PROJECT ON

“QUASI CONTRACTS”

A project submitted to
University of Mumbai for assignment completion
of the degree of Bachelor of Laws
Under the Faculty of Law

By
Anuj Patel
Roll No. 22
FY-LLB Under the Guidance of Prof. Digambar Deokar

SIDDHARTH COLLEGE OF LAW

Mumbai 400-023
2020-2021
 INDEX

SR. NO. CONTENTS PAGE NO.

1 Project Name with students details
2 Index 2
3 Introduction 3
4 Quasi-Contracts Or Implied Contracts Under The Indian 4
Contract Act
5 Distinction Between Quasi Contract And Contract 7
6 Examples In Relation To Quasi Contract 8
7 Case Law In Relation To Quasi Contract 10
8 Conclusion 12
9 Bibliography 13

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 QUASI CONTRACTS

INTRODUCTION

A valid contract must contain certain essential elements, such as offer and acceptance, capacity to contract,
consideration and free consent. But sometimes the law implies a promise imposing obligations on one party
and conferring right in favour of the other even when there is no offer, no acceptance, no consensus ad idem,
and in fact, there is neither agreement nor promise. Such cases are not contracts in the strict sense, but the
Court recognises them as relations resembling those of contracts and enforces them as if they were contracts,
hence the term quasi- contracts (i.e., resembling a contract).

A quasi-contract rests on the equitable principle that a person shall not be allowed to enrich himself unjustly
at the expense of another. In truth, it is not a contract at all. It is an obligation which the law creates, in the
absence of any agreement, when any person is in the possession of other persons money, or its equivalent,
under such circumstances that in equity and good conscience he ought not to retain it, and which in justice and
fairness belongs to another. It is the duty and not an agreement or intention which defines it. A very simple
illustration is money paid under mistake. Equity demands that such money must be paid back.

A quasi contracts rest upon the maxim, “No man must grow rich out of another person’s loss.”

Some examples of Quasi Contract:

T, a tradesman, leaves goods at C’s house by mistake. C treats the goods as his own. C is bound to pay of the
goods;

A pays some money to B by mistake. It is really due to C. B must refund the money to A;

A fruit parcel is delivered under mistake to R who consume the fruits thinking them as a birthday present. R
must return the parcel or pay for the fruits. Although there is no agreement between R and the true owner, yet
he is bound to pay as the law regards it as Quasi Contract.

These relations are called as Quasi-contractual obligations. In India it is also called as ‘certain relation
resembling those created by contracts.

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 QUASI-CONTRACTS OR IMPLIED CONTRACTS UNDER THE INDIAN
CONTRACT ACT

The following types of quasi-contracts have been dealt within the Indian Contract Act—

(a) Necessaries supplied to person incapable of contracting or to anyone whom he is illegally bound to support
- Section 68.

(b) Suit for money had and received - Section 69 and 72.

(c) Quantum Meruit

(d) Obligations of a finder of goods - Section 71.

(e) Obligation of person enjoying benefit of a non-gratuitous act - Section 70

Necessaries

Contracts by minors and persons of unsound mind are void. However, Section 68 of the Indian Contract Act
provides that their estates are liable to reimburse the trader, who supplies them with necessaries of life.

Examples:

(a) A supplies B, a lunatic, with necessaries suitable to his condition in life. A is entitled to be reimbursed
from B’s property.

(b) A supplies the wife and children of B, a lunatic, with necessaries suitable to their condition in life. A is
entitled to be reimbursed from B’s property.

Suit for money had and received

The right to file a suit for the recovery of money may arise (a) Where the plaintiff paid money to the defendant
(i) under a mistake, (ii) in pursuance of a contract the consideration for which has failed, or (iii) under coercion,
oppression, extortion or other such means. A debtor may recover, from a creditor the amount of an over-
payment made to him by mistake. The mistake may be mistake of fact or a mistake of law. (b) Payment to
third-party of money which another is bound to pay. For example, where A’s goods are wrongfully attached
in order to realise arrears of Government revenue due by B, and A pays the amount to save his goods from
being sold, he is entitled to recover the amount from B. (c) Money obtained by defendant from third-parties.

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For example, where an agent has obtained a secret commission or a fraudulent payment from a third-party, the
principle can recover the amount from the agent.

