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written by | April 19, 2022

What is a Quasi Contract? Definition, Meaning and Examples

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Contracts are legal documents that contain commitments and obligations that can be set. Whenever a contract is formed, both parties are legally obligated to carry out the terms of the agreement. 

In a quasi-contract, the parties do not have a formal agreement. The courts create it in case of disputes. It is done to prevent one of the parties from getting an undue advantage over the other.

For instance, if someone accepts products or services while not having requested them, these agreements can be enforced by courts, which usually result in financial compensation.

Did you know?

English law was the first to recognise the responsibility deriving from a quasi-contract. The Indian Contract Act of 1872 incorporates the same components as the English Contract Act.

Quasi Contracts: What You Need to Know

In the Indian Contract Act, there is no description for a quasi-contract. However, the Act notes that relationships between parties are similar to contracts when a quasi-contract is formed. However, even if there is no signed agreement, a quasi-contract can be characterised as a collection of rights and obligations. The law imposes this responsibility to ensure justice. The law prohibits one party from taking unfair advantage of the other. As a result, a quasi-contract can be described as a form of solution rather than a genuine contract.

Quasi-contracts dictate a party's obligations to another when they possess the latter's goods. Such parties may or may not have previously agreed to work together. 

When X owes anything to Y because they have X's goods (intentionally or not), the contract is enforced by law as a solution. If Y decides to keep the goods without compensating X, the agreement becomes enforceable.

The contract is legally valid because it is drafted in a court of law so that neither party can object. The quasi-contract's goal is to achieve a fair solution when one side has taken advantage of the other. The person who obtained the property must compensate the party who was wronged for the item's worth.

The amount of compensation, or the sum received, is determined by the amount or degree of the dispute.

Also Read: Guide On TDS Payment To Contractor (Section 194C)

The Distinction Between a Normal Contract and a Quasi-Contract

Contract

Quasi-contract

A contract is a formal agreement between two or more parties.

A quasi-contract is not an agreement but is very similar.

Both parties give their consent.

There is no consent since they are not made voluntarily.

Parties are liable under the terms of their agreement.

Parties are liable for their conduct based on morality, natural justice, equity, and a good conscience.

Contracts are covered in their entirety under the Indian Contract Act, 1872. 

Quasi-contracts are covered under the same act, in sections 68-72.

An Instance of Quasi Contract

A person orders food online. But the food arrives at the wrong address and not to the person who ordered it and paid for it. It can produce a typical quasi-contract situation. If the person at the incorrect address retains the food, they may be considered to have consumed it and thus be obligated to pay for it. A court might then impose a quasi-contract requiring the person who received the order to reimburse the individual who paid for it if they order the same thing a second time. The quasi-contract's requirement seeks a fair settlement of the dispute.

Characteristics of a Quasi Contract

  • It often involves monetary compensation.
  • The right is enforced by law rather than the result of an agreement.
  • It is based on the concept of equity, good conscience, justice, and principles of natural justice.
  • The right does not apply to everyone but just to specific individuals. As a result, it has the appearance of a contractual obligation.

Quasi Contracts Under the Indian Contract Act, 1872

The Indian Contract Act of 1872, Sections 68–72, outlines 5 scenarios where a Quasi-contract may arise. Keep in mind that there is no genuine contractual relationship between the sides, yet the law enforces contractual obligations owing to the exceptional situations.

Section 68

Merchandise Provided to Persons Who Are Unable to Enter a Contract

Consider a person who is unable to enter into an agreement, such as a mentally disabled or a juvenile. If a person provides necessities appropriate to such a person, they may be reimbursed from the former's assets.

Rakesh is mentally disabled. Suhaas provides Rakesh with some necessities, such as essential goods. On the other hand, Rakesh is unable to pay due to a lack of funds and his illness. Such an instance is a quasi-contract, and Suhaas is entitled to compensation from Rakesh's assets.

Although, Suhaas must show two factors to validate his claim:

  1. Rakesh is mentally disabled.
  2. The necessities provided by Rakesh were required.

Section 69

Payment by an Individual Who Is Interested

If a party offers payment on behalf of another. If that payment is legally bound to be paid, then the former is entitled to compensation from the latter.

