QUASI CONTRACT
A quasi-contract is a legal obligation that a court can impose to prevent one party from
unjustly benefiting at the expense of another:
It is a fictional contract that a court recognizes to correct an unjust situation. It's also known as
a contract implied in law or a constructive contract.
A quasi-contract is a remedy for disputes between parties that don't have a contract. It forces
the party that received an advantage to compensate the other party.
A) Claims for necessaries supplied [Section 68] Where necessaries are supplied to a person
who is incompetent to contract, the supplier is entitled to recover the price from the property of
the incompetent person. Example: Gopal supplies Madhav, a minor, with necessaries suitable
to his condition in life. Gopal is entitled to be reimbursed from Madhav’s property.
B) Payment by a Person Having Some Interest in Payment [Section 69] –
a) The person making the payment must have some interest in paying the amount. The person
making the A person who is interested in the payment of money of which another is bound
(liable) by law to pay, and who therefore, pays it, is entitled to be reimbursed by the other.
Conditions:
b) payment must not be bound by law to pay the amount.
c) The other person from whom the money is sought to be recovered must be legally
bound to pay the money.
C) Claim for any benefit received under a non-gratuitous act [Section 70] - When a person
lawfully does anything for another person or delivers anything to him, not intending to do so
gratuitously, such person who enjoys the benefit must reimburse the former or must restore to
him the thing so delivered.
Conditions:
a) The person must lawfully do something for another person or deliver something to
him.
b) The person doing some act or delivering something must not intend to act
gratuitously.
c) The other person must voluntarily accept the acts or goods and he must have enjoyed
their benefits.
D) Responsibility of finder of goods [Section 71] - A person who finds goods belonging to
another and takes them into his custody is liable as a bailee. The finder of goods must try to
find out the real owner of the goods and deliver the goods to him on demand.
E) Money paid 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: Ram and Shyam jointly owe 1,000 rupees to Malinga. Ram alone pays the amount to
Malinga, and Shyam, not knowing this fact, later on also pays 1,000 to Malinga. Malinga is
bound to repay the amount to B.
CONTINGENT CONTRACT
– Section 31-36
A) Section 31 defines contingent contract as follows – “a contract to do or not to do
something if some event, collateral to such contract, does or does not happen.” For example –
V contracts to pay B 5 lakh rupees if B’s house is burnt. This is a contingent contract.
Contracts of insurance, indemnity and guarantee are also example of contingent contracts.
B) Essentials of Contingent Contract –
a) There must be a contract to do or not to do something
b) The performance of the contract depends upon the happening or non-happening of
some event in future
c) The event must be uncertain (not fixed)
d) The event must be collateral or incidental to the contract
Rules regarding contingent contract –
1) Enforcement of contingent contracts on an event happening – Section 32 Contracts which
are contingent upon the happening of a future uncertain event cannot be enforced by law
unless and until that event has happened. If the event becomes impossible, such contracts
become void. Example: a) Alex promises to pay Peter 5,000 rupees if the ship reaches port.
Now, contract will be enforceable (valid) if ship reaches the port. On the other hand, if ship
does not reach port, then contract will be void. b) Janvi contracts to pay Hitesh a sum of 1 lakh
rupees when Hitesh marries Makarand. Makarand dies without being married to Hitesh. The
contract becomes void.
2) Enforcement of contracts contingent on an event not happening – Section 33 Contracts
contingent upon the non-happening of an uncertain future event can be enforced when the
happening of that event becomes impossible Example: Alex agrees to pay Peter a sum of 10
lakh rupees if a certain ship does not return. The ship is sunk. The contract can be enforced
after the ship sinks. On the other hand, if ship would have returned the contract would have
become void.
3) Contingent Contracts Dependent on future conduct of a living person – Section 34 A
contract may be - Absolute contract - it is a type of contract where the promisor promises to
the perform the contract without conditions. It is also known as unconditional contract
Contingent contract it is a type of contract where performance is dependent on some conditions
which may happen or may not happen. If the future event on which a contract is contingent is
dependent on the future act of a living person, then contract will become void if that person
acts otherwise Example – Sharvi agrees to pay Makarand 1 lakh rupees if Makarand marries
Hitesh. Hitesh marries Gaurang. The marriage of Makarand to Hitesh must now be considered
impossible, although it is possible that Gaurang may die and that Hitesh may afterwards marry
Makarand.
