Quasi Contract: Definition, Meaning, Importance & Features Explained

A quasi contract liability is an obligation a court will impose on a person to restitute another for being unjustly enriched. Indebitatus assumption was a strategy utilized by the courts to form one party to pay another as if a contract had been made between the two parties. The defendant’s understanding to be bound by a contract that required recompense was inferred by the law. The early days within the history of quasi-contract saw such contracts being utilized to uphold commitments related to compensation. The main principles on which these types of contracts work are justice, equity, and good conscience.

Further, it relies upon morality, natural justice, equity and good conscience. To put it simply, it is an obligation that the law creates or imposes for the sake of justice even when there is no such contract. This is because of the relationship or because one of the parties would get an unfair or unjust advantage. https://1investing.in/ The result of such an obligation is similar to the one which a contract creates. The parties are legally bound by the contract when there is an exchange of a promise for adequate consideration. In contrast, quasi-contract refers to situations in which a defendant is bound as if there were a contract.

features of quasi contract

In that case, the court can order M to reimburse A under Quasi-contract law. The main difference between Contract and Quasi Contract is that in the case of the latter, there is no exchange of offer, acceptance, or consideration between two or more parties. When money is paid by any party either by mistake or under coercion, the party who has received the money must return or restore it. Here, the word coercion is not covered under section 15, however, it means and includes money obtained by way of extortion or oppression. In a quasi-contract, the law assumes a promise that enforces obligations on one party and confers right in favor of the other. So, these are not actually contracts but the Court of law perceives them as relations similar to the contracts and effectuates them as if they are contracts.

With a quasi contract, a defendant is required to behave as if there was a legal contract with the plaintiff. It is designed so that one party is not unjustly enriched at the expense of the other. Unjust enrichment is when someone benefits unfairly, either due to circumstance or the other party’s misfortune.

Prerequisites for quasi contract

In case of the latter, even though there is no contract between the parties as per the facts, the actions and words of the parties amount to mutual consent over the disputed matter. The difference between the two can be illustrated with an example. Contract – An agreement between two or more parties in which a promise is made to do or provide something in return for a valuable benefit.

features of quasi contract

If someone receives money or goods by mistake or under coercion, then he is liable to repay or return it to the owner. To understand quasi-contractual obligations, one needs to first understand what are contracts and quasi-contracts. In the case of a contract, the liability of the parties exists as per the terms and conditions laid down and agreed upon. As against, in the case of quasi-contract, the liability of the parties exists through their conduct.

Quasi-contracts in India

In general, the quasi-contract doctrine is applied in disputes regarding payment of goods delivered or services rendered. If there is no valid contract between the parties, the main question that arises in such situations is the liability of the defendant. As the aim of this doctrine is to prevent unjust enrichment of one party, at the expense of the other, the damages are usually restricted to the value of the services rendered or the cost of the materials delivered. In short, the liability of the party who has enjoyed unjust benefits is limited to the value of that benefit only.

For instance, if some good is left at our doorstep by mistake, we have an obligation to keep it in good condition and return it to the true owner. While in a contract, the presence of agreement between the parties is a must. But the presence of an agreement is not necessary in the case of quasi-contract. A quasi-contract is legally imposed with an aim of preventing unjust enrichment.

In that period, the law dictated that a plaintiff would receive a sum of money from the defendant, in an amount dictated by the courts, as if the defendant had always agreed to pay the plaintiff for his goods or services. A quasi contract will only afford as much recovery as necessary to prevent one party from being unjustly enriched. In the example above, it would be unfair for Teresa to benefit from the new greenhouse at John’s expense, even though she never intended to enter into a contract with him. It states that the receiving party has enjoyed the same benefits if a person does anything for the other person lawfully or delivers something without intending to do the same gratuitously. Then, such a receiving party is bound to compensate the former party. Section 72 of the Contract Act, stated that “A person to whom the money has been paid or anything has been delivered either by mistake or coercion, must repay or return it.

If A, a person pays on someone else’s behalf say B, which the other person is bound by law to pay, then A will be reimbursed by the other person, here, in this case, B. Here in this article, we’ll be discussing quasi-contracts, quasi-contractual obligations, and there stand under the Indian Contract Act, 1872. All in all, a contract is an agreement that creates and defines obligations between parties. Conversely, a quasi-contract is a legal alternative to a contract. In the case of a contract, the obligation is a result of the consent of the parties. Whereas in the case of a quasi-contract, the obligation is a result of the operation of law on the principle of equity.

“Quasi contracts” are also called “implied-in-law contracts” or “constructive contracts”. The creation of a quasi contract is irrespective of the intention of the parties to enter into a contract or not. A quasi-contract can be considered as a valuable contract or a suggestion of law. It is a fictitious contract, pointed towards giving a cure to the distressed party, which isn’t the case in an express contract. Peter misjudges the terms of the lease and pays municipal tax incorrectly.

