can recover
the money they paid.
4.4 Illustration:
B has a lease on land in Bengal, given by A, who is the landowner (zamindar). A has fallen
behind in paying the land revenue to the Government, and the Government has advertised the
land for sale. According to revenue laws, if the sale occurs, B's lease will be terminated. To
prevent the sale and the lease termination, B pays the amount owed by A to the Government.
A is obligated to reimburse B for the amount paid.
5. Responsibility of Benefitting from Non-Gratuitous Actions (Section 70)
5.1 This is the third category of quasi-contracts outlined in the Contract Act. Section 70 states the
following:
(a) When a person lawfully performs an action or delivers something to another person,
(b) without intending to do so as a free favor (gratuitously), and
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(c) the other person benefits from it then the latter is bound to compensate the former for
the action or return the delivered item.
(d) For this section to apply and prove a right of action, three conditions must be met:
(i) Someone must have lawfully -
(A) performed an action for someone else, or
(B) delivered something to someone else.
(ii) This action or delivery must have been done
(A) voluntarily, and
(B) with the intention of being paid for it (non-gratuitously).
(iii) The other person must have benefited from
(A) the action performed for them, or
(B) the item delivered to them.
5.2 If these conditions of Section 70 are met, it creates a quasi-contract between the parties.
Consequently, the party who performed the action or delivered the item is entitled to recover
its value from the person who received the benefit.
5.3 Illustrations:
(a) A, a trader, accidentally leaves goods at B's house. B treats the goods as his own. He
is bound to pay A for them.
(b) A saves B's property from a fire. A cannot claim compensation from B if the
circumstances show that he intended to act without charge.
(c) If a porter carries a passenger's luggage at the railway station without being asked, or
a shoe-shiner starts polishing a passenger's shoes without a request, and the passenger
does not object, then the passenger is obliged to pay a reasonable fee since the work
was not intended to be free of charge.
6. Responsibility of Goods Finder (Section 71)
6.1 Section 71 addresses another situation that implies a quasi-contractual obligation. It states that
"A person who discovers goods belonging to someone else and takes them into his possession
has the same responsibilities as a bailee."
6.2 In other words, the law implies an agreement between the owner of the goods and the finder,
treating the finder as a bailee.
6.3 Duties of the Goods Finder:
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(a) The finder must try to find the actual owner of the goods and should not use the
property for their benefit. If the true owner is identified, the finder must return the
goods upon request. Failing to do so could lead to criminal misappropriation of
property under Section 403 of the Indian Penal Code.
(b) Additionally, while the goods are in the finder's possession, they must take reasonable
care of the goods, like how a prudent person would care for their own goods of the
same size, quality, and value under similar circumstances.
6.4 Illustration:
Suppose a customer, 'P,' in 'D's shop places a brooch from her coat and forgets to retrieve it.
One of 'D's assistants discovers it and places it in a drawer over the weekend, only to find it
missing later. 'D' was held responsible for not exercising the ordinary care that a prudent
person would have taken in this situation.
6.5 Rights of a Goods Finder:
The rights of someone who finds goods are explained in Sections 168-169 as follows:
(a) Until the actual owner is found, the finder can keep possession of the goods and
refuse to return them to anyone in the world.
(b) The finder can request reimbursement from the true owner for expenses incurred in
preserving the goods or locating the true owner.
(c) The finder has a right to retain the goods until the money spent on preservation and
finding the owner is repaid. However, they cannot file a lawsuit to recover these
amounts.
(d) If the owner had offered a reward for the return of the goods, and the finder learned
about the reward before locating the goods, the finder can file a lawsuit to claim the
reward.
(e) The finder can sell the goods in two situations:
(i) When the goods are in danger of deteriorating or losing most of their value.
(ii) When the lawful charges incurred by the finder amount to at least two-thirds
of the value of the goods.
(f) In this case, the true owner is entitled to receive any surplus from the sale proceeds
after settling the lawful charges.
(g) It's important to note that only the true owner can demand possession of the goods
from the finder. If anyone else unlawfully takes the goods from the finder, the finder
can file a lawsuit seeking damages for trespassing.
6.6 Illustration:
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'H' found a diamond on the floor of 'F's shop and handed it over to 'F' for safekeeping until the
owner could be located. Despite extensive efforts, the true owner could not be found. After
several weeks, 'H' offered to pay 'F' the lawful expenses incurred in searching for the owner
and provided an indemnity bond. 'H' asked 'F' to return the diamond. However, 'F' refused. In
this case, 'F' must return the diamond to 'H' because 'F' had the right to keep the goods if the
true owner did not claim them.
7. Liability for Receiving Money or Goods by Mistake or Under Coercion (Section72)
7.1 This is the fifth and final type of 'quasi-contract' outlined in the Act. Section 72 states the
following:
"When someone receives money or goods by mistake or due to coercion, they must repay or
return it." In other words, if one party mistakenly pays money to another party, which was not
owed under a contract or any other agreement, the recipient must return that money.
7.2 Illustrations:
(a) A and B jointly owe Rs. 100 to C. A mistakenly pays the entire amount to C, and B,
unaware of this, also pays Rs. 100 to C. In this case, C is bound to repay Rs. 100 to B.
(b) A railway company demands an illegal charge for transporting certain goods to the
consignee. To get the goods, the consignee pays an excessive charge. The consignee
can later recover the portion of the charge that was illegally excessive.
(c) A fruit parcel is mistakenly delivered to R, who consumes the fruits, thinking they
were a birthday present. R must either return the parcel or pay for the fruits. Even
though there was no explicit agreement between R and the true owner, the law
considers it a quasi-contract, and R is obliged to pay.