Examples:

B holds land in Bengal, on a lease granted by A, the zamindar. The revenue payable by A to the Government
being in arrear, his land is advertised for sale by the Government. Under the revenue law, the consequence of
such sale will be the annulment of lease. B, to prevent the sale and the consequent annulment of his own lease,
pays to the Government the sum due from A. A is bound to make good to B the amount so paid.

Examples :

(a) A and B jointly owe 100 rupees to C, A alone pays the amount to C, and B, not knowing this fact, pays
100 rupees over again to C. C is bound to repay the amount to B.

(b) A railway company refuses to deliver up certain goods to the consignee, except upon the payment of an
illegal charge for carriage. The consignee pays the sum charged in order to obtain the goods. He is entitled to
recover so much of the charge as was illegally excessive.

Quantum Meruit

The expression “Quantum Meruit” literally means “as much as earned” or reasonable remuneration. It is used
where a person claims reasonable remuneration for the services rendered by him when there was no express
promise to pay the definite remuneration, Thus, the law implies reasonable compensation for the services
rendered by a party if there are circumstances showing that these are to be paid for. The general rule is that
where a party to a contract has not fully performed what the contract demands as a condition of payment, he
cannot sue for payment for that which he has done. The contract has to be indivisible and the payment can be
demanded only on the completion of the contract. But where one party who has performed part of his contract
is prevented by the other from completing it, he may sue on a quantum meruit, for the value of what he has
done. The claim on a quantum meruit arises when one party abandons the contract, or accepts the work done
by another under a void contract. The party in default may also sue on a “quantum meruit” for what he has
done if the contract is divisible and the other party has had the benefit of the part which has been performed.
But if the contract is not divisible, the party at fault cannot claim the value of what he has done.

Obligations of finder of lost goods

The liability of a finder of goods belonging to someone else is that of a bailee. This means that he must take
as much care of the goods as a man of ordinary prudence would take of his own goods of the same kind. So
far as the real owner of the goods is concerned, the finder is only a bailee and must not appropriate the goods
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to his own use. If the owner is traced, he must return the goods to him. The finder is entitled to get the reward
that may have been offered by the owner and also any expenses he may have incurred in protecting and
preserving the property

Obligation of a person enjoying benefit of non-gratuitous act

Section 70 of the Indian Contract Act provides that where a person lawfully does something for another person
or delivers anything to him without any intention of doing so gratuitously and the other person accepts and
enjoys the benefit thereof, the latter must compensate the former or restore to him the thing so delivered. For
example, when one of the two joint tenants pays the whole rent to the landlord, he is entitled to compensation
from his co-tenant, or if A, a tradesmen, leaves goods at B’s house by mistake and B treats the goods as his
own, he is bound to pay A for them.

Examples:

(a) A, a tradesman, leaves goods at B’s house by mistake. B treats the goods as his own. He is bound to pay A
for them.

(b) A saves B’s property from fire. A is not entitled to compensation from B, if the circumstances show that
he intended to act gratuitously.

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 DISTINCTION BETWEEN QUASI CONTRACT AND CONTRACT

Quasi - Contract Contract

A quasi-contract is not a real contract. Quasi A contract is a contract between two parties. In
contracts are also known as “constructive contract, always there is an agreement between
contracts” or “certain relations resembling those the parties.
created by contracts”.
Where as in quasi-contract, there is no agreement In contract, always there is an agreement between
between the parties. the parties.

In quasi-contract, the parties do not consent. In contract, the parties must give their consent to
it.

In quasi-contract, the liability exists independent In contract, the liability exists between the parties
of the agreement and rests upon equity, justice by the terms of the parties.
and good conscience
It is imposed by law. It is not created by the It is created by the operation of the contract.
operation of the contract.

It is right in rem, and also right in personam. It is right in personam. i.e. strictly available
against a person and is not available against the
entire world.

Section 2(h) of the Indian contract act, 1872, Salmond defines quasi contracts: “there are
defines contract: “an agreement enforceable by certain obligations which are not in truth
law is a contract” contractual in the sense of resting on an
agreement, but which the law treats as if they
were”
The word “contract” is divided from the Latin Lord Mansfield explained that law as well as
“contractum” which gives meaning “drawn justice should try to prevent “unjust enrichment”.
together” or “consensus ad idem (identity of I.e. enrichment of one person at the cost of
minds). Thus the meaning of “contract” is a another. He explains: “it is clear that any civilized
drawing together of two or more minds to form a system of law is bound to provide remedies for
common intention giving rise to an agreement”. cases of what has been called unjust enrichment
or unjust benefit, i.e. to prevent a man from
retaining the money of, or some benefit derived
from, another which it is against conscience that
he should keep. Such remedies in contract or tort,
and are now recognized to fall within a third
category of the common law which has been
termed as quasi-contract or restitution”

