1

“QUASI-CONTRACT”

PROJECT SUBMITTED IN THE FULFILMENT OF THE COURSE TITLED –

LAW OF CONTRACTS-1

SUBMITTED TO:

Ms. SUSHMITA SINGH

FACULTY OF LAW

SUBMITTED BY:

NAME: KUMAR JYOTIVARDHAN

COURSE: B.B.A., LL.B (Hons.)

ROLL NO: 1831

SEMESTER: 2nd

CHANAKYA NATIONAL LAW UNIVERSITY, NYAYA NAGAR,

MITHAPUR, PATNA - 800001
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DECLARATION BY THE CANDIDATE

I hereby declare that the work reported in the B.B.A., LL.B (Hons.) Project Report entitled
“Quasi-Contract” submitted at Chanakya National Law University is an authentic record of my
work carried out under the supervision of Ms. Shushmita Singh. I have not submitted this work
elsewhere for any other degree or diploma. I am fully responsible for the contents of my Project
Report.

NAME OF CANDIDATE: KUMAR JYOTIVARDHAN

CHANAKYA NATIONAL LAW UNIVERSITY, PATNA

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ACKNOWLEDGEMENT

I would like to thank my faculty Ms. Shushmita Singh whose guidance helped me a lot with
structuring my project.

I owe the present accomplishment of my project to my friends, who helped me immensely with
materials throughout the project and without whom I couldn’t have completed it in the present
way.

I would also like to extend my gratitude to my parents and all those unseen hands that helped me
out at every stage of my project.

THANK YOU,

NAME: Kumar Jyotivardhan

COURSE: B.B.A., LL.B. (Hons.)

ROLL NO: 1831

SEMESTER – 2nd
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INDEX

INTRODUCTION …………………………………………………………………pg. 5

* AIMS AND OBJECTIVES

* HYPOTHESIS

* RESEARCH METHODOLOGY

* SOURCES OF DATA

1. INDIAN CONTRACTS ACT, 1872 ………....……….pg.7

2. QUASI-CONTRACT. ………………………………….pg. 9

[Link] OF QUASI-CONTRACT ……………………………..pg.11

[Link] IN INDIAN LAW ……………………….……pg15

5. SIMILARITIES AND DISTINCTIONS BETWEEN CONTRACT

AND QUASI- CONTRACT ………………………………….pg.16

6. IMPORTANT CASE LAWS pg. 18

7. CONCLUSION pg. 20

8. BIBLIOGRAPHY pg. 21
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INTRODUCTION

AIMS AND OBJECTIVES:

1. To separate the criteria which distinguish valid contract from a quasi-contract.
2. The researcher tends to establish principles of Quasi-Contract through various case laws.

HYPOTHESIS:
The doctrine of quasi contracts has been an essential part and aspect of the Indian Contract Act,
1872 in dealing with such obligations which causes loss to one party over undue benefit to the
other party.

RESEARCH METHODOLOGY:
The researcher relied on Doctrinal method of research to complete the project.

SOURCES OF DATA:
The researcher relied on both primary and secondary sources to complete the project.

1. Primary Sources: Indian Contract Act, 1872.

2. Secondary Sources: Books, Newspapers and Websites.
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INDIAN CONTRACT ACT, 1872

The Indian Contract Act, 1872 prescribes the law relating to contracts in India. The Act was
passed by British India and is based on the principles of English Common Law. It is applicable
to all the states of India except the state of Jammu and Kashmir. It determines the circumstances
in which promises made by the parties to a contract shall be legally binding and the enforcement
of these rights and duties.

The Act as enacted originally had 266 Sections.

General Principles of Law of Contract- Sections 01 to 75

Contract relating to Sale of Goods- Sections 76 to 123

Special Contracts- Indemnity, Guarantee, Bailment & Pledge- Sections 124 to 238

Contracts relating to Partnership- Sections 239 to 266

Indian Contract Act embodied the simple and elementary rules relating to Sale of goods and
Partnership. The developments of modern business world found the provisions contained in the
Indian Contract Act inadequate to deal with the new regulations or give effect to the new
principles. Subsequently, the provisions relating to the Sale of Goods and Partnership contained
in the Indian Contract Act were repealed respectively in the year 1930 and 1932 and new
enactments namely Sale of Goods and Movables Act 1930 and Indian Partnership act 1932 were
re-enacted.

