Quasi Contract Question Answers/Business Law/BBS/BBA Notes

1. Define the quasi-contract and explain the basis of the quasi-contract. 

Answer:

Generally, contracts are created by expressed or implied agreement between two or more than two parties. Any agreement with the fulfillment of certain essential elements is called a contract. But there may be certain cases in which contract is created without any agreement and essential elements of a valid contract and such contracts are called quasi-contract. 

A quasi-contract is also known as a constructive contract or implied-in-law contract. In quasi-contract, there is no formal agreement between the parties that existed in the contract.

In these cases, the court creates a contract so that one party does not become unjustly enriched (Beneficial). A quasi-contract is created by the court system and specific law in order to correct a situation in which one party owes something to the other party because they are in possession of that particular party.

Individuals or parties of quasi-contract did not have any created formal agreement between themselves but by the court or by the system of law they are in the contract. Quasi-contracts impose justice when one party benefits unjustly through a loss to another. 

Quasi-contract is based on the principle of equity, justice, and good harmony that no person shall be allowed to in justly enrich himself at the expense of others. In such a contract there is no face to face contract. However, it is an obligation created by law or court.

A quasi-contract is termed as a constructive contract under the English law. The Civil Code, 2074 has recognized it as an indirect contract.

Thus, a contract constructed by law on the basis of human activities or relationships of the parties but not by the parties themselves is known as quasi-contract. It prevents one party from taking benefits from the other party without any effort or investment for the benefit taken by one from another.

Features of a Quasi Contract

The major features of quasi-contract are listed as below:

• The rights in the contract are not determined by the contract but are executed by the operation of law.
• In this contract, necessary elements of a valid contract are absent.
• This contract is not made in written form.
• It is conduct based or duty-based contract
• It contains a supply of goods, money, or work to another person.

Basis of Quasi Contractual Obligation/Requirements for Quasi Contract

The real basis of quasi-contract is equity and good conduct or behavior. The idea or gist of quasi-contract is that the defendant upon the circumstances of the case is indebted by the ties of natural justice and equity to refund the money or goods.  Thus, the main objective of the quasi-contract is to restore the benefit obtained unjustly. In order to judge and to make a ruling in this type of case, there are certain requirements for a quasi-contract.

1. The first requirement for quasi-contract is that the plaintiff must have provided a tangible good or service to the defendant, with the impression that the plaintiff would receive payment for that good or service.
2. The second requirement for quasi-contract is that the plaintiff must be able to express why it would be unjust for the defendant to receive the good or service without paying for it, and would, therefore, be unjustly enriched.
3. The retention of enrichment amount to unjust.

Thus, we can say that in the civilized society, the system of law is bound to provide remedies for cases of unjust enrichment or unjust benefit.  It means the law prevents an individual from retaining the money of or some benefit derived from others by constructing the quasi-contract. In American law, it is called restoration. Thus ensuring equality, equity, and fairness in the society through the means of creating the contractual relationship is the main rational and motive of quasi-contract.

2. What are the cases/types/rules regarding quasi-contract? OR What do you understand by quantum meruit? When does the claim on quantum meruit raises?

Answer:

(For the meaning of quasi-contract see the initial part)

Types or Cases or Rules of Quasi-contract

There is no generally accepted way of classifying quasi-contract. Civil Code, 2074 has recognized quasi-contract as indirect contract and Chapter 15 of Part 5 has listed the different instances of quasi-contract under the heading of indirect contract and chapter 16, under the heading of unjust enrichment which is the basis of Quasi-contract.

In general, the following are the several types of quasi-contract.

1. Action for money had and received

It has the following three circumstances:

a. Money paid by one to another which the first party seeks to recover

Recovery of the money by one party (plaintiff) from other parties (defendant) depends upon the principle of natural justice. When money is paid by the first party(plaintiff) to the second party (defendant) then he has the right to recover the same. 

It also may be on the following grounds:

• Money paid by mistake: Section 667 of the Civil Code, 2074 states; “In case any a person pays the amount to any person by mistake, believing he was indebted other, then the person receiving the amount shall return back the money to him. For example, A has purchased 500 computer sets from B and while making payment A has paid for 550 computer sets. In such case, to return the money of an additional 25 sets of computers to A is responsibility of B or to get back the sum of 25 computer sets from B is right od A and such relation is called quasi-contract on the ground of mistake of material facts.

Similarly, when money was paid under a contract which subsequently becomes void, a person who made the payment is entitled to return of the money as money had and received. 

At the same time, the money paid in discharging genuine legal obligations cannot be recovered on the ground that the payer was induced to fulfill obligations by reason of a mistake of fact. 

For example, A has to pay to B and C @ RS.10,000 per person. Now while paying by A to B Rs.10000 mistakenly gone into the account of C. It is the payment by mistake but A cannot take back that money

• Failure of objective and consideration: when money is paid under a contract and if consideration of which has failed (means consideration has impossible to get or finished or destroyed) or objective of which is failed, the payer has entitled to recover it. But the point to be noted is that the consideration or objective should be failed completely to recover the paid sum of money. If part of consideration or objective is still remaining then money cannot be recovered. For example A pays money to purchase a set of water pumps for the purpose of irrigation. Afterward, the land is destroyed by flood as such a manner no need for irrigation. A can recover the money paid as the consideration or objective has failed entirely. 

Similarly, A paid Rs.200,000 to B for a horse for the purpose of horse riding.  Instantly the doctor suggests to A, not to ride the horse. In such a case the objective has failed and on such basis A can recover the money. 

But if A is using the horse for other purposes like digging the field etc. then A cannot recover the money from B.

