A' deliver a box of chocolates to B by mistake.
'B' eats the chocolates and
refuses to pay because it was not his mistake. Can 'A' recover the cost?
Yes, ‘A’ can recover the cost under section 70 of Indian Contract Act 1872: "Obligation of
person enjoying benefit of non-gratuitous act"
Obligation of person enjoying benefit of non-gratuitous act.
—Where a person lawfully does anything for another person, or delivers anything to him,
not intending to do so 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.
Section 70: Liability to pay for non-gratuitous acts
This section creates liability to pay for the benefits of an act which the doer did not intend
to do gratuitously i.e. when a person without intending to do gratuitously for another
person, lawfully does something like if he delivers goods or service and benefit of the
delivery of that goods or services enjoys by the other person, the latter is bound to make
compensation to the former. Gratuitous act means an act which is intended to be free.
In Bihar Nurses Registration Council v. Harendra Prasad Sinha, when employees rendered
his services, then an employer is bound to pay for their services.
The elaboration provided under section 70 of the Indian Contract Act, 1872, it is clear
that three conditions need to be fulfilled to ensure application of this section:
1. A person should lawfully do something for another person or, precisely, should
deliver something to him.
2. The contention of the individual making payment, performing the act, or delivering
the think should be non-gratuitous, that is, he should anticipate in return.
3. The other person should enjoy/derive the benefit/profit of this payment or the
delivery of the thing.
A person should lawfully do something for another person or specifically, should deliver
something to him
If an individual does something or another individual or delivers any commodities to him
without a gratuitous intent, then the individual is entitled to claim the
reimbursement/payment for the same from the other individual. In Damodar Mudaliar v
Secretary of State for India, a specific tank was repaired by the government, and the tank
was used for irrigating the fields of the defendants. The government did not undertake the
repairs with gratuitous content, and the defendants were aware of this fact. The defendants
still took benefits of the repairs of the government. It was held that the government was
entitled to recover from the government the part of the cost of the repairs in proportion to
the lands belonging to the defendants.
Theory of unjust enrichment
A general equitable principle that no person should be allowed to profit at another’s
expense without making restitution for the reasonable value of any property, services, or
other benefits that have been unfairly received and retained i.e. if a person has gained
benefit from other person thereby causing loss to the other person, then in such case, equal
to the amount of benefit, the person who has gained is required to reimburse to that
particular person. Also, according to Black’s Law dictionary, the retention of a benefit
conferred by anyone without offering any compensation in such circumstances where
compensation is to be reasonably expected is unjust enrichment.
Definitions of Quasi Contracts
There is no statutory definition of a quasi-contract available either under the English Law or
under the Indian Contract Act. Pollock describes quasi contracts as "contracts 'in law' but
not 'in fact', being the subject matter of a fictitious extension of the sphere of the contract
to cover obligations which do not in reality fall within it". Sir William Anson, a noted English
author points out that "circumstances must occur under any system of law in which it
becomes necessary to hold one person to be accountable to another, without any
agreement on the part of the former to be so accountable, on the ground that otherwise he
would be retaining money or some other benefit which has come into his hands to which
the lai regards the other person as better entitled, or on the ground that without such
accountability, the other would unjustly suffer loss. The 'Law of Quasi Contract' exists to
provide remedies in circumstances of this kind." Quasi contracts are also called implied
contracts, they are implied because they create such obligations which resemble those
created. The essentials for the formation of a contract are absent but as outcome resembles
those created by a contract they are called quasi contracts. Under English Law, they are also
termed as Constructive Contracts or Contracts in Law, etc. Indian Contract Act terms quasi
contracts as certain relations resembling those created by conti-acts and are found under
sections 68 to 72.
Illustrations
(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.
Conclusion
Quasi Contract are not contracts but they are obligations and it is also known as a
constructive or implied-in-law contract. Chapter V of Contract Act covers the contractual
obligations under the heading “Of certain relations resembling those created by contract”.
The principle of Unjust Enrichment is the basis for the foundation of quasi contract. The
main motive of incorporation of section 70 under the Indian Contract Act, 1872 was to
prevent unjust enrichment and benefit to one party and unfair losses to the other party to
ensure that the other party is compensated/reimbursed for the work done or service
rendered. Under section 70, there are three basic essentialities that need to be fulfilled to
ensure application of section 70, namely: A person should lawfully do something for
another person or precisely, should deliver something to him, the contention of the
individual making payment, performing the act of providing the thing should be non-
gratuitous, that is, he should anticipate in return, and the other person should enjoy/derive
the benefit/profit of this payment or the delivery of the thing. There are some exceptions
under section 70, such as unenforceability in the case of minors, etc.
