Fast-growth companies that are scaling need to enter into contracts frequently and nurture them well. Contracts are of many types; one of the contracts discussed below is a quasi-contract.
The contract is a signed document by both parties accepting the rights and obligations mentioned in the agreement. Contract in business minimises the risk and claims the damage with this legally binding document.
Nowadays, contracts are between businesses, not people. Some basic contracts occasionally signed by people are to sell a house, accept a job offer, a partnership, and between customer and suppliers are some of the basic agreements in business.
Parties have to perform some rights and responsibilities in the contract. Quasi-contract plays a vital role when such rights and responsibilities are absent, as it creates the same obligations as the contract. Quasi-contracts are based on equity, justice and good conscience.
Now let’s learn more about what is a quasi-contract in business law and how it is used in business.
What is a Quasi Contract in Business Law?
Quasi-contract was one of the main principles of Roman law as it derives from the Latin statement “Nemo debet locupletari ex aliena jactura,” which means no human should profit from another’s loss. However, the definition of a quasi-contract is more grounded in natural law principles like morality, justice, honesty, and duty towards another.
A quasi-contract is an agreement developed between two parties without any contractual obligation known as a quasi-contract. The quasi-contracts are formed legally and ensure fairness between the parties or provide a remedy for the harmed party. A quasi-contract is also called an implied contract.
Also, it doesn’t contain all the elements of a valid contract, such as offer and acceptance, legal enforceability, capacity to contract, consideration, and free consent.
A contract in business is a record of details of both parties, which agree upon mutual consent. Breaching a contract impacts business and leads to conflict, but quasi-contracts arise after injustice occurs. The contract can act as legal evidence in business, but the judge also determines the quasi-contract.
Features of a Quasi Contract
- If there is no obligation mentioned in the contract between parties, then the quasi-contract is enforced by law for the benefit of both parties.
- The result of such obligation in a quasi-contract is the same as a contract.
- Quasi-contracts are imposed by law, not by an agreement.
- The obligation of a party is not a promise but a duty.
- In most cases, right under such a contract is money
- The party has the right to act only against that one particular person, not against everyone.
Examples of Quasi- Contract
Mr X ordered a dress for his wife as a wedding gift. The delivery boy mistakenly delivers Y. Now, the Y used the dress thinking her husband ordered the gift. In this case, Y is responsible return the parcel or paying for the dress. X and Y have not signed the contract; it will be considered a quasi-contract.
Mr A went to B’s home and forgot his wallet, which has found by B’s brother. Now B’s brother has to return the wallet to A.
What are the Main Components of a Quasi- Contract?
The Indian Contract Act of 1872 mentioned five components to impose a quasi-contract.
Section 68: Claims for the Necessities Supplied to an Incapable Person
The person who supplied necessities to someone who cannot contract, such as a person of unsound mind, a minor, or someone dependent on that incompetent person, is entitled to recover that amount from that person’s property. If the incapable person has no property, nothing is obliged to pay.
Section 69: Payment Made by an Interested Person
When one person is interested in any property/goods, the money is paid on behalf of the owner, and the interested party is entitled to reimbursement from the liable owner.
Section 70: Obligation of a Party Benefits Enjoying Benefits of a Non-Gratuitous Act
Any act not provided for free is non-gratuitous. When someone legally does something for another person or delivers something with no purpose of doing it for free and that other person benefits, the other person is obligated to pay for the same or restore what was performed or provided. Therefore, the plaintiff must prove some conditions as:
- The act or delivery in question was done or delivered legally.
- That the plaintiff did not perform any gratuitous acts or provide any free services.
- That the defendant has benefited from the actions or results.
Section 71: Finder of Goods
Any person who finds goods and knows they belong to another person is obligated to keep the goods safe and return them to the rightful owner. The following responsibilities of the finder of Goods are:
- He has to treat the property with the same respect as a regular person.
- He is not permitted to take possession of the goods, and he is required to return them if the owner is found.
- The finder of the goods can recover the owner’s expenses while maintaining the goods.
Section 72: Liability of a Person to Whom a Payment is Made, Either Mistakenly or Under Coercion
The party who received the money must return or restore it if any party paid it in mistake or due to coercion. The term “coercion” in this context includes money earned through extortion or oppression.
Quasi- contract is a fictional contract recognised by the court. It originated from Roman law and is still used in the modern legal system. It aims to prevent one party from unfairly benefiting from the situation at the other party’s damage. Quasi-contracts are those in which the law imposes legal duties without an offer and acceptance. The basis for the quasi-contractual obligations is that justice and law should work together to avoid unfair enrichment. It is very similar to the contracts claiming compensation for the damages caused by the wronged party. After knowing what is quasi contract in business law, it’s better to get in touch with a competent lawyer for quasi-contract-related issues.