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
Mistake may be of two types.
- Mistake of law.
- 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
- If there is a mistake, the agreement is void. But as the mistake is subsequently discovered it is called discovered to be void.
- 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
- Mistake must be bilateral. Unilateral mistake is no mistake.
- The mistake must be in relation to some fact.
- The fact concerned must be essential to the agreement.
- 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.
Discharge of Contract
A Contract may be discharged in any of the following ways- Discharge by Performance.
- Discharge by Mutual Consent or Agreement
- Novation - When a new contract is substituted for an existing contract
- Alteration
- Rescission
- Remission - Accepting the lesser sum of amount than what was contracted for
- Discharge by subsequent illegality or impossibility
- Destruction of Subject-matter
- Failure of ultimate purpose
- Death or personal incapacity of Promisor
- Change of Law
- Discharge by lapse of time
- Discharge by operation of law
- Discharge by breach of contract
- Anticipatory breach
- Actual breach
Remedies for Breach of Contract
Chapter VI of Contract Act with Sections 73 to 75 deals with the consequences of breach of a contract.When a contract is breached, the injured party is entitled to one or more of the following remedies.
- Rescission of the contract
- Suit for damages
- Suit upon quantum merit
- Suit for specific performance of the contract
- Suit for injunction
Damages
- Ordinary or General damages
- Special damages
- Exemplary or Punitive damages
- Nominal damages
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