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 EXAMPLES IN RELATION TO QUASI CONTRACT

Case:
Mr. Sharma v. Mr. Nitin
Facts:

Mr Sharma owns a furniture shop. Kamal, a class X student wanted a study table for his room. His father Nitin
was adamant at not splurging money in buying unnecessary items. Kamal visited Mr Sharma's shop and offered
to buy a study table for 5000/- rupees. Mr Sharma looked at Kamal and realized that Kamal was not yet 18
year old. Mr Sharma told Kamal that only if his father agreed to pay the price, will Mr Sharma sell the table
to Kamal. Kamal promised to Mr Sharma that he would ensure that his father Nitin makes the payment.

Nitin refused to make the payment

Judgement:

The court justified that we should look at the very basis of Section 11, which is that a party incompetent of
understanding the consequences should not be the party which suffers losses, monetary or otherwise, because
of its inability to understand the consequences of the contract, in perspective with the law,[xl] which says a
good may be a “necessary” to a minor, but the quality or quantity supplied may render them unnecessary.

The counsel for Plaintiff has failed to show through valid arguments or evidence that the study table in question
was indeed a “necessary” and has also failed in negating the fact that 5000/- rupees is not a huge amount to
pay for a study table. This leads us to the conclusion that the study table in question is out of the definition of
“necessaries”. The court therefore holds that the study table in question is not a “necessary” under the
definition of Section 68.

Case:
Gobind Ram Sanchaiti And Anr. vs Ram Kishore Choudhari And Ors
Judgement:

In this case the judgement was held that case was made by a. purchaser of an estate from a limited owner
during the existence of his interests in order to redeem a subsisting mortgage on the property. This chapter

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deals with the question of reimbursement. Section 69 relates to a case where the person who makes the
payment is interested in such payment, although another is by law bound to pay it.

Case:
The above can be illustrated by a case law where 'K' a government servant was compulsorily retired by the
government. He filed a writ petition and obtained an injunction against the order. He was reinstated and was
paid salary but was given no work and in the mean time government went on appeal. The appeal was decided
in favour of the government and 'K' was directed to return the salary paid to him during the period of
reinstatement .[Shyam Lal vs. State of U.P. A.I.R (1968)

Case:

The supreme court has ruled in Union of India vs Amar Singh that the statutory fiction by which a contract of
bailment is inferred between a finder of goods and the real owner should not be enlarged by analogy or
otherwise and, therefore , a railway authority which took into its custody wagons containing the plaintiff's
goods and which were left across the border in Pakistan become the contractual bailees of goods , and it was
not necessary to regard them as finders within the meaning of section 70 .

Section 72 Liabilities of person to whom money is paid , or thing delivered, by mistake or under coercion.
A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or
return it to the person who paid it by mistake or under coercion. Every kind of payment of money or delivery
of goods for every type of 'mistake' is recoverable. [Shivprasad vs Sirish Chandra A.I.R. 1949 P.C. 297]

A payment of municipal tax made under mistaken belief or because of misunderstanding of the terms of lease
can be recovered from municipal authorities.

The above law was affirmed by Supreme Court in cases of Sales tax officer vs. Kanhaiyalal A.I.R.1959
S.C.835

Similarly any money paid by coercion is also recoverable. The word coercion is not necessarily governed by
section 15 of the Act. The word is interpreted to mean and include oppression, extortion, or such other means
[Seth Khanjelek vs National Bank of India]. In a case where 'T' was traveling without ticket in a tram car and
on checking he was asked to pay ` 5/- as penalty to compound transaction. T filed a suit against the corporation
for recovery on the ground that it was extorted from him. The suit was decreed in his favour. [Trikamdas vs.
Bombay Municipal Corporation A.I.R.1954.

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 CASE LAW IN RELATION TO QUASI CONTRACT

Mahabir Kishore and others(Appellants) v State of Madhya Pradesh (Respondents)

Headnote: Contract Act (9 of 1872), s.72 – Money paid under mistake – Suit for refund– limitation – starting
point – Date of judgment of Court declaring law under which the payment as void – Judgment of lower court
reversed.