4) When contracts become void which are contingent on happening of specified event within
fixed time – Section 35 Contracts which are contingent upon the happening of a future
uncertain event within a fixed time will becomes void if the contract does not happen within
fixed time. Example – a) Alex promises to pay Peter 5,000 rupees if the ship reaches port
within 1 year. Now, contract will be enforceable (valid) if ship reaches the port within one
year. On the other hand, if ship does not reach port within 1 year, then contract will be void. b)
Alex promises to pay Peter 5,000 rupees if the ship does not reach port within 1 year. Now,
contract will be enforceable (valid) if ship does not reach the port within one year. On the other
hand, if ship reaches port within 1 year, then contract will be void.
5) Agreements contingent on impossible events void – Section 36 Contingent agreements
based on impossible event are void. Example – Anuradha promised Shyam to pay 1 crore
rupees if he brings Taj Mahal from Delhi to Mumbai. This contract is void contract.
DISCHARGE OF CONTRACT
Discharge of Contract - means termination of the contractual relationship between the parties
to a contract. In other words, a contract is discharged when the rights and obligations created
by it are extinguished (i.e., comes to an end).
According to the Indian Contract Act of 1872, a contract is discharged when the obligations
and rights created by it are no longer in effect. This can happen in several ways, including:
Performance: The contract is fulfilled by the parties, either fully or in part.
Mutual agreement: The parties agree to terminate the contract.
Frustration: An event occurs that makes it impossible or significantly different for the parties
to fulfill the contract.
Breach: One party fails to fulfill their obligations under the contract.
Operation of law: A change in circumstances leads to a breach of contract.
Waiver: One party gives up their rights under the contract, releasing the other party.
Merger: A party's inferior right merges into a superior right they have under another contract.
Unauthorized alteration: A party makes a material alteration to the contract without the other
party's consent.
The best way to discharge a contract is to perform the promise within the agreed time frame.
Other methods can be unpleasant and lead to damages.
Sec 37 provide that ‘parties to a contract must either perform or offer to perform, their
respective promises unless such performance is dispensed with or excused under the provisions
of contract Act, or of any other law.’
Performance is of two types:
1. Actual performance - liability of such a party comes to an end.
According to Section 40, if the contract is based on personal confidence, or involves the
exercise of personal skills like painting, or dancing, it must be performed by the promisor
himself and nobody else. The contract does not involve personal skills, the promisor or his
representative may employ a competent person to perform the same.
Provisions relating to the performance of Joint Promises have been given in Section(s) 42-45.
Time and Place for Performance
If a time and place for the performance of the contract are agreed upon, then the promisor
should perform the promise accordingly. If not, then it should be performed at a reasonable
place and time. The ICA, specifies some rules regarding the time and place for the
performance of a contract under sections 46 – 50.
According to Section 46, even though no time for performance is fixed by parties, the contract
is not rendered void for uncertainty.
Application by the Promisee required (Section 48); Let’s say that there is a contract where
the promisee necessarily needs to make an application for the performance of a contract, then
the promisee needs to ensure that the application is made at a proper place and time. In this
case, the phrase ‘proper place and time’ can have different meanings in different cases.
Example: Peter and John enter a contract where Peter promises to fix John’s car whenever he
asks him to. Peter also takes an advance payment for the same. When John asks Peter to fix his
car, he must ensure that he doesn’t ask Peter to go a lot out of his way. Also, he must
preferably ask for repairs during business hours.
No Application is to be made but the Place of Performance is not Specified (Section 49);
Imagine a contract where the promisee is not required to make an application for the
performance of the contract. Also, the place of performance is unspecified. In such a scenario,
it is the responsibility of the promisor to apply to the promisee asking him to appoint a
reasonable place for the performance of the promise.
2. Attempted performance or tender of performance [Section 38]– if the promisor tried to
perform the contract and the promisee refused to accept, the promisor is not responsible for
non-performance, nor the promisor thereby lose his rights under the contract and can sue the
promisee for breach of contract.
Discharge by mutual agreement
a) Novation [Sec 62] – Novation means the substitution of a new contract in the place of the
original contract new contract entered into in consideration of the discharge of the old contract.
The new contract may be.
a) Between the same parties (by a change in the terms and conditions)
b) Between different parties (the term and conditions remain the same or changed)
The following conditions are satisfied:
1) All the parties must consent to the novation
2) The novation must take place before the breach of the original contract.
