Quasi Contract

In one minute

A quasi contract is not a contract. It is a duty that the law puts on one person to pay or return something, although the parties never made an agreement. The law does this so that nobody keeps a benefit at another person's cost.

Sections 68 to 72 of the Indian Contract Act, 1872 list the cases. In exams, the meaning, the idea of unjust enrichment, the five sections and Moses v. Macferlan earn the marks. In real life, it decides who pays when work or money changes hands and there is no valid contract.

Legal provision

Sections 68 to 72 sit in a chapter headed "Of certain relations resembling those created by contract".

• Section 68: a person who supplies necessaries suited to the condition in life of a person incapable to contract, or of anyone that person must support, is entitled to be reimbursed from the property of the incapable person.
• Section 69: a person who is interested in the payment of money that another is bound by law to pay, and who therefore pays it, is entitled to be reimbursed by the other.
• Section 70: where a person lawfully does anything for another, or delivers anything to him, not meaning to do it gratuitously, and the other enjoys the benefit, the other must pay compensation or restore the thing.
• Section 71: a person who finds goods belonging to another and takes them into his custody has the same responsibility as a bailee.
• Section 72: a person to whom money has been paid, or anything delivered, by mistake or under coercion must repay or return it.
• Section 73, third paragraph: when an obligation resembling those created by contract has been incurred and not discharged, the injured person gets the same compensation as if he had contracted for it and the contract had been broken.

Meaning and definition

The Act does not define quasi contract. It speaks only of "relations resembling those created by contract". The word "quasi" means "as if". The law treats the parties as if they had made a contract, but only to enforce a duty to pay or to restore.

The Supreme Court explained the source of the duty in Mulamchand v. State of M.P. It is not founded on contract or tort, but on "a third category of law, namely, quasi-contract or restitution". In plain words, the duty comes from the law, not from the parties' promise.

The idea behind the chapter is unjust enrichment. The Latin maxim nemo debet locupletari ex aliena jactura means that no one should be enriched at another's loss. Contract law cannot help here, because there is no promise to enforce. The law therefore creates the duty itself. The tree shows the five situations.

• Quasi contract sections 68 to 72
  • Claims by a supplier or payer
    • Necessaries for an incapable person section 68Paid from that person's property.
    • Payment by an interested person section 69Reimbursed by the person bound by law to pay.
  • Claims for a benefit received
    • Non-gratuitous act, benefit enjoyed section 70Compensation, or restoration of the thing.
    • Goods found and taken into custody section 71The finder is treated as a bailee.
    • Money paid or thing delivered by mistake or under coercion section 72Must be repaid or returned.

Detailed explanation

Step 1: why the law creates the duty

Imagine a person who gains from another's money, work or goods and then says, "I never agreed to pay." If the law accepted that answer, the loser would have no remedy. The law refuses to accept it. It orders the gainer to pay back what he gained.

The English roots lie in Moses v. Macferlan (1760). Lord Mansfield held that where the defendant is obliged by the ties of natural justice and equity to refund money, the law implies a debt and gives an action to recover it. Lord Wright in Fibrosa v. Fairbairn (House of Lords, 1942) said that every civilised legal system must give remedies for unjust enrichment.

Step 2: no agreement is needed

In an ordinary contract the parties must consent. In a quasi contract, consent is not the test. The law looks at what happened and who gained. That is why a person incapable of contracting can still be reached through his property (section 68).

The Supreme Court applied the same idea to Government in State of West Bengal v. B.K. Mondal & Sons (decided 5 December 1961). A contractor built a kutcha road, guard room, office, kitchen and rooms at Arambagh and storage sheds at Khanakul for the State's Civil Supplies Department in 1944. The officers had not made the contracts in the form that section 175(3) of the Government of India Act, 1935 required. The Court held that the contracts were invalid, but the State still had to pay under section 70 because it had accepted and used the work.

Step 3: the five situations

• Section 68. Imran supplies rice and medicines to Hari, a person of unsound mind. Imran is reimbursed from Hari's property.
• Section 69. A tenant pays the land revenue that his landlord owes to the Government, to stop a sale that would end the tenant's lease. The landlord must reimburse him.
• Section 70. A tradesman leaves goods at the wrong house by mistake, and the householder treats them as his own. He must pay for them (the Act's illustration (a)).
• Section 71. Meena finds a smartphone on a bus seat and takes it home. She must look after it as a bailee and try to trace the owner.
• Section 72. A railway demands an illegal charge before it releases the consignee's goods. He pays and can recover the illegal part (the Act's illustration (b)).

Step 4: what the claimant can get

The claim is for reimbursement, compensation for the benefit, or restoration of the thing. It is not a claim for damages for breach, and it cannot be a claim for specific performance. In Mulamchand the Court said that a person claiming under section 70 "cannot sue for the specific performance of the contract, nor ask for damages for the breach", because there is no contract between the parties.

Section 73 adds one more rule. When an obligation resembling a contract is not discharged, the injured person gets the same compensation as if there had been a contract and a breach.

