Quasi Contract & Quantum Meruit
Chapter 5 (section 68-72) of the Indian Contract Act, 1972 deals with quasi contract. The law binds the parties in these contracts. Law imposes obligation on one party and confers a right in favor of the other. The term quasi contract is used because such a contract is different in respect of mode of creation. A quasi contract is derived from the principle of ‘unjust enrichment’ that was given by Lord Mansfield. According to this, a person shall not enrich himself/herself unjustly at the cost of another person.
The Supreme Court of India applied this principle to cases of import raw materials secretly consumed in the manufacture of final produce.
In Mahabir Kishore V. State of MP, the court held that in an action for unjust enrichment, the following essentials have to be proved:
- The receipt of benefit has enriched the defendant
- The enrichment has been at the expense of the plaintiff
- The retention of enrichment is unjust
TYPES OF QUASI CONTRACT
SUPPLY OF NECESSARIES:
According to section 68 of Indian Contract Act, 1872 “if a person has supplied necessary goods and services to incompetent person or to anyone whom the incompetent person is legally bound to support, then the person is entitled to be reimbursed from the property of incompetent person”.
PAYMENT BY AN INTERESTED PERSON:
According to section 69 “a person who is interested in payment of money which another is bound by law to pay, and who therefore pays it, is entitled to be reimbursed by other”. The person who makes payment and later claims reimbursement is plaintiff who has an interest in making payment. He/she makes payment to protect his/her interest. The person who is bound by law to pay is defendant. After the plaintiff has discharged the defendant’s debt, he/she is entitled to be reimbursed by defendant. However if the plaintiff is bound to pay and also make the payment, then he/she cannot have an action against defendant.
OBLIGATION TO PAY FOR NON GRATUITOUS ACT:
According to section 70 “when a person lawfully does anything for another person or delivers anything to him, not intending to do it gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered. If the person does something for the other gratuitously, then the latter is not bound to compensate”.
RESPONSIBILITY OF FINDER OF GOODS:
According to section 71 of the Indian Contract Act “a person who finds goods belonging to another and takes them into his custody, is subject to the same responsibility as a bailee
In case the finder of goods does not try to find the rightful owner then he will be guilty of wrongful possession of goods. Till the time, the owner is found the finder of goods can hold the goods as his own property. But in certain instances the finder can retain the goods and use them for his own purpose or sell them if he wishes to. The instances where the finder has the right to sell the goods are following:
- When the good found is in a perishable condition
- When the owner could not be found with reasonable diligence
- When the owner is found but he/she refuses to pay the lawful charges of the finder
- Lastly when the lawful charges of the finder, in respect of the thing found, amounts to two-thirds of the value of the thing found
MISTAKE OR COERCION:
According to section 72 “a person to whom money has been paid, or anything delivered, by mistake or coercion, must repay or return it to the person who paid it by mistake or coercion”.
Quantum Meruit in simpler terms means “as much as earned” or as much as merited. It involves instances where one party derives a benefit while the other party gets nothing. In contracts, it refers to the advantage or enrichment which one party receives as a result of the other party’s actions. In simpler words, it means that the other party who has received the services is unjustly benefited and must return it to the party who provided such benefit.
Quantum meruit is a claim under quasi-contract. The remedy to a party in a breach of contract is to file a suit upon quantum meruit. The suit rises where a part of a contract is performed by one party and then there is a breach of contract or it is discovered that the contract is void or becomes void.
The claim for quantum meruit presents itself only when the contract is discharged and only the party that is not in default can bring it. In the following given cases, claim for quantum meruit can arise:
- When an agreement or contract is void
- When something is done without any intension to do so gratuitously:
- When there is an express or implied contract to render services but there is no agreement as to remuneration
- When the completion of the contract has been prevented by the act of the other party to the contract
- When a contract is divisible:
- When a contract is completely performed but badly
CASE LAWS ON QUANTUM MERUIT:
In Craven–Ellis vs. Cannon Ltd, Craven–Ellis was employed as a managing director in a company. After he rendered service for three months, it was found that the directors were not qualified to appoint him. It was held that Craven could recover remuneration for the services rendered by him on Quantum Meruit.
In Cutter vs. Powell, Powell agreed to pay Cutter, 30 guineas on the completion of a voyage from Jamaica to Liverpool. Cutter died before the completion of the voyage. Held, C’s widow was not entitled to claim proportionate payment for the part of the voyage completed as the contract imposed one indivisible obligation, which had not been performed.
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College: Vivekananda Institute of Professional Studies, GGSIPU
 (1990) S.C. 313
 (1936) 2 K.B. 403
 (1795) 6 T.L.R. 320
Author: Akanksha Yadav,
Vivekananda Institute of Professional Studies, GGSIPU, Law Student