Quasi Contracts

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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 meaning laws which 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 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 as to why it is unfair for the defendant to be in possession of the goods without paying for it.

FAQ (Frequently Asked Questions)

Q1. What are the Main Quasi Contract Elements?

Ans. The three main elements of quasi-contract theory are as follows:

  • The individual must provide evidence for the products for which they are asking for compensation under the Quasi contract.

  • There should be proof that defendants were in possession of the goods in question and have enjoyed their benefits. 

  • The defendant also should have accepted goods under unethical circumstances for which the owner did not receive any reimbursements.

Q2. What is Quasi Contract Recovery?

Ans. One can avail recovery under various kind of quasi-contract in the following circumstances:

  • When there is no contract, under which the plaintiff can avail compensation.

  • When there exists a contract that cannot be legally enforced or which is unjust.

  • In situations, when the plaintiff himself has conducted a whole or partial breach of a valid, legal contract which has resulted in benefits for the other party.

Additionally, one should also keep in mind the term ‘quantum meruit’.  This term is used by law courts to determine the extent of severity of the damage, based on which courts decide the reimbursement amount in case of a quasi-contract.