We utilize the Indian Contract Act, 1872, as a lens to examinedifferent types of quasi contracts, showcasing their practical applications in the corporatelandscape.. Courts create quasi
Trang 1FOREIGN TRADE UNIVERSITY FACULTY OF LAW
-*** -MIDTERM REPORT
Course: Introduction to Law and Legal, Ethical issues in Business
Class: PLUE105.1 Instructor: PhD Ha Cong Anh Bao
Group: 02
Hanoi, December 2023
Trang 2I Introduction 2
II Literature Review 3
2.1 What is a Quasi Contract? 3
2.2 Principles of Quasi Contract 4
2.3 Types of quasi-contract 5
III Analysis of the practical applicability in the business of Quasi contract 8
3.1 Advantages of Quasi contract 8
3.2 Disadvantages of Quasi contract 9
3.3 Case Law regarding the Quasi contract: Mills v Wyman (1825) 10
IV Conclusion 15
V References 16
Trang 3The business world revolves around contracts, meticulously crafted agreementsforming the bedrock of every interaction But what happens when these agreementsfalter, leaving gaps or ambiguities that expose businesses to the possibility ofexploitation? In such situations, the law unveils a powerful safety net: the quasi contract.These "unofficial contracts" aren't mystical entities, but rather legal remediesdesigned to prevent one party from unjustly enriching themselves at another's expense,even in the absence of a formal document They transcend the rigid framework oftraditional contracts, offering a flexible and equitable solution in situations where fairnesscries out for intervention.
This paper delves into the intriguing world of quasi contracts, dissecting their coreprinciples and exploring how they prevent unjust enrichment and promote fairness inbusiness dealings We utilize the Indian Contract Act, 1872, as a lens to examinedifferent types of quasi contracts, showcasing their practical applications in the corporatelandscape We also unveil the advantages and limitations of quasi contracts forbusinesses, exploring how they can act as a safety net while acknowledging theirpotential pitfalls Through real-world examples and insightful analysis, we'll shed light onwhen these remedies are most beneficial and when they might not be the optimalsolution
Finally, to solidify our understanding, we delve into the landmark case of Mills v.Wyman This legal battle will serve as a microcosm, showcasing how courts apply quasi-contractual principles in practice By dissecting the arguments and the court's ultimatedecision, we'll gain a deeper appreciation for the nuanced application of this legalconcept
Trang 42.1 What is a Quasi Contract?
A 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 orservices provided Courts create quasi contracts to prevent a party from being unjustly enriched, or from benefiting from the situation when he does not deserve to do so.1Because the agreement is constructed in a court of law, it is legally enforceable, soneither party has to agree to it The purpose of the quasi contract is to render a fair outco
me in a situation where one party has an advantage over another The defendant - the part
y who acquired the property must pay restitution to the plaintiff - the wronged party to cover the value of the item
However, In order for a judge to establish a quasi contract, some specific prerequisites must be satisfied:
One party, the plaintiff, must have experienced a loss as a result of a transfer.The defendant must have or acknowledged receipt of and retained the item of valu
e, but made no effort or offer to pay for it
The plaintiff must then demonstrate through burden of proof why the defendant received an unjust enrichment
The item or service cannot have been given as a gift
The defendant must have been given a choice to accept or deny the benefit.2
Trang 5The principles of quasi-contracts revolve around fairness, restitution, prevention ofunjust enrichment, and promoting equity in contractual relationships These principles gui
de the imposition and enforcement of quasi-contractual obligations in situations without acontract between the parties Here are the key principles of quasi-contracts:
Fairness and Equity
Quasi-contracts are founded on the principle of fairness and equity They aim to prevent one party from unjustly benefiting at the expense of another When one party receiv
es a benefit or advantage from another, it would be unfair for them to retain that benefit without compensating the other party Quasi-contracts ensure that parties are treated fairlyand that no party is unjustly enriched
Restitution
The principle of restitution is central to quasi-contracts It entails (involves/requires) restoring the aggrieved party to their original position before the benefit was conferred.The party who received the benefit must make restitution or provide compensation to theparty who conferred the benefit This principle seeks to restore the balance and rectify an
