QUASI CONTRACT

QUASI CONTRACT

Generally a contract comes into existence as a result of offer made by one party and its acceptance by the other party, with free will of both the parties. However under certain conditions even though no will is expressed by both the parties for creating contractual relations, the law creates and enforces legal rights and obligations. Such contracts are known as Quasi Contracts. The principle behind Quasi Contracts is that a person shall not be allowed to enrich himself at the expense of another.

Section 68 to 72 of the Contract Act deals with 5 different kinds of Quasi Contracts explained below:

1. Supply of Necessaries to Incapable Person (Section 68):

        

If a person incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by another person with necessaries, suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person.

Example: A supplies B, a lunatic, with necessaries suitable to his condition in life. A is entitled to be reimbursed from B’s property.

2. Payment by Interested Person (Section 69):

A person, who is interested in payment of money, which another is bound by law to pay, and who therefore, pays it, is entitled to be reimbursed by the other.

Example: A holds land in Bengal on a lease. B is the owner of the land. The land revenue payable by B to the government is in arrears and therefore the government advertised the land for sale to recover the dues. To prevent the sale of land A pays the arrears of land revenue. In this case B is bound to reimburse the amount to A.

3. Payment for Non-gratuitous act (Section 70): 

Where a person lawfully does anything for another person or delivers anything to him not intending to do so gratuitously and such other person enjoys the benefit thereof, the later is bound to make compensation to the former in respect of, or, to restore the thing so done or delivered.

Example: A, a tradesman, leaves his good at B’s house by mistake. B treats the goods as his own and uses them. B is bound to pay for the goods.

4. Liability of Finder of Goods (Section 71):

A person who finds the goods belonging to another, and takes them into his custody is subject to same responsibility as a bailee. He must take reasonable care of the goods and keep them in sound condition and try to find out its true owner.

5. Payment of Delivery by Mistake or under Coercion (Section 72):

A person to whom money has been paid or anything delivered by mistake or under coercion must repay or return it.

Example: A and B jointly owe Rs.5,000 to C. A alone pays this amount to C. B not knowing this again pays Rs.5,000 to C. In this case C is bound to repay Rs.5,000 to B as this amount is paid to him by mistake.

TYPES OF MISTAKE

TYPES OF MISTAKE

 Mistake may be of two types.

1. Mistake of law.
2. Mistake of fact.

1. Mistake of law: Mistake of law may be-

A) A mistake as to a law in the country (India) 

or

B) A mistake as to a law of foreign country.

2. Mistake of Fact: Mistake of fact can be divided as bilateral and unilateral mistake.

A) Bilateral Mistake:  According to Section 20 "where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement shall be void".

Various cases that fall under bilateral mistake are as follows:

Mistake as to the subject matter: Mistake as to the subject matter may be ‑ regarding existence of the subject matter, quality of the subject matter, quantity and price of the subject matter.

Mistake as to the possibility of performance: If the parties believe that the agreement is capable of being performed when in fact it is not the case, then the consent is nullified. The agreement is void on the ground of impossibility.

B) Unilateral Mistake: If the mistake is only unilateral, i.e. one party to the contract is under a mistake of fact, the contract is not voidable. Unilateral mistakes do not affect the validity of the contract unless they concern some fundamental fact and the other party is aware of the mistake. 

A unilateral mistake may be:

Mistake as to the nature of the transaction: A contract shall be void if a party to the contract without any fault of his own makes a mistake about the very nature of the contract. It may be because of blindness, illiteracy, or servility of the person signing the contract or due to the trick or fraudulent misrepresentation as to the nature of the document.

Mistake as to identity of the contracting parties: The person or with whom the contract is to be made must be identified correctly by the other party. It is a fundamental mistake on the part of the other party not to recognize the correct person. The principle of the contract holds good only when the identity of the contracting party is given importance.

EFFECTS OF MISTAKE

EFFECTS OF MISTAKE

1. If there is a mistake, the agreement is void. But as the mistake is subsequently discovered it is called discovered to be void.
2. When an agreement is discovered to be void then any party who has received any benefit from the other party shall restore it to him or make compensation for it.

ELEMENTS OF MISTAKE

Elements of Mistake

1. Mistake must be bilateral. Unilateral mistake is no mistake.
2. The mistake must be in relation to some fact.
3. The fact concerned must be essential to the agreement.
4. As regards mistake of law, if there is mistake of about Indian Law then it is not considered as a mistake of fact to an Indian. But a mistake of law of foreign country is a mistake of fact.

MISTAKE

Mistake may be defined under Section 20 of Indian Contract Act, 1872, as "an erroneous belief about something". If the agreement is made under an erroneous belief it cannot be said that the parties enjoyed free consent i.e. both the parties shall understand the same thing in the same sense.

Difference between Misrepresentation and Fraud

The basic difference between misrepresentation and fraud is that in fraud the person making the representation does not himself believe in the truth of the statement he is making whereas in situations of innocent misrepresentation the person making the statement may believe that what he is saying is true. This is due to the fact that the person making the statement is simply repeating what another person has asserted to be true. In cases of fraud, the person making the statement is a complete liar and is making the statement to deceive others to enter into a contract. However this is just the general rule.

Difference between fraud and misinterpretation :-

In misrepresentation the person making the false statement believes it to be true. In fraud the false statement is person who knows that it is false or he does not care to know whether it is true or false.

There is no intention to deceive the other party when there is misrepresentation of fact. The very purpose of the fraud is to deceive the other party to the contract.

Misrepresentation renders the contract voidable at the option of the party whose consent was obtained by misrepresentation. In the case of fraud the contract is voidable It also gives rise to an independent action in tort for damages.

Misrepresentation is not an offence under Indian penal code and hence not punishable. Fraud, In certain cases is a punishable offence under Indian penal code.

Generally, silence is not fraud except where there is a duty to speak or the relations between parties is fiduciary. Under no circumstances can silence be considered as misrepresentation.

The party complaining of misrepresentation can’t avoid the contract if he had the means to discover the truth with ordinary diligence. But in the case of fraud, the party making a false statement cannot say that the other party had the means to discover the truth with ordinary diligence.