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Quasi Contracts and their Impacts

A quasi contract is a legal precept imposed on parties involved in a dispute to avoid unfair enrichment. A court brings two parties into a legally binding arrangement in which they have to abide by a court-designed contract even though they were never legally bound to each other before. This type of ruling goes back in time to fix a situation where one side got something while the other lost out.

Relevance and application of quasi contracts

In the absence of a formal agreement, a quasi-contract may be relevant if one party unfairly gains from another’s loss. It comes in handy in cases where the absence of mutual consent renders conventional contract law inapplicable. Therefore, it is an effective tool for ensuring that businesses execute their dealings with utmost good faith, knowing that the law will always favour equitable outcomes and punish unjust gains. As it is a court’s decision to define the terms of the contract, a quasi-contract does not require any mutual agreement between parties.

Quasi contract example

To understand this more clearly, let’s assume that two parties, X and Y agree verbally that X will sell Y his used pickup truck at $15,000 next summer. However, come summer, Y refuses to buy the truck unless he is given a discount of $2,500, stating that there are better models in the market for $15,000. Now, X takes Y to court, stating that he already committed to the deal and even turned down other prospective buyers. In light of this, the court must weigh the merits of the contract and ensure none of the parties suffers prejudice.  

Tort vs quasi contract

While quasi-contracts exist to prevent unfair enrichment in the absence of a formal contract, tort law addresses civil violations that inflict injury on individuals, whether done voluntarily or involuntarily.

Types of Quasi Contracts

There are four main sections under the Indian Contracy Act, 1872 that deal with quasi contracts as outlined below:

Section 68Compensation involving persons inacapable of contracting

This section says that one can be held liable for compensation even if they are not of adult age, in proper mental or physical health. However, it must be proven that the mentally unstable party or minor benefitted from the supplied goods or items.

Part 69: Payments by interested third parties

One may seek compensation from another under section 69 if they are willing to pay the financial cost that another person is obligated to pay.

When one party offers to pay another’s expense, that party becomes obligated by law to reimburse the third party. For example, if Kennedy’s property was in danger of being auctioned of because of a debt, and Thomas steps in to pay off the creditors on Kennedy’s behalf, Thomas then has the right to seek reimbursement from Kennedy.

Section 70: Unintended gratuity

According to Section 70, if someone lawfully helps another out or gives something to someone else without intending to do so gratituously, the recipient must pay the original party.

Section 71-Responsibility for finders’ goods

Anyone who finds someone else’s belongings and takes them into their possession has no right to appropriate the items. Instead, they must treat them with the care that a reasonable person would. Thus, he must return the things to their rightful owner; otherwise, the owner has the right to seek reimbursement from him.

Section 72-Obtaining goods by accident or through coercion

According to Section 72 of this law, if someone receives anything that was not intended for them as beneficiaries or obtain such things through coercion, they must either return it or reimburse the person who paid for it.

In summary

Quasi-contracts are founded on the universal need for fairness, conscience, and justice in the society. They are in place to make sure that everyone plays by the rules and that no one gets to benefit unfairly from someone else’s hard work or resources without paying them back.