Quasi Contract Examples
Let's take the most basic example first. Let's say you pay for a pizza to be delivered. If that
pizza is delivered to another house, and someone else enjoys your three-topping special, a
quasi-contract could be initiated. Now, the pizzeria could be court ordered to reimburse you
for the amount you paid for that pie.
Here's another example. Let's say a school district hires a roofing company to complete a
specific task. As that task is being completed, the roofing company uncovers a leak that
needs to be fixed. The roofing company fixes that leak and, when it comes time for
payment, the school district only pays the roofing company for that initial, specific task, and
not the work surrounding the leak in the roof. In this instance, the roofing company may
have a case for a quasi-contract, in order to seek restitution for the added work to fix the
leak.
Here's a more grandiose example. Let's say Mary tells Alex that she will hire him to work as
a web developer if he moves to be closer to her business. They forego any sort of formal
agreement, as Mary assures Alex they'll work out the details when he arrives.
Alex proceeds to quit his current job, move a thousand miles away, and rent a new
apartment. When he meets with Mary, she tells him she doesn't have a job for him. In this
situation, Alex might want to go to court, showing that Mary's statements caused him to
rely on her word and move halfway across the country. Then, Mary would be estopped
from denying her statements and pay some sort of restitution to Alex.
Kinds of Quasi Contract
Chapter V of the Indian Contract Act, 1872 deals with quasi contract under the heading “Of
certain relations resembling those created by contract”. Section 68 to 72 provide for five
kinds of quasi contractual obligation which are as follows:
Section 68: Supply of necessaries
Where necessaries are supplied to a person who in incompetent to contract like a lunatic or
a minor or to someone whom he is legally bound to support, then, the supplier get
reimbursement from the property of the incompetent person.
Illustration: John is a lunatic person and Jack supplies to John with necessaries suitable to
his condition in life. In this case Jack is entitled to be reimbursed from John’s property.
Section 69: Payment by interested person
When a person is bound by law to pay money but on his behalf other person who is
interested in the payment pays that money, then he is entitled to reimbursement by the
other person.
In East India Transport Agency v. Oriental Insurance Co Ltd[4], where good was sent by the
consigner through a carrier and the same was looted enroute. The insurer paid the entire
amount of the damage to the consignee. It was held that the insurer is entitled on the basis
of the letter of subrogation issued by the consignee to the insurer to recover
reimbursement from the carrier.
Section 70: Liability to pay for non-gratuitous acts
This section creates liability to pay for the benefits of an act which the doer did not intend
to do gratuitously[5] i.e. when a person without intending to do gratuitously for another
person, lawfully does something like if he delivers goods or service and benefit of the
delivery of that goods or services enjoys by the other person , the latter is bound to make
compensation to the former. Gratuitous act means an act which is intended to be free.
In Bihar Nurses Registration Council v. Harendra Prasad Sinha[6], when employees
rendered his services, then an employer is bound to pay for their services.
Section 71: Finder of goods
When a person who find goods that belong to the other person and take the same into his
own custody, then he is subject to the same responsibility as a bailee i.e. the responsibility
of finder of good is that he has to take care that good as he will take care of his own goods
with much care.
Section 72: Mistake or coercion
When payments made or anything delivered to other person by mistake or under coercion,
then he is liable to repay or return it.
Illustration: 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 or return it.
In Tilokchand Motichand v. Commissioner of Sales Tax[8], the Supreme court clarified the
‘mistake’ word scope.
In the case of Sri Shiba Prasad Singh v. Maharaja Srish Chandra Nandi[9], the money paid
under mistake and even that mistake is of fact or law, the money is recoverable.
Quasi Contract Claims
An official offer and acceptance may be lacking, but that shouldn't stop one of the parties
from admitting the essence of a contract-like relationship. In the end, equity may prevent
one of the parties from denying the existence of a contract-like existence.
QUASI CONTRACTS
There are many situations in which a person may be required to conform to an obligation,
although he has neither broken any contract nor committed any tort. For example, A has
forgotton certain articles in B's house. Now B is bound to restore them to A. Such
obligations are generally described as 'quasi contractual obligations'. Quasi contracts are
based on the principle of equity and justice. It simply states that nobody shall enrich himself
unjustly at the expense of another. In fact, a quasi contract is not a contract at all. It is an
obligation which the law creates in the absence of any agreement, when the acts of the
party or others have placed in the possession of one person, 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. He then is placed under an obligation to restore
or repay for such a benefit.
