An Introduction
Quasi Contract laws have been derived from the Latin statement “Nemo debet locupletari ex aliena jactura” which proclaims that no human being should gain an unjust benefit from another’s loss. It was one of the main principles of Roman law.
The word ‘Quasi’ means having some resemblance to but not all. Similarly, Quasi Contract means laws that are like regular contract law but not quite so. A regular contract should have some essential components to be considered valid. It includes offers, acceptance, consideration, two or more parties who are legally and mentally capable etc.
Whereas Quasi-contract definition is based more on the principles of natural law such as moral conscience, justice, honesty, duty towards another human being etc.
The main difference between Contract and Quasi Contract is that in the case of the latter, there is no exchange of offer, acceptance, or consideration between two or more parties. However, it is still legally enforceable.
For example, if a package belonging to A is delivered to M, then M is legally obligated to return it to A. If M uses up the contents of the packaging for himself, then A has the right to sue him. In that case, the court can order M to reimburse A under Quasi-contract law.
Types of Quasi Contracts
According to the Indian Contract Act of 1872, there are five types of Quasi-contract laws. These have been discussed below:
Supply of Necessities
An individual who is legally incapable of entering into any agreement, or if the person is unable to support themselves, then another individual who is legally responsible for supporting the former, then the latter will be reimbursed from the estate of the dependent. Instances of Quasi-contract cases include, If C supports the family of his friend D, who is mentally incompetent, then C should be provided with reimbursement from D’s property.
Payment by an Interested Party
Under Quasi-contract in business law, if any individual wishes to make payment of money which the other party is legally bound to pay and who eventually bears the cost, shall receive retribution from the latter. For Instance, if person A pays off B’s outstanding debt, then the latter must reimburse A under Quasi-contract law.
Obligation to Pay for a Non-Gratuitous Act
In circumstances, when a person performs an act for another which he or she is legally bound to do and which is not performed out of gratitude, then the person for whom it is being done must compensate the former.For Instance, if a shopkeeper delivers some goods to B’s house, then B is bound to pay the shopkeeper for services performed. However, if the shopkeeper returns goods that B had forgotten, then B is not liable to compensate him or her as it was an act of gratuity.
Finder of Goods
A person who comes across any item belonging to another individual, and takes it under his custody, then he or she must take proper care of the thing as much as he or she would take care of an item of the same value, bulk, and quality until the appropriate owner is found. If the owner is not found, then the finder can retain the item as their own according to Quasi-Contract.
A mistake of Coercion
Section 71 of contract law states that an individual who receives any item by mistake or through coercion is legally bound to return the items or repay the person who initially made the payments. For example - if a parcel is delivered belonging to B, is delivered to A, then A must return it to B promptly.
Unjust Enrichment
One of the main features of Quasi-contract is unjust enrichment. In the case of unjust enrichment, one party derives benefits either by mistake or through the other party’s misfortune or loss. Additionally, when an individual enjoys advantages for which he or she has made proper payments or has not worked for it, and which was not intended as a gift, then it is also termed as unjust enrichment. However, courts consider several other aspects while deciding whether an unfair enrichment has taken place or not under Quasi-contract in the Indian contract Act. These elements are mentioned below:
The defendant must have received benefits or advantages to which he or she is not entitled to.
The plaintiff should have sustained loss or damage of some kind when the defendant received unjust enrichment.
The court also needs to prove that the enrichments or benefits in question are unfair to create a Quasi-contract.
There should be no proper explanation for enrichment. Additionally, the plaintiff also needs to justify why it is unfair for the defendant to be in possession of the goods without paying for them.
FAQs on Quasi Contracts: Meaning and Examples
1. What is a quasi-contract in simple terms?
A quasi-contract is not a real contract but a legal obligation created by a court to prevent one person from unfairly benefiting at another's expense. It is based on the principle of equity and justice, ensuring that no one gets unjustly enriched. It's also known as a contract implied-in-law, as the law imposes the obligation even without any agreement between the parties.
2. What are the essential elements needed to establish a quasi-contract?
For a court to recognise a quasi-contract, three essential elements must be present:
The plaintiff must have provided a tangible good or a service to the defendant.
The defendant must have received a benefit from that good or service.
The benefit was received under circumstances that make it unjust for the defendant to retain it without paying for it. This establishes 'unjust enrichment'.
3. Can you give a real-world example of a quasi-contract?
A classic example is the mistaken delivery of goods. Imagine a pizza you ordered and paid for is accidentally delivered to your neighbour's house. If your neighbour accepts the pizza and eats it without pointing out the mistake, they have been unjustly enriched. A court can impose a quasi-contract, obligating your neighbour to pay you back the cost of the pizza to ensure a fair outcome.
4. What are the main types of quasi-contracts under the Indian Contract Act, 1872?
The Indian Contract Act, 1872, specifies certain relationships resembling those created by contract. The main types are:
Supply of necessaries: Claim for necessaries supplied to a person incapable of contracting (e.g., a minor).
Payment by an interested person: Reimbursement of money paid by one person on behalf of another, which the other was legally bound to pay.
Obligation for non-gratuitous acts: When a person lawfully does something for another without intending to do it for free, the latter must pay compensation.
Responsibility of finder of goods: A person who finds lost goods belonging to another has a responsibility similar to that of a bailee.
Money paid by mistake or under coercion: A person to whom money has been paid by mistake or coercion must repay it.
5. Why is the principle of 'unjust enrichment' so important for quasi-contracts?
The principle of unjust enrichment is the very foundation of a quasi-contract. Its purpose isn't to create a new agreement but to restore a benefit to the rightful party. Without this principle, a person could legally keep benefits they received by mistake or chance at the expense of someone else. Quasi-contracts exist specifically to provide a legal remedy against such unfairness, ensuring that a person's gain does not result in an undeserved loss for another.
6. How is a quasi-contract different from a regular contract?
The key difference lies in their origin and basis. A regular contract arises from a mutual agreement between the parties (offer and acceptance). In contrast, a quasi-contract is not based on any agreement; it is a legal remedy imposed by a court. The liability in a regular contract stems from the parties' consent, while in a quasi-contract, it stems from the law's desire to prevent unjust enrichment.
7. In what situations would a claim for a quasi-contract likely fail?
A claim for a quasi-contract might fail if the benefit was provided without any expectation of payment (gratuitously) or if it was imposed on the defendant against their will. For example, if a painter decides to paint your fence without your request or knowledge as a 'gift', you are not obligated to pay. The court will not create a quasi-contract if the plaintiff acted as a volunteer or an 'officious intermeddler' who forced a benefit upon the other party.
8. What is the remedy provided in a quasi-contract case?
The remedy in a quasi-contract is not damages for a breach (since no contract was breached), but restitution. This means the defendant is ordered to return the property or pay a sum of money equivalent to the benefit they unjustly received. The goal is to restore the plaintiff to the financial position they were in before the unjust enrichment occurred, a concept often referred to as 'quantum meruit' (as much as deserved).
