Contracts and doctrine of

quasi-contracts in India
February 6, 2024
1661

This article has been written by Vimala Devi pursuing a Diploma in

International Contract Negotiation, Drafting and Enforcement course
from LawSikho and edited by Shashwat Kaushik.

This article has been published by Shashwat Kaushik.

Table of Contents

 Introduction
 Essentials of contracts and quasi-contracts
 Doctrine of quasi-contracts
o Fairness and equity
 o Restitution
o Prevention of unjust enrichment
o Nature of remedy
 Basis of contracts
 Types of contracts and quasi-contracts
o Contracts
o Quasi-contracts
 Necessaries supplied to incapable person: (Section 68)
 Reimbursement of person which he is interested (Section 69)
 Obligation to pay for non-gratuitous acts: (Section 70)
 Responsibility of finder of goods: (Section 71)
 Liability of person when something is delivered by mistake or under coercion (Section 72)
 Advantages and disadvantages of quasi-contracts
o The recovery of quasi contracts
 Role of quasi contract and the court
 Differences between contracts and quasi-contracts
 Case laws
o State of Haryana vs. Raja Ram (2017)
o State of Rajasthan vs. Basant Nahata (2019)
o State of Madhya Pradesh vs. Sahi Infracon India Pvt. Ltd. (2021)
 Conclusion
 References

Introduction
A contract is the term that is defined under subsection (h) of Section 2 of
the Indian Contract Act of 1872, that “an agreement should be enforceable
by law.” There is no definition for quasi contracts under the Indian Contract
Act, but we can see the provisions that covered quasi-contracts under the
statute of the Act 1872, from sections 68 to 72. The term quasi-contracts is
the combination of two words, “quasi” and “contract.” Quasi means nothing
but “Pseudo,” which is not a real contract. For a valid contract, there must be
an offer, acceptance, consideration and the capacity to contract. A contract
that is formed without any offer or acceptance but is still enforceable by law
is a quasi-contract. Quasi-contracts are based on the principle of the Latin
term “Quantum Meruit,” which denotes “as much as he deserved.” It purely
depends on the doctrines of equity and justice.

For example: A and B made a contract where A agreed to deliver the dress
to B’s residence and B promised to pay Rs. 3000 for it after delivering it to
him. Here, A mistakenly delivers the dress to C’s residence instead of B.
When C got home, he assumed that the dress was an anniversary gift and
got it. Here, there was no contract between A and C but the court considered
this a quasi-contract and ordered C to either pay for the dress or return the
dress to A.

We have to note one important thing that quasi contracts differ from the
other contracts actually made by the parties. Quasi -contracts are considered
a legal tool to prevent one party from benefiting unjustly from the other
party without incurring any expenses or contractual relationship.
Essentials of contracts and quasi-
contracts
The essentials of the contract are explained under the provisions of
Section 10 of the Indian Contract Act:

 There should be an agreement between the parties that is enforceable

by law.
 Both parties should give their consent to act upon the same thing, and
the consent should not be based on any force or coercion.
 The contract must be made by the competent parties.
 The consideration and the object should not be unlawful, i.e., against
law.
 It must be registered when the law in force requires it.
The following are the essentials in the quasi contracts:

 It is created by the promise or relationship, not by the actual contract.

 Right in personam.
 It is based on the principle of “prevention of unjust enrichment of one
person at the cost of another.”
 There is no agreement between the parties.
 A valid contract is not required under this contract.

Doctrine of quasi-contracts

Fairness and equity

It would be unfair when one party is getting benefits and the other party is
suffering. To ensure that no party is unjustly enriched and each party is
treated fairly, it depends on the principles of fairness and equity. Fairness
means that each party is treated equally and has the same opportunities.
Equity means that each party’s needs are taken into account and that those
who are most in need are given the most help.

There are a number of ways to ensure fairness and equity in a situation

where one party is getting benefits and the other party is suffering. One way
is to require the party that is benefiting to pay compensation to the party
that is suffering. For example, the company that is polluting the environment
could be required to pay for the clean-up of the pollution or to provide
financial assistance to the people who are living near the factory. Another
way to ensure fairness and equity is to regulate the activities of the party
that is benefiting. For example, the government could pass laws that require
companies to reduce their pollution or provide safe working conditions for
their employees.

Ensuring fairness and equity is important for a number of reasons. First, it

helps to create a more just and equitable society. Second, it can help to
prevent conflict and social unrest. Third, it can help to promote economic
growth and development.

Restitution
The compensation should be provided by the party who received the benefit
to the conferred party to rectify any profit obtained by one party at the
expense of another. This is necessary to ensure that both parties are treated
fairly and that no one party is unfairly enriched at the expense of another.