• Money obtained by fraud, oppression, etc.: If money obtained by fraud, oppression, or extortion, it might yet open to the injured party to choose either form of action and recover as on tort or on contract. This case generally arrives on the belief of money is paid under protest in satisfaction of an illegal demand and is the subject of recovery subsequently. For example, a pledge refused to deliver goods unless an extra amount is paid.

b. Money paid by one for the benefit of another which the first party seeks to recover

When money is paid by a person for the benefit of another, the payer can recover the money paid from another in which there was no promise or request from the beneficiary of such payment. But the point to be noted is that the money has paid not on the basis free of cost by the payer.

For example: If A and B borrowed money from C in the form of joint debt and the amount should be paid by both equally. Later, the sum of money has paid by A entirely and he can recover the excess burden of such debt from B as he has paid the debt for the benefit of B and which was not free of cost as well. 

Similarly, If T and M being friends went shopping to purchase a watch for M. The watch selected, being expensive, M refrained from buying. Knowing this, T, without a request of M pays the amount to make enable M to purchase the watch. In such a case, M afterward bound to return back the money to T paid by him unless such right to recover is waived by T expressly.   

Thus, for recover the money on the basis of quasi-contract, the following three conditions must be fulfilled:

• The thing must be done lawfully.
• The thing must not be done by a person free of cost.
• The person for whom the act has done must enjoy the benefit thereof.

2. Quantum Meruit

Meaning of Quantum Meruit

The expression quantum meruit literally means as much as earned or according to the quantity of work done or service rendered. If one person has done work for another, he is entitled to recover from another a reasonable remuneration of such work has been fixed by the contract. 

Therefore, it refers to the situation in which payment as per the proportion of the word done or service rendered. That is known as the doctrine of quantum meruit. 

When a person has done some work under a contract, and the other party repudiate the contract or some event happens which makes the further performance of the contract impossible, in such case the party who did perform his part of assigned work can have entitlement for the compensation/payment for the work he has already completed. 

Thus, the claim for quantum meruit arises only when the original contract is discharged, and hence the party not in default cannot claim upon quantum meruit till the original contract exists.  Further, the claim for quantum meruit can be brought only by the party who is not in default.

For example: K, an owner of a periodical publication called “Nepal Economics Journal” engages T to write a volume on an article to it. For this T is to receive Rs. 35000 on compellation. When T has written part of the work K cancels the series. Here T can claim payment for the work already done.

Thus, the objective of allowing a claim on quantum meruit is to remunerate or re-compensate the party for the value of what he has performed or delivered.

Types or cases of quantum meruit/Cases in which claim on quantum meruit arse

The doctrine of quantum meruit may be applied or arrived in the following cases:

• Where an act or service has rendered but there is no contract: If a person has done some works or rendered services even without implied or expressed contract, he can recover the reasonable remuneration of his services provided.
• Where there is a contract for work or services but no agreement as to the payment: In case if there is an express contract for an act or service but no agreement as to remuneration then this does not imply that receiver of benefit by such act or service under no obligation to pay for those works or services. The service provider or the person who has done the work as per the contract has the right to get reasonable remuneration.
• Where the agreement is discovered to be void: Thre is the right to get reasonable remuneration of partial performance up to the date of validity.
• Where a contract is divisible: if the duty or task under the contract can be divided into divisible part then such a contract is called a divisible contract. In such cases the right to get the reasonable remuneration of the completed part is there on the hand of the party. The divisibility of the contract is based on the terms of the contract paper.
• Where the completion of the contract has been prevented by the act of the other party of contract:  In such a case, the party can claim the reasonable remuneration of the performed part even in the case of the contract is indivisible.
• Where a contract is discharged by breach of law: In such a case, the party not in default may sue on the quantum meruit for the value of work he had done under the contract.
• Where a contract is fully performed but not exactly: When a contract is completely performed but the performance is different than agreed terms and conditions then the person who has performed the contract can claim the amount agreed if the counterparty accepts the performance and the other party may deduct the amount as bad work. For example, A and B agreed to lease the house of A for 5 years for Rs.1500,000 and A requires that the house should be decorated properly. But the house is not decorated and, in such case, B can deduct the amount of money required to decorate the house from the agreed amount as the performance of the contract is not exactly held by A.

3. Necessaries Supplied to Persons Incapable of Contracting

Imagine a person incapable of entering into a contract like a lunatic or a minor. When any individual provides or makes available necessaries matched to the situation in the life of such a person, then he has the right to get the payment from the property of the incapable person. 

Suppose A is a lunatic. B supplies to A with certain necessaries suited to his situation in life. However, A does not have the money or sanity and fails to pay to B. This is called a quasi-contract and B, is entitled to get payment from A’s property.

Here the burden of proof lies on B and he has to prove the following two things; 

1. A is lunatic. 
2. The goods supplied were necessary for A at the time they sold or at the time of delivery.

4. Responsibility of Finder of Goods

When any individual or a person gets or finds a thing/good of others or belonging to somebody else and receipts them into his keeping, then he has to follow to the following duties:

• Look after/take care of of the goods as his own goods
• No right to appropriate the goods
• Return the properties to the owner (if found)

5. Accounted Stated

It is the peculiar provision of English law. When any person mentioned that he has to pay the due to another then he has to pay the due to another person if there was no any due amount to be paid in reality. This is based on the rule of estoppel.

References

Mishra B.P. (2006), Mercantile Law, Kathmandu: Asia Books Distributers

Upreti Shreepraksh. (2018), Business Law, Kathmandu: Samjhana Publication Pvt Ltd

Kuchhal M.C. (1978), Mercantile Law, New Delhi: Vikas Publishing House Pvt Ltd

Panday Yugraj. (2019), Business Law, Kathmandu: Asmita Books Publisher & Distributors Pvt Ltd