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Quasi ContractA quasi contract is a contract that is created by the court when no such official contract exists between the parties, and there is a dispute with regard to payment for goods or services provided. Courts create quasi contracts to prevent a party from being unjustly enriched, or from benefitting from the situation when he does not deserve to do so.Consider the following example of a quasi contract:Teresa’s brother, Eric, tries to talk her into building a greenhouse in her large back yard. She declines, but Eric is convinced that, if she were surprised by a lovely greenhouse, she would love it. Knowing that Teresa makes good money, and could easily afford the greenhouse, Eric contacts greenhouse builder John, and arranges to have him erect the structure while his sister is at work one day.Teresa is not happy by her brother’s initiative, but the deed is done. Eric has directed John to bill his sister for the greenhouse, and that turns out to be the biggest surprise for her. She declines to pay, and Eric tells John he cannot afford it. John is now out, not only payment for his many hours of hard work, but cash for the materials he used.John has no choice but to file a?civil lawsuit?against Teresa, seeking payment. No contract exists between Teresa and John, however the court might allow John to recover the costs involved with building the greenhouse from Teresa, in order to prevent Teresa from being unjustly enriched. This is because, whether Teresa planned on it or not, she now has a brand new greenhouse.The court is likely to create a quasi contract, essentially contriving an agreement between John and Teresa, and holding Teresa responsible for the cost of John’s materials. It is also possible the court might order her to pay for John’s labor as well. Quasi contracts are always made to fit their specific situations.A quasi contract, or an “implied-in-law” contract, may offer less recovery than an implied-in-fact contract. This is because an implied-in-fact contract lays out the terms of an agreement in its entirety, as the parties initially intended, even if only in a verbal agreement. As a result of an implied-in-fact contract, a party may be entitled to recover any and all expected profits, as well as the cost of any labor and materials he may have laid out to complete the project.A quasi contract will only afford as much recovery as necessary to prevent one party from being unjustly enriched. In the example above, it would be unfair for Teresa to benefit from the new greenhouse at John’s expense, even though she never intended to enter into a contract with him.History of Quasi ContractThe history of quasi contract can be followed back to the Middle Ages, under a practice that was referred to back then as?indebitatus assumpsit. In that period, the law dictated that a plaintiff would receive a sum of money from the defendant, in an amount dictated by the courts, as if the defendant had always agreed to pay the plaintiff for his goods or services.Indebitatus assumpsit?was a method used by the courts to make one party pay another as if a contract had been created between the two parties. The defendant’s agreement to be bound by a contract that required compensation was implied by the law. The early days in the history of quasi contract saw such contracts being used to enforce obligations related to?restitution.Unjust EnrichmentThe term “unjust enrichment” refers to an individual receiving a benefit unfairly, whether it be by chance, or as the result of another person’s misfortune. When one is unjustly enriched, he has not paid or worked for the benefit he has received, and it is therefore morally and ethically appropriate for him to return it. Five elements must be shown in order to prove unjust enrichment:The defendant must have received an enrichment.The claimant must have suffered a disadvantage as a result of the enrichment.The enrichment must be established as unjust.There must be an absence of explanation for the enrichment and related disadvantage.There must be an absence of a remedy provided to the claimant by law.The remedy available to a claimant in a case involving unjust enrichment is restitution. Restitution is payment to compensate him for what the claimant was originally promised so as to correct an injustice. Restitution can either come in the form of an order for the defendant to pay the cash value of the benefit he received, or he might be ordered to return an item that is the subject of the enrichment.Requirements for Quasi ContractIn order for a judge to make a ruling in this type of case, there are certain requirements for quasi contract. The first of the requirements 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. The second of the requirements 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.Consider the above example of the greenhouse. John would have every right to demand payment from Teresa, who unexpectedly received a new greenhouse on her property. A quasi contract would be handed down by the court, requiring Teresa to pay restitution, or “quantum meruit,” to John. Quantum meruit is only awarded to the extent that the defendant was unjustly enriched, and no more.Quasi Contract Example Involving the Construction of Houses on Two PropertiesAn early example of a quasi contract can be found in a case involving the construction of two homes on two lots that ultimately could not be completed. In February of 1981,?Walter Salamon, a homebuilder, and Alfred E. Terra, Jr., a landowner, entered into two written agreements wherein Terra agreed to sell two properties to Salamon for $9,000 each. From this $9,000 amount, $8,500 was to be paid on delivery of the deeds, which was to take place in August of that same year. The parties agreed that Salamon would take over ownership of the lots by April 15.The parties also agreed that Salamon would, upon taking ownership of the lots, be responsible for paying the expenses related to the construction of houses on these properties, and that he would then sell the properties to third parties and pay Terra from the proceeds. Salamon was able to partially complete the construction of both houses, but he was unable to find the financing and purchasers necessary to complete the construction, due to the state of the economy at that time. The sales agreement was extended by several months, but Salamon was ultimately unable to pay for the lots.Not only was Salamon unable to pay for the properties in full, he wanted Terra to reimburse him for the money he spent partially building the homes. Salamon sued Terra in district court, asking the court to create a quasi contract so that he could recover for the costs associated with the two partially completed houses.The court found that no promise had existed on Terra’s part to pay Salamon for the value of the partially completed houses. However, the court found that Terra had been unjustly enriched, as he then had partially-built structures on his properties. The court imposed a quasi contract, awarding Salamon $15,000 – the value of the benefits Terra had received – to compensate Salamon for his labor and materials.Terra appealed the decision, and the Appellate Division reversed the lower court, holding that the lower court’s finding of a quasi contract was erroneous. According to the court, even if Terra was enriched and Salamon had suffered, there was no evidence to prove