There are a number of ways to calculate compensation. One common

method is to use the difference between the value of the benefit received by
the party who received the benefit and the value of the benefit that would
have been received by the conferred party if the benefit had not been
conferred. Another method is to use the reasonable cost of providing the
benefit.

In some cases, it may be difficult to calculate compensation. For example, if

the benefit is intangible, such as a good reputation, it may be difficult to
determine its value. In these cases, it may be necessary to use a more
subjective approach, such as determining the amount of compensation that
would be fair and reasonable in the circumstances.

The amount of compensation that is awarded will depend on the specific facts
of the case. However, the goal of compensation is to ensure that both parties
are treated fairly and that no one party is unfairly enriched at the expense of
another.

Prevention of unjust enrichment

The important principle of a quasi contract is to prevent unjust enrichment
and to treat the parties fairly when one party gains a benefit from the other
party without any proper justification. A quasi contract is a legal fiction
created by the courts to prevent unjust enrichment. It is not a real contract,
but it is treated as if it were a contract for the purposes of enforcing the
obligation to pay for a benefit received.
Quasi contracts are created when one party receives a benefit from another
party, but there is no valid contract between the parties. This can happen in
a variety of situations, such as when:

 A person provides services to another person without being asked.

 A person pays for goods or services that are never delivered.
 A person is injured or suffers damages as a result of another person’s
negligence.
In these cases, the courts will step in to prevent unjust enrichment by
requiring the person who received the benefit to pay for it. The amount of
the payment will be based on the reasonable value of the benefit received.

Quasi contracts are designed to ensure that parties are treated fairly when
one party gains a benefit from the other party without any proper
justification. By preventing unjust enrichment, quasi contracts help to
promote justice and fairness in the law.

Nature of remedy
Quasi-contracts are not actual contracts but rather legal obligations that
arise out of a person’s actions or omissions. They are created by the law to
prevent unjust enrichment, which occurs when one person benefits at the
expense of another.

There are two main types of quasi-contracts:

 Constructive trusts: These arise when a person has been unjustly

enriched by another’s mistake or wrongdoing. For example, if someone
receives money that was mistakenly sent to them, they have a duty to
return it.
 Equitable estoppel: These arise when a person has led another to
believe that they will perform a certain act, and the other person relies
on that belief to their detriment. For example, if someone promises to
sell you a house and you take steps to prepare to move in, they cannot
later back out of the deal.
Quasi-contracts provide a legal remedy for the parties to restore the affected
party to their rightful position. For example, if someone is unjustly enriched
by another’s mistake, the court may order them to return the money. If
someone is led to believe that they will perform a certain act, and they rely
on that belief to their detriment, the court may order the other person to
perform the act.
Quasi-contracts are an important part of the law because they help to
prevent unjust enrichment and to protect people from being taken advantage
of. They provide a way for the courts to ensure that people are held
accountable for their actions and that everyone is treated fairly.

Basis of contracts
Contracts are based on the basis of formation and performance.

Formation:

 Express – The contracts are either in oral or written form.

 Implied – Gestures or actions are used in implied contracts.
Performance:

 Executed- It is a fully executed contract signed by both parties, even

though the requirements were not met.
 Executory- An executed contract is one where the contract has already
been executed but has not been fully executed, i.e., to fulfil the
remaining obligations as stated in the agreement.
 Unilateral- It is like one side of the coin on which only one party has to
perform its obligations.
 Bilateral- Each party agrees to perform their obligations from each
side.

Types of contracts and quasi-contracts

Contracts
 Valid contract- Valid contracts are contracts that are legally binding
to the parties. Provision 10 of the Act defines the essentials of a valid
contract.
 Void contract- Contracts that are valid when they were originally
made by the parties but, in due course, become void due to some
circumstances.
 Voidable contract- When contracts are executed by force, undue
influence, mistake, misrepresentation or coercion, they should not be
legally enforceable. It becomes void.
 Contingent contract- A “contingent contract” is a contract to do or
not to do something if some event, collateral to such a contract, does
or does not happen.
  Unenforceable contract- A contract that cannot be enforced by the
court due to issues like technical defects in the contract, lapse of time
and so on.
 Illegal contract- An agreement that has been created against law or
public policy is considered an illegal contract. For example: selling
marijuana drugs to the public.

Quasi-contracts

Necessaries supplied to incapable person: (Section

68)
When the necessities are supplied by the person to whom he is legally bound
to support and incapable of entering into the contract, the supplied furnished
person is entitled to reimbursement from the property of such incapable
person.

Illustrations: A supplies B, a lunatic, with necessaries suitable to his

condition in life. A is entitled to be reimbursed from B’s property.