3) The new contract must be valid and enforceable.
For example A owes B Rs.50,000. A agrees with B and gives B a mortgage of his estate for
Rs.40,000 in place of the debt of Rs.50,000. (Between same parties)
A owes money Rs.50,000 to B under a contract. It is agreed between A, B & C that B shall
henceforth accept C as his Debtor instead of A for the same amount. The old debt of A is
discharged, and a new debt from C to B is contracted. (Among different parties)
b) Rescission [62] - Rescission means cancellation of the contract by any party or all the
parties to a contract. X promises Y to sell and deliver 100 bales of cotton on 1st Oct his go
down and Y promises to pay for goods on 1st Nov. X does not supply the goods. Y may
rescind the contract.
c) Alteration [62] - Alteration means a change in one or more of the terms of a contract with
mutual consent of parties the parties of new contracts remain the same.
For example, X Promises to sell and delivers 100 bales of cotton on 1st Oct. and Y promises to
pay for goods on 1st Nov. Afterwards X and Y mutually decide that the goods shall be
delivered in five equal instalments at is godown. Here original contract has been discharged
and a new contract has come into effect.
d) Remission [63] - Remission means accepting a lesser consideration than agreed in the
contract. No consideration is necessary for remission. Remission takes place when a Promisee-
i) dispense with (wholly or partly) the performance of a promise made to him.
ii) Extends the time for performance due by the promisors
iii) Accept a lesser sum instead of a sum due under the contract
iv) Accept any other consideration that agreed upon in the contract
A promise to paint a picture for B. B afterwards for him to do so. A is no longer bound to
perform the promise.
e) Waiver - Intentional relinquishment of a night under the contract.
f) Merger - conversion of an inferior right into a superior right is called a merger (Inferior
right end).
Discharge by Lapse of time - Where a party fails to take action against the other party within
the time prescribed under the limitation Act, 1963. All his rights are to come an end. Recover a
debt – 3 Years; recover an immovable property – 12 years.
Discharge by Impossibility performance
a) Initial Impossibility - at the time of making the contract
Both parties know – put life into dead body – void.
Both don’t know – void.
One knows – compensate to the other party.
b) Supervening Impossibility -
Where an act becomes impossible after the contract is made – void
Becomes unlawful, beyond the control of the promisor – void
Promisor alone knows about the Impossibility – compensate the loss.
Doctrine of Frustration
The abovementioned supervening impossibility is known as doctrine of Frustration under
English Law. This doctrine got statutory recognition u/s 56 (2). It means the occurrence of
intervening event or change in circumstances entirely beyond the contemplation of parties. In
other words, Frustration is a circumstance where the courts will discharge the parties of
obligations under the contract, therefore meaning that the parties are not liable for any further
obligations under the contract.
Essentials
The contract cannot be performed by either of the parties in any possible way, hence it
stands as null and void.
Dissolution occurs automatically and does not depend upon the choice of parties as in
rescission.
Frustration should not be due to the act of the party to contract/ self-induced.
Frustration may be due to any of the following reasons:
1) Destruction of Subject matter
Taylor v. Goldwell (1863) – Music Hall agreed to let the plaintiff for four days for a series of
concerts and fetes. Owing to the destruction of the hall due to an accidental fire, led to the
frustration of booking the hall. Neither party was at fault for this destruction. The claimant
sued for breach of contract. The issue is whether because the hall that the claimants had
contracted to use could no longer be used, this excuses the rights and liabilities of the parties
under the agreement?
The court held that parties are said to be discharged if the performance involves a particular
music hall, which due to no fault of either of the parties is destroyed. This renders the
performance impossible. This was the most just solution and the one that made the most sense
in terms of contract law. If the parties were forced to continue their obligations under the
contract even though the music hall was on longer in use then this performance would be very
different from the ones that the parties had originally contracted to undertake. The burnt down
musical hall renders the contract undoable.
2) Change of Circumstances – normal commercial hardships may not be taken as a ground
for claiming doctrine of frustration but the declaration of war etc. may be taken as a valid
ground for claiming the doctrine of frustration.
3) Non-occurrences of contemplated event
Krell v. Henry [1903] – The defendant agreed to rent out a flat in Pall Mall for two days,
belonging to the plaintiff. Both the days, it had been announced that the coronation processions
would take place and pass along Pall Mall. The contract did not contain any express terms on
the coronation processions or any other purposes for which the flat was to be rented. The
defendant paid the deposit of 50 pounds upon signing of the contract and the remaining
balance of 75 pounds will be paid later. The processions, however, did not take place on the
announced dates as King become ill. As a result, the defendant declined to pay the balance
amount.
