QUASI CONTRACT

INTRODUCTION TO QUASI-CONTRACT

Section 68 to 72 of Indian Contract Act, 1872 deals with ‘certain relations resembling those created by contract’. It incorporates those stimulation which are known as ‘Quasi- Contracts’ or ‘Constructive contracts’ under English Law. It covers cases were the obligation to pay rises neither on the basis of a contract nor a tort, but because a person has acquired an unjust benefit at the cost of another. The principle of ‘natural justice and equity’ is thus the deciding factor in such obligations.

Mansfield in Moses V. Macferlan1

The quasi- contractual obligations are based on the principle that law as well as justice should try to preclude unjust enrichment, i.e. enrichment of one person at the cost of another or to prevent a man holding the money of, or some gain derived from, another which it is against conscience that he should keep.

 

SUPPLY OF NECESSARIES

Minor’s agreement being void ab inito, he cannot therefore, as a general rule, be asked to pay for the services rendered or goods supplied to him. Sec 68, however, allows reimbursement to a person, who supplies ‘necessaries’ to a minor or a lunatic person. No personal action can lie against the minor, etc., for reimbursement but reimbursement is allowed from the property or estate of an incapable person.

WHAT ARE NECESSARIES?

Necessaries does not mean bare necessities of like (e.g. food, cloth, shelter, etc), but means such things as may be necessary to keep a person ‘according to his conditions in life’ (i.e. his status and requirements). Articles of mere luxury are always omitted, though luxurious articles of utility are in some case allowed. The infant must not have already a sufficient supply of the necessaries.

The following have been held to be necessaries:

  1. Supply of racing cycle for an infant apprentice
  2. Debt incurred for performing the funeral rites of minor’s father
  3. House given to a minor on rent for living and continuing his studies.
  4. Wedding presents for a bride of minor.
  5. Money advanced for defending criminal proceedings
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But where a minor is occupied in trade, contracts entered into by him for trading designs are not necessaries and are not binding on him. It important point must also be taken into not that the necessaries may be supplied to someone whom the minor is legally bound to support, for example his wife and children.

PAYMENT BY AN INTERESTED PERSON

A person who is fascinated in the payment of money, which another is bound by law to pay, and who therefore, pays it, is entitled to be reimbursed by the other. For example, where a party had united to purchase certain mills, he was allowed to recover from the seller the amount of already overdue municipal taxes paid by him as to to preserve the property from being sold in execution.

The conditions of liability under Section 69 are:

  1. The plaintiff should be interested in making the payment. It is not necessary that that he should have a legal proprietary interest in the property in respect of which the payment is made.
  1. The plaintiff himself should not be bound to pay. He should only haveinterest in making the payments so as to protect his own interest.
  1. The defendant should be under legal compulsion to pay.
  1. The plaintiff should have made the payment to another person and not to himself.

LIABILITY TO PAY FOR NON-GRATUITOUS ACT

Three crucial aspects must be considered before Section 70 can be invoked:

  1. A person should lawfully do something for another person or deliver something to him.
  1. In doing the said thing or delivering the said thing,he must not have an intention to perform gratuitously, and
  1. The other person for whom something is performed or to whom something is rendered must enjoy the benefit thereof.

For Instance,

  • A, a tradesman, leaves goods at B’s house by mistake. B treats goods as his own. He is bound to pay A for them.
  • A save B’s property from fire. A is not entitled to compensation from B if the circumstances show that he intended to act gratuitously.

Similarly, where a coolie takes the luggage at the railway station without being asked by the passengers or a shoe-shiner starts shining shoes of the passenger without being asked to do so, and if the passenger does not object to that,then he is bound to pay reasonably for the same as the work was not intended to be gratuitous.

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In cases failing under section 70, the person doing something for another cannot sue for particular performance, nor ask damages for breach, as there is no contract between the parties. All that sec. 70 provides for is that if the services or goods are recognized as the liability to pay arises.

The person for whom the act is done is not fettered to pay unless he had the choice to refuse the services. It is only where a person intentionally accepts the thing or enjoys the work done that the liability under section 70 arises. Further, it is necessary that services should have been rendered without any request. However, tenable compensation may be recovered for services rendered at request. Services rendered to a person incapable to contract (e.g. minor) at the instance cannot be made the ground of an action under this section.

Even if there is a non- compliance of constitutional requirement of contracting with the state, then also Section 70 would apply.

State of West Bengal V. B.K. Mondal & Sons2

At the request of an officer of state, certain constructions were made by the plaintiff. The state recognized the work but refused to pay pleading that there was no valid contract. The court held in favour of the plaintiff. Similarly, in another case, the corporation tried to divert liability on the ground that the contract was not made in conformity with Bombay Municipal Corporation Act. The Corporation was held liable under section 70.

FINDER OF GOODS:

A person, who discovers goods belonging to another and takes them into his custody, is subject to the same responsibility as a bailee (Section 71)

 

MISTAKE OR COERCION:

Money has been paid, or anything delivered, by mistake or under coercion, to any person, must repay or return it. (Section 72)

For Instance, 

  1. B and A jointly owe Rs. 100 to C. B alone pays the amount to C, and A, not knowing this fact, pays Rs. 100 over again to C. C is bound to repay the amount to A. (Mistake)
  2. A railway company declines to deliver up certain goods to the consignee, only except upon the payment of an illegal charge for carriage. The consignee pays the sum charged in order to obtain the goods. He is eligible to recover so much of the charge as was illegally excessive. (Coercion) 

RELEVANT CASES

Sales Tax Officer V. Kanhaiya Lal Saraf3

It has been held that the money paid under mistake is recoverable whether the mistake be of fact or of law. And under section 72 the term ‘mistake’ has been used without any limitation. In this case, a certain amount of sales tax was paid by a firm under the U.P. Sales Tax laws on its forward transactions. Subsequently to the payment the Allahabad High Court ruled the levy of sales tax on such transactions to be ultra vires. The firm wanted to retrieve back the tax money. The supreme Court allowed it. The court observed: Payment ‘by mistake’ in section 72 must refer to a payment which was not legally due and which could not have been enforced; the ‘mistake’ is thinking that the money paid was due when, in real, it was not due.

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Tilok Chand Moti Chand V. Commr. Of Sales Tax4

In this case, a firm paid sales tax in respect of sales to consumers outside the State of Bombay and which were, therefore, not liable to any sales tax. The tax money was itself collected by its customers. The amount was ordered to be refunded to the customers. The firm paid back the amount, however, the act under which the recovery was made from the firm was declared to be ultra vires. The firm sought to recover back the money as having been paid under either mistake of law or coercion. The supreme court held that the firm did not suffer from any ‘mistake’ under section 72. The court, however, held that the payment was made under coercion and would have been recoverable under section 72.

 

 

1(1760) 2 Burr 1005

2(AIR 1962 SC 779)

3(AIR 1959 SC 135)

4(AIR 1970 SC 898)

Author: AKANKSHA CHHABRA,
School of Law. IIMT

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