Introduction

• A quasi-contract, also known as a constructive contract, is a legal construct that allows a court to enforce a contract–like obligation without a formal agreement between the parties.
• Under Indian Contract Act 1872, quasi-contracts are recognized and enforced under Section 68 to 72 to ensure justice and fairness in situations where one party is unjustly enriched at the expense of another.
• The concept of quasi-contract is first recognized by English law.
• Lord Mansfield is considered the founder of quasi-contractual obligation.

Elements of Quasi-Contract

• Absence of Formal Contract
  • There must be no formal contract or agreement, whether written or oral, between the parties involved.
  • Quasi-contracts are imposed by law, not by the mutual consent of the parties.
• Unjust Enrichment
  • The principle of unjust enrichment is central to quasi contracts.
  • This occurs when one party benefits at the expense of another without legal justification.
• Legal Obligation
  • The obligation to pay or compensate is imposed by law to prevent unjust enrichment.
  • This obligation arises from the circumstances and conduct of the parties.
• Non-Gratuitous Act
  • The act of conferring the benefit must not be intended as a gift or gratuitous act.
  • The party providing the benefit must expect to be compensated for their service or goods.

Types of Contractual Obligation under the Indian Contract Act, 1872

• Supply of necessaries to a person incapable of contracting: Section 68
  • If a person incapable of entering into a contract, such as a minor or a person of unsound mind, is supplied with necessaries suited to their condition in life, the supplier is entitled to reimbursement from the property of the incapable person.
• Payment by interested person: Section 69
  • When a person pays money on behalf of another person who is legally bound to pay, the person making the payment is entitled to be reimbursed by the person on whose behalf the payment was made.
• Obligation to pay for non-gratuitous act: Section 70
  • If a person lawfully does something for another or delivers something to another, and such act or delivery is not intended to be done gratuitously, the other person is bound to make compensation for the benefit received.
• Finder of goods: Section 71
  • A person who finds goods belonging to another and takes them into their custody is subject to the same responsibility as a bailee.
  • The finder must take all necessary measures to preserve the goods and return them to the owner.
• Things delivered by mistake or under coercion: Section 72
  • If money or goods are delivered by mistake or under coercion, the person who received them is bound to repay or return it.

Case law

• State of West Bengal v. M/S. B. K. Mondal (1961)
  • In this case, the government benefited from construction work done by a contractor without a formal contract.
  • The Supreme court held that the government was liable to pay the contractor for the services rendered under Section 70 of the Act.
• State of Madhya Pradesh vs Bhailal Bhai & Ors (1964)
  • The Supreme Court held that the payment of sales tax under mistake is covered within Section 74 of the Indian Contract Act.
  • The Government to whom the payment has been made by mistake must repay it.
• Mahabir Kishore & Ors vs State Of Madhya Pradesh (1989)
  • The Supreme Court laid down the necessary elements for constituting principal of unjust enrichment and that are as follows:
    • First, that the defendant has been 'enriched' by the receipt of a "benefit"
    • Secondly, that this enrichment is "at the expense of the plaintiff"
    • Thirdly, that the retention of the enrichment be unjust

Conclusion

Quasi contracts play a crucial role in the Indian legal system by addressing situations where formal contracts do not exist, yet one party benefits at the expense of another. By recognizing and enforcing quasi-contractual obligations, the Indian Contract Act, 1872, ensures justice and fairness, preventing unjust enrichment and promoting equitable treatment in various transactions and interactions.