At present the Indian Contract Act may be divided into two parts

Part 1:deals with the General Principles of Law of Contract Sections 1 to 75

Part 2:deals with Special kinds of Contracts such as

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(1)Contract of Indemnity and Guarantee

(2)Contract of Bailment and Pledge

(3)Contract of Agency

1. Offer 2(a):- When one person signifies to another his willingness to do or to abstain from
doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is
said to make a proposal.

2. Acceptance 2(b):- When the person to whom the proposal is made, signifies his assent there
to, the proposal is said to be accepted.

3. Promise 2(b) :- A Proposal when accepted becomes a promise. In simple words, when an offer
is accepted it becomes promise.

4. Promisor and promisee 2(c) :- When the proposal is accepted, the person making the proposal
is called as promisor and the person accepting the proposal is called as promisee.

5. Consideration 2(d):- When at the desire of the promisor, the promisee or any other person has
done or abstained from doing or does or abstains from doing or promises to do or to abstain from
doing something such act or abstinence or promise is called a consideration for the promise.
Price paid by one party for the promise of the other Technical word meaning QUID-PRO-QUO
i.e. something in return.

6. Agreement 2(e) :- Every promise and set of promises forming the consideration for each other.
In short,

7. Contract 2(h) :- An agreement enforceable by Law is a contract.

Therefore, there must be an agreement and it should be enforceable by law.

8. Reciprocal Promises 2(f):- Promises which form the consideration or part of the consideration
for each other are called 'reciprocal promises'.

9. Void agreement 2(g):- An agreement not enforceable by law is void.

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10. Voidable contract 2(i):- An agreement is a voidable contract if it is enforceable by Law at the
option of one or more of the parties there to (i.e. the aggrieved party), and it is not enforceable by
Law at the option of the other or others.

11. Void contract 2(j) :- A contract which ceases to be enforceable by Law becomes void when it
ceases to be enforceable.
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QUASI-CONTRACT
Quasi-Contracts are transactions which do not arise between the parties in the proper legal sense
but out of rights and obligations similar to those created by a contract. Example- A pays to B the
money that C owes B. Therefore, A shall be entitled to be reimbursed by C. Quasi Contract or
Implied Contract is used interchangeably. Such contracts deal with rights or liabilities accruing
from relations resembling those created by a contract. Such legal relations resembling a contract
are known as contract implied in law. It is not a real contract and thus called a consensual
contract based on agreement of the parties. Implied contracts are based on the principal of equity
and justice and prevent enrichment of one person at the cost of another. Quasi-contract is a
fictional contract created by courts for equitable purposes mainly1. A quasi-contract is a legal
substitute formed to impose equity between the two contracting parties. It is used when a court
finds it appropriate to create an obligation upon a non-contracting party to ensure fairness and to
avoid injustice. It is invoked in circumstances and is connected with the concept of restitution or
reimbursement. Generally, the existence of an actual or implied in fact contract is required for
the defendant to be liable for services rendered and a person who provides a service uninvited is
an overbearing intermeddler who is not entitled to reimbursement.

In other words a quasi contract is an agreement between two parties without previous obligations
to one another that has been created and legally recognized by the court system. under a quasi-
contract, neither involved party is expected to create such an agreement; this contract is arranged
and imposed by a judge to correct a circumstance in which one party acquires something at the
expense of the other party.

For example, consider a pizza that is delivered to the wrong address. The pizza has already been
paid for. If the individual does not correct the delivery man and instead keeps the pizza, the court
system could issue a quasi contract that would require the individual to pay back the amount of
the pizza to the party that paid for the pizza. The contract is used to prevent any party from
benefiting from the situation at the other party's expense; the restitution required under the
contract is to make the situation fair.