y unjust gain obtained by one party at the expense of another
Prevention of Unjust Enrichment
Quasi-contracts are designed to prevent unjust enrichment, which occurs when oneparty gains a benefit or advantage at the expense of another party without proper justification The principle of preventing unjust enrichment ensures that parties do not profit unfair
ly from their actions or receive benefits for which they have not provided consideration.Quasi-contracts aim to restore the rightful position and prevent individuals from retainingbenefits that they are not entitled to retain
Trang 6Quasi-contracts serve as remedial measures to provide a legal remedy when a contract is lacking or insufficient to address the underlying fairness concerns They ensure justice and equitable outcomes by imposing obligations on parties to prevent unjust enrichment and restore the affected party to their rightful position.3
Overall, the principles of fairness, restitution, prevention of unjust enrichment, and the promotion of equity underpin quasi-contracts
These principles guide the imposition and enforcement of quasi-contractual obligations, ensuring that parties are treated fairly and that one party does not profit unjustly at the expense of another
2.3 Types of quasi-contract
Quasi-contracts are addressed in section 68 to section 72 of the Indian Contract Ac
t, 1872 These sections outline different types of quasi-contracts recognized by Indian law Here are the types of quasi-contracts as per the Indian Contract Act:
Section 68 – Necessaries Supplied to Persons Incapable of Contracting
If a person, incapable of entering into a contract, or anyone whom he is legally bou
nd 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 propert
y of such incapable person
Example: John is a lunatic Peter supplies John with certain necessaries suited to hi
s condition in life However, John does not have the money or sanity and fails to pay Pete
r This is termed as a Quasi contract and Peter is entitled to reimbursement from John’s property
3
Suhani Dhariwal, Writing Law
Trang 8However, to establish his claim, Peter needs to prove two things:
- John is a lunatic
- The goods supplied were necessary for John at the time they were sold/ delivered
Section 69 – Payment by an Interested Person
A person who is interested in the payment of money which another is bound by la
w to pay, and who therefore pays it, is entitled to be reimbursed by the other
Example: 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 i
t has started yielding good produce In order to prevent the sale, John pays the governmen
t the amount due from Peter In this scenario, Peter is obligated to repay the said amount t
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Trang 9If a person finds goods that belong to someone else and takes them into his custod
y, then he has to adhere to the following responsibilities:
- Take care of the goods as a person of regular prudence
- No right to appropriate the goods
- Restore the goods to the owner (if found)
Example: Peter owns a flower shop Olivia visits him to buy a bouquet but forgetsher purse in the shop Unfortunately, there are no documents in the purse to help ascertainher identity Peter leaves the purse on the checkout counter assuming that she would retur
n 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 went home When Olivia returns looking for her purse, Peter can’t find it He is liable for compensation since he did no
t take care of the purse which any prudent man would have done
Section 72 – Money paid by Mistake or Under Coercion
If a person receives money or goods by mistake or under coercion, then he is liable
to repay or return it
Example: Peter misunderstands the terms of the lease and pays municipal tax erroneously After he realized his mistake, he approached the municipal authorities for reimbursement He is entitled to be reimbursed since he had paid the money by mistake Similarl
y, money paid by coercion which includes oppression, extortion or any such means, is recoverable
Trang 103.1 Advantages of Quasi contract 4
The inherent flexibility and equitable application of quasi-contracts make them avaluable tool in diverse situations One of their core strengths lies in the principle ofunjust enrichment prevention This principle ensures that no party exploits another,preventing one-sided gains even in the absence of a formal contract Imagine a scenariowhere a contractor accidentally constructs a fence on your property, significantlyincreasing its value While there was no formal agreement, a court might impose a quasi-contract to compensate the contractor for their work while also preventing you fromenjoying the unearned benefit of the improved property without fair compensation Thisprotective nature makes quasi-contracts especially beneficial for innocent victims ofwrongdoing, acting as a safety net when traditional law might not offer adequateremedies
