Quasi Contracts: An In-Depth Legal Analysis

Quasi-contracts represent a significant concept in legal theory, focusing on situations where obligations are imposed by law rather than by mutual agreement. Rooted in the principles of equity, justice, and good conscience, quasi-contracts aim to prevent unjust enrichment by ensuring fairness in relationships where formal contractual obligations do not exist. Though not contracts in the conventional sense, these legal constructs are integral to resolving disputes where one party benefits at another’s expense without any formal agreement.

This article delves into the concept of quasi-contracts, their features, legal basis, historical evolution, types under Indian and international law, relevant case laws, and practical implications in modern legal systems.

What Are Quasi-Contracts?

A quasi-contract is a legal remedy developed by courts to address situations where one party is unjustly enriched at the expense of another. Despite the absence of a formal agreement or mutual consent, quasi-contracts impose obligations on the benefiting party to rectify the imbalance.

The term “quasi” originates from the Latin word meaning “as if.” Thus, a quasi-contract is treated as if it were a contract, even though it lacks the defining elements of one, such as offer, acceptance, and consideration.

Features of Quasi-Contracts

A quasi-contract is a legal construct designed to prevent unjust enrichment, ensuring fairness when one party benefits at the expense of another without a formal agreement. Despite the absence of mutual consent, quasi-contracts impose obligations that resemble those of an actual contract. Below are the key features of quasi-contracts:

Absence of Agreement

Quasi-contracts arise in situations where there is no prior agreement or understanding between the parties. Unlike traditional contracts, they do not depend on offer, acceptance, or consideration. The obligations are imposed by law to address specific circumstances.

Imposed by Law

Quasi-contracts are created by the courts to ensure fairness. These obligations are not based on the parties’ intention but are imposed by law to rectify instances of unjust enrichment, ensuring that no individual gains at another’s expense.

Remedy of Restitution

The primary objective of a quasi-contract is to restore the aggrieved party to the position they were in before the unjust enrichment occurred. This is achieved through restitution, which requires the benefiting party to compensate the aggrieved party for the value of the benefit received.

Prevention of Unjust Enrichment

The essence of a quasi-contract is to prevent unjust enrichment. It ensures that no party unfairly benefits from a situation while the other incurs a loss or is deprived of their rightful dues.

Involuntary Nature

Quasi-contractual obligations are involuntary, meaning they are imposed by the court regardless of the consent or intention of the benefiting party. The focus is solely on achieving equity and justice.

Non-Gratuitous Nature

The benefits conferred under a quasi-contract must not be gratuitous. The court intervenes only when goods or services are provided with an expectation of compensation, even if not explicitly agreed upon.

Applicable to Specific Situations

Quasi-contracts are applicable in narrowly defined scenarios, such as the supply of necessities to individuals incapable of contracting, payment by mistake, or benefits derived from non-gratuitous acts. These are codified under Sections 68 to 72 of the Indian Contract Act, 1872.

Right Against a Specific Person

A quasi-contract creates an obligation enforceable against a specific individual or entity who has received an undue benefit. Unlike torts, the remedy is not against the world but is limited to the benefiting party.

Legal Basis and Principles in Quasi-Contracts

The principle underpinning quasi-contracts is rooted in the doctrine of unjust enrichment. This doctrine ensures that no individual profits unfairly at another’s expense, encapsulated in the legal maxim:
“Nemo debet locupletari ex aliena jactura“ — “No one ought to be enriched at another’s expense.”

In India, quasi-contracts are codified under Sections 68 to 72 of the Indian Contract Act, 1872, which outline specific situations where obligations may arise without a formal contract.

The Doctrine of Unjust Enrichment and Quasi-Contracts

Unjust enrichment occurs when:

1. One party receives a benefit.
2. The benefit is received at the expense of another.
3. Retaining the benefit would be unjust without restitution.

Courts impose quasi-contractual obligations to address these imbalances and uphold the principles of equity and fairness.