The History of Quasi Contracts

Under common law jurisdictions, quasi contracts can be followed back to the Middle Ages under
a form of action known as indebitatus assumpsit. This law saw that the plaintiff in a case
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received a sum of money from the defendant, as dictated by the courts, as if the defendant had
agreed to pay the plaintiff. Indebitatus assumpsit was the courts' way to make one party pay the
other as if a contract or agreement already existed between the two parties – the defendant’s
promise or agreement to be bound by the contract requiring reparations was implied by law. At
the very beginning of the quasi contract's use, it was typically imposed in order to enforce
restitution obligations.

Requirements
Certain aspects must be in place for a judge to issue a quasi contract. One party – the plaintiff –
must have given a tangible item or a service to another party – the defendant – with an
expectation/implication that payment would be given. The defendant must have accepted or
acknowledged receipt of the valuable thing but did not make any effort or offer to pay. Then, the
plaintiff must express why it would be unjust for the defendant to receive the thing of value
without paying for it, so the defendant received unjust enrichment.

Considering the example above, the individual that ordered the pizza and paid for it would have
every right to demand payment from the individual who actually received the pizza; the first
individual is the plaintiff, the latter is the defendant. A quasi contract, also known as an implied
contract, would be handed down, requiring the defendant to pay restitution to the plaintiff. The
restitution – known as quantum meruit – is calculated by the amount or the extent to which the
defendant was unjustly enriched.
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KINDS OF QUASI CONTRACT

(1) SUPPLY OF NECESSITIES (Sec.68)

If a person, incapable of entering into a contract, or anyone whom he is legally bound to support,
is supplied by another with necessaries suited to his condition in life, the person who has
furnished such supplies is entitled to be reimbursed from the property of such incapable person.

Ex. A supplies B, a lunatic, with necessaries suitable to his condition in life. A is entitled to be
reimbursed from B's property.

(2) PAYMENT BY AN INTERSTED PERSON (sec. 69)

A person who is interested 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.

Ex. B holds land in Bengal, on a lease granted by A, the Zamindar. The revenue payable by A to
the govt. being in the arrears, his land is advertised for sale by the govt. under the revenue law
the consequences of such sale will be annulment of B's lease. B to prevent the sale and the
consequent annulment of his own lease, pays to the government the sum due from A. A is bound
to make good to B the amount so paid.

The conditions of the liability under sec. 69 are:

The plaintiff should be interested in making the payment. It is not necessary that he should have
a legal proprietary interest in the property in respect of which the payment is made. However,
often it is used to determine whether plaintiff was interested. Sec. 69 does not invite such judicial
limitation that a person who has not an interest in the property can be interested in a payment of
that property.
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The plaintiff himself should not be bound to pay. He should only be interested in making the
payment in order to protect his own interest.

The defendant should be under legal compulsion to pay.

The plaintiff should have made the payment to another parson and not to himself.

(3) OBLIGATION TO PAY FOR NON-GRATUITOUS ACTS (Sec. 70)

When 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 things so done or
delivered.

Ex. 1. A, a tradesman, leaves goods at B's house by mistake. B treats the goods as his own. He is
bound to pay for them to A.

Ex 2. 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.

Before any right of action under sec. 70 arises, 3 conditions must be satisfied:

(1) The thing must have been done lawfully.

(2) the person doing the act should not have intended to do it gratuitously.

(3) The person for whom the act is done must have enjoyed the benefit of the act[union of
India vs. Sita ram, AIR 1977,S.C. 329]

EX. A village was irrigated by a tank. The government effected certain repairs to the tank for its
preservation and had no intention to do so gratuitously for the zamindars. The zamindars enjoyed
the benefits thereof. Held, they were liable to contribute {Damodar mudaliar vs. secretary of
state for India, 1894, 18 Mad. 88}.

(4) RESPONSIBILITIES OF FINDER OF GOODS (Sec. 71)

A person, who finds goods to another and takes them into his custody, is subject to the same
responsibilities as a bailee. He is bound to take as much care of the goods as a man of ordinary
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prudence would, under similar circumstances, take of his own goods of the same bulk, quality
and value. If he does not, he will be guilty of wrongful conversion of the property. Till the owner
is found out, the property in goods will vest in the finder and he can retain the goods as his own
against the whole world.