Reimbursement of person which he is interested

(Section 69)
A person who is willing to pay when another is bound by law to pay, and
therefore who pays it, is entitled to reimbursement by the other.

Illustration: “D” is a landlord. Y holds one of D’s lands on a lease in

Chennai. The revenue from D’s land is in arrears, payable to the
government. The land ends up being advertised for sale by the government.
Under the revenue law, if the land is sold, it will result in the annulment of
Y’s lease. To stop the sale, Y pays D’s dues. In such a situation, D is bound
to pay back Y.

Obligation to pay for non-gratuitous acts: (Section

70)
When an individual lawfully works on something or delivers for another
person, not intending to do it so gratuitously and another person enjoys the
benefit, the latter is bound to pay the compensation for the former in respect
of the things done or delivered.
Illustration: A, a salesman leaves some grocery items at B’s door by
mistake and B treats the goods as his own. B is bound to pay A for them.

Responsibility of finder of goods: (Section 71)

Any person who finds the goods and takes them into his custody that do not
belong to him possesses the same responsibility as the bailee.

Liability of person when something is delivered by

mistake or under coercion (Section 72)
When money has been paid or delivered by a person by mistake or under
coercion, he must 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 the amount to B.

Advantages and disadvantages of

quasi-contracts
The main advantages of a quasi contract involve the concept that these legal
tools depend upon the principle of unjust enrichment and prevent one party
from getting unjust benefits from the other party without incurring any
expenses or contractual relationship. Therefore, it protects the aggrieved
party and provides legal remedy to him by compensating for the damages
incurred by him.

However, there are also some cons involved in quasi contracts. There is no
provision for recovery of a higher amount than that which has been received
by the plaintiff. Thus, no person is charged more than the amount he
originally received under the contract; he cannot demand compensation as
the whole amount has not been recovered. Even though a quasi-contract is
considered a legal remedy, a plaintiff can get relief only after he proves his
losses due to the breach of contractual obligations by the defendant.

The recovery of quasi contracts

Under quasi -contracts, there are three situations for the recovery:

1. There should be an absence of a contract that allows the plaintiff to be

compensated.
 2. The existence of the contract is not enforceable.
3. The plaintiff’s receipt of some type of benefit while breaching an
existing contract.

Role of quasi contract and the court

Generally, disputes between the parties will arise when there is overpayment
for the services or goods rendered by one party to the other based on the
actual contracts. When there is no agreement between parties, the court will
create a quasi-contract as a substitute for a contract to prevent unfair
enrichment and promote fair treatment or equity between the parties
involved in the dispute.

Differences between contracts and

quasi-contracts
Contracts Quasi-Contracts

There should be an offer, an

It is a Pseudo-contract and there is no agreement.
acceptance and an agreement.

The liability of the contract involved

It wholly depends on equity, justice, and a good conscience.
between the parties.

It is strictly available against one person only and not against the
It is a right, both personal and legal.
entire world. i.e., right in personam only.

It is created by contract. It is created by law.

Case laws

State of Haryana vs. Raja Ram (2017)

According to the Supreme Court of India, the existence of a legal contract is
not necessary for the creation of quasi-contracts. In this instance, the court
emphasised the importance of the unjust enrichment principle and the
avoidance of unfair benefits in figuring out the obligation resulting from a
quasi-contractual connection.
State of Rajasthan vs. Basant Nahata
(2019)
The Rajasthan High Court ruled that a quasi-contract can arise when a party
makes payments on behalf of another party, and such payments are not
voluntary or without any obligation. The Court held that the party making the
payments is entitled to reimbursement or compensation based on quasi-
contractual principles.

State of Madhya Pradesh vs. Sahi Infracon

India Pvt. Ltd. (2021)
The Madhya Pradesh High Court held that the principle of unjust enrichment
is a crucial factor in determining the liability arising from a quasi-contractual
relationship. The Court ruled that if one party has received a benefit or
advantage at the expense of another, the principle of restitution should be
applied to restore the aggrieved party to their original position.

Conclusion
Quasi-contracts act as an important legal remedy that fills the gaps in
contractual relationships and wholly depends upon the principles of
restitution, the prevention of unjust enrichment and the promotion of
equitable outcomes. When quasi contracts are not formed by express
agreement, it is imposed by law to prevent the loss of one party from
unjustly benefiting at the expense of another.

Individuals, businesses, and legal practitioners can navigate contractual

relationships more effectively and ensure equitable outcomes by
comprehending the principles and legal framework surrounding quasi-
contracts. Quasi-contracts play an important role in promoting fairness,
upholding restitution, and preventing unjust enrichment within the legal
landscape. Understanding and applying these principles contributes to a
more just and equitable society in the realm of contractual obligations.

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