Historical Evolution of Quasi-Contracts

The concept of quasi-contracts dates back to English common law. It was formally introduced in the landmark case of Moses v. MacFarlane (1760), where Lord Mansfield articulated that obligations akin to contracts could arise to prevent unjust enrichment. In his words:

“The gist of the action is that the defendant, upon the circumstances of the case, is obliged by ties of natural justice and equity to refund the money.”

Over time, quasi-contracts have evolved into a distinct category of obligations recognised in various legal systems worldwide.

Types of Quasi-Contracts

Under Indian law, quasi-contracts are specifically outlined in Sections 68 to 72 of the Indian Contract Act, 1872. These provisions highlight situations where quasi-contractual obligations may arise:

Section 68: Necessaries Supplied to a Person Incapable of Contracting

If a person supplies necessities to someone who cannot enter into a contract (e.g., a minor or a mentally incapacitated individual), they are entitled to reimbursement from the incapacitated person’s property.

Illustration: A supplies food and clothing to B, a minor without guardians. A can claim reimbursement from B’s estate.

Section 69: Payment by an Interested Person

When a person pays money on behalf of another to protect their interests, they are entitled to reimbursement.

Illustration: A tenant pays the property tax on the landlord’s behalf to prevent eviction. The landlord is obligated to reimburse the tenant.

Section 70: Obligation of the Person Enjoying Non-Gratuitous Benefits

If a person lawfully provides goods or services without the intention of doing so gratuitously, and the recipient benefits, the recipient must compensate for the benefit.

Illustration: A supplies goods to B, believing B had ordered them. B uses the goods. B must pay A for the value of the goods.

Section 71: Responsibility of Finder of Goods

A person who finds someone else’s goods and takes them into their custody has a responsibility to return them to the rightful owner or compensate for any loss or damage.

Illustration: A finds a lost wallet belonging to B. A must take reasonable care of the wallet and return it to B.

Section 72: Money Paid by Mistake or Under Coercion

If money is paid under a mistake or coercion, the recipient is obligated to return it.

Illustration: A accidentally transfers ₹5,000 to B’s account. B is legally required to return the amount.

Landmark Casers on Quasi-Contracts

Moses v. MacFarlane (1760)

This case laid the foundation for the concept of quasi-contracts. The court held that the defendant must repay money received under a mistake of fact to prevent unjust enrichment.

State of Madhya Pradesh v. Bhailal Bhai (1964)

The Supreme Court of India ruled that the government must refund taxes paid under a mistake of law, reinforcing the quasi-contractual obligation to return money paid by mistake.

Spolka Anonyme v. Fairbairn Lawson Combe Barbour Ltd. (1942)

The court clarified that obligations arising from unjust enrichment should be treated separately under the concept of restitution or quasi-contracts, not under tort law.

Hari Ram Sheth Khandsari v. Commissioner of Sales Tax (1958)

The court recognised the excess payment of taxes due to a mistake as a situation warranting restitution under quasi-contractual principles.

Limitations of Quasi-Contracts

While quasi-contracts provide a fair remedy in many cases, they have certain limitations:

1. Lack of Mutual Intent: The absence of consent can lead to disputes over the scope of obligations.
2. Complexity in Proving Unjust Enrichment: Claimants must demonstrate that the enrichment was unjust, which can be challenging.
3. Restricted Applicability: Quasi-contracts do not cover all scenarios of unfair benefit, such as those involving fraud or criminal acts.

Difference Between Quasi-Contracts and Express Contracts

Conclusion

Quasi-contracts serve as a vital legal tool for addressing situations where one party benefits unfairly at another’s expense. By imposing obligations without requiring mutual consent, they uphold the principles of equity, justice, and good conscience. Codified under Sections 68 to 72 of the Indian Contract Act, 1872, and recognised globally, quasi-contracts bridge the gap between morality and law, ensuring fairness in relationships that lack formal agreements.