Ex. F picks up a diamond on the floor on k's shop. He hands it over to K to keep it till true owner
is found out. No one appears to claim it for quite some weeks in spite of the wide advertisement
in the newspapers. F claims the diamond from K Who refuses to return. K is bound to return the
diamond to F who is entitled to retain the diamond against the whole world except the true
owner.

(5) MISTAKE OR COERSION (Sec. 72)

A person to whom money has been paid, or anything delivered, by mistake or under coercion,
must repay or return it to the person who paid it by mistake or under coercion.

Ex. (1) A pays some money to B by mistake. It is really due to C. B must refund the money to A.
C, however, cannot recover the amount from C is no privity of contract between B and C.

(2) A railway company refuses to deliver up certain goods to the consignee, except upon the
payment of an illegal charge for carriage. The consignee pays the sum charged in order to obtain
the goods. He is entitled to recovers so much of the charge as is illegally excessive.

Sec. 72 does not draw any distinction between a mistake of fact and mistake of law {D. cawasji
& co. vs. state, AIR. 1969 mys.23}

Ex.(1). K paid sales tax on his forward transactions of bullion. Subsequently this tax was
declared ultra vires. Held, K could recover the amount of sales tax and that sec. 72 is wide
enough to cover not only mistake of fact but also mistake of law.{sales tax officer, benares vs.
kanhaiya lal mukand lal safaf, 1959 S.C.J. 53}.

(2) An insurance company paid the amount on a policy under the mistake that the goods had
been destroyed by a peril insured against. The goods infact had been sold. Held, the money could
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be recovered by the insurance company {Norwich etc. society ltd. vs. price W.H. LTD 1934
A.C. 455}

(3) An insurance co. paid the amount on a policy which had lapsed by a reason of non- payment
of premiums by the assured. The company knew this fact but it was overlooked at the time of
payment. Held, the company could recover the amount "however careless the party (company
paying money) may have been omitting to use the diligence to inquire into the fact"{Kelly vs.
solari 1841 9 M. &W. 54}
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POSITION IN INDIAN LAW

Chapter V of the Indian contract Act, 1872 deals with the “certain relations resembling to those
created by contract”. It incorporates those obligations which are known as “Quasi Contracts”
under English law. A person is obliged to compensate another although the basis of this
obligation is neither a contract between the parties, nor any tort on the part of the person who is
bound to compensate. The basis of the obligation is that no one should have unjust benefit at the
cost of the other. If A gets unjust enrichment at the cost of B, A has an obligation to compensate
B for the same. For instance, 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 the amount to
B.

In an action for unjust enrichment, the following essentials have to be proved:

 The defendant has been “enriched” by the receipt of a “benefit”.

 The enrichment is “at the expense of the plaintiff”.
 The retention of the enrichment is “unjust”.
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SIMILARITIES AND DISTINCTIONS BETWEEN

CONTRACTS AND QUASI-CONTRACTS
SIMILARITY
The result of contract and quasi contract are similar to that of contracts. So far as the claim for
damages are concerned they are very similar to that of contracts because section 73 of the Indian
Contract Act, 1872 provides remedies for the breach of quasi contracts as provided for the breach
of express contracts in various sections of the Indian Contract Act, 1872. Remedies are available
under quasi contract under Indian contract act, 1872.

DISTINCTION
A “quasi” or constructive contract is an implication of law. An “implied” contract is an
implication of fact. In the former the contract is a mere fiction, imposed in order to adapt the case
to a given remedy. In the latter, the contract is a fact legitimately inferred. In one the intention is
disregarded; in the other, it is ascertained and enforced. In one, the duty defines the contract; in
the other, the contract defines the duty[xiv]. Any contract has two essential features i.e.
agreement and obligation. Agreement arises when a party puts forwards a proposal and when
that proposal is accepted by the other party. Obligation comes into picture as law imposes it over
the parties but is linked to the agreement between the parties. Therefore, a contract is a legally
enforceable agreement. Basically contracts are express or implied by law. The former comes into
picture by the conduct or words or negotiations between the parties. The contract that implied by
law is not a real contract. It would be unfair to term it a contract. It arises when law irrespective
of agreement aims at meeting the ends of justice. A distinction is set forth in Keener on these
types of contracts. The learned author says that:-

