Quasi contracts

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Illustration

Saurabh supplies goods to his customer Vishal who receives and consumes them. Vishal is bound to pay the price. Vishal’s acceptance of the goods constitutes an implied promise to pay.

Now, if the goods are delivered by a servant of Saurabh mistaking Shubam for Vishal, then Shubam will be bound to pay compensation to Saurabh for the value if he uses those goods

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Meaning

Not a contract at all One or the other essentials of a contract

are absent An obligation imposed by law upon a

person for the benefit of the other even in the absence of a contract.

Based on the principle of equity

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Features

Imposed by law and does not arise from any agreement

Duty of a party and not the promise of any party is the basis of such contract

Right under it is always a right to money Right under it is available against specific

persons and not against the whole world A suit for breach may be filed in the same way

as in case of a complete contract.

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Distinction

Quasi Contract The essentials for the

formation of a valid contract are absent.

Obligation is imposed by law.

Contract The essentials for a valid

contract are present. Obligation is created by

the consent of the parties.

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Types of quasi contracts

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Right to recover the price of necessaries supplied

The person who has supplied the necessaries to a person who is incapable of contracting or anyone whom such incapable person is legally bound to support, is entitled to claim their price from the property of such incapable person.

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Right to recover money paid for another person

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

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Right to recover for non-gratuitous Act

Ex: P had constructed certain structures at the oral request of an officer of civil supplies department. The State accepted the works but attempted to escape liability on the pretext of non-compliance of certain requirements of the Government of India Act 1935.

Held- By accepting the benefit of structures an obligation has arisen to pay for the same.

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Quantum meruit “as much as earned’ Payment in proportion to the amount of

work done. When a person has begun the work and

before he could complete it, the other party terminates the contract or does something which make it impossible for the other party to complete the contract, he can claim for work done under the contract.

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Contd-

He may also recover the value of the work done where the further performance of contract becomes impossible.

The party claiming relief has to establish the following: He has been ready and willing to perform

the contract. He has made a part performance of the

contract for which the remuneration is due.

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Cases in which the claim of quantum meruit can arise

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Performance of contract

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Meaning

A contract is said to have performed when the parties to the contract either perform or offer to perform their respective promises.

Sec 37 : “The parties to the contract must either perform or offer to perform their respective promises, unless such performance is dispensed with or excused under the provision of the Act, or any other law.”

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CONTRACTS WHICH MUST BE PERFORMED

The parties to a contract must either perform,

‘actual performance’ or ‘attempted performance’, i.e. ‘offer to perform’

or offer to perform, their respective promises, unless such performance is dispensed

with or excused under the provisions of this Act, or of any other law.

Promises bind the representatives of the promisors in case of the death of such promisors before performance, unless a contrary intention appears from the contract.

Contd -

Types of performance:

Actual performance- It occurs when both the parties perform their promises according to the terms of the contract

Attempted performance

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Contd -

Persons who can demand performance Promisee Legal representatives Third party Joint promisee

Persons who must perform Promisor Promisor’s agent Legal representative Third party Joint promisors

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Time and place of performance

The contract must be performed within a reasonable period of time.

The promise must be performed in the manner and at the time prescribed by the promisee.

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Contd-

Time as essence of contract – It is essential for the parties to a contract to perform their respective promises within the specified time.

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Breach of contract

Contd-

Breaking of contract means a breaking of the obligation which a contract imposes

Breach of contract is of two types: Actual breach of contract Anticipatory breach of contract

Actual breach of contract

At the time when the performance is due During the performance of the contract

Anticipatory breach of contract

Ex; A undertakes to supply certain goods to B on 1st January. Before this date, he informs B that he is not going to supply goods. This is an anticipatory breach of contract

Anticipatory breach does not necessarily discharge the contract, unless the promisee (the aggrieved party) so chooses.

Remedies for a breach of contract

A contract gives rise to correlative rights and obligations.

A right accruing to a party under a contract would be of no value if there was no remedy to enforce that right in the law court in the event of its infringement or breach of contract.

A remedy is the means given by law for the enforcement of a right

Contd –

When a contract is broken the injured party has one or more of the following remedies. Rescission of the contract Suit for damages Suit for quantum meruit Suit for specific performance of the

contract Suit for injunction

Rescission

A right not to perform obligation The aggrieved party is discharged from

all the obligations under the contract. He is entitled to claim compensation for

damage which he has sustained for the non performance of the contract

Suit for damages

Monetary compensation allowed for the loss suffered by the aggrieved party due to the breach of the contract.

Case; Hadley vs Baxendale

Contd -

Rule ; Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be as such as may fairly and reasonably be considered either arising naturally ie, according to usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in contemplation of both the parties, at the time they made the contract, as the probable result of the breach of it.