In case an individual supply is necessarily suited to the condition in life of such a person, at that point he can get repayment from the property of the unfit person. There are cases where the law infers a guarantee and forces commitments on one party whereas conferring rights to the other indeed when the fundamental elements of a contract do not show. These guarantees are not lawful contracts, but the Court recognizes them as relations taking after a contract and upholds them like a contract. A person who is both interested in and pays money that another person is required by law to pay. A quasi-contract is not a contract in its natural context and therefore it is also named an inverted contract.

features of quasi contract

This principle is based on a legal maxim ‘Nemo Debet Locupletari Ex Aliena Jactura’ which in literal terms means no man must grow rich out of another persons’ loss. Consensus ad idem is an important element that constitutes an agreement and therefore it is an important element for the formulation of the contract. This is a Latin phrase that in literal terms states that all the parties involved in making a contract are on the same page about all the details of the contract and everyone has accepted the offered contractual obligations of each party. It would be handed down ordering the defendant to pay restitution to the plaintiff. The restitution, known in Latin as quantum meruit, or the amount earned, is calculated according to the amount or extent to which the defendant was unjustly enriched.

The contracts are the expressed ones approved by the parties under consideration as a matter of law where they share interests and consequences though specifically described conditions. In contrast, under quasi-contracts, the obligations are enforced by the law based on the parties’ conduct to prevent the undue advantage of one party over the cost of another party. Sections 68 to 72 of the Indian Contract Act deal with certain relations resembling those created by contract.

contracts and quasi-contract?

The enforceability of a quasi contract is directly linked to the obligations imposed by the court on the person. This means that two private individuals can form a legally binding contract provided the contract formation rules are observed and the contract does not violate public policy or the law. The purpose of a quasi contract is for the court to remedy a situation where a party has unfairly taken advantage of another. Hence, the basis of a quasi-contract is very basic that a contract cannot supersede the requirement and sense of justice.

We will first go over what it means, understand what quasi contracts or implied-in-law contract means, look at some concrete examples, define its elements and more. The concept of quasi-contract was first discussed in the case of Moses v MacFarlane . In this case, Lord Mansfield stated that such obligation was based upon the law as well as justice to prevent undue advantage to one person at the cost of other. The plaintiff has to have provided an item or service to either the defendant or another party with the expectation of getting paid. The defendant has to have accepted the item or service without attempting to pay for it. Finally, the plaintiff must establish that the defendant should not have received the item for free and that doing so constitutes “unjust enrichment.”

  • So the defendant’s obligation to be bound by the contract is seen as implied by law.
  • In another example, the lessee/tenant misunderstood the lease agreement and paid municipal tax erroneously.
  • But as soon as the urge was felt to explore their juristic basis, the controversy was born.

In this case, the person who lost the work and the money could file a civil suit, asking for the payment to be made. In this case, the judge may institute a Quasi-contract, if they think money is owed. Instances of Quasi-contract cases include, If C supports the family of his friend D, who is mentally incompetent, then C should be provided with reimbursement from D’s property.

Quasi Contract

Plaintiff – A person who brings a legal action against another person or entity, such as in a civil lawsuit, or criminal proceedings. Defendant – A party against whom a lawsuit has been filed in civil court, or who has been accused of, or charged with, a crime or offense. There must be an absence of a remedy provided to the claimant by law. The claimant must have suffered a disadvantage as a result of the enrichment. It states that if a person finds goods that belong to another party and takes such goods into his custody, then the former has responsibility the same as that of a bailee.

The agreement is imposed by law through a judge as a remedy when Person A owes something to Person B because they come into possession of Person A’s property indirectly or by mistake. The contract becomes enforceable if Person B decides to keep the item in question without paying for it. Under Quasi-contract in business law, if any individual wishes to make payment of money which the other party is legally bound to pay and who eventually bears the cost, shall receive retribution from the latter. For Instance, if person A pays off B’s outstanding debt, then the latter must reimburse A under Quasi-contract law. It is proved by the research that contracts and quasi contracts are far different.

What is Quasi Contract: Meaning, Essentials with Examples

A quasi contract would be handed down by the court, requiring Teresa to pay restitution, or “quantum meruit,” to John. Quantum meruit is only awarded to the extent that the defendant was unjustly enriched, and no more. The Latin maxim, Nemo debet locupletari ex aliena jactura,means “No man can earn money from the loss of another person.” Therefore, the obligations of the quasi-contract are based upon the principle of unjust enrichment. A person, say for example does something for someone gratuitously without the intention to do so and the other person enjoys the benefit.

This is the reason why the term quasi-contract is not stated out there expressively. The most simple principle it follows is that a quasi-contract is a simple and basic contract that will not and cannot supersede features of quasi contract the requirement of justice. To understand this easily, any person who is incapable of entering into a contract i.e. is a lunatic, minor, mentally incapable of understanding their surroundings, etc.

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