Quasi – Contracts And Unjust Enrichment (Section 68 To 72, Indian Contract Act)

This Article is written by Raj Ranjan & this article discuss the concept of Quasi – Contracts and Unjust Enrichment (Section 68 to 72, ICA).

INTRODUCTION
ESSENTIALS OF QUASI CONTRACT
UNJUST ENRICHMENT AND RESTITUTION
LANDMARK CASES IN QUASI – CONTRACTUAL OBLIGATIONS
REMEDIES AND DAMAGES PROVIDED BY QUASI – CONTRACTS
WHAT ARE THE BENEFITS OF QUASI CONTRACTS
CONCLUSION
REFERENCES

INTRODUCTION

Contracts are an essential part of our legal system and regulate a wide range of daily interactions and transactions. In contract law, the idea of quasi obligations is frequently disregarded. Contracts implied by law or quasi-contracts are terms used to describe these relationships that bear resemblance to contracts. Actually, this is not an agreement between the parties that forms the basis of a contract. These duties are established by a legal fiction. Contract-free obligations are referred to as quasi-obligations.

Despite the lack of a contract between the parties, it might be necessary to prove one person’s obligation to another on the grounds that, in the absence of the agreement, he would be keeping the money or other benefit to which the other party is legally entitled, or that another party might incur unjust loss. Situations of this kind are covered by quasi-contract law.

Legal scholars and practitioners, as well as every individual and business owner, should be aware of quasi-contractual obligations. Quasi-contracts define rights and obligations if you have inadvertently received money, given goods or services without a clear agreement, or been the recipient of someone else’s kindness.

‘Nemo locupletari potest aliena iactura’, or unjust enrichment, means that no one should profit at the expense of others. Unjust Enrichment is the idea that others shouldn’t profit from the death of a person. It would be unfair to benefit one person at the expense of another’s demise. It implies that keeping someone else’s property or goods is against the fundamental principles of justice since it would be unfair to the other party. It implies that if B gives something to A, then A should give something back to B. Since there is no expectation of anything in return, the gift does not fall under the category of unjust enrichment.

When someone who is legally obligated to support someone else or someone who is incapable of entering into a contract is given necessities appropriate for their current state of life by someone else, that person has the right to receive payment from the incapable person’s property. This means that if someone named “A” gives something to someone named “K” that is required by nature, then A has the right to get payment for giving the thing to K or from K’s property. It implies that if one person benefits at the expense of another, that person must repay the benefit; otherwise, it would be considered an unjust enrichment or benefit.

ESSENTIALS OF QUASI CONTRACT

It’s governed by the law. It is not established by agreement.
In personam, it is a right.
The person who spends money has a right to compensation (unjust enrichment).
It is brought up by means of a legal fiction.

It includes those responsibilities that, in terms of English law, are referred to as constructive contracts or quasi-contracts. It includes situations in which a person’s unjust benefit at another’s expense gives rise to a payment obligation rather than a contract or tort. The deciding element in such obligations is therefore the concept of natural justice and equity.

The quasi-contractual obligations stem from the idea that both justice and the law should work to prevent unjust enrichment, which is defined as the enrichment of one person at the expense of another [Lord Mansfield in Moses v. Macferlan (1760)]. Alternatively, they aim to stop a man from keeping money or benefits derived from another that he feels he should not be keeping against his conscience.

We refer to these relationships as quasi-contractual obligations. It also goes by the name “certain relations resembling those created by contracts” in India.

UNJUST ENRICHMENT AND RESTITUTION

They are both in different shades of grey. Restitution is defined as returning goods or property to their rightful owner when obtained by dishonest means. Nevertheless, the commodity or goods must be traceable. Section 65. the responsibility of someone who benefited from a null and void contract, or contracts that nullify. Anybody who has benefited from an agreement or contract that turns out to be invalid is required to return it to the source of the advantage or reimburse them for their money. It means that they have to return it to its original location or pay the original owner back for the benefits they received. Should this not happen, one party will gain unfair advantage at the expense of the other.

A quasi-contract is a contract that is made by a court instead of through regular relations. Its purpose is to administer justice; otherwise, it would be an unjust enrichment and retention of property. A quasi-contract differs from a regular contract in that it is made at the court’s direction and does not rely on an offer, prior agreement, or acceptance by the parties. A Quasi Contract does not require the consent of either Party; in a Contract, free consent is required for the formation of a contract. In a quasi-contract, the conduct of the parties involved determines liability, which is determined by natural justice and equity; in a contract, however, the parties’ liabilities are predetermined by the terms of the contract. The Indian courts impose quasi-contracts. The Indian Contract Act of 1872 does not make reference to quasi-contracts specifically. Nonetheless, Chapter 5 of the Act addresses some relationships that are similar to those established by contract. It refers to relationships that, despite their appearance, are not contracts. Chapter 68–72 addresses quasi-contracts.