that either of these results was unjust.The Appellate Division also stated that there was no basis for finding that Salamon had reasonably expected Terra to pay for partially completed houses if Salamon was unable to perform the contract. Therefore, the Appellate Division concluded that Salamon bore the risks involved with not completing or selling the houses, and must therefore also bear the losses suffered for not anticipating the effect of the economic downswing.Salamon then appealed to the Commonwealth of Massachusetts, which affirmed the Appellate Court’s decision. The court held that the evidence did not support the conclusion that either party should have expected Terra to pay for the value of the partially completed houses, or the expenses that Salamon had incurred. The court went on to say that the fact that Salamon built two houses on property Terra owned was merely part of the financing arrangement, and that Terra did not request, or even want the houses to be built. Terra, per the court, was only interested in receiving the balance of the purchase price of the lots.Said the Court, in its decision:“Where services are rendered by one party and voluntarily accepted by another, the?presumption?that there is an expectation of payment therefor, as well as an implied promise of payment for the reasonable worth of those services, may be rebutted by a showing of strong self-interest in the outcome of the transaction by the party furnishing those services. Compensation on a quasi contract theory is not mandated where the services were rendered simply to gain a business advantage or where the plaintiff did not contemplate a personal fee.” Quasi ContractThe word ‘Quasi’ means pseudo. Hence, a Quasi contract is a pseudo-contract. When we talk about a valid contact we expect it to have certain elements like offer and acceptance, consideration, the capacity to contract, and free will. But there are other?types of contracts?as well.There are cases where the law implies a promise and imposes obligations on one party while conferring rights to the other even when the basic elements of a contract are not present. These promises are not legal contracts, but the Court recognizes them as relations resembling a contract and enforces them like a contract. These promises/ relations are Quasi contracts. These obligations can also arise due to different social relationships which we will look at in this article.The core principles behind a Quasi Contract are justice, equity and good conscience. It is based on the maxim:?“No man must grow rich out of another persons’ loss.”Let’s look at an example?of a Quasi contract: Peter and Oliver enter a contract under which Peter agrees to deliver a basket of fruits at Oliver’s residence and Oliver promises to pay Rs 1,500 after consuming all the fruits. However, Peter erroneously delivers a basket of fruits at John’s residence instead of Oliver’s. When John gets home he assumes that the fruit basket is a birthday gift and consumes them.Although there is no contract between Peter and John, the Court treats this as a Quasi-contract and orders John to either return the basket of fruits or pay Peter.Features of a Quasi ContractIt is usually a right to money and is generally (not always) to a liquated sum of moneyThe right is not an outcome of an agreement but is imposed by law.The right is not available against everyone in the world but only against a specific person(s). Hence it resembles a contractual right.Sections 68 – 72 of the Indian Contract Act, 1872 detail five circumstances under which a Quasi contract comes to exist. Remember, there is no real contract between the parties and the law imposes the contractual liability due to the peculiar circumstances.Section 68 – Necessaries Supplied to Persons Incapable of ContractingImagine a person incapable of entering into a contract like a lunatic or a minor. If a person supplies necessaries suited to the condition in life of such a person, then he can get reimbursement from the property of the incapable person.John is a lunatic. Peter supplies John with certain necessaries suited to his condition in life. However, John does not have the money or sanity and fails to pay Peter. This is termed as a Quasi contract and Peter is entitled to reimbursement from John’s property.However, to establish his claim, Peter needs to prove two things:John is a lunaticThe goods supplied were necessary for John at the time they were sold/ delivered.Section 69 – Payment by an Interested PersonIf a person pays the money on someone else’s behalf which the other person is bound by law to pay, then he is entitled to reimbursement by the other person.Peter is a zamindar. He has leased his land to John, a farmer. However, Peter fails to pay the revenue due to the government. After sending notices and not receiving the payment, the government releases an advertisement for sale of the land (which is leased to John). According to the Revenue law, once the land is sold, John’s lease agreement is annulled.John does not want to let go of the land since he has worked hard on the land and it has started yielding good produce. In order to prevent the sale, John pays the government the amount due from Peter. In this scenario, Peter is obligated to repay the said amount to John.Section 70 – Obligation of Person enjoying the benefits of a Non-Gratuitous ActImagine a person lawfully doing something or delivering something to someone without the intention of doing so gratuitously and the other person enjoying the benefits of the act done or goods delivered. In such a case, the other person is liable to pay compensation to the former for the act, or goods received. This compensation can be in money or the other person can, if possible, restore the thing done or delivered.However, the plaintiff must prove that:The act that is done or thing delivered was lawfulHe did not do so gratuitouslyThe other person enjoyed the benefitsSection 71 – Responsibility of Finder of GoodsIf a person finds goods that belong to someone else and takes them into his custody, then he has to adhere to the following responsibilities:Take care of the goods as a person of regular prudenceNo right to appropriate the goodsRestore the goods to the owner (if found)Peter owns a flower shop. Olivia visits him to buy a bouquet but forgets her purse in the shop. Unfortunately, there are no documents in the purse to help ascertain her identity. Peter leaves the purse on the checkout counter assuming that she would return to take it.John, an assistant at Peter’s shop finds the purse lying on the counter and puts it in a drawer without informing Peter. He finished his shift and goes home. When Olivia returns looking for her purse, Peter can’t find it. He is liable for compensation since he did not take care of the purse which any prudent man would have done.Section 72 – Money paid by Mistake or Under CoercionIf a person receives money or goods by mistake or under coercion, then he is liable to repay or return it.Let us see an example. Peter misunderstands the terms of the lease and pays municipal tax erroneously. After he realizes his mistake, he approached the municipal authorities for a reimbursement. He is entitled to be reimbursed since he had paid the money by mistake.Similarly, money paid by coercion which includes oppression, extortion or any such means, is recoverable. ................
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