Quasi-Contracts: Legal Obligations without Agreements

Quasi-Contracts: Legal Obligations without Agreements

Introduction

Contracts are typically formed when two or more parties agree to create legally binding obligations. But what happens when there is no agreement between the parties, yet the law imposes certain obligations to ensure justice and fairness?

This is where the concept of quasi-contracts comes in. A quasi-contract is not an actual contract, but the law treats it like one to prevent unjust enrichment of one party at the expense of another.

The Indian Contract Act, 1872 (Sections 68–72) recognizes quasi-contractual obligations, ensuring that no person benefits unfairly without providing due compensation.

What is a Quasi-Contract?

A quasi-contract is a legal obligation imposed by law, even though no formal contract exists between the parties. It is based on the principle of equity, justice, and good conscience.

Definition (in simple words): A quasi-contract is a fiction of law where obligations are created as if a contract exists, though in reality, there is none.

Example:

• If A mistakenly delivers goods to B, and B uses them, B is legally bound to pay A even though there was no agreement between them.

Legal Basis: Indian Contract Act, 1872

Sections 68–72 of the Indian Contract Act lay down the framework for quasi-contracts:

1. Section 68: Supply of necessaries to persons incapable of contracting.

2. Section 69: Reimbursement of a person paying money due by another.

3. Section 70: Obligation of a person enjoying the benefit of a non-gratuitous act.

4. Section 71: Responsibility of a finder of goods.

5. Section 72: Liability of person to whom money is paid or thing delivered by mistake or under coercion.

   
   

Essentials of a Quasi-Contract

1. No actual contract – No formal agreement between parties.

2. Obligation imposed by law – Law creates the duty.

3. Prevents unjust enrichment – One party should not unfairly benefit at another’s expense.

4. Equitable remedy – Based on fairness, not strict contract law principles.

   
   

Types of Quasi-Contracts under the Indian Contract Act

1. Supply of Necessaries (Section 68)

If a person incapable of contracting (e.g., a minor or mentally unsound person) is provided with necessaries, the supplier is entitled to reimbursement from the property of such person.

Example: Supplying food and clothes to a minor.

2. Reimbursement of Person Paying Money Due by Another (Section 69)

If A pays money on behalf of B, which B is legally bound to pay, then A is entitled to be reimbursed by B.

Example: A tenant pays property tax on behalf of the landlord to avoid seizure of the property → landlord must reimburse.

3. Obligation of Person Enjoying Benefit of Non-Gratuitous Act (Section 70)

If A does something for B without intending it to be free, and B enjoys the benefit, B must compensate A.

Example: A leaves goods at B’s house by mistake. B uses them → B must pay A.

4. Responsibility of Finder of Goods (Section 71)

A person who finds lost goods is considered a bailee and must take reasonable care of the goods, return them, and cannot appropriate them.

Example: If you find someone’s wallet, you must try to return it instead of keeping it.

5. Liability of Person to Whom Money is Paid by Mistake or Under Coercion (Section 72)

A person to whom money is paid or goods are delivered by mistake or coercion must return them.

Example: Bank mistakenly credits ₹10,000 to your account. You must return it.

Case Laws on Quasi-Contracts

1. Moses v. Macferlan (1760) established the principle that no one should be unjustly enriched at the expense of another.

2. State of West Bengal v. BK Mondal & Sons (1962). The government constructed a structure on the defendant’s land without a contract. Defendant enjoyed benefits → liable to pay compensation.

3. Sita Ram v. Radha Bai (1968)Court clarified that quasi-contracts are not actual contracts but obligations imposed by law.

   
   

Importance of Quasi-Contracts

• Ensures fairness: Prevents unjust enrichment.

• Protects vulnerable parties: E.g., minors, persons of unsound mind.

• Balances equity with law: Applies principles of justice where no contract exists.

• Relevant in business: Mistaken payments, goods supplied, and benefits enjoyed are common commercial issues.

Quasi-Contracts vs. Regular Contracts

Aspect	Contract	Quasi-Contract
Formation	By offer and acceptance	By law, no agreement
Consent	Essential	Not required
Intention	Parties intend legal obligations	The law imposes an obligation
Basis	Agreement	Prevention of unjust enrichment

Practical Relevance in Modern Times

• Banking Sector: Recovery of mistaken online transfers.

• Corporate Law: Vendor payments made in error must be returned.

• Consumer Protection: Ensures fairness where no contract exists.

• Digital Economy: Mistaken online deliveries or digital subscriptions.

Conclusion

Quasi-contracts bridge the gap between contractual obligations and equitable justice. Even when there is no agreement, the law ensures fairness by imposing duties where one party benefits unfairly.

By codifying quasi-contracts under Sections 68–72 of the Indian Contract Act, 1872, Indian law provides a clear framework to handle such situations. For businesses and individuals alike, understanding quasi-contracts is essential to avoid unjust enrichment disputes and uphold the principles of fairness in transactions.

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FAQs

Q1: What is a quasi-contract in simple terms?

It is a legal obligation imposed by law where no formal agreement exists to prevent unjust enrichment.

Q2: Which sections of the Indian Contract Act deal with quasi-contracts?

Sections 68–72 cover quasi-contractual obligations.

Q3: Is a quasi-contract enforceable like a normal contract?

Yes, though not based on agreement, quasi-contracts are legally enforceable as if they were real contracts.