68. Request reimbursement for necessities provided to an incompetent person or on their behalf. If someone who is legally obligated to support someone else or someone who is incapable of entering into a contract is given necessities appropriate for their stage of life by another person, that person has the right to receive payment from the incapable person’s property. The person supplying has the right to receive payment for the necessary goods from their own property if they are given to an unstable person who is unable to enter into contracts. The requirements vary depending on the circumstances and are determined by the courts.

69. Reimbursement of person making payment for money owed to another, in which case he has an interest. A person who pays money that another is required by law to pay because they have an interest in doing so has the right to reimbursement from the other party. The parties have a quasi-contract formed by Section 69. The Party providing the funds required to have interest on the payment for other parties is the fundamental component of this section. The government forced the other party to make the required payment.

LANDMARK CASES IN QUASI – CONTRACTUAL OBLIGATIONS

The Indian legal system has interpreted the Indian Contract Act 1872 through a number of seminal cases. Despite the fact that Sections 68 to 72 of the Act deal specifically with a contractual obligation, a number of court rulings have established significant precedents regarding quasi-contractual obligations.

The following section discusses some of the seminal rulings on quasi-contractual obligations that have influenced the understanding:

Govindram Gordhandas Seksaria vs. the State of Gondal (1949)

In this case, the Maharaja of Gondal was bound to pay a certain sum to a third party to prevent the sale of certain mills because of unpaid municipal taxes. The Maharaja argued that since he and the third party did not have a contract, he was not obligated to pay the money.

Nonetheless, the Privy Council ruled that the quasi-contract theory requires the Maharaja to make the payment. The ruling stated that since the Maharaja received a benefit from a third party, it would be unfair to let him keep it without having to pay for it.

State of West Bengal vs. M/S B.K. Mondal & Sons (1961)

In this instance, an officer of the State of West Bengal requested that a contractor build certain works for the State. Although the state acknowledged the work, it refused to compensate the contractors, arguing that the contract was invalid because it was not made in accordance with the Bombay Municipal Corporation Act’s provisions.

The Honorable Supreme Court ruled that the quasi-contract theory required the state to reimburse for the works. It was decided that the contractor had provided the state with a benefit, and it would be unfair to keep the benefit unpaid for.

Hari Ram Khandsari vs. Commissioner of Sales Tax (2003)

A taxpayer in this instance had overpaid sales tax. The taxpayer argued that he was qualified for a refund of the excess tax that he had paid. The government argued that since there were no legal provisions allowing for refunds of overpaid sales tax, the taxpayer was not entitled to a refund.

The High Court ruled that the quasi-contract theory entitled the taxpayer to a refund. According to the ruling, the taxpayer had provided the government with a benefit, and it would be unfair to permit the government to keep the benefit without giving the taxpayer a refund.

REMEDIES AND DAMAGES PROVIDED BY QUASI – CONTRACTS

Even though there isn’t a formal contract between the parties, quasi-contractual obligations exist to provide remedies in situations where one party benefits at the expense of another without payment or legal justification. Quasi-contracts are enforced by law to stop unjust enrichment.

The following are the main damages and remedies for quasi-contractual obligations:

Restitution: A person is required to give back any benefits they receive that were obtained unfairly at the expense of another. For instance, if someone receives money or property by error, they are required to give it back to the owner.
Damages: The party that loses out on the quasi-contracts has the right to get compensation from the party that gains something. For instance, the person who provided the necessities may be able to recoup damages from the minor’s property if the minor is given goods that they cannot afford. Damage amounts differ from one instance to the next.

WHAT ARE THE BENEFITS OF QUASI CONTRACTS

As a safeguard against unfairness and unjust enrichment, quasi-contracts are required to create obligations even in the absence of an official contract between the parties. The law of quasi-contracts offers remedies when someone gains something at the expense of someone else. Quasi-contracts have a number of advantages, which are covered below:

Unjust enrichment is prevented by quasi-contracts: Quasi-contracts aid in the prevention of unjust enrichment. When someone gains advantages at another person’s expense without any legal basis, it’s known as unjust enrichment. For example, it would be unfair if someone received money accidentally on someone else’s behalf and kept it for themselves. The procedures for getting this money back are outlined in quasi-contracts.
Quasi-contracts advance justice and equity: By guaranteeing that people are paid for the benefits they provide to others, quasi-contracts advance justice and fairness. For example, when an individual provides essential goods or services to a minor, that individual is entitled to reimbursement from the minor’s assets.
Even without contracts, there are still ways to access quasi-contracts: Quasi-contracts make sure that the person who provided a benefit to another person gets paid for it, whether or not there is a formal contract in place.

CONCLUSION

Although chapter five of the Indian Contract Act 1872 deals with relations that resemble contracts, quasi-contracts are not actual contracts under the Indian Contracts Act, although they do have certain obligations. Laws impose it to prevent unfairly benefiting others. Over time, the doctrine of unjust enrichment has undergone evolution, and courts have begun to apply it to broader concepts, such as taxes and contracts. in circumstances where taxes have been incorrectly appropriated.