Step 5: where the idea stops

If a valid contract governs the dispute, the parties must claim under the contract. In Mahanagar Telephone Nigam Ltd. v. Tata Communications Ltd. (2019) the Court explained that each section in this chapter assumes there is no contractual relationship. It held that the dispute was governed by section 74 and the liquidated damages fixed in the purchase order, so no quantum meruit sum (a reasonable price for work done) could be added to them.

In B.K. Mondal the Court refused to read section 70 through English decisions on English statutes. It held that the words of the Indian section must be construed as they stand.

The five situations at a glance

Section	Who may claim	Main condition	Claim is for
68	One who supplies necessaries	The receiver is incapable of contracting, or is a person he must support, and the goods suit his condition in life	Reimbursement from the property of the incapable person
69	One who pays another's legal debt	The payer is interested in the payment, and the other is bound by law to pay	Reimbursement by that other person
70	One who lawfully does something for, or delivers something to, another	He did not mean it gratuitously, and the other enjoyed the benefit	Compensation, or restoration of the thing
71	The owner of goods found	The finder took the goods into his custody	Care and return of the goods, as from a bailee
72	One who paid money or delivered a thing	He did so by mistake or under coercion	Repayment or return

Don't confuse: contract, quasi contract and tort

All three create a legal duty. They differ in where the duty comes from and what the claim is for.

Point	Contract	Quasi contract	Tort
Source of the duty	The parties' agreement	The law, to stop unjust enrichment	The law, to protect a person from a civil wrong
Consent	Essential	Not required	Not required
What the claim is for	The promised performance, or damages for breach	The value of what was received	Damages for the wrong done
Who may be bound	Only a competent party	Any person who received the benefit, even an incapable person through his property	The wrongdoer

Common mistakes

• Calling a quasi contract a contract. It has no offer, no acceptance and no consent.
• Thinking section 68 makes the incapable person personally liable. The claim lies against his property.
• Claiming damages or specific performance in a quasi-contractual case. The claim is for reimbursement, compensation or restoration.
• Using sections 68 to 72 where a valid contract already governs the dispute.

Apply it

Leading case laws

• Moses v. Macferlan (1760)

  Facts. Moses endorsed promissory notes to Macferlan on his promise not to sue Moses on them. Macferlan sued him in the Court of Conscience, and Moses had to pay. Moses then sued for the money.

  Principle. Where a defendant is obliged by the ties of natural justice and equity to refund money, the law implies a debt and gives an action to recover it.

  Why it matters. It is the foundation of the law on unjust enrichment, which sections 68 to 72 apply.

• State of West Bengal v. B.K. Mondal & Sons (1962)

  Facts. A contractor built storage sheds and rooms for the Civil Supplies Department in 1944 at officers' requests. The contracts did not satisfy section 175(3) of the Government of India Act, 1935. The State refused to pay Rs 19,325.

  Principle. Section 70 applies where there is no valid contract. The State must pay when it voluntarily accepts and enjoys the work. AIR 1962 SC 779.

  Why it matters. It is the leading authority that a quasi-contractual claim does not depend on any contract.

• Mulamchand v. State of M.P. (1968)

  Facts. The Supreme Court considered a section 70 claim against a State where the contract did not comply with section 175(3) of the Government of India Act, 1935. (1968) 3 SCR 214.

  Principle. The duty under section 70 rests on "a third category of law, namely, quasi-contract or restitution", and not on any contract.

  Why it matters. It states the legal basis of every quasi-contractual claim.

• Sales Tax Officer, Banaras v. Kanhaiya Lal Mukundlal Saraf (1958)

  Facts. A Banaras bullion firm paid sales tax of Rs 1,365-12-0 for 1948-51. The Allahabad High Court later held the tax on forward transactions beyond the State's power. The firm asked for a refund. AIR 1959 SC 135.

  Principle. Section 72 covers money paid under a mistake of law as well as a mistake of fact.

  Why it matters. It applies unjust enrichment to a refund from the State.

• Mahanagar Telephone Nigam Ltd. v. Tata Communications Ltd. (2019)

  Facts. MTNL deducted money from Tata Communications' bills. A purchase order already fixed liquidated damages at a maximum of 12 per cent. The Supreme Court decided Civil Appeal No. 1766 of 2019 on 27 February 2019.

  Principle. Each section of this chapter assumes there is no contractual relationship. The dispute was governed by section 74, so only the contract figure could be claimed and the excess was refunded.

  Why it matters. It shows the limit of quasi contract.

How to write this answer in the exam

Key points to remember

• A quasi contract is a duty imposed by law, with no agreement between the parties.
• It rests on unjust enrichment: no one should be enriched at another's loss.
• Sections 68 to 72 cover necessaries, an interested payer, a non-gratuitous act, a finder and a payment by mistake or coercion.
• The claim is for reimbursement, compensation or restoration, not damages for breach.
• Section 70 applies even where a Government contract is invalid for want of form (B.K. Mondal).
• It does not apply where a valid contract governs the dispute.

Quick self-test

Related topics

• Necessaries supplied to a person who is incapable of entering into a contract
• Liability to pay for non-gratuitous acts
• Things delivered by mistake or coercion
• Quantum merit