Section 73

Deals with compensation for loss Ordinary damages Special damages Exemplary damages Nominal damages Damages for inconvenience and discomfort Liquidated damages and penalty Stipulation for interest Forfeiture of security deposit

Suit for specific performance

Demanding the court’s direction to the defaulting party to carry out the promise according to the terms of the contract

Suit for injunction

Demanding court’s stay order Injunction means an order of the court

which prohibits a person to do a particular act.

Suit for quantum meruit

Right to claim compensation for the work already done.

Ex: C an owner of a magazine engaged P to write a book to be published by installments in his magazine. After a few installments were published, the publication of the magazine was stopped. It was held that P could claim payment for the part already published.

Discharge of contract

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Discharge of a contract

Discharge of a contract means the termination of contractual relations between the parties to a contract. A contract is said to be discharged when the rights and obligations of the parties under the contract come to an end.

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Modes of discharge of contract

Discharge by performance (a) By actual performance (b) By attempted performance

Discharge by mutual agreement: (a) Novation – Substitution of a new contract (b) Rescission – Cancellation of contract (c) Alteration – Change in terms of contract with

mutual consent of parties. (d) Remission – Acceptance by promisee of a

lesser fulfillment of the promise made

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Contd -

(e) Waiver – Intentional relinquishment of a right under the contract.

Discharge by operation of law – (a) By death of promisor (b) By insolvency (c) By unauthorized material alteration (d) By the identity of the promisor and

promisee

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Contd -

Discharge by impossibility of performance Effect of initial impossibility Effect of supervening impossibility

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Indemnity and Guarantee

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Definition

It is entered into with the object of protecting the promisee against anticipated loss.

A contract by which one party promises to save the other from loss caused to him by the promisor himself or by the conduct of any other person, is called a contract of indemnity. (Sec 124)

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Contd - A lost his share certificate. He applied to the

company for the issue of a duplicate certificate. The company asked A to furnish an ‘indemnity bond’ in its favor to protect it against any claim that may be made by any person on the original certificate. A, accordingly executed the indemnity bond. It is a contract of indemnity between A and the Company. A is the indemnifier and the Company is the indemnified or indemnity holder.

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Contracts of guarantee A contract of guarantee is a contract to perform

the promise, or discharge the liability of a third person in case of his default. (Sec 126)

Features Three parties Consent of surety Obligation arises in case of default Types of contract Primary liability

Consideration is necessary for contract of guarantee

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CONTRACT OF GUARANTEE A “contract of guarantee” is a contract to perform

the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the “surety”; the person in respect of whose default the guarantee is given is called the “principal debtor”, and the person to whom the guarantee is given is called the “creditor”. A guarantee may be either oral or written. - Section 126

Person giving guarantee is also called as ‘guarantor’. However, Contract Act uses the word ‘surety’ which is same as ‘guarantor’. - - Three parties are involved in contract of guarantee. Contract between any two of them is not a ‘contract of guarantee’.

Contd-

Anything done, or any promise made, for the benefit of the principal debtor, may be sufficient consideration to the surety for giving the guarantee.

Ex; A advances a loan of Rs 5000 to B in consideration whereof C promises with A that is B does not repay.

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CONSIDERATION FOR GUARANTEE

Examples: (a) B requests A to sell and deliver to him goods

on credit. A agrees to do so, provided C will guarantee the payment of the price of the goods. C promises to guarantee the payment in consideration of A’s promise to deliver the goods. This is sufficient consideration for C’s promise.

Objectives of contract of guarantee

To secure the performance of a mercantile promise

To secure the honesty and fidelity of someone

To secure a person from injury arising out of some wrong committed by another

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Bailment It involves change of possession of goods from

one person to another for some specific purpose.

Bailment is concerned only with goods Ex: A delivers a piece of cloth to B a tailor, to be

stitched into a suit. There is a contract of bailment between A and B.

Sec 148: Delivery of goods by one person to another for some purpose upon a contract, that they shall, when the purpose is accomplished , be returned or otherwise disposed of according to the directions of the person delivering them.

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Pledge

Bailment of goods as security for payment of a debt or performance of a promise is called ‘pledge’.

A pledge is bailment for security.. Ex: If A borrows Rs 200 from B and

keeps his watch as security for payment of debt, the bailment of watch is a pledge.

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Agency

Sec 182: An agent is a person employed to do any act for another, or to represent another in dealings with a third person.

Person for whom such Act is done –Principal

Agent – connecting link between the principal and third parties.

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Agency

Two essentials Agreement between the principal and

agent – agency depends on agreement but not

necessarily on contract. No consideration is necessary to create an

agency. Intention of the agent to act on behalf of

the principal.

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Test of agency

Has that person the capacity to bind the principal

Can he be made answerable to a third person by bringing him (the principal) into legal relations with the third person

can a privity of contract be established between that person and the principal?

If yes, he is an agent, otherwise not.

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