Karthik pays off  Shekhar’s outstanding debts, and under quasi-contract law, Shekhar must provide compensation to Karthik.  

Section 70

Responsibilities of an Individual Benefiting From a Non-gratuitous Act

Reconsider the previously mentioned food delivery instance. In that instance, one party is responsible for compensating the other for their action or the products obtained. This compensation can be in the form of money or, if feasible, the other individual can return the delivered item.

The complainant must, however, sho:

  1. It was legal to perform the action or transfer the item.
  2. They didn't do it on the spur of the moment.
  3. The advantages were experienced by the other individual.

Section 71

Item Finder's Responsibilities

If an individual discovers assets that belong to somebody else and takes control of them, they must follow the following guidelines:

  1. Take great care of the stuff as if they were the rightful owners.
  2. There is no legal right to take possession of the found things.
  3. Return the items to their rightful owner.

Karthik is the owner of a stationery shop. Ankita visits him to purchase a notebook, but she forgets her wallet in the store. Sadly, no documentation in her bag may be used to confirm her identification. Karthik places the wallet on the checkout counter, expecting her to come back to retrieve it.

Ajay, Karthik's shop worker, discovers the wallet on the countertop and places it in a cupboard without notifying Karthik. He completes his work and goes home. Karthik is unable to locate Ankita's wallet when she arrives. He is responsible for damages since he did not take proper care of the wallet, as any reasonable individual should.

Also Read: Know About GST On Labour Charges In India

Section 72

Amount Paid in Negligence or Under Duress

If someone acquires cash or products by accident or under duress, he must return or restore it.

Let's look at an example. Suresh misunderstands their lease agreement and pays the wrong municipality tax. He asked the local authorities for compensation when he realised his error. He is eligible for reimbursement because he made an error and paid the fee.

Likewise, money obtained through coercion, such as blackmail, is reclaimable.

A Solved Example to Understand Quasi-Contract Better

Q: Karthik and Ankita sign an agreement that Karthik commits to transport a basket of nuts to Ankitha's home, Ankita pledges to pay ₹1,000 once the nuts have been received. On the other hand, Karthik sends a basket of nuts to Suhaas' house rather than Ankita's. Suhaas thinks the nut basket is a gift and proceeds to eat the contents. Is Suhaas obligated to compensate for the items?

Yes, Suhaas is responsible for the nut basket. Even though Karthik and Suhaas have not signed a contract, it’ll be regarded as a quasi-contract, and the court compels Suhaas to either restore the nut basket or compensate Karthik.

Conclusion

The premise of quasi-contract is that while the concept of quasi-contract is frequently disregarded, it still has a significant role to play because it is based on the ideals of fairness and justice, a quasi-contract is not an agreement in the traditional sense. The premise of a quasi-contract is straightforward: a contract cannot trump a demand or sense of fairness. When anything is done for an individual or a thing is provided to them without their permission, they’re obligated to compensate the other party. A quasi-contract is set up so that neither party benefits unfairly at the cost of the other.
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FAQs

Q: Are quasi-contracts actual agreements between two parties?

Ans:

A quasi-contract is not an agreement in the traditional sense and is a fictional arrangement.

Q: How many sections of the Indian Contract Act outline scenarios of quasi-contracts?

Ans:

5 sections of The Indian Contract Act of 1872, Sections 68–72.

Q: Which sections of the Indian Contract Act outline scenarios of quasi-contracts?

Ans:

The Indian Contract Act of 1872, Sections 68–72, outlines five scenarios where a Quasi-contract may arise. Keep in mind that there is no genuine contractual relationship between the sides, yet the law enforces contractual obligations owing to the exceptional situations.

Q: Is there a description of quasi-contract in the Indian Contract Act?

Ans:

In the Indian Contract Act, there is no description for a quasi-contract. However, even if there is no signed agreement, a quasi-contract can be characterised as a collection of rights and obligations. The law imposes this responsibility on the sides to preserve truth and justice.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.