Facts:

• State Government allotted contracts for the manufacture and sale of liquor. In return they charged 7 1/2% as
Mahua and fuel cess.

• In 1959, the High Court of Madhya Pradesh decided that the charging of this cess was illegal. But still the
government continued to levy the cess and the mahua and they did so till the decision came out in 1961. Again
in 1961 that the charging of this money over the auction money was illegal. This was recorded in the AIR in
1962. Thus after the decision the government discontinued the collection of mahua but did not take a decision
on the repayment of the already collected money.

• The Appellants on the ground that they came to know of the later decision only in September 1962issued a
notice to the Govt. that they must be refunded the money, under s.80 of the C.P.C. and later filed a suit for
recovery of the amount paid, on24/12/1964.

• The final decision of the Government regarding the charging of the money was stated in a letter meant only
for internal communication, dated 17/10/1961. The decision was that the Government desired that ‘all
processes whenever issued or proceedings instituted against liquor contracts for recovery of the mahua or fuel
cess should forthwith be withdrawn and no revenue recovery certificates should be issued inrespect of this
cess’. This, however, was never communicated to the plaintiff or other liquor contractors.

• The High Court held that the claim was barred by time by 7 days

Issues:

1. Whether the suit was within limitation?

2. Whether the law ‘Nul ne doits enrichir aux depens des autres – No one ought to enrich himself at the
expense of others’ applies here?

3. Whether, and if so, which provision of the Limitation Act will apply to such a suit?
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Brief Judgment & Conclusion:

In the instant case, though the Madhya Pradesh High Court in Surajdin v. State of M.P. [1960 MPLJ 39]
declared the collection of 7 1/2 per cent. illegal and that decision was reported in 1960 MPLJ 39, the
government was still charging it saying that the matter was under consideration of the government.
The final decision of the government was purely an internal communication of the government copy whereof
was never communicated to the appellants or other liquor contractors.
There could, therefore, be no question of the limitation starting from that date. Even with reasonable diligence,
as envisaged in Section 17(1)(c) of the Limitation Act, the appellants would have taken at least a week to know
about it.
Mr. Rana has fairly stated that there was nothing on record to show that the appellants knew about this letter
on October 17, 1961 itself or within a reasonable time thereafter.
We are inclined to allow at least a week to the appellants under the above provision. Again Mr. Rana has not
been in a position to show that the statement of the appellants that they knew about the mistake only after the
judgment in Doongaji case [1962 MPLJ 130] reported in 1962 MPLJ 130, in or about September 1962,
whereafter they issued the notice under Section 80 CPC was untrue. This statement has not been shown to be
false. In either of the above cases, namely, of knowledge one week after the letter dated October 17, 1961 or
in or about September 1962, the suit would be within the period of limitation under Article 113 of the Schedule
to the Limitation Act, 1963.
In the result, we set aside the judgment of the High Court, allow the appeal and remand the suit. The records
will be sent down forthwith to the trial court to decide the suit on merit in accordance with law, expeditiously.
The appellants shall be entitled to the costs of this appeal.

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 CONCLUSION

The conclusion of quasi contract is that the principle of quasi-contract is often ignored but still it holds a very
important place, since the principle is grounded on the principles of justice and equity.

Despite the fact that quasi contract is moulded in the Indian Contract Act under a new name. However, the
basic nature and essence of the principle remains same without any drastic change.

When dealing with quasi contract , you may hear the term quantum merit.

This measures the severity of the plaintiff's suffering. If someone has willfully breached a contract, quasi
contract recovery is less likely. Yet, you'll find this sort of restitution is often less severe in instances when an
employee willfully breaches a contract. Thus, quasi-contracts form an integral part of the contracts act and it
definitely comes to an aid of the victim when a person is enriched unjustly over the former.

A quasi-contract isn’t a contract within the pure sense. It can be considered as an invented contract.

This moreover may be the reason why the statute does not say the term “quasi-contract” expressively, but
indirectly covers the concept to prevent out of line improvement.

Hence, the basis of a quasi-contract is very basic that a contract cannot supersede the requirement and sense
of justice. When something is done for a person or a thing is delivered to him without a needless deliberate,
he is bound to form a compensation or restore the aggrieved party to his past position.

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 BIBLIOGRAPHY

www.google.com

www.indiankanoon.org

www.lawyerservices.in

Indian Contracts Act, 1872

Avtar Singh book on Indian Contract Act, 1872

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