He says that the quasi contracts basically contracts implied by law denote the nature of evidence
established through which the plaintiff can claim but the obligation arises out by the law. Though
the defendant would not intend to assume any obligation but the law will impose an obligation
because to avoid undue advantage to him at the cost of the plaintiff.
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It has been observed that these contracts and quasi contracts are the matter of practical
importance. The concept revolves around the agreement and obligations between parties. The
quasi contracts differ from contracts that are generally express as they contains each terms in
words while in the latter, the terms come into existence by the conduct of the parties. In one case
it appears to be a fiction and in the other appears to be a fact that is legitimately inferred. In one
intention is discarded and in the other intention is ascertained and enforced. In one duty defines
the contract while on the other hand contract defines the duty. Quasi contracts are not entered by
implied words but are operated on the basis of the conduct of the parties. It seems to be unfair
that the law implying a promise on someone whose declarations disprove any intention but still
this practice is in functioning. The express contracts are approved by parties as a matter of law
both sharing equal interests with equal consequences though the conditions are stated expressly
while in the case of quasi contracts the law imposes obligations taking into view the conduct of
the parties in order to prevent undue advantage to one party at the cost of another. These types of
contracts are those which are referred to distinguish in practice form obligation quasi ex
contractu and to pay for benefits conferred. If the situation arises where a mistake is not to the
doer when the benefit is incurred, the obligation is quasi contractual. The concept of such types
of contracts has been in existence upon the principles of honesty, justice and fairness. Basically
the most fundamental principle to make quasi contract come in existence is upon the principle of
justice to ensure no one ought to have unjustly enrich himself at the expense of another.[xvi] In
Mahabir Kishore v. State Of Madhya Pradesh.[xvii], the requirements of the principle of unjust
enrichment were laid down by the Hon’ble Supreme Court as follows:

 The defendant has been ‘enriched’ by the receipt of a benefit.

 This enrichment is at the expense of the plaintiff
 And the retention of unjust of the enrichment is unjust.
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IMPORTANT CASE LAWS

[Link]’s Wharf v. Goodman Brothers
The defendants were a firm of furriers who had imported from Russia a consignment of squirrel
skins in August, 1934. Out of the consignment ten packages were stored by the defendants in the
bonded warehouse of the plaintiffs. Whilst in the warehouse they were stolen on the night of
September 7-8, 1934. The plaintiffs as bonded warehousemen were compelled by law at the
demand of the Customs to pay the duties on those packages out of their own moneys. The
defendants had refused to supply the plaintiffs with the necessary funds for that purpose. The
plaintiffs claimed from the defendants the amount of the duties, 823l. 17s. 10d., which they had
thus been called upon to pay to the Customs, on the ground that, as between themselves and the
defendants, the defendants were primarily liable for the duties. Holding Import Duties Act -
Primary liability on the Importers The plaintiffs' claim thus depends on considerations of law.
Customs duties are charged on goods under the charging section, which in this case is s. 1 of the
Import Duties Act, 1932. That section provides that there shall be charged on all goods imported
into the United Kingdom, subject to certain exemptions, a duty of Customs equal to 10 per cent.
of the value of the goods. That means, I think, that the importer is the person who is primarily
liable for the duties…. The machinery embodied in the Act includes a system of bonded
warehouses, of which the plaintiffs' warehouse was one. The owner of the bonded warehouse is
required under s. 13 of the Act to give security by bond for the payment of the full duties
chargeable on any goods warehoused with him or for the due exportation thereof. In each of
these sections the phrase is used "duties due on the goods" and I think these words refer to the
duties due from the importer as from the date of importation. The purpose of these provisions
appears to me to be to enable the Customs to have ready recourse to the warehouseman wherever
goods are improperly removed from the warehouse… the obligations so imposed on the
plaintiffs as warehousemen are ancillary to and by way of security for the due payment to the
Customs and do not supersede the liability of the importers, though, if the warehousemen pay the
duty, the importers cannot be made by the Customs to pay it over to them a second time…. The
only person from whom the duties are due in these cases must be the importer.