Lower courts held in favour of the defendant hence plaintiff appealed.
The contract did not have a reference to the coronation. The court held that the plaintiff was
not entitle to recover the balance amount, as both the parties recognised that they regarded the
taking place of the coronation processions on the days originally fixed as the foundation of the
contract. The purpose was understood by both parties. Performance was not rendered
impossible, since the defendant could remain in the flat. But the defendant would not receive
any benefit as the object was frustrated. Parol evidence is admissible to show that the subject
of the contract, which was flats to view the coronation and was known by both of the parties,
in order to determine whether the object of the contract was frustrated by the non-occurrence
of the coronation. Therefore, the court held that Defendant was excused from performing
under the contract and Plaintiff’s claim is dismissed.
4) Death of incapacity of a party
5) Government or Legislative Intervention
In Boothlinga Agencies v. VTC Pariaswami (1969 – SC) – had a licence to import ‘chicory’
for manufacturing coffee powder. Before the arrival of the ship sale was banned. The contract
thus was held to have become void.
Satyabrata Ghose v. Mungeeram Bangur & Co. (1954 – SC)
The intervention of a temporary nature (requisition of land by the government for military
purposes) which does not uproot the foundation of the contract, will not have a dissolving
effect. The case is related to the sale of land and the question before the court was about
certain supervening events which led to the performance difficult.
In 1941, someone for the appellant who was a nominee in the sale of land purchased land and
gave Rs. 101 as earnest money. But later on, collector requestioned land. The company
cancelled the agreement or gave the option after Performance has not become impossible. SC
held that the doctrine of frustration is not applicable.
6) Intervention of war –
When a contract is frustrated, the party must restore benefit to the other, if he has received any
(section 65).
In the following cases, the doctrine of frustration may not apply:
i) Where a ship has to take a longer route because of the closure of normal routine (due to war)
causing inconvenience and loss to the shipper, held that there was no frustration.
ii) Similarly, Commercial hardships or difficulty – price rise, sudden depreciation of the
currency, it is not enough to frustrate the contract. Disappointed expectations do not lead to
frustration of the contract.
iii) Failure of one of the objects is also not the frustration of the contract.
iv) Completed transfers or executed contracts – Section 56 only covers executory contracts
(future contracts) and not the executed contracts.
BREACH OF CONTRACT
Online Contract / e-Contract
Due to technological advancement and growth of e–commerce, e-Contract have come into
existence. When ICA was enacted, there was no such contemplation in the minds of the
legislature.
E-contract is an agreement modelled, signed and executed electronically, usually over internet.
Unlike offer, acceptance and communication in face-to-face agreement, Online Contract / e-
Contract is entered into in a different manner. Consumer click on the ‘I agree’ or ‘click to
agree’ option for indicating the acceptance of the terms presented by the seller or they can sign
electronically.
Once the terms are accepted and the payment is made, the transaction can be completed. The
communication is basically made between two computers through servers.
Many of the terminology like e-signature has been defined under the Information Technology
Act, 2000. But the laws relating to contract will be yet governed under the ICA.
Online contracts include employment contract, non-disclosure agreements, licensing
agreements etc.
Types – shrink wrap agreements and click wrap agreements. Shrink wrap agreements are only
readable and accepted after opening a product, while click wrap agreements are often used
during software installation.
These agreements typically fail because the court finds that users were not aware of what they
agreed to. These agreements typically don’t require the user’s affirmative assent to the terms,
creating an ambiguous situation that courts do not like. Sign-in wraps are sometimes deemed
unenforceable, as courts have held, they use a “dual-purpose” button and don’t clearly
demonstrate that the user agreed to be bound to the terms. Sometimes they change the terms
and conditions later on but that keeps the consumer binding.
Sometimes the considerations may not be the same as in case of face-to-face contract. As in
case of using the social media sites, we do not pay any material considerations, but that keeps
the company binding. As using the social media sites itself is the consideration from the user’s
side and the company will maintain privacy and will provide the services is the consideration
from the social media sites.
Timex International Fze Ltd Dubai v. Vedanta Aluminium Ltd. (2010) 3 SCC
P R Transport Agency v. Union of India AIR 2006 All 23