Furthermore, quasi-contracts offer a compelling alternative to the standardcompensation for damages framework In situations where quantifying precise damages
is difficult or impractical, a court can leverage a quasi-contract to ensure mutually faircompensation The court-ordered nature of quasi-contracts contributes to theirenforceability All parties involved are bound to adhere to the quasi-contractualobligations, fostering a stronger sense of responsibility and compliance compared topurely informal agreements This legal backing provides both parties with the security ofknowing that their rights and obligations are formally recognized and enforceablethrough the court system
Ultimately, the flexibility and adaptability of quasi-contracts make them a versatiletool for resolving diverse legal dilemmas Unlike the rigid structure of traditionalcontracts, quasi-contracts can be seamlessly moulded to fit unique circumstances,providing a nuanced and equitable solution where standard legal frameworks might fall
4
Reference from Adam Hayes, Quasi contract, 2022
Trang 11short Their ability to adapt to unforeseen situations and address the complexities of world interactions solidifies their position as a valuable instrument for upholding justiceand promoting fair commercial practices.
real-3.2 Disadvantages of Quasi contract
While the equitable nature of quasi-contracts offers undeniable advantages, it'scrucial to acknowledge their limitations to ensure informed implementation One keyrestriction resides in the negligence clause Those who negligently receive benefits, actunnecessarily, or engage in miscalculations may be shielded from full liability Imagine acontractor unintentionally exceeding the agreed-upon scope of work due to amisinterpretation of the plans Though they enriched the property owner, their negligencecould minimize their obligation to be fully compensated for the additional work This canpresent a challenge for the provider of goods or services, creating potential for undercompensation
Furthermore, the quantum merit principle in quasi-contracts imposes a ceiling onrecoverable amounts Even when liable, a party cannot be charged more than the actualbenefit they received This can leave providers shortchanged in situations where thereceived benefit is significantly less than the originally intended value The presence of
an express agreement, even an informal one, can also impede the applicability of contracts The doctrine of election requires the plaintiff to choose between pursuing theoriginal agreement or a quasi-contractual remedy If they opted for the originalagreement, even if it wasn't fully fulfilled, they may have to forgo claims under a quasi-contract, potentially leaving them with an unsatisfactory outcome This adds anotherlayer of complexity to already nuanced situations
quasi-Finally, quasi-contracts thrive in scenarios where proving damages is challenging.However, in cases where quantifiable damages are evident, quasi-contracts might not bethe optimal remedy A traditional breach of contract action, with its focus on quantifiable
Trang 12damages, might provide a more direct and comprehensive path to compensation than aquasi-contract seeking to prevent unjust enrichment.
3.3 Case Law regarding the Quasi contract: Mills v Wyman (1825)
Summary:
On February 5, 1821, Mills (plaintiff), a Hartford, Connecticut resident, came upo
n Levi Wyman, the son of Wyman (defendant) Levi was twenty-five years old and had just returned from a voyage at sea He was extremely ill, and was taken in and cared for b
y Mills, a stranger, for fifteen days Levi then died His father, Wyman, lived in Massachusetts and wrote to Mills upon hearing of Levi’s death Wyman promised to pay Mills forthe expenses he incurred while taking care of Levi However, Wyman later refused to payand Mills brought suit to enforce Wyman’s promise The court of common pleas held forWyman and ruled the promise unenforceable Mills appealed
Rule of Law:
The doctrine of quasi contract allows for the enforcement of an obligation to preve
nt unjust enrichment when one party confers a benefit upon another, and the recipient of t
he benefit would be unjustly enriched if they did not compensate the conferring party, despite the absence of a formal contract