2. Abraham v. K.A. Cheriyan

A purchased some property for B, who was residing abroad, and collected the rents on behalf of
B to be deposited in B’s accounts but made a delay in deposit of the rent amount in B’s account.
Therefore, A claimed remuneration from B for his services in the form of purchasing property
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for B and collecting the rents on his behalf. It was held that there was nothing to prove that A
rendered the services not intending to do gratuitously. Moreover, the fact that in this case B had
gained no advantage at the cost of A, rather A had gained advantage by utilizing the rent
collected until the same had been deposited in B’s account, A was not entitled to claim any
amount under section 70.

3. S.S. Sakhar Karkhana Ltd. v. C.I.T., Kolhapur

In this case compulsory deductions were made by assesse Sugar-Co-operative Societies out of
sugarcane purchase price paid to cane growers in name of deposits. Deposited amount was
utilized for conversion into additional shares , for repayment of loans etc.; for transferring of
deposit to another member ; for payment of interest on deposit. It did not denude amount of its
character of deposit. Assessee-Co-operative Society did not exercise complete dominion over
deposited amount. Deposits were held not taxable as income of assessee Society. Apart from
that”‘compulsion of law is not coercion”, the apex court ruled

[Link] Flour Mills Pvt. Ltd. v. Bihar State Financial Corporation

.In Radha Flour Mills Pvt. Ltd. v. Bihar State Financial Corporation, in recovery of loan and
interest from the appellant, there was an accounting error on the part of the corporation, and as a
result Rs. 29,000/- could not be recovered from the appellant-debtor. On the discovery of the
accounting error after a decade and a half, the corporation claimed the amount along with
interest. The Patna High Court held the demand of interest as improper as it would premium on
default being committed by the corporation and hence amounted to unjust enrichment.

[Link] Bank Of India v. A.T. Ali Hussain and Co.

In this case, the receiver of the money under mistake could not be asked to repay the same
because before the mistake was discovered, he had parted with the benefit so received and he did
not get any unjust enrichment.
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CONCLUSION
It is proved by the research that contracts and quasi contracts are far different. They are not
contracts but are obligations that the law imposes upon someone to prevent undue advantage to
one person at the cost of another. The Indian Contract Act, 1872 covers these types of
obligations under the Chapter V under the title ‘OF CERTAIN RELATIONS RESEMBLING
THOSE CREATED BY CONTRACT’ but the act does not include the term ‘quasi contract’. It
could be because of the reasons that the act also wants to tell that these type of obligations are far
different from real contracts and they must not be called quasi contracts. It is the law that
compels parties who get unduly advantaged to compensate the other party on the principle of
equitable justice. The foundation of quasi contracts is based on the principles of Equity, Justice
and Good Conscience, which requires that nobody shall benefit himself unjustly, at the cost of
others. This is known as the Principle of Unjust Enrichment. The basis of quasi contract is that
technicality of contract cannot override the requirements of justice. When something has been
done for the benefit of another person without the waiting for his formal assent as also for the
completion of other formalities, it is expected that the person receiving the benefit must
compensate the other party for the trouble and expenses incurred. The contract and quasi contract
can be distinguished by focusing on the concept of agreements and obligations by and on the
parties respectively. The unjust principle came from the old maxim of Roman law ‘Nemo debet
locupletari ex aliena jactura’ that means no man must grow rich because of one’s personal
loss.[xxiii] The doctrine of quasi contracts has been an essential part and aspect of the Indian
Contract Act, 1872 in dealing with such obligations which causes loss to one party over undue
benefit to the other party.
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BIBLIOGRAPHY
The researcher consulted following sources to complete the project:

PRIMARY SOURCES:
1. Contract-1 by Dr. R.K. Bangia
2. Contract and Specific Relief by Avtar Singh